>> welcome to daybreak australia. shery: the top stories this hour. the fed delivered its third straight hike raising by 75 basis points as expected. jay powell signaling there is more to come to crush inflation. >> the two year yield topping 4% for the first time since 2007. >> president biden says russia has shamelessly violated the u.n. charter. take a look at how futures are coming online in the asian session. stock markets struggle forbes -- direction after the fed statement today. we were up 1.3 on the s&p 500 before we finished near session

lows. the message of economic pain coming from chair powell has been hard to digest for the markets. even chinese stocks took a big hit. this was even before -- you have to look at the broader em textbased. -- tech space. the bloomberg dollar spot is at a record high. we are also watching the resilient real. we're talking about a huge tightening one of the most aggressive in the world. today we saw pressure given the concerned about the economic slowdown, but it was really about the treasury volatility. they didn't know where to go throughout the session. they were all over the place.

we are talking about the two year yield topping 4% for the first time since 2007. >> keeping an eye on it's happening in the bond space as well in asia, the two stands, we are not quite inversion yet. we had seen yields looking -- ahead of the fed session. the boj very -- basically owning the market. we could see some moves later in the session will be have that all-important boj meeting coming up.

the dollar as you said not ruling out any downside risk from here. currencies in the g10 space moving in a tight range. kiwi stocks looking a little bit higher -- higher. >> as we get into what is expected to be a pretty interesting asian trading session, when you talk about the fed we are looking ahead to what the dot plot changes would be and they were significant. when you take a look at the outlook in terms of future tightening, significantly more hawkish when it comes to the dot plot. for example look at where we get to by the end of 2023, that median move to 4.65 is a lot higher than 4.1% that the market is currently anticipating for the end of next year.

one of the things to keep into context is that today's move gets the fed to neutral. everything they do from today is what puts rates into the restrictive territory. they want to cool demand. at this point, we are not quite there yet. the real question is have we finished playing catch-up? there are some big moves when you look at the all key dot plot and where that takes it from here. >> this is just the start. we were all watching the fomc but now we have a bonanza of other central banks to come. we have the boj also expected to really not do much. after first a new -- afternoon, the swiss national bank is expected to cause a scrap in the national rates. there are plenty more things to watch in the asian investment session.

let's bring in our process at reporter. the markets do not know where to go today. it was all over the place. it's surprising because the last few sessions of meetings and right hikes, we saw stock markets rally. >> today, we bucked the trend and it was a crazy swing. they realized the fed is really serious. the s&p closed near session lows that we have the -- it was up at 1.3% would it closed at 1.7% it is now 20% lower from its january high. we have the dollar also rallying. jay powell's message was consistent. we will keep at it until we are done.

earlier we were confused about how equities were higher. things took a turn for the worse and that's probably when investors realize that the fed means business and they will do whatever it takes to curb inflation down. investors are expecting rates to be 4.6% this year and next year and that is a hawkish tone. that also means that for november a 75 basis point hike is on the table and that's just one week away from the midterm election in the u.s.. >> let's bring our economic and policy editor kathleen hays who is standing by with our next guest. >> this is somebody we know very well. a former governor at the federal reserve. he has been there done that. when you listened to jay powell today, when you saw the dots, is

it clear than ever that jay powell has finally embraced the idea that without slowing the economy to the point of recession, giving up all hope of a soft landing is necessary that's what he has to do that's what they have to do now to finally down inflation. >> that's the core of it. i don't think you would say he has completely given up the idea that it would be something that is soft issue. the rate is only going to be 4.4%, that is still much to sanguine. fig is going to go beyond 5%. -- i think is going to go beyond 5%. there is going to be more pain. is it necessary? >> the interesting thing is not that they moved 38 that they expect to get to to 4.6 from 3.8

, look at the dots. you have six along the top almost at five then six along the bottom who are closer to 4.4. then you have the median in the middle. lately we have found that has been the more hawkish dots, the hawkish people on the fomc who have led as we went forward. you are in the 5% on's. why? >> i think they will most likely be in 4.5% to 5%. it really depends on what happens with inflation particularly core inflation. one of the challenges is that the biggest piece of core inflation is mostly through shelter services owner

equivalent rent. rents are going to be slow to slow down. a lot of places are still catching up on rents. some markets there have been prohibitions on increasing rents and they are being relaxed now. you will continue to see a lot of pressure in poor pce. -- core pce. there will be pressure to raise rates and keep them above this for quite some time. that's why we will be in the 4.5% to 5% range for much of 2023. >> what was interesting to me even when our markets reporter was talking about how they are finally realizing this is for real that this hawkish. will stay, has anything changed and what will investors be up for next? >> you are exact the right. his message has been incredibly consistent since the previous meeting.

the markets seem to not pay any attention to it. your program and others talking about this, you have to take this guy seriously. he is not going to just give in. he's not going to pivot. he said were going to keep at it until were done. he said the same thing today and the dot plots were of -- revised. >> when it comes to recession risks, they stop short of saying the u.s. will fall into a recession. when you look at the labor market outlook, the expectation for the deterioration of the labor market, we have never seen that happen without a recession before. are we being too optimistic to think that a soft landing still on the table? >> as i said, i think it is highly unlikely but not impossible.

a lot of what will happen to global economy will be decided by vladimir putin. that is a real wildcard, it's hard to predict what's going to happen there. as i mentioned, i think the unemployment rate is likely to go higher probably get to a five handle. by previous recessions that wouldn't be so bad, but of course it's never good to have the on employment rate going up. the alternative is even worse getting into a late 1970's early 1980's situation. last time interest rates were this hot -- the last time inflation was this hi, volker had interest rates at doubled the -- double-digit levels. >> jay powell said there was a contingent of members of the fomc who were pushing for 100 basis point hike today. we clearly have that hawkish

nest that you don't see in the final rate hike. the next meeting is going to be critical. two meetings this year. it's going to be right around the midterm elections. would it have been better to do 100 today so you can pull back to 50 just ahead of the election? can i do something that aggressive? right ahead of an election. it wouldn't that just have political ramifications or repercussions that might be bad for the fed? >> i think it's better that they are trying to soothe rather than surprise people with 100 basis points now. obviously, they are still working that out. is a lot of volatility in the market today as they're trying to suss out what the inflation risks are, what the recession risks are. it's going to take a while to work out. obviously, the meeting just

before the midterm election will be politically fraught, but better that they just keep a consistent path and message. they have now laid a clear foundation for being around 75 basis points for the next meeting. it's not going to come as an extreme surprised. i think it is better that they didn't cause too much tumbled today. they don't want the focus to be on them. >> thank you so much for your time. still ahead, how to navigate while market swings ahead of further rate hikes. why they think the fed pivot is dead. less president biden accuses vladimir putin of making threats as the russian leader orders an escalation in ukraine. analysis coming up. this is bloomberg. ♪

>> iranian state media says six people have been killed in protests across the country over the death of a woman in police custody. she had been detained for breaking the dress code for

women. the state of new york is suing donald trump and three of his children for allegedly inflating the value of his real estate company's assets as well as a multiple year investigation. the president caused a lawsuit another witchhunt and says the attorney general should be focused on tackling violent crime. the government of western australia has outlined new rules to target sexual abuse and harassment in the mining industry. the investigation revealed multiple abuses of women in several companies. recommendations include funding for legal advice and increased site security. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn.

this is bloomberg. >> president biden has used his u.n. general assembly speech to rally support for ukraine. >> the world should see these outrageous acts for what they are. vladimir putin claims he had to act because russia was threatened. no one threatened russia. no one other than russia sought conflict. >> let's bring in our white house reporter who joins me here in new york. this came after leaders of other countries also blamed vladimir putin of imperialism. what are some of the key takeaways? >> we saw vladimir putin and russia isolated on the world stage here at the u.n. general assembly. in the speech yesterday, he was seeking to divide the allies, the u.s. and others who were trying to keep up the sanction

campaign. he was tried to break that spirit and judging from president biden speech, he is not showing any indication that the u.s. or its allies are willing to back down from the sanctions on the kremlin or defenses for ukraine. >> are we seeing limitations of what could be achieved by the alliance? are the sanctions having it deteriorated affect? >> there's the added element of vladimir putin's nuclear threat. when they talk about ramping up sanctions, it's not just that their previous measures are maybe not working this was they hoped, do you want to push it too far where you would push one where potent into a corner and create a situation where he might lash out and use a nuclear weapon? the allies might not want to take that risk. these are questions i will have to answer in the coming months.

>> china also figured prominently in joe biden speech at the u.n. but he emphasized the u.s. does not want war. >> is a shift in geopolitical trends, the u.s. will conduct itself as a reasonable leader. we do not seek conflict. we do not seek a cold war. we do not ask any nation to choose between the united states or any other partner. the united states will be unabashed in promoting our vision of a free, open, secure, prosperous world. >> before the assembly, the president said he would defend taiwan if china invaded the island. beijing says taiwan compact rates want the territory to be part of china adding that if it has the patient's to someday bring taiwan under is can scroll -- under its control.

>> this comes as the ceos of the biggest u.s. consumer banks have been warning lawmakers about the economic risks of surging inflation. we will have more on the capitol hill testimony next. this is bloomberg. ♪

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>> the imf says slowing growth will make next year feel like a recession. the managing director told us the policymakers must ensure they communicate the importance of the inflation fight. >> at this moment, the most important signal they have to send is inflation is going to go

down. because we don't have price stability, that affects growth and [indiscernible] so bringing confidence that we can deal with the stubborn inflation is paramount. the labor market is resilient so the fight in inflation must continue. >> do you think we can avoid a global recession given the aggressiveness of the central bank and the continuing -- coming from ukraine with the extra mobilization of troops from vladimir putin? >> in 2022 i don't see a global

recession. in 2023 it becomes tougher to predict whether we can avoid it. because the increasing interest rates will bite and we will see the impact of growth. already today we had china going down significantly. europe because of the aggressive actions of russia on the energy side some of the countries in europe may be in recession. whether we're going to meet the technical definition of recession or not, i do expect that for hundreds of millions of people, it will feel like recession. buckle up. a tough year we had to go through it and hopefully we will get inflation under control, then we can see a foundation for

growth and recovery. >> that was the imf managing director speaking with francine lacqua. soft banks -- pretends to visit seoul, korea for the first time in three years for a potential partnership. he says his final goal is to take the company public in the u.s. after the sale to nvidia fell apart. jamie dimon has signed cryptocurrencies again calling the digital asset decentralized ponzi scheme. in congress he said data points would not be problematic with correct legislation. elliott investment management bought about $1 billion of a jump on deal supporting its own

buyout of a software company citrix. >> coming up next, our guess tells us why a hope of apace it -- pivot is silly and why we should not fight the fed. this is bloomberg. ♪

>> my colleagues and i are extremely committed to bringing inflation back down to the 2% goal. we raised the target range to

3.75% and there will likely be softening of labor market conditions. we should move our policy rate to a level that is restrictive enough to bring inflation down to 2%. we have just moved into what i believe is the very lowest level of what might be restrictive. >> it's time for morning calls. we're going to take a look at what strategists are saying about a recession. what calls are you following right now? >> there's a big one that has come out. they're looking at the odds of a contraction on the back of the fed rate hikes. they say a recession is all but

unavoidable. this is coming from the head of fixed income. this is a man named earl davidson. he says rates will need to stay much higher for longer. he said they could warn to recession. >> when it comes to the corporate debt market, what is he saying? >> you can see this is our aggregate bond index. when you compared to a few years ago around 4%, there's a lot of construction going on this market. pgi m is one of them, j.p. morgan another one saying there are significant buying opportunities in this market. they are saying on a fundamental level, interest-rate risk this is the real driver here of

credit spreads widening rather than what we see in the underlying balance sheet. >> our next guest says investors need to stop hoping for a pivot or even a hint of a pivot from the fed. let's bring in our guest. >> we had a minor rally, but the hawkish this is not going to get better just yet. we need to remember where we are being in the cycle. we are entering into this time of contraction, this is not march 2008.

>> this chart on the market -- on the bloomberg shows how we are back to levels from the first rate hike months ago. >> they need to keep tightening. you have a lot of uncertainty on how we get money out of the system which could help with inflation. you need to be expecting tightening. he is giving you these clues and he's talking about how he's willing to sacrifice unemployment. we have never had unemployment, more than .5% without entering a recession. he is committing to the fact that he may push the economy

into a recession. i don't know if i would say 99.9%, but even jay powell said this but were going to have to do. he is committed to doing this the 1980's way like paul volcker and not the 70's. you are also not listening if you think they're going to start stop start stop. i feel jay powell is committed to staying higher for longer and causing some pain to get the core inflation down and healthy. >> when the two-year is at 4%, are we looking at different alternatives and the fading that there is no alternative other than equities trade? >> that's the short end that has come up in the 0-6 month range, when you look at the curve we have steepness between zero and one year but the two-year is at 4% then you have 54 basis point

inversion between the two year and 10 year. the 30 year is below the 10 year. you look at where the curve is showing you, it's flashing recession. if you're getting paid it four to sit around, that becomes very attractive to investors to sit out some of this carnage. i would rather be a little late then to be early right now. >> energy is a big theme. what is the strategy for finding opportunities we have these expectations that the broader economy and the household consumer are going to be coming under more stress. >> we want things we can talk about moats and sustainability of cash flow. if the consumer comes under stress, they will cut some of their discretionary spending. cell phones are not

discretionary anymore. staples, things that consumers are still going to need to buy. health care and stocks that are generally a little more beta. it works historically to hide out in defensive sectors. energy you have to be careful on. we liked some of the natural gas place. you have to be a little careful of oil and be patient. you are getting paid massive dividends in the energy sector. understanding you will see some price volatility historically with the oil and gas sector but it's lower than it has been since they started building up and they're going to start running that down and buying oil again. we will start to see more demand pickup then you would historically see and a slowdown.

>> tech giants have added -- hate like -- in times of trouble. is there any part of the sector that you like? >> i like the value tech. ibm, it's not a flashy company but used you do have some value tech out there. adobe, you have to be careful to make sure your balance sheet -- it's trading at a reasonable multiple. great dividend yield. the mantra is be boring right now. have companies that can weather the storm. you can even argue back and forth that google and apple are almost utilities in early on -- early in our lives. amazon may look a little bit like fedex because of shipping

costs. it's not technology sector stock, but i do throw it in there. you need to be picky and you need to be watching your multiples and cash flows. >> quickly, what levels would you want to see on the s&p before you start bargain-hunting? >> 3600, i can see 3400. 3400, i'm more interested in buying. >> always great to talk to you. let's hit you the first word news. vonnie: protests have been reported in russia after vladimir putin declared a partial mobilization of nearly 300,000 reservist. one group says 1200 people were arrested in cities. in announcing the escalation, he also renewed hints of nuclear threat vowing to use all means to protect russia and its people.

president biden is calling on the world to maintain support for ukraine following fodder pigeons threats of escalation. -- following vladimir putin's threats of escalation. he says the war aims to extinguish ukraine's rights. >> the world should see these outrageous acts for what they are. vladimir putin claims he had to act. because russia was threatened. no one threatens russia. no one other than russia sought conflict. >> santos has been order to continue a halt on its $3.6 billion gas project off of australia's northcoast after a court ruled in favor of indigenous groups saying they were not properly consulted on the plans. it has two weeks to shut down drilling operations and remove its rigs. it says it's a disappointing

outcome and it is planning an appeal. tom brady is defending his workweek after he reportedly planned to take every wednesday off. he told a podcast he has worked weekends every year so he deserves one-week day off. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. >> coming up, u.s. bank ceos art sounding alarms on rising rates and prices. their testimony on capitol hill next. this is bloomberg. ♪

>> while the worst of covid may be behind us, the economic changes we are facing are daunting. >> the country may be facing uncertain economic times for years to come. >> the current inflationary

environment has added stress. >> we are very concerned about the high prices that consumers are facing. >> rates will have to go up that will reduce demand. spending less money reduces demand. >> and i haven't impact of slowing demand and increasing the cost of debt. >> interest rates remained i -- hi in order to tame inflation. >> there's a small chance of a soft landing. there's a chance of a milder recession, a harder recession. >> we expect to be in for tougher times ahead. >> there's a chance it could be worse. >> bank ceo speaking during testimony in front of congress. all part of a two day growing by lawmakers. su keenan joins us to talk about this. they weighed in on everything from the economy to crypto to concerns about china. >> it was wide-ranging when i got to the questioning.

these are the biggest consumer focused banks. congress was very interested in what they had to say about the u.s. consumer. they had more than five hours of tough questions from the house committee on financial services wednesday here in the u.s.. they will face another round from the congressional committee in the senate on thursday. jamie dimon and jane fraser led the warning on economic risks the consumer with jamie dimon saying the u.s. economy is a classic tale of two cities with competing headwinds and tailwinds that make it very difficult to bricked the future. frazier predicted more difficult times ahead for the consumer. the ceos told lawmakers of efforts they made to help the consumer by eliminating overdraft fees. wells fargo ceo also touted his bank efforts to reduce overdraft fees.

his bank came under fire from lawmakers this year after an investigation found that wells fargo had approved fewer than half of refinancing sought by black homeowners. you will notice a lot of red on the screen. the bank stocks appeared to do fairly well during a lot of the testimony. during the final hour of trading, it was rocked with the rest of the market. in terms of grabbing headlines, jamie dimon said the worst possible outcome in terms of the fed trying to maneuver a soft landing would be stagflation. he said oil is going to cause a global recession and he also had some of his toughest criticism yet for crypto. he called crypto tokens decentralized ponzi schemes. there were a lot of concerns about capital ratios and regulation all mixed in.

>> lawmakers were also asked -- they also asked the ceos to weigh in when it comes to political issues in china. >> you did have a smattering of comments from the house members that indicated they are very concerned about china and a missouri lawmaker wanted to know what banks were doing in china despite human rights concerns as well as continued bank operations in the event of an invasion of taiwan. the lawmaker asked you are not going to commit to pulling out of china if they invade taiwan? jane fraser pointed out this is a hypothetical scenario, but she pointed out that have operations in 13 different cities. they would significantly reduce their presence in the event of such an occurrence. many of the lawmakers made clear they were concerned that given russia's invasion of ukraine perhaps there was an emboldening

of china to take some aggressive action toward taiwan. the banks were fairly measured in the response. bank stocks year to date under a lot of pressure. some of the remarks from the ceos had to do about -- did the -- relate their concerns that the savings rate of consumers is surprisingly low. notably as this chart shows, cash levels for the banks relatively high right now. it appears they are keeping their powder dry. >> we have the new zealand trade numbers crossing the bloomberg. it's looking like the deficit continues to be held. the imports number continuing to search to what looks like another record amount in the month of august. we had a record in july. imports rising for a fourth consecutive month by close to $8

billion extending the gain from the month before. we see new zealand exports falling to just about $5.5 billion. that means that trade deficit in the twelve-month year to date is just over $12 billion for the month. we're looking about $2.5 billion for the monthly trade deficit. we have seen the impact of the change in energy imports. diesel had been leading the gains among all products. we saw in july the imports of fuel can tripping to the new record. -- contributing to the new record. it's not just the pressure of declining in terms of trade, but also the very slow return to tourism investment services for the new zealand economy. >> it's a very broad story across asia.

we saw the same thing in japan and korea. a little bit of pressure because a strong dollar, but this is after incredible strength coming from the war in ukraine. natural gas futures broke -- extended losses with the latest on the ukraine crisis. we continue to hear more threatening rhetoric coming from russia. oil is also unchanged in the asian session. it fell because of mounting economic concerns. gold was still higher. we had the fomc rate hike although broadly speaking, gold is down almost 8% this year because a high inflation and the potential for more rate hikes. the slowdown rhetoric is seen across the metal space with copper down at the moment. get in-depth analysis from the daybreak team.

stay with us. ♪

>> a little bit of downside pressure on markets across the asian session given the strength of the dollar. we have the dollar spot index

climbing to a record high. the fed announced a third 75 raises point rate hike. earlier in the week, we were headed toward multiyear lows. the japanese yen at the moment is also weakening headed toward the 145 level. the level we are watching is a low in 1988 against the u.s. dollar as we are we -- awaiting the boj decision. the offshore you want past -- y uan past seven. no changes expected from the boj, but we are expecting some hedging for an eventual policy shift. >> knowing this for quite some time, we had seen no change expected from the boj.

expected to keep its rates in negative territory. it will be the only central bank globally keeping rates at -0.1%. markets are positioning for what could be an eventual policy shift. if you look at this terminal chart, what we are seeing is bank stocks. we are seeing bank shares outpacing the losses. some moves to the upside that we are seeing for this banking shares. the reason banking stocks well-positioned in a rising rates environment. >> there's a lot to choose from. >> in asia, we have indonesia, taiwan among them. the philippines as well. lots to be keeping an eye on.

one that will be interesting is the bank of england today because this is the first chance the policymakers are having to react to all of the political changes that we have seen in the u.k. with liz truss taking on the prime minister shift and also pledging the cost of living pressures. in money markets we are seeing traders pricing in 200 basis point hikes over the next meetings. >> all of that is going to play into the volatility for the start of trading here in asia. we have most parts of australia closed today including trailing giving that it's a monthly day of mourning for the queens

passing. across the broader emerging markets, we saw currencies suffering. that is one pressure point to watch today. >> coming up, we will discuss the global implications of more rate hikes with a guest from the university of maryland who thinks the fed will keep going. plus hear my exclusive conversation with the president of columbia. he tells us what's behind the nations soaring inflation. this is bloomberg. ♪