haidi: welcome to daybreak australia. >> we are counting down to asia's major market open. shery: the top stories this hour. stocks under pressure ahead of friday's u.s. jobs report on concerns hawkish fed may cause a deeper recession. the yield curve inverting to a four decade extreme. >> the be away -- boe biggest hike and 30 years. a new phase of tech austerity prop job cuts and a hiring slowdown. look at apple after hours because we heard that they have stopped hiring outside of r&d. we are seeing the downside pressure after the close. we had the s&p 500 down for a fourth consecutive session.

it was down 1.5%. the pressure was on big tech given that we continue to see the resumption of losses. we are also watching eco-data. what that means for the fed. broader risk off sentiment translating into oil prices. it's all about the jobs numbers coming up on friday. look at the jobless claims that came out today. the jobs numbers did fall slightly. they are still near historic lows. we are seeing an overheated labor market like jay powell said it's correct. we are thinking the jobs numbers will come in with the growth of 200,000 showing the labor market

continues strong in the u.s.. >> something not really helping us in asia. the other sector we have been tracking has been the wild swings in chinese shares. stocks listed in the u.s. are seeing their third straight day of gains. what started it was these unconfirmed reports that beijing could be looking to pivot away from covid zero. they were since quashed by the top health officials and the company -- country saying that's not the case. we saw mainland shares snapping a two-day rally but still this was the position on thursday. we will see if that gives us any boost into trading in asia on friday. it still looking risk off.

the yen has been whipsawed following the fed but the boe is the other big central bank we are watching as well. >> the biggest hike at 75 basis points in 33 years. interesting the nuances of this committee case and at the same time telling investors to rein in their expectations saying that if it follows market pricing, that's going to set about a recession for the economy. what they're trying to communicate is the balancing. yes they are taking the fight against inflation seriously, but reining in the rate expectations signaling the peak will be lower than what the market is currently pricing.

this is a sharp contrast to what we heard from jay powell on wednesday saying that u.s. rates will go higher than what the markets are thinking. >> it's hard to try to protect what the markets will do. ahead scratcher for everyone. no wonder we are seeing popular hedges misfiring and what people are calling a weird bear market. talking about buying the debt sheltering mega caps buying crash insurance stock hedges designed to pay off in a southern downturn like 2020. it seems the policies designed back then are wrong for this kind of bear market. people are trying to figure out how to trade when you have central banks saying different things. for more, let's bring in kathleen hays.

>> the jobs market -- the jobs numbers are supposed to be solid . i want to underscore something you said. this left out at me when jay powell gave his press conference yesterday. they have a ways to go in interest-rate. the market is overheated. it's going to take a bit of a cooling-off to a still solid level to convince the fed that we should rethink this. what is going to take is a steady decline in inflation numbers on a monthly basis. 190,000 is the forecast for payroll numbers. it would be less than the prior month.

if people get more optimistic about jobs and come back into the labor force while there looking for a job and still unemployed, back could be something that pushes up the unemployment rate. knowing how low jobless claims still are, we were -- we are going to surmise that an increase in unemployment might be due to that. this is still double the rate that we saw average growing wages before the pandemic. this will have to be a lot weaker to make people think something is happening. even traders are going to need some convincing the labor market is truly cooling-off. >> to that end, what do we expect to see in terms of market reaction given that the inversion is the most extreme in four decades? we expect more selling and treasuries? >> we saw that inversion

reaching most extreme level since the 80's today. in terms of the jobs report, i was reading a note from ben jeffrey up bmo saying if we get another solid jobs number, that would clear the room to price and another higher terminal rate that would ring up the two year yield because it is ultra policy sensitive. fears of maybe a recession as a result of that aggressive fed tightening would cause people to pile into the longer end of the curve. for the stock market, we are down for consecutive days in the s&p 500. it seems like the market is looking for a reason to rally, so there are some strategists saying if we get a worse than expected number, we could have a pop in the equity market but it would not be enough to sustain

any real change for the fed especially after the hawkish report yesterday. >> we have seen firms cutting guidance but is corporate america gloomy enough? >> one of the themes this season has been people talking about how wall street analysts need to bring down their expectations for s&p 500 earnings. i have been looking at what the actual corporations are saying and what they're forecasting. right now this is according to bespoke research. 10% of companies that have reported earnings so far this season have cut their guidance. according to them, that's not enough. a macro strategist said he wants to see 15% of companies reporting cutting their guidance to signal we have reached the peak pessimism and we are at the bottom of the stock market. he points out that 9% of

companies that have reported are still raising guidance this quarter. that is certainly not an environment where companies are pricing in an aggressive tightening and economic slowdown. >> getting realistic has been a theme for central banks. trying to communicate the nuances of their path forward. if you contrast we heard from the boe versus the fed, it underscores the challenges at the moment. >> they are huge. the fed knows with her facing. inflation too high a job market still hot. the problem for the bank of england is on top of that, they have a economy probably already in a recession. a fiscal package they won't know

what it is for another couple of weeks. they are moving ahead. they did the 75 basis point rate hike today. seven-to vote. the last time they did 50 basis points, the majority voted for the smaller hike. they are saying that the markets expectations for the key rate at 3% now at 5% maybe unnecessary. they see a shallower path ahead. here is what andrew bailey said earlier. >> we should not increase bankrate too far. the path required to return inflation sustainably to target is shallower than that priced into financial markets. >> he said that it means

mortgage rates will have to move higher. their key rate that resets is up to 6% now. it was at 1% the end of last year. more and more brits are going to have to refinance then pay higher monthly payments at a time when they have to pay higher gas prices and they are worried about their jobs. they are realizing that they are still upside risk to rate hikes, they don't think they are done yet, but they are saying the bigger hikes may not be necessary and they will have a milder recession and inflation will come down not as quickly but that is their strategy right now. >> let's get you to vonnie quinn. vonnie: the ecb president says there is still a ways to go on raising interest rates to counter record inflation.

she says the ecb will use everything to bring back to the 2% target. the u.s. and south korea have warned north korea that using a nuclear weapon will result in the end of the kim regime. the u.s. and south korea defense ministries told a joint reaping they would extend the military drills that pyongyang calls a provocation. >> we have decided to extend vigilant storm. that is our long scheduled contrarian -- training exercise to further bolster our readiness and interoperability. vonnie: sources say the eu is studying the feasibility of using russian central bank

assets to help ukraine's reconstruction efforts. legal experts are looking into possible options. they are focusing on how to seize russia's reserves that were frozen by the eu and other allies. the former prime minister a pakistan is in stable condition after surgery to remove bullet fragments. his party says he blames the prime minister and his administration for the attack. the government has condemned the incident and called for an investigation. police say at least one bystander killed in gunfire. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. >> still ahead we discussed the upcoming jobs report.

up next, why brian jacobson says investors should not take jay powell's hawkish and us to seriously. this is bloomberg. ♪

>> don't focus on the pace anymore. >> it's more about the destination then the journey. >> the beginning was misleading. >> we are not pausing. >> the second bombshell. >> suddenly a more hawkish tone. >> chair powell is more concerned about under tightening men over tightening. >> a big disappointment for the market. >> the fed does not want to see a replay of july. >> now it's about the ultimate destination. >> you are expected to see a step up for the terminal rate. >> they love guessing with the terminal rate is. >> guests reacting. our next guest says not to take jay powell to seriously.

i guess you have to contrast with what we heard from the boe overnight trying to manage market expectations that they think are too extreme going forward. does this just emphasized the challenges for central banks that they have only so much data to work with right now? >> that's exactly it. they are as a grunt about the future as anybody else. the way that chair powell, what he was doing was trying to play good cop bad cop investors. he had the policy statement come out that was interpreted as being dovish because they might not pause but at least slow things down. then maybe the compromise that he struck with the rest of the committee was that then he would go out there and deliver hawkish message. when you listen to the details about what he was talking about, he was almost like rehashing old

arguments. to prove that they really don't know what they're going to do next. there effectively flying blind. he shouldn't burst ash pretend as though they're going to push rates higher when they have no clue how high rates are going to go. >> investors are also flying blind. how do you invest around this opacity in the future? >> it's interesting because there's a time where it seems like there's monetary malpractice taking place. it becomes evident when he makes reference to things like there's a beverage curve that we look at. any serious economist who looks at those things knows they don't work and they are really good real-time indicators of where good mont -- monetary policy should be set. one of the most honest things that was said was that core pce, the month on month changes in the core personal consumption expenditure price index.

let's say we take a three-month moving average, that's probably a good guide of when they think inflation is going to be. they want to raise the federal funds rate at a place -- pace and in the hopes that core pce is also coming down. where those two lines intersect you get the funds rate above that then we can take a pause. we are pretty close to that. come january we could be at a point where the federal funds rate is higher than real-time reading for core inflation then that's when they can probably take a pause. probably a lot of volatility between now and january. there are still good opportunities now that equities have in the reality of a likely

recession hitting the economy sometime in the first may be early second quarter of 2023. >> are the opportunities in defensive sectors given what you're talking about? >> we are more biased toward defensive sectors like consumer staples. we were shunning the interest rate defensive sectors like utilities telecom reits, getting rid of some of the interest rate sensitivity. given that rates have moved higher, there's a lot to like about the more traditional defensive areas. consumer staples versus the broader market. one of the areas that we really like our short duration strategy. on the fixed income side, we have a short duration team.

>> does that mean that they should be planning back into treasuries given that you expect the pivot to happen sometime soon? we saw optimism soon -- we saw optimism but that didn't seem to last. >> it was a stunning the intraday moves. they were down than up when chair powell said going to go higher as opposed to where the economic projections are. when he says the sep is going to be higher as far as the rate they're going to hold, he might only be talking about 25 basis points or 50 basis points. the market is pricing in the rate is going to be something above 5%. maybe they only need 4.75%.

on my multi-asset team, we think we could see a decent rally in the 10 year treasury. 4.5% seems like that's a really good opportunity. right now we are at 4.15%. we would be surprised if we went down to 3.5% by sometime in january or february. >> good to have you with us. we have more to come, this is bloomberg.

now to the latest signs of austerity. amazon and apple are expected to pause in hiring for certain areas. twitter is said to be cutting half of its employees. su keenan joins us with the latest. we are hearing that apple could

stop hiring. it is that the idea right now? parks >> we are seeing a reaction after hours. this is a pause in hiring at apple for many jobs outside of r&d. it's an escalation of their prior existing plan. now apple is joining a large team of companies that appear to be tapping the brakes on hiring or they have come out with announcements. all due to what they are calling headwinds in the macroenvironment. an announcement thursday one said it grew operating costs to quickly and they are now cutting back. amazon also making announcements saying it's going to pause adding some portrait -- or per jobs.

you are looking at year-to-date returns for the stocks of almost all the companies that have either tapped the hiring brakes, have been reported to be making cuts or have all -- outright announced they are going to do so. amazon is pausing the corporate lift seagate. sources say that twitter is planning to cut roughly half of its staff. elon musk says is going to be restructuring cutting $1 billion in cost. >> more to come, t

>> the bank of england governor has pushed back against market

expectations for the scale of future rate increases after a 75 basis point hike the biggest in 30 years. >> the u.s. and u.k. are facing different situations. we are facing a huge negative real income shock in terms of energy particularly gas which the u.s. is not facing. i don't think people should be surprised when they see that we are looking at things through different lenses will become to different conclusions. i resist people saying you should do the same as this other central bank. >> you think you would be more aggressive in tightening quicker? >> the fact we should -- that we have done 75 today people should not read into it that that is the new norm. >> what indicators do you look

at to see when you can cool off? >> we always look at the profile of inflation going forwards. as i said earlier on, we look carefully at the labor market because we have a very tight labor market in this country. it's interesting there's a lot of evidence that the economy is slowing. there is some evidence that labor demand is starting to slow but we still have a very tight labor market. we have a smaller labor force today than before covid. >> are there indicators that carry more weight than others? parks no, we have always avoided that sort of debate. that means that individual pieces of data get too much significance. changes over time, the things that we look at in the economy more than others the pen on the situation.

the labor market right now has a close focus because it is so tight. >> we had a column that i'm sure you've read saying it was the bank of england's lack of pension fund oversight that ousted liz truss. what do you say? >> i did read the column and he made two points. the first was pension fund oversight. we did organize a stress test for parts of the system back in 2019. it seemed an interest rate strategy. it was a bigger stress than the last quarter-century. what we experienced in september was substantially bigger than that. that poses a question to any central bank, how do you react to that? what is the right place to set the stress? i would say this is off the scale of history.

the second thing that i fundamentally disagree with with the conclusion of that article was the suggestion that we stopped our intervention and we should've continued for financial stability purposes and that is wrong. we stopped our intervention at a point when we concluded and i think the evidence supports it, that the stability problem we were dealing with we felt had been dealt with. if we had gone on longer than that, we would have been creating moral hazard problem. that would have had a detrimental effect on financial stability over time. >> bring in and about. what are economists saying about the height? -- hike? >> it's divided. you had one policymaker saying 25 basis points that have been more appropriate.

ing is basically saying the boe like other central banks faces a tight balancing act between inflation and at the same time not sending economies into freefall. economists at ing saying the boe had two choices. either they could have done a more aggressive move to shore up the sterling but of the same time, you have about one third of u.k. households with their mortgage rates fixed on a two-year time. that is the choice that the boe is making. yes 75 basis point hike, but that could be a one-off. economists say we are more likely to see a slower pace ahead to allow mortgage rates to come down. as for the outlook for stirring -- sterling, is being influenced by the issues around the current account deficit. then other factors like inflation and the rate hikes.

>> what about the outlook when it comes to china was to mark >> a bit of a consensus, that we are unlikely to see any sort of pivot away from covid zero in china until march 2023 at the earliest. that is given that's when the current leadership reshuffle will be complete. what they say after that woman get a move away from covid zero, basically they face a catch 22 because either they are slow to pivot away and that disappoints investors, we have seen moves around essential easing of covid zero this week to the upside but at the same time, if they do a sharp pivot away, they could see a huge rise in cases given the vaccination rate among the elderly remains low. given also the misting around the virus in china that it is

still deadly. in terms of what that means in the outlook for stocks, someone commented on the moves we had earlier this week. if you look at implied volatility on a short-term basis, we can expect a lot more wild swings ahead. >> we get the jobs data due friday expected to show that the labor market remains to tight for the fed's liking. let's bring in our chief economist. good to have you with us. despite that we are seeing a tight labor market. this chart showing how wages are not keeping up with inflation. we are seeing 18 consecutive month of declines when it comes to wages as opposed to prices. what is this telling us about where the fed goes next? >> this is one of the most frustrating points for the consumer. annual wage growth at 5% for

more than a year. real wages when you take inflation into account has been trending negative. this is compounding the pressure on the american consumer that is already struggling to stay afloat. for the fed woman look at the labor market still positive job growth and an unemployment rate at a 50 year low, this is not sufficient to satisfy the fed to say that they have created enough job destruction, enough demand destruction in order to get stable prices back in play. the terminal rate is going to be significantly above expectations. i think the policymakers are aware of the lag. at the same time, the chairman

noted that the lag is likely much shorter this time around given the markets anticipatory reaction in terms of financial market conditions. there may be less of a need for the fed to take a prolonged pause to assess earlier rate hikes if they do anticipate the realized reaction of the market is going to be felt or seen in the numbers. much quicker than it typically is. >> before a lag it becomes evident, what about the data on confidence destruction particularly in the corporate sector? we are hearing that apple might be pausing hiring and more and more reports across the corporate sector. >> from the fed perspective,

this is good news. first we see stage one where businesses begin to freeze hiring. stage two we begin to see sizable layoffs and that filter into the broader data, rise in the unemployment rate, pulling sideline workers back into the labor force. these are the intended results that the fed is looking for by raising rates. this is not a deterrent, but an indication that tighter monetary policy is working. >> what about the housing market? what about the indicators that are jumping out at you in terms of trends we are starting to see? >> we are starting to see a decline in demand. housing sale activity is still positive. it's the second derivative

decline or a slower pace of positive activity. the housing market is cooling off, prices are cooling off from doug -- double-digit growth. but we do have structural support in the u.s. labor market that suggests we won't follow the cliff. going forward, based on population growth, immigration come first-time entrance into the housing market, there should be some structural support for price growth even as we continue to see rates rise. it's not to see we can't see further destruction in terms of home prices, but i suspect some structural supports for the u.s. housing market this time around.

>> great to have you with us. coming up, the market implications of the presidential victory in brazil. this is bloomberg. ♪ at fidelity, your dedicated advisor will help you create a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this.

this is the planning effect.

a chinese rocket booster is said to make an uncontrolled reentry through the atmosphere on friday and pieces could crash to earth. china says there is little danger from falling debris but the u.s. and -- say that the level of risk is still unacceptable. in brazil, bolsonaro called on his supporters to dismantle hundreds of roadblocks. he says they are not legitimate warm demonstrating. supporters have taken to the streets across brazil.

global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. >> i'm glad you finally made it back after getting stuck in the airport at sao paulo. we were worried given the level of protests after the election that it was going to keep you there. tell us about your experience being on the ground and your stories you were witnessing as history was made this time. >> i can't tell you how glad i am to be back in new york. we rushed to the airport because we knew the road blockades were coming the day after the election. we went early to avoid them but we got caught at the airport because there was only one entry access to the airport and there were not many protesters, but the ones that were there blocked the access. we could not get the staff to come into man the planes so the

airplanes were not taken off that day. we were at the airport about 20 hours and we could not get out, we couldn't go to the hotels. we had to sleep on the airport floors. a lot of the lounges were closed. it was quite the experience. as soon as i landed in new york, i checked to see if bolsonaro had conceded defeat. he did give up a speech signaling there would be a transition of power, but he did not formally accept feet. this is as good as it gets. let's bring in erik schatzker to discuss the implications of brazilian elections. the impact of politics on emerging market economies. what was interesting was as soon as the numbers rolled in, the first to congratulate lola then president biden the second.

the congratulations from democracies was very fast. i wonder if the new president will live up to expectations. >> the narrow victory in the brazilian presidential election immediately thrust him into the center of two most important topics in debates at the new economy form in singapore in 10 days. that would be climate change and geopolitical tensions. maybe we will start with geopolitical tensions first because the reason joe biden or one of the reasons why he was so quick to congratulate lula and emmanuel macron also, they hope he is going to be eager to join the fight against russia on one hand and also helped to form a bulwark against the rise of china. the best thing about >> lula's

we have some history. if we think about the china question alone for a moment, it was during the first presidency that brazil embraced china. in fact, exports to china over the eight year time rose 1400%. the two-way trade was up almost 16 fold in eight years. that tells you about his posture and what's animating his thinking and what might serve to disappoint the fact he is so eager to rush back to the unilateral consensus and western alliances. >> the other big focus is climate. there is so much hope being pinned on if you can restore

credibility on that side of things. some people have thought it might be a devils bug. >> he is being hailed and has been as the second ballot victory over the weekend as the savior of the amazon. he is going to cop and surely that demonstrates his environmental credentials. i wonder if it is really a case of also fast. this shows deforestation in the amazon by square kilometers. although the numbers are small because this is over a long time, what it shows is that it was duringlula's first primacy -- presidency that the amazon was sustaining maximum deforestation. it is true that those numbers start to fall off and by the end of his presidency, deforestation

had fallen off. they hit the lows under his successor. again if we look at the record of history, it does raise some doubts about whether he is going to be as much of a climate warrior as people anticipate. >> one of the big challenges on that big to do list. eric will be there at the fifth annual bloomberg new economy form in singapore. we will be there as well. you can watch the full event on bloomberg new economy.com. we are very excited, we hope you are also. this is bloomberg. ♪

>> a chinese art up is set to unveil its first ev with sensors that can monitor the driverless -- drivers vital signs. >> it's an idea that was formed a couple of years back. when i first engaged into the thought of electric vehicles.

it was pretty quick that it comes to my mind that electric nichols are not just -- electric vehicles are not just electric versus motorcar. it contains an infrastructure to work with ecosystems. in terms of use cases, you mentioned at the beginning health. what did you mean by that? how do you envision the car? if you are driving in the wintertime and you have a symptom, what kicks in to speak to you and if you don't respond we would be able to detect via camera or sensors. the autonomous driving would take over and we would shepherd

you into a safety lane. then we would have a conversation with you and the data that we are deploying in their help the doctors to make a better judgment on you. >> you have a range from low to high price points. where do you see this? >> we position it and what we call the super premium or upper premium. we wanted to design a really sporty sex or car -- sexy car. with all of the use cases, we hope you have a chance to redefine what is an upper premium super premium definition of premium car so to speak. >> it sounds like you have a very ambitious vision for the future. you talked a bit about the

fundraising aspect. how is that going in terms of fundraising, helping you get the money you need? [laughter] >> it's pretty tough. globally is not the best timing. but a lot of us came from professional backgrounds. we just need to manage this one step at a time. hoping that things will get better. we are hopeful that things will get better. >> i also wanted to ask you for your outlook on the china market were broadly. september, ev sales were up from a year ago. there is a lot of growth there. if time, there are something like 200 electric car companies in china. what do you see for the future? is there enough business for 200 companies in this market? >> china is the largest market

in the world. if there is an opportunity and chance, this is the place. our fingers crossed. i would say the potential is there. i have no doubt about it. again, consolidation might happen. i would not see consolidation in a bad way. consolidation means partnerships. >> that was beyond car founder and ceo on the start rhenium car and the chinese auto market. daybreak: asia is next. this is bloomberg. ♪