>> good morning and welcome to "daybreak: australia."

>> we are counting down to asia's major market open. >> top stories this hour, asian stocks look set to fall as a strong u.s. jobs data heightens concerns over the impact of tightening on a terry policy. chinese markets returning after the holiday. [crosstalk] haidi: the communist party congress is likely to hand xi jinping a third term as president. annabelle: and hurting the chip supply chain in economy. some cold water on the stock market, from the jobs report. jobs at -- joblessness at a 50 year low.

it suggest the fed is not going to look back over its shoulder and think about a pivot. it is more rate hikes, possibly 75 for the next two meetings, that's what people are betting. if you look at futures, you can see the nasdaq and s&p down about a third of a percent, big losses on friday. s&p 500 down 2.8 for -- down 2.8%. the nasdaq with nearly a 4% loss. moving to the bond market, no surprise with that kind of market and jobs news, the 10 year note yield approaching 3.9%. that for 10 weeks and a row, and it's not just the question of the 75 basis point hike, it is the terminal rate, the market pricing in a 4.7% rate by march. a little bit lower on the screen for the dollar, but it was higher on friday.

and oil, higher after those announced opec-plus cuts. west texas intermediate at 16% last week, about $93 a barrel. it is home -- it is holding city at that level. it is concerns about supplies pushing the price up. we had been worried about global recession hurting demand. what a difference and opec-plus production cut can make. annabelle: the question is how long can the oil gains last? the risk of the fed continuing to stay aggressive is really the trading tone ahead of the open in asia. new zealand online to the downside. a lot of markets in asia closed today for the holiday. taiwan and malaysia shut. in the currency space, particularly the yen, continuing

to weaken slightly against the greenback. very close to the levels that started intervention in september. 145.90. also in the offshore yuan is well this morning, looking like this after its best week since may. we are getting the readthrough on how weak consumer spending was during the key golden week period. the pboc under further pressure as we head into the fourth quarter. the pboc one of the outliers with policy-setting compared to what we see around the rest of the world. around 90 central banks hiking. the question is how aggressive they can stay when there are more recession headwinds. kathleen: that is certainly the big story this week, because we've got the imf world bank meetings, all of these central bank aggressive hike craig

stories is something emerging markets are already complaining about. of course there are a lot of questioning if it's going to be too much, because an unnecessarily deep recession and others are saying it will do what it needs to do and no matter what the cost or pain, it will bring down inflation. let's listen to larry summers, former treasury secretary, who has been pounding the table for the fed to keep raising rates until it meets that objective. larry: i think it is a real mistake to suggest that somehow we shouldn't do the monetary policies that are necessary to avoid inflation becoming entrenched because of concerns about financial stability. kathleen: is not just the fed, it is the ecb, it is the bank of england. rbnz last week, they did a faith the -- they did a 50 basis point hike. you have china and japan, they will not do anything, and the

rba notable last week as well, they did 25 instead of 50. a handful are not being so aggressive but many others are on that path. haidi: certainly, not doing anything when it comes to following the rest of the pack, but the pboc could be doing more. even as we get this drumbeat into the last week as we get into the party congress meeting, where we assume we get a third term for president xi jinping, a lot of analysts are hoping we could see a roadmap out of covid zero coming out of the party congress. 1600 new covid cases on saturday, the highest for china since early september. it comes at a pretty bad time when it comes to this key political gathering. a lot of these have come over the national golden week holidays and it calls into question will the leadership be willing to loosen the reins when it comes to covid zero even after this key political

gathering has happened? if not, we could potentially see the pboc forced to do more, and more heavy lifting on the fiscal side as well. when it comes to u.s. markets, the s&p, nasdaq coming off best weeks in a month. we will get data the next couple of days. our correspondent garfield reynolds is here. the main topic is still whether we will see this central bank misstep, policy error priced in. if you look at swap pricing, for example. what are you looking at this week? garfield: a big part of what i am looking at is whether we get a return into inflation or even after inflation. this might sound a little weird, i almost think the cpi is a sideshow compared to what the fed is going to do. unless you get an

extraordinarily big cooldown in inflation. having the jobless rate go back down to 3.5%, strong jobs growth, strong wages growth, there is no reason whatsoever for fed officials to say ok, the job is done on inflation. even if, even when we have some very strong indications there are major dangers for recession, they will be looking at the jobless rate and think 3.5%, why would we start hiking rates? you could argue if you get a slowdown in inflation, they say this shows we should be doing this because jobs are staying resilient and inflation is coming down. given that, i think there is a lot of danger for people who come into buy the dip. i also think when he of people will be willing to do that because we have such a strong expectation across a range of asset classes that peak inflation is in and therefore peak rate hikes are coming.

the little bit of hawkish and as we get from central banks, a lot of people are treating that as another step closer to when they stop. kathleen: i second everything you said about the fed and inflation, and even a week cpi report. that is our chief rates correspondent for asia, garfield reynolds. let's move onto china, where president xi jinping has begun the congress -- begun the final meeting before the party congress meeting. meanwhile, covid cases are mounting and we are seeing slowing economic activity. stephen engle joins us. it is a very interesting confluence of events as china gets ready for this very important event. what is going on behind closed doors in beijing? stephen: this is called the seventh plenum in the five-year plan, and the numbers of the central committee, the members

as well as the alternates are gathering behind closed doors as of yesterday. they will meet this week. essentially it is more mundane. they will be formalizing perhaps xi jinping's speech on sunday, which should cover the gamut of all of the challenges and priorities for the party going forward, as xi jinping no doubt will secure his president busting third consecutive term. the less party hungers he essentially did away for term limits for the top man, e.g. him. so there is lots to be had behind closed doors, but there are still obviously a lot of challenges that xi jinping no doubt have to address. the big one is the drag on the economy caused by covid. haidi: you know as well as i

that everything is perfect going into these big events, the skies are blow and there is no traffic, everything goes to plan. i don't want to see a big surgeon covid cases just before this. stephen: yeah, surge, you have to put that into perspective, 1645 new cases nationwide on saturday. but that is too many for the leadership in beijing to handle ahead of this highly politically charged conference that starts on sunday. the big clusters are far away from the powerbase, as the coasters -- clusters in inner mongolia. there were a handful of cases and shanghai as well as beijing. eight cases in beijing outside of quarantine. that will be a concern because again, china is coming out of a weeklong holiday were people, not as much as years past, did travel around the country. there could be more transmission than the leadership is

comfortable with. they will be watching that closely. beijing, yes there are blue skies, as you know, but the security apparatus will be in full force. if not, there would be a lot of movement around the city for the party congress. haidi: stephen engle there on that top story for us. let's get over to vonnie quinn for the first word headlines. vonnie: china criticizing the expanded u.s. restrictions on access to semiconductor technology. the foreign ministry called them unfair and said they will also hurt the interest of u.s. countries. they said they will harm supply chains and the world economy. recent u.s. measures to stop china's drive to develop its own chip industry and advanced military capabilities. south korea says its military will boost security cooperation with the u.s. and japan, including the deployment of what it calls u.s. strategic assets. this after north korea testfired

two more missiles sunday. they say the provocations violate the you insecure to council resolution and will drink and sanctions against its neighbor. russian president vladimir putin is blaming ukraine for the attack that badly damaged a key bridge linking annexed crimea to russia. in the first comment on the attack, he blamed the ukrainian secret service, alleging they were holding russians. kyiv has not officially claimed responsibility for the blast, but they have celebrated with a new postage stamp. the u.k. prime minister is -- mp's and her party. liz truss is expected to replace chancellor. she is fighting to regain control of her party. 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. haidi: still ahead, what is at stake in the upcoming chinese communist party congress. the former ambassador to beijing will be with those. next, we preview the asian trading week. our guest tells us what she is seeing as it recession proof investment. this is bloomberg. ♪

kathleen: let's look at the week ahead. the imf releases its latest world economic outlook and global finance in washington. this will be the fully in-person imf meeting since the outbreak of covid. u.s. inflation data expected, and india and china also releasing inflation numbers. also, battling price pressures. meanwhile, many economists expect the bank of korea to make a mini u-turn this week as the fed's rapid tightening puts pressure on the won. sing it was monetary 30 releases a policy statement on friday. the central bank expected to tighten for a 5th street meeting.

haidi: we are also watching chinese markets after the golden week holiday. they went into the weeklong break at the lowest numbers since april 2020. someone is saying the focus for returning traders will be china's specific challenges, including covid zero, and the ailing property market as we count down to the party congress this week. the end of this week, kicking off with jeffrey morgan, said group, morgan stanley with quarterly numbers. that is your week ahead. our next guest says she has shifted into stocks that perform well in a recessionary environment with high inflation and interest rates adding to uncertainty. let's bring in grady wolf. great to have you with a spear

we were -- with us. we were talking earlier about regardless about -- the fed is on attracted what about the markets that are second-guessing what the fed is doing? grady: we are seeing a shift out of growth stocks. the pandemic stocks. we are seeing investors shifting into safe havens of banks again because we know they perform well in a normalized curve. we have the gold miners action looking really good the next 12 months. we are anticipating a turnaround in the u.s. dollar. we are seeing a lot of shift in stocks -- consumer stocks that perform well over a five-year period and perform well in an inflationary environment. haidi: one of there is a policy misstep? there is a great deal of uncertainty. what are you expecting in the next earnings assume -- earnings season?

grady: we are expecting a lot of revenues and profits to be hit on the rising interest rate and inflation around the world a lot of company's have failed to provide guidance and investors have been quick to punish them on this front, knowing there is no certainty in markets globally. so when companies like one that was sold off last week. investors are looking for an -- for any certainty. if there's a downturn, we've seen rallies off the back of the rba coming in lower-than-expected in the markets so i think at the moment, any rally is short-lived. kathleen: how about energy? you've been talking about energy stocks a while and i'm wondering if the opec-plus cut last week made you even more positive. grady: absolutely.

we are really positive on the energy sector. there is a lot of momentum in investing in the likes of energy companies, and more concentrated stocks as opposed to investors piling into others for diversified portfolios. the ones catching our eye, the boss energy of the world. commodity prices are through the roof. we are seeing well prices at an all-time high lately. energy is definitely one sector we are seeing a lot of momentum at the moment. we don't see downside anytime soon. with opec-plus cutting the daily oil production, it is a positive and negative for oil prices in australia and around the world, but demand will continue. kathleen: what about gold? you are focused on commodities of all kind and you think if the

dollar turns around, gold miners locally in australia will surge, but the dollar turning is a big question at this moment. grady: it is a big question at the moment, when it will happen, but the recession outlook is high in the u.k. in europe, which will weigh on the u.s. market. local producers have done really well through the last few months and years. the australian spot gold price has maintained science through the downturn in the u.s. -- exceeds me, the surging u.s. dollar. gold is looking really positive the next 12 months and we are expecting a lot for different gold producers on that front. haidi: when you look at bonds as part of the balanced portfolio, are they becoming more prevalent? grady: they are. bond yields are soaring at the moment with rising interest rates. the diversification of the

portfolio, investors are increasingly considering bonds as part of their portfolios, especially in this inflationary environment at the moment. kathleen: many analysts, no matter what market they are looking at, are talking about the earnings season and looking at banks, etc. how are earnings seasons in markets around the world factoring into your expectations are what you are waiting to see? grady: from the big banks, we will see them coming out with their earnings season and we are expecting to see high profit but also looking for increased provision of doubtful debts. we know a lot of people around the world took on loans that they didn't understand or could not quite afford and did not have the outlook we saw the rba and said and around the world increasing interest with rate hikes. we are looking for the debt

increasing, and how big we are not sure, but we will be looking at that metric as reports are coming out to see how big banks are expecting defaults to increase over time. haidi: grady wulff. china bless the u.s. limitations on chip technology. we will have that story ahead. this is bloomberg. ♪

kathleen: a quick check on the latest business flash headlines. renault is said to be cutting its stake in nissan. sources say they are ramping up talks to split its electric car and combustion engine assets in november. nissan is pressuring renault to reduce its stake to 15%.

a company -- meta said it is going to notify up to -- users that their logins may have been compromised. meta is working with apple and google to remove apps that caused this. and an investor has sold his holding to a firm. he was -- this was once the most active trading bitcoin platform. haidi: looking at the day ahead, sky network tv has agreed to exclusive rights. gmu resources has signed an

agreement for eastern australia. we are looking for the government in australia to extend the life of a coleman -- coal mine for almost a century. coming up, we look at the china party congress and break down what is at stake for xi jinping and the world's second-largest economy. this is bloomberg. ♪

vonnie: you are watching daybreak australia. i'm vonnie quinn. china seeing a big rebound in

covid-19 cases just as the country's top leaders are set together in beijing for the upcoming communist party conference. a sharp slide in holiday spending is covid-related lockdowns continue to sap sentiment. china is raising elon musk's proposal for a twitter like app in taiwan. it could enforce a special administrative zone for taiwan. taiwan's ambassador thanked musk. the president wants to strengthen the economy and them a craddick allies. bite ned mensuration is ready to talk with north korea on removing weapons in the korean peninsula. john kirby said it will take cooperation from south korea and

japan. north korea fired two short range missile sunday, adding to 10 it fired in the last two weeks. the french president has urged citizens not to panic after a strike against gas stations left them completely drained. those are your headlines. kathleen: let's take a look at china criticizing u.s. plans to ban restrictions on semiconductor supply chains. president biden announced the curbs on friday. let's get more now. we are looking at a global recession. the chips industry beaten up. why has the biden administration moved to do this now? >> i guess you could see it in the larger framework, in one sense, of the china-u.s. competition. the u.s. argues china has

publicly announced ambitions, especially on ai and chipmaking, and that it uses its capabilities as they come online, these capabilities will be used to surveilled chinese citizens and build up the chinese military. this is something the administration has to take action against. it's part of a bigger whatever you want to call it, competition or antagonism between the world's two biggest economies. haidi: how do we see this impacting u.s.-based companies? tony: after this dropped, we heard from nvidia who said in so me words that they have already factored this in. but it comes at a sensitive time. for the entire industry.

with sales under pressure and there is an international aspect to it which is the biden administration, if you want to make something like this stick, it would have to get semiconductor companies and other allied companies to go along with that because the u.s. is not the only country where this happens. the country that exports the machines needed to make these high-end chips. there are a lot of complications, but when you step back and say how airtight can these constructions be given the international market ships -- chips, one company depends on another. it's a very complicated chain. tony: that is the argument taken

up by the chinese foreign ministry. in their response, they said this will backfire. it is unfair and illegal under international trade rules, which is something that howard -- would have to be taken up elsewhere. china said this will backfire and harm global supply chains and the global economic recovery . if you parse what the u.s. companies were saying, there is possibly some overlap. it is a global industry and the bottom line is this is something hard to enforce. haidi: staying with china and the chinese president, xi jinping has kicked off the final meeting of the top leaders before the opening of the communist party congress set to hand him a third term in power. let's get more analysis with the

australian ambassador to china. he joins us now. always great to have you on the program. obviously geopolitical tensions, be it with the u.s., with australia, inroads with the former islands in the pacific are all key, but does a shadow of covid lube over everything going into this congress? >> it is a huge issue and has had a very deep drag on the economy throughout the course of this year. with random lockdowns, some extended for very long times. but you touch on a good point. before the congress, domestic issues will prevail over policy issues. haidi: there are signs of with censorship that it is difficult. it's not like you can get an opinion on how they feel about

covid zero but there is such malcontent. do you think that's weighing into the leadership's ultimate desire for stability above everything else? geoff: absolutely. i think the random lockdowns, the uncertainty and demonstration of the states capriciousness is having a big impact on how people in china and big cities like shanghai, how they think about the system they live under, it's not just about covid. it's about the uncertainty in a one-party state. haidi: there's also being an investor of someone who does business with china. in australian business, has it been increasing frustration? geoff: very much so. a lack of certainty, the

capriciousness, and the inability to get things done. you don't really know if you are going to be able to meet a client or not, to travel to china. it is very damaging to the economy. kathleen: with all this even more public discontent, and i'm sure there's a lot more behind-the-scenes, everyone expects xi jinping is going to be there for years. that he's not going to get one more term, he's going to get many more terms. do you see any crack in that system? what will have to happen for someone somehow in the communist party to push back and gently let someone else take over? geoff: the key thing is what you said about the communist party. first and foremost, china does

have an institutional mechanism of governance, unlike russia these days. xi jinping is a servant of the party. at the point at which the party feels xi is undermining the parties legitimacy and support in the community, than elite members of the party could well question whether xi is the right person to leave the party. he has the presidency, there's a lot of concern about him being removed in the last congress. that's not the key position. its general secretary of the party and he has to have internal support from this party. i don't see anything happening between now and next week, but certainly over time, xi is unable to maintain support over the party and legitimacy, his position could be undermined and he could be ultimately brought down. kathleen: with so much going on

in the world,, coming out of covid, the power to make a move like that -- property prices. how big of a black eye is that? or do they figure it's necessary to stir that pot and the government helped create the crisis by putting focus on the indebtedness and causing bondholders all over china to start telling -- start selling bonds, etc. geoff: deleveraging has been underway for two years now. to a certain extent, amongst the leadership, there's an understanding that this excessively -- excessively leveraged sector needed to be deal leveraged. i don't think that by itself is an issue. but there's a confluence of issues that really challenge xi

-- covid management, weak economic growth, his management of covid, deleveraging and xi has quite a lot of enemies because of the way he's run the anticorruption campaign over the last 10 years. so the pressures are a norm us. -- r -- are enormous. haidi: there is a book called china the bubble that never burst. this is a country that frequently encounters historical crises but always surmount some. is that a benefit of eight top-down policymaking? does that mean even with political risks mounting that the economic risks will always be managed somehow? geoff: it depends on the circumstances. but the book is terrific and i

highly recommend it to everybody. a big part of the book is talking about how analysts and forecasters have gotten china wrong year after year after year. there must be something going on as to why people have got their calls on china so badly wrong. but quite clearly, they are doing 2% growth this year and you have to clean up the property sector, massive deleveraging, it may be getting closed -- close to a burst now. haidi: the geopolitical security -- do you see a change in the relationship, the dynamic between the u.s. and china? we had seen these meetings in recent weeks and months. geoff: i think they u.s. dynamic is a much stuck on competition. i don't see an offramp at present.

australia and china is quite interesting. not the course of this year, the chinese side has made overtures to the s trillion side. we've had to -- overtures to the australian side. we've had a meeting with the fed's ministers. as i read last week in the australian financial review, there are clearly green shoots. problem is getting more excitement into the relationship and on the s trillion side -- on the australian side, china is duly opposed -- imposed trade measures against australian products. and no australian government would move forward with the relationship until china removes those trade measures. china should not have imposed the trade measures and now they are the major barrier in moving the relationship forward. so while on one hand, china is indicating to move forward and normalize the relationship, they

won't remove the trade measure because they will lose face in the australian government cannot move forward until they do. kathleen: one of the big concerns in the u.s. is china's military might, how big it might get. xi jinping stays in leadership role, where does that go? geoff: china will continue to modernize its military as its economy grows and as its global reach expense. that is to be expected. i think still and most analysts would agree, that the u.s. is decades out of china in military capacity, experience in using the military and so on. so there isn't really any direct military threat to the united states or other people. the point i would make, as i made in my book, is that china,

unlike russia, is incredibly vulnerable to global sanctions. it depends on the rest of the world for all the iron ore, all the energy, big part of the food it needs. china is utterly dependent on world markets and that constrains chinese military adventurism. i think the sanctions against russia underscore the risks to beijing of military adventures anywhere, including taiwan. haidi: always great to chat with you. especially at a key time like this going into the party congress. coming up, we will hear from the u.s. labor secretary who weighs in on the latest numbers and what they say about the health of the economy. that conversation is up next. this is bloomberg. ♪

kathleen: u.s. employers continue to hire at a solid pace with the jobless rate returning to a historic low in september. in an interview with bloomberg television, secretary marty wash -- marty walsh flagged the labor market for rising prices. sec. walsh: we need to continue to bring down the rising prices, certainly what opec made a decision to do with not helpful. the president was disappointed and we are disappointed but they need to bring down those pressures. i certainly don't want to see the unemployment numbers go up. >> some people say that is the objective. how are you preparing for the pain they are forecasting and what can we do when it comes to things like immigration? sec. walsh: on the unemployment, we are talking about three months for those numbers to come down. we are still seeing 263,000 people going to work today.

we are still seeing those numbers going on, so that is something that is important. people still looking for work, we like to see the participation rate a little higher. we have to see what happening now. >> you broke a deal with union in the last few months. i understand -- are you worried about the rate? sec. walsh: the union leaders now are out explaining to the members within those contracts. it was a painful negotiation. two years with really no movement and i look at these contracts, they are good.

health care freeze cap, work rules change, a good contract for the employer and employee. hopefully we can get the rest of these ratified in the next six weeks. >> those workers would get better pay. capping the cost of workers -- have the poor workers asked for the same condition? sec. walsh: i don't know what they are asking for, but those are the conversations generally on the table. the west coast port negotiation is a very fluid conversation. they are having conversations and it's a longer process and they kind of take one segment at a time. i stay in close contact with the unions and both sides have

expressed they are still moving forward. there will be sticky issues that pop up every now and then but nothing making me concerned that i have to have a 20 hour meeting in my office about. kathleen: sticking with u.s. jobs numbers, let's bring in annabelle to talk about a three term strategist. annabelle: the readthrough from these jobs numbers is the labor market is tight. trying to bring down wage growth, what we are seeing is basically a lot of investors coming to terms with the idea that -- we see u.s. futures looking lower. that is extending declines with

new zealand also in the red. the fed was going to act, but jeffries getting a different read, saying it's not the fed but it has been telegraphing the heads. they could be doing another one in december. investors have been slow to catch up and that's why we are seeing what jeffries calls an emotional reaction to the physical realities. haidi: plenty of critics of the fed, mohamed el-erian is one of the most outspoken. what are we hearing? annabelle: he was speaking on u.s. television, giving his views on the u.s. jobs numbers and what that means. he says the odds of contraction are very high. he's saying the fed has a dual mandate, not only to bring down inflation but to restore its credibility.

as he has said, the fed is slow to act and that teens we have a high chance of the contraction or a session that could have been avoided. in terms of what else he spoke about, the opec-plus decision. he says the critical reaction, because we did see oil having its best week since may. it was understandable or could have been predicted. haidi: the eu is preparing several options to cut the price of gas. leaders are eyeing specific plans when they meet in brussels in two weeks. we have this report from prague. >> european leaders stuck in a tricky balancing act. storage up and demand down, they agreed gas prices remain unacceptably high but could not agree to put a limit on it.

when the germans speak, they say they are worried about the supply implications they price cap could do in a global market. they say prices need to be intervened ahead of winter. lack of coordination could see european company -- european countries outbidding and competing among each other and that would be unacceptable. they do not have a magic solution but they do have eight. a european diplomat telling us that by the next summit, that would be the end of the month on october 20 and 21st, the european commission needs to have something european leaders can discuss. the price cap seems to be approaching and the formula and designs behind it, we are far away from consensus. haidi: more ahead on daybreak. this is bloomberg. ♪

haidi: let's take a look at how fx is trading -- a little weakness when it comes to the aussie dollar and the kiwi.

millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. that means millions are saving hundreds a year with the fastest mobile service. and now, introducing, the best price for two lines of unlimited. just $30 per line. there are millions of happy campers out there. and this is the perfect time to join them... add a line to your existing plan, or see for yourself how easy it is to save by talking to our helpful switch squad at your local xfinity store today.

kathleen: you are