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>> you are watching daybreak: asia coming to you live from new york, sydney, and hong kong. >> we are counting down the market opens in tokyo and seoul. >> australia has come online. the fed downshifts to 50 basis points as expected, but signals tightening will continue to a higher peak rate. fed chair jay powell says there is always to go. the heil kish outlook weighing on asian stocks after wall street snapped a two day rally. ftx and the collapse on capitol hill as lawmakers consider tighter regulation of the crypto sector. >> we have the open of the asx 200. at the start, we are snapping a two day slide down to the reaction to the fed. we will get through all the details in a moment. basically interest rates will be higher than expected next year. we will watch the defenses of that today in the australian sector, food and beverages, health care, transport among them. it seems for some investors that

the santa claus rally we had been hoping for may not appear. today we are seeing movement through the bond yields. moving a little higher. not the magnitude of moves in treasuries in the prior session. the aussie dollar holding flat. we saw it a little stronger in the prior session. we are keeping an eye across futures for much of asian trading today. they are pointing towards a weaker open. new zealand already trading this morning in the red. what is interesting is in new zealand we got gdp numbers earlier. we saw it rising in the third quarter more than twice the estimate. a lot of action in the kiwi dollar this morning. chinese futures are flat now, but had been pointing to a drop at the start. there are other factors in play there with the monthly activity too. this should show sharp deterioration in the economy. remember this is for the november reading, just the

timeframe prior to the government starting to ease covid zero restrictions. fixed asset investment, industrial production, they are expected to show weakness and retail could be the hardest hit. >> markets are reacting to the fed. we had the downshift, a more hawkish downshift seeing u.s. futures muted at the open. perhaps a slightly rebounding from losses in the regular session where we had the s&p 500 at one point falling back. it pared back some earlier declines. the message investors took was the fed would go higher for longer. that did not set well. treasuries whipsawed. yields spiked after the fed's hawkish rejections before coming back to the pre-decision level of the 10 year yield around 3.5%. oil trading around the $77 level. we had it higher for a third consecutive session in the new york session, at the highest level in a week or so.

the iea says oil could rally next year as a sanctions squeeze russian supply. of course, that will have impatience for the inflationary picture as well. not to mention, what china does. but, really, the message seemed to be from chair powell that we are not going to really see at least any easing when it comes to 2023. listen. >> i would not see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way. that is the test i would articulate. you are correct. there are not rate cuts in the sep for 2023. >> it's really still down to the basics. getting closer, confidently closer to 2% inflation. he does not want to talk about the prospect of rate cuts until then. so, it all became quite a nuanced delivery of the decision. i thought, given that markets

were so optimistic after the cpi print going in. it was really a mixed bag. a downshift with a very hawkish twist is what we ended up getting. >> really, it was not just about the short-term projection, but the long-term projection. what happens in 2023. let's delve in with our global economics and policy editor kathleen hays along with a special guest. >> we are joined by jeffrey lacher federal -- former president of the federal reserve bank of richmond. jeff, markets so -- still seemed to doubt a bit that jay powell and his colleagues would deliver on the promise to do whatever it takes, more or less, to get inflation down. what do you hear? what was the message we got today from the fed? >> i think they are resolute in their intention to bring inflation down and deserve credit for articulating that firmly and forcefully over the course of this year. that even if it involves some pain, even if it involves

recession, contraction in employment, they will do what it takes to bring inflation down. what i think is unclear is just what that will take. he has tried very carefully to draw inflate -- attention away from the size of the meeting to meeting increase and draw attention towards what you might call the destination, the of the peak interest-rate that they will bring it up to and hold two for some time. that destination, they have characterized as a rate that is high enough to be sufficiently restrictive to bring information -- inflation back down to target. but, they have not said much about what sufficiently restrictive really means. fortunately we have history on our site here that suggests that 5.1%, their most recent projection for the federal funds rate for the end of 2023, next

year, it is unlikely to be sufficient if inflation does not come down all by itself in the meantime. >> what do you think the inflation rate will do? how high is the funds rate going to have to go? >> i think they announced an intention to bring it to about 5% or 5.5%. i do not think that will be sufficient to bring inflation down in the first half of next year. despite her the good news we got yesterday from the cpi report. i think there is substantial inflation pressures that remain. you see inflation expectations by survey measures. one year, the near term horizon. between five and 7.5%, 8%. you see wage gains over 6%. by the way we can best measure that. the way that the address for

composition effects, the average hourly earnings. so, i see substantial inflation pressures in the pipeline. 5.25% will just not be enough to diminish. >> 6%, 7%? how high is high enough? >> with inflation between 5% and 6%, they would have to raise rates to above 6%. somewhere between 6% and 8%. so, 7% would not surprise me as what is required. >> they also increased projection for the jobless rate to 4.6% from 3.7%. is that realistic? i tend to think not. if you look back at history, it is rare that the unemployment rate gradually increases by that magnitude. what is more typical, and embodied in something called psalms rule sham's rule.

if the m -- on employment rate goes up .5 percentage points over its previous low it goes up two percentage points. it either goes up a little or a lot. something in between like .75 of a percentage point, that is very rare. >> do you think that the fed, talking earlier about how china was not mentioned, global factors were not mentioned, but one of the wildcards for global inflation next year is at the chinese reopening. we could see a 20% upside to global energy prices. it could bring, in the second half, uscp i back to 5.7% after a drop of midyear. is this something the committee would be thinking about, or should be thinking about coming out? -- be thinking about, now? >> i think they should be and i think they should be articulating to the public what

could happen in different scenarios. last year, the decline in energy prices bleeds through to core prices. helps down bring down -- helps bring down core inflation as well and we have seen that in monthly numbers. should energy prices reverse field and rise, if they might if there was an unexpected surge in demand from a source like china, certainly, that would change the inflation outlook. it would reduce the rate at which inflation is subsiding. it would tend to put them in a box and force them to think about higher rates. >> one thing jay powell was asked about during the press conference was financial conditions and if they were getting more hawkish to offset some reducing a financial conditions that we have seen recently. part of the answer that remains the clearest to me is basically, he seemed to me to be saying, look, we are going to get this right.

and in fact, if we see inflation -- skews me, financial conditions softening, we may have to do more. again, i am paraphrasing. it seems to me he was telling the markets, you want us to get tighter? go ahead. soften financial conditions. >> i think they have tried to, in their communications, be gradual in the way they under -- unveiled how much pain they will have to inflict to produce the growth of demand, cool off the labor markets, and reduce inflation. i think they have continuously put out these forecasts that are right on the edge of possibility. everything has to go right. we have to have energy prices climb or stay low. all of these things have to fall in a for their scenarios to come out. even in this scenario they need 5% to 5.25% interest rates. if that does not come true, if

they do not get an immaculate disinflation like that, it will have to be higher rates. i do not think they have fully informed the markets of the extent to which there is that upside risk. and, the extent to which they sort of understand that things have to break right for them to achieve the forecast they have laid out. >> jeffrey lacker, former richmond fed president, a pleasure to have you. let's get to vonnie quinn with the first word headlines. >> china's closely watched economic policy meeting is set to be back on schedule for a thursday start in beijing. officials decided not to postpone the central economic work conference, even as covid infections rise. berg early reported the meeting would be delayed due to the latest virus surge. it's not clear why officials changed track. china is said to have asked some of the biggest banks to stabilize the domestic bond market after one of the biggest credit selloffs since 2015.

according to sources, regulators asked lenders to buy bonds. the apparent goal is to absorb selling pressure caused by retail withdrawals from bank wealth management products. the bank of japan a review its policy next year. officials see the possibility after wage growth and a slowdown of the global economy are examined. a review is unlikely before governor kuroda into his term in april. that assessment could reverse the boj ultra easing policy. it might end up reaffirming it. bahamian court officials at odds with u.s. bankruptcy lawyers over the remains of sam bankman-fried's crypto empire. the american legal teams are fused to give liquidators appointed by the bahamian court access to ftx computer systems, timing securities regulators in the bahamas cannot be trusted. each side previously argued it should be leading the hunt for fds assets to repay creditors. global news 24 hours a day on air and bloomberg quicktake

powered by more than 2700 journalists and anaylsts in over 120 countries. i am vonnie quinn this is bloomberg. >> the ecb and boj decisions are coming up next. this -- a preview ahead. this is bloomberg.

>> 5% wage increase does not look good when inflation is running at 70%. but as inflation comes down, as headline inflation comes down due to lower goods prices and lower energy crisis ill get, 70 million americans will get an 8.7 percent increase in social security benefits come january. so my presumption is that the economy will show more

persistence than what people think in terms of momentum. that will force the fed's hand to be higher for longer. >> bloomberg opinion columnist and former new york fed president bill dudley reacting to the fed downshift to the 50 basis point rate hike. let's get the latest market moves. our chiefs rate correspondence for asia garfield rendered -- reynolds joining us now. you said it was a surprisingly easy fed reaction. give your thoughts as to the nuanced delivery of this hawkish downshift. >> well, i think the key thing is probably that the fed did indeed do 50 basis points as expected. there was a fair bit of nuance in both the dot plots themselves and also in what chairman powell said. i think the other thing you have to look out for is that a 5.1%

terminal rate sounds scary. but it is kind of where the market has been for most of the past while. it's not very far away from where we are now. it is basically 325 basis point hikes or 150 out of 25. so, that is definitely a significant slowing of space. for me, the concerns there would be the fed's determination that they will raise rates to say, that level. and keep that level for some time. now, the market kind of goes, yeah, yeah, sure about that. because, it is very confident inflation is coming down. i was looking at the inflation swaps complex through which investors bet on where they expect inflation to be in the coming year. and the decomposition you can see on what that means month by month. investors are basically expecting that year on year

inflation will be under 3% by june next year, already. versus 7% during the most recent print. that is a very very fast deceleration. it will go down by more than 50% under 3%, that is within shouting distance of the fed's goals, you would think, once you extract what that means for the core pictures. with all that going on, the market is basically going, well, if the fed does go to 5.1, that might well be too spicy and they might ring it down or at least signal they will bring it down a little bit. because, they do not need to be that restrictive. you would also expect some fairly strong economic pain that would help to drive that. so, that is why bonds, in particular, i am not too concerned about what seemed like a hawkish move. >> what does it mean for asia

and asian central banks and asian markets trying to understand this? if you have the fed saying or suggesting that they will stay higher for longer, where do central banks in asia have to go? we have policy decisions coming from taiwan, the philippines. how will markets interpret that? >> well, it adds to did the difficulties that are facing central banks here with a look at what they will need to do. for example, the new zealand central bank just got a very, very strong gdp reading. that will reinforce that they need to keep hiking even though there is definitely a very strong chance for a recession there. there will be something of, at least in the short-term, a bias for asian central banks to not skip their homework, as it were. they need to be very seriously

considering restrictive policies. that is the point the fed is making. we are restrictive. we expect to go more restrictive and stay restrictive for longer. the market has been focused on the idea that this means slowing the pace of hikes because they are now restricting. but, as i said, do your homework if you are an asian central bank. are you restrictive? if not, how soon do you need to be restrictive? otherwise, the markets will end up punishing you. >> south korea's finance minister coming out this morning saying financial markets are seeing stability. really, everyone is trying to gauge where markets will go with this fed decision. garfield reynolds, good to have you back. our chief rates correspondent for asia and live contributor for. follow more on his commentary added the day's trading on our lives blog at mliv . get the market rundown in one take. there is analysis from bloomberg's expert editors. this is bloomberg.

♪ >> let's look at crypto. the continued implosion of ftx with sam bankman-fried in the bahamas waiting potential extradition request from the u.s.. look at the congressional testimony overnight. you still have a handful of lawmakers enthusiastic for the digital currency. in bitcoin, we are saying that they're seeing that well under the 18,000 level, hitting the milestone for the first time since prior to the ftx bankruptcy. binance appears to have stabilized. we have seen slower than expected inflation data adding a boost. these are bits of the fed

downshift. perhaps, using some funding liquidity issues might be at play here. >> the fallout from the ftx collapse. a handful of hedge funds are warning that the tether stablecoin could be the next crypto catastrophe. why are hedge funds interested in shorting tether? >> some hedge funds are short tether because they think that the reserves had their -- tether has backing it. it is supposed to be one dollar in, one dollar out value. the shorts were tell you that the reserves, they suspect, might not be as secure as tether says. really, they are worried about the opacity around tether and the fact it has not undergone an audit. there are many reasons for that that has or has put forward. it is unaudited and the third-largest cryptocurrency. it attracted a lot of attention for that reason.

>> what are we hearing in terms of cases being built, criminal charges against sam bankman-fried? how does that play in broader sentiment? >> sam bankman-fried was the ceo of ftx. now, the disgraced founder of that exchange as well as alameda research, and affiliated trading firm. yesterday, he was brought -- imprisoned in the bahamas after charges, criminal charges were brought against him. the charges include eight counts, eight criminal counts. they include conspiracy to commit money laundering, as well as wire fraud. they threw the book at him. any number of charges are in there as well as campaign finance, potentially. >> you talk about opacity when it comes to tether and concerns around it. this whole drama around sam

bankman-fried is also the lack of transparency, tell us a little bit about how this is affecting the broader industry and what we could see in regulations. >> it has caused a lot of skittishness in crypto. you saw an immediate decline in the value of crypto assets after ftx imploded. if you zoom a way out, what you really see is ftx was a bastion of trust, viewed as a secure place to store crypto assets. it had a lot of clout in washington and people in the u.s. felt comfortable with it along with all over the world. the trust has been shaken to its core to see sam bankman-fried carted away in handcuffs charged with criminal offenses that are very serious, stealing customer funds. it has shaken the rest of the crypto ecosystem and caused people to go back and rethink who they trust in the ecosystem. it does not mean you cannot trust anyone. but it does mean people are rethinking. >> bloomberg's annie massa

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♪ > the forecast is now for gdp to be lowered to 0.5 for next year. >> anything, .5 percent is

probably overly optimistic. >> it is a more hawkish tone than the markets expected. >> is not forecasting recession, but it is as close to recession as they ever get. >> they have slowed the economy at that point sufficiently to generate slack in the labor market so wage trends come down to be consistent >> with 2% inflation. >>we have a back-and-forth, a little bit of data whether we have seen the bottom in equity markets. i think the jury is out. i think a more cautious stance is still warranted. >> a key component is it is sticky and suggest more tightening is needed. >> bloomberg tv guests reacting to the fed rate decision. that's the focus for markets in asia today. 30 minutes out from opens in korea and japan. nikkei futures coming online in singapore pointing towards a drop at the open. it is down to the reaction in the fed. a lot of details. we will get to them in a moment. the headline is basically rates

will be going higher than expected next year. in terms of the other trading markets, watching for astoria half an hour in the session, also in the red. defensive plays are the only in degree today. consumer staples, .9% to the upside. utilities in focus. let's change now. we are keeping an eye on the direction of the dollar following the fed rate decision. it is in -- within a critical clarity area that has offered a lot of fluctuation in the past. we could see some support from peaks in 2017, 2019. though, we also have the results of our markets live survey adding to the results of this. nearly 60% of respondents expect the greenback to end the year higher. a lot of investors in the survey did not add very much or resonate much with the key messages of the fed. >> annabel, as expected we are

getting the hong kong monetary authority raising the base rate by 50 basis points following the fed to four point 75%, the seventh time this year that the hkma has moved in lockstep with the u.s. fed, given the currency peg meaning they move in increasing rates along with the federal reserve. we will watch the hong kong dollar. it is being pressured by a rising u.s. dollar. we will pay attention later today to hong kong's biggest banks. they could be revisiting their main lending rates in light of the hkma moves higher, with their base rate to 4.75%, in lockstep with the fed the 47's contacted if time. -- consecutive time. >> we see that passed through to federal banks usually swiftly in the morning after the fed, putting further pressure on consumer and business spending

and confidence for hong kong's economy. it is not just like the fed. the ecb will be announcing its rate decision thursday. markets will be contending with rate decisions out of the bank of england. other monetary authorities, central banks in europe, latin america, and asia as well. let's bring in our chief asian north america correspondent into current --enda curran. what was your big takeaway? >> you should not be surprised, but he doubled down on the idea that ultimately the fed funds rate may end up higher than investors are expecting at the moment. that's important. he is emphasizing it is no longer about the pace of interest rate hikes by the fed, ultimately where they end up on the hiking cycle. he was clear on the point that they are nowhere near getting inflation back to 2%. they have a lot of work to do. more fed hike through the first

quarter of next year. that was global implications that probably means support for the dollar. it continues to pressure emerging economies. as we head into 2023 the fed hawkish hiking cycle is far from done. >> you mentioned emerging economies. what does this mean for asian central banks? inflation has not been as pronounced and as bad as it has been in the u.s. for many of these asian economies. at the same time, you have pressure from the u.s. dollar. >> some central banks in asia has been trying to get ahead of the curve. the philippines are quite aggressive. so is korea. others were raising rates to keep pace with the fed, if not stay ahead of the fed. the broader picture is inflation will come off the boil. we know commodity prices are coming off a peak and food prices have eased a little bit. global growth is slower. it all leads towards slower inflation. throw in the base effect. the pressure is off central banks to height rates.

the fed is not finished yet. that will continue to draw money from this part of the world and pressure global currencies lower. asian central banks will remain vigilant. as not forget the wildcard in all this, china's economic reopening. post the public health issues there, how that plays out. that'll be critical for the asian inflation story. >> can we say that inflation has peaked? we have been talking a lot about the fed. of that the fed did not address global factors. should that be a big factor given that we know it could be an inflationary issue next year? >> i think it is a key variable, heidi. even if global inflation piece, central banks want to keep pushing borrowing costs higher. the european central bank and bank of england later today, for example. unlike the fed, where the fed is in with a fighting chance of pulling off a soft landing, that's not true for western europe and the u.k.. they are hiking borrowing costs

into the teeth of a recession, even though inflation is coming off. you have key readings around the world showing inflation may be slowing. the officials are not taking a chance. they are going hard down trying to get prices down. to get prices down to the mandated targets that we all work towards. they are worrying about growth second. rate hikes today from europe, the bank of england, norway, switzerland. other central bank in latin america too. regardless of whether inflation has peaked or not, borrowing costs are still going up. >> bloomberg's chief asian economics correspondent enda curran there. chinese -- china's exit from covid zero. a key chinese planning meeting will go ahead from beijing this thursday despite the spike of covid infections. sources earlier told us the central economic conference would be postponed due to the spike in covid. for the latest let's bring in

our chief north asian correspondent stephen engle in hong kong. would we know? >> we don't have confirmation whether the central economic work conference will go as planned today. sources close to the situation are telling us they decided to go ahead with it. no reason has been given. obviously, we have not gotten a comment from the state council information office when we requested them as to whether that will go forward today. or, the reasoning why it did a u-turn on that. again, we have u-turns in china on covid zero as well without much announcement. we will see and talk to jean-luc in the next hours. he is our managing editor in beijing. he might have a better polls check on whether that is going through today or not. but this is a key meeting to set economic priorities for 2023. it will be announced whenever they decide the closed-door meeting at the national people's congress in march of next year. obviously, any clues to whether

they plan to come as enda just said, navigate economic recovery, to stimulate the consumer and domestic demand, while also trying to mitigate a burgeoning health crisis with the number of covid cases going up. one of the reasons why they reportedly earlier this week postponed the central economic work conference was they were worried that if you have the 20 members of the party as well as all of the provincial governors and heads of institutions and government agencies all in one area, that there could be a super-spreader event, given the high number of cases, obviously being seen in the capital. it looks like they are going to throw caution to the wind and go ahead and do that given the economic priorities now. >> some disruptions are already being seen. we have the data dump today. the national bureau of statistics usually has the press conference. that has been canceled. >> right. that will quibi -- bt too.

retail sales will be pretty weak. the weakest reading since the second quarter of this year when we had the shanghai two-month lockdown. then we saw a boost up in the number of retail sales through the summer. but it has been petering out ever since. the number we get for november later today is likely about a 4% fall year over year adding to the contraction we saw in october. now, there was a she ma article yesterday that essentially outlined what the central committee and state council published in a report, the first chapter of that, essentially saying that domestic consumption will be the key driver of growth going for the next 12 years, through 2035. they are pushing domestic consumption because of what they called the complex and greater external conditions. again, consumer, consumer, consumer is what they will try to push. already, the data and anecdotal evidence is that there is hesitancy on the part of the consumer area in particular in

-- the consumer. in property look at the property investment of ours. it is a cumulative number, down 9.2% expected in the data dump today before property investment. singles' day, the alibaba big event held november 11, well, alibaba never even published the sales figures this year because, likely, the numbers were a contraction. also, the automobile association in china is essentially saying that november sales have fallen off a cliff 9.5% year-over-year. that was a key driver of consumption through the summer. now, even automobile cells are petering out. >> our chief north asian correspondent stephen engle there ahead of the data. let's get to vonnie quinn with the first word headlines. >> u.s. regulators are taking the first step towards the most widespread rebound in stock trading in more than a decade aimed at spurring better prices

for investors and directing more businesses to traditional exchanges. the sec laid out four proposals that it says it can use to without also competition affecting pricing and disclosures that brokers must make to clients. oil prices could rally next year as sanctions squeeze russian supplies and demand beads earlier expectations. the iea says russian output is expected to plunge 14%. the agency sees higher demand from india's growth and china's recovery. france will defend their title against argentina in the final a football world cup after a hard-fought to having zero victory over morocco in qatar. the world champions ended the north african nation as the first team from the continent and in the first arab country to make the semifinals. the french must overcome argentina sunday to become the

only country to retain the world cup since brazil in 1962. global news 24 hours a day on air and on bloomberg quick take powered by more than 2700 journalists and anaylsts in over 120 countries. i am vonnie quinn. this is bloomberg. >> japan find itself $44 billion short on funding. a promised expansion in defense spending will look at where prime minister kishida may find the money next. this is bloomberg.

♪ >> japan needs another $44 billion to fund the promised expansion in defense spending according to document seen by bloomberg. politics reporter isabel reynolds joins us for more from tokyo. we know that japan for a long time had a pacifist constitution. what are the up locations of this? >> this is really a huge and dramatic change for japan. it has been happening legibly quietly. now it has burst into the public consciousness. i think, even beyond japan, with with this big wrangle over where the money will come from. the change in the policy is quite popular with the public. we have seen a dramatic change in public consciousness since the russian invasion of ukraine

and amid the growing tensions over taiwan. i think people in japan are feeling less safe than they used to. so they are mostly on board with raising defense spending. but, when you ask of them, if you look at and take opinion polls, well, do you want a tax hike to pay for it? most say they do not. that's where the disk and unity emerging. prime minister kishida is saying he wants to start text -- tax rises not next year but the year after. he is facing quite an open rebellion from within his cabinet and party from people that say that's not a good idea. >> it is difficult when they are try to get that vote threat economic cycle. so they are locked in this last-minute struggle over how to make up for this shortfall. what about bond issuance? what is the debate at the moment? >> right, yes. bond issuance is something that certainly would will have to

happen in the short term to fund it. a lot of people in the party are saying, let's borrow money to pay for it in the longer term as well. you have one section of the party, and some people in the cabinet saying, yes, we do not want to do anything to damage the economy at this point. we have seen tax rises in the past. for example, a sales tax rise that seriously hurt the economy. we don't want to be doing this. we are struggling to come out of the pandemic here. we don't want to be adding another burden to the public. so, there is talk about construction bonds. there is talk about using existing taxes. but, kishida is literally looking behind the cushions on the couch to find money for this. he will sell his government's in the commercial building in tokyo. he is finding money from all over the place. i think that also casts doubt on how sustainable that will be. he does not have infinite

numbers of commercial buildings in tokyo. so, those kinds of bits of funding will not always be there. it does raise an element of doubt about how sustainable change can be. wax -- the change can be. >> our next guest says the war in ukraine has changed the japanese public and political appetite for defense budgeting. joining us is tobias harris that deputy director of the asia program at the marshall fund of the u.s.. it's not just the threat of russia. there is the ever-growing threat of north korea's ballistic missile program and the challenges to u.s. military superiority in asia as well. is this the perfect timing to see for japan? how does this have the potential to challenge the pacifist constitution? >> well, you know, clearly, this was a perfect storm. you had, i think, a trend of

japan taking on greater roles. you had defense budgets rising gradually. the late prime minister shinzo abe's tenure. things were moving in this direction. clearly there was a visceral impact of images seen in ukraine in the earlier days of the war. there was an emotional element that has been lacking. you had defense hawks saying we live in a dangerous neighborhood for many years. those arguments do not appear to have resonated until now. i think the public now understands what this means. whether it is a real blow to the pacifist constitution, i mean, i think we can dispute that a little bit in that the interpretation for years, going back to the very early days of this constitution, has been that japan has a legitimate right of self-defense. this is in that vein. i do not think there is a constitutional argument here. >> we just talked about the spending aspect, the physical aspect. 44 billion dollars short for this proposed expansion.

however they fund it it will probably be paid in full. how would you say they need to prioritize the spending here? >> well, you know, i think they have -- i mean, there are urgent needs across the board. a lot of it is not particularly glamorous. in the past when there has been discussions about defense spending it has been airplanes, warships. focused on big-ticket items. i think there has been a recognition, particularly as a result of the war in ukraine that a lot of what needs to happen is not glamorous. making sure japan has enough ammunition, missiles. that it is able to attract enough personnel. i mean, this is really a hidden problem, may be, that is not recognized. given labor shortages in the economy as a whole japan has to find a way to attract people into its delft -- self-defense forces and pay them enough to stay, improving facilities, improving the quality of life of service personnel. a lot has to be done. it will have to be stretched in

a number of ways to ensure japan is meeting its defense needs. really, it will not all be a clamorous fighter jets and things like that. >> tobias, there is a region japan has a pacifist constitution. it was after world war ii because of japan's aggression during the war. i cannot imagine this sitting well with neighbors. obviously, not china. obviously, not south korea. is this something japan needs to consider? >> well, i mean, i think the remarkable thing about a japan taking this step now is it comes after years of substantial defense spending increases in china. we do not even really know the full extent of those. we just have the public numbers. but lots of guesses are that the actual spending has been higher. south korea has also been increasing defense spending. japan's neighborhood is seeing a lot of defense spending. japan, in some ways, is the last to join the race in northeast asia. after years, really, of

reluctance, it is now finally seeing that it is time to, you know, for japan to do more. so, that is really remarkable to me. i think, it is very hard for japan's neighbors to complain that after all the years of japan's spending being moribund, now they will belatedly increase their spending. >> tobias harris, deputy director of the asian program at the german marshall fund of the u.s.. we have japanese trade numbers crossing the bloomberg now. we are seeing exports rising 20% year on year, slightly better than expectations of 19.7%. imports rose 30.3%, more than expectations of 26.9%. we have the currency effect when it comes to the import number. the trade balance there is coming in at a steeper deficit. that expected. so, what we are really seeing is potentially a little currency effect. this comes after we saw the

trade deficit narrowing in november with the lower oil price picture reducing the import. we are starting to see a reversal of that. when it comes to the breakdown, exports to china rising just 3.5%. of course i'm a we know that the chinese demand, given covid zero has been remarkably weak. we look for that number to change as the country reopens. exports to the eu fairly robust at over 30%. exports to the u.s. at 32.5%. more to come on daybreak: asia. this is bloomberg.

>> a quick check of the latest business flash headlines. hsbc will no longer finance new oil and gas projects, putting it ahead of peers in addressing global warming. the bank addressed an update to its energy policies that covers loans and debt underwriting. hsbc is among one of the world's biggest financiers of fossil fuel companies providing $111 billion of debt since the paris agreement in 2015. pfizer signed an agreement to sell its antiviral drug paxlovid in china through a state-owned company. do y'all -- the deal with the group is effective immediately with terms not disclosed.

covid infections are surging across the country as authorities make a rapid about-face in their strict covid zero policy. >> we continue to see resilience in emerging market currencies after we had two sessions of gains and despite the downside we saw in risk assets. following the fed's rate decision and the hawkish downshift. we continue to see the drop in volatility in emerging market currencies. when you follow the jp morgan measure of implied volatility for em currencies, now at a 10 month slope. the market opens in seoul and tokyo are next. this is bloomberg.

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♪ >> this is daybreak: asia counting down to asia's major

market opens with the fed out of the way, we saw a hawkish downshift and, as expected, a hike of 50 basis points. we have policy decisions out of the philippines, the ecb, the boe, and many more in the next when he flowers, not to mention chinese eco-data as well. >> as we get this whipsaw, not just from markets reacting to the hawkish downshift from the fed, but also the fact we may have this key economic conference out of beijing carrying on after all even as covid cases continue to sweep the capital. let's get annabelle for the market open. >> the monthly activity data from china is one to watch later. today we are really about the reaction to the fed and the open here of japan and korea. we have the start of trading for cash treasuries. we had a whipsaw move in yields in the prior session. the 50 basis point move, as expected. still, the hawkish tone around where rates will end up. our bloomberg intelligence team

says it could set us up for further yield curve inversion. that has been a reliable indicator of recession. in japan the policy divergence between the fed and boj has been a major theme over the year. we have been watching trading of the and in particular. we are hearing from sources a review could take place sometime next year. stocks wise, we are taking cues from the wall street session, down .6% at the part -- at the start. we had traded data narrowing slightly the trade deficit in november from the month prior. though not as much as expected. oil prices play into that. let's change to korea at the start of trade. this is down to reaction from the fed. we had the government inside korea discussing their discussion in the last couple hours. the key message from the meeting is essentially that korean financial markets are restoring stability, even though there are a lot of uncertainties. we are watching the moves. the kospi dropping .7%. we are not seeing the same

measure for the cause stack, the tech heavy sector, at the start. korea one below the key psychological 1300 level. let's change to australia. the asx 200 is one hour into the session. it is still in the red. defensive's are doing a lot better. consumer staples around .8% up. oil has given up earlier gains in the session today. traders had been more focused on positive price messaging out of the iea. it doesn't seem now they are a lot more focused on what came out of the fed. >> let's discuss what they came out of the fed. it was a hawkish message that signaled higher rates next year. kathleen hays is here with the latest. will the fed be emulating mario draghi's spirit of doing whatever it takes now? >> the bazooka. or a better metaphor. paul volcker. do have what it takes?

can you stay the course? nobody wants to see people lose their jobs. jay powell started his remarks today after they made this decision at 2:30 eastern time during a press conference, saying that the american people clearly want they will push hard. that is what they have to do to bring down inflation. yes, the 50 basis point hike instead of 75. dated four in a row. 425 rate hikes this year. that's a lot of tightening. it's another reason why people will think, gee, that will come down. it will not be a problem. look at the dots. this was another, not a surprise, a lot of people figured it was possible that the federal reserve would raise the terminal rate for 2023 to 5.1%. a lot were still thinking for .8 percent, especially after cpi, consumer prices, came in lower than expected for the second month in a row. the message was very different. the fed sees inflation will be

higher next week, 3.5%. 3.1% is what they forecasted at the september meeting when they changed their summary of economic projections and there. forecast. they also think unemployment will be higher than they thought. they still do not think it will necessarily cause a recession. let's listen to one of the very important things jay powell said of the press conference. -- at the press conference. >> i would not see us considering rate cuts until the committee is confident inflation is moving down to 2% in a sustained way. that is the test i would articulate. you are correct. there are not rate cuts in the fcp for 2023. >> the fed still has a ways to go. i think one of the most important things that jay powell indicated was, we think we will have to go to 5.1 percent. we think inflation will go to 3.5%. although, that is higher than we thought just three month ago, the level for 2023. if it does not come down as much as we want he made it clear the fed is ready to push rates even higher.

markets may think the fed has the wrong view of what the economy will do and how much that will bring down inflation, but you have to listen to what the fed is saying end listen to what their intentions are. it seems to me their intentions are clear now. >> kathleen hays has the economic picture and what the fed is saying. our next guest says the data is screaming at the fed to pause. with us is the global cio and portfolio manager. it is good to have you with us. as kathleen was telling us, the fed does not seem like it will pause. 5.1% is that the projected rate next year. what will that do to markets? >> i mean, the fed is saying they don't want to pause. they made it clear they would like another three rate hikes in next year. but, the data are really clearly slowly -- slowing. we see inflation on a three months annualized basis down 3%, 3.5% or so. it will only slow faster.

the fed can talk and jaw the expectations higher. they can say we will get to 3.51%. they have not been good at predicting where inflation will be. they have not been good at predicting where rates will go. so there will come a point early in 2023, we think, where they will simply have to stop hiking and pause. now, if they keep pushing above five percent, they will cause a recession. inflation will come down very rapidly. i think that is a risk of they are aware of. i want to prepare the markets for another couple hikes. >> are you taking a more defensive position now. you reduced equity slightly. >> we have a little bit. it is really a reflection of prices pushing hire quickly recently and an increasing risk of recession. we still do not think a recession early next year is the basic case. but, you have to respect the inverted yield curve. and it's very, very inverted.

we know that has historically proceeded recession. so, we have to be thinking towards the end of 2023, early 2024, there is a significant risk of recession. that said, if the data continue to soften and inflation slows, the fed will not take the 5.1%. they will probably get for 75. in that case, equities could still push higher. from a risk management perspective now, with the rally, it is time to just take a little bit off, we think. >> what does that mean when it comes to earnings revisions? is there further ago when it comes to the earnings recession, or could we see price to the upside? wax in -- >> in the near term this has opened up a little scope for an upside surprise. we have seen earnings expectations ratchet lower. we think we will see more of that. now, if we avoid a recession in the first half of next year, and we think that the u.s. is likely to avoid it in the first six

months, there is scope for upside surprise. that really does mean you could still get ok returns in equity markets. of course, with the rally we have seen recently, the return so far have already been brought forward a little bit. i think that is being priced in somewhat. it is not really time to be adding exposure. we are happy to start moving back towards a more neutral setting from where we are now. >> would you be adding exposure to chinese equities or other chinese assets given the pace of reopening? >> it is a difficult one. the pace of reopening has surprised everyone with just how quickly they rolled some of these restrictions back. that does introduce some risk. but, when you look at the playbook from the rest of the world, when economies reopen from covid, there is pent-up demand it just waiting to get out there. we think it will be the same in china. we would expect over 2023 for the chinese economy to grow much

faster than we have seen this year. it has been a recession this year. coming out of recession there will be policy support. we are rolling back covid. we think that chinese equities could be one of the best performers through 2023. depending on your position now, it is a really good time to start looking at that. >> always great to chat with you, isaac pool, the global financial manager for oriana financial services. let's get a vonnie quinn with first word headlines. >> china's closely watched economic policy meeting is back on schedule for a thursday start in beijing. officials decided not to postpone the central economic conference ease been covid infections rise. bloomberg earlier reported the meeting would be delayed due to of our research. is not clear why officials changed. oh -- china set to ask biggest banks to help stabilize the domestic bond market after the biggest credit selloff since 2015. regulators asked lenders to buy bonds via their prop trading

desks. the apparent goal is to absorb selling pressure caused by retail withdrawals from the banks wealth management products. at the bank of japan may review its policy next year. officials see the possibility after wage growth and any slowdown of the global economy are examined. a review is unlikely before governor kuroda into his term in april. an assessment could reverse the boj's ultra easy policy, but also may up -- may end up reaffirming it. bahamian court officials are at odds with u.s.-based bankruptcy lawyers over the remains of sam bankman-fried's crypto empire. the american legal team refused to give liquidators appointed by a bahamian court access to the ftx computer systems. they claim consumer -- securities regulators in the bahamas cannot be trusted. each side previously argued it should lead the hunt for ftx assets to repay creditors. global news 24 hours a day on air and bloomberg quicktake powered by more than 2700 journalists and anaylsts in over 120 countries. i am vonnie quinn.

this is bloomberg. >> let's see what is moving in the markets. >> taking a look at one of the worst performers, just over 10 minutes into the trading session for japan and korea, tech stocks following the fed rate decision. unsurprising given we had moves in the u.s. session over the nasdaq closing down nearly 1%. the likes of nvidia, amazon, alphabet live wise tumbling. this is the state of play for some of the big mega caps in asia and chip players as well, mostly in the red. another sector that can perform a little better in a rising rates environment is the bank stocks. they can be a beneficiary depending on the overall health of the market. today we are seeing financials looking a little mixed. definitely, holding up. better than other areas of the market. like tech stocks. jay powell signaling the fed is not done in fighting its anti-inflation campaign. borrowing costs will be heading higher next year. >> ahead, uncertainty about

china's growth prospects next year is out in high. the chief agent pacific correspondent alecia garcia herrero shares the outlook. the rest of the bonanza of central bank decisions post fed. onto the ecb and the boe, both expected to stay tightening in the fight against inflation. this is bloomberg.

♪the forecast is now for gdp to be lowered to zero >> >> .5 for next year. >> anything .5% is probably overly optimistic. >> it is quite a hawkish tone from the fed, more hawkish than markets had been expecting. >> it tells you it's not forecasting recession, but it's as close to recession is -- as

they ever get. >> they have to slow the economy sufficiently to generate enough slack in the labor market so wage trends come down consistent with 2% inflation. >> we have had a back and forth, debate over whether we see a bottom in equity markets. i think the jury is out. i think a more cautious stance is still warranted. >> the key components are still quite sticky. that would suggest more tightening is needed. >> bloomberg tv guests they're reacting to the fed's rate decision. following that, the bonanza of central bank decisions continues with the ecb rate decision thursday. markets will be contending with defense -- decisions out of the bank of england and other central banks in europe, latin america, and asia. let's bring our chief asia economics correspondent enda curran. what was your take away from this hawkish downshift for the fed? >> the idea that they are not comfortable with where inflation is at. even though inflation is slowing

in the u.s.. they are saying ultimately the peak for where they wanted the fed funds rate went up could be higher than investors are still thinking. it's important that even though they are slowing the pace of rate hikes, they are saying going into 2023 they will still keep jacking up borrowing costs, probably looking at a fed funds rate over 5%, 5.1%. that means they have a bit of work to do. importantly, if you told someone one year ago that is where the fed would be, their job would have dropped given the pace of the tightening over the past few months. i think the message was, lots more work to do. not comfortable with where inflation is that yet. certainly, no discussion of rate cuts. chairman powell was clear on that point. >> what does that mean for other central banks that have been following the fed higher? >> we are now in a space where people are saying they can slow the pace of tightening around the world. again, this does not necessarily

mean they will stop raising interest rates. we will get good examples of that again later today. with the ecb and the bank of england. the ecb may be down 75 to 50, even though the economy is heading to recession. that is a bold move by a central bank. lagarde is consistent they have to go with inflation first, growth second. in the u.k., inflation data is slowing again. of course, the central bank feels they have to move. because of the benefits, wage gains, they have to keep a lid on that. similar for other central banks around the world. switzerland, norway, also making decisions today. all these central banks are saying, just because we are slowing the pace of the rapid tightening does not mean they are finished. as we head into 2023 it feels like mortgage rates on borrowing costs are still going higher. >> the question is whether inflation has peaked. also, even if it has peaked, what are the risks to the upside going into next year? >> i think that it has probably

page. a lot of comments say look where commodity prices are. the food story has eased up a little bit, oil prices. in the u.s. this week we look at core inflation. you can argue inflation has peaked. where will it settle? just because it has peaked does not mean it will come back to the targets were central banks wanted. that's number one. number two, what is the risk of a mistake by central banks? they stopped tightening only for inflation to take off again. there are variables. there are wildcards. one people are talking about is china. number one is the public health situation there. if china does reopen and reconnect its economy to the rest of the world, that would have invitations for their demand for energy and commodities. we will have implications on chinese consumer spending and the demand for overseas too. we are in this space where people think i'm ok, inflation may have paid. but, nobody is sure where it

will settle. nobody is sure as it is in danger of a rebound either. >> bloomberg's chief asian rate correspondent enda kern there. get around above the stories you need to get your day going. central bank decisions are coming up still. check out dayb on your terminals. it is a day like this where you need to read all the summary of the news. also available on mobile on the bloomberg anywhere app. this is bloomberg.

>> a quick check of the latest business flash headlines. microsoft says antitrust regulators shrugged off its offer to make call of duty available to gaming raffle sony. the offer was made prior to the ft decision suit to block the microsoft acquisition of activision blizzard. microsoft needs regulatory approval in 16 countries for its $69 billion purchase. >> we originally said when we announced this in january of this year that we were looking at it in 2023. that is still the way we look at it. >> blackrock announced a leadership overhaul. changes include the appointment of its former head of stewardship as chief operating officer of its global client business. the world's largest asset manager is also clearing the way for a new global markets unit managed by its former head of human resources.

bc will -- hsbc will no longer finance new oil and gas assets a move ahead of peers in addressing global warming. hsbc is among the world's biggest finance serves -- financiers of fossil fuels companies providing $111 billion of debt since the paris agreement was signed in 2015. binance founder says outflows from the largest crypto exchange have stabilized. he wants employees at the industries recovered from that that she warned employees that the industries recovered from the ftx collapse will be bumpy. blockchain analytics firm says binance has at least $60 million in reserves. >> look at how cryptocurrencies are trading at the moment. a mixed picture. muted movement after bitcoin surpassed the $18,000 level. for the first time since ftx

fell into the chaotic bankruptcy ongoing now. this is getting a boost from bets on the fed downshift. though, the markets were disappointed to see that downshift was actually a hawkish downshift. we continue to hear more warnings about where cryptocurrencies are going. guggenheim's scott minerd warning investors there will be more shakeups to come following the collects of -- collapse of ftx. let's delve into the wreckage of crypto exchange ftx. its relationship with sister company alameda research is a key point of interest. bloomberg discovered some computer coding that offers clues on this. let's bring in cross asset team editor john dawson sure to explain -- joanna ossinger to explain. >> we found documentation in the form of comments with specific lines of code that made hidden alameda research is ballooning liabilities on ftx.

it looks like a code may have been able to kind of obfuscate exactly what was going on with alameda and the debts they were piling up. >> what do we know about the latest when it comes to sam bankman-fried? he is in a jail cell in the bahamas. what are the conditions? what does this mean for the case? where we go from here? we are still waiting for an update when it comes to a potential extradition. >> right. so, barely, the conditions in that jail are known to be not all that great. there have been reports in the past that it has been rodent infested and very overcrowded. so, people in the past have said that is a jail that can break people. and even though sam bankman-fried, his lawyers said he will fight extradition, sometimes, when people are actually in that jail cell, they say, well, they believe -- maybe i will not fight it in the end.

there is the potential it could speed things up on that front. in terms of where we go from there, you know, it will be interesting to see what exactly the u.s. does in terms of motions. what happens to san bankman-fried after he has spent a few nights or weeks in jail and why he -- if he changes his mind about k strategy. for now, he is in the medical wing. but, it sounds like it is not the best conditions for him, especially, given that he was in a pretty nice place before this. >> what do you make of the market moves? bitcoin topping $18,000 despite all this chaos. >> yeah, exactly. it's pretty interesting. might be some people thinking that the worst is over, especially now that sam bankman-fried has been arrested. there may be some clarity. but also, volumes are lower on a lot of things as well. the volume is down on binance by about 40%.

there is still a lot of uncertainty in kind of a low in the market. we might have prices doing well. not everything is completely rosy in the markets yet. >> joanna osundairo with the latest on crypto. still more upside for volatility across the asset classes as we await further developments on ftx. post fed, pre-ac become a pre-boe. still a lot of news to get through when it comes to central banks. futures in europe opening for the session on the ecb decision day. stoxx 50 futures looking a little bit to the downside at the moment, .3 percent. mse i europe pre-much flash. dax futures in germany lower by .3%. we saw a muted but steady session after the post inflation rally before the fed. that wasn't the biggest rally in more than one month on the back of inflation numbers. perhaps, we are sitting -- seeing a little money sitting to the sidelines before we get more

of a decisive move from the ecb. but, we do know that the fed reports their 20 for vision forecast will comfortably exceed 2%. we are expecting moves from the ecb in their fight against price pressures. coming up, as china struggles with reopening, our next guest things uncertainty about earth prospects has never been higher there. alicia garcia herrero is with us next. this i

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>> we are getting australian jobs, this activity could be a volatile series, that we are seeing when it comes to the

unemployment rate, that is really remaining steady at 3.4 percent. big on expectations unchanged from the previous month of october as well. see the employment change of 64 thousand jobs added to the australian economy, that is much more than the 19000 and the overall consensus. bloomberg economics was expecting 10,000, we actually got 64,000, and that really doubling from the 32,000 we saw in the previous month as well. part-time unemployment for november, almost 30,000 jobs being added from a full of close to 15,000 jobs in the previous month. the participation rate is holding steady. actually climbing a little bit, 66.8% from 66 point 5% and that is sure than expected. it is that employment change of 64,000 jobs being added to the labor market. not exactly showing that job growth is moderating out all in this month. we have really seen labor supply in australia being boosted by

one faster population growth and also increase participation. we see that participation rate jumping in really reflecting that dynamic. let's get you a look at the markets. >> just to pick up on what you're saying about aussie jobs, very vows about -- volatile dataset. we are watching it closely given that we did have expectations that could be looking to end its tightening program in february. we are very much focused on central banks generally in the session and asia, we are looking risk off. we had the decision from the fed, but a lot more coming up, including from the e cbe in the boe. but the key message from the fed, 50 basis point move, but still hawkish around the outlook for rates. we are seeing bond yields moving higher in currencies looking a little bit weaker against the dollar, including the korean won, which is leading the drop in the asian session. stocks wise, we are mostly looking lower here at the start of trading, unsurprising given

the lead we did have the -- did have from the wall street session. just the defensive's holding up. now sectors here in the red today. that's changed now because one of the interesting things that came out of the fed decision is that gap we are seeing with what policymakers see for rates and the dot plots revised to see the fed funds rate ending next year at 5.1%. that is not what it's been expected from swaps traders who do see a pricing -- a slower price here with a cap of around 4.9% on just under and may. perhaps there's a little bit of lack of conviction going on in the session. we are seeing trading volumes looking a little bit lower. haidi: let's get some more when it comes to processing that fed downshift that chair powell is saying the central bank has more work to do in raising interest rates. but investors seem to be seen the outlook for 2023 differently. let's get some insight with the

chief asia-pacific economist. always great to have you with us. we been talking about this as being a hawkish downshift with a lot of nuance from fed chair powell. what was your biggest take away in terms of how the fed is seeing the path to normalization of inflation -- inflationary pressures next year? >> yes, it has been a hawkish, but i would like to highlight the following, that there is a new elephant in the room for the fed and that's china. in the sense that in my view, the cpi data it would have had with 6% core inflation rate really coming down. and by the way, mostly on the market. inflation is still up on the services, but not on the goods market. my review would have been great, this is really about supply, this is energy, but this is also

supply chain. this is very important, and we are seeing normalization. and everything is back to normal in china. ppi and china is plummeting. we won't get any external inflation. that would happen until we saw this massive opening up. there is a new risk out there unknown for the fed, and i want to highlight this fact, explains the longer -- slightly higher. that's not the point, longer. we don't know what has to go on here and we don't want to mess it up again. we want to make sure inflation comes down steadily and remains low. i think that is the message that they will not hesitate to remain there for the industry. we kind of knew that, but now it's for sure. no matter whether the u.s. economy accelerates fast. i think that's a key message

here, uncertainty on the goods market and this could be related, as i said, to china's opening up. sherry: higher for longer and we are not talking about rate cuts until inflation confidently gets closer to 2%, that's what we heard from the fed, does that give them enough of the buffer if it actually does result in bigger inflationary pressures globally, pushing up energy prices potentially passing through another bump up for u.s. inflation by the end of next year? >> indeed, you set it right, that's the near risk. and is that enough? i guess with the fed is saying, so far, i'm not even telling you i'm going to do. they could go back to -- imagine that we do see spike and energy prices, it could be related. if it's related to a increase in demand from china, no reversal

in opening up, everything goes very fast. at if not back to 75, we surely have to remember it's 50 again and it's going to stay there for very long. i guess the point here is, how much of that feeling from china will we get in the next few months? it's very hard to tell, it could actually be the economy doesn't respond to the opening up, i would say half deflationary, very low export prices and china. will the fed change, i doubt. i think it will remain steady and maybe 25 and then steady there for the rest of the year because still, the risk of that fast reopening is there an energy prices as well. so i guess that's the message from the fed. shery: inflation across asia has been nowhere near where it's been in the u.s.. where do central banks across asia say the likes of japan are you have inflation where they

are not expecting that to be sustained, whether they go from here when you have a fed thinking about higher for longer and you have this huge divergence happening? alicia: that is a great question. i think in asia, somehow i can't even believe this if you ask me, because we have central banks that have for long imagine taiwan doing only a third of what the fed was doing. 12.5 basis points, and that was it, and we have had the usual tapering culprit, so indonesia or in india, much less. is just amazing, but a lot of the inflation -- inflation we have not seen is repressed. somewhere but it's repressed because we have had huge subsidies on energy and asia. so let's put it this way, if

everything goes as expected, we would not see major increases in the philippines. that's going to go. we know that. and rightly so. in a sense, we will see very little in 2023. which means that not only did asia start later than the fed, but it actually did less than the fed and it will not do more in the industry. this is only on the basis of china not spoiling the party. there is a lot of demand pressure. that's the key. shery: so we will actually have to delve into what's happening in china and potential activity next year. she is staying with us to discuss that, but for now let's get to vonnie quinn with the first word headlines. vonnie: u.s. regulators are taking the first step towards the most widespread revamp of stock trading in more than a decade. it's all aimed at spurring better prices for investors and directing more business towards traditional exchanges. the sec laid out for -- that it

could boost transparency with. this plan affects pricing and disclosures that brokerage must make the clients. the international energy agency says oil prices could rally as sanctions we rush in supply and demand beads earlier expectation. the iea says russian output is poised to plunge 14% to the end of the first quarter. the agencies these higher oil demand from india's growth in china's reopening with consumption growing by 1.7 million barrels a day by next year. france will defend their title against argentina and the final footballs world cup after a hard-fought 2-0 victory over morocco. the world champions ended the north african nation's historic run as the first scene from the continent in the first arab country to make the semifinals. there french must overcome them on sunday to become the only site to retain the world cup since brazil in 19 622. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries.

haidi: more to come on daybreak asia. "bloomberg technology." -- this is bloomberg. ♪

haidi: covid infections are surging in beijing, disrupting official government work and keeping people at home. let's get more from our managing editor for asia global business.

we have this back and forth as to whether this central economic web conference will kick off today. we heard it was being postponed and now we are hearing it will go ahead. we heard things like the national bureau of statistics briefing today has been canceled. >> it appears as though there is some disruption to the running of the government. it does appear to be the city getting hit first and hardest in this reopening way, which we expect to be pretty significant and pretty huge in china, given it has never really, at any time of the pandemic been hit by covid before with the exception of what happened in wuhan at the start. so we are starting to see some disruption. i guess it provides a little bit of a precursor to what you might see in more economically key parts of china. i'm thinking at the factory belts manufacturing areas. once covid gets in there, it

could be a whole different ballgame and much more disruption, not just for china's economy, but the global economy. shery: much more problematic would be we are seeing the stop/start reopening in china. any indications now that we will see perhaps more restrictions given the spike in infections? >> i think that's actually quite unlikely. i've been stunned at the reversal just within a week of china moving from covid zero, where you would have a city that shutting down, locking down without even a case, just the threat of one to a situation where we are hearing about doctors being sent to work while infected with covid. that's huge whiplash, and it does seem to be reflected in the propaganda that we are moving forward, we are prioritizing the economy, a lot of talk in state

media propaganda about the economy. so i do think that there's no turning back now, and we are going to see a rocky couple of months as covid finally hits the world's biggest population with a vengeance. and the ramifications of that. shery: bloomberg samurai with the latest on china's covid infections. we have seen already the fallout from china's covid zero strategy. key indicators likely to show that the economy worsened in november, putting it in a vulnerable position. this as of course we see more disruptions as emma mentioned given the spike in infections. let's bring back alisa who sees the risk of china reversing course on its reopening. i guess we know that the economic data from november is not going to be great given covid zero. the question now seems to be, given the pace of reopening that we see right now and emma tells us that even she is -- she is

stunned at the pace, how soon can we expect the economy to rebound? alicia: the economy will rebound widely because the opening is wise. but of course there is risk. it's not so much reversal, i have to say that as we speak, the risk of reversal is decreasing by the mere fact that it would not be possible to put everybody back and walked down after having so many cases. there is contact tracing you can never do again. so i think the key here is to know whether actually the wave of infections could have some hard impact on supply, basically on manufacturing production. that's the key for the rest of the world as well. inflation. so, basically, is inflation going to increase because of supply chain disruption's? not the lockdowns, but the

absence of them in the massive contagion that we are seeing now and covid cases in china. that's the risk. but once that is done, and it might take some time, i think the idea of peaking, i've heard it will peak by the end of the year as it compared to other economies, that's fast for a country of that size. i don't take it will be as fast for december. we may see some disruption in supply chains all the way to the end of the first quarter. that's the recovery that will come there after. i do think we need to see growth in china these 5% next year. much higher than we had in mind before china opened up. not as highest 2021 because there is still a lot of uncertainties. shery: that's where i was going, if you take the base of it being low and what we are coming from, 5.5% seems really achievable, but what about the fundamental

perennial questions related to long-term growth in china, and what those drivers will be when you still have issues and that key part of the economy, which is pretty? alicia: yes, it is, property will still shape a little but of growth next year, but we have to realize they are putting a lot of money in the real estate sector, basically every large bank is asked to lend, we are seeing now even interventional on the bond market wealth management products, everything that moves in the wrong direction is now being basically intervene because the whole idea is to release every obstacle to growth in 2022. still is not like 2021, because the off cycles can be smoothened they cannot be fully lifted. again, still headwinds, it's not all about tailwinds from covid, but that would clearly help

after this massive contagion kind of ends, i would say end of the first quarter. haidi: we are hearing that the central economic work conferences going on despite concerns about surgeon cases being disrupted. we had earlier heard that it would be postponed. what what are you looking at in terms of the report after this meeting? what with the focus be given that we all want more details on what the progrowth priorities look like? alicia: we heard a little bit in the last one. i guess it was too early to appropriate have a proper preliminary because we only hear from the final growth target possibly, but the preliminary one from dashers about five, which is low. but let's bear in mind that last year we have the same thing.

even when we thought china was really getting out of covid at the end of 2021, it was very conservative in the growth rate was at 5.5 sounded very low because we were coming from it. so, unexpected and rather low number because the whole idea is the uncertainty, and they don't want to come back to saying we messed it up by two percentage points like this year. so is going to be low, and my view, but that doesn't mean that china will not recover. it just means that they realize that the contagion wave, as you said, the surge might last longer than expected and that would shave off a lot of growth in the first quarter. first quarter last year was good. so the basis is negative. they need to be careful with the first quarter. so they can come up with a big number now. i think that the growth target will be rather low. i would be surprised. we say, what's going on? nothing is going on, it's just the uncertainty.

the uncertainty is very, very large. haidi: always great to have you with us on this rotor closer -- roller coaster. chief asia pacific economist. much more to come on "daybreak asia". this is bloomberg. ♪

shery: hsbc says it will no

longer finance new oil and gas field projects and move that climate -- a move that climate activists as it puts them ahead of many peers in addressing global warming. the bank announced an update to its energy policy that covers both loans and debt. hsbc is among the world's biggest financiers of fossil fuels companies, providing $111 billion of debt since the paris agreement was signed in 2015. pfizer has signed an agreement to sell its antiviral drug and china through a state owned company, the deal that the group as affected immediately with terms not disclosed. covid infections are surging in china as they make a rapid about-face on their strict covid zero policy. haidi: china plans to expand domestic demand so plays a greater role in economic growth as a country recovers from covid. our chief china correspondent joins us now.

having deja vu because the rebalancing to creating a robust domestic market is not anything new, but i guess this is something much needed given the hit that is taken from covid zero. >> this really speaks to the jewel circulation strategy that was introduced a few years ago by xi xiping. this meant stirring up domestic demand while also exporting to the rest of the world. was clear is that exports are vulnerable to these shifts in the global situation and that's becoming increasingly difficult. stimulating to domestic demand, that has been quite difficult for china. china has one of the largest and highest household saving rates in the world. this pension system is virtually nonexistent. people say there isn't much investment yet. so really getting the consumer and chinese residents to play a role in the economy is the focus.

if that works, that's one of the biggest stories, biggest themes for the long-term investors i speak to. but it's an important focus going forward. shery: we have talked about how much markets are priced in the reopening for a while right now. is set enough of a catalyst to move into higher next year, what else do we need to see? >> it is the biggest policy shift according to larry summers, it's huge. in itself, it's a huge stimulus measure from china reopening the economies is what many economist up and calling for because it didn't matter how much stimulus, how many interest rates to pboc cut or how much money at throughout the financial system, that wouldn't work if you had a closed economy and people weren't keen to borrow or invest in the economy. what we do need to signs of

whether that's working. we get a dataset from china for the month of november. it's a set of data that has been overtaken by events. you had a guest to earlier saying that it's expected to be weak, but it's also expected to be the bottom. let's see if that goes forward. that will be the catalyst that markets this. shery: a preview of what to watch in the chinese markets as we head towards that economic data dump from beijing. that's it from daybreak asia were markets coverage continues as we look ahead to the start of trade and hong kong, shanghai and shenzhen. standby for bloomberg markets: china open. this is bloomberg. ♪

>> good