>> welcome to daybreak: asia.

the top stories this hour, concern over slowing demand. the moves toward pretty tight -- preflight testing and sam bankman-fried will face trial in october after pleading not guilty to fraud. we are talking about the s&p 500. apple actually falling off that with this market value falling

beneath that level the last time we had microsoft at saudi aramco falling from that club last year. we had oil prices plunge the most since november. all of this after we continue to see this concerns. really easing some concerns that the energy crisis will continue in the winter. there is so much uncertainty. a lot of that is playing into these markets. look at australia trading. reversing some pretty steep losses in the first trading day.

chicago nikkei futures reversing some of that early positivity. japanese equity markets are coming back online after the holiday. we have seen a picture of resilience when it comes to currency trading. lots of focus when it comes to this. write a bit of volatility. there does seem to be a consensus that the outlook for the chinese economy even if it is going to be a bumpy ride has improved compared to what was a horrible year last year. it looks like this year it will be about the euro dominated the list of winners. when we get these concerns, is

there an upside to the greenback? >> certainly. that could play out. i think the narrative is about the relativity between central banks. we have a very good macro view explaining what to -- is planning what to expect ahead. you have to look at the federal reserve and see what they were talking about. very few people would have expected these for the federal reserve. things started to change a bit as the outlook central bank started to look up.

the federal reserve probably still has a little bit more to do. nobody we want to take the risk that they did not do enough to combat inflation. the european bank will be there trying to force it down. they will probably be more than the fed. then you have the bank of japan which is the new one in the frame as it were. they changed the yield curve and now they have a new central bank governor in a few months time and people are speculating there may be a complete change in monetary policy as well. that will all work in favor of the yen.

you have europe and japan right front and center in the g10 picture. the pound me benefit. you would expect most of the g10 block to do reasonably well. place what does all of this divergence in monetary policy mean for what the boj will do? especially when it comes to the monetary space? >> it will not be easy. especially in the first or second quarter of the year. you are starting with pretty tight monetary policy. likely to get even more tight as the next few months progress.

for companies to beat forecasts will be pretty hard. then you have a lot of slow downs. that will not be great for company earnings. this is all stacked against equities. it will be tough to make much progress. only toward the middle of the year will people think the fed has done enough for they can think about lowering interest rates. or we can see signs that the u.s. consumer has been a lot less resilient than expected. people would defensively move toward bonds. that is why even in germany, we already have an inverted curve.

>> recession is not the biggest risk facing the federal reserve. kathleen hays is here. the fear of recession and of what the fed might do really playing into the markets. bill dudley says that if the fed does its job, there will be a recession. markets are certainly exhorting that more and more all the time. may be the good news is that the fed does have the tools to deal with it. if we have a recession, it will be a fed reduced recession. >> bill dudley has been there and done that, dealing with fed

actions to create one, of set one. the atlanta fed gdp tracker for the fourth quarter now, the number is already up to 3.9% on an annual basis. nearly 4% going into the first part of the year. what will that mean for the fed? maybe neutral rates somewhere around 5%, four and three quarters. we will see goods inflation come down. the prices have come down. as people had to tolerate transitory goods, they will have to realize it is transitory on the way down.

>> one else for the focused on for this year? >> we will get a look on this friday with the jobs report. wages, hourly earnings. dudley says we have to see them getting down to three and a quarter percent. if you look at this terminal chart, you can see the ways tracker is up to 6.4% as dr. while average hourly earnings from the last report, that is from the november report, that is 5%, it has been for a while. it has ticked up. he is looking at financial conditions. what if markets start rallying again? even with political pressure is growing, if we see unemployment rising, if we see the fed doing what it has to do according to current and former fed officials, you will hear pressure from congress on both

sides of the aisle. bill dudley is in the believer camp. as many have told us on the show , once rates get up, they will probably have to stay up until the end of 2023. it will be a big test for the fed. >> to vonnie quinn in new york. >> the european union moving toward a requirement for masks and preflight covid testing. the european commission spokesman said china was a corresponding measures that place covid restrictions on its travelers for what it is: political goals. china's finance minister has reiterated plans to expand fiscal spending while pledging to push more on systemic risks. setting risks including a contraction in demand and supply disruptions. china needs to use proceeds for

government bonds to reduce investment. sam bankman-fried has pled not guilty to criminal charges and will face trial in october. he is accused of illegally diverting massive sums of money to make lavish real estate purchases and risky trades. the judge also agreed to keep two people who will help secure his $250 million bill package. kevin mccarthy has fallen short of winning the speakership after three rounds of voting. the chamber can't conduct any other business until that is done. global news, 24 hours a day on air and on bloomberg quicktake. i am vonnie quinn, this is bloomberg.

>> still ahead, we will speak with the ecuadorian central bank chief. how that is affecting the developing world and have ecuador's economy is rebounding. why she expects a volatile time for marcus before the fed and rba start cutting rates later this year. this is bloomberg. ♪

>> there is still a lot of uncertainty. i think we are in the same spot where we see equities down in the near term. possibly recovering toward the end of the year. i think the key challenge is risk premium. markets always fall faster and recover faster. so much is down to timing. how do you see the trajectory when it comes to market recovery this year? it is probably become --

probably because it is forward-looking. it is forward-looking between 12 and 18 months. we are now -- the equity market is think what a lot of recessionary probability. we are going to have quit a lot of corporate downgrade in terms of earnings. then we will have -- from here on, we do think expectations will get more realistic simply because consumers are going to tighten their belts and corporate is going to tighten the spending and analysts will be much more realistic. we do see a stronger start into the year and with the earnings really taken place earlier this year. >> how do you gauge the volatility?

when does that economic recovery really take place? >> this reopening will continue however the trajectory will never be smooth. particularly when it comes to china. they have been in lockdown for a very long time. the news below seems like this restriction on mobility may have something to do with that. we are going to see weaker data. we would see weaker data than is meant to because of chinese new year and consumers becoming far more cautious than initially expected because of the infection. -- inflection.

the data point will be week. we should see that transfer to weaker markets and weaker commodity prices. commodity prices have done incredibly well. >> what are the implications of what is happening in china for markets and economies that are heavily dependent on china? >> we think it prevents -- presents a. of challenge in earnings. -- a period of challenge in earnings. people in china are locking themselves and how so they don't

get reinfected. some of the data suggests the covid spread has been quiet severe. what that means is economic activity will be incredibly week. that affects the economy such as australia that are dependent on demands. they will struggle somewhat for the next quarter or so. >> tell us about the earnings outlook. last year we had so much optimism and upside for the energy sector. could we see that in 2023 as well? >> we think that the energy sector will get tougher. as a global economy going into a recessionary economy such as the u.s. and others -- we could see a technical recession. that never bows lover while prices.

we have passed some of the high demand time for oil. that is going to release some of the upward pressure on the oil as well. china's recovery is going to take time. all of that combined beans while prices are very hard to see. we are still at the current price. it is hard to see them which level that they touched last year. >> what about economies that are getting closer to overcoming the inflation of the rba? are we seeing the last because of what will be good consumer spending before we get to see the impact of higher rates? >> i think australia is somewhat fortunate in that way. you are absolutely right.

we are still cycling that easy covid lockdown. this christmas was the first christmas in three years that australia did not have a lockdown. we will see pretty gorgeous retail data. consumer held up ok. retailers are holding. overall, consumer spending was all right. we will see the top line be ok. we will see that margin french. our economy is doing ok. we will see that in the next six months.

particularly when the higher rates start to hit. >> happy new year. coming up, the ftx founder, sam bankman-fried set to face trial in october. the latest on his legal fight, next. this is bloomberg. ♪

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>> sam bankman-fried has led not guilty to criminal charges and he has had to face trial in october. we have this update from the courthouse in manhattan. >> sam bankman-fried appeared at the southern district of new york at a manhattan court. he pled not guilty to a criminal

counts that included wire fraud. sam bankman-fried has been accused of charges. they also sought to modify his bail to include restrictions when it comes to any potential access of alameda wallace. this is of immense end for free has tweeted about. he said he is not done but it is something the prosecutors are separately looking into and we will have more details in the coming days. we will have prosecutors put forward evidence as it pertains to the charges. they will seek to hear motions from sam bankman-fried's attorneys. we will hear much more in the coming weeks. we will be looking forward to any changes as it pertains to a speedy trial.

>> a quick check of the latest business flash headlines. foxconn has brought the world's largest -- the official reports that foxconn's plant is operating with roughly 200 had -- 200,000 staff. they have secured enough workers despite a covered resurgence and recent staff upheaval. apples latest slide has pushed its market viability below the trillion dollars. apple shares closed at the lowest in june of 2021 as concern grows. hyundai missed its sales targets for the last year. all as of the session fees continue to strain the car industry. 2022 sales rose just four .1%.

hyundai and ksc there combined global sales jumping nearly 10% this year. coming up -- we are hearing that the eu is the latest to move toward requiring preflight testing. this is bloomberg. ♪

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adopted by some countries targeting china lack scientific basis. we are firmly opposed to attempts to manipulate covid-19 measures for political reasons. >> that was the spokesperson for china's ministry of foreign affairs. the eu is moving to record -- t oward a requirement for preflight testing and masks. talk to us about, perhaps surprisingly, we hadn't had a response from beijing on these numerous travel restrictions from 10 countries. this reaction that we've seen shows that covid remains a politically sensitive topic. >> certainly, it does, haidi. the government here in beijing, needing to show it is defending china's prestige, the rights of chinese citizens to travel

abroad. hitting back, saying that they will retaliate against measures they feel are excessive or unacceptable, against measures they believe are being put in place purely for political reasons. with the wave of infections that we've had here, crowds in hospitals, mounting deaths, the government does need to take some action, to show that it's helping the chinese citizenship deal with everything that's happening around them. >> how much does the chinese public care about all these diplomatic spats? at home, you are seeing bodies piling up. tell us a little bit about how bad the situation is. >> the absolute number of deaths is spiking.

the weight to get a spot at a crematorium is -- the wait to get a spot at a crematorium is simply unbelievable, up to five days, the body at home, before the crematorium or the funeral home can come and get the body. we have reporting that there are long lines, people showing up at 3:00 a.m. for a spot at a crematorium, to get a number for a spot at a crematorium. a great deal, unfortunately, of activity at funeral homes. we have not seen that in the official data. that's partly why there's been this concern in the u.s. and europe and other parts of the world. >> there's a sentiment being shared on social media. we couldn't afford to live under lockdown, and now we can't afford to die. just so tragic. i do wonder, the government's handling of covid zero and now the handling of with one fell

swoop, the dramatic opening up -- is that going to have ramifications on the leadership? >> i think it depends. so far, as we speak, the absolute number of people who are dying is large, but, as a percentage of the population, it is relatively small. the vast number of people who had covid here in beijing and other parts of china, they have had relatively light cases. most people recover very quickly. we've started to see in the economic activity data, that places like where the iphone factory is, people are going back to work. the economy is coming back. if mounting numbers of deaths are combined with a really robust economic rebound, where people see a brighter future, better job prospects, better business prospects, then i think those things might balance out. it might just see the country, the government muddle through the next months. >> john liu, with the latest.

we will have more, especially on the economy and when we could see a rebound. we will have an economist with us from credit agricole. a weakness has been exposed in the armor of chinese president xi jinping, said rudd. the fall out for china's political leadership. >> the bottom line, in terms of xi jinping, it is as follows. he is numeros numero uno, duo, y in the chinese political system. if you want any evidence of that, you look at the 20th party congress, where anyone who did not come from his group within the party was given an exit pass. instead, we've had four people

elevated to the politburo who are virtually lifelong career supporters of xi jinping. his authority is great. however, this policy u-turn on zero covid, which was executed on december 7, will raise a whole series of questions in chinese political circles about the fallibility of xi jinping's political judgments. here -- therefore, that does create a dent in the armor for the long-term. >> i look at this, kevin rudd, turning into a pumpkin in march, part of the issue. we have an allied response in europe. we have an understanding of how to respond to cutin -- putin. i don't see a response against china. doesn't exist? -- does it exist? >> it exists, but no one is happy about it politically. every ally understands you don't

want china to fail. every ally understands they are not happy with maximum xi, as kevin and i describe it. every ally understands we need to do business with china, even though we are concerned about what our present level of interdependence and coupling implies. we know we can't suddenly rip it up. that underlying reality, which does align the united states with the entire g7, is very different from the political statements that need to be made by various leaders, because no one is happy with china. scoring points off of china is very easy to do. in between those two things, you have to find a policy, how are you going to hit the chinese in ways that are essential to your national security without upsetting the entire relationship? tom: this is so important, a question he will answer now, not in april or may. kevin, i look at the united states and the republican and democratic coalition against china.

how should the united states advocate to the broader pacific rim, if we are all on the same page in our distrust of beijing? kevin: let's look at it on these terms. i will challenge your premise to say there's not solidarity between u.s. allies in asia, to with australi-- to wit, australia, japan, and partners such as india. let's call it the broad thrust of administration china strategy. they have done a good job in herding the cats both in asia and, frankly, in europe so far. however, for the future, what is the missing element in the u.s. grand strategy? it's called the economy stupid. and that is you cannot continue to assume that they will -- there will be collective solidarity on security questions, but on the economy,

the united states, happy to throw some of its allies under a bus. for those reasons, the united states congress needs to embrace a different strategy, which opens its markets more to its allies in asia and in europe, despite the overriding protectionist sentiment of the u.s. congress and political class, more generally. >> that was kevin rudd, ian bremmer, speaking with tom keene. let's get you to vonnie quinn with the first word headlines. vonnie: a former new york fed president says an economic recession is on the cards. he sees a quote -- slow down as likely. he told us the writ -- recession won't be severe, and he doesn't see a big risk of financial instability. >> what's different this time is, if we have a recession, it's going to be a fed-induced

recession. in the fed can -- and the fed can end the recession. vonnie: the white house says there's no reason for china to retaliate against the u.s. and other countries. the press secretary says the moves are justified on health grounds. beijing has said it will hit back at nations imposing new rules, dismissing the measures as political. a general manager of the philippines main airport says flight delays may continue on wednesday, as they reel from a technical glitch that stranded 65,000 passengers. operations of the airport are expected to fully normalized by thursday. the airlines expect to take weeks to clear the backlog caused by the power failure. american football player damar hamlin remains in critical condition after suffering cardiac arrest while playing for the bills against the cincinnati bengals. the incident is sparking new

criticism over player safety in the nfl. no decision has been made about whether the game will continue. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 150 countries -- i'm vonnie quinn. >> we will speak with guillermo avellan. we will discuss the outlook for the developing world. this is bloomberg. ♪

>> ecuador's economy rebounded in the third quarter of 2022 on the back of record customer spending. their could be more upside ahead, -- there could be more upside ahead, thanks to a new free-trade agreement with china. guillermo, it's good to have you with us. thank you for your time. i do wonder about your prospects for the whole of 2023, especially if we get to see a stronger dollar, given all of the central bank -- global central bank tightening in a dollarized economy, like yours. >> let me wish you a happy new year. let me start mentioning in 2021

the korean economy grew by 4.2%, exceeding all previous forecasts. in 2022, forecasts were reduced from 2.8% to 2.7% due to strikes that took place in june. ecuador's gdp grew by 3.2% in the third quarter of 2022, compared to the same period of 2021, reflecting a recovery in economic activities. it's also important to highlight that the household consumption reached a historic high of $11.8 billion in real terms, making it a fundamental component for a sustained recovery for the ecuadorian economy, as it represents more than 65% of our gdp. from the central bank perspective, we think this results -- these results indicate the ecuador economy is to -- returning to its growth

path, generating positive expectation for the fourth quarter of 2022 and exceeding the most recent annual forecast of 2.7% for 2022. therefore, we are expecting that ecuador's economy growth for 202 2 will exceed 3%. >> what about 2023? does it mean you will be revising back higher -- that higher, given how much better you are performing? and what about the stronger dollar? >> well, so far, we are planning to retain the 3.1%. we have been following the international situation that might affect ecuador. we are analyzing the impact of a stronger dollar. we are also following very closely the real exchange rate. so far, the benefit is ecuador

has a low inflation compared to other countries in the region. ecuador's inflation remains controlled mainly by our dollarized economy, and partly for subsidies on gas prices. in addition, the government approved an important type of reform for roughly 700 imported goods in 2021, and it also improved how tariffs are estimated in ecuador. these two relevant reforms also contributed to reduce inflationary pressures in our country. november 2022 reached 3.6%, which is significantly lower, compared to other countries. >> do you expect a stronger dollar to have a negative impact on your exports and therefore your economy? i want to get your take on perhaps the new free-trade agreement with china and what that could mean broadly for your economy. >> right.

free-trade agreements are very beneficial for -- >> i think we've lost you. the head of the central bank of ecuador. this is a very interesting conversation, because we are trying to see what global monetary tightening will mean for central banks in developing economies, especially significant in an economy like ecuador that is dollarized, that use the dollar as their official currency. especially at the time -- my question, what happens when you have a big fta with china. they just announced it today. what does that mean for the ecuadorian economy when you have such market access to an economy, the second biggest in the world, right? >> it was a really timely conversation. you were talking about this fta with china they just concluded after 10 months of negotiations, four rounds of talks. this could have a significant

account -- impact for both economies. china is in a precarious situation given the chaotic reopening and the need to get the trade flows back on track. let's bring back our guest, head of the central bank of ecuador. apologies for the technical hitch. great to have you back. shery was just asking, and i want to reiterate the question, what expectations of benefits do you have from this recently concluded fta with china? >> experts to show an increase of 25% between january and october of 2022, compared to 2021. by 22%, due to an increase in external sales of products such as -- there are other important industries, such as banana, cocoa, tuna, fish, coffee products that will benefit from this trade agreement with china. so, this will reduce the

dependency on oil exports and promote nonoil exports that are essential for economic growth of ecuador. it's great news. it was also communicated that they completed the negotiation with costa rica, regarding the free-trade agreement, which is also important trading partner for ecuador. it's a step in the right direction for ecuador's trade. >> what is your outlook when it comes to the energy front? we saw a slide going into the end of last year when it comes to exports of crude to the u.s. what is your reliance when it comes to the broader picture for energy exports this year? >> well, we export not only oil, but also energy to colombia. oil exports are doing quite well

during this year, not only because of prices. for instance, oil export has increased from 7.5 billion between january and october of 2021 to roughly 10 billion in oil exports during this year, for the first 10 months of 2022. this is an important recovery of our total exports of oil, basically because we have benefit from a higher prices. we also sell energy to colombia and other countries in the region. >> guillermo, we had high expectations for ecuador in the beginning of last year with the recovery, but then we had the protests in june. with this anxiety with higher global rates, how do you expect

that to play in the financial markets and eventually filter through the court dorian -- the ecuadorian economy? what is your outlook on that space? >> ecuador's risk premium does not reflect the significant progress of key macroeconomic indicators. the current level of the -- is a result of the uncertainty generated by different views between the presidency and the congress, as well as the strikes that took place as you mentioned in june, related to fuel subsidies. in fact, according to that sustainability analysis, there is a high probability that the debt to gdp ratio will decrease in the following years. more importantly, the current administration, as has been mentioned several times, this administration understands the relevance of how you ensure macroeconomic stability and

having access to international markets. >> so important, especially after the 2020 external debt restructuring. what was the takeaway from that experience, and what other new credit lines are you looking at? >> as you know, the central bank of ecuador is the custodian of dollarization. passed it in may 2021, it's a fiscal agent of the public resources. it ensures the availability of cash nationwide, as well as manage the central bank system, the central payment system, and the country's international reserves. so, the central bank of ecuador is responsible for protecting and strengthening this monetary system, therefore the central bank has to ensure access to

liquidity facilities. for instance, with the bank for international settlement, the federal reserve bank of new york. for instance, the bank for international settlement doubled the contingent for the central bank of ecuador from 420 million to 840 million. the federal reserve bank bank of new york recently granted us a f acility for exclusive central banking operations in periods of liquidity shortages. in the past year, the central bank of ecuador has restored its institutionalized strength and laid the foundations to consolidate -- while -- such as imf, the world bank, and the treasury department. >> guillermo, it was great to

chat with you. appreciate your time. the head of the central bank of ecuador. more to come here on "daybreak: asia." this is bloomberg. ♪

>> let's continue our series of 2023 outlooks. today we focus on growth in the asia-pacific. david ingles has the latest data projections. talk us through the dominant themes, trends, any particular

stand out economies for you. david: let me start off with the second question. economies that stand out, thailand, india, and vietnam. and thailand is expected to accelerate from last year. india and vietnam are expected to continue trend growth of more than 6%, 7%. in terms of the dominant trends we have seen, and this applies regionwide, including the economies i mentioned, a lot of the forecasters have basically seen rounds and revisions lower from june and july, so we are looking at slower growth going into this year. shery: david, thanks for that. the market opens in seoul and tokyo our next. this is bloomberg. ♪

shery: this is daybreak: asia. we are counting down to asia's major market opens. we are watching japan coming back from a holiday season and we could see challenges given that wall street fell in its first trading session of 2023. haidi: we are seeing the reopening after two days of holidays for the tokyo stock exchange but potentially the yen will be the biggest story for japan with a hawkish surprise to that late in the air from the bank of japan having the potential to create ripple effects across the region. we saw quite a bit of yen dominance and resilience in the face of a rising dollar. shery: we are continuing to watch what is happening in china to gauge sentiment across the broader asian space -- after a fall of almost 20% for the asia-pacific. this is how japan is coming online in the first trading

session of 2023. a downside for the nikkei of almost 1%. we are talking about strength for the japanese yen. a little bit of weakness against the u.s. dollar but it was strength all along last week. we continue to see speculation about the boj having to normalize policy even more. we are holding at that 131 level but the call is for the japanese yen to strengthen. we continue to watch japanese bonds, especially the 10 year yield. where we are at coming given the ban and the cap having been raised by the w had seen gain after the boj had unscheduled buying in order to cap the yield. we had seen that fall to a two month low. it was investor concern about the earnings outlook, especially among tech stocks, the likes of

samsung, for example. the cause deck falling .7%. a significant weakness on the korean won. we had managed to rise against the u.s. dollar. because we saw some of those losses as foreign investors and local funds unloaded local stocks, but that faltered in the last few minutes and hours of the trading session and we saw a little bit of a rebound in the korean won and that is holding right now. haidi: what we are seeing holding his some of the gains would it comes to australian shares, pulling back from the steeper losses we saw in the tuesday session. banks leading health care, popping by 5.5%. energy performing quite well despite seeing oil falling the most since november. the stronger u.s. dollar not being good for the commodities play but we are seeing materials

hold up by .7% when it comes to trading in australia. gold miners some of the top performers as we see gold jumping to a six month high. take a look at what we are watching when it comes to currencies. the aussie dollar and kiwi with some of the downside currencies impacted by the dollar. a picture of u.s. treasuries -- the best start for treasuries to any year since 2001. a solid bond rally to kick off the year. the question is where the 10 year yield goes from here. shery: our next guest says there should be an opportunity to increase equity allocations as the year progresses. the chief market strategist at j.p. morgan asset management, good to have you back and happy new year. what are you looking at that makes you say we could see opportunities later down the line? what's going to drive that? >> i think a few things.

close to home, the reopening of china despite the near term challenges with rising infections, we think that growth momentum should pick up starting in the second quarter. if you look at the market performance of december, china outperformed the u.s. by a significant margin. at the same time, elsewhere, we are waiting patiently for the fed, when they will stop raising rates. at the same time, the concern right now is whether the u.s. will go into recession. we typically see the end of the recession in the u.s. present great opportunity for equity investors. i do think we will start the year with more conservative starts, with fixed income as an emphasis, but as we get through 2023, allocation of equities can be increased across develop

markets and -- developed markets and an eventual recovery in the u.s. economy. shery: given the strong relationship between the u.s. dollar and asian equities, where do you see the greenback going into thousand 23? tai: i think the greenback will support it if the u.s. economy is slow down. you could get risk aversion and that's good for the dollar but at the same time, if we get a rebound in the chinese economy and asian economies, that's where the u.s. dollar starts weakening. the dollar is extremely expensive right now. from that perspective, the dollar should be more of a tailwind going into 2023. as you mentioned earlier on, there's lots of concerned about export performance in asia, especially in markets like taiwan, south korea, maybe japan as well. at the same time, as we experienced last year with

reopening spreading throughout asia, this year with china and the northeast asian economies reopening, the domestic demand and travel services could benefit. haidi: take a look at the big price action we saw in the reversal for hong kong stocks. it was a great start to the year when it comes to hong kong and china. how much of this has priced in the positivity with reopening and how much is potentially not pricing and how chaotic this reopening, the border reopening, the impact of cross-border covid waves could be? tai: if you look at the hang seng index, it has bounced up, rebounding about one third. but a couple of things to bear in mind -- the market is trying

to work through what the reopening looks like. governments are trying to work through what eventual reopening will look like. the second point is a lot of international investors are very much in wait and see mode. we've seeing active flows between hong kong and the chinese markets but we have yet to see convinced investors coming in from the u.s., from europe. from that perspective, i think there is room to go but we need a little more clarity in the next few weeks, over the lunar new year in terms of how they covid situation evolves in china but in terms of cross-border flows. how is that going to change in china and with other asian markets? haidi: let me throw to you are question of the day. it takes a look at how big the gains when it comes to chinese equities are going to be given we know economically speaking, we probably won't see a

meaningful recovery in the first quarter as the chaos of covid zero works its way out. what do you see for the equities gain? tai: it's going to take a couple of years to get back to where we were at the end of 2021 levels. we are not expecting a rapid recovery, but a couple of things to bear in mind -- one, the economic cycle is likely to accelerate starting in q2. second, we are likely to see positive support whether short-term or some of the longer-term policies in kind. from that perspective, it's not just about the economy opening but how the economy starts to normalize and longer-term themes such as electric vehicles getting back into the mix of investor preference. it does require a little agility , not so much about picking bottom from tops but picking the

right sectors and companies that will benefit oath from the short-term economic rebound, these are travel sectors, but longer-term plays like renewable energies and electric vehicles and some of the consumer we can expect to recover over the longer term. haidi: let's not forget the fed is the other, ever looming in the background. we know there are inflation risks coming from the china reopening but talking about inflation risks in the u.s. rearing their ugly head and as you say, does that put a question overfed credibility and the ability of these markets to be able to project what they are expecting? tai: i do think in the u.s., inflation is gradually coming down but it may not be as quick as the fed wishes, hitting this 2% target any time soon. if you look at some of the

components light core goods, those are slowly coming down. i think the fed understands that. from that perspective, the path of inflation coming down is in reasonable shape. but as you pointed out, the risk is for inflation to linger a little longer. we could still have disruption in the end supply that could ship energy prices. the fed is still very much in the camp of let's keep policy type in order to put a weight on the problem. the fed has been highlighting its preference for slower growth in exchange for slower inflation even if that means the economy comes under the long-term dread -- long-term trend. the fed is trying to regain its credibility while -- five playing tough on inflation.

haidi: always great to chat with you. let's get you to vonnie quinn with the first word headlines. vonnie: bloomberg opinion columnist and former fed president filled aa says an economic recession is on the cards. he says it's likely because of what the fed must do to cool inflation. he says it will be a severe one and does not see a risk of financial instability. >> it is likely because of what the fed has to do but what is different this time is if we have a recession, it's going to be a fed-induced recession and the fed can reduce the recession by reducing monetary policy. the challenge is not to ease too soon. vonnie: china's finance minister has -- told -- citing risks including a contraction in demand and supply disruptions. he says china needs to use proceeds from special government

bonds to boost investment as well as increased transfer payments to less developed areas. ftx founder sam bankman-fried has pleaded not guilty and will face child in october. he is accused of illegally diverting massive sums of customer money from ftx to make lavish real estate purchases and risky trades. a judge agreed to keep confidential the identities of two people who helped secure his bail package. u.s. house republican leader kevin mccarthy has fallen short of winning the speakership after three rounds of voting. a small group of party dissidents refused to back to california represented a. the first time since 1923 house speaker has not been selected on the first ballot. voting will resume when the house meets again wednesday. chamber cannot conduct any other business until a speaker is chosen. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. shery: still ahead, the call for

china to rebound 25% gdp in 2023. up next, china blasts countries imposing new covid curbs on travelers with the eu the latest to require pre-flight testing. we will have more from beijing. this is bloomberg. ♪

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>> this policy you turn on zero covid which was executed on seven december will raise a whole series of question in chinese put equal circles about the fallibility of xi jinping's political judgments. therefore, that does create a dent in the armor for the long-term. haidi: the former australian prime minister on china's rapid removal of the covid zero policy. the european union is requiring masks and preflight testing from china where covid is running rampant. let's get the details from china's senior executive editor. we've had the response from beijing. this feels like the start of the pandemic as opposed to entering its fourth year. it's clear this is such a politically sensitive topic. john: the underlying

fundamentals politically have not changed since 2020. the chinese government just as governments around the world need to show they are doing things to protect their populace and that is what the chinese foreign ministry is doing now, hitting out at countries that have imposed testing requirements for travelers coming in from china, hong kong and macau, saying they believe these measures are unscientific or put in place purely for political reasons and saying they will retaliate in response to measures they believe are excessive to the point of unacceptable. shery: how bad is the covid situation on the ground? john: we have gone through a wave in beijing. there was a time when there was basically no traffic, very light ridership on the subway. that has changed. we've seen the same in places like shanghai.

slowly, cities across china are starting to recover and people are going back to work, back to the factory and activity is picking up. haidi: what does this lunar new year look like in terms of the resumption of domestic travel and outbound travel when borders reopen? john: domestically, there is a lot of demand to go home for the holiday. there is some concern, a fair amount of concern that as people go home to villages in the rural areas that they will bring covid with them. the outbreak has largely been focused on the biggest cities in the country so far, so as people go home for the holiday, there is at danger it will spread infections even further into the countryside. in terms of traveling abroad, we have seen a big jump in the searches and that demand for tickets to go outside of china

for the last three years. chinese citizens have not been allowed to leave the country for tourism reasons. that has changed starting from january 8. the country is starting to issue new passports to allow people to leave the country for tourism and removing the quarantine when they return. shery: the eurasia group president says xi jinping's trip on powers firmer than ever within china but it's international standing might not be as firm. he told us about the consequences of china's rapid reopening. >> both for china as the second largest economy in the world but also xi jinping having consolidated so much power in his hands and using it in ways that are capricious and not in any way transparent, the global economy has never experienced anything like that level of uncertainty in the persona of one human being.

we have seen it with the decision to do a complete 180 with the pandemic and zero covid. we have seen it with a trillion dollars off of market value of chinese tech stocks because xi jinping decided he was going to squeeze them. that level of uncertainty as china reopens, with no level of data we use to get five or 10 years ago is enormously concerning. >> this goes to your colleague. years ago, they told me don't underestimate his power. have we brought down -- do we see him we can off the covid disaster? >> you see china we can on the global stage. the lessons they are taking from taiwan, they've seen the united states and ukraine, the lessons they are taking from concerns about american economic strength

vis-a-vis china on semiconductors, on the willingness to impose exports controls and the fact chinese have sat on their hands. xi jinping is on the same geopolitical position before the pandemic started but politically, inside china, he is only stronger and that is the nature of the risk for 2023. >> how does china permeate out to all the other thinkings of the top risks this year. they just seem to dominate every conversation. >> it's not that the chinese do it something very specific -- the time the united states democracy and economy is coming out more resilient and stronger than anyone out there would have imagined 1, 2, 3 years ago. we are seeing around the world a significant number of super empowered individuals who are not getting great input from

experts, who are able to act with impunity, and are not getting what they want in various ways on the global stage. putin is one, xi is the other, the iranian regime is the third and a small percentage of tech billionaires are forth. those individuals are driving a commence reroute -- commence are meant -- commensurate amount of global risk in the market right now. haidi: ian bremmer there with the former's trillion president speaking with tom keene. coming up, sam bankman-fried is set to face trial after pleading not guilty to criminal charges. we get the latest on his legal fight, next. this is bloomberg. ♪

shery: ftx founder sam

bankman-fried will face trial in october after pleading not guilty to criminal charges. our cross as it team manager joins us. what is next for sam bankman-fried? joanna: has pleaded not guilty. he will be able to put together the case a little bit. the guilty plea was not unexpected but the prosecutors have said they should have evidence together within the next four weeks ahead of the october trial bait. he will get to see what the evidence is and there is probably still going to be some negotiation but we are looking at getting these things out in the next few weeks and then, there could be a weight until the trial or we could get the activity in the meantime, especially with the back and forth between prosecutors and the defense. haidi: regulation is going to be a big theme for crypto. we are hearing more from banking regulations on this?

joanna: exactly. u.s. banking regulators have come out with the office of the comptroller of the currency have come out and expressed concerns. they did not issue any new regulations but they have said they are very concerned with what has gone on in the past year with possible spillover into the banking sector. they have highlighted like potential fraud, new governance models that have come out and things that are happening in crypto where the banking sector may have a better cushion. they are definitely watching what is happening in crypto and have expressed these concerns but they haven't done anything specific yet in terms of regulation. haidi: let's get a quick check of the latest business flash headlines. canned i missed its sales target . inflation and recession fears continue to restrain a car industry.

sales rose just 1.4%. can day adds kia motors sees their combined sales jumping nearly 10% this year. the company has been accelerating its transition to electric vehicles and has pushed for growth. apples latest light has pushed its market value below $2 trillion. they were the last company standing in the $2 trillion cub after microsoft and saudi aramco fell out last year. concerns grow iphone production problems will alert -- will hurt holiday sales. tesla shares fell the most since 2020 after the company delivered fewer vehicles, despite offering hefty incentives in its biggest markets. the company opened two new assembly plants last year and still fell short of its goal to expand sales by 50%. or to come here on daybreak asia. this is bloomberg. ♪

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shery: we have the final

manufacturing pmi numbers for japan coming in at 48.9, a slight vision up from 48.8 but it doesn't make a difference in the fact it is still the second month of contraction low the 50 threshold for japan manufacturing pmi. japan is not the only one. asian factories have been under pressure as we see global demand slowing down and manufacturing pmi's for the likes of taiwan, malaysia and vietnam have remained in contraction territory. china pmi showing some optimism could lead to a better prospect in the year ahead but so far, japan's manufacturing pmi at 48.94 the month of december. haidi: watching data when it comes to the u.s. economy. we heard from former fed president u.s. -- william dudley . he told us markets may be underestimating the fiscal threat they are facing. >> fiscal is the big risk that

is not remarked on by anybody. a budget deficit of about 5% of gdp, which is an affordable place to end the business cycle at an that's before we get costs associated with higher interest rates and the costs associated with medicare as the baby boom generation retires. the fiscal situation has deteriorated sharply. up to now, markets have been extremely tolerant about this. >> i want to go back and the top 10 risk to media, which is the bloom out there, the world is going to end and we will have the recession to end all recessions. take us back to your study of recession history and guessing at berkeley years ago. can we actually guess a recession in 2023? >> recession is pretty likely just because of what the fed has to do. the fed has to drive up the

unemployment rate sufficiently to slow down the economy, to generate slack in the market. but what is different this time is if we have a recession, it is going to be a fed-induced recession and the fed can in the recession by subsequently easing monetary policy. i don't think there is a big risk of financial instability cataclysm that pushes the economy into a deep recession. i think the fed has the controls . when they need to ease, they can do so. the job for them is not to ease too soon and to ease in a timely way. shery: bloomberg opinion columnist and former fed president, bill dudley. to consider -- to continue our series of growth forecast, david ingles has more. what are the dominant trends to keep in mind and is any economy stand out to you? david: happy new year.

it's the first time i'm speaking to you. i think bouncing off what bill dudley was talking about, recession risks mostly at the moment seems to be a dm story, not so much in asia pacific story. a dominant theme has been when you look at these forecasts, these are full-year forecasts for 2000 when he three. a lot if not all of these numbers have been taken down from june and july by about 1%. australia is a good example. at -- in june it was close to 3%, same with south korea. when you look at southeast asia, when you look at standouts -- vietnam is one to watch. thailand is another. the only one that is actually expected to see growth picking

up relative to our growth was last year. that is outside hong kong and china which barely saw any growth last year, so we are expecting growth there. and india at 6.9%. certainly trend growth for both, india and vietnam, even indonesia, expected to remain robust going into this year. haidi: david ingles there with a look ahead. so key to these projections is what happens when it comes to china's economy. our next guest expects they will hit 5% growth. the chief economist at shaner equitable college. we expect the road is going to be bumpy. how do you see the post-covid rebound playing out? is it going to be and even recovery? >> thank you for having me.

happy new year. for china's growth recovery, we are seeing multiple difficulties going on at this moment. if you look at the pmi data that came out this week and last weekend, it shows china is still struggling to handle the covid situation that we have seen. this is likely to continue to create challenges for china in the first quarter. that said, from the second quarter when we ease back to the current recovery and stabilize again at a relatively low level, there will be obviously a notable pickup in terms of household consumption growth. that's going to drive growth recovery this year and in addition of the property sector which hasn't seen deep

corrections in the past two years will finally start to show more signs of stabilization over the course of this year. however, if you look at the headwinds, certainly we will see exports to remain active. export has already declined to -9% and this year, a small contraction with acceleration, seeing a global slowdown which is led by the recession seeing the developed markets. it is unlikely to be a year of recovery, certainly for china but we remain quite hopeful. haidi: we have seen some of the high-frequency data showing we are starting to see the return to activity -- the subway data is encouraging. take a look at this chart --

after sluggish demand for lending last year, despite the pboc push to turn the taps on more, we are seeing credit impulse turn again. how important is this to show we are perhaps seeing business activity broader sentiment start to improve? >> that is right. if we look at the high-frequency indicators we track, we are seeing some initial signs of sequential rebound, especially the mobility data you have just highlighted. but if we look at the industrial side, the services side, we are still seeing headwinds in terms of supply constraints and always in the labor shortages still happening in china. also, if we look at the demand,

it is relatively soft as people prefer to stay at home because they are getting infected or a fear of getting infections. but after spring, we are going to see more signs of pickup because compared to many other major advanced economies which experience reopening last year, china is not facing that kind of supply-side shortages. this is because chinese laborers still need to go back to work, to rely on their labor income to make a living and support their consumption. there was a lack of consumption stimulus so we think supply-side will come back rather more quickly compared to some other economists during the reopening and that would help as well. in terms of policymaking, i

think the macro policies will certainly remain quite supportive, especially in the first half of this year when inflation is still mild and china is in the initial phase of recovery. the pboc will remain quite supportive. shery: is that what is going to help the property sector? >> the property sector, if we look at the latest data, demand is still quite sluggish. people are instead of home, they don't have an appetite to go out and shop for new homes, but the property sector is ramping up pacing the past two months with supply-side and demand-side and we think the property sector policies will continue to remain quite supportive and hope to

restore the real demand from the household sector to purchase. that said, we are not expecting any v-shaped recovery in terms of property. yes, cyclically, a lot of things have changed and that would be helping but let's not forget their are important structural headwinds because of china's aging population, because of the problem with chinese developers that will take a few more years to solve. shery: good to have you with us. we have breaking news at the moment coming out of japan -- take a look at tokyo gas shares -- falling or than 4%. we had the broad down trend in the japanese market but this is an exceptional fall given we are

hearing reports coming from reuters that tokyo gas unit is nearing a $4.6 billion deal to buy rock cliff energy. this would be a unit of this company in advanced talks to buy a u.s. natural gas racer from a private equity firm for 4.6 billion dollars. this is according to people speaking to reuters. the deal would include debt. coming up, ecuador's economy is rebounding on the back of record spending. more from our exclusive conversation with the central bank chief. this is bloomberg. ♪

vonnie: this is daybreak asia. i'm vonnie quinn. the eu is moving toward a requirement for masks and preflight covid testing for charters from china. a spokesman says the strong majority of company -- of countries back tests. china says it will take corresponding measures on nations that place covid restrictions on its travelers for what it calls political goals. the white house says there is no reason for china to retaliate against the u.s. and countries placing restrictions on its travelers. the press secretary says the moves are justified on public health grounds given china's surging cases. beijing says it will hit back on

nations imposing the rules, dismissing the measures as political. a general manager of the philippines report says flights may continue wednesday is airlines real from a new year's technical glitch that stranded some six to 5000 passengers. operations at the millet airport are expected to normalize by thursday. philippine airlines expect it will take weeks to clear backlog caused by the power failure. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. shery: that of ecuador's central bank says four year growth for two -- full year 2022 growth could exceed and a -- he told us exclusively that policymakers are closely watching the effects of a strong dollar on inflation. guillermo: from the central bank

perspective, we think the results indicate the ecuadorian economy is returning to a growth path, and exceeding the most recent forecast of 2.7% for 2020 two. therefore, we are expecting ecuador's economic growth will exceed 2%. shery: what about 2020 three? last time, you called for 3.1 percent growth. does that mean you will be revising at higher given how much better you are performing? what about the stronger dollar? guillermo: so far, we are planning to maintain 3.1 percent. we have been following the international situation that might affect ecuador. we are minimizing the impact of

a stronger dollar and so far, the benefit is ecuador has low inflation compared to countries in the region. partly for subsidies on gas prices. haidi: what expectations were benefits do you have from this recently concluded fda with china. guillermo: experts show an increase of 25% compared to 2021. nonoil experts -- exports grew due to an increase in external sales. there are important industries such as banana, tuna, coffee that will benefit from this trade agreement with china.

this would reduce dependency on oil exports and promote nonoil exports that are essential for economic growth of ecuador. it is great news. the president communicated this past week that they completed the negotiation with costa rica regarding the free trade agreement which has garnered an important trading partner for ecuador. so it is a step in the right direction for ecuador's trade. haidi: that was the central bank of ecuador's manager speaking exclusively to us on daybreak asia. tune into bloomberg radio if you need more from the big newsmakers and get in-depth analysis from the team there. broadcasting live from her studio in hong kong, you can listen on the app radio plus or bloombergradio.com. more ahead. this is bloomberg. ♪

haidi: a quick check of the latest business flash headlines. foxconn has brought the largest iphone went back to 90% capacity. the report says the plant is operating with roughly 200,000 staff.

that suggests apple's main production partner has secured enough workers despite a covid wrist surgeons and recent staff of people. apple's latest slide has pushed its value below $2 trillion. it was last company standing in the $2 trillion value club. apple shares closed at their lowest since june of 20/20 one as concern close production problems in china will hurt holiday sales. the university of california is investing $4 billion in the massive rock stone real estate income trust. they've been forced to limit withdraws. blackstone sweetened the deal by earmarking a billion-dollar black -- billion-dollar backstop and a return of 11.25%. >> this is a big win for us. it's a big win for the university of california who is making this investment. it's a massive affirmation of the quality of the portfolio we

have construction -- we have constructed, of the value of the assets here and the performance outlook. haidi: rolex has raised prices in the u.s. and u.k. according to analysts at barclays. the price of the most popular models rose between 1% and 3%. the latest increase believes rolex believes it can lift prices to protect margins amid rising inflation without hurting demand. shery: we are looking ahead to the open in china. ella tilly of chinese stocks remained high into the new year. we saw the hang seng china index falling more than 2% and ending 1% higher to see its best start to a year since 2018. are equities reporter joins us for the latest. how should we make sense of all this volatility? charlotte: we are seeing high volatility going into the new

year. it is -- it shows it is difficult for investors to assess the on the ground situations for covid in china, given there's not a clear set of data. it also shows people are expecting to firmly how fast the consumption recovery will come back as well as the rural areas in china. on the other hand with a broader market, you can see traders with a range bond. after two months of surge, investors are waiting for the new catalyst to come. one that could be around the corner is the broader reopening on january 8 as well as the chinese lunar new year coming up. we could be getting more data, more information how consumption

activities are coming back. haidi: what is going to be the catalyst when it comes to the property sector? we are still seeing these companies struggle to survive. charlotte: for the property sector, it is clear chinese authorities are working hard to put a full end to the crisis and the recent measures, especially the liquidity crisis has helped with the investor sentiment but in terms of recovery for the sector, the general view is that it's going to take a while. investors are definitely waiting for close signals on the demand side and, as we see, prices have been following for 15 consecutive months and sentiments remain week. i would say the real catalyst has to come from the demand side. shery: where are we in terms of valuations? we've seen a big surge for chinese equities. charlotte: if we take the

example compared to the emerging markets, south of the five-year average, it is quite attractive, which is one of the reasons some investors, especially the global long-term investors have become more constructive on chinese equities during december. they think the risk could be upwards. the gain is looking quite attractive but as we have been talking about, now that covid zero has passed, it is about if the economy can come back to 4.8%. that would be supporting people to reduce positions on china when there is a pullback. haidi: charlotte yang with the latest as we count down to the start of trading in hong kong and the philippines. these are some of the stocks we are watching. apples asian suppliers are going

to be in focus. the iphone makers stocks lighting under the $2 trillion market cap amid growing demand concerns pushing it out of the $2 trillion club. also concerns about growth in tech stocks more broadly. another has resumed about 90% of peak capacity at its main iphone plant. also watching filipino airlines. the philippines airport will suffer from flight delays as airlines real from a technical glitch on new year's day. shery: coming up, hs vc's head of global income expects bond investors to recover more losses from last year. plus more on china's 2020 23 outlook. -- 2023 outlook.

>> from the world of politics to the world of business, balance of business, balance of power with david westin brings you news, analysis and insight from the power players. balance of power weekdays on bloomberg.