>> you are watching "daybreak:

asia." >> we are counting down to the market opens at tokyo and seoul. >> australia has just come online. our top stories this hour -- asian stocks dip on wall street as u.s. data services fuel speculation the fed will keep policy type. also i think use from australia's central bank. the rba, seeing the end of the tightening cycle. the u.s. and the eu are weighing new tariffs on chinese metals in a bid to fight carbon emissions. >> we had the open of the asx 200. in the early minutes here, we are on the downside. futures suggested a drop of .6%. we did have a lead in from the u.s. session but also the other big factor today is going to be in australia with the rba decision. the general consensus, a hike of 25 basis points. the big unknown is a sort of

guidance -- -- sort of guidance we got from officials on what is the outlook for rates. the governor won't shut the door to more hikes ahead. we are seeing fairly flat trading in terms of bond yields. the aussie dollar also unchanged. . the other big factor driving sentiment is what came through in the u.s. specifically the data around services. it forced an adjustment around the expectation for the fed and that's tightening path. we are seeing new zealand trading on the red. futures also looking lower, including in china, even as we see china's pivot away from covid zero accelerating. >> take a look at how u.s. futures are coming online in the asian session. not a lot of movement after we saw u.s. stocks seeing the worst day in about three weeks. we had the ism services data, really rising unexpectedly, leading investors to think perhaps the fed tightening is far from over just yet.

we had more concerns about where we are headed with the fed. we had the 2/10 deeply embedded. the most since 1981. we are seeing a very stretched rally already even with a downturn today. we are headed for the best fourth since 1999. perhaps investors are thinking, is there more from here in terms of upside? we have seen wti with all the risk off sentiment come off. we are seeing a little bit more upside. 77 u.s. dollars per barrel. perhaps that china optimism about the reopening could be fueling some of that sentiment. >> let's bring in the chief rates correspondent for asia and live contributor, garfield reynolds, and our economics reporter, swati pandey. we saw the markets selling. what was driving that?

>> the pivot everyone was hoping for is not here. just because they might slow to 50 basis points at this meeting does not mean that they are going to move to what they would regard as being a less than very tight policy stance going forward. the services was a shock to the thesis that the economy is already slowing down under the fed. therefore the fed can ease back. in fact part of what caused the selloff in both bonds and stocks, which remain surprisingly and concerningly tightly correlated was the gain ed price and the fed terminal rate just about 5%. that is where the st. louis fef president, bullard, has said the minimum they need to get to and hold it there for

some time. seeing as he was the one who really led the charge towards outsized rate hikes, he's been ahead of what ended up being the fed's game for most of this year. if he is saying where the market is now pricing is the absolute minimum where they need to go, you've still got the potential for planning of pain, because the market still looks too complacent about what the fed is likely to do. >> swati, it is a big day for the rba today. >> yes, this is the last meeting of the year, the reserve bank does not meet in january, so a lot of attention as to what they say about the forward guidance, what they plan to do and 2023. -- in 2023. today the are predicting a 25 basis point increase. but there is a chance they could do 15 basis points, or pause

even. there's a lot of interest in what decision they make but also what they guide about 2023. >> the consensus pretty much that we are going to save 25 basis points today, but the path is less certain. what i markets pricing and? >> markets are perhaps more realistic about where the rba is going. the rba has made it clear that they are not thinking they need to be as hard-core as the fed. even though inflation here is close to the sort of levels we are seeing in the u.s. but there are a range of factors including we have mostly variable-rate mortgages. the u.s. is mostly fixed. some other factors as well, the with the labor market works and the rest of it. the markets expect the rba to go 25, almost certainly today, then to keep going probably at least another 25 basis points early next year.

after that, it becomes a little bit muddir. -- muddier. terminal rate for australia, 3.5%. maybe two more after this, and perhaps another small 1, 15 basis points to get us to the traditional quarter-point increments. then the rba to pause with its very strong optimism that that sort of level is going to be enough to bring inflation back down to the target fairly rapidly. >> you can get more on this story and all the day's trading on our blog on the bloomberg. you can get a market rundown in one click. there's commentary and analysis from bloomberg's expert editors, you can find out what is affecting your investments right now. let's get over to su keenan with the first word headlines. >> sources say the u.s. and the

eu are weighing new tariffs on chinese steel and aluminum as part of a bid to fight carbon emissions. it would mark a novel approach as they would seek to use tariffs usually employed in trade disputes to further their climate agenda. the idea is still in the initial phase and has not yet reform really -- been formally proposed. the u.s. has proposed selling taiwan as many as 100 of its most advanced patriot air defense missiles for about $818 million. the deal adds to the provision of a sale back in 2010 with a potential total value of $2.81 billion. the earlier package infuriated beijing and led to it matt suspending -- it suspending some military contracts with washington. lawyers for the south african president are preparing a court challenge against an advisory panel report that said there may be grounds for his impeachment.

at issue is the way ramaphosa handled money at us for here what a spokesperson says ramaphosa will not quit and will seek a second term as leader of the governing african national congress. finally and australia, one of the world's largest wheat exporters is poised to harvest another record crop this season. according to government forecasts, farmers are set to gather around 36.5 million tons this fiscal year. that is an almost 14% jump from the september forecast. more week from australia should help ease concerns over tight global supplies. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. ♪ >> still to come -- we speak to the university of sydney about the future of renewable energy and business in china. we will have more on that later.

and is the chinese covid zero pivot feeling consumption? more, next. this is bloomberg. ♪ thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

>>nipun capital.

there's been a rise in inflation as well. what sort of unintended consequence do you expect from the sharp rebound in consumption in china? >> the important thing to keep in mind as the sharp rebound is not only the change to covid policies, but also the stimulus for the property sector which has been struggling for the past few years. in addition, the chinese megacap stocks, i was at the policy is becoming more favorable there. so there's broad-based policy support we are seeing beyond school been driven by the fact that china only grew 3% this year against an expectation of 5%. so another priority is pressing forward on all gears to get to the 5% gdp number next to. -- gdp number next year. >> do you think that will be a realistic goal? because the growth target for this year looked hopelessly optimistic. how does next year look to you? >> i think a lot of it is going to be driven by government spending. the property sector drives more

than half of gdp growth. you are already seeing infrastructure construction pick up. that's really government spending. a lot of the gdp growth will come not just from consumer spending or private investment, but government spending. if you remember the first wave of growth was on china, a lot of that had to do with government infrastructure spending as well. i suspect that will pave the way for that 5% number for next year. >> what about government regulation or the lack of? more specifically i'm thinking a megacap tech and china? do we see a more optimistic outlook for these companies? because we have seen beijing trying to bring them in. >> yes, now that they have established the power situation, these companies understand they have to play ball the government -- was the government. you are starting to see signs of

a change in policy there. that was in the news yesterday the government wants to partner with alibaba and fincen to develop the semiconductor industry and fight off the u.s. semiconductor agenda. that is a very hopeful sign. it means companies are learning to work with the government rather than against each other. i also think that is a sign for hopefully the easing of regulations against the sector. the market certainly seems to think so. >> talking about fighting against the u.s., how much will those tensions and measures coming from the west affect china? the last couple of hours, we saw another headline the u.s. and eu are eyeing climate related tariffs in china steel and aluminum. >> that remains a big risk. geopolitical risk. the situation with taiwan and the fact that the u.s. has

restriction on ertain things in china -- on certain things and china. china has been the most oversold market all year. what could dampen the flow is increased regulations from the u.s. authorities. that remains the biggest risk at this point. it's not so much the economic risk or even earnings growth. the biggest risk is the u.s. stance toward china impacting u.s. investment. >> have seen tremendous gains for chinese stocks. particularly in hong kong, the hang seng. how much more upside do you see there? >> if you look at how much the stocks have crashed, if you look at the property stocks, they are down 80% to 90% from their peak. even at this level, stocks like tencent, they could double and still not be back to the previous peak.

i'm not saying the previous peak is the right level, but investors often anchored in previous highs. these stocks could easily double and still not be on those previous highs. to give you some numbers -- the msci china while it is up 30% the last month like you said, it's only trading at 10 times forward earnings, which is really cheap, if we do start to see earnings growth in the consumer sector, overall gdp growth of 5% or more, that is a very reasonable valuation. i think the msci china, chinese equities. >> does it help if the chinese market is somehow insulated from fed rate hikes, or at least more than another emerging-markets? you're absolutely right -- >> you're absolutely right. i wouldn't be surprised if despite the selloff in the u.s. today, chinese markets still hold up. because we have seen signs of decoupling all year.

in months like july, when the u.s. rally, china did not participate in the rally because those markets were very much driven by what's happening locally on the ground. so i agree with you on that. i think china is less exposed to the fed hiking cycle than other em countries. also keep in mind china has also been oversold at this point that even if u.s. investors were reticent, there is more selling of chinese equities to be done. it also acts as a support. >> where is the yuan headed? especially when you have more divergence with the fed and we saw significant strength because of the covid restrictions being eased? >> it will trade in a narrow band like it has historically. if anything across em, we could see more downside for the u.s. dollar in the next 12 months. that of course has to do with the historical strength and a little bit of reversion.

what also we are likely to see demand driven recession next year. if that is the case in the u.s., with demand and earnings finally slowing down, with china markets continuing to outperform, you could see a little bit of a setback for the u.s. dollar. >> good to have you with us. you can get around above all these stories you need to know to get your day going and today's addition of "daybreak" at dayb. this is bloomberg. ♪

>> take a look at how asian

stocks are trading at the moment. the asx 200 losing half a percent. tech and energy stocks leading the declines. oil, seeing the worst decline in more than two weeks. the asian session is recouping some losses. kiwi socks, also reversing the gains we saw in the previous session. we have seen the kiwi dollar and the aussie dollar under pressure, given the strength of the u.s. dollar. take a look at how a nikkei futures are trading at the moment. we are seeing at flat -- it flat. japanese stocks, gaining a little bit in the previous session. the japanese yen's underperformance among g10 peers, really being felt across markets. we saw the risk on sentiment after china eased covid zero strategies. but at the moment, the yen trading at around that 136-137 level. also coming off the strongest level since august, risk off

throughout last week, morgan berkley saying the yen could be a in more than 7% next year. u.s. futures also rebounding slightly after stocks saw the worst day in three weeks. >> in terms of the yen, some investors are expecting it to bounceback in 2023 after the we just level -- after the lowest level in decades this year. does the fed stop hiking rates or does the bank of japan turnaround? >> the fed has done a lot of the heavy lifting. the bank of japan's been largely anchored in its mood and posture. i don't think that's going to change through the end of kuroda's tenure. everyone is so keen on the pivot.

they have had their hearts broken a few times. we saw the reaction of the market. the market could be overstated. the market, by march, you can really see bets ratchet up. the dynamic of the two, the bigger dynamic would be the bank of japan departing from its policy, talking about hiking and that sort of stuff. speaking to a few people we spoke to on the story, i think that we could see it at 115 as the rug gets pulled. a bit of a violent reaction in april, may. ? > what are the global implications of a stronger yen?

>> the first people it hits is the chinese. bottom line, we are talking multiple percent bottom line. that would probably touch japan stocks a little bit. then further around, you would probably see, depending on where central banks are in their own policy delivery, the rba is looking toward the end of it, the also, the yen could really take a hit -- aussie, yen could really take a hit. it would be good for the world to see japan remove this implication over the market and we get back to a more

free-flowing yen. >> fx reporter michael wilson with his take on the japanese yen and some of the calls for 2023. here's a quick check of the latest business flash headlines. deutsche bank, set to be considering a return to trading. residential mortgage-based securities. sources say the idea was floated internally as part of plans to build out the lender's fixed income and currencies unit. we are told deutsche bank would only get involved in market-making for the securities rather than originating the debt itself. credit squeeze is appealing the award of $600 million in damages over the mishandling of a client's money. the court ruled on march the source lender should pay the prime minister and his family the money for allowing the funds to be misused by a rogue banker. credit suisse is arguing the amount awarded is unfairly large. pepsico is set to be laying off

hundreds of workers at its various headquarters in north america. the dow jones reports the jobs will go and its beverage business based in new york. the snacks and package food businesses in illinois and texas. they employ around 130 thousand people in the u.s. and 300,000 worldwide. crypto lender nexo is phasing out in the u.s. after facing cease-and-desist orders from multiple states. they are offering interest-earning account without registering the investment products as securities. nexo will continue processing with john's -- withdrawals in real time. nike has ended its endorsement deal with basketball star kyrie irving. the termination comes a month after nike suspended a relationship over his refusal to disavow anti-semitism. irving has been a nike athlete

throughout his professional career and had many signature shoes names after him -- named after him. espn report says deal was worth $11 million a year. >> still to come -- we get an update on tesla and its plans to cut production at a shanghai factory. this is bloomberg. ♪ millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. that means millions are saving hundreds a year with the fastest mobile service. and now, introducing, the best price for two lines of unlimited. just $30 per line. there are millions of happy campers out there. and this is the perfect time to join them... add a line to your existing plan, or see for yourself how easy it is to save by talking to our helpful switch squad at your local xfinity store today.

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>> we have breaking out of japan -- we are getting the household spending numbers. year on year growth of 1.2%, slightly higher than economists expected for the month of october. a deceleration from the previous month of september when we saw growth and household spending up

more than 2%. we have higher consumer prices and year on year comparisons. it's not surprising we had a smaller than expected rise in household spending for the month of october. a growth of 1.2%. taking a look at labor cash earnings year on year, also a growth of 1.8%, decelerating from the previous month. if you adjust for inflation, this is the number you have to watch. real wages falling to .6% year on year. you can see the contraction and how much people are earning is a bigger contraction than the previous month. all and all to do with of course rising inflationary pressures. even in a country like japan. we will perhaps hear more details about where wages and inflation is headed with kuroda scheduled to appear in parliament at 9:30 a.m. local time. let's get to su keenan with the first word headlines. >> bloomberg has learned beijing is starting to cooperate with the u.s. efforts to ensure

american technology is not routed to the chinese military. sources tell us the ministry of commerce is helping domestic companies through end-use texts by the u.s.. they have 60 days from october 7 to show their products will not be used by the military, banned from trade with u.s. businesses. as the georgia senate runoff campaign comes to a close, donald trump said he plans to hold a rally via telephone for herschel walker. polls indicate it will be a very close call between walker and democratic senator rafael warnock. the election will determine if democrats win a 53rd seat in the senate. russian president vladimir putin has signed into law a sweeping ban on the positive portrayal of gay relationships in books, traditional media, and the internet.

the new measure covers adults, which expands on a 2013 law that prohibited the promotion of homosexuality to minors. the un's high commissioner says the law further infringes on international human rights, norm s, and standards. the u.k. is set to announce a package aimed at boosting growth in financial services as well as the city of london on friday. sources tell bloomberg the treasury will sweep away unnecessary regulations before christmas in a bid to secure new opportunities post-brexit and boost competitiveness. two policies loaded so far are the repeal of the bank a bonus cap in the adjustments of the ring fencing regime also impacting banks. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. ♪ >> we have seen a big jump in chinese markets and other

assets, linked to the country's exit from covid zero policies. the question is how much further can the gains extend? annabelle is taking a look at this. >> of course it is clear to us now that china is starting to ease away from its covid zero policies, with more cities starting to relax restrictions. we have seen a big market reaction. this chart here, taking a look at the customary open index. travel, entertainment, other stocks in it. you can see huge gains, even outpacing the broader rally we have seen for the csi 300, which itself has jumped off the lows reached at the end of october. the question is, where do we go from here? goldman sachs has a new note out, saying less than half, around 40% of the full impact of economic reopening is already priced on. they looked across asset classes. stocks, bonds, commodities, fx, which ones getting the most.

not only inside mainland china and hong kong, but also assets sensitive to the growth trajectory, the likes of the aussie dollar could climb as much as a 6.8% -- as much as 6.8%. goldman sachs also seeing gains of 6.5% in gdp a year after the reopening takes place. we have obviously seen it hovering around the 3.5% mark over the past few quarters. the timeline, paul that is expected for a full, reopening to come around april. we do have the leadership reshuffle closing in march. >> shares fell in the u.s. trading ahead of reports of test a lower production at the shanghai factory. the latest sign demand in china is not meeting expectations despite record deliveries in november. for more on this, let's bring in our north asia correspondent, stephen engle, and hong kong.

what is tesla facing in china? >> have also doubled up capacity and shanghai recently. they've been pumping out a lot of cars. essentially the demand is not catching up with all that excess supply. deliveries had a record in november of more than 100,000. but they have been offering so many different incentives, price cuts as well as insurance subsidies and shorter leadtimes from the order time to delivery, to kind of get some people to purchase. but again the economy is not doing very well in china. the consumer confidence is not doing very well. we are just coming out of the covid zero restrictions -- at least the relaxation of these restrictions. this would be the first time elon musk's company has voluntarily cut output productions. of course he had to cut back output with the two-month

lockdown and shanghai. there were also some supply chain snarls that impacted tesla's operations and shanghai. but again those were outside factors. this would be the first time they voluntarily cut. because demand is simply not there. what we are seeing now is tesla representatives in china not commenting to bloomberg news when we requested. shanghai security news, citing unidentified people reporting the plan cut -- planned cut, upwards of 20% from full capacity, they were running at full capacity in october and november, that would be 20% cut as early as this week. -- a 20% cut as early as this week. they say that it's also information. we will be looking at these stocks today. panasonic, samsung, sdi, a quarter of their sales come from tesla.

26% go to tesla from -- lg energy solutions, excuse me, 26%. and catl. change the page and you can look at the other component suppliers. chinese companies listed in the h-share market in china. we will be watching these as well. they also have big exposure to tesla. >> watching apple suppliers as well, given that we have heard about foxconn also suffering. >> absolutely. the bulk of the global iphone pros are made an iphone city. it was locked up because of an outbreak. it also had those walkouts my employee is protesting. those quite violent protests. they walked off the assembly line and across the campus over

the fences and out. there could be expected disruptions. this happened late november. foxconn reporting november sales were down 11.4% year-over-year. . some shipments obviously affected by the outbreak of covid there and those walk offs by the employees. apple has already said it expects deliveries to be slowed this year because of the disruption. but again, we are hearing from foxconn offering reassurances the situation has "been brought under control and production will improve the rest of this year." >> bloomberg's stephen engle with the latest on china's covid-19 restrictions and the loosening we have seen around the country. up next, we will discuss the future renewable energy investments in china and beijing's past 10 zero with the university of sydney's business school. this is bloomberg. ♪

>> looking at the future of energy, and our energy transition segment today, a study predicts fossil fuel consumption will likely peak over the next decade, still that woodley global emissions at

nearly 25 billion tons a year, 29% less than now. the good news -- there is hope for the world to achieve net zero emissions by 2050, if governments and companies take decisive action now. for more, let's bring in bloomberg's nef analysts. what does reaching peak emissions within this decade mean for fossil fuels? >> under our economic transition scenario, which is created primarily by technology costs and no additional policy option, we foresee coal is already reaching its peak this year, and about 180, we see it declining down to -- down by 2050. that peak would happen around 2028. we see a little bit of a pickup in oil demand between now and then. thereafter a gentle decline. for gas, and the 2030's --

in the 2030's, then a slight decline. within the next 10 years, fossil fuels will reach their peak consumption. if you want to region at zero, we would have to happen happen -- have to to have it happen a lot earlier. our net zero scenario requires $190 trillion in investment in ev's and other technologies that has allowed energy to be shifted. 190 trillion dollars may sound like a lot of money between now and 2050, but looking at financial institutions that have already signed up to zero, those institutions alone have more

than $130 trillion worth of assets under management. it is not an issue of money. it is about having the enabling environment providing the right number of projects for investors to invest in. >> we have also had news today the u.s., the eu as well are thinking about applying tariffs on chinese steel and aluminum. what are the implications of this? >> we still have to see the details of this. if it is an iteration of the eu's carbon border mechanism, that could potentially be a positive driver. initially there were a lot of concerns. what we have already seen for example the procurement of more clean parts and compliance with regulations.

if this is for geopolitical scoring, that would not be conducive to climate action. >> let's focus a little bit more on what is happening on china. our next guest says esg investment is an ideology in the country and china is committed more than ever. joining us now is wei li. lecturer at the university of sydney's business school. what are the characteristics of esg in china right now? >> we see china is really committed to esg more than ever. we are seeing that esg is mainly driven by public pressures, shareholders, focused on corporate self-governance. but let's not forget esg in chin a is really driven by ideologies from the central government but also the communist party to make initiatives. one is carbon neutrality -- through many initiatives.

one is carbon neutrality and carbon prosperity. so they focus much less on self-governance but are more focused on corporate compliance. >> so, how do these characteristics also combined with the fact that china is slowly trying to exit covid zero , and the pressure this puts on these companies as well? >> obviously at the moment, we are seeing a lot of pressure on companies because of what you mentioned, with covid zero. there are a lot of markdowns, but also impacts on projects, construction, and development as well. over time, china has already developed a strong competitive advantage into areas -- in two areas related to esg, one is china has a strong localized supply chain capability in manufacturing. that's what has been proven during the covid-19 time.

some of the major global wind turbine companies are suffering a bit because of their supply chain and distribution in different countries. but chinese turbine manufacturing companies have been ok because a lot of the supply chain is actually localized and based in china. the other thing is moving into a technology leader, such as in battery, storage, offshore wind turbines and also hydrogen. these are long-term advantages china is trying to develop. covid had an impact, but overall we have seen some strengths and advantages in the chinese companies. >> can you give us a sense of the scale of the investment that is going to be needed here, and where the money is coming from? >> yes, so obviously there will be a lot of money that needs to

be going into here. at the moment, we are seeing it from the chinese companies, driven by central governments and central policies. a lot of times companies are investing into infrastructure, but not the 2008-2009 type of infrastructure. a lot of the investment is actually going into green infrastructure. china has actually been very active in green financing as well. some of the latest development in the chinese banks, you see a lot of focus on esg, particularly encouragement integrate financing. let's not forget china is also a huge market for renewable energy projects. so we are seeing very strong global companies looking into china is a major market for renewable energy transition, and actually foreign capital are willing to invest into chinese

companies through direct investment, but also increasingly through the capital markets. so we are seeing some of the companies that may be linked to electric vehicles, batteries, renewable energy, transitions are already interested in it as well. >> china is set to meet net zero goals by 2060, or is that an optimistic timeline? >> [laughs] from a business perspective, we think that is very ambitious. china is a major carbon emission country. it still heavily relies on coal. because of geopolitics, it is going to be longer, the reliance on coal, because china believes coal is the only major energy source that china can be self-sufficient, so we don't see a lot of struggling here.

there is geopolitical concern about energy security and self-sufficiency, the reliance on coal. i think the ambition is very high. it needs a lot of investment -- there needs to be a lot of investment into the space and a lot of companies innovating into the space. but as i said, in china, i think what is happening in the moment is esg is turning into something driven by ideologies, from the central government, but also from the communist party itself as well. i think there's quite a strong political incentive and motivation for companies to pursue that. >> all right, wei li. lecturer at the university of sydney's business school. plenty more to come. this is bloomberg. ♪ even if you got ppp

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>> it's that time of day, we bring at the latest covid figures out of china. we are getting numbers for shanghai at the moment, 577 new cases reported on december 5, yesterday. 577 new local covid cases for shanghai. we will have numbers for the rest of china a little later on. regardless of the rise in cases,

the reopening continues. >> yeah, not so much of a reopening when it comes to south korea, perhaps more work stoppages. staging demonstrations at 16 places to support striking truck drivers. our global business reporter joins us with the latest. we are seeing more strikes, but at the same time, the president's approval rating is going up? what is going on? >> sure, so basically, like you said, there will be a pretty large strike in the country. as you mentioned, by the union association, it is a pretty large organization in the country. they have about one million members, working in the various kinds of industries, such as steel, autos, semi conductor. we will see the strike will be like a one-day thing. sort of like a voluntary thing.

we see there could be a pretty limited number of participants. not all the one million members, but probably thousands of people will be participating. the point is, they are demanding other labor issues, which is pretty with -- demanding other labor issues which are pretty difficult to resolve. the trucker strike continues and there could be more labor issues that we could probably see. >> the government is trying to persuade drivers to return to work. is that having any impact? >> well, yes. like you said, they are really trying to persuade drivers to return to work, they are sending text messages and making phone calls. they are even sending some investigators to the site, to see how many drivers are actually returning to work.

they are also investigating about 100 shipping companies, to see if they are still trying to block the entrance of the ports or something like that. but when we look at the ports in the country, only half of the deliveries have recovered to normal levels. so there is still a long way to go for us to see sort of any kind of improvement in the situation. >> bloomberg's global business reporter with the latest on those trucker strikes across south korea. these are some of the stocks we will be watching in korea and japan. asian energy stocks could move, we could feel the downside pressure. oil is rebounding in the asian session after seeing the worst day in about two weeks. also stops related to sports and entertainment could be active. japan, losing to croatia in a penalty shootout. south korea, also losing to brazil.

4-2-1. . it was really painful to watch. -- 4-1. it was really painful to watch. >> of course australia wins out argentina a few days earlier. no's from asia now left in the world cup -- no teams from asia now left on the world cup. let's focus on the business world, shall we? it will make us feel a little bit better. [laughter] this is bloomberg. ♪

♪ >> this is daybreak asia and we are counting down to asia's major market openings as we get the lead with covid cases from

beijing for december fifth, adding to shanghai's 577. as we continue to see more restrictions being eased across major cities, we have a major monetary policy decision today. paul: that's right. the reserve bank of australia meeting for the last time until february. the consensus is for 25 basis point rise but after that, who knows. it's an open question as to whether the fight against inflation is one or not. annabelle: certainly a lot of questions over how hawkish they will be in their decision. we have the open now for japan. and south korea. we are watching the opening of cash treasuries, particularly the 10 year yield seeing as we saw them tumbling after the stronger-than-expected u.s. data. a lot of expectations shifting on how long the fed is going to need to keep hiking rates. in terms of market reaction, we are keeping an eye on what is happening with the yen because

we saw dollar strength on that, that we are seeing the yen giving back some of those gains, moving a fraction higher today. strategists out there are saying the yen could rise by as much as 7% in 2023, but what is interesting as well, the assumptions that those calls are based on specifically that we are going to see a dovish fed. and the boj turning more hawkish. but that has been complicated by further data coming out in the last 30 minutes. those household spending numbers really showing the effects of inflation. and a stronger baseline as well. let's change because we are seeing stocks lower. for the kospi, we are seeing it outpacing the border losses at the chart of trading. we saw that reflected in the u.s. session with the nasdaq also closing lower than the s&p 500, that we do see futures pointing fractionally higher. we are continuing to monitor what is happening in at the world. again, it is looking weaker against the dollar, further risk

aversion coming back into the markets. let's change up because we are one hour into the trading session for the asx 200. again, lower on the day. really being dominated as well like you were saying, the expectations for the rba lower today. 25 basis point hike is in order, strategists unclear what sort of message we will get from the rba. td securities, one of those saying they expected to keep the door open to further rate hikes. and also just watching what is happening at wti, we are below the $80 goal. shery: our next guest says he trades high but sees inflation as a tactical opportunity. they are head of research at ubp. tell, where are you seeing the drivers of returns for 2023? >> good morning. so, we think that 2023 is going to be not easy.

we've published in outlook called walking the tight rope, which kind of tells the story. but one thing we think is quite likely is that while inflation is high, it is already probably peaked and is going to start to fall. in these situations historically, high but falling inflation has been an opportunity to generate real, positive real returns from equities. so against this, we think there are a couple of strategies to focus on. one is focus on profits from kind of forced reallocation of spending toward things like lean energy and infrastructure. we think that could be a catalyst. secondly, against the uncertain backdrop, focusing on dividends and income as a component of total returns as well. so those two strategies. shery: one about chili know especially given that we are seeing more signs of covid

restrictions being eased? we have seen a rally for chinese equities in the past month. -- what about china, especially given we are seeing more signs of covid restrictions being eased? kieran: we are cautiously optimistic. it is going to be one of the big stories next year and it could have serious ramifications, not just for asia, earnings and market performance, but globally, in terms of inflation, energy prices etc. so if you look at the bottom in 2020, you know, most markets were lacking china when we were talking about china being first in, first out of covid. all of that performance was given back. so if we kind of restart the clock on reopening for china, certainly a lot of it, you know, people are anticipating that and markets are anticipating that, but we think there is

significant upside to going 25 to 40%. paul: i want to take a look at this chart on the bloomberg terminal as well that shows the emfx index trading higher. with the a.m. sci china index. do you see there is a floor under the currencies? this is the reign of the dollar in its time to take a look at the environment? kieran: absolutely. so the change in the interest rate framework has produced a strong dollar. and we are most of the way there. the terminal rates are likely to be around five and in the first half of next year. so, you know, be strong dollar trade is mostly done. and so the opposite side of that is obviously a weaker dollar. and the weaker dollar is generally positive for e.m. markets. the big swing factor is how does china get out of covid and how fast?

so we think that will be the main driver and certainly, it is time to start to look at e.m. in that context. paul: it is going to be a rough road out of covid zero. i wanted to get your views on the yuan, it is tracking below seven against the u.s. dollar. where do you see it heading from here? kieran: around where it is now is probably the boc is relatively comfortable. you are asking about a sharp weakness from here, i do not think it is something in our best case. but anything is possible and certainly the currency is in control of the pboc in china. so we will leave it there. paul: all right. head of equity research for asia at ubp. let's get back to annabelle for what is moving. what are you watching? annabelle: just discussing what you had with the guest around

the pivot out of covid zero in china and how tough the road is going to be ahead. one of the companies feeling the effects is tesla, because were told by sources it is going to cut production edits shanghai factory. so people familiar with the matter are saying it could trim production by 20% from last month. we have seen it recently cutting prices and offering incentives to try to lower in buyers in china. this is the effect we are seeing for the biggest supplies in asia. you can see those are broadly in the red. let's change because we are focusing in on the sector in the energy space. given we are still seeing wti trading below the $80 barrel level, in terms of what is driving that, it is down to the broader collapse we are seeing across equity markets and the sentiment around the fed, given we had the data, more strong data coming through, suggesting rates could be higher for longer. some strategists saying the

outlook will be volatile, really over the near term. let's change now, because bad news if you are a soccer fan in japan, they were forced out of the world cup after losing to croatia in a penalty shootout. we are seeing stocks slumping. cyber asia is one of them, this has been broadcasting all of the games on its free streaming service and it gained around 17% from a november for low. the media companies in the red as our apparel and beer companies. shery: what about korea, we lost to brazil 4-1. i can just imagine the red across n with the first word headlines. su: beijing is starting to cooperate with u.s. efforts to ensure american technology is not routed to the chinese new a terry. sources tell us the ministry of commerce is helping domestic companies through chats by the u.s.. chinese firms have 60 days

beginning on october 7 to show their products will not be used by the military. or they risk getting blamed -- i should say banned from trade with u.s. a sense. -- u.s. business. the u.s. has proposed selling taiwan as many as 100 of its most advanced air defense missiles. this for 800 $82 million. state department notice obtained by bloomberg news shows the deal as a provision of a sale in 2010 with a potential total value of $2.81 billion. the package infuriated beijing and it led to suspending military contracts with washington. in south africa, lawyers for the president are bearing a challenge against an advisory panel report that says it may be grounds for impeachment. the issue is the way that he handled at least $580,000 at his farm. a spokesperson says they will

not quit and will seek a second term as leader of the governing african national congress. in the u.s. as the georgia senate runoff campaign comes to a close, donald trump says he plans to hold a rally via telephone for republican candidate herschel walker, opting not to campaign in person. polls indicate it will be a close call between walker and democratic senator rafael warnock. the election will determine whether democrats win a 51st seat in the senate making it easier to legislate. in australia is poised to harvest another record crop. farmers are set to gather around 36 and a half million times this fiscal year. that is a 14% jump from the september forecast. more wheat from australia should ease concerns over tight local supply. 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 su keenan. this is bloomberg.

paul: still to come, we will get the outlook for asia-pacific banks with jp morgan. harsh modi thinks it will be business for a new normal. tesla is planning to cut production edits shanghai factory while foxconn is reporting a drop in sales. a look at disruptions in supply and demand is next. this is bloomberg. ♪

shery: we are seeing broad downside on asian suppliers to tesla. this is as bloomberg has learned that elon musk cv maker plans to

lower production edits shanghai factory, the latest sign demand in china is not meeting expectations, despite record deliveries in november. tesla shares in new york fell on the news. let's bring in stephen engle in hong kong. local media in china have denied what bloomberg has learned, but at the end of the day, we would not be surprised if we saw a production cut, given the challenges that tesla is facing in china. stephen: absolutely. the shanghai security news was citing an anonymous source as saying essentially that the story from bloomberg news is false information. but still of course we stick by the story. sources close to the situation are telling us tesla could be reducing its factory output in shanghai by as much as 20% and those cuts could start as early as this or next week. but again, keep in mind that tesla's factory doubled its capacity and had been pumping out cars at full capacity in

october and november. they are trying to reduce the lead time to consumers. there's been a number of different incentives from price cuts and insurance subsidies and the reduced lead time from ordering to delivery. deliveries were higher, more than 100,000 cars, 291, record number of deliveries in november. but basically they have shortened the lead time, but again, it is an indication where the factory is pumping out more cars then it is selling. so that is the big thing that is facing tesla. 20% output cut could be in the cards soon, because consumer demand has slowed the chinese economy is slowing. and essentially, this would be the first time elon musk ev maker has voluntarily cut production output. of course there were production output cuts following that two-month lockdown in shanghai earlier this year, as well as the resulting supply chain snarls.

voluntarily, this would be the first cut. but right now, there is no confirmation of that from tesla. except the story in the shanghai security news saying it is false information. we are watching suppliers, especially ev battery makers which are predominantly south korean in japanese, as well as see atl which will trade in the next hour. chinese suppliers are across the chain of components and we will be watching them as well when the shares begin trading. paul: we are also watching latest case numbers for covid coming in from china. we just heard, 4000 and 84 local cases reported monday, follows from the 4637 we had in beijing and 577 from shanghai, so case numbers continuing to rise and covid disruptions have had a big impact of course on the iphone maker foxconn. so what is the topline impact of

the lockdowns, and protests? stephen: that is going to be an ongoing risks as the numbers of covid cases increase, there is the possibility that they will be further lockdowns, despite the fact that we have been reporting a number of cities that have reduced their pcr testing requirements for people to enter public space and use public transport and the like. that is where we have that market sentiment obviously with chinese markets and hong kong markets up significantly yesterday. there is always the risk of further lockdowns and unrest, if you will, as you are seeing at the foxconn plant late last month, where workers walked off the assembly line, walked across the campus. sometimes up and over the fence and getting out of there because the facility was being locked down. and not surprisingly, precision/foxconn has presented a drop year-over-year in november sales. that is to be expected.

the campus is where the bulk of apple iphone pro's are assembled. and apple has said it expects deliveries to be slow this year because of those disruptions. the company though is saying those disruptions have been brought under control and production will improve for the next of the year. we will have to see. there are still risks because covid zero is still a stated policy of the communist party and xi jinping. they are relaxing it but there is a risk of it tightening in various places. paul: all right, chief north asian correspondent stephen engle there couldn't u.s. china relations are part of the reason american companies are looking beyond china for alternatives like singapore and india according to yell university professor and former mortar stanley asia chairman stephen roach who says china does not have a monopoly on the region. >> singapore has benefited a lot from the shifts that have occurred in hong kong, but hong kong, to its credit, is trying

to reclaim its position as a major financial center in japan and asia. we will see if they can pull it off. >> tim cook reit's accidental conflict. what does he do? what does he approach for multinational americans led by apple and china? >> tim cook has been leading the way in evaluating the commitment of u.s.-based multinationals to the full outsourcing in china. apple is the quintessential producer, it is taking advantage of this production platform. in the guangdong province. now for a variety of reasons, understandable, conflict is part of it. starting to diversify production of the iphone in india, slowly. that is a move that needs to be watched carefully for the future.

>> with all of your experience do you have a confidence that they can get the main infection process in other nations equal to what they have invented in china? -- get the manufacturing process in other nations equal. >> china has made a huge bed, in terms of revamping its infrastructure and equipping its companies and workers with the latest in technical skills and new technologies, but by no means does it have a monopoly on that opportunity. and that isties for other offshore, low cost production platforms. shery: yell university professor stephen roach speaking with bloomberg's tom keene. you can get a roundup of all the stories that you need to know to get your day going in today's addition of daybreak, bloomberg subscribers go to dayb . it is available on mobile in the bloomberg app. you can customize your settings so you only get the news on industries and assets that you care about. this is bloomberg. ♪

shery: take a look at how european futures are trading in the asian session, we are seeing broad downside and really extending those declines that we saw in the first trading day of the week. food and beverage, underperformed in europe. but put it into context because this comes after the longest weekly gaining streak for european stocks since april of 2021. we have been supported by signs of cooling u.s. inflation, that's on a softening fed, tightening, not to mention china's economic reopening. for today's session, european futures under pressure. paul: the u.s. might be looking at upgrading its weapons package to taiwan. according to a state apartment notice obtained by bloomberg

news, the biden administration has proposed selling taiwan as many as 100 of its most advanced patriot air defense missiles. bloomberg news bruce joins us now from hong kong. bruce, technically speaking, is this a new deal? bruce: this is part of a deal announced in 2010. it involves about $800 million worth of missiles and other equipment. the u.s. has provided patriot missiles to taiwan in the past. these would be the most advanced versions. more advanced on the ones that taiwan already has. what happens next is there is a 30 day time where congress can review this. we have not yet heard from a reaction from china, but china will not be happy about this.

they were extremely angry back in 2010 when the u.s. first announced the deal. and suspended some military to military talks back them. we will have to see how they respond this time. the u.s. has said that it thinks that china wants to have the capability of invading taiwan by 2027. so selling these more advanced patriot missiles would be part of the u.s. efforts to protect taiwan. president biden has multiple times said that the u.s. would come to taiwan's defense if china were to invade. shery: elaborate on the fact that beijing will probably not care about the technicality of this not really being a new deal. your mentioning how we were expecting intentions coming from beijing authorities. u.s. china relations have looked better after the in person summit between presidents xi

jinping and biden. where are we now? ? bruce: there has been a thaw or at least we think so, between the two sides following the president to president. however, as we know, there is nothing more sensitive for china then the issue of taiwan. and with the visit earlier this year of house speaker nancy pelosi to taiwan and china has reaction to that, we see that taiwan is a really hot button issue. and so, even if relations have been on the mend, the fact that this has happen, the fact that the u.s. is now going to be providing more advanced patriot missiles to taiwan, that certainly is going to complicate the narrative. shery: bloomberg's global business reporter bruce joining us from hong kong. here is a quick check of the latest business by headlines. deutsche bank is set to be considering a trade return. residential mortgage-based securities. the idea was floated internally

as part of plans to build out the letters asked income and currencies unit. deutsche bank would only get involved in market-making for the securities, rather than originating the debt itself. credit suisse is appealing a bermuda court's award of $600 million in damages over the mishandling of a clients money. the court had ruled in march that the swiss letter should pay former georgian prime minister and his family the money for allowing their funds to be misused by a rogue banker. credit suisse is arguing that the amount awarded is unfair and large. nike has ended its endorsement deal with kylie irving. determination comes a month after the company suspended its relationship with the basketball star. when he failed to does about anti-semitism. irving was a nike athlete throughout his professional career so far. espn reports his deal was worth $11 million a year.

coming up, the rba is expected to hike its cash rate by 25 basis points as it nears the end of tightening. a preview of the rate decision next. this is bloomberg. ♪ millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. that means millions are saving hundreds a year with the fastest mobile service. and now, introducing, the best price for two lines of unlimited. just $30 per line. there are millions of happy campers out there. and this is the perfect time to join them... add a line to your existing plan, or see for yourself how easy it is to save by talking to our helpful switch squad at your local xfinity store today.

paul: just getting some breaking news on the bloomberg terminal for you. the current account balance for australia for the third quarter coming in substantially weaker than expected. a contraction of 2.3 billion australian dollars. the expectation was for 6

billion australian dollars and the net exports as a percentage of gdp also contracting to 2/10 of 1%. that was better than expected. a half of 1% contraction was anticipated. but still, somewhat of a deterioration on the second quarter. we have got the aussie dollar meanwhile pretty flat against the greenback right now. $.67 and change, but the current account balance as i mentioned coming in weaker than expected for the third quarter, $2.3 billion to the contraction. all right, big event today though. thank of australia expected to hike the key rate by 25 basis points in a couple of hours time. this is as it walks a tightrope between putting in ocean and trying to achieve the elusive soft landing. we got more from bloomberg economics reporter. so, to any five basis points increase, there is a lot of consensus over that. but what about in terms of the statement in the path going forward that is not always

clear? >> the expectation is higher today and they go for a break in january. there is no decision then. if they talk in the statement about the fact that they have already raise interest rates by three percentage points and they have done enough and they will look at incoming data and decide what they want to do in 2023. markets will take that as a dovish shift. which good imply -- good imply that they are considering pausing in february. they have already said that they have looked at taking a pause in 2023. they have basically let all options open for themselves. but they have been sounding more dovish on interest rates and all of the central banks of the world. shery: we really have been looking for some dovish central bank talk coming from the fed. we have not seen that, despite the fact that we have a lot of

speculation about the sing of the aggressive tightening cycle. so what is unique about australia, that it takes such a different policy path, compared to not only the u.s., but new zealand? swati: yes, i think the biggest difference is the reaction function of australia's central bank. the government has said they want to preserve the employment gains. wants to make sure that they're able to engineer a soft landing and confident that they can engineer a soft landing that compares with the u.s. federal reserve, who has said they want to crush inflation at all costs, even if it comes at the cost of a recession in the economy. so that is the biggest difference. the other difference is australia is -- their economy is pretty strong. households savings rate is pretty high. we are still benefiting from high commodities prices, so

australia is an exporting country. there are some of those underlying strengths in the economy as well, which is giving the confidence. but they do want to preserve the employment gains and economic growth that we have seen during the pandemic. paul: bloomberg's economics reporter there. let's take a look at what is moving our markets now and keeping an eye on things is annabelle. annabelle: taking a look at what we are seeing in sovereign debts and the decision do later, the aussie two year yield, the short end of the curve, moving high on your today ahead of the eating but it generally is the trend we are seeing across the debt space in the session this morning. that is down to the stronger-than-expected data that came through in the services sector in the u.s. in the price session. slowly starting to reset expectations of how long the fed is going to need to keep hiking rates. in terms of other asset classes, you can see we are risk off across the board, including with what we are seeing in the currencies space. the korean yuan around a 10th of

a percent around that key psychological 1300 level. the japanese yen, one of the gainers in the session today and that is an interesting move, given that we did see the household spending data squeezed by inflation in the past hour. telling us perhaps at the boj is going to have little incentive really to be changing any of its easy policy settings. in the equity space again, we are generally down across the board but failing range at the start of trading, a half an hour into the session for japan and korea in australia already online as well, just looking pretty flat. it will be interesting though, given we have mainland china getting under here in less than an hour. already we are seeing hong kong futures to a drop of more than 2%. so changing now, just seeing a lot of exuberance around china's reopening story, could be set for a bit of a pause today. we are seeing that in the second order, in the material sector today. given that is leading losses for the broader asian-pacific index.

it had been one of the biggest gainers on monday, with more companies or cities rather in china starting to relax the restrictions. we are seeing the effects of how tough this road out of covid zero is going to be with the likes of tesla for instance we are told by sources it could be forced to cut production in china. shery: goldman sachs also saying their best case scenario is that covid zero will last until april, so we continue to watch that carefully. let's get to su keenan with the first word headlines. su: sources say the u.s. and eu are weighing tariffs on chinese steel and aluminum as part of a bid to fight carbon emissions. the move would mark a novel approach as the u.s. and eu would seek to use tariffs usually employed in traded disputes to further their climate agenda. the idea generated within president joe biden's administration is still in the initial phase and has not been formally proposed at this time. the u.k. meanwhile is set to announce a package and that boosting growth in financial

services, as well as the city in london on friday. sources tell bloomberg best the treasury will sweep away necessary regulations before christmas in a bid to secure new opportunities post-brexit and boost competitiveness. two policies floated so far are the repeal of the bonus cap and adjustments to the regime which also impacts banks. to russia, president vladimir putin assigned into law a sweeping ban on the positive portrayal of gay relationships and books, media, and the internet. it covers adults, expanding a 2013 law that prohibited the promotion of homosexuality to minors. the un's high commissioner for human rights says the law further infringes on international human rights, norms and standards. south korea and japan have exited the soccer world cup,

showering hopes of having to asian teams in the quarterfinals for the first time ever. -- shattering hopes. brazil had a 4-1 win over the koreans which set up a crash with croatia. france and england have also booked their place in the quarterfinals with wins over poland and senegal. 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 su keenan. this is bloomberg. shery: coming up next, we will get the outlook for asia-pacific banks with jp morgan, which expects it will be business as usual. but in a nether new normal. this is bloomberg. ♪

shery: take a look at how asian currencies are trading at the moment. we are seeing upside for the japanese yen trading at 136 level. a one-week high against the u.s. dollar. remember it underperformed all g10 peers in the previous session, given positive session around china easing covid euro. we are really is seeing other currencies pressured at the korean yuan trending at around 13 level. we'd seen upside after the forest reserves rose for the first time since july. that's not really holding today,

given the broader risk off sentiment we are seeing. the aussie and quibi gaining ground. remember, we are following it closely given that we have the rba rate decision, the expectation for a hike and the bloomberg dollar index coming under pressure after rounding in the new york session after we saw the ism services number come in a little bit stronger-than-expected. paul: our next guest says the uplift in rates and growth is broadly positive for banks and insurers, consistently higher inflation on the other hand has implications that are immediate and long-lasting. harsh modi is the head of research at j.p. morgan. thank you so much for joining us. in your latest know, you talk about the current environment as being yet another new normal. i do wonder how you see asian banks positioning themselves for growth and return in this environment of high rates, high inflation and probably weaker growth.

harsh: thank you for having me. it is an issue. inflation being so high, it will have an impact, because much higher inflation means especially the u.s. fed hiking and staying high for much longer. it has implications for growth in the u.s.. and a lot of asian countries rely on exports. as a result of which, it can have implications on credit demand and ultimately, credit quality over the next months. so, it is a fine balance that a lot of financial services in industries have to manage. but ultimately, what we expect is banks with good fundamentals, who can generate capital and distribute capital more importantly it will be in a much better position. paul: let's take a look at china banks particularly, as the country exits covid, china also

dealing with a lot of well-publicized issues around its property sector. what is your outlook for financials in china heading into the first few months of 2023? is this a bumpy road out of covid zero to navigate? harsh: as you said, this is a bumpy road and we will see how it gets navigated. in addition to the covid zero being exited in phases, there is also a matter of property being managed. and what we are starting to see is as we start getting some degree of confidence on some of the work in progress being completed, some of the banks where the risk has increased significantly because of the property portfolio, some of that offers a bit of a trade over the next you months. but ultimately, the more medium-term outlook depends on

how does the new normal for growth in china outlook. and that remains to be seen on how previous policy. shery: we have a governor in japan, speaking at parliament, saying that the benefits of easing exceed its costs. that the boj will communicate the exit strategy with practical approaches. their objective will take time to achieve. the boj's goal is too early to discuss. so basically, we have seen japan as being one of the exemplary countries, where the rate versus the fx trade-offs are very, very clear. what are you seeing in terms of where japanese banks could go from here and what is important to them? harsh: that is a very important point that you made. we have a very wide continuum on that. on one hand, we have japan with

no movements in rates and fx is a factor. and on the other hand, we have hong kong, where they are launching fx and singapore similar. then you have other countries. so various countries have different ways of managing based on their reality on potential gdp, as well as the leverage. so has rates go up, there is going to be some than if it on the operating profit level. but ultimately, what we need to see is how these higher rates impact the debt servicing ability, especially for the 90th and 95th percentile. and the more it starts impacting will impact quality. so we have to go country by country, bank by bank, and

figure out which effect on either rates or as rates higher profits or affordability is a driver. shery: what about fiscal balances as well? how did they affect the banking outlook? harsh: so it is quite an important variable. because ultimately, fx is a function of current account as well as capital growth. if it becomes almost a one-way trade, it starts impacting capital flows, which then becomes a bit of a problem. so, those are the aspects which i guess all the policymakers are trying to address. and over the next six to 12 months, i think that conundrum is probably going to be a bit more pronounced. if the fed rates go higher and stay higher. shery: harsh modi, thank you for

your time. we have plenty more to come. this is bloomberg. ♪ kept on employees through the pandemic, innovation refunds could qualify it for a payroll tax refund of up to $26,000 per employee, even if you got ppp. and all it takes is eight minutes to find out. then we'll work with you to fill out your forms and submit the application. that easy. innovation refunds has helped businesses like yours claim over $1 billion in payroll tax refunds. but it's only available for a limited time. go to innovationrefunds.com to learn more. ♪♪

paul: let's get a quick check of the latest business flash headlines. sales for november fell more than 11% from the previous year after shipments were affected by a covid outbreak in central china.

last months outbreak lead to a worker exodus, violent protests and at the iphone factory. the company known as foxconn says the situation is under control and production will improve quickly. pepsico is set to be laying off hundreds of workers at its various headquarters in north america. dow jones reports the jobs will go to the business based in new york and that it's snapped in package food is this in illinois. it employs hundred 30,000 people in the u.s. and 300,000 worldwide. crypto lender nexo is phasing out its orders after cease-and-desist orders. regulators say the company is offering interest-earning accounts without edges during the investment projects as securities. they will continue processing withdrawals in real time as they plan for an orderly exit. shery: bank of ireland governor

and european central bank governor and councilmember gabriel says the euro area is likely to endure a technical recession, but does not see 2023 as a year of recession. he discussed the challenges ahead for the ecb on bloomberg surveillance. >> i, christina and all the numbers of the government counsel are facing these sorts of challenges that i think many people across europe, if not the world, are facing, which is dealing with some extreme uncertainty. i know we have been talking about that for a while. but the combination of the recovery from the pandemic, the supply chain problems that we have added, the news about china, i just heard you talk about it. the ongoing russian war in ukraine and so on, we have a constellation of issues that we have to navigate through. to arrive at the policy for the

euro area, so it's a challenge. >> ireland's leadership in growth for whatever reason is debatable. but the fact is it has been a growth engine. everything said and done. one of the distinctions here is a belief in the strength of technology, the nominal gdp of america, versus a lesser nominal gdp in europe. do you push against that, do you say we underestimate the potential of european growth forward? >> i absolutely do. i think the potential is huge. historically, a very big economy. and it is ambitious for itself. so i think technology is going to be a critical platform for the future. digitalization and climate change and demography are the big economic transitions that we are all going through right now. and i think europe has the

potential to get ahead of all of those, actually. >> let's talk about the reality of the decision that you face. best case, does it include a recession in the euro zone economy now? >> i have not seen the ecb forecast, which we are going to see. but my own view is that we are likely to see the euro area in a technical recession. i respect by q4 of this year, we will see a slightly negative gdp number. we are likely to see that for quarter one it next year. on the other hand, my expectation is we are not going to see it in 2023 as a year of recession. >> how does that influence your view of how much tightening we ultimately need? >> well, in my view, you know,

we started the normalization of interest rates. people have forgotten that in june, we were in negative rates territory. definitely not there now. but i also think that next week, when we meet, i think a 50 basis point increase is the sort of floor that we should be discussing. i expect us to go there, but i do not excite us to end there. i expect us to continue in future meetings. >> how far would you push that? >> i was about to say, how far -- how far i would push that will very much depend on the data. and seeing what the projections are telling us, seeing what the latest data are telling us. but in my view, it is clear that inflation will get on target at 2%. core inflation at 5%. i think it is pretty clear that next week's decision will not be

the last increase. paul: that is bank of ireland governor gabriel asked speaking -- speaking excessively with bloomberg tv. china has taken several significant steps to reverse the country's worst property slump in modern history, leaving economists searching for signs of clues. let's get to sophia. here is a clue for you. let's take a look at dollar bonds. they have rallied 404%. is this rational, sustainable? sofia: what a return, what a trade. these bonds were trading at distressed levels, as well as the majority of the market. it does not take much to get that kind of return, but really looking for a bottom in the property market, this is the longest downturn in the physical markets in china's recent history. and home sales are likely to continue to decline, prices are still declining. we did get data around mid

december, to really show whether that has slowed down at all, but this will take time. any measures to support the property markets are not yet feeling through to demand obviously. that is a covid zero story as well when you look at the bonds and the stocks, it's not just the bonds. stocks of property developers rose 61% in november. that is quite a return as well. it is a speculative market, but these securities we are trading at such distressed levels, that just vocalizing support for the sector can get you these kind of games. shery: so markets pricing in the turnaround, what are economists watching? sofia: so actually, there was an interesting note out from goldman sachs that says markets have only priced in 40% of the china reopening story. and that's, you know, markets tend to get ahead of themselves, get ahead of the story. the data in the near term will continue to be rather weak. that is because obviously, the reopening story has not happened on the ground.

economists are looking for recovery next year. definitely better growth than this year, this year is looking at around 3.4, 3.5%. far short of beijing's target. but recovery next year and a full reopening around april, march, is what economists are calling for. shery: chief china markets correspondent. we are headed to the start of trade in hong kong, shanghai engine gentry of bloomberg markets china open is next. this is bloomberg. ♪ ♪ we all have a purpose in life - a “why.” maybe it's perfecting that special place that you want to keep in the family or passing down the family business or giving back to the places that inspire you. no matter your purpose, at pnc private bank, we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why?

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>> it is not a bug in the morning right here in hong kong and in beijing. this is bloomberg markets china open. let's look at our top stories. we have stoc