haidi: welcome to daybreak australia. >> we are counting down to asia's major market open. shery: the top stories this hour. an ugly session on wall street as u.s. stocks plunge to the lowest in 22 months. traders are betting on more turbulence ahead. haidi: treasuries under pressure as advisors hammer home the news on rate hikes. >> meta is cutting headcount for the first time. >> u.s. futures muted at the open of the asian session after a lot of volatility in the new york session.

we are talking 90% both the dow and s&p 500 members moving around. the nasdaq fell almost 4% after we heard from jim bullard talking about how investors in the market are finally realizing that we will see more rate hikes to come in the next few months. we have the 10 year yield rising again resuming the gains after the boe intervention. we have the risk off sentiment also toward oil markets. right now slightly higher about 81 .63 level. it is all about the volatility, the swings and that is affecting the treasury market as well. it we are seeing some signs that the u.s. stock market is flashing warning signs on liquidity. if you turn to this chart, you can see that the dollar swap spread has now rebounded after falling to -75 basis points.

this is a record move in either direction. huge swings we are seeing showing that perhaps we will see more liquidity stress with no clarity when it comes to central banks tightening. some are saying this my continue for a while. >> we are the last day of the third quarter and it has not been a great one no matter which way you look at it. the superlatives we are watching, asian stocks now on track for their seventh straight week of losses. we haven't seen that since 2015. down around 12% for the msci index alone in september. analysts including those at j.p. morgan urgent for patients. these are all the factors that need to be watched very closely.

we are getting kiwi stocks online. they in the red this morning. we see technicals pointing to further ahead for the pair. one bank says it's unlikely to go below 144 especially when you get more hawkish fed speak coming through. >> hawkish but also reinforcing the narrative we have heard. firmly so far. we heard from james bullard again saying the markets seem to be getting the message. he is saying if you look at the dot plot there does seem to be the assumption that the committees going to make a fair amount of moves this year. it does seem to be the right interpretation. given all the global volatility

and what's coming from the u.k. and the boe, he is saying that he acknowledges -- that these development are not going to make the fed take pause when it comes to its path to tightening. >> he is a voter in this year's fomc along with the cleveland fed president. she said she's going to see real rates being in positive territory and staying there for a while. even after the markets closed, we heard from the san francisco fed president as well. she was more careful in her words saying that perhaps the fed should fight inflation in a way that avoids a difficult downturn. the narrative is still there. the fed will continue to tighten. you mentioned the dot plot. the implication of that is 125 basis points of tightening in the next two meetings.

>> it is sizable as you said. it's a continuation of a sense of commitment that we heard from fed speakers led by jay powell for many weeks now. early intensifying into this week as we see that resumption of market turbulence. what they will be focusing on if not global volatility is on the day come at the totality that we keep hearing. we sought u.s. jobless claims falling to the lowest since late april. we saw a drop in applications led by new jersey. the moving average also declining for the fifth straight week. we are seeing these underlying signs of robust amounts of workers despite the signs of economic uncertainty. >> we got core pce numbers for the second quarter that came in better than expected. for how long will this last? especially when you have the fed acting, tightening conditions

mortgage rates at a 15 year high. that is more pain for homebuyers. already, the market was difficult to get into. it may you have rates soaring 6.7%. the highest since 2007. if you talk to a baby boomer right now, they will tell you that something. they saw 19% mortgage rates in the 1980's. when it comes to affordability, we're talking about housing prices being double what they were. this is really painful from all sides of things. it's discussed the market moves and how fed hawks are circling investors right now. let's bring in our process at reporter. what were you watching today? there was so much volatility uncertainty throughout the week. >> there has been a lot of volatility. look at the vix because throughout the selloff or the last few months, everyone has

been pointing to the treasury market volatility and also foreign exchange volatility. we have not yet seen the vix hold above the 30 level which is historically very high for a consecutive string of days. a lot of strategist have not wanted to call and equity market bottom yet because we have not seen that sign up the vix above 40. people so that's a sign of capitulation. one said today historically a few consecutive days of even just about 30 has marked tradable bottom. he said you hold that level for friday, it could mean potentially equity market bottom. >> it was an ugly session when it comes to tech. so much of this was the apple downgrade story. >> it is rare to see apple particularly because when you look at all of the faang stocks and tech stocks, apple has been the safe haven. it is still outperforming the

nasdaq 100 year to date. certainly, it has been falling and today it did drag down on the nasdaq 100. it is the largest weight and it is rare to see a downgrade. the downgrade from bank of america was about the fact that consumer demand for their devices is slowing and it underscores the scoop that we have from bloomberg news earlier this week that they expected to wrap up their production for iphone 14 than they actually had to scale that back because they are not seeing that spike in demand. is this story going to bleed into other companies? we are seeing it in one of the u.s.'s largest companies right now. >> more in tech now, meta is planning to cut headcount for the first time in 18 years. that builds into that bearish sentiment overnight. su keenan is here with the details. tell us more about this scoop from bloomberg. >> this is the first ever budget

cut, the first ever talk of reducing headcount since the company was founded in 2004. it is fairly drastic from that viewpoint how this came about according to our bloomberg reporter who broke the story. it was a basic q&a between mark zuckerberg and staff and that's where it came up that there would be a sweeping reorganization. a hiring freeze that goes beyond hiring freeze and it involves leaving departing employees positions open, not filling them and managing out lower performers, employees who are less successful. they also warned employees of much tighter budgets for all teams. mark zuckerberg said at the end of 2023 facebooks parent meta will be a smaller organization. he made several comments to staff that bloomberg got a copy

of. he spoke about the economy saying i hope the economy would become more stabilized by now and for more we are seeing, it doesn't seem like it. the company wants to plan conservatively. when he detailed the kind of budget-cutting that would be hitting all kinds of teams, he used the word shrinking. shrinking is not something people associate with facebooks parent meta. they have been over hiring by many analyst accounts in the past two years. any kind of reduction of headcount again a fairly drastic admission that the advertising revenue growth is really slowing amid downing competition for users. as you know alphabet and snapchat have also made similar hiring freezes although they have not gone this far with the budget cuts. again, a very significant outcome. a lot of analysts say has to do perhaps with meta's switch into the metaverse and the investment in that regard.

those have been painful on the front end. they were anticipated to incur losses on the front end but in this current environment, the company appears to be bringing in both its costs and losses. >> softbank may also be making serious staff reductions not that surprising given that we have been talking about the challenges for a while now. >> this was foreshadowed when the founder said he would be taking proactive steps to navigate the downturn in tech after the record 23 billion-dollar loss for softbank. this is the result. bloomberg has learned that they have already begun the layoffs in the money-losing vision fund. people familiar with the matter expect softbank to cut at least 30% of the vision fund staff which is based out of london. we are talking about at least 150 employees being impacted. it all has to do with record

loss in the tech portfolios that softbank has. very much a sign of the times. companies taking these losses now reacting aggressively to navigate the territory. >> let's get you to first word headlines. liz truss is not backing down on economic policies. she is betting russia's war on -- blaming russia's war on ukraine telling the bbc her government has done the right thing. >> what we are focusing on is delivering the growth plan and making sure with things like our energy inflection the people across the country are protected. without growth, you are not going to generate the income and the tax revenue to pay for

public services we want to see. that's why the budget was absolutely essential. >> u.k. labour party has surged ahead in polling. the opposition now has 33 point lead over the governing conservatives who are under pressure. the pull comes ahead of the conservative party's annual conference on sunday. china is allowing some cities to lower their mortgage rates for first home purchases. it is a bit to help stimulate struggling housing market until the end of this year. the pboc says the new rates could be negotiated directly between the banks and their customers. hurricane ian is set to regain strength over the atlantic and make landfall in south carolina on friday after tearing a path

of destruction across central florida. it ruined homes, unprecedented floods across the state. power was knocked out for more than 2.6 million homes and businesses. resident biden says lives may have been lost. >> this could be the deadliest hurricane in fortis history. the numbers are still unclear, but we are hearing early reports of what may be substantial loss of life. we will learn a lot more in the coming hours. we know many families are hurting. our entire country hurts with them. >> still ahead, china's pmi's are set to reveal an anemic picture for the economy. we will get a preview later this hour. up next, at the market playbook with investment solutions and

why they see recessionary concerns looming larger than inflation. this is bloomberg. ♪

>> if you look at the dots, it looks like the committee is expecting a fair amount of additional moves this year. i think that was digested by markets and it seems to be the

right interpretation. >> the st. louis fed president jim bullard. our next guest says recessionary concerns probably loom larger than inflation. it's bring in the co-cio and group president at investment solutions. it's good to have you with us. is the recession concern driving markets right now because the fed seems to be squarely focused on raining and inflation given that the data has been pretty strong including labor market strength. >> i think that's absolutely the case. inflation and unemployment are the key focuses. jobless claims are down. for the fed to continue to raise

rates, that means that the markets, they are digesting this and returning to the fact -- probably looking at 75 in november and another 50 in december. it's a pretty harrowing set of increases. inflation, we have the path to get that under control. the august numbers were distressing. we saw the oil coming down but everything else did not follow suit. i think recession is more of a concern. >> we have the recession -- we have a little bit of relief with the boe intervention in the markets. where to fixed income investors go on this market? >> it's interesting because so many investors now, there is no

place to hide. i don't necessarily think that means -- at this point you're getting zero for your dollar. looking at other places, it's interesting for some folks but places like insurance annuities where to fixed income investment, we see payouts going much higher now. you're in a market with your uncomfortable with what's happening versus a product where you can get a higher payout. >> what does your global strategy look like if you're

looking for ways to diversify? >> it's tough because we look at what's happening in europe. consumers investors look at that and say -- i was talking to people to member that what's known about prices -- what's known about the economic turmoil they are facing is already priced in. it still becomes the right thing to diversify internationally. a broad-based diversify approach to international markets. even one where we try to get into smaller and more value ranges, maybe you're not so connected to the global scheme so you are getting some

diversification. it looks like a bad picture but think about the fact that the price is already recognizing that. >> you mentioned fedex warning as being a bellwether as opposed to a harbinger more downward sentiment to come. what are your expectations particularly now that we have an even stronger dollar to contend with? >> i think we are starting to see that. we are seeing more more companies come out and say we are seeing layoffs and we have to recognize that we can't come down in an environment like this. the companies now put into their planning a recessionary environment. the increases in inflation that we've experienced in the last year for a lot of corporate management teams may be the first time really in their careers that they have seen this

kind of market environment. they are contending with massively increasing inflation, massively increasing the cost of capital. a different environment than what they are experiencing. i think that we are heading for an earnings season with a lot of downgrades. >> when should we start factoring in pre-election volatility and what happens after the midterms? >> that might be an argument that there could be something on the other side. it is typical to have volatility in a midterm year. what we have going on this year is driven by a lot of other fundamental factors. you get past the -- the pre-election season and all the others, it has been typical in markets that you start to see markets come back from that. we are likely headed for recession, so that's one helpful

indicator for us to get past the election season. i don't think it offsets everything us that we are seeing unfortunately. >> always great to speak with you. we will be live again today later at the asia summit in singapore. we have great conversations coming up. this is bloomberg. ♪

>> taking look at the day ahead for australia and new zealand. the national cabinet meeting is for australia for today. companies may be forced to cut back on sensitive data they

retain about customers and the changes to privacy laws being considered after privacy attack. new home loan approvals plunged. >> take a look at how early trading is going across asia. kiwi stocks are reversing some of the gains we saw in the previous session. we had asian stocks eking out slight gains in the previous session but that may not be held today given that we have seen u.s. stocks falling to the 22 month low, a new bear market low. sidney futures down. it a little bit of upside for the aussie dollar at the moment. we have month end dollar buying pressure markets bringing forth their hedging dollar requirements. coming up next, we discussed

>> you are watching daybreak australia. north korea fired two short range missiles hours after kamala harris went to the demilitarized zone. the launch followed a single short range missile fired sunday and to others on wednesday. during her trip, she stood on the south korean side while north korean soldiers kept close tabs. the central bank of bangladesh has delivered a rate hike as it attempts to tame prices and curb exchange-rate pressure. it raised the rate by 25 basis points but left the reverse repo rate unchanged. the currency remains under

pressure as imports -- import costs increased. disappointment with -- declining throughout the country sovereign debt. the provider says dialogue with the rb are will continue with india to remain on watch and be reassessed for inclusion next march. the markets await a review from j.p. morgan in the coming days. the international monetary fund is working on an approach to the global food crisis. the imf adds 48 countries need $50 billion this year to eradicate food insecurity this year. those were your first word headlines. >> our next guest says if the worst is over for the yuan

depends on how much dollar strength is ahead. let's bring in our senior analyst. great to have you with us. even though we see it off the peak, there is no real fundamental expectation that we will see a weakening u.s. dollar. what does that mean for the yuan policy? >> i think the critical question is is this temporary respite or we have seen the cmi come off its highs and it's really going to come down to whether or not we see the u.s. dollar see another burst higher and that is possible with everything that is going on around the world. in that event, our assumption is the chinese government will continue to fight this administratively as long as they can before they have to step in

with direct intervention and start selling down u.s. reserves. if we look at the ministry of toolkit, they still have scope to cut the rrr on foreign currency to mom dated -- denominated deposits. it is now at 6%. historically, it was as low as 3% so there's another 300 basis points there. if they continue with a been doing for a number of weeks which is fixing stronger than what the projections are, there is also the possibility that they would again raise the risk reserve requirement on forward purchases, foreign-exchange and it could always reintroduce the countercyclical factor in the daily calculation of the fixing which is something that has been used then not used often on for a few years now. at the moment, it could be

introduced again and that is there for what it says the countercyclical management factor there for the calculation of the daily fixing. there is one other thing they have done if we look back to early 2016, the authorities intervened in the cnh market offshore to drive up cnh rates very high to try to squeeze out speculators by raising the cost of borrowing cnh. that is also an option, but one thing i would note right now is today, we don't see a gap between cm y and cnh that we did back then. back then, that gap got as large as 1400 and today it is much much narrower which suggest that we don't have a whole lot of speculation going on in the cnh market. >> in the meantime, stability is what they are aiming for at least until they get past the

congress. what are your expectations? do you see a pathway to lifting out of covid zero which is going to be the major impetus for any kind of economic momentum change? >> at this point, we have a property sector that is not functioning very well at all. it's hard to see how that would turn around and a short time. we have a deepening export demand here as the rest of the world slows down. that leads us with zero covid as being the one potential policy that the authorities could tweak to try to facilitate stronger growth on short. we assume there will be some tweaking happening to that policy is soon as the congress is over. the idea that it is going away

anytime soon i think we are much more skeptical about because simply of the risk of a large outbreak hospitals being swamped a large amount of death, we need to member that this is a country with 1.4 billion people. this is what the chinese government keeps saying. the numbers here will be so much larger than we have seen anywhere else in the world. if they have to take on the death rate of e-cig alert -- similar magnitude. >> we have seen the economic impact play out and a little bit of their recovery after shanghai came after a lockdown. it was sort of numbers are we expecting in the numbers in september? parks >> we expect it to be a little less strong than what we have seen in august. i think the key areas of disappointment are going to be exports of course.

as well as retail sales. retail sales surprise to the upside. be consensus by two percentage points last month which is a really big margin. that was due to the fact that we had adult outbreak in china and august of last year. that pushed down the base. that is going away in september. we think we're going to see retail sales pulling back. fixed asset investment will hold up for the most part. spigot drag from property is really counterbalancing anything on the infrastructure side. >> heidi alluded that some authorities in cities across china allowing local authorities to cut mortgage rates for the first time homebuyers and some other measures for lending programs. how much will that help? >> i think it will help a bit, but it is keeping people on the sidelines is they keep reading about the distress among

developers and they keep hearing about friends and family not receiving units they had put their life savings into. this situation i think both of those issues need to fundamentally turnaround before the chinese homebuyer starts to have confidence in pre-buying units. we could start to see a pickup in sales in the secondary market as more and more homeownership we cannot sit on the sidelines indefinitely, we need to buy something why don't we just buy an existing unit and the authorities have just said that they're going to get rid of the old requirement where you had to repay your entire mortgage on your home before you can resell it which was a big obstacle in getting more activity on that market. now that that is gone, we could potentially see a pickup in secondary market sales but that doesn't do much for growth because there's no new building

attached to that. i think we're going to need to see a lot more improvement before we start to see buyers having confidence prebuying units. >> good to have you with us. we continue to watch the markets with larry summers saying that the global market risk is building like it did ahead of the global financial crisis. bring in annabelle. >> larry summers spoke with us earlier saying this is a time of elevated risk. he does compare that to the buildup we had ahead of the financial crisis. in the northern hemisphere, summer 2007 that's when he said we started to see nerves around the u.s. housing market and he says investors should also be anxious at this point as well. the reason he is looking at this increased debt load in countries

around the world, central-bank hiking, recession fears, commodity prices, geopolitical risk. a long list for us to be worried about. he is also looking at the u.k. as another market risk. look at the debt levels we see in the u.k. near 100% of gdp. indicating how much more elevated those debt levels become during recessionary times. the risk being the energy crisis starts another major contraction looking like it could or will but larry summers saying the risk of that is that it could have a ripple effect because when a country is big as britain goes through something like this, it could have consequences that go far beyond. >> words that leave the outlook for commodities? >> this is something we have been looking at, broader recession risks because this chart taking a look at how much

oil has been moving in tandem with the equities market and reflection that oil is being driven more by the macro story. because we haven't seen any sort of changes in the underlying supply or demand dynamics at the moment. this is something that we spoke to goldman sachs about. one representative talking about the consequences the monetary is having on prices. >> inventories in the oil market are low but money supply is shrinking. that is taking the price level driving it down even though you still have few goods. we look at the fundamental picture, this'll continue to tighten as we go to year end. >> basically a story of dollar strength because people are pulling back on the commodities prices because of that strength we are seeing in the greenback. he says until we start to see any stabilization in the

currency we are unlikely to see major moves in the commodities market. he says we will need to see oil trading around 85-95 dollar range in order to encourage more supply to come back into the market. >> coming up next, a difficult balancing act to slow the pace of policy tightening while the world major central banks continue their commitment to big hikes. more on that next, this is bloomberg. ♪

>> the markets are pessimistic investors are sidelined other than the dollar, there's not a lot that are trading constructively. >> [indiscernible] >> guests on currency volatility as we continue to see a little bit of upside for the currencies trading against the u.s. dollar. we have seen the u.s. dollar easing for the past two sessions given that we were already around fresh record highs. that has affected mobile markets including the commodity space at the market -- at the moment. we are seeing a rebound for the bearish pound. -- british pound. the aussie has risen a little bit.

it was under a little bit of pressure so perhaps there is some support on the back of that decline that we saw on the previous session. we heard that some of the corporate funds brought that action a little bit earlier given all of the market volatility out there. a tight range of trading for the japanese yen. the level at which we saw the intervention for the first time since 1998 last week. >> we are seeing australia's central bank facing an uphill bottle -- battle. renewing its commitment to jumbo sized hikes. along with the rbnz, we get the sense that the bulk of the heavy lifting of these big moves might be over. they have to keep up with the likes of the fed. >> that's right.

the rba does want to go slow and i don't think anybody is doubting that intention. the question is whether they can really go slow in a world where the fed is going so fast. also the australian dollar is weakening with the u.s. dollar so high. if you go slow, you risk collapsing your currency. it's going to be a very tricky meeting and also a tricky communication challenge. >> the official monthly indicator slowing down a little bit this week, what does that tell us about where the rba stands as opposed to the rest of the world which seems to be remaining quite hawkish? >> even from the start of australian inflation, compared to u.s. and u.k. has not been that high.

we have not had the wage breakout elsewhere in the world. i think the biggest concern that the bank has is the household debt. australian households are some of the most indebted in the world. with interest rates going up, their repayments are going up and how that impacts household spending. also in australia, the interest rates, the majority of the mortgage book is on variable-rate. unlike the u.s. where it's fixed term. even if they do smaller hikes and the terminal rate does not go up as much as in the u.s., as much as it is estimated for the u.s. federal reserve, it will still be enough to cool demand in australia. >> we talked about the weakness of the dollar, we have seen the

outperformance of australian bonds this month. however broader broader markets taking this diversions? >> the market is welcomed this move from the governor to slow down the pace of hikes and australian bonds have outperformed. there one of the best-performing bonds in the world. the markets are welcoming it. although there are questions about whether they can deliver on this. this has been the case for some time. the rba has said they want to do something and they have not been able to do that because they have been swept away by markets. they are in this position again. >> the credibility question is still there. >> we continue to watch what global central banks are doing. mexico central bank has now hiked rates again by an outsized

amount 100 basis points. the expectation was for inflation to start slowing down. it didn't, they raised their inflation forecasts so we are talking about the highest rate on record at 9.25% for mexico. it is all about gaining the credibility when it comes to fighting prices. it's interesting because you also have to wait for all of the central banks, if you tighten too fast if you fight inflation too much will you cause a recession? that was part of the calculation coming from colombia because they unexpectedly slowed the rate of rate hikes. there slowing down a little bit. >> we are seeing the caution coming back into the central bank communications. we spoke about the rbnz earlier and how the governor said the bulk of the heavy lifting has already been done setting up for slower pace. we know is delayed transmission in terms of how quickly the rate

moves are transmitted to the broader economy. look at the situation when it comes to europe. there are so many types of crises taking hold. for germany certainly, you take a look at the challenge for the european central bank. inflation hitting double digits for germany. we are seeing prices jump almost 11% from one year ago in september. is much higher than the very high estimate of 10.2%. this is after we saw temporary government release measures and the energy crisis continuing to worsen. it creates more troubles for the european central bank and its policy path forward. we have more ahead on daybreak. this is bloomberg. ♪

>> a quick check of the business flash headlines. meta has outlined sweeping plans to reduce headcount for the first time. it is freezing hiring and restructuring units to trim expenses and reorganize priorities. meta will likely lead -- be smaller in 2023 then this year.

softbank group is said to have started laying off employees at its vision fund. it is expected to cut 30% of staff from the london-based unit. the fund recently posted $23 billion loss. most of that coming from a plunge in valuations in the portfolio companies. one of amazon's executives is leaving after making crude remarks on tiktok video. the procurement chief told bloomberg he sincerely apologizes for mistaken attempt at humor. volkswagen said porsche's final listing price of the upper limit raising over $9 billion and fetching a value of $73 billion.

the ceo said he is confident that the carmaker can whether an economic downturn. >> we don't expect a slowdown proportionate demand -- four po rche demand. we have a portfolio for the next years which is very stunning. we are looking very positive to the future. >> take a look at how futures are trading at the moment. a little bit of upside for u.s. futures after the s&p 500 dropped to a 22 month low. the lowest since november 2020. another bear market low. this is after we had hawkish comments coming from jim bullard and others after the close. it was the nasdaq 100 that fell almost 4% after the st. louis fed president's comments.

that investors have now understood that they can't escape additional rate hikes the coming months. we have some slightly better than expected eco-data. personal consumption, weekly jobless claims falling to the lowest since april. we have the treasury space resuming kleins. the 10 year yield slightly higher. the dollar index easing for a second session and everything on the other side of the dollar a little bit more strained. we are live again today at the milken institute summit in singapore. stay tuned for big guests from the investment bank. that is it for daybreak australia. daybreak asia is next. this is bloomberg. ♪

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