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>> good morning. welcome to daybreak: australia. i'm paul allen in sydney. i'm at about -- annabelle droulers in hong kong. >> i'm kathleen hayes. president biden and house speaker kevin mccarthy confident their tentative debt ceiling bill will pass congress averting a historic u.s. default. >> global markets primed for relief rally on a tentative deal after the debt crisis battered risk sentiment in recent weeks. >> turkish prez on seals a reelection victory raising the prospect of more friction with western government and more uncertainty with investors. for more on the debt limit let's go to debt -- joe matthews in washington. joe, this is a deal that a lot of people did not think could be done. what is in place now?

what are the key points they have to come together on? >> the most important thing we can tell you is this extends the debt limit until 2025. that's the most important part in terms of avoiding default. it gets the picture out of the way, the issue of the debt ceiling until after the presidential election. that was something joe biden was not likely to move on. it auto -- also flattens spending for fiscal year 2024. it will increase 1% the following year unless lawmakers come to the table to actually pass a budget that will hopefully be incentive for them to do that. defensive spending goes appear a little bit. that was taken out of the equation, much like president biden asked for in his budget. it goes up 3% year to fully fund benefit care. it raises the age from 54 to 49 and resends $30 billion in covid

funding for the states. when you put all this together this is a bill that is likely able to pass. it's expected to get a vote wednesday. speaker mccarthy has some dissenters on the right side of the republican house majority that wanted steep budget cuts. they are not getting those. president biden is getting some flack from progressive democrats that won't -- don't want additional work requirements. they will both have to give up some votes and i suppose that is the meaning of compromise. >> indeed, joe. flattened spending as you described. kevin mccarthy is calling the deal transformational. does it meet that definition? >> it's hard for me to say. he will choose the language you well. both sides, frankly, will try to s this positive because they both have a way to claim victory here. politically speaking speaker mccarthy does have a victory when it comes to getting joe biden to the table. he spent weeks in washington trying to get joe biden to the

negotiating table while the president demanded a clean debt ceiling bill. the fact this even happened is a moral victory for speaker mccarthy. at the same time, like i mentioned, he was: for steep budget cuts. he wanted spending levels back to fy 2022 not calling for things like medicare or social succumb -- security. he will take some flank from his right side on that. whether it is transformational we don't see much different. if it were to be transformational it would have to deal with items not on the table. that comes down to entitlement, down to undergone spendings. without addressing those issues it will be very difficult for them to make a real debt -- dent in the trajectory of debt long-term. >> as i check online to make sure i'm getting numbers right. 220 22 -- 220 two republicans in the house and 2013 demoed as 213 democrats. the freedom caucus pushed hard

for deep spending cuts. when you look at what moderate republicans may be thinking, the center, how big is that? how big will it need to be to get past the freedom caucus? to get the rest of the house republicans to vote for this? >> you are kind of answering the question. it's possible speaker mccarthy could lose the entire freedom caucus, 33 members. they sent a letter to the speaker two days ago with the #hold the line and were threatening on the floor as they left town to vote no on any deal that is not and still the spending cuts they were looking for. the house progressive caucus may have even greater numbers that said they would note -- vote no for additional work requirements. in neither case is it enough to spoil the math in what will likely be a very deliberate day or two of a vote whipping that both sides will have, hakeem democrats -- hakeem jeffries for democrats and the majority

leader steve scully's will all be working the phones here. yes you will see peel off on both sides but it is likely they have something that could pass because frankly they would not have left the room otherwise with the deal they have. they have been whipping along the way here. it's pretty much what they know the numbers will look like. i stress we don't actually have legislative language yet. they still have to finish writing the bill. lawmakers will have 72 hours to read it. that was another promise speaker mccarthy made. at that point we can have a real conversation about who is voting yes or no. >> important distinction. this is a bill that both sides described as in principle. kevin mccarthy's speakership started in a rough place. how does it look now after the deal is reached? joe: it depends who you ask but most republicans are -- sources from staffers most important lay on capitol hill that hear their bosses speak and understand the vibe on this, to consultants in washington they all seem for the

most part to believe that speaker mccarthy strengthen his hand through this time, not only through the 15 rounds it took him to become bigger in which he got to know a lot of his opposing forces on a personal level, but going through this project with the president, getting him to the table, help him, in many cases, with lawmakers. that is not to say he will not lose him -- some members of the right-wing flank of the house majority. but to suggest some but it will come along with a motion to vacate the speakership, which was the story at one point, that if he cut a that -- if he cut a deal he would be fired, they said. there is no one else that can be speaker here. there does not seem to be the numbers or motivation even in his most extreme members to make that happen. >> bloomberg's joe mathieu there in washington. we will bring you more coverage of the debt ceiling deal as the morning progresses in the asia-pacific. now to annabelle for a look at market reaction.

we will see a relief rally today. annabelle: absolutely that's what we are positioning for at the start of the trading week. the u.s. dollar in particular, given it has been the currency or asset that has really gained out of all this angst. still higher against the japanese yen above 140. trending lower against more risk sensitive peers. the aussie dollar in focus. overall relief but also thin trading coming through the session given u.s. u.k. markets shut for public holidays monday. u.s. futures pointed to a gain of .5% at the open. qe stocks already online trending in the green. the question, as you say, how long does all this optimism last? if you bring up the terminal we can look at the concern of this in terms of the u.s. cash balance that is now sitting at its lowest level since 2017. the treasury, of course, is about to replenish that.

it will be competing with banks for cash. as a result lenders could see short-term funding costs increase. the big question is, what does this really mean in terms of the impact it will have on credit conditions. bank of america says the phenomenon would have the same consequence as a quarter-point hike from the fed. you already put that against what we are expecting at the next meeting from fed officials. we saw the preferred inflation reading coming in hotter friday. it's very much a live decision at the next one. that is something we will be seen playing out. paul: thank you, annabelle. turkish president are to want secured another five years in power winning just over 50% of sunday's runoff vote. it raises the prospect of more friction with western governments and more uncertainty for investors. let's get the latest with bloomberg's turkey bureau chief. onur ant.

give us the scale of the economic turmoil he is facing and what he needs to do to turn things around. economic turmoil was there before the election. that's one of the reasons why a lot of people including international investors expected a possible -- opposition win. that's why after the first round when everyone came on top we saw a lot of pain in international financial markets as traders tried to weigh the possible discontinuation of erewhon -- president erewhon's unorthodox policies. after he won the election he gave a victory speech and said his top priority was inflation which he knows is still taking a toll on turkish people. he promised to courbet. he said he did before and do it again. what was really important in today's victory speech, we thought, was the fact erdogan said he's putting together a

team to manage turkey's finances that has international credibility. that remark is key. a lot of people tomorrow will try to read into those remarks. and, to gauge the possibility of whether or not erdogan reverses from his unorthodox policies. there will be a lot of people reading into those remarks that think a team with international credibility might involve people that will force a reversal in erdogan's economic policies. whether that will be the case, we don't know yet. but we will find out the next couple days. kathleen: what about foreign policy? turkey has always sat in an interesting position between east central asia, and the west. but with the word ukraine and erdogan's position on ukraine visa b russia, more supporting russia than perhaps nato allies, what will happen to that? onur: turkey has been managing

this balancing act between its traditional allies in the west, nato on the one side, and, rest on the other. especially, the war in ukraine complicated matters. it also put him on the world stage. he did help broker the deal that allowed grain out of ukraine to be exported to local markets. in his victory speech erdogan did not go too much into foreign policy issues, but we know from people close to him, close to his thinking, that we should expect little change in turkeys balancing act between russia and nato, on one hand. on the other, we might see some movement in other key issues such as nato's expansion to include sweden as a member. turkey has been the main road out there but we think there might be progress provided there is simultaneously progress in talks between turkey and the uss turkey tries to purchase f-16 airplanes from the u.s..

that will be one area of possible movement after tonight's election results where erdogan was reelected and extended his rule by another five years after ruling turkey for 20 years already. >> i want to return to the point you made about the fight against inflation. of course, so far, erdogan's tactic has been strangely orwellian cutting rates to fight inflation. what is the future of unconventional monetary policy in turkey? onur: he did not go there tonight. in recent days and weeks he has been going on and on about how he will continue to push for lower interest rates. this was something that was really one of the reasons why traders and investors have been bracing for more pain in turkish financial markets. tonight's speech, very interestingly, erdogan did not go there. the top -- fact he did talk about putting together finance

management with international credibility did kind of give the indication he might be considering a reversal, or at least, an adjustment in his unorthodox policies. you mentioned turkey has been cutting interest rates in the face of inflation. erdogan and self thinks lower interest rates will help lower inflation longer-term. that is the opposite of the assumption that central bankers around the world had when they put together their monetary policies. but, it is what erdogan believes. his central bank did follow his guidance on monetary policy in the last 2-2.5 years, basically since 2021. what happens there we do not know yet. but, if tonight's speech carries any indication as to the future of turkey's economic policy, we think there is a possibility that tonight's speech does leave room for erewhon to possibly adjust his economic policies.

and, might select a new team of economic administrator to run his policies. paul: now let's get the first word headlines. profits that china's industrial firms kept falling the first four months of the year's underlying cooling demand and deeper factory gate deflation. industrial profits fell 20.6% january-april. from the same timeframe in 2022. profits for april were up 3.7% from one year earlier. compared with the margins decline of about 19%. here is commerce secretary gina rolando. she said the u.s. will not tolerate china's ban on microchips. calling aging's decision economic coercion using her sharpest language yet to describe washington's reaction. china warned companies against buying products from micron this month saying they failed a cybersecurity review.

the australian trade minister says the barley sector may be the next beneficiary of a foreign relationship with beijing. he expects china to remove 80% of his tariffs on barley experts that exports in the next few weeks, signs ties between china and its top trading partner are on the mend. indian prime minister modi inaugurated a new parliament house in a revamp of the colonial center of new delhi. about one third of the country's federal lawmakers including those from the main opposition congress party boycotted the ceremony. criticisms linger that the new building is a vanity project to boost modi's image ahead of the 2024 national vote. >> i had, turkish president erdogan set for a historic third term. more from the middle east later

on what that means for the country. and next we have the debt deal but the next battle is to get congress to pass it before the june 5 deadline. we will discuss with amp's chief economist and head of investment strategy. this is bloomberg.

kathleen: look at u.s. futures closely. almost a .5 game on the s&p 500 which rose 1.3% friday. the nasdaq was up 2.6%. marv l technology revenues in 2024 at least double a year ago from a search on ai propelling the nasdaq to a 2.36% gain. it was also about the debt ceiling. news of that agreement looks like it may be put together over the weekend. it's no surprise we saw stocks a good portion higher. in fact, the highest in these markets now since late 2022. you can see overnight going into asian trade, there is still optimism. we will potentially hear a lot more from president biden on what is going on and expected. paul: paul: let's talk more with

shane all head of amp investment strategy and she for economist. shane, we have a start on the debt limit, which, let's be honest it's really just an agreement that lawmakers will not shoot themselves in the foot. what sort of relief rally do we expect as a result of this? shane: the dealer itself is worth 1% or so on u.s. shares. it has already been discounted to some degree because of confidence with the rally friday and thursday. you have already seen a bit of arises there. of course the ai frenzy was another factor. i think you will get a bit of a positive reaction. we are starting to see that in u.s. futures. when the u.s. share market reopens tuesday there will be a bit of uncertainty about whether it passes through congress. that will hold the market back a little bit to the extent that you hear congresspeople rejecting it saying they will not support it.

that might give us a bit of pullback. i think broadly is positive. i think ultimately it will pass. but it will reveal more uncertainty over the next few days. paul: how enduring do you think the relief rally will be? once we take around -- away all the drama around the debt ceiling what fundamental issues remain that have been holding markets back? >> fundamental issues are still there. obviously there are positives. as investor sentiment is still negative. many investors and surveys looked to underway shares. we have that ai story. that has been very positive longer-term. that should help. and of course the u.s. economy and the global economy has held up better at the start of the year. the flipside is you still have the fed sounding hawkish. inflation numbers friday were a little bit to the upside compared to expectations. the u.s. economy is still likely to slow.

the risk of recession is still there. look at commodity prices. take copper, often referred to as dr. copper. it struggles to maintain any positive momentum. momentum recently has been quite negative. and there is uncertainty about the strength of the chinese economy. i think once this is out of the way you still will have a fairly rough ride in shares and we are coming into a difficult season as we come into the june and september quarter. , often rough. you get a knee-jerk reaction there. the other thing to note is a video does cap spending in the u.s. so you will get less government spending than previously expected and you have a liquidity withdrawal as the fed -- sorry, the treasury starts rebuilding his deposit at the fed. i suspect we will still be in for a bit of a rough ride for shares over the next few months. kathleen: at home in australia

inflation is an issue for many central banks around the world including the reserve bank of australia. what do you expect there and how will it position them in the midst of global forces? the chinese reopening not so strong. in the u.s. the question of recession and how far the fed heights. shane: we get an update on that wednesday with monthly inflation figures in australia. the monthly indicator is still a bit volatile. it's a relatively new indicator but i suspect it dips a little further. the most recent reading was 3.68% down from a high of 8.4% in december. we think it will slip to about 6.2%. the consensus is it goes up a little to 6.4%, but, whatever it is i think the trend remains down and it will confirm we have seen the peak. the problem for the reserve bank of australia, like many central banks, is inflation is still very high and there are concerns about sticky services inflation and wages growth being too

strong in australia with an upcoming minimum-wage case. the result i think will be announced sometime in june. all of those things will keep the reserve bank on edge even if we get a further slide i did a monthly inflation numbers out wednesday. kathleen: i have to ask you about japan. there's a country that wants inflation higher and it is well above its target. the bank of japan still cannot quite believe it. meanwhile, what a stock market rally in japan. we had a j.p. morgan and others over the weekend saying, basically, by japan. they are very positive. how do you put this all together? shane: if you look at japan from apparently -- from a purely technical point of view it looks very positive. it has broken out of constraints. it's the highest level since 1990 or something. technically it looks pretty good. the only, i guess, uncertainty is the inflation story. we have the headlight number around 3.5%.

we have the core measures on a u.s. bases around 2.4%-two .5%. so it's above the target. the longer the inflation stays above that target, particularly, core measures, the greater the chance the boj will get more hawkish like other central banks and that might dampen the performance. other share markets around the world have been constrained. japan is a little different. but, if the b of j starts to see more change, it could signal ground -- downside pressures on the japanese share market. yes there is a bit of a buy there. the japanese trade market has more upside but i think the gains will be constrained and i keep a close eye on what the boj does. paul: back to something you mentioned a couple of times, the ai inspired rally. there is no doubt that's an

exciting technology with a bright future. do you see shades of.com level excitement around it on the shane: i certainly do. i must admit that all the technologies that come along like bitcoin on a crypto, everybody got excited about that and that proved to be a bit of a false start. ai is a lot more fundamental and it offers a lot more hope in terms of productivity. the service sector for high labor companies. that's a positive thing. the problem is, like we saw with.com, it had a great long-term future, in the late 1990's, and we reap the benefits of that but it took time for that to show up and the market got ahead of themselves. if there are echoes of .com there i think investors need to tread carefully in terms of not getting care -- carried array. the unfortunate reality as john maynard keynes says is the market can keep going for longer than you can hang on.

but, i think it is getting a bit frothy. paul: the amp head of investment strategy and chief economist shane oliver joining us in sydney. the big story of the hour is of course the in principle agreement to settle the u.s. debt ceiling. we anticipate a relief rally today. u.s. futures trading. it will be a market holiday1 on the u.s. monday. it's sunday now of course. monday morning in the asia-pacific. locale futures are trading to the upside. modestly so, though. better than .5%. nasdaq futures better than -- by just a little more. joe biden is due to speak shortly. joe biden and kevin mccarthy are both signaling the deal will pass. let's go to president biden now, who is about to address us. president biden: we have good news. i just spoke with speaker mccarthy and we reached a bipartisan budget agreement that we are ready to move towards the full congress.

i think it's a really important step forward. it takes the threat of catastrophic default off the table and protects our hard earned an historic economic recovery and represents a compromise that means no one got everyone they want. but, that is the responsibility of governing. this deal is good news. i believe you will see. for the american people the agreement prevents the worst possible crisis, a default, for the first time in our nations history. an economic recession. retirement accounts devastated. jobs lost. it protects key priorities, accomplishments, and values that congressional democrats and i have fought long and hard for. invested -- investing in good jobs in communities throughout the country protecting social security, veterans, and more. the speaker and i made it clear from the start the only way forward was a bipartisan

agreement. that agreement now goes to the united states house and senate. i strongly urge both chambers to pass the agreement. let's keep moving forward on meeting our obligations and building the strongest economy in the history of the world. i will take a few questions. >> you said at the beginning the debt ceiling was nonnegotiable. wasn't that what you have just on here? president biden: look, in the past they said they would pass the debt ceiling on the condition it would have all of these cuts. i said i will not do that. you pass at the debt ceiling and i will negotiate with you on the cuts. you say what is going to happen? what will the budget look like? that is what we are negotiating in order to get to them deciding that they will go along with a new debt ceiling, meaning, it's not attached. something totally different was attached before.

you want to make it look like i made some compromise on the debt ceiling. i did not. i made a compromise on the budget. >> even though you have not gone as far as i wanted. president biden: sure, yeah. can you think of an alternative? >> what do you say to members of your own party that say you made too many concessions on the steel. president biden: they will find i didn't. >> on your allies and adversaries to america would you be willing to talk about what you think this process said to those adversaries and allies? what does the process and struggle say? president biden: we have been through this more than once and it is the nature of the way we handle the nemesis -- deficit and handle each year whether we will pay our debts. it has happened more than once. it will probably happen again. but it won't happen at least for another two years. i think beyond that it will not either. >> do you think it's time for

the u.s. to get rid of the debt limit? pres. biden: no. i think it would cause more controversy getting rid of the debt limit, though, i am exploring the idea that we would, at a later date, a year or two from now, decide whether or not the 14th amendment, how that would actually impact whether or not you need the debt limit every year. but that's another day. testing, please stand by. >> -- do you believe speaker mccarthy has the vote and did he negotiate in good faith? i believe he did negotiate in good faith. he kept his word and did what he said he would do. i have no idea if he has the votes. i expect he does. or i don't think he would have made the agreement. >> do you have a comment on the elections in turkey? have you spoken with president everyone -- president erdogan? >> some are saying the policy will lead people to go hungry.

what's your response? >> that's a ridiculous assertion. >> is financial aid for ukraine secured in your new budget? kathleen: president joe biden at the white house coming out to speak about the deal on the table now with republicans, house speaker kevin mccarthy. they hammered this one out. most of the questions, did you compromise, could you think of anything different, he said. did you too -- do too many? anne-marie heard turn ordern joins us from washington. what do you make a video? it seems like something that can pass by when they? annmarie: it has to pass both chambers. when you look at the house the issue is getting the fringes,

the hard-liners on both sides to want to sign up for this. there are items in video, or items not in the deal they were hoping for or expecting. but it does look like they will be able to with enough votes -- with enough votes from either side to make sure this passes. potentially we could see that as soon as wednesday. but then he goes to the senate and the issued -- issue with this and it of course is any one senator has a pretty wide scope of power in terms of how they could make this a very cumbersome process. we already heard from one senator mike lee of utah saying that if he does not see the steep spending cuts, many of which were left on the table, he would make the process very difficult. what you have here is a very tight timeline to make sure the bill gets across both the house and the senate and to joe biden's desk before june 5, what the treasury secretary told us before we went into this long weekend, that it was not as soon

as june 5 that we could potentially default. it was june 5 we will be running out of cash. paul: ok, so a fairly definitive date. you describe a few hurdles yet to clear with the agreement. what are the key issues that could still be sticking points? i could still pose hurdles? annmarie: on the right wing side of mccarthy's conference, they voted for a bill that had much more spending cuts in it, deeper spending cuts. there will be individuals on that side. we already heard from one representative earlier this weekend when video came out, representative bishop. who just tweeted what he thought of it with a vomit emojis sign. these individuals are annoyed by things like work requirements. the democrats gave in on some work requirements, but not

medicaid. you can see how both mccarthy and biden come out and say not everyone would like the bill, because it is a compromise. on the progressive side they feel like they gave too much. they are upset about any work requirements. even though it was not medicaid they are upset there are work requirements now to access a food social safety net called snap. these are issues at play on both sides of the aisle. the job that will be difficult this week for the white house, with the house in session and congressmen and women back in their districts, it will be difficult to make sure they get enough in the middle to get this through. it seems like when you have speaker mccarthy talking to the press all day today, president biden back at the white house giving a press conference, this is obviously squarely their number one task and it doesn't seem like they will get it through. but obviously crafting a deal and passing it through congress

are different things. kathleen: joining us now is the managing director and managing strategist at kappa alpha. -- capital also. james: i think the clown show is over. i think there is a 100% chance this passes next week. the result is aptly what most people expected weeks ago, a spending freeze and not much else. both sides could have settled down and negotiated a spending freeze weeks ago. so, it's really a lot of send -- silly spectacle to get nothing done and i'm very happy to see it over. i hope the next time we have a debt ceiling battle it does not go this badly. kathleen: in terms of future battles, we will be going into

an election year. kevin mccarthy, a lot of people thought his chances of getting anything through were dim after what a hard time he had having to compromise with the freedom caucus to become the speaker of the house. is he now a stronger leader or in a better position to push legislation through? god forbid that it be good for both sides again somehow, getting to more of a metal? james: i think he is a vastly stronger the leader -- a vastly stronger leader in the ncs political capital in the bank. people show -- take them seriously now. he has shown ability to whip his members, negotiate a tough deal, and do the functional role of a house speaker. i think mccarthy standing was definitely increased but not because of the deal today. it has been on the increase for the past several weeks. i think the real issue will be in coming years when the u.s. faces a fiscal crunch that is

vastly greater than what we are facing now, when the medicare trust fund runs out, when social security runs out, when we have tremendous pressure on the budget due to rising interest rates. bottom line, you have got to learn to grow up and have a reasonable budget negotiations because future negotiations will be much, much harder. it's not because of a fake debt limit crisis. it's because the u.s. is really entering budget constraints in the future. paul: you described the debt limit crisis as fake. is there any desire on either side of the house to end their charade? president biden was asking about that in the press conference. is it time to get rid of it altogether? he feared doing that might be more controversial. but can you see it happening that there is no debt limit?

james: i want to say that the crisis is a fake crisis not in the sense that it is not a real issue of running out of appropriafunding to pay for the dead, but rather, congress can always vote itself an extension. it is a fake crisis in the sense that it is a artificial crisis. they are using the deadline as a political force function and if things got close they would probably just extend the deadline. i think in the future we might reconsider the debt limit. i think if you just changed the attitude people had to treat this as the sort of budget negotiation congress has every year when it is appropriations, and you don't have both sides insisting they will shut everything down that would help. of course, there are plenty of other ways you can also work around the debt limit. perhaps, doing what was contend -- considered to be the mcconnell solution for the 2011 budget act, allowing the president to raise the debt

limit subject to a motion of its approval. the bottom line is this is all about formalities, all about posturing. i do not think the debt ceiling is inherently the problem itself. there are good aspects of the debt ceiling. but what you really need are people willing to address the fiscal crisis towards which the united states is hurdling when social security and medicare run out of money and when other programs continue to grow far ability of the current tax base to finance them. things will get very hard and that means we need grown-ups that are willing to talk about issues and not idiots that want to posture about deadlines that congress can extend at 12. -- at will. paul: strong language there, james. it lays into this question.

u.s. policymakers are aware how this debate makes them appear to the rest of the world and the risk it entails. james: i am sensitive to this because i have been in this business for throughout that for 30 years, going on 40, depending on when you start the count. i have been required to discuss the situation in tokyo, in london, in other capitals of the world. nowhere else on the planet gets this nonsense. it's not taken seriously and it makes america look full list. it makes -- foolish. it makes the u.s. look especially foolish when the president curtails a strategically important diplomatic mission to asia to come back and sit in the white house, said in delaware while other people negotiate this stuff. this theater has gotten out of control here. if i seem a little ticked off, is just that i have done this for so long. i have been embarrassed in so many foreign countries trying to explain this. i really see the outcome today

as a simple spending freeze that requires none of these shenanigans. that's all i have to say. i'm tired of this. it's been three decades of my life. >> may be the next decade will be luckier. we can only hope, jim. i have to ask you specifically about the u.s. dollar. there is a lot of discussion now about the dollar losing its role as the world reserve currency and all the influence and power that can go with that whittled away. is this another thing? are you concerned about that? james: as far as the dollar goes, i think the dollar does have many advantages which help the united states. certainly, it's an extravagant privilege for the united states to manage the world's reserve current fee -- currency and thus have much more flexibility with deficit spending. i am worried about this in the context of other things. the extent to which i believe the u.s. government is trying to

use sanctions policy, trying to use access to the u.s. financial system as a tool for geopolitical leverage. in effect, we are abusing the position of extravagant privilege we hold. we have pushed it to the ends degree -- nth degree with our sanctions on russia. i support a strong policy on russia and use of sanctions in appropriate cases but i think we have to wake up and realize we cannot extend extraterritorial financial sanctions. we cannot do everything possible to encourage the world to move away from the dollar for political reasons, and, at the same time, go through these stunts that undermine global confidence in the dollar as a reserve currency. even if the united states maintains lots of advantages, i believe, the argument that the dollar will reign the world reserve currency because other

currencies like the yuan or euro can't do the role the dollar does. but we are hurting herself with debt ceiling onto and overreliance on sanctions in this tool at foreign policy at the same time. p james --paul: james lucier from capital alpha joining us. next we have a reaction from republican cofounder charles fleischman and matt bennett. let's bring in annabelle for a morning call. the short-term looks set up for a decent rally in the asia-pacific. annabelle: that's right. the focus is really short-term. this chart shows it. the line in white is 10 year u.s. treasury futures and the blue is s&p 500 futures. you can see risk assets looking

to gain and havens set the slip. it is the question of how long this lasts. we do look at a situation now where the u.s. treasury will be replenishing its cash stockpiles, in competition with lenders for funding and off that we could see funding costs spike and in turn that could do some of the fed's work for it to the tune of 45 basis points. the next fed decision, given the preferred inflation gauge came in hotter friday as well. certainly there's a lot to assess in the days ahead. but short-term at least, investors out there, including j.b. s, saying markets could not breathe a sigh of relief today because of the deal appears well-balanced. but, not so much it really jeopardizes growth. they say treasuries could gain out of this. anna -- kathleen: how long could

a relief rally last? annabelle: it depends who you are talking to. there is a big debate now setting up on wall street where you have the likes of bank of america, for instance. they raised their year end target for the s&p 500 to around 4300. same time, you have the likes of michael wilson from morgan stanley who come as you know has been one of the top stock pickers on wall street over the past year or so. he said to be aware of the s&p 500 rally looking at gains of nearly 10% over the course of 2023. he does not believe this will be enduring for any sort of long-term to come. listen. michael: this is what bear markets too. they are designed to full you, to confuse you to make you do things you don't want to do, chase think that the wrong time, probably, sell them at the wrong time. we think the fundamental cases to support where stocks are trading today weather at the

index or the single stock level. the second act will be choppy her and probably downward in the index. paul: a warning there for morgan stanley. we have more to come on daybreak. this is bloomberg.

paul: with targets -- turkish president erdogan ceiling

reelection victory in a runoff vote, focus now shifts to changes to the cabinet that could signal changes in economic policy. joining us now is gonul tol. president erdogan celebrates victory today with another five years in power. he has a lot of work to do particularly around the economy with inflation around 50%. food prices are soaring. what's the plan for dealing with this? gonul: i don't think he will change course. on the campaign trail he repeatedly said he would continue his unorthodox financial policy. the question is, will he be forced? economists expect a worse turn for the country's economy. and that could force him to go to the imf. in the past he repeatedly said he would not do that. the last year or so he increasingly relied on friendly autocrats.

countries like russia for instance. they injected cash into the turkish economy. to shore up the country's finances. so, i think he has two routes moving forward. he could either rely further on the friendly autocrats, or, he can go to the imf. again, in the past he said he would not do that. but, the question is, you might have to. paul: in the context of his interference with central-bank decision-making, the very unconventional policy of cutting rates as inflation surges, even -- are his friends, other autocrats likely to have short patients with this approach? gonul: certainly economic conditions in the country are so dire you might need more than a few billion dollars to save the

country's economy. but, in terms of economic policy, on the campaign trail and before he did not signal a change. and he did not put together a strong enough economic team. previously he had his son in law on board in charge of the economy. and he had a few market friendly faces in his government in 2018. they were forced to resign when he brought on board his family members. he insisted on those unorthodox policies. but, right now he does not have anyone with the necessary background to offer a solution to the country's problems. and, he does not intend to change course. kathleen: what about the talk of some sort of international team coming in? is that something that has been leaned towards in the past?

is this something new that could change the program substantially? or, do you think it's another way to patch things over? gonul: before the first round election president erdogan reached out to a man that lives in london and was in charge of the country's economy until 2018 and was one of the few market friendly faces in his cabinet. before the elections he reached out to him and reported lee -- reportedly offered him to take the reins of the economy but he declined, suggesting, he doesn't see a way out for the country's economy as long as erdogan is at the helm. kathleen: thank you director of the turkey program at the middle east institute. tune into limburg radio to hear more from today's big newsmakers and get in-depth analysis from the daybreak team now broadcasting live from our studio in hong kong. plenty more is ahead.

stay with us.

kathleen: a debt deal is on the table and president biden is confident moving ahead, has is the house speaker. you can see how this is keeping some booths under stocks that started friday as the deal got

closer. the s&p and nasdaq both of about .5%. that is in bn nasdaq of about one third. let's look at how markets are performing in the awake of the agreement on the u.s. debt deal. not a huge gain for the u.s. dollar. strengthening against the yen above 14079. the aussie dollar performing well, 6523 against the greenback. on the board not trading at the turkish era --lyra. that does it for bloomberg daybreak: australia. bloomberg daybreak: asia is next. this is bloomberg.

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