>> a very good morning and welcome to daybreak australia. i'm haidi stroud-watts in sydney. it >> i'm annabelle droulers in hong kong. >> good evening from bloomberg world headquarters, i'm shery ahn. elon musk revises his bid for twitter at its original price, avoiding a costly legal battle and sending the social media giant shares surging. >> stocks had their best day since may of 2020. the dollar and treasury yields slumping. >> opec-plus considers a cut of 2 million barrels a day. u.s. futures under a little bit of pressure after the best to-day gain since april of 2020. we are talking about risk appetite returning to the markets. we have the s&p 500 95% of members in the index gaining ground for a second consecutive

day. also the treasury yield continuing, really the bearish bets really being flushed out of the markets. even the two year yield falling below that level before rebounding a little bit. we also have crude prices rallying on that opec plus news. at the moment under a little bit of pressure and still above $85 a barrel. but really remember that despite the fact that we could see double the amount of cuts expected from opec-plus, many of the members were really not even meeting the official quota. how that impacts prices will need to be watched. take a look at what twitter and tesla are doing in the after hours. elon musk is willing to pay $54.20 a share. we are seeing a little bit of downside. even tesla climbed given the broad risk appetite on the

market. >> that twitter deal also contingent on elon musk thing able to line up the necessary financing at a time when it's difficult for banks to be selling their debt. take a look at what we have for australia's open today. taking their cues from what we saw on wall street and this idea that control banks may not need to be as hawkish. still, this overarching theme playing through that we could be seeing a bit of a head fake that investors should not be getting ahead of itself and the should be a bit of a relief rally. but we saw a bit of a retreat, that the fed might be near the peak rates narrative. the kiwi dollar under a little bit of pressure still and we can take a look at this chart. the kiwi dollar down around 6%

over the past month. even with the rbnz being a front-runner, certainly a lot of traders on the fx markets wondering if we could see them being the next central banks slowing the pace after the surprise move from the rva yesterday. >> it has that chance to continue to reframe this market reaction and there is so much yearning in these markets when it comes to global stock and bond, there are signs of a more global pivot but we are not expecting that. they are expecting to come through with that 50 basis point hike but given they have been at the forefront of the global trajectory, they must be getting close to a point where rates have peaked. or maybe they are ready to take a pause as well.

it seems like most are saying that it would be some time yet and there is no sense of readiness. >> we do get a hawkish surprise, at the forefront of tightening and we could see the wind knocked out of those. we saw the global bond rally, but also leading to stocks and stock investors thinking about peak hawkish this. the short-sellers being forced to fold after the best today equity rally since 2020. professional speculators race shorts last month given the s&p 500 plunged to a bear market lows. they are feeling the pain and retail investors last month dumped the most in single stocks and data going back to 2015. but really suffice to say there has been a lot of risk on bullishness in today's session that even tesla gained ground.

elon musk reviving his bid to buy twitter at the original offer price of $50 and $.20 a share. let's get the details from emily chang. what are we hearing at this point? emily: it is not a done deal yet. twitter hasn't accepted the deal, it has not dropped the lawsuit, but elon musk having another change of heart. he came back late monday night with a letter from his lawyer's saying i want to do this deal after all and i want to do it at the original price, $54.20 a share which is still a premium on twitter shares even after the big spike today. elon agreeing to pay higher than market rate for twitter despite all of the potentially negative changes that have happened over the last several months and the ongoing lawsuit.

two weeks away from when the trial was supposed to start. they acknowledge the receipt of the letter and reiterated their intention to close the deal. they did not say anything about what their actual response would be. the judge has said to both parties, come back to me with a proposal about how you intend to settle this and what my sources are telling me is that if you are twitter, you're wanting some certainty. you could go to the judge and ask for something called a consent judgment which will basically be a port order that he has to go through with this deal. it went just be an agreement between twitter and must but an agreement between twitter, musk, and the court. >> what does this mean for twitter if there is a certain deal because we know there is so much acrimony and so much bad blood between the parties.

emily: there is a ton of distrust on both sides. in the previous hour, he said that's putting it too diplomatically. they hate each other. and there is a lot of acrimony on all sides. a lot of twitter employees have left. morale is extremely low. a lot of people that don't want to work for him. there are also a lot of people that love elon musk and you could see an exodus and you can see an influx of people who want to work for elon musk and believe in his vision of twitter. there is still a question of why now and what changed. everyone on twitter's side has been deposed. elon musk was supposed to be deposed this thursday and friday in texas and there's the potential he did not want to go

through that. there have already been a lot of public embarrassment on both sides. and he could've gotten advice from his lawyers that based on the looks of this, the way the judge has ruled so far, she seems to be ruling in twitter's favor so the outlook for you getting out of this deal doesn't look good. >> we saw the big move in the twitter stock jumping the most since early april. stocks are extending the rebound and traders are weighing whether there are signs of central banks pivoting away from hawkish monetary policy and if they are credible. let's go to our global economics and policy editor kathleen hays. in terms of bond markets and equity markets, is this seen as a wag the dog moment and doesn't have the potential to change the

narrative? >> there is skepticism that we have seen peak hawkish in us earlier in the trading day and excitement that maybe we reach that after the rva. even if you doubt we have reached peak hawkish in us, we are in a very macro driven market. take a look at the breadth of the s&p 500 and you can really see that we have over in the last five sessions for three of them, we have over 97% of stocks. not just moving on company fundamentals. including from chris murphy. we have never seen market breath is strong. he was looking back to 2000. his historical analysis is maybe we are poised for a continuation. that's what we are looking at

when it comes to equity market breadth right now. >> that is not the rhetoric or the narrative coming out of the federal reserve that we will see peak hawkish in us. >> not at all. not yet. phil of jefferson joined the board of governors in may. here is what he said. they will be resolute on the inflation fight. i guess he opened the door for recession. they will bring inflation back down to 2%. she was once a dove and have joined the hawkish camp. she once again talked about not policy at this high level n-terminal rates. it's more what it means for regular people, consumers, and businesses. >> the suffering that people

tell me they are going through is on the inflation side. if we let it go, it's a corrosive disease. >> john williams is president of the fed bank. he said yesterday, but let's keep him on the table today, that policy isn't restrictive yet. there is still a ways to go. two big things here. the jobs report this friday and the consumer price index. those are two things the fed will look at it closely. i can't imagine much that would deter the fed from this rate hiking path. >> australia has a much more open and traded economy. that is why they can afford to keep monetary policy looser.

can the same logic be applied to the rbnz? or looking at what the rva is potentially doing? >> i think a bit of both but there is a pragmatic consideration for the rbnz. a stronger dollar may put pressure on the rbnz to support its currency. that is still a factor there. what we are expecting is a 50 basis point rate hike. the swaps market, i think we will go out on a limb here. why are they so bearish on what they are going to do. their target is 1% to 3%. it is the fastest rate in 32 years. labor markets are tight, the

un-up limit rate is 3.2 percent. just under a record low. this week, they said they would raise prices in the fourth order. expectations for inflation or 6%. what might slow them down. they are up 41%. this is what they're watching very closely. that is what they will listen for. there is no press conference today. hence that maybe they are looking at the end. i think it's an open door with inflation that high. >> no wonder we are seeing the markets pricing in the potential less hawkish in us. showing the fed, the boe, the

ecb, markets early pricing in a drop in their projections for rates over 2023. no wonder we are now seeing shorts getting burned. >> shorts are getting burned here. anyone skeptical of the idea of peak hawkish this is going back to the fact that the rally has been powered by a so-called short squeeze. the market sentiment was so low, we reached peak pessimism. hedge fund exposure to equity was at 13 year lows. any type of move to the upside was going to spark a really massive move in the opposite direction and we will see that type of short squeeze. we are seeing the stocks leading the rally of goldman sachs in the market and up 6% on tuesday while the s&p 500 was up a little over 3%. shorts getting crushed here with the stocks doing so well. >> let's now turn to vonnie

quinn with the first word headlines. >> opec-plus is considering a reduction in the production limit of as much as 2 million barrels a day. the impact on global supply could be smaller. the group may discuss a cut and smaller reductions when the group meets later wednesday. several members are already far below their official quotas meeting they won't have the curb production even if limits are cut. thailand is battling its worst flooding in years and inundated by seasonal storms. 100 60,000 hectares of agricultural land has been affected and 80,000 houses damaged. the deluge is putting upward pressure on food prices and household debt. more heavy rain is forecast in the coming weeks. former u.s. president donald seeking intervention in the fight over paper seized at his home. the special master appointed

with classified markings. they are investigating of trump or his aides illegally took sensitive government records when he left office. the u.k. government says it sees the prospect of a deal with the eu on northern ireland's arrangements within weeks. the former secretaries told the conservative party conflict -- conference that the tone of discussions have improved. the u.k. sees trade flows as achievable although many sticking points remain. powered by more than 2700 journalists and analysts in more than 100 and 20 countries. this is bloomberg. >> still ahead we will preview the rbnz decision. they ca longer risk of the country slipping into recession. here why the cio thinks the u.s. stock rally won't last long. this is bloomberg.

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>> u.s. stocks coming off the best today rally since april of 2020, the second straight day that we actually saw 95% of the s&p 500 members gaining ground. this perceived peak hawkish in us really boosting investor

appetite. our next guest is not sure the u.s. stock rally will last long. let's bring in senior partner at asset management. it seems to me that it's not just you. cutting the year end price target to 3500, what are your reasons? >> to add on to some of the comments, a lot of it i see is not just rate hikes, but a supply of the amount of debt that's out there. in particular with u.s. markets, there's is an extra trillion worth of debt because of government spending over the next year. another for quantitative tightening. and so that means there are a lot more bonds for sale. and so it's just because of this massive flood of debt and the existing debt that's already out

there that would really also make bonds more attractive than equities and put more and more headwind on the equity. as long as we keep seeing these higher rates, even if the fed slows down the rate, even the amount of bonds out there will push the rates even higher. >> how are you hedging when the bond market and the vix are screaming fear? >> one that i put on is a bear hedge and so three times that direction etf. it isn't unexpected that we have these types of rallies. a today rally is pretty normal when you get that type of fear and like i said, there are still

some major macro headwinds. in the correlation today was very high. it wasn't fundamental. i think we still have some headwinds with the high dollar and a lot of multinational u.s. corporations that can deliver disappointing results as well as more negative revisions in q4. that is another headwind i'm very concerned about that we can see some down days. i don't think we are out of the woods yet. >> because you say we need bond buys, that rally needs to kind of proceed. what would be the catalyst that you see for that? >> the most easiest and obvious one is for governments, reducing spending programs. reducing the quantitative tightening. policy changes. comes from our different governments.

i don't see the amount of debt out there, it would be hard to come purely from the institutional side. so it really needs to come from policymakers. >> where do you see the biggest opportunities? >> not that i'm saying that we are out. if it's merely a hedge, it's a small portion of my overall positions but healthcare services is one area that held up very well in september and is already looking very fairly valued. united health care is one of my favorites. it stays stable during the downturn in september and has been participating in the upside. i think these types of companies that have stable growth at very reasonable if not bottom valuation prices and as long as we are facing these headwinds

with equities, that tends to put a lot of pressure on valuations. look for those really good value stocks with various drawing fundamentals. >> always great to chat with you at main street asset management. more to come on daybreak australia. this is bloomberg. ♪

>> here is a quick check of the latest business flash headlines. ray dalio has given control up of bridgewater associates, the firm he built into the world's largest hedge fund. he transferred all of his boarding rights to the board of directors and stepped down as one of the three co-chief investment officers. hsbc is exploring the sale of the canadian unit as the bank's latest move to streamline amid calls of the largest shareholder to spin off its asian

operations. the review is in the early stage and no decisions have been made. a bloomberg intelligence says the sale at fx almost $10 billion -- could fetch almost $10 billion. micron could invest $100 billion to build a memory chip factory in upstate new york. the company will get 5.5 billion dollars in state government incentives for the plant which will generate about 50,000 jobs. coming up, oil extending the rally as opec plus cutting up to 2 million barrels a day of output. a check on the energy markets, next. this is bloomberg. ♪

>> taking a look at the to ahead

for australia and new zealand, they are opposed to raise interest rates for 8:53. that 4.1% decline was second only to a 4.4% drop during the global financial crisis. australia is seeking feedback to consider adopting a global tax overhaul. it wants responses by november 1 on the impact, design, and implementation of the measures. shary. shery: take a look at how oil is trading. we are seeing pressure in the asian session after jumping above $86 a barrel. this ahead of wednesday's opec-plus meeting in vienna where they will discuss plans to limit production by 2 million barrels per day. this would be double the anticipated amount so why is opec considering such a big move?

>> it all boils down to their concerns over how demand is being factored in the market. we have seen prices actually take a rather steady tumble. we have seen benchmark prices lose at least 20%. the underlying factor for that was inflation and how they are affecting demand. demand disruption is already underway in places like europe. in light of that, i think there is this idea that opec is doing that if the perception of demand is going to be so much weaker then maybe they should pull back on supply. >> will the output cut the 2

million barrels per day? sheela: bear in mind that a lot of the producers in that group have not actually been meeting their existing -- already. most of the people we have been talking to come analysts and experts, they all believe that the output cut, the output volume that is going to be held off, will not be anywhere near there. it could be a million or even less than that. only a handful of countries are able to make it and the rest of them simply do not have or have not been investing enough to ensure that their production volumes are healthy to meet the quota, respective photos. to a certain extent, the potential supply cut, the capacity limit sounds very big. the actual impact on what will be -- it will be cut for the

supply. it might not be quite as big as what our experts tell us. >> let's get you the first word news with vonnie quinn in new york. vonnie: elon musk is buying twitter. the move backtracks on his efforts to avoid it. he made the proposal in a letter to twitter on monday. twitter shares climbed after the news. europe says it stands ready to use all measures to keep the financial system stable. the financial services commissioner spoke after a meeting in luxembourg to discuss the situation. they will be careful to prevent any -- energy insecurity. >> every finance minister is saying whatever we do, we want

to make sure that nothing will allow the difficulties to flow into financial instability issues. whatever measures we take, we will be cognizant of the financial stability in the european union. >> prices have suffered their biggest quarterly loss on record. the 4.1 percent quarterly decline is second to the record drop in the wake of the global financial crisis. 4%. president biden has reassured kishida of the commitment they have to defend its ally. they condemned the first missile launch over japan in five years. biden and kishida say they will work with south korea on a longer-term response to the launch. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700

journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. shery: former president donald trump is asking the u.s. supreme court to intervene in the fight over government paper sees that his mar-a-lago home. for more, let's bring in jodi schneider. this seems like a significant escalation. tell us more about the showdown? jodi: it is a significant escalation. lawyers are going to the highest court in the land, asking them to intervene specifically asking them to allow a special master which was appointed to the court as well to basically review 100 documents with classified markings that would take this in florida. basically, trump and his lawyers are arguing that they deserve the right to do this and they

are continuing to say that the search was not conducted properly. >> how does this escalate legal fights with the government? jodi: this has already been fairly extraordinary. the justice department is weighing in against a former president, something we have not seen perhaps to this degree since richard nixon in the watergate era. at this point, what is happening is that trump and his lawyers are saying that they deserve every right to make their claims because the search was illegally conducted in the president is continuing to say this in court and in social media. by allowing the records to be -- all these records, they are basically contravening his

arguments about the fact that he had declassified it appropriately. not only were they declassified appropriately but they were not legally taken. the government is making the case that these were illegally taken and the former and his lawyers basically continued repeatedly to obstruct efforts to get these documents. shery: we are less than a month away from the midterm elections. the countdown is on. how does this factor in? jodi: five weeks until the midterms and everybody is looking at everything. one thing president trump has said is this is a way to stop him from running in 20 24 and even to basically curtail his influence in this particular campaign. he has been busy in the courts.

he said they had defamed him. so this is -- it has larger implications for electoral politics. not only for this midterm season but in the 2024 presidential race. >> jodi schneider with the latest peer coming up, the rbnz posed to raise rates by .5% points for the fifth straight time. this is bloomberg. ♪

>> you are watching daybreak australia. twitter shares closed at their highest level after elon musk said he aims to proceed with his deal to buy the company. what has been the reaction so far? annabelle: this chart taking a look at some of the moves we had across the tech space. you can see that we did see a -- big moves for the broader nasdaq. that up about 3%. when you take a look at the moves of the social media giants, focusing on twitter, but snap and pinterest in particular. elon musk reviving his deal for the social media giant could have been also a contributor to that.

focusing on pinterest, bloomberg intelligence has a note out on what the deal would mean if you just change it. essentially, they say analysts say that the deal removes uncertainty and that is a net positive for pinterest because it follows similar trends to what we have seen for twitter specifically, a sharp drop-off in user engagement. user growth also moderating so this does point to positives here for pinterest. it also has been a takeover target. bloomberg intelligence is focused on the debt to ebitda ratio in particular. they are saying it's around 10 times elon musk's offer so that is quite high. elon musk is likely to be focused on bringing in costs. >> we are just seeing elon on twitter, where else? saying buying twitter is an accelerant to creating the everything app so we continue to

watch that story. he's trying to avoid legal action. the other big determinant on where the markets go is how hawkish central banks are and that is the major sentiment driver today. how long do we see that dip lasting for? >> not that long. that is what strategists are saying. the reason we have seen this retreat in the dollar is the expectations that the fed could be less hawkish moving forward and a lot of strategists focus on what the rba data and what really came through on the 25 basis point move that was less hawkish than what had been expected by a lot of economists out there, but the view is that we are nowhere near close to the fed at making such a move as well. neither is the boe or the ecb so we should not be extrapolating too much and technicals suggesting we have room from the dollar to start to rebound

again. take a look at this chart. the bloomberg dollar index very close to that key 1300 level. that is the psychological one to watch and it could reignite more interest in buying the dollar as well. >> let's take a look at how currencies are trading at the moment. the bloomberg dollar index really seeing a little bit more easing in the past few days. we are talking about the spot index falling more than 2% from a peak last week. we have the pound rallying in the last couple of sessions. given the u-turn on the tax cuts for the highest earners, a little bit of a dip in the asian session right now. it is higher after underperforming all of the g10 peers. the kiwi unchanged at the moment. the japanese yen holding at that level.

yen volatility hitting three-month lows. we have seen the boj intervene in the markets. haidi: of course, the australian central bank becoming the first major to brace for rate increases. surprising a lot of the market on tuesday. new zealand central bank is poised to raise another .5 -- half a percentage point. our economist joins us from auckland. this chart takes a look at the basis points expected and that would take 3.5% for the cash rate. this is matching the high we saw in the global financial crisis. we talk about australia as a reason for being able to maintain a looser stance, being that it is more open, more openly traded economy as opposed to domestic. does the same not go for the

rbnz given there is an argument that this may be the peak? >> it will have a lot of different centers when it comes to what is going on, looking at a range of data. it does show the higher interest rates are heading into demand. cost and price increases starting to moderate. inflation pressures still remain very intense. further interest rate increases will be required over the coming year. we do expect it will increase the ocr i 50 basis points at this meeting. that's how far market expectations have swung. it will be a real surprise. that said, central banks around the world are making monetary

policy decisions. it is often backward looking. it is a case of making policy decisions in the rearview mirror. that is what is happening. a lot of that comes down to interpretation of this data and what this means for inflation over the coming years. >> what are the things in their rearview mirror are they looking at as the transition mechanism kicks in? home prices seeing that record quarterly slump. is that something the rbnz would be concerned about or would they be relying more on measures to try and balance that? >> the key mandate is to bring inflation back to the target. also for employment. a wide range of sectors -- these

outcomes. the housing market is one area where interest rates have the most apparent an immediate impact in terms of that softening activity. we have seen that come through now in a decline in house prices. that said, -- they have surged so much since the start of the covid 19 pandemic as a result of loose monetary policy and what we see in terms of price declines more recently is a correction. what we are likely to see over the coming years is as lower house prices discourage new developers from housing supply, we are seeing construction remains solid and the near-term pipeline is looking pretty solid there. we do expect the weaker housing

market, particularly with lower house prices, will blow through in terms of construction demand. that would be one of the areas where we will see that slowing over the coming year. shery: how concerned should the rbnz be on that slump in the kiwi dollar to a 13 year low that might propel inflation higher? christina: with the currency, it is relative -- a relative gain. it is increasing its policy rate at a rapid clip. a lot of the central banks that are tightening at a slower pace, it does mean it will have downward pressure. it puts upward pressure on the price of imported goods that will contribute to high inflation and we see that most immediately through petrol prices here at the pump.

at the end of the day, the reserve bank, the key mandate is in bringing annual cpi inflation back towards the inflation target of 2% for the contribution to cpi here in new zealand. shery: what about wage pressures? are we seeing that tight labor market we have experienced here in the u.s. and in the australian economy as well? annabelle: it shows just how slight the labor market remains. it is the primary constraint on big business. a proportion of businesses reporting debt -- it's the primary constraint that continues to increase. looking at some other measures in finding skilled and unskilled

labor, we are seeing signs of a shortage. labor shortages remain very acute and it does point to continue pickup and wage growth over the coming year and that will add to inflation in terms of the pressures. haidi: christina leung joining us to preview the rbnz decision which you can get more on on your bloomberg at tliv . you can get commentary and analysis from our team of expert editors. this is bloomberg. ♪

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>> take a look at how twitter and tesla are trading after hours. twitter surged 22% in new york trading and even tesla climbed after elon musk said he would reconsider reviving his $44 billion bid for twitter at the original $54.20 per share. this proposal to proceed with his act he was vision is posing -- acquisition is posing a headache for wall street banks paid that get more from olivia. a very difficult time for the markets. since the twitter deal was announced, this chart on the

bloomberg showing how yields have surged since then so how likely is it that this deal will get done in leveraged finance markets? >> thank you. the timing of this for the banks is a little bit unfortunate. what they are dealing with now is a market where investors are really not interested in risky debt and they are having trouble to offload that as we have seen an example. last week, there was an apollo deal for $4 billion that got shelved because they could not find investor demand. they underwrote this deal before the market volatility set in. we reported that the max interest rate on the unsecured bond, which is the riskiest part of the financing, would not go higher than 11.7%. fees are now trading north of 15% so in order to get that

yield investors are going to want and maintain the cap for the company, the banks are going to have to offer the debt at a steep discount and potentially take losses. haidi: there's going to be an impact on the credit rating as well for the company? olivia: twitter only had $5 million worth of debt coming into this deal and roughly $3 million was worth of convertible bonds. it's going to significantly increase their leverage and significantly increase the amount of interest are going to have to pay on that debt over the next few years. moody's has decided -- cited that we could be see more downgrades in the future. >> you mentioned how this would affect banks so are we expecting them to go through with this? olivia: a lot of this depends on the closing date so banks are promising they will get this

committed and financed before the final deal closes. the question is are they going to be able to get commitments from investors quickly enough and if they cannot, the banks are going to be stuck financing the deal himself. haidi: olivia with the latest on twitter and these are the stocks we are watching when trading gains in australia. the rba breaking with outsized rate increases, smaller than expected quarter percentage point hike yesterday. watching property shares in particular. they are expected to benefit from the dovish trajectory from the rba. that is it for "daybreak australia." the market opens in sydney at the top of the hour. "daybreak asia" is next. this is bloomberg. ♪

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