shery: you are watching daybreak asia coming to you live from new york, sydney and hong kong. haidi: australia has just come online -- the top stories this hour -- asian shares set to rise after shares slipped to multiyear highs. president xi jinping in total control as he secures a third term in office, stacking china's most powerful bodies with allies. rishi sunak on the verge of becoming the next prime minister with boris johnson pulling the plug on a potential come back. annabelle: we are seeing aussie stocks snapping their two day slide. this is being driven by the news in treasury yields in multiyear highs. shery can get through the details but what we are seeing in the aussie bond space this morning, particular the moves we have in the three year yield. but driven by what we have for the fed in this moves board smaller rate hikes after that 75

basis point hike in november. the rba says it will be data-dependent. also dependent on how have -- how households react to conditions. we had the aussie earlier higher against the greenback but we are seeing that pullback into losses. the rba saying it not concerned about the depreciation. mostly it is against the greenback in a trade-weighted basket. let's look at what we are seeing for the yen this morning. we did see the yen sliding 1% against the dollar. we did have the big spike come around 2.7 percent with officials intervening once again. also tracking what we are seeing in the other g10 currencies, the

currency online but the pound here moving higher. rishi sunak is deemed as being better to lead the u.k. economy in such a time of crisis. shery: seeing perhaps a little more confidence when it comes to the pound but bank of america still keeping its call of dollar parity given the weakness we see in the u.k. economy. take a look at what markets are doing when it comes to u.s. futures. it's all about the treasury space when the volatility in the rates market and the treasury space. the 10 year yield falling for the 420 level. with the treasury selloff fading a little bit, we saw u.s. stocks having a boost in the session friday. talking about a stunning reversal, so many we have seen recently. we see the egg -- we had already seen every sector in the s&p 500

in the green, managing to eke out a gain, the biggest since june. we continue to watch the oil space because we see a little upside in asian session and a little gain in the week the -- weekly basis for wti but those concerns about an economic slowdown continue to weigh on the markets. haidi: and we continue to watch these moves in the yen. let's bring in garfield reynolds. watching the yen extending those intraday losses. you hear intervention would achieve much in the longer term because they need cooperation with trading partners. can they slow the rate of depreciation enough until the market turns? garfield: i think that's part of what they are trying to do. i thought the timing was nice on

japan's side, that they did intervene and they came in and a day where you also have the fed of it toward a potentially slower pace. you could almost say the currency markets were ready to take a step back from the dollar and then japan came in and gave that a push. they achieved more than you would have expected, a very big move but by the same token, you know it's not going to sustain all those reasons for yen weakness. they are still there -- the extreme policy diversions. the attention is turning to the boj meeting this week when they are going to stick with their policy of printing a lot of money to hold the yield at 2.5%. when you are doing that, it's hard to sustainably stop the yen declining. haidi: we see, -- shery: we see comments coming in about the need to diversify energy and

improve the trade deficit. that's one reason we see pressure on the japanese yen that they will need to raise japan's national power to strengthen the currency. the large fx moves for currency. the finance minister declining to come out -- declining to comment on potential intervention. let me turn to the u.k. because we see big moves on the british pound especially with boris johnson being out of the race. garfield: you would think traders have got a lot of what they are looking for with boris johnson pulling back. that's going to reduce the uncertainty and headlines about the current chancellor, welcoming the idea of soon at as the -- sunak as the next prime minister and mr. hunt policy is something markets have mostly welcome. the two concerns that remain are they political situation is

going to go on to be volatile and the tory government has done a lot of damage to its own credibility politically and economically. it takes a while to repair those damages. bank of america sees the pound going to parity, not because of anything directly going on in the politics but because the uk's economic outlook is so very difficult. that's a big part of the reason you get this political flux because this is not an easy job to do. you couldn't blame boris johnson for stepping back and saying this is not a job that is that attractive because how do you rescue the u.k. from its current plight? haidi: that is their big question, isn't it? garfield reynolds. chinese president xi jinping has secured a precedent breaking third term at the close of the party congress in beijing. let's bring in our chief north

asia correspondent, stephen engle who joins us in hong kong. evan characterized this as maximum xi jinping. are we at maximum xi jinping right now? stephen: he has what one could say is absolute power because he essentially could rule indefinitely now that he has secured that precedent defying third consecutive term with no term limits. he got rid of those five years ago and has essentially stacked his seven-member standing committee, six other individuals with his close allies. if you look at the breakdown, to individuals who are gone were not said to be in his camp, closely tied to hu jintao and the communist youth league. in their replacement are the party bosses from the key economic and plug power houses of china. you have the beijing party boss and that shanghai party boss who

will rise to premiership come march at the national people's congress. also who did he keep? he kept his anticorruption boss and his ideologies are who coined the term the chinese dream for xi jinping. we shouldn't be too surprised. the moves were being put in place to have his loyalists on the standing committee and the polyp hero, 24 members, it was 25 before, is full of loyalists. the one individual knocked down from that was a rising star but he was a hu jintao protege and got knocked out of the politburo and as you noted earlier, not a single female on the polyp bureau for the first time in 20 years. they only had one in the previous five years but one is a lot more than none.

shery: full of loyalist men. that's a very important in this huge change in leadership but interesting that you keep mentioning the former president, hu jintao. i feel like you are alluding to some of the reason why we saw that former leader in that shocking removal from congress. any idea what happened? stephen: what made this strange is this is a highly scripted event, the closing of the national congress. to have after the cameras were rolling and the foreign press and local press in the great hall of the people, to have these assistance come and physically lift -- this is the man who ruled china before xi jinping, to physically lift him out of the chair and he seemed discombobulated. he said a couple of words to xi and patted the shoulder of another on his way out. he's saying a couple of words to xi and xi just nods at him.

the word is hu jintao, who looked frail, had some health issues and that's the official response. but of course social media, what posts could not be censored was alive with speculation that this was a highly symbolic move given what he did on the standing committee, given what he did to hu jintao's loyalists. stacking the deck with his own allies, the removal of hu jintao, highly unusual and highly symbolic. i will leave it at that. shery: stephen engle breaking down the developments of the communist party congress in china. let's turn to the fed -- expected to deliver another 75 basis point rate hike at its meeting next weekend debate went to slow down and posits aggressive inflation fighting policy. kathleen hays is here with the

details. what is shifting at the fed? kathleen: the fed has done 300 basis points of rate hikes since march. unfortunately, flay -- inflation has not come down at all. they are looking down the road, talking about beginning the debate now because of their concern about doing too much, about destabilizing the economy. marion daily, president of the san francisco fed, she spoke on friday and said the fed should be considering smaller rate hikes, it's just that inflation is not cooperating, so she said you've got to keep going. it's not time to step down the hikes yet. let's listen to what she said. >> what you see is growth below trend in 23, policy tightening that gets the rate up between 4.5 and 5%. policy tightening that raises

and then holds because we have to keep the rate at a tightening level to fully reestablish priced ability. kathleen: 4.525% is still a lot with more to go. they turned up the word calibration, looking at further tightening and having to be more cautious. it was already being discussed. charlie evans, president of the chicago fed spoke on friday and sees the key rate getting up to 4.5% or higher by early next year. but he does say there's going to be a point where you have to pause and look where you are. he said frontloading was a good thing, doing the fast rate hikes but overshooting is costly and there is uncertainty about how restrictive policy much -- must become. how do we get to a level where

policy can rest? jim bullard echoing these comments on friday and he's saying something he has been saying for a while -- the next two meetings, there will be a big bait about a rate that pressures and -- pressures inflation. he's been talking about getting to 4.5% by the middle of the year and then taking a look. i think the question is how does the economy look and how does inflation look? if inflation is still stuck above 8%, it will be interesting to see what they would decide. more restrictive, looking down the road, that is the message. haidi: let's get you to paul allen with our first word headlines. paul: giorgia meloni has been sworn in as italy's new premise or, becoming the country's first female premise or and hitting the most right-wing government since world war ii. she must steer the economy and its debt through a crisis

surmounted by slowing, growth. she will address both houses of competence -- oath houses for a confidence vote. jim chanos is preparing to deliver the first budget update. economists predict the fiscal blueprint will show and underlying cash deficit of 22 billion u.s. dollars. he's promised a sensible first budget, mindful of the chaos caused by the uk's sharp tax changes. he told bloomberg china's slowdown is a key concern. >> the slowing of the chinese economy and their approach to zero covid does have consequences for our economy and you will see that in our budget forecast. not a revolution in how they go about that but a re-think in making sure our markets are diverse. making sure they've got the mix right. china is an important economic order. there's no use pretending otherwise. paul: china has enshrined its

rejection of taiwanese independence into the comet's party constitution. the document vows to contain chinese -- taiwanese independence and advance the model beijing has proposed. china called for the advancement of reunification with taiwan. taiwan's tfm see is said to suspend production to ensure compliance with u.s. regulations. the decision follows a report that there tax outperform nvidia chips which are banned for the chinese market. they have not reached a concern whether they meet the threshold for restrictions. those are the first word headlines. shery: coming up later this hour, we will look ahead to the boj policy decision. a weak yen pushes inflation to the highest since 1990. first, amp expect a

bread-and-butter aussie budget with no spending initiative. a preview with a senior economist, next. this is bloomberg. ♪

>> we can be amused, those of us

who don't live there by some of the things that are happening in britain, but if we think of it as an experience entirely outside of any kinds of concerns any countries could have, that would be a real mistake. haidi: the former u.s. treasury secretary larry summers. fiscal responsibility back in focus. let's bring in the senior economist at amp. i suppose it is the story that adds to the risk of a policy misstep. everyone looking at what happens in the u.k. is a cautionary tale. is that a dynamic we should be paying more attention to? >> the risk at the moment is governments are trying to help households out of this cost-of-living crisis a lot of developing economies are in, so you do to some extent have to address low and middle income households but the way to do that is not necessarily to

increase budget deficits as a share of growth which was a problem for the u.k. -- there projections would increase with budget deficits and that would add to inflationary pressures. the solution is governments need to assist households but in a way they might be taxing these companies and using that revenue windfall to give back to households. haidi: it is that fear about how households are being impacted. we had the numbers presented to the rba to weigh in there but it was that that potentially saw the downshift from the rba. what do you expect from the budget this week? the recent floods have also changed the outlook. diana: i think it will be a bread-and-butter type budget which is what the secretary has said it's going to be which means the government will go to to the budget showing the election promises they told us

about, increase in child care spending, those announcements have already been made as well as attentional reforms to age care, but the scope for the government to do significant changes is limited because they don't want to be adding to budget deficit pressures. they might be worried about what might happen if they are seeing to be spending a significant amount of money after what happened in the u.k. as well as adding to inflationary pressures and making the job harder for the reserve bank. i don't expect many significant changes. i think the budget will come under a lot of pressure because what has happened to the blowout and the government needs to address those issues. shery: when it comes to inflationary pressures, we continue to see prices accelerate at a 40 are high in the u.s. and yet we are seeing perhaps some hints of a turnaround when it comes to fed policymakers.

tim bullard and mary daly come about how much higher rates should go and when the debates should start. what do you make of this? diana: it's clearly two different points of view at the fed and the question is how they will come together in the coming months? what i'm seeing from the fed communication speeches as they will do another outsized rate hike, 75 basis points and reduce the pace of those rate hikes by december. but raising height -- raising rates by 50 points is high. monetary policy has tightened significantly in the past few months and as well as financial conditions generally tightening in the u.s. economy as well. all of these key what if hikes will have an impact to the u.s. economy more so in 23, so it makes complete sense for the fed to slow down the pace of hikes when the inflation data is

pointing down. shery: what about to other countries like japan? we are not expecting the boj to do much in terms of policy but it is further pressuring the yen. diana: a lot of these economies are in a difficult position because of what is happening to the u.s. dollar and, in the short-term, it is difficult to see significant downside for the u.s. dollar in an environment where you have a lot of recession risks. markets are in a risk-off environment. sure markets are down 15% or 20% from a year ago, so the government will continue to be quite strong. in countries like japan, there's not much they can do because there is no need to raise interest rates because inflation is not a problem for them. countries like japan, they would be happy because they've been trying to generate inflation in japan for a number of decades so they don't want to be raising

rates just to get the currency up. haidi: always great to have you with us. you can get a round up of the stories to get your day going. terminal subscribers king get that and it's available on the mobile. you can customize those settings so you get the news on the industries and assets that matter to you. this is bloomberg. ♪

shery: we are counting down to the start of trading -- south korea's joint chiefs of staff saying it's navy fired warning shots to repel a north korean merchant ship which violated its western sea border. pyongyang also claiming a south korean military ship violated

the border. korean air promising a thorough investigation with philippine aviation authorities after one of its plain overshot the runway while landing. also 1.1 billion dollar bond stabilization fund starts buying corporate bond and commercial paper today. haidi: take a look at what we are watching when it comes to the rest of the session -- the yen very much in focus. much more to come. this is bloomberg. ♪

annabelle: you are watching daybreak asia. 30 minutes out from the opens for tokyo and seoul, we are monitoring the news we are seeing in the n very closely

because we had seen it sliding beyond the 1.1 percent level against the greenback. put this in context with the moves we had friday when we saw the yen strengthening as much as 2.7%. that was the biggest rally we had since march 2020 and it did .2 intervention from authorities stepping in to prop up the weakness we've had. a lot of commentary coming out as to those moves including from the finance ministers himself. we do know from other officials, including panda, that government has established a policy tool to monitor the fx markets for the four hours a day every day for any signs of weakness or

one-sided moves in the currencies. that is the state of play but we are seeing that big spike in the implied volatility on a one-week basis. that had been around the 10 level but in terms of intervention, it is the yen futures contract that is the best sign to monitor for that. let's look at this terminal chart because we saw turnover in yen futures surging friday, the highest amount of turnover we have had all year. shery: japanese authorities becoming a broken record at this point, watching the forex with a think the urgency has been the phrase they have been using the last few days and now we continue to hear these comments coming from government officials but i wonder how much they can do when we have the boj meetings this weekend the rate differentials are expected to

expand? that's right. when you look at this chart, it tells the story japan is the outsider, sticking with that policy of ultralow rates and euro curve controls. a limit to 2.5% and we are seeing that being tested by the bond vigilantes and japan buying bonds in the market. in terms of what we are expecting this week, no big changes, not stopping markets or international funds. we can see bets on the 10 year swap rates if you look at this terminal, we can see that is spiking above the .6% level. that takes us back to an eight year high, above that target of point when he 5%. international funds out there betting the boj will be forced

to capitulate at some stage. haidi: let's get the first word news with paul allen. paul: fed officials are preparing to roll out another 75 point basis hike while rolling out more incremental increases. mary daly says policymakers should start planning for smaller hikes of 25 or 50 basis points after next week's meeting. charles evans says the fed will have to guard against overshooting on restrictive policy. south korea is pledging dirty $5 million to support credit markets under pressure. korea will look to prevent a credit squeeze in corporate bonds and other short-term money markets. it's one of the be us rounds of financial support for korean markets since the start of the pandemic. north and south korea have exchanged warning shots along their disputed western sea boundary. south korean joint chiefs of staff saying the navy fired warning shots monday morning to

repel a merchant ship. north korea's military says it responded by firing 10 artillery share -- 10 artillery shells. rishi sunak is on the brink of becoming the next u.k. prime minister after boris johnson pulled out of the race to lead the conservative ruling party. the decision leaves him facing the house of commons leader. johnson said in a statement that mounting a bid would not the right thing to do because it would divide his party. he left office last month after a series of scandals. 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 paul allen. this is bloomberg. haidi: the former u.k. chancellor of the exchequer says the most important thing is to calm the markets. >> we have seen the power of the

markets over the past few weeks and i think chancellor jeremy hunt was getting on top of that, putting together a package that would have been reassuring to the markets. what we must not do is anything which signals to the markets more chaos, instability, and uncertainty ahead. then the new government has got to outline a clear growth land. liz truss -- liz truss's plan was based on cut taxes by borrowing and magically that gives you growth. it doesn't matter whether that's credible because the markets are not going to allow it. there needs to be an alternative growth plan. how does written earn its living in the post exit energy crisis? my own view is we have to be prepared to take a few risks and articulate a role for the city of london, for the financial services industry.

that may mean being prepared to take some calculated risks as we put britain in the lead with areas of new technology and trading techniques and new products. i don't think britain has the option of simply sitting back, relaxing, and hoping the world will deliver it a living. >> we have reminders of the data that came through around retail sales and the strains on this economy, when it comes to your assessment of the likelihood of a fiscal plan being published and announced, the reporting from the times and our assessment is that is looking unlikely. would you concur and what would you expect the market reaction to be if it gets delayed? >> it depends whether the chancellor is replaced. if a new chancellor is up -- is replaced, they will want time to

look at the package. if the incoming prime minister decides to confirm jeremy hunt as chancellor, i see no reason why he could not go ahead and deliver the package. he's been working on it since he's been in office. >> how will the conservative party change? because of the voting rules, could we have a prime mr. on one day and >> pragmatism ahead of ideology? we could have a new prime minister if only one candidate passes the hurdle. what i is clear is the rules we currently have, which have a two stage with the mp's select two candidates and the members vote, that is not working. it has not delivered the results , no does the late -- nor does the labour party's method work. it has not served them well over

the last decade or so. both parties need to look at how we do this and make sure we have a leadership election methodology proper for that when he first century. shery: the former chancellor of the exchequer. coming up, japan reiterates it cannot tolerate excessive speculative moves of the yen. more on the governments action against depreciation and inflation. this is bloomberg. ♪

haidi: time for japan ahead -- the manufacturing pmi rate was previously at 50.8. we continue to watch the yen, the chatter around the government intervention mixing with the likely impact of the boj decision coming friday after the fed but we see that he and making some big moves. shery: are we seeing intervention again? we went from 149 something to 146 and we are gaining 1% after losses of more than 1.3% just minutes ago against the u.s.

dollar. we did hear from the finance minister coming out talking about monetary markets with a high since of urgency. they cannot tolerate excess moves. we had the top official in japan talking about the need to diversify energy and remove trade deficits. a lot of this rhetoric has not moved the yen higher, so what are we seeing now? let's ring in the principal economists at s&p global market intelligence. is it fair to speculate about potential authorities intervening again in the japanese fx market given the huge move we are seeing in the past few minutes? harumi: it is highly likely the government and boj with such a big move, it is not usual market movement and the yen is

obviously -- the boj thinks it is a rapid movement and is not good for the japanese economy. so this movement -- shery: we are seeing a huge spike in volatility and yen futures. what does this mean for fx policy going forward? we have the boj policy decision we are not expecting those rate differentials to narrow given the bn -- given the boj is not budging coming to its ultra-loose policy. harumi: you are right. we do not expect the bank of japan will change its current monetary policy. the economy has not truly recovered here. the demand is weak and must

consider in real time, the consumer spending could be week and could lead to weaker consumer spending. that is why the bank of japan thinks it is too early to change its monetary policy. we don't expect it is going to be as the government and bank of japan since the company cannot transfer its cost out of the crisis, especially the medium to small size industries. haidi: we see some potential weakness when it comes to the big companies. are we seeing the diversions

between the company and services with the opening of orders and manufacturers? harumi: right now, consumer spending has started to improve from the last part. the government has started and truly open borders. since the yen is still week, more than 30%, this could be able to lift consumer spending for the fourth quarter. the legal term for the next five months, it is hard for the household and pensioners --

even the exporters, it is hard to transfer the cost. haidi: when it comes to the labor market, the momentum behind that is expected to drive some level of wage growth the boj wants to see. that hasn't really been impacted even by record covid cases. are you optimistic this trend continues? harumi: yes. fundamentally japan's labor shortages underlying it.

the labor market is still in favor of the laborers. the union decided to ask for a 5% increase for the next annual wage negotiations, so it is a good move for supporting the bank of japan. but the impact, it is lower and there are also the external factors.

the company might not be able to increase its negotiation. haidi: before we go, i want to get the question of overall, what do you think the one change japan needs right now? harumi: the big challenge is for this structure change to increase the productivity and be able to sustain the increase and the deficit because japan's dependence of fuel energies. the energy consideration needs

to change as much as possible. haidi: great to have you with this given the mysterious moves we are seeing in the end this morning. the principal economist at s&p global market intelligence. tune into bloomberg radio to get more from today's newsmakers and get that analysis from that daybreak team there. you can listen in via the app. more ahead. this is bloomberg. ♪

haidi: the leadership -- over the widespread service outage that cause chaos last week. give us a roundup of the significance of this company to south korea and what we might be expecting. >> what happened in korea was over the weekend, the previous weekend, there was a fire that broke out south of seoul where they host a lot of servers. it impacted the entire nation as

it impacted infrastructure for banking, payment and gaming. people were not able to hail taxis, they couldn't send messages. especially kakao talk, used by more than 40 million people was effective and most of its platforms were restored but it took four to five days to wait for the full recovery of their servers. what we know is there was a blaze that ignited the lithium-ion batteries in the data center and why they are facing criticism is how they did not have the contingency plan for such cases when the entire center was shut down. shery: i also use kakao talk and

used kakao taxi because that's the only way you can get a cab these days. what are we expecting from this parliamentary hearing today? sangmi: the parliamentary hearing is going to start in an hour or so. what we are going to expect as we are going to see the founder of kakao and another company affected by the outage. they are probably grilling the founder over these outages that took hours long and even days long to be fully recovered and what they are going to ask is

why it took so long. it caused so much disruption to be restored which the president even said kakao talk, it's no longer just a private messaging app, it's more like a national messenger app as many government officials use this chat to send out some important releases and press releases. shery: the latest on kakao -- take a look at the japanese yen. what a roller coaster ride for the currency. we are seeing it pare back some of the earlier rally we saw in the asian session. we had seen significant weakness and now significant strength and now looking unchanged. our are asia south reporter joins us with what to expect at the opening. we have spoken about how week

the effect the japanese yen has on more positive stock outcomes in japan. what are we expecting today? is it about uncertainty and volatility? >> looking at the futures price, the japanese market is likely higher up the rally of u.s. shares last week. having said that, we have seen the yen, we've seen what looks likely to be an intervention in the daily volatility of the dollar yen has been quite high. that would keep many investors on edge. looking at a broader asian market, we have seen over the weekend, quite an astonishing development in china where during the communist party congress, the former chairman was escorted out from the meeting. investors are obviously paying

attention to what is going to happen in the chinese market given many investors are concerned about possible concentration of power and lack of check and balance would make many investors nervous. obviously we need to keep an eye on haidi: the chinese markets. haidi:our senior asia stock reporter with what to look for as we get into the market opens in seoul and tokyo. coming up next. this is bloomberg. ♪

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shery: this is daybreak: asia. we're coming down to asia's

major market opens. we are seeing the yen a roller coaster ride. we went from weakness around 149 to strength around 145. the big question is did authorities intervene again in the markets? >> suspected intervention on friday along with this or about potentially the fed's direction as well. looking ahead to the boj at the end of this week. wild moves in the currency. let's get you straight to annabelle with what we are watching. >> divergence between the fed and the boj in play ahead of the open for japan and south korea. the start of trade for cash treasuries. kicking off with we do have this expectation that the fed could have rate hikes as early as a year end.

the boj the big outlier here given no changes expected in policy this week. that is what is driving the moves we see in the currency. up as much as 1.3%. reversing that. are we seeing officials again stepping in to the market? we heard from the finance ministry himself saying he will not even comment on why he is not commenting on whether they intervened. a lot of intrigue around this. when you take a look at what is happening in the turnover in young futures, that is a key signal they are stepping in and we are seeing the spike in volume. in terms of the direction of stocks, we are was going to give and have the consensus the fed could have a smaller pace of rate hikes except for the 75 basis point hike in november. let's change and take a look at the direction for korea given it

is tracking those moves. u.s. futures pointing to a second day move to the upside. we do have green across the screen for the kospi and bigger moves in the tech index. the korean you want looking -- the korean yuan looking like this. we are looking a little bit lower even though we had seen it higher. a lot of the stem to what we are hearing from the rba. it will be more data-dependent for decisions in the months ahead. we can see that in the rate sensitive three year yield. asx 200 looking like this. watching what is happening with u.k. futures at the start of trade given that boris johnson has bowed out of the race. his focus is on rishi sunak is seen as doing a better leader to deal with the conditions facing the u.k. you also have the pound moving higher.

shery: let's bring in the head of research at cnb investment corporation. what an exciting morning to have you on with us. we are hearing from a top official saying japan can take action 24 hours, seven days a week. we have the suspected intervention in the forex markets but i have to wonder, what is the end goal given we are heading to another boj policy decision and not much is expected to change in that ultra monetary easing policy? >> i feel like never intervention is effective enough to reverse the trend. i think japan, multi-policy is coy extreme. there is a structure of problems. every time you intervene in the market, you have a rebound and then the trade is shut again. that is the strategy right now. even government officials coming up to say we would like 24

hours. i don't think it will be enough to reverse the trend. shery: the trend seems to be not only in japan but across asia given the volatility and uncertainty the markets are facing. whether south korea or taiwan, they are trying to support the markets. market stabilization funds. we are seeing the korean yuan jumping given that korea has also pledged to support credit markets. is this the new trend as we continue to see this uncertainty globally? >> i think for the asian markets, you can see the yen weaker. other currencies in the asian market is also weaker. that is affecting a lot of financial markets in the region. for korea or even taiwan or other areas, they may have to change their policies.

i think structurally you have to look at your economic outlook. the economic outlook attracting money back to your area is the best strategy to support your currency. haidi: when you talk about dollar-yen needing to reflect fundamentals, is it just the pollen see divergence fundamentals between the fed and doj -- boj fundamentals? how do we gain fair value in this type of environment? >> and this type of environment, for japan it is a tough position. that is a painful path. i think now japan reopening the economy and global supply chain is commodity prices, that will

be helpful for japan to trigger more growth. all those things like traveling and japan, all those things will help. for the moment i think you have to strengthen economic outlook of the country first. haidi: you are selectively constructive when it comes to china. what did you take away from the weekend, the wrap up of the party congress? what it means for the party going forward given the changes in the economic management team? >> i think the congress is giving you economic and political stability is for the next five years and beyond. for the last three quarters, you

see adjustments. the most important thing is -- we need catalysts. lots of things on the table. we know that trans-party conference is helping you strengthen your confidence on the country, on the future outlook. we are quite positive the catalyst is coming up. the market will be performing much better than before. haidi: always great to have you with us particular on a fascinating market stage like today. let's get you back to bell who is looking at the movers. career brokerages are in focus. annabelle: given what you are discussing, the government in korea is pledging support for credit markets. timely given they have been strained by rising interest

rates. stepping in to reduce the risks of default in the country. we did just have a rare default last week on commercial paper by the developer of the korea legoland theme park. we are taking a look at what is happening with brokerages here. we are seeing stocks moving to the upside. the target of asset-backed commercial paper related to real estate projects that will be among the beneficiaries. t a look at how we'll estate firms and rates are performing. we are seeing their moves to the upside. shery: it's get to the first word headlines. fed officials preparing to roll out another 75 basis point rate hike next week while mulling an eventual downshift to more incremental decreases. san francisco president mary daly says fed should start planning a for smaller hikes up her next month's meeting. chicago president charles evans says the fed will have to guard

against overshooting on restrictive policy. australian treasurer jim chalmers is preparing to deliver the new labour government's first budget update. economists predicted tuesday's fiscal blueprint will show an underlying cash deficit of 22 billion u.s. dollars. chalmers has promised a sensible first budget. he told bloomberg china's slowdown is a key concern. >> the slowing of the chinese economy and their approach to zero covid does have consequences for our economy and you will see that in our budget forecasts. not a revolution how they go about that at a bit of a re-think in making sure our markets are diverse. i worked very closely with our big employers to make sure they have the next right. shery: china has enshrined its rejection of taiwanese

independence into the willing party's computation. -- party's constitution. the charter previously only called for the advancement of reunification with taiwan. taiwan's tsmc said to have suspended production of advanced silicom for byron technology to ensure compliance with u.s. regulations. a source says the decision follows a report that products outperform nvidia's a 100 ships which are bad for the chinese market. we are told tsmc has not reached 80 can ocean on whether adults meet the u.s. threshold for restrictions. those are your first word headlines. haidi: still ahead, signs of a downshift at the fed has mary daly says it is time to start talking about smaller hikes. plus the future of lies in the

hands of xi and his all-male inner circle. this is bloomberg. ♪

>> we will work with all of people to champion humanities. common values of peace,

development, equity, justice, and freedom to promote global peace and prosperity to keep pursuing a shared future for the community. china cannot develop in isolation from the world. the world's development also needs china. shery: president xi jinping has filled china's most powerful bodies with his close allies while also securing a precedent breaking third consecutive term at the close of the party conference in beijing. let's bring in stephen engle in hong kong. is it safe to say there was little compromise with his picks ? >> in hindsight of course we could have protected this because the moves were in place for a shooting pain to stack his loyalists. that is what he good. out is one young. they were tied more to the

previous leader and not a close allies. he appointed four new people including reappointing his propaganda czar as well as the head of the anticorruption campaigns. then he brought in powerhouse party bosses. and also the shanghai party boss. probably the one person we need to get to know better. he broke ranks in the sense he was never a vice premier. vice premier said the standing committee and will be in line to be the next premier come march when the national people's conference will convene. there is the lineup right there. they are all loyalists. you can say he has stacked the deck in his favor for what could be an indefinite oral. -- an indefinite rule. haidi: what happened there?

we know this is such a perfectly choreographed event that was not by accident. >> the saturday closing of the congress is a scripted event. there are very few surprises if any. when the cameras came in and the journalist came in to the great hall of the people, where the first things they saw were ushers coming in to usher the leader before shooting ping. they lifted him up and he was somewhat reluctant to get up until he was assured to get out. state media says it was for health reasons. if it was health reasons, you would think he would not have been there in the first place unless he was extremely ill. he did show some resistance to moving. he did say a few words to xi. xi nodded to him. he gave a pat on the shoulder as you see there who also by the

way on the next day was left off the standing committee. they are close as well. there is political intrigue. i don't want to read too much into it. you can see the symbolism. the weekend involved the removal of his loyalists in the politburo and on the standing committee. he was physically ushered off the stage the same weekend. read into it what you like. shery: we have had georgetown university's evelyn melitta errors called this michigan -- call this maximum choosing pain demonstrated during this party conference. what will this mean in terms of how china deals with the rest of the world especially its relationship with other major powers? >> he did make a nod to that. xi jinping has heard all the criticisms of his policies domestically with covid zero.

his crackdown on the platform economies. at the same time he is firmly in control. he has his people to carry out his orders. he made a nod to the international community which is also concerned because of the wording he has used on taiwan. his no limits partnership with vladimir putin has relayed -- has raised alarm bells. he said china's economy is resilient and he failed to deepen economic ties internationally. i will quote him, translation from mandarin. china cannot develop in isolation from the world. the world's development also needs china. that is pretty much what he had to say about the international scene. this is a domestic little event. now we get behind closed doors and lineup what they are going to prioritize for the national people's conference in march.

haidi: our chief north asia correspondent steve engle. more to come as we get toward march. let's take a look at the other big story. did they or did they not? take a look at how dollar-yen is trading. we had the in trading, just about 1% lower and trading higher by 1% against the dollar. still seeing that level being held at 148. if we are talking about intervention, that shows more strengthening result of and perhaps a one to 50 is the level we are watching in terms of their appetite for weakness. we did hear from the currency officials saying they will not comment on whether they did intervene but they can take action 24 hours, seven days a week. let's bring in bloomberg's executive editor. the previous economists we spoke to seem to think this was some

semblance of the impact of intervention. what are you see a? -- what you see a? >> i think the people we are talking to see it that way. the move friday night was pretty aggressive, pushing the young weaker. seems like some more follow-through in trading this morning. those comments, we can intervene any time 24 hours a day even on christmas day. maybe this is a demonstration of that ability to be there at the age open and everywhere in between. japanese policymakers are talking about this battle against speculation over the yen. that is the thing they dislike. it is the sharp moves. the one-sided trades. the people we are talking to kelby saying that is what they want to disrupt more than anyone else. so people are not going all in on betting on even weaker japanese currency. shery: let me turn to the

british pound because we have seen some strength as well especially with boris johnson dropping out of the race for the conservative party. at the same time i keep hearing calling for dollar parity. >> everywhere you look in fx, there is a story. so fascinating. the pound i guess getting a little bit of support today because of the fact it seems there will be more clear direction in terms of choosing a leader. less uncertainty perhaps. some confidence in the rishi sunak jeremy hunt kind of combo if that is what we were to end up with. the long-term outlook is so awful with its account deficit, negative gdp and the government going to have to sell a lot more u.k. government bonds to finance the deficit.

it needs interest rates to be high enough for the pound to be weak enough to encourage oversea investors to come in. those are the arguments for a weaker pound. maybe there is confidence for the conservatives if they can sort is out more. longer-term the consensus almost is for the direction to still be south of the u.k. currency. haidi: reminding us how bleak the outlook is even if we see a little bit of optimism in the pound. let's take a look at how futures in europe are opening up. we did see european stocks trading higher. getting the live from tech stocks. we have been watching u.k. assets. trading in the pound as a get into the trading session after boris johnson pulled out of the contest to lead the conservative party. they gives more potential for rishi sunak. we saw gains in the pound in the

asian session. some upside for your stoxx 50 futures of just about 1.5% following some of the optimism we are seeing in asia. you can get a roundup of stories you need to know to get your day going on today's addition of daybreak. it is also available on the mobile in the bloomberg anywhere app. this is bloomberg. ♪

>> i don't think bitcoin is the answer to what crypto promises. i think there will be something that is just like coin that is a mechanism of the exchange. for bitcoin it is about >> the macro appeared for the rest of crypt to, that is an inevitable

march to starting to change how we actually operate. >> now we are in this market you will see builders come to the four appeared over the next couple of years we expect a lot of innovation to happen across multiple chains. >> our investors recognize and the market recognize decentralized protocols have unique advantages the not only can benefit crypto markets but also crypto markets more broadly. annabelle: our guests sharing their insights on what is next for cryptocurrencies. let's look into the results of the survey in more detail. the big takeaway is most people still not looking to increase exposure to crypto over the coming year. what is also interesting, the asset class does appear to be looking more attractive from a regulation standard. 60% of people like the string of

actions they are seeing from the sec. in terms of the outlook, people also slightly more optimistic than they were in june. most people still say bitcoin will trade range bound around the 17 to 25,000 range over the coming months. that is better what we had over the northern hemisphere summer when people were saying it would drop down to 10,000 four recovering to the 30 k mark. any terms of correlations, they are saying it coin could start to trade like a haven again. they are looking at the correlation with gold. back around zero in early august. haidi: let's get a quick check of the headlines. sources are saying saudi arabia's public investment fund is in talks with boeing and airbus took biplanes for a new

national airline. the sovereign wealth fund plans to buy 40 planes and take out purchase options for 40 more. saudi arabia wants a second national airline to make of the economy less dependent on oil. bloomberg has learned credit suisse's chief compliance officer is set to leave in the coming weeks. sources say his departure is not related to the swiss bank planning to announce those strategic reviews. he has spent a little more than a year at the post. more to

shery: breaking news out of japan. we are getting pmi numbers complementary data for the month of october. posit numbers coming in at 51.7

which is slightly higher than the previous month of september, 51. services side of speeding the previous number and growing to 53 so we are all still in expansionary territory. the manufacturing numbers coming in at 50.7. this is a slight deceleration from the previous month. the reason this is surprising is that we do have a weak japanese yang but with global manufacturing having weekend, we are seeing the yen weakness is not doing much to bolster export demands. same reason we so in september the manufacturing pmi falling to lows we have not seen in a few months. right now we are getting those pmi numbers and the composite still expansionary at 51.7. however we setting up in the markets? annabelle: you mentioned the weakness seen in the yen that is the big focus for us this morning.

we have seen pretty wild moves with speculation that officials have again stepped in to the market. how we could be monitoring that but in terms of what traders are bracing for, more volatility across the week. you take a look at the volatility on one week basis, it does speak to this focus we have on the boj given that meeting is coming at the end of the week of the are expected to stay on hold in keep that program of yield curve control in place. that is the driving factor behind yen weakness but in terms of how we are seeing more official stepping into the market even though they are declining to comment on it, we can see that in yen futures contract. take a look at the turnover we are seeing in the contract because we did see that rising to the highest level on friday when we saw the yen jumping as much as 2.7%. but also take a look at the turnover spiking through the session and we release all that paying up when we saw the yen

strengthening once again. in terms of the broad of direction of markets, we are very much risk going in the session. we are being driven by what we are seeing in treasury yield action. that sense we have that fed officials will not need to be so aggressive in rate hikes in the months ahead. you can see that in the drop in yields across the space. we do often check the three year in equities, we will risk on here for australia up nearly 2%. eyeing what is happening in the south korean= given we are -- korean yuan given we are getting more support. a pound as well. look at the bottom of your screen and that is down to the changes around who could be the person vying for the head or the leader of the u.k.. haidi: some uncertainty being

removed with boris johnson removing himself from contention. let's get you the first word lines. rishi sunak is on the brink of becoming the next u.k. prime minister after boris johnson did leave out of the race -- did back out of the race. this leaves rishi sunak facing penny more debt. johnson said deltek -- said mounting a bid would divide his party. he left office last month after a series of scandals. giorgia meloni has been sworn in as italy's prime minister becoming the first female leader and heading the worst -- heading the first right-wing government since world war ii. she will address both houses of parliament next week for a confidence vote. south korea is pledging about $35 billion to support reddit markets under pressure from rising interest rates.

the finance ministers says korea it will look to prevent a credits who ease hitting corporate bonds and other short-term money markets. it is the biggest round of support since the start of the pandemic. north and south korea have exchanged warning shots along their disputed western sea boundary. joint chiefs of staff said the navy fired warning shots early monday morning to repel a merchant ship that violetta the border. with korea said the military responded by firing 10 artillery shells and accusing a south korean navy ship of intruding into its waters. those are your first word headlines. shery: the fed expected to deliver another 75 basis point rate hike at its meeting next week and then debate went to slow down and pause its aggressive inflation fighting policy. kathleen hays is here with the details. are we seeing a real shift at the fed? >> we are seeing the beginning

of a serious debate about now they have done so much, 300 basis points a rate hike since march, when do they start slowing down? trees don't grow to the sky and central banks don't hike rates indefinitely so it is logical they will keep going forever. mary daly said by now the fed should be considering when are we going to slow down by inflation has not been cooperating. she said he still have to get restrictive should it is not time to step down on rate hikes yet. let's listen to what she said on friday. >> what you see is growth below trend on 23. policy tightening that gets the rate up next year between 4.5 and 5%. policy tightening that raises and holds because we have to keep the rate at a tightened, tightening level to reestablish

price stability. >> faithful fed watchers will recall as we got the minutes of the fed's last meeting we saw this word, calibration. getting a bit more cautious as they do for their tightening. it was about looking if you go too fast, financial instability, those kind of questions. several fed members were talking about that at that meeting. charlie evans, the president of the chicago fed sees restrictive policy now. get up to 4.5% by early next year. then he said it is time to look good frontloading, the fear hundred basis point rate hike since march is not -- is costly. they are in kind of an on precedented time. you can understand -- if inflation is still around 8% and inflation is not breaking

down, what will the fed do then? they are forecasting at. jim bullard said the rate that causes inflation pressure that starts hitting it hard is going to be a key debate for the next two meetings. he is probably also talking about the december meeting where people are wondering if they shift back a little bit to a 50 point basis hike? haidi: the australian treasurer will be aiming to establish the new labor governments for school credibility this tuesday when he delivers his first budget. he told us the fiscal up they will be celadon sensible with an eye on a slow down with australia's is trading partner. >> we are concerned about developments in china. the slowing of the chinese economy and their approach to zero covid does have consequences for our economy and you will see that in our budget forecasts. this is the probably the third

biggest global downturn in the last decade and a half. this one is very different because it is an inflation shot bringing about blunt and brutal response from central banks around the world and puts at risk a hard landing in the global economy. our approach is very different to the other two. you need a responsible budget at home sharing >> you flag that budget should inflation is going to continue longer and higher than had been expected. does that mean australian should be embracing for u.k., u.s. style longer run of harder rate rises? >> i don't want to second-guess or grab the difficult decisions taken by the independent reserve bank. they have made it clear they expect there to be more rate rises to come. our job and a lesson from

overseas is we have to nicely lineup we are doing in the budget and what central banks are doing with interest rates. you don't want them to be at odds and you get a very difficult situation and the market reacts strongly to that. inflation is the primary influence on the budget we are putting the finishing touches on. it guides how we have approached fiscal relief. it also guides our approach to cleaning up the budget after a decade of wasteful spending. what people can expect to see on tuesday night is a budget which is solid and sensible and suited to the times. it does more than just been down the hatches against global uncertainty. it begins to build a better future, families in and real trillions a rate -- bring us trillions together over these big economic challenges we face. >> there has been a big debate

in australia about tax income for how your nurse. we have seen in the u.k. shows the risk of getting those figures wrong and bring in tax cuts where there should not be tax cuts. as in the current experience in the u.k. show the experience -- show the importance of fiscal caution? >> first of all, what we will be doing on tuesday night will be calibrated to these challenges we have inherited and we face around the world. those tax cuts are some time into the future so we have more pressing of iras. blessing i call from the primary -- i think there are two obvious lessons. you have got to nicely lineup your fiscal policy and monetary policy. when they gets out of whack, the markets will react. i think if you're going to make a big change in budget, you need

to explain it and you need to bring people along. but i have tried to do as treasurer and what i will continue to try to do is talk up to people and not talk down to them. i am an optimist by nature but we have some difficult things to deal with. i want to level with people about that. another lesson i draw from their u.k. if you're going to make a big change from a make sure you prepare the ground for it. shery: be sure to tune in to bloomberg radio to hear more from the days big news makers. plenty more ahead. stay with us. ♪

shery: as heads of state gather for this years g 20 summit in bali, we are putting the spotlight on some of the key issues they are facing in the post-pandemic era. among them is the rising debt word in of poor countries worsened by a strong dollar and rising interest rates. over the past decade, g20 member countries such as china and india have risen as the top new lenders overtaking france and the u.s. haidi: we are now dealing with a

ballooning debt crisis in low income countries testing china's soft power strategy in poor nations. the g20 has set up a framework for debt treatment but it has not worked as intended so far. chad, zambia and ethiopia have so far requested debt relief. no agreement has been reached. our next guest says turning to china as unlikely to be a long-term solution to developing economies debt problems. joining us is a senior fellow at the institute of southeast asian studies. great to have you with us. the cynical of those amongst us would say the debt issues were at least in part created by chinese investment in the first place. >> i think we can't blame china for all of the problems these countries are facing.

certainly they borrowed at their own pollution but there are some countries that did borrow in unviable economic projects partly due to some lead to strengthen ties with china. and china's need to create his huge network of transport infrastructure. a country like laos for instance has built this fast rail network which will not benefit laos very much but has put into serious macroeconomic debt and crisis but will benefit china greatly in connecting the network and bringing it all together. there are some projects of the bri that have caused these problems. we know about sri lanka.

there are other difficulties rising with the current world economic environment that are compounding those problems. haidi: we have talked a little bit before about the failure of this initiative to get off the ground. what is the best plan of attack in terms of stemming the problems that are already at hand and preventing the situation from deteriorating for a number of these nations? >> i think you mean the g20 initiative. initially it was about suspending the service burden on debt. this was during the pandemic. this has ended. it did not work very well as you mentioned in your lead up. there was not very much covered.

there were $13 billion worth of debt rescheduling. it is not forgiveness. it is only delays in payment to help countries through a difficult time which is the pandemic. now we have to look at longer-term solutions and a kalman framework is one such initiative. the key in that approach is to ring in private sector debt as well as public or multilateral debt. there is no point in having countries reduce their debt obligations to the public or other governments or the world bank and imf. only to find the savings are used to pay off private sector debt. we need to have coordination and harmony between all sources of borrowing. hopefully the kalman framework can do that and the number of countries that will be involved,

expand to just beyond three in africa you mentioned. shery: how real are the risk of sovereign defaults because we know when debt crises happen, they usually happen in clusters like we sold during the great depression or the 2008 financial crisis. is this a real concern? >> i think there is no big risk of a contagion type debt crisis. similar to what we saw with the global financial crisis or the asian financial crisis where many countries it just by being connected physically or financially. i don't see that as an issue. there are some common problems and number of these oriented companies are facing. those are mostly external. we know there has been a sharp appreciation of the u.s. dollar.

a lot of the debt is denominated in u.s. dollars. his is increasing the burden at a time where exports are falling because of falling global demand and a possible global recession. export receipts are not going to help much in reducing the burden of financing the debt but also i think we have to look at how countries change policies at home to -- at home once these lee ways are provided. we need policy changes at home to avoid a long-term recurrence of these sort of debt trap problems. shery: what sort of platform or support can a platform like the g20 provide for these countries if a lot of it has to do with a

lot of the domestic policies that need to change? how much do you need to address the external shock problems like a strong dollar, rising borrowing costs around the world? >> i think the g20 needs to work with the multilateral institutions like the imf in particular but also the world bank, the adb and african development bank and so on to ensure that there are conditionality's associated with these buckets of money coming in to try to tide over these countries during a difficult time. there has to be domestic reforms. this is not a good time to try to sell that type of reform program of short-term pain for longer-term gains when there is so much short-term difficulty and uncertainties. and imf type program is

basically the way forward for a lot of these countries in bringing in the domestic policy changes required to move forward from here and avoid a recurrence. shery: it was good having you on. senior fellow with his views of the debt issues around the world. we will be having more analysis on the challenges the group faces on mondays at 8:40 a.m. hong kong time on bloomberg tv. stay with us. ♪

haidi: markets in china coming online in less than an hour. party congress is over. your holiday is now over. what are you watching? david: those two things were not coincidental. all the work really has been put on yvonne man. as we head into the open today, we are going to see a pop at the open. perhaps not so much to do with the vents in beijing but what we have seen. hsbc dropped a note in our inboxes this morning talking about the next things to watch. you had the central economic work conference typically in

december. that is an update of economic targets. possibly this national financial work conference and that basically lays out the priorities in terms of financial sector reform over the next five years. other things to track, a bonsall taking place. what happens to the onshore rate given how steep the rise in the offshore rate has been up until this point. shery: we have seen a little bit of disappointment there has been no stimulus packe out of this meeting. what does this mean for markets that the party congress is over? >> goldman sachs came out with a note. all pretty much the same formula. they prefer onshore a-shares over offshore on the back of the absence of any new catalyst so far that risk premium they say will stay. given what we have seen in terms of makeup of the politburo, they look at as so easy and to quote

andrew tilton's email from this morning, the little giants are well-placed to benefit from strategic policy tailwinds under president xi jinping. shery: i coanchor david in glace in -- david ingles in hong kong. we heard from tsmc they have suspended production from china's borrowing technology to ensure compliance with u.s. regulations. these other stocks that we will be watching a link to some of the key focuses of china's 20th party congress as we have in discussing with david as well. that is it from daybreak: asia. bloomberg markets china open is next. this is bloomberg. ♪

♪ david: happy monday morning. it is 9 a.m. in hong kong, beijing and shang