>> good morning.

welcome to daybreak australia. i am haidi stroud-watts in sydney. >> we are counting down to asia's major market opens. >> good evening. i am shery ahn. the top stories this hour. u.s. stocks ending mixed as markets way what it would take to reverse the veteran path as they show signs of a moving creditors. quest we will speak. for moree global economic challenges ahead of g7 meetings in japan. take a look at how u.s. futures are coming online. we have the s&p 500 really staying slightly above water.

we are announcing u.s. futures under a little bit of pressure. breaking news at the moment. california's financial regulator now saying they wanted to more closely scrutinize banks with $50 billion in assets and increased staffing, overseeing those big banks. we did see pac west in today's session jumping up double digits. really extending those gains after hours. this after i said the business remains sound but they said they plan to overhaul this process for escalating parents. regulators will work more closely with the federal counterparts. their plan to focus more on the level of banks and also examine the risks imposed by emerging banks and technology. do you have it.

the latest on california's financial regulator. over $50 billion in assets. we had seen a little bit of downside after that mixed finish when it came to the wall street close. the 10-year yield really rising to that 350 level. the two year yield actually rising to that 4% level. of course, more so i was training from now on. oil in the asian session after pressure after gaining in new york. let's turn to a fed survey that has found the u.s. banks reported tightening lending standards weaker than for loans in the first quarter and the latest financial stability report warning of slower growth

that could further tighten credit markets a celebrity downturn. let's bring in our bloomberg economist and kaplan, let's start with you and what the fed will learn. >> banks are already lending less. they are tightening credit in the wake of the bank turmoil. some would say small to medium-sized bank prices in the united states. we are talking about the senior loan officers opinion survey that the fed puts out once every quarter. usually barely get the headline. this time, everybody is here in the last week to see what it showed. what is shown is 40% -- 46% of banks tightened terms on commercial and industrial loans to medium and large firms. this is like the lifeblood of credit for many companies in the united states. they went from 46% tightening up from 44.8% in the fourth quarter. it also shows them following

loan demand. 55.6% in the survey says this i weaker see and i loan demand in the first quarter, up from 31.3% in the fourth quarter. it was already about it there we were seeing. now it is more than half. >> one of the problems here is that it is hitting small businesses, small banks, particularly hard. this is the chairman of o'leary funds. you might also know him from shark tank fame. he knows a bit about this. let's listen to what he said. >> 60% of the economy here. driven by small business. we talked to our ceos. there is no money right now. quest the fed survey has found

out. we are worried about what is going on. there are concerns about economic outlook, credit quality. and a sharp contraction in the availability of credit. households they already have for many. they potentially resulted in a slowdown of economic activity. some say the odds of a session the second half of the year if it continues and right now, according to banks surveyed, it looks like there is no reason to think that it will continue. >> when it comes to these broader concerns starting to emerge about the risk of u.s. recession, what is the latest forecast we are seeing? >> we have the fed chair shaming of the session can still be avoided. we have very strong jobs data on friday.

there is a kind of viewpoint that as long as the labor market remains, they will stoke the risk of recession. there could be a slowdown in lending. also, we had a whole debt ceiling drama. kicking off again this week. also, potential market volatility. the white house warning that it would mean. a risk of extreme weather events in the west. plenty of the world has already extreme -- seen extreme weather events. that could drive flooding for example. that would impact food supplies,

commodity supplies, travel costs of energy and feed into the whole inflation story. it is certainly a risk that needs to be kept abound. click the thinking there is the market pricing that the fed may do this by the end of the year. the fed may push back hard against that. goldman sachs -- 10 minutes in row, the most aggressive cycle, it is probably unlikely that they revert back to cutting rates. this is the whole story about warnings against the mistakes

made in the 1970's. they could cut inflation is too soon. that is where some of these strategists are pushing back against this. that is where the fed could be cutting interest rates later on this year. quest i was kathleen hays there. let's get to and about. >> river jp morgan is one of

those saying that they have proved to be bearish in the direction for the dell as well. let's take a look at what this means for markets in asia. it is actually dollar weakness that has been one of the key factors. today, in terms of the set up, there were risk bound and range bound. a slight bit of weakness. kiwi stocks already in line. that is still sitting around that 1.3 five mark. really ahead of that u.s. inflation data. we have not seen the s&p 500

breaking out of his recent ranges of that. a lot of emphasis coming down in the data later this week. quest plenty to watch out for. >> thank you. china has confirmed a nationwide anti-spy campaign is on the way, targeting consulting firms. operations already carried out invasion, shanghai and shenzhen. canada has expelled a chinese diplomat. the finance ministry says it is accusing it of interfering. jeff had looked into penalizing it.

china's foreign ministry says the trade with russia is completely above board and beijing will respond firmly if the eu goes ahead. australia is officially headed there since 2008. they also forecast smaller future deficits. tax revenue from a fully employed economy have been boosting the government's numbers. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. >> still had, pakistan's petroleum minister joins us exclusively for an update and

how the government plans to avoid further energy shortages. first, we get the world bank's latest news. why it is not just inflation and higher rates moving in the wrong direction. david is going to join us next. this is bloomberg. ♪

>> the growth outlook has not improved. concern is building over banking issues. for more on how things are shaping up, the g7 finance chief is -- let's bring in david as well as the global economics and policy

editor. perhaps not as resilient. >> there is a dangerous shortage of growth. their borrowing. you don't get the determinism -- dynamic him -- the dynamic field

in the global economy. >> at a time like this, it becomes more urgent than ever to deal with debt restructuring. can i seek some clarification on what was agreed to? you mentioned new concessional funding from the world bank. is that not what the bank already does? can you give us some details on these new commitments? >> it is a commitment by the world bank to have concessional funding. the world bank is putting in funding that lowers the burden for developing countries.

right now it is a stalemate. >> one of the things that you brought to term is world bank president's is time on wall street. you know how these markets work, you know how these banks work. it shows lending demand down, tighter credit. how big of a concern is it? too much capital going to the developed nations. >> it is already having an impact. there is not much credit growth. the concern is this is not cyclical but it is secular. it could continue into future years. new investment is not taking

place now as much as what is needed. especially from the developing countries, the capital inflow is going to broaden -- the wrong way. as people out and the rollout of debt that might have occurred in previous years. you are at 0% interest rates. it will take a while for those that have a duration mismatch. it takes a while to sort that out. >> what about fighting inflation? should the fed be done? what about doing those aggressive rate hikes that exacerbate this mismatch that have caused other problems that

magic? >> i am not sure that britt has caused inflations to go down. you need to have more supply. if what you're having right now to bring down demand, that has not been working. you see high demand, consumer demand in the u.s.. i think the fed and central banks in general should be using more tools. not just the rate hike tool. that means talking about how the interaction of monetary policy with production within the economy, when you're hiking interest rates, you are reducing the production we saw in the did. the credit growth goes down. that keeps persistent inflation that we are seeing in the core inflation numbers.

these are big challenges, trying to look forward and change the way policy works that allows more production and lower inflation. quest we also have a complex medical landscape. how much are you waiting the political risks? correct exports pressure on the debt -- the debt burden is going up to add some physical strain on governments. they have been pointing toward

fragility. the reader countries are in that because food prices are higher and fertilizer prices are higher. their currencies we can do. that adds to their own inflation. it puts more pressure on political systems worldwide. these days, we are talking about trade settlements. will this make some of these economies that have this huge shortage of daughters -- tell is more reliable on china's ability to impose the currency on them?

quest there are various parts of that. china is making loans through swap arrangements. that avoids some of the disclosure that is done through normal kinds of lending. and where they tie it to imports , if i lend you money, you have to buy from me, it creates a difficult situation because you don't know whether you are getting money from it. that is one side of the equation. it has not showed up yet. there was a little bit of that on the edges. if the u.s. economy is strong, the dollar can be stable. it is very attractive for global transaction.

i am more worried about the productive capacity to fill the needs around the world. this is specific guidance on what they have or have not agreed to do. collectible bank is all about concessional financing. they put a huge amount of net positive flows into countries. it is a source of concessional

resources and that is a commitment that restructurings work. as i say, it is a stalemate as far as any progress being made. on zambia, ethiopia, ghana, others around the world. as the countries try to move into a restructuring phase and deposit the growth.

that has been increasing in order to try to make these restructurings work. of the issues aspects. if they do a very long rescheduling, that gives benefit to the country if the interest rates are lower. there is going to be a technical seminar. there was agreed to at the

global roundtable that we had at the world bank last month. i hope that will pave the way for some of the debt restructures that have been going on. it has been frustrating because of the lack of progress. >> always great catching up with you. thank you so much. that was the brabant president joining us here on bloomberg television. we will be live on the bloomberg wealth asia summit. we will hear from the hong kong monetary authority as the summit discusses innovative approaches to investment and wealth creation. he is a quick check of the latest business flash headlines. it now expects the metro to grow by some 100 basis points.

the week guidance overshadowed paypal's first-quarter earnings. apple has tapped the u.s. which upon markets selling bonds in a five car deal. a source says the longest portion will yield 100 basis points. apple is the second one at reported earnings. coming up next, we speak to the standard chartered ceo to explain what is needed to

♪ >> you are watching daybreak austria, i'm vonnie quinn with the first word headlines.

chinese foreign minister has met with investor nicholas burns for the first time. he asked burns to serve as a bridge between their countries saying top priorities are to improve ties. ties have been at odds over tech curbs, taiwan and the ukraine war. mitch mcconnell will not come to president biden's rescue on the debt limit by breaking a deadlock. he told president biden it is up to him and kevin mccarthy to find a solution. the tuesday meeting between biden and congressional leaders stakes are growing because both sides face a need to act before june. banks faced tighter standards and weaker demand for loans than the first quarter. industrial and commercial loans rose from 44% in the previous quarter. those reporting weaker demand rose, the highest since 2009

during the financial crisis. california's financial regulator says it will closely scrutinize lenders following the collapse of silicon valley bank. it plans to overall its process -- overhaul its process. and increase staff. of the banks to collapse, three where in california. 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. haidi: ceo bill winters says regulations should have prevented recent banking turmoil. speaking to us he weighed in on calls for a radical overhaul of how banks are funded. >> deputy governor of the bank of england, paul tucker, he wrote a piece saying regulation and bank management will have to change. we have to expect a 100% run on

deposits at any time. that is a very different world. if we have to be prepared for that kind of migration of money, we are going to have to have a fundamentally different underlying functional financial infrastructure. >> that strikes fear and horror into me. i lived through the crisis as did you. which brings us then to regulation. failure to update and expand the insurance regime has hammered more nails into the coffin, so with that in mind, the fdic's is late and lagging in regards to regulation. >> let's get the order of things right, first order, banks need to manage themselves. when the dust settles and we take a look at what happened in the u.s. or switzerland, banks did not manage themselves perfectly. there were things that they could have done differently that

could have made this better. second is the regulators need to have regulatory rules that incentivize good behavior. there were clearly some inadequacies in the infrastructure in the u.s. and elsewhere in the world. third is the role of central banks. there has been a default to let's raise deposit guarantee threshold. that might be a good thing but if you're worried about a massive deposit outflow from corporate clients, private banking, large depositors, increasing the guarantee in the u.s. to $1 million does not cover the bulk of the deposits that are sitting in the financial system. there is a fourth piece which is central banks, their job is to make sure solvent banks, healthy banks have access to liquidity. that is what discount windows are for. i give you my collateral, i get

cash. >> they've done a good job of that. >> i am afraid not, i'm afraid not. you have solvent banks in the u.s. and a solvent bank in switzerland that died because they could not get access to liquidity from anyone, not from their depositors and central banks. we have to ask why not? shery: ceo bill winters speaking to manus cranny the fintech summit. let's stick with the stress in the banking sector and other risk events. jp morgan warning that the worst is not over. what are we hearing? annabelle: when it comes to the direction of u.s. stocks, jp morgan has a note out and it makes for a dire reading. we could have more losses to come because the expectation from investors, jp morgan says we have hit the peak of pressures in the market and that is because recession risk is an

event on the horizon. they see equities remaining or weakening for the remainder of the year. we are yet to see the full effects of the fed's tightening policy hitting markets. the factors that have supported growth like corporate margins are going to be starting to wane. take a look at the monthly performance of the s&p 500. you can see we had gains, that is march and april. in may, the direction has been lower. jp morgan saying that is likely to continue because the risks of recession are not priced into the market. there has been a low rotation so far on a historical basis into defensive pockets of the market. the reason for rate cuts, jp morgan says you've got to look at the reason we would see changes from the fed. that is because there's been a recession or contraction in the

economy or there is distress in financial markets. haidi: we continue to watch these risks building around the debt ceiling issue. in about: dysfunction -- annabelle: dysfunction has been playing out including the dollar. that has tended to be bearish or the direction of the greenback. but the pimco co-founder spoke with bloomberg and essentially he's looking at opportunities where you can make some money out of what is going on in washington. take a listen. >> it's ridiculous. it is always resolved and not a 100% chance. i think it gets resolved. i would suggest for those who are less concerned similar to myself, that they buy out one month, two month treasury bill at a higher rate than they get with a longer-term treasury bill. >> coming up next, pakistan

races to tackle inflation as bailout talks with the imf continue. we speak to the minister of state for petroleum. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh

♪ >> all right and of course it is on the people of the australian budget, we know it will be momentous when it comes to potentially returning to positive for the first time in 15 years. this delivery of the budget comes when there are cost of living pressures across the australian population. it will be a political balancing act. as we have been talking about, it has been important when it comes to following the trajectory that we've seen from the reserve bank of australia which has come under political pressure for continuing to raise rates at a time when household budgets have been strained. asteria is headed for the first budget surplus since 2008. we've seen tax revenue from a fully employed economy and elevated commodity prices for exports really building the governments coffers. will be hearing from jim chalmers.

he is forecasting 4 billion australian dollars which puts us through to june. that's happening at 7:30 p.m. this evening, local time. shery: it's tough for a government when you have this temptation to spend all of that revenue and not do so given that you are trying to keep monetary policy aligned. the fact that we will see the potential surplus in 15 years with the cash search is huge. we are seeing the labour government trying to rein in inflation. chalmers begging that curtains will pay off in two years time when he hopes to face the election with prices contained in borrowing costs falling. it seems to be a political calculation for them as well. haidi: we will be watching out and as you say, then of temptation to use spending to fix the short-term issues from

the adjustment of the global monetary policy landscape. let's get you caught up with the latest business flash headlines. coinbase is considering making the united arab emirates its international hub. the crypto exchange has been navigating a difficult u.s. regulatory environment. eo brian armstrong said coinbase will not leave the u.s. but is looking for a global hub to serve more countries. >> we've expanded into other markets. now what we are doing is looking for a home to set up an international hub that could serve the countries in the world. the middle east, africa, parts of asia. the uae is attractive. it deserves credit. there the first country i'm aware of that created a new regulator to crypto and they've published a rule book and it is business forward and protecting of consumers. >> kkr earnings fell in the first quarter from a year earlier on a prolonged drought. the firm reported $719 million

to distribute a bowl earnings or $.81 per share. that beat the average of 15 analysts. kkr shares fell 4.3% following the announcement. citigroup's u.s. shares jumped after bloomberg reported the company will give employees a 5% raise. a staff memo says the bump comes with the cash balance increasing. it signals prospects for the e-commerce and gaming firm that last year had to cut 10% of its workforce. shery: take a look at how u.s. futures are trading. we had a mixed picture in the regular session, s&p 500 staying afloat but the dow under pressure. we seen that continue in the after hours session after the federal reserve said the credit market was tightening. business and demand was weakening. that has stocks fluctuating between gains and losses. with a 10 year yield at the 350

level and crewed prices in the asian session really under pressure. and reversing those gains that we saw in the new york session. and of course we have been following emerging markets. trading has been volatile. the shifts in the political landscape are really not helping, putting investors on edge. with a slew of upcoming elections adding pressure. let's bring in maria. what are the most-watched political events this year and how is that going to affect the investment landscape? >> politics is something that emerging-market investors are looking at and for the first half of this year we had not had a major set of elections but that changes this weekend with turkeys presidential election. that is the event investors are looking at and saying it will

kickstart a time of volatility for emerging markets. when people are investing in developing countries, they look at elections because the policy path following the election depends on who is at the helm. so we had elections in argentina this year, elections in pakistan, elections in poland. everybody has their eyes open there. >> some countries are facing a more difficult situation. a debt crisis in a political crisis at the same time, talking about pakistan. >> pakistan is in a difficult situation. the bonds have been trading at deeply distressed levels, so you can read it from there for almost a year. the last big test that they faced as an issuer was paying back creditors a $1 billion bond in december. shortly after having devastating

plots that jeopardized their fiscal stability. just last week one of my colleagues in asia interviewed a journalist who told us that the country has almost $4 billion in the next two months. so that is looking ahead at what pakistan is going to do, putting pressure on the countries trying to secure an imf program. they have been in talks for almost six months. everyone is watching for sure in pakistan. shery: the latest on political risks across emerging markets. talking about pakistan, tackling asia's inflation, they just raised taxes as negotiations continue for the bailout. let's bring out minister of state for petroleum. minister, it is great to have you with us. higher energy prices have hit your population. you have said that you want to

make fuel costly for the rich and cheap for the poor. can you give us an update on fuel discount plans and what the imf saying about this? >> well, we originally thought it was a simple idea. previously when we were negotiating with the imf and the bank was also supporting the negotiations. we put together a plan in which we charged a high price for natural gas to the rich. in a lower price to the poor. in essence, we were subsidizing the poor but charging more to the rich. and our proposal here exactly was trying to do the same, the same thing that we were doing for the gas sector. without we would charge the rich people who drive expensive cars a little bit more and poor people who drive bikes in kari lake two or three children on the bike, we will charge them a little bit less and give them a little relief.

but i understand that the imf had some reservations, so we are very open to sitting with them and explaining the program. and making sure that they are satisfied with it. shery: during the imf talks there was a plan to reduce debt in the energy sector by asking state owned companies to issue dividends. can you give us an update on what is happening on those plans? >> well, what we ended up doing was through the plan that i have just shared with you where we were charging the rich people a little bit more, our industrial sector a little bit more and subsidizing the poor, we were able to take care of circular debts. we were able to take care of the debt which was difficult to finance. and we could not push that price onto the consumers. our regulator would not let us do that. so we successfully got rid of that circular debt or the debt

could not be financed, the debt that could not be charged to the end consumers. so we successfully did that. but that only took care of the flow which basically meant that we were not contributing to the circular debt anymore. however the stock that we had, we thought many of these companies own each other a lot of money because most of the sector is dominated by state owned enterprises. and some of these companies had account repayable's or account receivables. so our thinking was that we would actually do the equity swaps or issue dividends in payoff so that the circular debt or the debt that different companies oh is taken care of. so that is also in progress. we are still working on it and coming up with a mechanism of

issuing dividends and then using those to pay off the debts. and clean the books. so the whole idea is to clean the books. the general idea -- sorry, pardon me? shery: what is the timeline? >> it will take a little while. we are not in a rush. our biggest problem is escalating debt and that we have stopped. so the zero contribution to the circular debt, we have seized the flow of circular debt. in terms of the stock we have, we are very comfortable that in a couple of months we will be able to sort it out. we want to make sure with our petroleum scheme, we saw that the imf had some where ease and some concerns. so we want to make sure now that if we move forward, we take care of their concerns and make sure that they completely understand what we're are trying to do and why. haidi: we talked about the tough decisions your party has had to

make when it comes to energy, electricity and the fight against inflation. can you give us an indication of how you are feeling towards election results? what are the chances for the party and do we have an update on when they would be held? >> the elections will take place toward the end of this year. the term of this current administration finishes around october and i think that is exactly the end of the five-year term. the elections would take place exactly on time. i think we had to make a bunch of very difficult decisions and as you mentioned, inflation is high. it is a poor country with high inflation. but flirting with extreme economic difficulties when we took over. so we have been pushing the envelope and i think we are trying to restructure the economy as we go along. so we are reasonably confident that as we move forward we will provide relief.

and our mantra is simple. we charge the rich people a little bit more and provide relief to the poor people of pakistan. we think that is the right thing to deal with and if we continue to do that, people will begin to appreciate the hardship that the administration and government is going through, that people are going through and they would begin to have hope. through the hope we would win the hearts and the votes of the people. haidi: what are the hopes for amazing markets. the recovery that's nations in china, china, pakistan and afghanistan have agreed to expand and deepen cooperation including when it comes to the china and pakistan economic core door. what are your thoughts on the economic cooperation, there is a lot of focus and scrutiny over how beijing deals with debt restructuring for the poorer nations. >> our thinking is simple. we took a lot of debt to do with the government should be doing,

building infrastructure. and i think we were able to build an enormous infrastructure between 2013 and 2018. i think it is now time that we have a new port. we have the road infrastructure and most importantly we have the energy infrastructure. i remember in 2013 when i originally joined the cabinet, we were having about 12 to 16 hours of blackouts as we fondly call it. and over the next five years, we were able to completely get rid of this menace of load sharing. that contributed to economic growth because we were able to provide industry to our commercial sector and new businesses were created, new jobs were created. now we are trying to do the same thing. infrastructure we have put together now our hope is with a

little financing, we would be able to do startups, we have new economic zones, promotion zones, technology zones. these are zones where the taxes are very low. and we are hoping with a little bit of additional financing we would be able to create new businesses and jobs and economic growth. shery: thank you very much for your time today. it was really great having you on. minister of state for petroleum. terminal users can get more of the biggest emerging markets stories. this is bloomberg. ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww.

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♪ haidi: we are expecting the delivery of the australia budget at 7:30 local time in sydney. we are watching consumer related discretionary bending -- spending stocks. property stocks as well as commodities. this is bloomberg. ♪

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