shery: you're watching daybreak asia. >> we are counting down to the market opens in tokyo and seoul. haidi: major stocks are set to extend a global route. fear smelt of a global slowdown. the ecb and boe followed the fed slowing rate hikes. trade tensions escalate between washington and beijing as the u.s. blacklists dozens of chinese tech companies. >> we have the open of the asx 200. we are extending into a today slide. -- two day slide.

investors are continuing to assess the outlook for tightening. so far the moves in bond yields looking fairly muted but the aussie dollar moved in the prior session with the strength back into the greenback. the aussie dollar off as much as 2.7%. turning now to what that means for the asian picture today. dollar strength could be something that weighs in the asian session. new zealand already online. we're still looking for a more muted start for chinese equities.

you had the blacklisting of chinese tech companies, that was outweighed by those concerns. take a look at u.s. futures. we are perhaps downshifting on the pace of rate hikes, but we might go higher for longer. investors are not liking that. we are watching the 10 year yield as well because treasuries were mixed and the 10-year was down to 3.44.

let's dive in on major central-bank meetings. more rate hikes, the battle against inflation rages on. kathleen hays is here with more. there was no surprise when it comes to the easing of the pace of rate hikes. >> the boe estimates that there probably already in recession. this was the night rate hike this year, although they move in slower steps than the other central banks. is this the start of the global financial crisis at 3.5%? they do say that inflation may have peaked but that isn't enough. they have to see it coming down as the fed would say sustainably. this is the path now in fact

traders are expecting the boe will follow through. if we follow to the ecb, it shifted to a 50 basis point hike. this is something traders are taking them seriously also looking for a higher terminal rate next year. christine lagarde said very clearly don't think that a 50 basis point downshift is a pivot because we are going to do many more in the time ahead. they also announced tightening for next year letting the balance sheet starting to run off. that also adds some tightening on the edge. it seems inevitable central banks around the world not only because they see their own inflation slow to come down in many cases, but because they see their central banks like the fed still moving it puts more pressure on them. these three seem all in tandem now.

>> u.s. retail sales coming in weaker than we expected for november. is this building a picture of weakening demand? >> it very well could. these retail sales numbers are very subject to revision. however, what we saw down the biggest drop in 11 months. this is not quite the holiday shopping season, it's the preholiday shopping season. retailers are cutting inventories because they are building up. manufacturing is weak and that's the part that i meant to say not down before the pandemic so it's another sign that if the

beginning of the kind of slowdown that the fed wants to see. it's >> the wave of rate hikes has pummeled stocks across global markets. the enthusiasm for a pause, pivot, turn has been notched down when it comes to market expectations. are you looking at pricing across the board and seeing a more realistic reflection of the trajectory of the central banks? >> investors have had a bit of a wake-up call. they were probably wondering what a restrictive coordinated policy looks like. for a long time if you have been a investor in global markets, you are used to coordinated policy easing.

now we are getting the complete opposite. this is almost coordinated tightening across the major central banks in the world. the only one left out is the bank of japan. maybe they will surprise us next week. this is a huge wake-up to investors particularly as you look ahead into 2023. we will be starting the year with extremely restrictive policy across the board and we have faced that for a couple of decades. we haven't gone into a new year with a high interest rates to begin with and the prospect they could go even higher. that's not an encouraging outlook particularly in the equity markets. the timing is not great because people are thinking about year end, they want to drift quietly into the end of the year maybe we address their portfolios and they aren't being allowed to because with the central banks are doing. this is a real shocker across

the board. it's likely to be worse going into the new year. >> what stood out to me in the conversation earlier today with the global strategies president, he was saying that the fed will have to ease next year, this is all signaling for the markets that perhaps we could see a big rebound year because if you look at the data, the data looks pretty bad and the fed will need to stop. the same goes for other central banks. our the markets positioning that way? it seems that they are not necessarily picking up or having faith in what policymakers are saying even if you look at this chart, you can see the huge divergence of where markets see fed funds going. >> what you have in the market is expressed with the inverted treasuries yield curve. the reason why it is so steeply inverted is you do have a number of investors willing to put on macro hedges in case recession

comes early in the united states. that's why the 10 year is so far below the two year yield. in case the data is so bad and we get a recession the first half of the year in the u.s.. the fed is very confident in their models that the u.s. economy is holding up well. they are looking at things like the u.s. employment rate which is still extremely low and jobs are being created. if you look at the fall in equity markets, that tells you where short-term traders what they are thinking and where they are putting their money. the hedging in the long end of the treasury market, i think you can take it with the pinch of salt. that's not a huge commitment to the market. the reality is what's going on in the equity market and that's not so serious.

>> the u.s. is also adding dozens more chinese companies to a trade blacklist that prevents them buying certain american components. stephen engle is joining us from hong kong. what specific action is the u.s. taking? >> adding 36 companies to this entities list. it is in an effort to limit chinese companies from accessing the most advanced chip technologies as well as ai technologies because of the fear that it could end up at the use of the chinese military. for the immediate timeframe, it's these companies they get added to the list. it essentially means that anybody who would want to sell to those companies on and entities list would have to seek approval from washington.

if they are using or selling u.s. equipment to these chinese companies and it is very difficult to get approval. the companies i am talking about, there are 36 but i highlighted three of them of notable interest. one of them, one of the biggest flash memory chipmakers in china. it had talks with the likes of apple which makes almost every single iphone in may and then china. -- in mainland china. also shanghai micro. it is china's leading lithography equipment maker. i also want to highlight px w. it is a fledgling chip business, but a key element is it's run by a former top huawei executive

which is facing and under significant u.s. sanctions. the concern would be that this company would be supplying some of its technology some of its chips to huawei which is under those restrictions. not everything negative for the chinese companies. there were 26 entities this other restrictions eased. they have been removed because they have complied with the u.s. checks. >> we also understand that u.s. inspectors made progress when it comes to accessing the papers of these companies that were facing a possible delisting. guest: there were about 200 listed in the u.s.. apparently, the public company accounting oversight board the united states sent a team of

inspectors to hong kong. china gave them access and the chair told us that her team of inspectors were able to view full audit workpapers and retain the information they needed but their work is not done. >> this is the beginning not the end of our work to investigate completely. we plan to have teams on the ground next year to continue our regular inspections. if china denies access, we will not hesitate to make a determination immediately next year. stephen: this is major progress on a long-running dispute between china and the united states because it was chinese and hong kong-based companies that were essentially the outliers not complying with the u.s. requirements to hand over

the audit papers. this does remove a major stumbling block and removes the most acute pressure on the possible delisting's. >> let's get you to vonnie quinn. >> japan will describe china as an unprecedented strategic challenge. the overhaul is expected to get cabinet approval on friday it includes approval of a counterstrike capability that would see it by weapons including tomahawk missiles from lockheed market -- lockheed martin. hong kong's executive says it's possible the border with men then china will reopen in 2023. he says he is hoping for a step-by-step restoration of exchanges. he announced an immediate fivefold increase in the quarantine home to -- hotel room quota.

hong kong has been effectively closed off from the mainland for three years. central banks in the philippines and taiwan have increased their rates. inflation is still seen as above target next year. mexico's central bank has slowed the rate of rate hikes. inflation in latin america's second-biggest economy eased last month. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. shery: still ahead the collapse of ftx sparks fresh debate about digital assets. we discussed that with our next

guest. but first, a look at how currency markets are reacting to the decision to hike rates by 50 basis points. this is bloomberg. ♪

>> the dollar has rallied after the rate hikes from central banks this week. the fed is signaling higher than expected borrowing costs next year. is it hard to see any option other than a little bit more continued weakness?

>> the scale of the decline has done enough to tell us that the dollar has peaked and we are in early stages of a multiyear downtrend. when risk sentiment served -- suffers, a big reversal of what we have seen in the moves overnight. there's not going to be one way traffic down, but one of the big risk next year is if we are heading to a recession typically risk markets don't bottom out in the u.s. until we are in the middle of a recession so that's a warning perhaps that there's going to be further safe haven risk off support for the dollar as we go through the year. >> maybe a warning that it's awkward to be a one-way street.

>> we put a lot of weight on looking at how the remember he is behaving. we have come from above 730 just a few weeks ago to below seven. aussie is doing very much what you would expected to do in relation to that. the economic news is going to get worse before it gets better. markets are still saying if march or april next year we think the economy is going to be in a position of revive construction activity among unfinished homes and a proper reopening of the economy, i think that portends further strength that will feed into aussie. we have to get above 70 for a good part of the first half of next year and onwards and upwards to at least 75 in the

second half. >> on looking at geopolitical news and we are seeing allete up when it comes to the delisting concerns for chinese companies but at the same time, more pressure on blacklisted tech companies. >> we have seen significant capital outflows from china to some extent from fixed income is the interest-rate pickup over the u.s. in particular has compressed as much is. some of those worries have certainly shown up in a retreat from a lot of foreign investors into those stocks. i think ultimately it's the extent to which the economy's

going to reopen and if you think about the global growth landscape next year at the moment i would pick china is likely to be far and away the fastest growing large economy. that relative shift in growth dynamics is what leads us to continue to be a bear on the u.s. dollar but also thinking there's a fair amount of appreciation to come over the course of next year. >> new zealand is doing pretty well when it comes to growth recoveries. we have seen pressure on the currency this week, but are we expecting more upside because the economy has grown so much faster than expected? >> we got completely the opposite view. there's a lot of economic weakness but has not shown up in the 2% q3 gdp rise ported earlier in the week. the important thing to remember is that mortgage resets for most new zealand borrowers something

like 80% of them are subject to fixed rates haven't yet touched the side so there are going to be some very serious sticker shock from fixed rate mortgage resets at a time when the housing rates we have seen year on year declines of approximately 20%. we think there's a lot of economic weakness in the cake and the new zealand dollar has been one of the outperforming currencies especially against the australian dollar. yes more to come from the rbnz and they are still signaling potentially 125 basis points to come but that is well discounted in markets and if the economy starts rollover as we think it will, i think that calls time on new zealand dollar outperformance even if it's going to do very well in the context of a broadly weakened

dollar. >> if we see a pivot from the bank of japan, that is huge positioning for the yen. >> it is still fundamentally the most undervalued of the major countries. we have to look at the wage rounds in march next year for small and medium-size companies, we won't have a line of sight of that until may, june, or july of next year. that's the earliest we might be thinking about any kind of pivot from the bank of japan. if we are going to see a move there, it's something we don't expect until the latter half of the year but there's a reasonable chance if those wage numbers are seem to be consistent with maintaining inflation around 2%, we could see in and to negative interest-rate policy from japan before the end of next year. >> have a great christmas. more to come here on daybreak,

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>> we have an alert on the bloomberg, we are getting the chinese reaction to news that u.s. inspectors have been able to sufficiently review audit documents the china securities regular -- regulatory commission saying it welcomes the decision on auditing that they want to create a more stable international regulatory environment with the u.s. that they will continue supervision work with the u.s. in the future. this after we saw the risks of delisting fall substantially with the comments coming from u.s. authorities. thi it's official, america. xfinity mobile is the fastest mobile service. and gives you unmatched savings with the best price for two lines of unlimited. only $30 a line per month.

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>> you are watching daybreak asia. we are now half of our -- 30 minutes away from the open. we are setting up for a tone of risk aversion across the board. that is not surprising given the lead-in and we had from the u.s. session. the s&p closing at its lowest in more than one month. he also have to add what investors have been doing throughout the course of the week assessing this wave of central bank tightening, the warnings of or paid to come as well. we have the aussie session also 30 minutes into the day. being led lower by the tech stocks off more than 2%. tech stocks are more sensitive to rate rises and recessionary fears.

as we approach 2023, which sectors can we look to outperform? if you look at this terminal chart, we can look at how growth has been performing this year versus value. this index has outperformed the growth index by nearly 19 percentage points this year. that is the biggest outperformance we have seen since the.com bubble burst into thousand. the question is whether that can extend. one says the rotation has a long way to go. >> japan will describe china as an unprecedented strategic challenge and a draft document of a new national security policy that is expected to get cabinet approval on friday. our politics reporter points us from tokyo. >> this is a pretty big shift for japan. i suppose acknowledging the

reality of the situation it finds itself in as we know we have seen a growing threat from china in terms of the military prowess, the tensions around taiwan. this is a once in a decade kind of document that it puts out to layout -- how it needs to deal with it on its own and in conjunction with its allies and other countries. >> will provide more support with how to fund an increase in defense spending? >> it does layout -- or three documents coming out today and part of that will layout this huge increase in defense spending japan is planning. what it doesn't layout is the way that's going to be funded.

that comes in a whole separate negotiation over taxes. it's kind of a separate situation. there will be a huge increase in defense spending. about 60% over the next five years. this will include things like stockpiling longer-range missiles which are capable of reaching china, north korea, and parts of russia. in a sense, trying to deter the various threats that china is increasingly aware of in this region. that kind of change in the outlook has really come since the beginning of the war in ukraine. i think that was really the trigger point changed public opinion in japan and enabled the government to make this huge change. >> we do have breaking news. panama is closing commercial operations at the first quantum copper mine.

we are hearing from the panama president that almost a year later, the mind has not fulfilled the commitments agreed in january 2022 hence the decision has been taken. we were expecting the course of action to be determined after the failure to agree on new tax terms with the canadian operator first quantum. the administration and the president had lamented the company's conduct across operations -- negotiations including submitting an offer after the deadline last night. previously agreed royalty modification and that these negotiations have resulted in the decision to close commercial operations at the first quantum copper mine. >> the central banks of the u.k. and eurozone have followed the fed with 50 basis point hikes, slowing their rate of tightening.

the ecb president says to expect more moves for some time because policymakers have more ground to cover. >> we judge that interest rates have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target. our future policy rate decisions will continue to be data-dependent and follow a meeting by meeting approach. >> the u.s. is adding more than 30 chinese companies to a list to provide them from buying american components. 200 chinese companies no longer face an immediate threat of

being booted off american stock exchange is. the oversight board says it's inspectors have been able to sufficiently review audit documents from firms listed. this comes after recent inspections and hong kong. hong kong has named the first female chief executive the city market regulator. the government appointed her for a three-year term starting january 1. she has worked almost two decades in the local government and is a journalist for 10 years. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. >> goldman sachs says commodities will be the best asset class next year. one says that smart investors should expect over 40% returns. >> go back to our call for a super cycle in october 2020.

you had 42% returns in 2021. so far we are headed toward 23% 24% returns in 2022. this is a continuation of the strong returns that we have been seeing over the last several years. bottom line, we think about what super cycle is. it's not this big upward trend in prices. because commodity prices perform an economic function, they have to rebalance supply and demand. they have to bring them back when they get out of line. markets are rebalance today because china is being locked down. we have not been investing in supply. supply is stagnant. i have to ask what happens when

china the largest consumer in the world, the largest oil importer in the world begins to rebound significantly the first part of next year? it's going to tighten these markets significantly and put upward pressure on prices. you have the largest economy in the world essentially hibernating. the core point, underinvestment week demand today but we see sequential growth in 2023. one last point, inventories have been exhausted. >> let's talk about the china narrative. we are seeing a huge 180. there is a huge you turn china they are reopening but what comes with that is likely to be a huge pickup in cases. the numbers look pretty bad. how should we be thinking about the china reopening?

is it going to be similar to the stop start and how does that work how does that impact the commodity price? >> oil is a testament. it's going to be a rough puppy start the very beginning. when oil is doing like this each week big violent moves because you're going to have your starts and stops. when you take markets like oil equities or copper, or more forward-looking. they are looking into march april of next year. as a result, they don't have that same kind of noise. >> that was jeff curry speaking to bring tb. still ahead, more fallout from the ftx collapse. we will get the case for crypto saying that real innovation is still going on. this is bloomberg.

[speaking foreign language] this is bloomberg. ♪

i think ftx is very much an issue given the domicile and nature of crypto that it doesn't have intrinsic value and the people that want to invest in it must be prepared to lose their money. >> the bank of england governor on the ftx fallout.

take a look at crypto. we have seen a pullback as well as investors broadly try to digest where the path lies ahead. we are seeing bitcoin well below the level. we have seen cryptocurrencies getting a boost from the downshift from the fed, but the new wants of that being hawkish downshift and potentially we see higher rates sticking around for longer it's creating a bit more of a drag. it has been such a volatile dramatic time when it comes to this space. >> that raises big questions about what's ahead in the collapse of ftx and the arrest

of sam bankman-fried. despite the chaos, it's worth remembering that real innovation continues to happen. with us now is su keenan. morgan, let me start with your expectations in this industry. we've had so much drama, so much chaos, a lot of questions about more regulations coming up. you have these financial institutions still trying to leverage at least blockchain technology in order to improve their operations. >> absolutely and the key message is there has been a massive fallout of crypto lending and trading platforms. that have been highly unregulated. we clearly need more regulation globally particularly in the u.s.. it's important for everyone to remember that the failure of ftx, it was a centralized exchange and it wasn't

particularly blockchain oriented. blockchain technology has massive transformational impact for the industry globally. things are already happening today. i would characterize 2022 as the first real wave of institutional adoption by large financial institutions. firms like apollo, hamilton lane. keep financial institutions harvesting blockchain to give better services to their customers. >> want to ask you, blockchain came into existence a lot of people myself included have to double check the difference between blockchain, defi. you left traditional finance because you saw decentralized finance and the blockchain as the future. it is the way that we record bitcoin transactions, that's how it came into existence.

you see it going so much further. that complicates things in terms of selling it to the banks. you talk about success in getting some firms to adopt it but as the chief doctor -- a doctor -- as the chief adopter, what are your challenges right now? >> we are still in the early days, but we are well past poc days. my first day wasmy first day wah nasdaq as they were setting up private market securities. i implemented successfully blockchain with alibaba for instant business-to-business payments across border. it is an enabling technology and it enables us to rewrite how financial services is done. this is the new digital factory

of finance and it allows us to strip away costs across the industry and making financial services more accessible across the world. financial services is typically available for people who have money because the cost is so high. some of the challenges that remain regulatory clarity in the stablecoin space will be important. digital money representing fiat issued by credible institutions is a very important piece of the puzzle. we need digital money, the banks have the risk management approach. we think stablecoin legislation is likely to happen next year and that will be a very important catalyst. the second challenge is you need to walk before you run. we are past poc's, companies are putting on some funds on chain. it is added then replaced.

you are adding a digital channel where the asset is issued natively on the blockchain and that will be the things -- the way things are done. these banks have large digital asset teams. they already have their strategies endorsed by the board and we are in execution mode. >> i want to ask you about each of these banks already having digital teams. we just saw highlights up her puzzle for how to regulate crypto coming from two former regulators. among the proposals is to regulate use of stablecoins. you mentioned that a lot of these banks, when you offer publicly has its own token. it was the failure of the usd

stablecoin that led to the selloff that led to a collapse in a hedge fund three arrows the collapse of two lenders and ultimately the collapse of ftx. can you talk about how your banks and your token is different? >> absolutely we have what's called usd f. bank minted tokenized posits. 13 banks are currently a part of it. it is minted on demand meaning it's already in your wallet. if you are banking at one of these consortium banks, would you need to send money to a business to pay for goods if you want to buy digital asset, your bank will meant deposits on chain natively for you reflecting the money in a bank account. the other bank will receive it. that way you get interchanges the way a lot of commerce is done in the u.s. meaning credit

card swipes that's are part of instant payment. but it's expensive. we believe banks need to be a part of minting digital funds, digital money tracking via and based on money in a bank account already. it is still early days, we are testing and is cussing with regulators. >> so much of the conversation around crypto even prior to ftx was a worry about bad act and regulation is there to prevent something like what happened with ftx potentially from happening. their civil criminal money transmission consumer investor protections. what other types of regulations could add validity to this industry?

>> i totally agree that we need to apply the principles of financial to the crypto space. that means segregating funds. providing limits on lending. a lot of the high-profile bankruptcies have been because there was an inappropriate collaboration. restrictions on operating conflicting businesses. prohibitions against fraud and manipulation. those principles that make a core functioning system today need to be applied in the crypto space. what we are really focused on is putting real-world financial assets on blockchain to basically rewrite and rearchitect financial infrastructure because a lot of the innovation in finance over the last decade has been at the consumer application layer, what

customers see on their mobile app to make substantive changes we can finally get at the infrastructure across to suppan's and that's where the decentralized capability is very powerful. >> great to have you with best. -- great to have you with us. you can tune into bloomberg radio as well to hear more. we are broadcasting live from our studio in hong kong. much more ahead, this is bloomberg. ♪

no citigroup has told most employees they can work from anywhere from the final two weeks of the year. there -- workers were told they must stay in the country of employment to take advantage of the park. citigroup will wind up its consumer banking business in china, affecting about 1200 employees there. the exit will include products such as insurance, loans, and investments. they announced plans in april.

bonbon group has swung wildly. a decline of 53%. that volatility because multiple trading halts. the luxury companies listing in new york is the first time in the u.s. for china's forcing them into international. company executives say the timing is perfect despite the drying up. ceo look at the director as -- reynold. -- months reviving relations. another proponent of resettling or resetting the partnership with the chairman was reappointed for a further four-year term. shery: these are the stocks we are watching at the open. vindicate reporting that sony -- another plant in the prefecture. we are also watching four major

japanese banks including mitsubishi. they have agreed to provide an 8.8 billion dollar loan to the japan industrial partners for its buyout for toshiba. asian energy related energy stocks may move as central bank decisions way on come on -- commodity markets. coming up in the next hour, f gmc capital tells us why they think investors should continue taking equity profits and heading in 2023. then morgan stanley will share their optimistic views on china's growth next year, despite the uncertainty around its reopening. the market opens in seoul and tokyo are next. this is bloomberg. ♪

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>> this is daybreak asia. the global rout continues with the ecb and b.o.e. following the fed with 50 basis point rate hikes. signaling that they are not done yet. haidi: listening to what the central bank has been saying and struggling with the introductory going into next year, we have made it to the end of a big week. let's take a look at these final asian markets that are coming online are doing at the moment. this was being called a make or break week for markets, it does appear that santa claus rally won't be happening anytime soon and i do have the open now of japan and south korea. we also have the start of trading for cash treasuries read we will be watching that 10 year

yield closely. we are setting off with a risk of trading in asia as you mention. this is down to central bank moves. the risk of more recession building on the horizon. geopolitics are also weighing into this as well, because not only between the u.s. and china with more mainland tech companies being blacklisted by washington. you can add that in this part of the world the tensions between beijing and tokyo. japan is expected to describe china as an unprecedented strategic challenge and a national security policy. we do have the nikkei coming online this morning. already down more than 1%. let's change to what we are seeing in korea at the start of trade. we are watching the tech sector very closely. because we did see it tech stocks leading the drop in the u.s. session. the nasdaq off more lime -- more than 3%. you can see the broader the tech heavy because dax index is

outpacing those losses. the kosdaq index. one -- really reflecting at risk of sentiment coming back into markets. let's turn now to australia. like in korea, we are seeing tech shares really drawing down the asx 200. the biggest intraday slot we have had in the six weeks at this stage. we are on track for a second weekly loss for the index. oil is just turning a little more positive, that is an interesting move. we do have a lot of focus on the recession, central-bank moves, but still, goldman sachs is warning of a bumpy ride ahead for oil prices. you can probably apply that to other asset classes as well. shery: that is exactly what our next guest is saying. he suggests that investors should continue taking equity profits and head into 2020 little lighter. the founder of s gmc capital is

with us. how challenging will the first quarter be? >> things need to get worse before they do get better. the recent rally we have seen it was mostly on the bank of better than expected inflation numbers before global investors cheered that because inflation was and is coming down. it is not enough to sustain the rally we have seen? probably not. the focus is going to be in terms of the macro economic environment, especially of the consumption. with unemployment going higher and interest rates remaining high and being more restrictive, you will see less demand, less consumption. you are likely to see the macroeconomic environment going down quite drastically into the first quarter of next year. that is of course going to be a negative calculus for equity and valuations. we don't expect a huge crash either, but from these levels, further slowdown and further faults are likely.

it is better to take the profits of the last two months, start the year a little bit lighter, and keep your liquidity ready to use in next year. the mac do you also agree with the hawkishness? we had an earlier guest saying that is just positioning, that is not necessarily the intent. that is just signaling to markets that have already rallied, but they will actually need to cut giving the data. >> that is what the market is thinking as well. if you look at expectations, they are seeing two to three cuts in the second half of next year if we are talking about the fed. we think that the fed cannot make a mistake once again because they are risking their image too much. they were behind the curve all of last year and probably the first half of this year. they cannot risk again being behind the curve. they will continue talking about interest rates and the fact that they will keep interest rates higher for longer. we expect that will be the case. maybe you will get one cut may

be at the end of next year, but we don't see three cuts next year. that is not going to be compatible with the narrative and once again, they will not want to risk their image knowing the fiasco of last year. the mac subordinating paper is where you are seeing the most interesting -- >> big liars on a fixed income and lateral in october, we had well them on air for quite some time. they have come down quite a lot, credit spreads have tightened quite a bit. interest rates might actually be a little too low. in terms of the corporate bond space, it continues to be attractive. you seem -- see quite a bit of tightening. it has had a positive move, there is still some juice there. for those investors which can stomach a little bit of a higher risk in their portfolios, looking at subordinating paper, from a very solid and reputable

companies -- you still do get very attractive absolutely yields, that is an area that we have been looking to add in the first quarter of next year. haidi: do you think it will rebound next year? oh we have gone it now below 350. that is probably a little bit too low. because of the entrenched leaf that already in the second half of next year we will start seeing cuts -- we think it has to edge a little bit higher, both tactically and strategically create 350 seems low to us. we need to get back to the 375 kind of handle. probably with a cup of 4%, it will be difficult to get the bank about four. 350 seems a little low. it seems like the market is not really pricing in the fact that the fed will want to keep rates higher. the mac what opportunities are

you seeing out of the china reopening and potentially the volatility that we are also watching for? >> in terms of valuation, china remains extremely attractive. of course, we have seen a little bit of everything that can happen. the important thing is that if you look globally, china is very slow -- small. global investors are very under invested to china. you are starting to see a bit about narrative over the last few weeks with some of the big names starting to come out more positive. asked that gets entrenched and as global investors get back into that, you are going to see a move upward. in terms of a relative underperformance, if you compare it to the u.s. names, there is still a lot of catch up to do. yes, it has had a positive few weeks, but there is still potentially a lot of further outside movement. global investors should look at that space, should take advantage of that. of course, not putting too much

of their portfolios in their, but a little bit of interest is there. >> great to have you with us. let's -- this geopolitically sensitive space in the asia tech. haidi: -- >> washington blacklisting more chinese companies, even though we do see that risk of delisting for now. chinese companies in the u.s. could have been kicked off of american exchanges. the nasdaq dropped more than 3% with its general tone of risk aversion coming through and with investors still assessing the outlook for global central bank tightening. we are actually seeing under 10 minutes into the session for dark -- for japan, the it tech stocks. southbank down around 4%. let's take a lookout another

sector that tend to perform a little better in a rising rates environment. we are having a look at some of the big bank stocks in japan and korea. a little more of a mixed picture here today, but they can be beneficiary, they can also start to suffer when we start to see the overall health of the economy deteriorating. shery: let's get to vonnie quinn. vonnie: the united states added more than 30 chinese companies to a trade blacklist that prevents them buying certain components. the firms include young's in memory tech on the the -- they will be on the entity list. about 200 chinese companies no longer face an immediate threat of being booted off american stock exchanges. the u.s. company accounting oversight board says its inspectors have been able to sufficiently review all the documents from firms. the announcement came after

recent -- in hong kong. a major breakthrough in the long-running dispute. hong kong's chief executive says it is highly possible the city's border will reopen in 2023. john lee says that he is hoping for a step-by-step restoration of exchanges with neighboring shenzhen. he announced an initial fivefold increase in the quarantine hotel room florida -- quota. japan will describe china as an unprecedented strategic challenge in a new national security policy. the defense overhaul is expected to get cabinet approval on friday. it includes approval of a so-called counterstrike capability that will include martin's tomahawk missiles. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries.

indymac we will be talking to morgan stanley the raised expectations of china's growth next year. what they are looking for out of the key economic work conference this week as well. coming up next, announcements from central bank has been amended these waves of rate hikes and warnings are more tightening and pain to come. this is bloomberg. ♪

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>> for the next six months, just as in the last months, inflation

will drop like a stone. it will be below 2% by july. and it will probably be in deflation territory by september. haidi: professor of economics at dartmouth college speaking to us on daybreak earlier today. two more 50 basis point rate hikes, this, of course, a battle to contain inflation rages on. our editor kathy is here with the latest. we are expecting the downshift, where we expecting the hawkishness? kathy: a lot of people raise that question. if you are downshifting, maybe that would signal a little bit less aggressive. you want to be a little more cautious and see how things are going before you continue raising rates. it seems to me the message from the central bankers is, we are talking about the bank of england and the ecb, that yes, we can slow down a bit. we feel we have gotten to a certain point in our amount of stimulus, and amount of tightening we have done.

we have more to do. look at where the inflation rate is. they think it will start falling. they think this could happen over time. the risks according to andrew bailey, the governor of the bank of england, still remain to the upside. that is why they did another 50 basis point rate hike to three and half percent. 3.5%. we move on to the european central bank, again, a 50 basis point rate hike, downshifting from 75. christine, i love when she said, don't mistake this from a pivot. they are up to 2% now. they are expecting to get that up. they will start of the quantitative tightening, running down the balance sheets in february. steen also says there is more rates to come. they also have a very high inflation rate and they need to bring it down.

this is the way they see doing it. it was interesting talking to dani, a former member of the bank of england's policy board. he thinks people have it all wrong, they don't know that we are responding to temporary shocks with the supply and labor markets, those will cause inflation to come down rapidly. there are a lot of people who think that, and the markets are wondering about this. the prevailing view seems to be, you got to hit it, hit it hard, if you overdo it, you can always turn around and start cutting rate. >> focusing on the big three this week, central banks on the move in asia as well read kathy: they move in much smaller increments. they did another 12 and half -- 12.5 basis point move up to 1.7 5% yesterday, late yesterday. they are signaling that they could do more. people are saying probably not.

they are getting to the point where the economy is starting to suffer a bit, exports are being hit. they have a number of reasons to maybe think this will be the final hike and this is something -- also expected as inflation falls. of course, vsp. they did the 50 basis points to five and half and signaled that they, too, could be doing -- they didn't say how many more. about 50 or 75. a low probability according to felipe medalla you. this terminal rate is going to be where they are now. he is usually pretty frank about where they are going. it sounds like we can expect more action from them. broadly speaking, if you go on the emerging markets, maybe they are at the point where they don't have to do so much especially if the fed gets to the point where they slowdown. still at that point where they have to do just a little more as this year comes to the close. the mac haidi: of course

mentioned, the central bank philippines central bank early a medulla will be joining us. i will be taking place at 9:40 a.m. hong kong time. the u.s. is adding more chinese companies to a trade blacklist that prevents them from buying american components. what specific action are we seeing from the u.s. government now? stephen: this is in addition to all the other restrictions that the united states has announced basically making it very difficult for chinese chipmaking facilities in china to get u.s. technology to make advanced chips. this entities list has now 36 new additions, 36 new companies added to the list that essentially is part of washington's efforts to restrict

china's ability to access u.s. advanced technology in chips, as well as ai technologies. essentially what it does is it makes it a requirement for anyone who sells u.s. technology to these chinese companies to get a license from washington first, which is extremely difficult to get. there are 36 companies that have been added to the list, and it adds to the growing angst between china and the united states. i singled out about three companies to highlight. in particular, because they are rising stars within china that could be significantly adversely affected by this move. one is a young's in memory technologies. it has been making rapid advances in flat steps. have been in talks with apple, which of course, makes nearly all of its iphones in china. also shanghai micro, sm ee, leading lithography equipment maker. a small arrival to the much

bigger dutch layer, asml. then there is ic manufacturing. p x w, an integrated circuit maker. it is run by a former executive and the officials or people close to the situation say the u.s. had found they had been building their facilities right next door or very close to the huawei headquarters just across the border from here. they were potentially going to be supplying the integrated circuits to huawei which is heavily sanctioned by the united states. shery: assessing the audit papers of many chinese companies that face possible delisting, so perhaps a little bit of relief or beijing? stephen: quite a bit, as well as those investors who had bought and held on to those adrs listed. like alibaba, all three of these companies surged on this news only to fall back by the close

as just about every benchmark did fall on central-bank comments. essentially, they did surge on the news because it removes a major hurdle or a major pressure, if you will, that was potentially going to lead to delisting of these companies if they did not open up the audit books to u.s. inspectors. those inspectors from the united states, the pca ob they came to hong kong and they are saying that they have satisfactorily reviewed these documents. they are not ending the investigation, they will continue and ramp it up in 2020 that's what the charitable bloomberg news. >> our work is just beginning, this is the beginning, not the end. we already are making plans to have teams on the ground in 2023 in order to continue our regular inspections there. if china denies our access, if

there are any impediments they put in our way, we will not hesitate to make a determination immediately next year. stephen: erika williams was saying they will pick up the efforts if china does decide to pull back on giving access to those documents, those audit documents. essentially, chinese companies in hong kong based companies where last outliers of the sec probe around the world to get companies that are listed in the united states to open up the audits as required. for more than decades, they kind of turned a blind eye to these companies, no longer. shery: so many stories to keep track of. u.s. and china tensions, unless central-bank decisions read go to dayb on your terminal. you can get a roundup of all those stories that you need to know. this is bloomberg. ♪

haidi: let's check in on futures in europe after what was a difficult session. europe slumping the most since may on the back about hawkish ecb. really doubling down on rate hikes just as we see the recession starting. the warning that aggressive rate hikes are far from over really raising the stakes for the broader year region. we are seeing futures pretty flat for the moment, you see that decline of just about 3% there. german dax futures also looking pretty limp at this point. after we really did see just about a 3% decline for the stocks europe 600, as well as that reaction to the inflation forecast for the next two years as well. all of this going back on to the

hawkish dashes from the fed. ftse 100 futures also down by just about 1% after we had a more -- a bank of england voting swing, suggesting we could see smaller 2023 rate hikes read wasn't really something that investors are taking very much comfort and at this point. shery: here is a quick check of the latest business flash headlines. citigroup will wind down its consumer banking business in china, affecting 1200 employees there. the exit will include products such as insurance, loans, and investments. they announced plans in april last year to exit consumer franchises in 14 markets around the world. holes made iphone assembler is easing most anti-covid restrictions on its factory. the company says it is ending the system which restricted employees daily movements between the dormitories and the factory. the facility had become a

flashpoint in and china's efforts at containing infections as tough restrictions start worker unrest. japan's nikkei news it says sony is considering a new semiconductor plant. they say the japanese electronic giant plans to invest several hundred billion yen. it says the new plan would produce smartphones from 2025. ceo luca demeo as director as it seeks to reshape its partnership with nissan. he joined the french carmaker two years ago, and has spent months reviving relations. another proponent of resetting the partnership, ament was reappointed for a further four-year term. haidi: it has been a risk off week. the major central-bank decisions

really weighing on sentiment, of course a couple here in asia as well. takei 225 is down. a little bit less weakness in south korean equities. australian shares also sitting low by about 0.7%. s&p at its lowest level in more than a month. we are also contending with a stronger dollar. investors fleeing to haven assets. to that end, you see agents currency index is seeing its biggest rat in 20 months. as the direction of the dollar trade it really just turned. still ahead, binance has slowed. we will get an update next. this is bloomberg. ♪

haidi: we are getting the latest knowing oil domestic exports number out of singapore when it comes to the november reading, falling 9.2% a month on month, much worse than a decline of 2%. cpi electronics, falling 22.2% year on year. this tends to be a volatile series when it comes to pharmaceuticals and electronics demand. none oil exports on a year on your basis, 14.6 percent is the decline we are seeing, much worse than expectations of just a decline of 6.5%. we are seeing around the board -- across the board, i should say, a pretty major miss on expectations. exports to china down by over 30%, really eight -- illustrating the weakness in demand for china as well as how

exposed the singapore economy is to external headwinds and demand we as we are seeing. and we will be taking a look at other elements of that, but certainly that demise when it comes to the china export side is really one that jumps out at the moment. shery: sort of a similar picture when we are seeing in japan, pmi numbers, the composite has been fluctuating depending on external demand and domestic demand. right now 50, we are at expansion territory coming from contraction in the previous month. these are preliminary numbers for december. what is surprising is manufacturing hesitating contraction territory for a second month after being in expansion territory for almost two years. you can see downside pressure when it comes to external demand there. pmi services has actually strengthened 251.7, so you can

see the reopening in japan is also starting to be felt across services. lets see how brother markets are performing now. annabelle: we have 30 minutes into the session for japan and korea, and what is interesting is the difference we are seeing and how it investors in different asset classes are reacting to the central bank targeting more warnings around recession and pain i had because we are seeing bond yields looking muted this morning, but in terms of the equity space, the nikkei of 1.5% and other markets in the red, asx 200 siding by the most in six weeks and on track for a second weekly loss. korean won of .6 of 1%. we are seeing a different reaction, and that is playing out when you look at this terminal chart, which tracks etf's which focus on u.s. stocks in u.s. treasuries.

we are starting to see divergence coming, which has been interesting given there is been so much focus on how the 60-40 a portfolio has not been performing this year. it investors and equities are starting to reassess the outlook around what bad economic news means the fed. it could mean they need to end their tightening cycle, bad news is bad news on its own as well. haidi: plenty of bad news across crypto, it may be a lit -- a little bit of good news or less bad news. data showing customer outflows from binance's crypto trading partner have not slowed. the ceo is downplaying concerns about a recent wave of user redemptions. our editor joins us now. what is he trying to do or say to reassure customers at restore confidence, which has been badly

beaten down across the sector? >> sizi has gone into public forums and talking a lot about how binance has operated, trying to distance himself from the problems of ftx, which imploded last month and the drama continuing. he is saying customer assets are backed 121 -- 1-1 and you would be able to withdraw at any time, so he is trying to downplay concerns and calm consumers. shery: we are seeing some new measures coming from different countries, especially japan when it comes to crypto and perhaps more taxation on this. what do we know? >> well, actually, this is an interesting one. japan's ruling party has come up with a measure that would

actually ease taxes on crypto, so it is showing some countries despite issues with ftx and bankruptcies and other things that have happened this year, some countries are trying to do more and go forward with the space. the proposal would exempt companies for paying levees on paper gains from some tokens, so it would make it easier to do some crypto activities. shery: our cross asset team editor there. let's turn to vonnie quinn. vonnie: central banks of the philippines and taiwan have raised their benchmark interest rates as they fight record high inflation. the philippines hike rates by half-point and signal more action to come up with inflation being seen above target next year. i want to raise rates by a more modest 2.5 basis points with customers is expected reason 2023. mexico's central bank has slowed the pace of interest rate increases, raising its key rate by .5 of one point.

it will continue hiking barring cotton 2023. the bank's decision comes after inflation in latin america ought to be a second biggest economy eased typically last month. policymakers have matched the fed's hold for six straight decisions. hong kong is named julia leung the first market regulator. the government appointed her for a three-year term as head of the security and futures commission starting the first week of january. she has worked at most two decades of local government and hong kong monetary authority and as a journalist for 10 years. donald trump is entering the digital assets phase ahead of his 2024 white house run. he has nft trading cards including pictures of him with super hero like powers. trump is being paid under license. the market for nft's has fallen sharply in recent months along with the rest of the crypto universe.

global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am vonnie quinn. this is bloomberg. haidi: goldman sachs as commodities will again be the best performing class next year. the bank's global head of commodities research told us smart investors should expect over 40% returns. >> go back to our call for a super cycle back in october 2020, you have 42% returns in 2021. so far we are headed to 23%, 24% returns in 2022, so this is a continuation of the strong returns we have been seeing over the last several years. when we think about what a super cycle really is, it is not this big upward trend in prices. it is a sequence of spikes. commodity prices perform an economic function, they have to

rebalance supply and demand, bring them back in line when they get out of line as they did this year. markets are rebalance right now because china is being locked down, so demand came back down on top of supply, but we have not been investing in supply. supply is stagnant, so i have to ask what happens when china, the largest commodity consumer in the world, the largest oil importer in the world begins to rebound significantly in the first part of next year? it will tighten all of these markets tremendously and put upward pressure on prices, and i think the key point is you basically have the largest commodity consumer in the world essentially hibernating over the course of the last year, and that has been hiding a lot of underinvestment. underinvestment, weak demand today but sequential growth in 2023 that begins to tighten

markets. inventories have been exhausted. >> let's talk about the china narrative. we are seeing a huge 180, a huge u-turn by china, they are reopening, but what comes with that is likely to be a huge pickup in cases. the numbers look pretty bad. how should we be thinking about the china reopening therefore? will it be similar to the one we experienced, stop-start, and how does that work? how does that impact commodity price? >> oil is a testament to it. it will be a rough, bumpy start at the beginning, but when oil is doing this, you will have your fits and starts and stops, but when you take markets like oil equities or copper, they are more forward-looking. they are looking into march, april of next year. as a result they do not have

that same kind of noise. shery: coming up, morgan stanley has raised its growth forecast for china. robin xing joins us next. this is bloomberg. ♪

haidi: investors are awaiting

news from a chinese conference. it was scheduled on thursday after early reports they were considering postponing it due to the surge of covid cases across the capital. morgan stanley as raised its view on john's 2023 gdp growth to 5.4%. joining us now is the chief china economist, to have you with us. look at this chart that shows what we are seeing when it comes to expectations for economic growth next year. we know the official setting could be around 5%. we will probably no more out of the work conference and more again in the early part of next year. look at domestic activity indicators that were terrible, worse then low expectations. does that tell us it will take longer for the rebound to pass through to the economy? >> no, i think what we are seeing now -- the broad-based weakness is the dark before the

dawn. a short-lived bump before a strong recovery. the strong policies stimulus are supercharging the economy. after two or three months, a temporary bump in consumption we expect a stronger recovery starting from the second quarter of next year. haidi: where do you see the focus of that recovery? because we know that there are still structural problems with the economy free covid -- pre-covid? do you see this as being an uneven recovery that will be stronger in some parts than others? >> i think all in all you have the pivots to growth forecast since the party congress. you have the housing rescue plan , now the central economic work

conference setting a tone, shifting the local government back toward growth, and most importantly is the reopening. i know many investors are asking what can china do to stimulate the economy, consumption, but reopening itself is there biggest policy lever. reopening is the equivalent to you have one million jobs and a $1 trillion relief plan, because covid lockdowns have caused around one million job losses. chinese mobility will normalize over the next two or three months. there has been so much excess saving just from sitting there, but because of the lockdowns there is no were to spend them. the excess savings is about $1 trillion, and that is the pent-up demand to be unleashed with reopening.

the reopening itself was part of high consumption growth, probably close to 8%. shery: how much of all of that positive news has already been priced into the markets, and do we still have room for upside? >> yeah, i think we have to see this pivot to growth forecast. it is not just about reopening. it is about housing resolutions entering a stable stage, helping the market to stabilize and on the tax front, you heard the news from your reporters on adr, big tech firms getting an injection, and finally if you can change the local government mentality from covid and crackdown to progrowth, that will unleash the animal spirit. it will be the first time in

three years to focus on the economy. i think there is further upside risk to the economy and the market. shery: does that translate to the chinese yuan? we might get a stronger dollar if the fed continues to hike and the pboc is going in a completely different direction. >> if you look at 2023, it is very different from this year. this year, the chinese economy underperformed. there were a lot of lockdowns, the u.s. was relatively resilient, but next year we are expecting the fed to prevent. to stop liking after january, and inflation is coming down. the u.s. economy will slow, while in china it is the beginning of a strong recovery after almost two or three years due to covid constraints and housing issues. the economic policy will support the strength of the renminbi. shery: good to have you with us.

coming up next, foreign investors have slashed their holdings of china's onshore bonds for a 10th straight month. we have the market open in hong kong and the mainland next. this is bloomberg. ♪

shery: a ceo says european banks

should exercise financial prudence while assessing the full impact of inflation and the energy crisis. we spoke exclusively to him on the sidelines of the international economic forum of the americas. >> the financial sector is in good shape, able to finance the economy. yes, the central banks want to fight against inflation, it makes sense. but at this stage we are seeing signs of slowdown of the pace of inflation. i am sure central banks will carry on money to caliber rightly there monetary policy. what is being done is needed. again, i do not think we are facing the same kind of scenario. external shocks can create a problem, but in the absence of an external shock, we have in

mind i slowdown we can resolve. >> what sort of schlock -- shock would you expect? >> a geopolitical crisis, the evolution of the conflict in ukraine. the way that we will fare the wi nter. hopefully temperatures are ok, which will mean gas reserves being preserved as much as possible will help for the next 12 months in terms of gas prices. there are many parameters which could go wrong and inflation. wage evolution also. at this stage i also see companies which are trying to avoid entering into a cycle where wages are increasing too much, so they want to preserve the future. every month we will see how it goes. >> what about corporate europe? do they have the strength to sustain the wage pressure, cost

pressures, but at the same time ecb, which continues to hike, interest rates go higher, the cost of capital goes higher. can corporate europe withstand that? >> overall, yes. there will be differences. some companies will not make it depending upon their leverage, their competitive position but so far but i'm seeing our companies on one end beginning to adapt, look at the evolution of electricity and gas. they are making progress to reduce the usage of energy, they improve their efficiency. most of them also i think have been able to pass in their prices the increase of the cost of energy wages, so again, that is where it is very important in my mind to see whether we are entering a cycle of normal or progressive inflation and i think it should be fine, or in

inflation stays, and then it might be more difficult. because at some point the consumer will not be able to absorb price increases. the jury is out. the coming months will be critical, but there is a path for something which is manageable i think. haidi: the societe general ceo there. global exodus has/there chinese bonds. what has been behind the selloff by international investors, and does the change in covid zero, the shift we see in markets potentially turn this around? >> yes, as you said, offshore investors have been selling chinese bonds, trimming their holdings for 10 consecutive months. the trend started back in february, and that was obviously

first triggered by the u.s. fed rate hike, which push up the u.s. bond yield higher, and currently the u.s. yield is far above that of china, and that is making china's bonds less appealing to investors, and also the dollar strength was another reason for the selloff. and more recently, as you mentioned, that was because of china's pivot away from its covid zero policy, the abrupt u-turn from the policy, and that as brightens growth out of the economy and increased interest in risk assets like stocks. there are signs investors have been diverting cash out of the bond market into stocks. having said that, for investors, regular holdings remain limited compared to what is held by domestic investors, which accounts for more than 96%, 97%

of holdings. any impact will be relatively limited. shery: debt payment obligations? any coming up? what are we seeing incorporate bond markets? >> redemption pressure is piling up. the pressure is there despite all efforts by chinese authorities to sooth market concerns. the fundamentals are key. the fundamentals remain very weak. if you are member yesterday the national stats of bureau announced economic data, including the weakening of property sales, which are still very weak, weaker compared to the previous month. that shows the fundamentals of the sector remain a concern, and also despite the recent shock rally in property bonds and stocks. the pressure is still heavy. there is no guarantee that

momentum will continue. shery: charlie zhu there with the latest on chinese bond markets. some stocks we're are watching ahead of the open, sunac, cifi holdings. broad swings after the u.s. stock exchange debut. we are keeping an eye on the majority owner of the luxury brand. haidi: a central bank governor of the philippines joins us to talk to its rate best. do not miss that exclusive conversation taking place at 9:40 in hong kong. that is it for "bloomberg daybreak: asia." what has been such a massive week for markets, we will be live in hong kong for the start of trading at the china open. this is bloomberg. ♪

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