♪ >> welcome to daybreak asia counting down to opens in tokyo and seoul. >> australia has come online. we are expecting unemployment numbers from south korea. >> we are getting those now, seeing the unemployment rate in south korea for september, 2.8%, slightly higher than economists expected. this is rebounding from the lowest rate on record, the previous month, 2.5 percent. we saw accelerating inflation in south korea weighing on the labor market, weaker consumer confidence as well. the rate increased to 2.8% for september. but, in the historical context of things, the unemployment rate

is still pretty low after bouncing off the record low, 2.5% the previous month. >> let's look at the opening action comes to stocks in australia. it's a staggered open. we continue to wait for much of the market to come online. looks positive after what a drawback it was for u.s. stocks from the losses sparked by red hot inflation, the highest in about 40 years, on speculation that perhaps the year-long selloff of u.s. equities could have reached a bottom. we are seeing upside of .4%, futures indicated a gain of over 1.5% once we get into the proper open. watch gold miners and metal miners for potential downside with prices falling overnight. upside for oil producers with brent seeing gains. australian bond markets are seeing three year, the 10 year in particular tracking moves in u.s. treasuries.

the yield rising 5.5 basis points, just over 4% and the aussie dollar holding steady at $.63. >> u.s. futures are a mixed picture after the s&p 500 surged today. it was a volatile session that wiped out about 2% of losses. we were higher, lower, higher again. it was a roller coaster. not surprising. there is a lot of speculation now that given the selloff, perhaps we are at the bottom. not to mention, technical started to kick in, the 10 year yield around 390. the treasury curve flattening again. oil rising for the first time this week, despite seeing signs of crude inventories building in the u.s.. in the asian session holding around $89 a barrel. that has to to do with cpi numbers. the headline number eased a little. court cpi rose to the highest in 40 years and spooked markets

about what is to come from the fed. >> let's get more when it comes to market expectations and bring in and about. -- annabelle droulers. we are looking at more volatile moves ahead. >> that's right. the top with the open in australia, it looks like we could see a higher start to trade in asia. we have the asx 200 coming online and futures opening for japan. new zealand is in the green. the moves we had in wall street are setting the trading direction. options trading could have played into the rebound we saw. more theories are coming through including the trading truism that basically of selling does not work, you can try buying instead. some people are pointing out that perhaps with some intrepid buyers going to market, others could join the fray.

certainly, expressive -- impressive price action across the board today in the session suggesting markets were teed up for a court cpi print going into this week. yesterday we were talking about the core cpi reading coming in hotter than expected, rebounding above march levels. and we would have seen havoc through the markets. could this be a sign of capitulation in the markets? look at the volatility index. the vix index is still very muted. the bad news, it is an indication for us perhaps that there is more room still for stocks default. a lot of -- stocks to fall. a lot strategists say we need to see shock like the boj abandoning yield curve control before we see traders capitulating in the market. but, the vix traditionally above the 40 level is when we start to see the fed changing policy. >> we are hearing from governor carrix that that is not -- governor kuroda that that does

not seem too likely. he says it is not appropriate to raise rates in japan now. we have seen him double down on loose monetary policy. after the cpi numbers today the yen is with sighing. >> the imf is giving the boj backing for its mandate of easier policy settings as well. certainly, there is a lot of momentum around sticking with those policy settings. you mentioned moves in the yen in the session. it whipsawed. it is a little off its weakest levels, but still trading above the level that sparked intervention from authorities at the end of september. the question is, are we going to be seeing the boj stepping in on behalf of the japanese government again? traders are saying you need to look at different points for clues on what will happen next. some people, including those at td securities are saying, look at the yen volatility. that is still subdued. that is a sign we will not see

any policy shift. others are saying, perhaps, we have already seen it, given what we have seen in the yen futures contract. that is also looking at the amount of intervention we are seeing across the board in asia and new data saying that asian governments spend $50 billion in foreign exchange reserves last months, propping up currencies around the region. >> annabelle droulers joining us from hong kong with top market stories. we are following twitter shares in post-market trading. the company is saying elon mus is -- elon musk is being investigated by federal authorities over the billionaires deal for the social media company. we will get the details with ed ludlow. >> this is a filing from twitter to the delaware judge presiding over the trial. is not currently a trial, because we are on pause. they claim elon musk is being actively investigated by federal authorities with regards to his

acquisition of twitter. bloomberg already reported the sec was looking at how he disclosed through the mechanism of how he disclosed his initial stake in twitter in april. what is key here is twitter is essentially asking the judge, we want the correspondence, the documents the elon musk team has been sharing with authorities. they basically say this is a long-standing request. we want these documents. we believe they are relevant to the litigation between the two sides. >> ed, we know there have been a series of various investigations into elon musk. a lot had to do with conduct, stock buying, with regards to the twitter deal. are we likely to find out details of what this pertains to an means for the next step of proceedings? >> it depends on if we had to trial or not. the original issue in april when elon musk first disclosed his

stake in twitter, 9.2% april 4, it wasn't the type of regulatory filing he used. he basically used a regulatory filing type for a tacit investor, not an active investor. -- a passive investor, not an active investor that would make an attempt to buy the company. the judge has given both sides until october 28 at 5:00 p.m. to close the deal. that is where we think we stand. the trial is suspended. there has been a stay of proceedings until that point. it is interesting that this court filing, the letter to the judge was dated october 6. that was the day she put the trial on pause and gave the deadline. it seems to be a part of discovery. twitter in the litigation want to know what elon musk is saying to government authorities. they want to know where they go next. >> bloomberg's ed ludlow there. let's get to vonnie quinn with first word headlines. >> u.k. prime minister liz truss

is preparing to abandon a central taxcutting agenda following weeks of chaos in financial markets. officials at the treasury are drafting options so -- although no final decision has been taken. it sparks speculation that a chancellor will quit, but he presses on with the strategy. hong kong is considering easing property taxes and visa restrictions as authorities seek to curb an outflow of residence leaving the city. chief executive john lee could include measures in his policy address later this month. four years of political turmoil and pandemic led to an exodus of people, many in key industries like financial services. about 24 police patrolled the busy beijing intersection of -- after footage of a rare protest against xi jinping ahead of the communist party congress. two banners criticized his covid policies. authorities are on high alert ahead of the party congress

sunday. xi jinping is expected to secure a third term as president of the party congress. double news 24 hours a day on --global news 24 hours a day on air and on bloomberg quick take, powered by more than 2700 journalists and anaylsts in over 120 countries. >> china's communist party congress begins this weekend with a host of challenges facing the nation's leadership, from covid and property drags on the economy, geopolitical tensions with the u.s. over high-tech and taiwan. let's bring in our chief north asian correspondent stephen engle in hong kong. steve, what will we be looking for in president xi jinping's speech? >> there i say everything. -- dare i say everything. the party congress is the chance for the head of state to lay out the priorities and policies for the next five years, as well as the leadership that will be carrying out those marching orders.

this will be a big leadership shakeup at the party congress, likely, after xi jinping. xi jinping, as we just heard, saying that he is obviously likely to secure the presidency for a third consecutive term. he could rule indefinitely. he is past the mandatory retirement age, 68. he is 69. he could over the next two terms continue to rule in perpetuity until 79 or beyond. who he will put in place beneath him, the other officials that have passed the time in age, will be a key point of the congress. again, policy. his priorities as he enters into what is presumably his third term. lots has changed in china since the last party congress in 2017. there was a fairly optimistic beginning in the relationship with the trump administration. that soured very quickly. world went into pandemic. hong kong had protests there

economic -- there are economic and regulatory challenges in china. he has challenges you see on your screen here that he will hopefully address, whether covid zero, geopolitical tensions with the u.s., the future of taiwan, and his position, whether he formalizes a top priority of unification with taiwan, that is a key element as well that we will be looking for in this speech. there are so many things potentially over the three hour speech sunday. >> so many things. our chief north asian correspondent stephen engle. we will watch all those things. we will get more analysis on the big event later this hour with china watcher jude blanchette, joining us with insights in terms of what he expects to come out of the congress. next, u.s. consumer prices rising by more than forecast to a 40 year high in september, likely securing another big fed rate hike and potentially more. academy securities shows how

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♪ >> i do not know if it will be a soft landing. i don't think so, but it might. mild recession or tough recession. in a tough recession, you expect to the market at 20% or 30%.

i will not keep eyes across those three things, but for all of us that worry about risk, you should plan for those things. >> jp morgan ceo jamie dimon talking about a potential hard landing. the soft landing looks very difficult. our next guest is incredibly worried about a hard landing. let's bring in peter tchir, head of macro strategy at academy securities. it's good to have you with us. why is it? is it the actions of the fed, the global macro picture that worries you? what is top of mind? >> top of mind is the fed. i think they have already gone too far too fast. i am sure they will hike 75 at the next meeting. i do not think they should. even with today's cpi print it will get foggy. .6%, 7.2% annualized. that sounds horrible and would be horrible. 23. 50% of that was a shelter. that is calculated by the ioer.

this was the highest month on month shelter increase since 1990. there is no way that happened in the u.s. in september of this year. maybe september last year. this is really old data skewing the picture. it's wrong. data is rolling over including shelter and that will not be factored into the fed. if they hike, it will make it more likely we see a hard landing sooner rather than later. >> why are we seeing this in the market still? was it a matter of technicals at some point? >> it was a part of technicals. 3500 was a big strike on the s&p 500. we hit that. i assume a lot of people close out options trades and that helped that bounce. cat had week earnings tuesday. it bounced a little. yesterday we had some week data. it bounced a little. even today, it has been oversold. i think we are preparing for a bounce. if you start thinking about the u.s. economy, the fed will have to pivot. it will not happen this meeting.

but, despite price action in rates, i think people are seeing a turning over in the economy. inflation is coming to an end or getting under control. that will provide a little lift off for stocks. >> yeah. with this broad-based macro driven, rate driven selloff, is it becoming indiscriminate? where do you see opportunities that are perhaps being too heavily sold at the moment? >> the last two weeks have been violently unchanged, whether the nasdaq 100, the s&p, barely unchanged in two weeks. it is a front with all the rest. remain nimble. be careful. maybe, europe does a little better. there is so much bad news priced in there. you want to continue with airlines, travel. that seems to be doing well. there is pent-up demand continuing. you are seeing business travel return. i like that. i do not like asia. i particularly do not like china. latin and central america could be very interesting. that is where you are seeing

u.s. interests shift too and where you are seeing u.s. companies focus on so that is a potential growth area. >> i like china. i want more on that. you are not expecting upside after the party congress. you are not expecting any return for china to play the cyclical growth factor more globally? >> no, i see a realignment of the world. basically, china aligned themselves more and more with the commodity which autocratic nations, whether russia or in the middle east. they are embracing saudi arabia. countries are worried about what the u.s. did with russian dollar reserves. you are seeing autocratic buildup i think they will find customers. the u.s. does not want to buy huawei goods and russia probably does. you are seeing a realignment of who china and the u.s. will do business with. some starts with the government, whether poser inspection about what ships are making it into military equipment, how we are getting health care. companies have been very frustrated with the zero covid policy. you cannot get into china.

you cannot see your plans and equipment. you have too little control. i think that is separating and will continue to separate. >> looking ahead to earnings season kicking off tomorrow, is it a no-brainer in the micro -- macro economic picture where rates are going higher? >> you know, i think for banks, honestly, rates higher is generally ok. except we still see very flat yield curves. the front end risen a lot. to me, inc.'s always do really well on transaction volumes. they like trading and capital market activity. that has slowed down. in the u.s., mortgage volumes deteriorated. mortgage rates, 7%. you are not getting the fees. i think banks will disappoint not so much on net interest margins, but on a transaction basis. i think they will give an unclear outlook. that keeps coming back, you look at this backward looking data. yes, we see inflation. when companies and ceos talk

they will express concern about where it is problematic. having said that -- >> peter tchir, always great to have you with us, head of macro strategy at academy securities. a round of strategies -- stories to get your day going in daybreak. terminal subscribers get that at dayb . it's available on mobile in the bloomberg app. customize the settings so you get the news and interviews on the assets that matter to you. this is bloomberg.

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♪ >> sources say kroger is in talks to buy rival grow sure albertson's for $25 billion. let's bring in leanna baker who leads our u.s. steel's coverage in new york.

how much is this to do with the global macro picture when we talk about soaring inflation, soaring food prices? >> it is putting a spotlight on food and grocery. there is so much competition happening for where we buy our food with walmart and amazon. this is an interesting time for these two companies to maybe come together and try to raise margins and banded together against the big threat of big box stores and big tech. >> it really creates a grocery giant if this deal was to go through. who are the major winners and losers here? >> this would combine the number one and two big u.s. grocers. it would attract a lot of antitrust scrutiny. while we are waiting for the deal announcement, it could be any minute, we are hearing a big winner for sure would be the shareholder, a private equity firm in albertson, cerberus. they have been holding on for 16

years to this asset. they have been trying to do various deals with it for years. it ipo to a few years back. we do not know if it would fully exit, but it would be a big winner here. of course kroger, when the story first hit, the stock had gone up a little bit. it did not end the day much lower. i think shareholders in kroger would may be applauded the deal. -- applauded the deal. >> you mentioned antitrust issues. how big are the two companies and how big are the regulatory hurdles? >> kroger is number one in the u.s.. albertson is number two if you view the market as just grocery. if you compare it to walmart, not necessarily grocery, but more people are buying food there, it's not as concentrated. it depends on how regulators view it. certainly, no slamdunk. there have been a lot of block

deals in the history of grocery transactions. >> bloomberg's liana baker on that potential deal. we continue to watch for development there. let's get you a look at some of the business flash headlines we are tracking. goldman sachs dropped tsmc from its conviction list saying the company is weathering choppy waters near term. when it comes to the chip giant slashing 2022 capital spending targets by roughly 10% to $36 billion. this sharp reduction suggests tsmc is bracing for a broader than anticipated downturn. netflix is set to introduce a lower price streaming package in november, charging customers last by subjecting them to advertising. the $7 a month plan will be rolled out in the u.s. and 11 other countries including japan, france, and brazil. the plan includes four to five minutes of commercials per hour with lower video quality and a smaller selection of content. apple and goldman sachs offer

savings accounts to users of the apple credit card. apple says card users will be able to open a new high yield savings accounts from goldman with no minimum balance requirements. this move is part of an apple event to feel growth in coming years. there is plenty more to come on daybreak: asia as we count down to the final trading session of the week. u.s. stocks roaring back after initial losses. the red hot 40 year high for the inflation rate. s&p futures at the moment of positive, a little bit of upside when it comes to trading in dow futures as well. the nasdaq continues to see a little more downside area certainly, there is repricing in these markets. potentially u.s. stocks at least may have hit a bottom after what has been such a prolonged selloff. there is more to come. this is bloombe millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile.

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♪ vonnie: this is "bloomberg daybreak: asia," i'm vonnie quinn. the international energy agency says the opec cut may tip the economy into recession. the group cut output to 400 $70,000 -- 470,000 barrels a day. the house january 6 committee voted to subpoena former president from there he lawmakers want to question him about the 2021 attack on the

capitol and documenting testimony and documents about his role. it is an escalation in the committee's demands to hold trump accountable. the sec is deepening its probe into outside messaging services and looking into practices at investment firms and major banks. the sec issued $2 billion in fines to banking giant mitts -- banking giants for the use of messaging apps due to compliance and record-keeping. it is reported dozens of firms have requested and received information from the sec. bank of england is expected to end its emergency gilt-buying program on friday as bonds show signs of recovery after a historic selloff after the boe wrapped up long purchases. total value of the central bank intervention over the past two weeks stands at 17.8 billion pounds.

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. ♪ david: let's look at -- haidi: let's look at the yen, continuing weakness depending on when -- on what we get from the u.s. dollar trading. it is the lowest level for the yen in more than 30 years after the hot u.s. inflation report. the boj governor is sticking to keeping policy loose to support the economic recovery. the boj wants significant wage growth as the missing puzzle piece to bring their policy. let's bring in our japan and korea economy editor paul jackson, who has just turned from the finance minister who said he had to explain to intervention moves while adhering to the fact that their lady further intervention if there are sudden, volatile moves in the exchange of market. what lies ahead?

and how much space do they have to continue intervening in the currency? paul: the first take away from today's comments in washington is that team japan is sticking with its messaging, sticking with its policy. finance ministers suzuki reiterated warnings that japan was prepared to act boldly against any excessive or speculative moves. meanwhile, boj governor ku roda said he would keep on easing. the japanese economy was not ready for interest rate hikes and the easing policy must continue. more of the same policy-wise and messagingwise. however, japan has intervened in september and is prepared to do so again.

it has got enough reserves by most calculations to do another few interventions if needed. so, markets have to be on watch. last night, there were some sharp moves when we hit that 32-year low. didn't look big enough to be an intervention, but notice from the comments in washington, one finance ministry official declined to comment on whether japan had stepped into markets again. that leaving doubt out in the markets is probably a smart move. shery: it touched 147 point 67 and we are not expecting the government to give us a heads up when they actually do step into the markets. but what is the top coming from either minister suzuki or governor kuroda about having to explain the moves to international players? we have talked about how

unilateral intervention by japan will not work, given rate differentials and where global central banks are vetted as opposed to the boj. could we see more coordinated action? paul: good question. i think for now, japan's main concern is just not crossing the line. it has got a balancing act to keep its explanation that its recent intervention was based on too much volatility, and explaining its case that we are not protecting a level here, we are not trying to defy where regular market activity is taking the rates. but they don't want speculative moves. now, whether we get to more coordinated action on a wider basis, we still have to see more dollar movement before that stage.

shery: paul jackson joining us from tokyo with the latest on the japanese yen. we are headed towards u.s. earnings season, banks kicking off friday, citigroup and j.p. morgan chase among first giants to report. the two sets of earnings and outlooks will be scrutinized for clues about the direction of stock prices. bloomberg's su keenan joins us with a preview. we already know the message is expected to be grim. su: it has been a brutal year for banks and we already know the big banks are expected to post the biggest profit decline of any s&p 500 index sector. that is according to data from bloomberg intelligence. in fact, if you exclude banks' earnings-per-share and growth projections, then the s&p 500 would probably be double their current levels. what to watch for? lending, jobs, trading in deals

cash trading and deals. jp morgan stanley, and others all reporting on friday, we have a broad picture of the economic landscape and the devil is in the details. stocks rallied strong thursday, rising with the rest of the market, but the hits in these earnings reports are going to come hard. we already know that investment banking fees, for instance, will be down considerably. estimates for investment banking declines are fairly grim, as mentioned. haidi: do we see trading to come up as a bright spot? su: that will be a bright spot in terms of fixed-income trading for some banks, jp morgan's fixed income trading expected to be at 12% versus last year. and shares of the bank have been down more than 30% year-to-date compared with a 21% decline for the snp 500 -- s&p 500 index financial index.

analysts say fixed income is all the more important for jp morgan with fees down. we heard jp morgan ceo jamie dimon morning of recession and ipo's and mergers are down and asian banks have been in the lead in that sector this year. haidi: bloomberg's su keenan. next, china's 20th party congress begins on sunday. president xi jinping is expected to get a third term. dude blanchette -- you'd -- jude blanchette joins us next.

♪ >> i think a longer-term picture in china is still bright. because i know the people in the culture and i think it is good, but they have ager issues. >> we do not seek a cold war. we do not ask any nation to choose between the united states and any other partner. but the united states will be unabashedly promoting our vision of a free, open, secure and prosperous world. >> this is not a time to create fresh ruptures, fresh cold wars, which means the united states and china. >> we have our scenario

planning, we also there is no increasing conflict on taiwan. >> despite all that geopolitical things that are going, it is still a very attractive market. >> as the chinese economy continues to slow the way we are seeing come of that could have a great impact on the world economy. >> you have the number-two economy that is not jumping forward. anabelle: bloomberg tv guests on the outlook of chinese markets ahead of the chinese party congress -- communist party congress. let's start with the economy. this is a period of great domestic uncertainty china -- covid zero policies, the campaign to rein in debt in the property sector. the official target is 5.5%. this chart is looking at forecasts and we are now at 3.3%. a lot of it is down to those

covid zero policies. we know beijing has no big plans to switch on that, so not expecting any sort of big announcements toward opening up. but investors are going to be listening for any clues on covid, which could whacked trading sentiment. -- whack trading sentiment. we have never seen a csi 300 performing so badly ahead of a cardica. the china index is at its lowest in more than five years and a 60% drop from the peak just five months ago. the other major concern is what support is offered for the property sector because efforts to far have not spurred any sentiment rebound. big deal for local governments as you can see that they are physical balances -- that their fiscal balances, they are spending their expenditure, in blue, a lot more than they are making. haidi: for more expectations around the key communist party

meeting, we are joined by the freeman share -- chair at the center for strategic international studies, jude blanchette. i will start with the sobering part of your latest report -- you see china going into the future becoming more coercive and dangerous. do we see signs of this that you are looking for in the speech this weekend? jude: when you read those words back to me, i feel like i was overly pessimistic. but this is an important moment, one of those rare windows where we get to see the party lay out its thinking but most of us watching this are trying to caution observers that the best indicator of where china is going to be in march of next year is where the policy trajectory line is now. the party congress doesn't magically change the basic --

the basic mathematics of policy calculations. a good report just let into this event expectations in changes on covid policy and where the economy is. i need, those calculations don't fundamentally alter or adjust after october 22, when the communist party congress wrapped up. we should be circumspect in our expectations for big policy suites. haidi: it also doesn't change the trajectory when it comes to economic or public health policy. but the matter is, you see domestic governance challenges constraining economic growth. are there politically palatable ways to address this? jude: it is one of the great mystery of xi jinping's now 10 years in power -- he shows himself to be remarkably power in certain areas, he performs

military purges and dismantles faction for it but he can't implement a property tax. he can't raise the level of chinese citizens paying income tax, roughly 7% of the population paying income tax versus oecd, an average of 45%. so, he is extraordinarily powerful but still shows himself unwilling to use political capital to push through, i wouldn't call them reforms in a liberal sense, but to upgrade and modernize the fiscal system. and i don't think it is a matter of he doesn't have enough power and maybe two weeks from now we are suddenly going to see a new world, he clearly just sees it as two frocks with risk. so, he is unwilling to push those adjustments. shery: is that because use capital and the political aims he has to play domestically? he is potentially getting a note from year and a new economic

advisor, the vice premier is set to retire? jude: yeah. one thing people are watching, if we see a full suite of retirements, and it could be at pboc, it could be at cbirc, we could see the whole senior team of economic policy advisers leave. and early indicators, when you look at people at ndrc or even if you see someone move into premier, these people are not coming in to rock the boat or go in a different direction from xi jinping. they will be brought on to continue to push forward with the line of policymaking right now, which is around self-sufficiency, industrial policy, technological upgrading, in a securitized view of economic policy given by geopolitical tensions.

shery: let's talk about the geopolitical tensions. we saw beijing's reaction to u.s. house speaker nancy pelosi visiting taiwan. what did that tell you about how china is going to position in the next five years when it comes to not only taiwan, but also the u.s.? jude: they told us two things, about beijing and the u.s. which is that both beijing and the u.s. right now don't have good strategies to manage tensions in the straits. you're going to see continued efforts to send congressional delegations, which will amp up tengion. -- tension. and you will see a response from the pla each time as it tries to escalate. but on beijing itself, we will see language out of the party congress, specifically in xi jinping's work report, but it is

unlikely to be much different from the taiwan white paper they issued. beijing is in a cul-de-sac when it comes to taiwan. they have no more carrots, all they have is stick. but this is a dangerous game beijing is playing because any conflict would be catastrophic for the level economy and the united states. it would be fundamentally and existentially risky for china given the proximity of taiwan to the mainland. we should expect the potential for conflict in the region, but it is going to be two superpowers clashing without a good strategy to finding a path to peace. haidi: the existential threat is always there for the party. xi jinping has been forceful for two years, -- forceful for

years, but is there a risk of lytic backlash or does this set the tone for governance? jude: that is the real black swan risk, it is hard to price right now. in some ways, xi jinping is reverting to the mean of the coming is party's 100-year history where succession has not been institutionalized, up to the whims of the leader. that is the case with most authoritarian political systems. it is unfortunate now, because china is the second-largest economy in the world, now entering into a period where, for the first time in decades, we have no idea who the first in line is. and xi jinping will probably live to be 730 eight. most authoritarian seem to live to old age, but there is a probability he has some sort of health event and we are in new territory. shery: jude blanchette, freeman

share of china studies at the center for strategic international studies. we will have special coverage for the party congress that kicks off on sunday, starting at 8:30 p.m. hong kong time, 8:30 -- 8:30 a.m. hong kong time, 8:30 p.m. new york.

shery: the philippines central bank governors is the bank may raise its key rate by 50 or 75

basis points. he spoke with us from the sidelines of the imf meetings. >> it is really a question of whether it is 50 or 75. i cannot say what we are doing because i don't know the direction the board will go. kathleen: 75 would be quite a step for the central bank of the philippines. >> yes. the advantage 75 is, it will probably reduce the pressure on the peso. and also, reduce inflation in 18 months or so. but the disadvantage is that the economy is not fully recovered yet. it is recovering from covid and we want the recovery to continue. kathleen: the peso is down 13%

this year? >> it is. kathleen: clearly a concern. how big of a driver is that part of it? because your inflation rate is still alive and you have a worry about this economy that is fully recovered, so how much of a factor pushing you toward even a 75 basis point hike is the weakness of the peso? >> let me put it this way. i have been told that if i had been told that the fed -- if i have been told that the fed is no longer raising rates, i would have said we have done enough already. the path is already target persistent. by 2024, we will be back to 3%. but this changes everything. because if this pushes the peso to become too weak, it could add to the inflation.

clearly, what the fed does has very significant effects on what we will do. kathleen: my colleague haidi is going to join with a question now. haidi: there has been talk among members of the g7 at least about the effectiveness of dental coordinated currency action, is this something you would support if fx markets get more volatile? if currency deserves are becoming a problem? >> the best possible option is a global economic action. but i am not sure that it could happen. because every country doing its own will be less effective than all the countries together, with

the overly strong dollar. shery: good to see you again, governor. will we see those rrr cuts you talked about before the end of the year and now with that complicate your monetary policy stance? >> the way it looks, the fed is going to probably do at least two more 75s and maybe another 50. so, its a question of how much we will respond -- it is a question of how much we will respond. the argument for not responding point by point is that our inflation rate is lower. it is lower. the argument for moving

something higher is that the pressure on the currency also has to be addressed. haidi: the philippines central bank governor speaking to us. this is bloomberg. ♪

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♪ shery: this is "bloomberg daybreak: asia," and it is all about inflation. u.s. cpi numbers, the core data accelerating in the most in 40 years, whip sawing not only u.s. markets, but the japanese yen. and we are heading for chinese inflation numbers as well. haidi: that heightens expectations for at least 75 basis points next from the fed.

some are calling for a full point hike and that is feeding through central banks here in asia. we heard from the philippines central bank governors saying they would have to react depending on what the fed does. we are watching out for both the central bank decision as well as data singapore on economic growth. shery: singapore has seen inflation accelerating to the highest since 2008, so we will watch numbers coming from nas. we ought -- mas. we are getting gdp numbers for the fourth quarter, the estimate coming in at 4.4%. this is much faster growth analyst -- much faster growth than analysts had expected. the previous quarter was upgraded to 4.5 percent. easing from the previous quarter, but still pretty strong. we have seen the reopening in singapore, influx of tourists, stronger house prices as well. the quarter on quarter number beating expectations of 1.5%

growth, counting back from a contraction in the previous quarter. we have seen growth coming from construction, services industry as well in singapore. haidi: we are seeing that move from the central bank, the mas, re-centering the currency band. they see 2022 core inflation at 4.5% and our recent ring the midpoint of the currency band, keeping the slope unchanged. singapore, using the exchange rate rather than interest rates like other developed nations, to stabilize prices. all 19 economists we spoke to expected they would be making got move -- making that move to strengthen the dollar. there are higher housing rental car prices and a lot of that has been borne by residents, but the

becoming lazy and potentially coming into view. bloomberg economics is saying the move to re-center the currency band that the prevailing level should allow for the sufficient slope to further appreciation in the singapore dollar to lean against on the elevated costs i have been talking about. the 2023 cpi has inflation and 5.5%-six .6% and they hope policy will help dampen inflation and raise the currency band, maintaining the slope and with. watching the singapore dollar, we are seeing it climb the question is how long that is going to last, -- seeing it climb. the question is how long that is going to last given pressure from the u.s. dollar, and that according to analysts depends on what happens with the fed. this is the third time mas has

tightened since october. you can get a lot more on this, get a live reaction from our tlv go and our team of experts. let's get to the market open. it was a hugely volatile session for u.s. markets. anabelle: it had swings of more than 5%, but the west session ending 2.6% higher. that sets up a rosy start to trading here in asia. opens for japan and korea and australia dollar -- australia, already online. the rate hike in december already baked in, already seen in moves across the fx space because we saw the yen dropping following the cpi print to a level we had not seen in more than 30 years. this morning, looking like this, we are still keeping an eye on whether we see anymore intervention from officials, given what we also heard from

the boj governor and the finance jeep in washington, sticking with the mandate for easy policy-setting, so do virgins is in play. inflation data are changing now, to look at the open for treasuries, dashing any hopes for a fed pivot. that led to a huge reaction and treasuries in the previous session, the 30-year yield gone 4% for the first time since 2011. also watching the more rate sensitive two-year, moving as much as 24 basis points, the highest since 2007. the five-year yield also on watch. in oil, look at how brent crude is coming online. pretty flat this morning although we are looking at a weekly loss, given these fears around fed rate hikes and what that means for the recessionary outlook. and this has been playing into wti throughout the session.

gold as well also coming off moves earlier, the hot inflation print threatening more fed ex and i had. and bitcoin is another interesting asset class to watch because it has been muted in terms of reaction of late. but some are saying that when we see low volumes, no volatility, it is not a great mix for crypto. haidi: let's get more analysis when it comes to what we are seeing from the singapore gdp read as well as the mis decision. bloomberg chief rates correspondent in asia and the current joins us now -- enda curran joins us now. that core inflation number looks like for the rest of the year, it will remain challenging. enda: indeed, a lot going on, gdp coming in much stronger than expected on one side, strength across the board, manufacturing,

services because debt services, construction and that speaks to a booming singapore. core inflation is forecast to stay around 4%. that is pretty high, speaking to the challenge nas as. the central bank did also tighten policy this morning by strengthening the exchange rate. with the economy in a sweet spot , that has allowed authorities to strengthen the exchange rate without worrying about trigger -- about triggering a recession or hard landing. when you look at the core inflation forecast, it suggests more tightening will be needed in the months ahead. so, a balancing act, but a strong gdp number four singapore, which gives them impetus for hiking. shery: singapore is known for really trying to control monetary policy.

if they are using the exchange rate and we did see the dollar strengthened of the bit, it did strengthen the last few times they tightened this year, but not for very long, especially against the u.s. dollar. how much leeway to authorities in singapore have in order to control their economic policies -- there macro economic policies enda: they use the local currency to strengthen the u.s. dollar for u.s. goods, that is fine, but they have to keep their eyes on competitiveness when it comes to exports. the big story overnight was a really strong u.s. inflation figure, which will mean ongoing u.s. dollar strength, which will challenge what the mas is doing to strengthen their own currency. they are not the only central bank in the region that is trying to put strength on the currency good look at japan. but what is happening in the u.s. won't help what the mas is

trying to achieve. i think a lot of central banks are hoping at some point, there will be a fed pivot, which would take pressure off the dollar. but that doesn't seem to be in the cards. when you look at nas, there is expectations they will have to keep going with tightening because of the counter pressures they are facing with the strong dollar and strong u.s. inflation story. i wouldn't say this mas tightening cycle is over yet. shery: bloomberg correspondent enda curran. the yen is weakening 6% against the u.s. dollar this year despite tightening measures. let's get more on singapore with our next guest, kelvin tay cio of asia-pacific and global well at ubs.

you focus on nations and domestic demand and given how exposed singapore is, what do you make of what is happening in the economy? and how do you rate it as a market player? kelvin: the singapore economy is likely to do quite well for the next while months. the reopening is going pretty good. we are seeing the streets coming back to life. in terms of competitiveness, where the tourism dollar is concerned, that might have a negative impact in the future because the singapore dollar this year has been one of the best-performing asian currencies and it is a little bit more expensive compared to the rest of the region. with the collapse of the aussie, the kiwi and other currencies with the exception of the dollar, singapore becomes a pretty expensive destination.

in the short-term, wage growth is going to be strong, but next year, higher interest rates and currency could make us concerned. shery: talking about weaker currencies, japan can't get a break. we had so much volatility overnight. we had the bank of japan governor speaking in d.c. today and doubling down on that loose monetary policy. how do you rate a market like this when you have a japanese yen under pressure because of rate differentials and it doesn't look like is going to change soon? kelvin: i don't think it is going to change anytime soon, until we get a new governor at least. but exchange is done through the ministry of finance, which is not what the boj wants. the governor has said he is keeping his policy rate where it is. that means the gap between the

dollar yields and japanese bond yields will increasingly widen. and with cpi data coming out in the u.s., you can bet the fed has more room to raise rates in the next couple policy meetings. increasingly come of the narrative has shifted from whether it is going to be 75 basis points in november and 50 in january, leading to 50 -- 50 in december, leading to 50 in january. and that is likely to widen the gap between the yen and u.s. dollar. haidi: more intervention by the fed increases financial stability concerns that impact the banks. would you prefer asian baking names in this environment? kelvin: asian banks are strong and have a wide margin base.

the economies are still doing pretty well, they are not in recession and they don't have to hike up deposit rays to get more deposit coming in in order to improve their lending. from that perspective, asian banks are in a very good position, in particular the singapore banks and some hong kong banks as well. at some point, the economy will slow down because your rates are too high. how can you borrow to fund expansion if you are rates are 4% or 5%? in the next 12 months the picture gets very murky. haidi: how constructive are you when it comes to markets like india? given that we are expecting more outflows with a more aggressive fed and even stronger dollar?

kelvn: -- kelvin: india is a tricky market. the higher interest rates go, it is going to affect the income of these companies. india is a net consumer market. you need to watch consumption very closely and i don't think it is going to be positive in the next expense given interest rates are rising and there's no way the rpi can prevent that from happening with regards to what is happening in the u.s. at this point. shery: always great to have you with us, the cio of south asia pacific at ubs global wealth management. let's get to build for early movers. and you are watching how we end the week in what has been a challenging time for chip stocks. anabelle: a whipsaw in the u.s. session, stocks down 5% at one stage and closing 3% higher.

entrance of reaction in asia, gains across the board. the eyes -- these are some of the suppliers that we had for dsmc -- tsmc and we did see a big cut in terms of the capex outlook. but a lot of strategists were saying that this was already raised in, so we can perhaps ignore the negative headline in terms of trade reaction. but tsmc closing the u.s. session up nearly 4%. the other thing we are keeping hours -- keeping our eyes on is the retail space in japan. the owner of this retail store, the earnings beat estimates. and macau trading this morning, affiliate-owned lionheart studio has dropped its ipo plans. shery: let's get to vonnie quinn with headlines. vonnie: u.k. prime minister liz

trust is said to be prepared to drop a significant part of her tax cut. no final decision has been taken. reports of the you turn sparked speculation that the chancellor of the exchequer would be forced to quit, but he has vowed to press on. >> our position has changed. i will come up with the median-term fiscal plan on october 30, and we will offer more detail them. but i am totally focused on delivery, on the many budget, and we cast on the needy -- min budget. vonnie: footage emerges of a rare protest against xi jinping before the communist party congress. incident comes it a tense time in china where xi is expected

to get a third term as president. the house january 6 committee has subpoenaed former president trump. they are demanding documents and testimony about his role in the attack on the capitol. it is seen as an escalation of the committee efforts to hold trump accountable for the assault. 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'm vonnie quinn. this is bloomberg. ♪ haidi: coming up, u.s. consumer prices rising by more than forecast to a 40-year high, likely triggering another big bed rate hike. the latest. this is bloomberg. ♪

shery: reports say the fed will consider dialing back on its rate hiking policy but that was asked when cpi came in hotter than expected. pop global inflation is at the top of the agenda, so a 75 basis point rate hike now seems a done deal. kathleen: it certainly does. and it is interesting that here in washington, at these meetings, top central bank officials like a governor,

medallia, he said he believes the fed has to go ahead, with numbers like this, no choice but to raise rates aggressively. and cpi went down. if you round it off, it is still just over 8%. that is a problem after 300 basis points of rate hikes since march. at the cpi or number as been too hike, went up in august and now, it went up again. it looks like inflation pressures are broadening when that happens, you worry they are going to get entrenched. a monthly number of .4% isn't terrible, and the court did not come down as was supposed to come it stated at 0.6% after months and months. shelter costs -- getting a lot

of attention right now. because everyone has said that actual rents have gone higher. and when you look at these numbers, they are 0.7% to 0.8% on the month-end are expected to stay at these high levels looking ahead. now, the terminal rate traders are betting on is something like 5% next year. it was around 4.5%. after this report, it will be interesting to hear many officials are opening the door. haidi: we know we are looking at a different set of preventing factors when it comes to the pboc and china's economy, but what is food inflation doing? kathleen: pour prices up 17%. how can you not see your cpi go up when core prices are surging?

i am an avid consumer of pork. if you love any good in the prices go up, you keep buying it no matter what is happening. that's can't be a permanent situation, we have seen this with core prices in china before. that is much help put peak cpi up to two point 5%, not such a bad number, and you can see on this chart how, when you look at the headline, when you look at the food pi, what a difference this is making. ppis supposed to continue to fall on the consumer price index because commodity prices are falling for the chinese inflation pressure is that falling. the chinese inflation -- commodity prices are falling. the chinese inflation pressure is falling. haidi: bloomberg's kathleen hays. breaking news -- speaking of central-bank action and

volatility out of the u.k., we are hearing from quasi that he has left imf talks early as their is a u-turn when it comes to the much maligned fiscal policy package. this is a according to a u.k. treasury spokesperson commenting on the plans. we have seen to and fro when it comes to u.k. assets and what is next. a friday deadline for the be ok is looming as we see scapegoating between the chancellor of the exchequer and the boe governor. more details on that. but back to china, food inflation remaining a problem, but myriad challenges for the leadership as we get into the communist party congress weekend. a host of challenges from covid to property dragging on the economy, to geopolitical tensions with the u.s. and

taiwan. let's bring in chief north asia correspondent stephen engle in hong kong. what are you watching for in the speech sunday? stephen: it could be a long speech, upwards of three hours. but he will outline a number of party policy priorities, going forward for at least five years, potentially 10 years if he is going to seek another two terms down the road, or even indefinite rule. a lot of questions about whether he will point towards a successor at the end of the congress. he has not named a successor. he is essentially ruling in perpetuity. but the big policy issues -- what he will say about taiwan, if he will formalize unification as a priority, as well as geopolitical tensions with the united states. that is the external site. internally, it is about securing his third term and who is going

to lineup beneath him. -- going to line up beneath him. shery: our chief asia correspondent stephen engle with the latest on china. this is bloomberg. ♪ a comprehensive wealth plan with tax-smart investing strategies designed to help you keep more of what you earn. and set aside more for things like healthcare, or whatever comes down the road. this is "the planning effect" from fidelity.

♪ haidi: let's look at european futures opening. dip buying bargain-hunting session in the previous trading session, quite a bit of upside after we saw u.s. stocks roaring to gains. futures up close to 1%. same thing with msci europe,

♪ shery: we are watching asian chipmakers. we had the philadelphia semiconductor index gaining ground in the new york trading session, rebounding almost 3%, swinging between gains and losses of newly 5% on the back of results from dsm -- tsmc. tsmc reported third-quarter earnings beat expectations at that may be the optimism of the sector during a week where we have seen bad headlines for chipmakers. tsmc also cutting its capital

spending, target by 10% for 2022, perhaps a sign of trouble in the industry. let's bring in our bloomberg intelligence analyst charles shum. we are seeing chipmakers in new york and asia rebounding, what were some of the more positive factors from the tsmc results? charles: i just finished an earnings call. tsmc giving everyone a surprise. very much better than analysts expected, hinting that q4 sales growth can be more than 43%. analysts were estimating 40%. this is a good sign. it is also holding this long-term view that the companies' long term sales goals can still maintain at 50% and

above. and also keeping the target long-term post margin, above 53% . even though it is a three-year process that incurs higher depreciation costs in the longer term, so that is something that is giving positive support to these sectors right now, when everyone is panicked about the futures. haidi: what else should investors be watching for? d the construct -- because fundamentally, the outlook is still dire. charles: for the longer term in the future, investors still have to be cautious because the management team didn't give us a clear answer on the broader impact from the u.s. curve of

advanced ship exports to china. i think the management team is just throwing aggression back to u.s. customers like intel, nvidia and amd. we still have the view that this could impact 12% of the tsmc revenue. because they are about 30% of the revenue, sorry, 30% of the advantaged chips in china -- advanced ships in china. and other things we have to be very careful about, the management team mentioned company revenue will be much worse in the first half of next year. that is something we have to be very careful about in the most

likely scenario is that the companies this year, there revenue growth will be 40% end next year, less than 10%. that is what we are worried about. and last but not least, the company has also indicated some of its capacity would be underutilized. that is not a good sign because tsmc is the leader in the industry. if there capacity is underutilized, i think other of their peers, they will face the same problem. that is something we also have to watch for. haidi: bloomberg intelligence analyst charles shum. let's get to vonnie quinn with first word headlines. vonnie: a deal is in the were -- in the works between twitter and elon musk to take the company

private. twitter attorneys say the tesla founder is under investigation by federal authorities. the u.s. sec sent a letter earlier this year to elon musk on how he initially disclosed his major stake in twitter. the singapore central bank has tightened monetary policies for the fifth time in a year. the monetary policy re-centered the band to prevailing level and that will allow the singapore dollar to strengthening and keep global jocks from feeding into local prices fit south korea says it dispatched f-35 fighter jets after north korea flew military aircraft near the border friday. the south korean military office says it detected the launch of a missile at 1:40 a.m. local time, the latest in a barrage of provocations by kim jong-un's regime. north korea quoted him as saying north korea needs to strengthen

its arsenal to deter e-minis -- dieter enemies -- to deter enemies. the iea has cut growth forecasts to 470,000 barrels a day due to stronger economic headwinds ranging from inflation to higher interest rates. the securities and exchange commission is deepening its probe into outside messaging services and is looking into investment firms as well as major banks. the sec issued $2 billion in fines to banking giants over the past year for use of messaging app due to risks around improper contacts, compliance on records keeping. it is now said a dozen firms have received letters for information from the sec. 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. this is bloomberg. ♪ shery: it is all about central-bank policy at the moment. we are hearing from the pboc governor, now talking about

prudent monetary policy needed in china, as we head toward cpi numbers. consumer inflation is pretty stable. that be ok also coming out saying they are closely monitoring financial and fx markets. we have u.s. cpi numbers and u.k. assets in focus as well. anabelle: there is really a lot for us to be keeping our eyes on including -- including the line that dropped 10 minutes gopi the u.k. chancellor quarteng heading back to the u.k. for a u-turn on this policy of tax cuts that were proposed by him weeks ago. the pound, a mover in the last session, big swings for the currency. it is looking weaker in the session but is on track to be the best currency in the g10 space this week's. you can see higher volatility as well as to those headlines drop. what else we are watching, they

yen is front and center -- the yen is front and center, lots of moves in this currency. lots happening in the markets the past 12 hours since the inflation print in the u.s. because we saw the end dropping to its lowest level in 30 years. we are off the weakest level of 147.67 but it is still above the level that's part boj intervention on behalf of the government last month. that is certainly a watch for us. a lot of ways to track that. one way the markets team is looking at is in terms of what we see in the futures contract because we saw volumes spiking, a sign perhaps officials already intervened, even though they have stayed at, refusing to speculate or confirm whether they did move into the markets. in the equity space this morning, we are green across the screen. gains for the nikkei. this is really reaction to those

massive moves in the u.s. session, wall street closing higher 2.6% with moves around 5%. you can see all that reflected in trading volumes today. we were in wait and see mode throughout the week ahead of the cpi print that you can see this is tracking on a one-day basis, the projection of where we will reach today. but the 20-day, strong volume as you can see. haidi: one of the imf's top officials in china gives us his view on the second-biggest economy ahead of the chinese party congress. this is bloomberg. ♪

♪ shery: the 20th chinese come it is party national congress that

begins sunday is perhaps the most important one in decades. president xi jinping is expected to get a precedent-defying third term in power, but there is more at stake. our chief north asia correspondent stephen engle explains. ♪ stephen: china's communist party has held fast to a mandatory retirement age of 68, allowing past party leaders to promote proteges. hundreds of cadres have been forced to leave the central committee over the last couple decades. the thing is, the man at the top, xi jinping, is 69 and will not be stepping down due to a constitutional change he pushed through. it begs the question, will his next power plate bh limits for everyone but himself --

power-play be age limits for everyone but himself? potentially all but three members of the powerful standing committee are set to retire. the vice premier and china's top legislator are both past retirement age. many of xi's aging deputies could be forced out, such as the economics are who spearheaded trade talks with funk, the vice premier, the top diplomat, the foreign minister and the only female on the politburo, the one overseeing covid zero lockdowns. elevating younger loyalists may not be a bad idea for xi, as he potentially could rule indefinitely. but it would not be without risk. at the time, china faces

challenges from covid drags on the economy to tensions with taiwan and support for moscow amid a war with ukraine. in fighting for positions will take place behind closed doors and we will know how strong a mandate the main man has when he walked out with his new team into, offering as well potential clues to a potential successor. stephen engle, bloomberg news. anabelle: pessimism is high ahead of the party congress. let's look at the economy. this is a period of great domestic uncertainty in the country and not only do you have beijing sticking firm to its covid zero policies, you have the impact of the campaign to rein in debt in the property sector. you have that ambitious target set by the government this year for gdp growth of 5.5%. but you can see how economists

have been lowering forecasts. we are now expecting growth around .3%. if that happens, china is going to be trailing emerging market growth the first time since 1990. a lot of this is down to beijing sticking with virus controls, so we are not expecting any major announcements during the congress. but investors will be listening very closely for any clues on covid. that could impact trading sentiment as well because we are seeing the csi 300 index never performing so poorly heading into a particular since the event started. on top of that, the msc end -- the mx cn china index is at its lowest level in five years and the drop was 60%, that was the peak it hit six months ago. the major concern is what support is offered to the property sector because officials have not managed to

spur a rebound in the sector. we have seen a steep drop in income to local governments from land sales, a key funding source. look here, this is the expenditure of local governments in blue and that is outpacing revenue that is coming in. haidi: and new research from the imf is showing a dark picture when it comes to the property market. the fund says 45% of developers may not be able to cover their debt obligations with earnings and 20% could become insolvent. let's get more with the imf senior representative in china, steven barnette. great to have you. we see this being highlighted by the imf governor speaking at the sidelines saying we need to make sure these developers are delivering these homes. going into the party congress, this is just one pressure point

for the economy. steven: thank you for having me today. we have marked down ever forecasts for this year and next year. we expect growth this year to be 3.2%. as mentioned, china since 2000 has grown at double the pace of global growth and it has always grown at least two percentage points faster than global growth. but this year, at 3.2 percent, is exactly the same as global road, an example of headwinds from struggles in the property sector in the management of the pandemic. haidi: we are going into this party congress expecting political change in the leadership, various roles at least if not the man on top, but that doesn't necessarily

translate into economic policy change or public health policy change. what expectations do you have this weekend? steven: a lot of people are speculating about changes in covid policy after the meeting. if i can speculate, we can make an assumption about covid and we assume the zero covid policy, that the conditions are in place to lift that by the second part of 2023. when we look at zero covid, in 2020 and 2021, china arguably had some of the best macro economic outcomes in the world. they had the least amount of scarring. but this year is different. we see the combination of more transmissible variants of covid and we see significant economic disruptions.

shery: you mentioned the covid zero policy, the housing slump and the imf report that could potentially translate into a banking crisis. where with the biggest threat to the chinese economy come from -- domestic issues or externally because of global demand? steven: you hit upon the three big issues -- headwinds from the management of the pandemic, from the struggle in the property sector and from weakening external demand. janet is also facing challenges ahead -- china is also facing challenges ahead. shery: in the long-term, do you expect china to achieve the doubling of the size of the 21 d gdp, like president -- 2020 gdp, like the president promised? steven: china has had average

growth around 9%. some call it the china miracle. it really wasn't a miracle. china pursued economic reforms, and those reforms propelled growth. going forward, we need to see the same recipe concerning advanced, market-based reforms to propel the type of sustainable growth that is good for china, but also for the world economy. haidi: in the absence of real demand from open borders, what about stimulus? are you seeing more stimulus in the pipelines? how have they done enough compared to previous instances? steven: china clearly has a policy space to support the economy. when looking at monetary policy, this year, we have seen reductions in interest rates. and we see space for monetary

policy to be accommodated, and inflation is still low. they are using interest rates as a price signal for core monetary policy paid but the key is fiscal policy in this year, we have seen fiscal policy be supportive of demand. but it is not just the size of the deficit and how much the increased spending, but really the composition of spending. it is really important to shift away from supporting investment and more towards supporting consumption. we think the multipliers that measure boost consumption are higher and it would help households that are feeling the difficulties of the current economic situation. shery: steven barnette, imf senior representative in china. we have plenty more. this is bloomberg. ♪

♪ haidi: pessimism is high for the chinese economy and markets heading into the party congress this weekend. we are joined by our asian correspondent rebecca chung wilkins --rebecca choong wilkins. what are we seeing in terms of

market sentiment? rebecca: it is very unusual to see markets behave this party -- this poorly in the lead up to congress, when it is typically a show strength. we see chinese equities bubble leading up to congress, which we have not seen. the csi 300, down 24%. the yuan is set for a loss at the chinese junk bond market set for record losses. it reflects years of policy where we have seen very painful crackdowns on leverage, the property sector, the tech sector. fundamentally, it is now all about whether we see any relief on the covid zero policy. shery: on all those fronts, especially when it comes to the tech crackdown or the housing slump, we have seen a little bit

of a reversal coming from policymakers, given the slowing economy in china. what are we expecting on those fronts? rebecca: we have seen policymakers making some moves state ease the fallout of those policies. i think it is too early to say we are seeing a reversal. but certainly there is a priority to manage systemic risk. make sure these don't get out a hand. the property market has taken support from local government, and central support to loans and things like that. but for the congress itself. -- congress itself, look out for this balance between risk and development. how xi jinping is xi jinping -- how is xi jinping going? to manage that? shery: rebecca choong wilkings on what to expect from the party congress and what stocks to watch.

we will be watching chipmakers after results from tsmc. that is it for "bloomberg daybreak: asia," "bloomberg markets: china open" is next. this is bloomberg. ♪