>> good morning and welcome to daybreak australia. shery: good evening i'm shery ahn. nvidia briefly becomes the first trillion dollar chipmaker joining an elite club of less than 10 companies ever hit that mark. >> the ai fueled euphoria losing steam. >> chinese stocks trading in hong kong now among the worst performers. let's look at how u.s. futures are coming in the asian session. little pressure after stocks finished. the s&p 500 flexure -- fluctuated around 4200.

energy companies weighed on the index. oil below $70 per barrel. it is still there, although a little bit of upside. we get more signals that the physical market has ample supplies. we are looking at treasury yields falling as there are hopes that congress will be able to pass the debt deal and head off a default. consumer confidence dropping to a six-month low. paul: here to discuss is our panel of guests. nvidia briefly touched $1 trillion but couldn't hold on. >> the path ahead, there is so much surrounding ai technology and nvidia is seen as the top key player in this industry.

they gave a strong revenue forecast showing there isn't just type it's real revenue demand. we think they will take a little bit of a breather because it has done so well, but people are still very optimistic. shery: we are looking at broader mega caps. >> like he said, there are a lot of investors who think there's a lot more room for this trade to run. there were a lot of portfolio managers who were heavily under invested in technology stocks and mega cap names and ai names to start the year. if you look at etf flows, we saw over a net $3 billion of outflows in the invesco qqq etf which is the classic nasdaq etf play. those investors who pulled out of tech now are feeling a little

bit of fo ml. we are seeing investors underperform the benchmark, only 33% of large cap mutual funds are being the benchmark right now compared to the average 38%. they tribute the lackluster performance to classic aversion to these technology mega caps. shery: how are other chipmakers besides nvidia doing right now? >> the whole space has been strong, but we are seeing the most pronounced gains with exposure to hi. -- ai. we saw marv l technology give a good forecast. they saw a massive rally on their news. most of it is nvidia lifting up the entire group. paul: in terms of ai nvidia

lifting and floating all books, what's going on in china? has the ai rally been helping? annabelle: it helped on tuesday because we had names like one that creates voice recognition was up 8%. gains in the ai sector or the ai names helped. it doesn't seem so significant as other markets, but china being able to close muted is a bit of a milestone because we have seen the stocks in those indexes so much under pressure. the reasons for that we have already discussed. things like weakening external environment, domestic issues as well with the economy. the yuan pushing past the seven level.

h-shares are in focus. we have been watching for that to enter a typical bear market instead we got the drop in the golden dragon index overnight. shery: how are the china pmi numbers going to factor into investor sentiment? annabelle: that something else would be really closely tracked. investors are looking for any signal that there has been a stabilization in the economy or at least perhaps an improvement. the prediction we are getting from our team you can see in this chart, this is the consensus call. broadly, we're looking for further stringing. in the factory sector. also services sector slowed. this was the time what we had

the labor day holiday so that's typically when we see an uptick in spending. this could all push the case of further stimulus from the pboc. something we will be tracking as well as geological tensions. jp morgan has been speaking about this ahead of their conference kicking off today. further dialogue something that can help improve the case for chinese stocks but they are also saying the bank's chief economist for china saying there is not much of a case for large-scale stimulus from the pboc. paul: we have a few growth concerns in china, also potentially hawkish fed circling. >> the narrow market breath has been coming up a lot as we see names like nvidia top $1 trillion. so far, we haven't seen the catastrophic market crash that a lot of the bears have been

talking about for morgan stanley. the rally is only being held up by a few of these names. so far, the earnings for these names have been strong. the technology names have held up incredibly well. the question is how much can this rally be sustained even if you do believe that ai is the future and you want to invest in it, how much longer can it power this rally in the face of a potential recession and higher rates? shery: jp morgan is hosting its annual global china summit in shanghai starting wednesday. the first in person event since the start of the pandemic. we will be there live and exclusively with jamie dimon to

talk about the banking turmoil, the debt ceiling debate, as well as the china ambitions amid geopolitical tension. that is coming up at the times on your screen. you can catch our other exclusive conversations from the summit as well. let's go to su keenan. su: kevin mccarthy says his job is secure despite threats from republican hardliners over the deal with the white house to avert a u.s. debt default. house freedom caucus chairman says the debt limit deal fails to deliver and another lawmaker says he will trigger a formal process to remove the speaker. an upcoming house rules committee vote will mark the first key test of support for the spending deal. >> speaker mccarthy had a mandate from the american people

, negotiated with a powerful negotiation position of a unified republican party not only in the house but the house and the senate to hold the line for the bill that we passed. this deal we have heard about totally fails to deliver on all of it. su: china's president has told officials to accelerate national security defenses. he told a meeting the complexity and toughness of security issues has notably increased. he reportedly said the government needs an early warning system for risks. he's is officials need to properly handle these concerns. taiwan's defective ambassador to the u.s. says the lack of a double taxation treaty is unfair and discouraging investment from taiwanese semiconductor firms. she added that taiwan is only a

top 10 trading partner of the u.s. but does not have an agreement that prevents double taxation. her comments come as the u.s. seeks to boost domestic production of advanced semiconductors. finally, the founder of theranos has reported to prison to start her 11 year sentence for defrauding investors. this after the unreliable blood testing technology. a court last year convicted her of wire fraud and conspiracy and she lost her final appeal last month. she is being held in a minimum security prison. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: we have an alert about japan's threat on north korea. japan's coast guard said north korean missile already fell and

they lifted the alert. we have heard from south korea they also sent a warning to shelter from north korean missile threat. the government of seoul sent the alert by mistake. they urged residents to prepare for evacuation. we are still watching the latest developments around that potential threat from north korea. paul: still to come, the u.s. debt limit bill heading into a crucial final stretch with less than one week to win congressional approval. deep dive into how those negotiations are evolving later. up next, how nvidia earnings outlook could embolden the fed to maintain hawkish stance. this is bloomberg. ♪

>> we couldn't get everything we wanted, and we had this debate you couldn't talk about the whole budget. so in essence, we were only able to focus on 11% of the budget. i understand people get upset about walking through a debt ceiling, but this is the house, the senate, and the presidency. when you read the newspapers, you sit back and read -- listen to economists, they will say

this is the strongest debt ceiling we ever had. paul: kevin mccarthy there on what else the debt limit deal. our guest joins us now from chicago. the debt limit relief rally lasted about 30 minutes. that's even less than the day or so we had in the asia-pacific. i think you're not surprised. guest: i'm not surprised, i expect that a debt limit deal will get done. politicians are willing to stand their ground as long as it allows them to make a point, but they also want to get reelected. i think everybody including them knows that not getting a deal done is catastrophic. i expect that a deal will get done, it will be passed. and we can move forward from here. paul: let's talk about the nasdaq which had a pretty good day. nvidia had a very good day but

couldn't hold onto the $1 trillion market cap. if you are holding nvidia shares, what do you do? do you take some profit? guest: as it turns out, i do personally own nvidia. i have always been a bull on the stock and i've owned it for a while. clearly, i've made quite a bit of money in the last two weeks because of it. i do struggle on whether or not i should sell it because i think there are long-term term tailwinds to the stock. they are going to make it so the stock will continue to move higher, however we have had quite a pop. i personally sold half of what i owned. i wanted to take profits. i think the long-term story for the stock remains positive. these trends toward ai, the trends that they are on the cutting edge of, they are rising and they are the leader in the

space. overall, the long-term story is great but in the short-term, i would be taken profits. shery: can the promise of ai over technological advances offset the risk of higher interest rates in the long term? guest: short-term there are pressures on the economy. i think it's interesting, we had better than expected consumer confidence numbers today. we have the jobs report on friday where we haven't seen a lot of weakness in jobs. we still have 1.5 jobs per unemployed person. we've had 10 consecutive months of declining inflation and we've had this tightening policy. the unemployed rate in the u.s. is going down from 3.6% to 3.4%. there are deftly crack's in the economy. there is slowing growth, but

long-term trends are not going to be stymied by short-term inflation headwinds and rising interest rates. i think it's a short-term phenomenon and two years from now, rates will be lower, inflation will be lower, and stocks like nvidia will continue to be doing well because the ai demand will grow. in the short-term, it's a stock that i want to take profits from then look for another entry point. shery: are you concerned about the breath of the market rally? we have seen other parts of the markets like small caps continue to be under pressure. guest: yes, it is concerning. since the october bottom, small caps are only up about percent. typically you would see them up 50% 60%. we haven't seen that. another interesting thing we have seen is that typically, you see financials do much better or

at least in line with the broader markets and we haven't seen that. banks as a whole are negative versus the s&p which is positive. that's concerning. there are areas of concern that are unusual if you think that we have already seen the bottom, i don't think we have. i think the strong report from nvidia, the stronger than expected consumer confidence, what is likely to be more of the same and implement markets and what is likely to be more of the same in the inflation numbers will lead the fed to a difficult decision which is should they pause or should they continue to tighten? that is the million-dollar question. i think they are likely to pause, but if we see a strong job report on friday, they might think twice and hike another 25 basis points which would be the right thing to do if the policy is about bringing down inflation. paul: that jobs report shaping

up as a crucial read for the fed. if we can't say or you can't say it with the fed is going to do next, where do you place the odds of a recession? guest: odds of a recession are 100%. the question is when. i don't of answers that. there was a lot of liquidity put back into the system after svb. during the debt ceiling negotiation, the treasury has been putting liquidity into the market. i think getting the debt deal done will pull some liquidity out of the market which is important. if that happens, we start to see overall market conditions tightening. more likely than not, the fed will continue to tighten and that will lead to a recession. the fed has made it clear that's what they're aiming for. a shallow recession, but a recession nonetheless.

there's so much excess liquidity in the system, it's not going to come out overnight. is going to take time before we see the real impact of the fed policy on the system. shery: always good to have you with us. of course a reminder about our exclusive conversation with jamie dimon live from the global china summit in shanghai coming up. you can also get a roundup of all of the stories you need to know to get your day going in today's edition of daybreak. terminal subscribers you can customize your settings so you only get the news on the industries and assets you care about. this is bloomberg. ♪

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shery: goldman sachs is said to be considering another round of job cuts as the dealmaking business remain slow. it will affect less than 250 people and will include the more senior employees. earlier this year, it hit eliminated 3200 positions. elon musk has told china's foreign minister in beijing that interest of china and the u.s. are intertwined echoing recent remarks from the bosses of apple and mercedes-benz. they met on his first post-covid visit to china. sources say elon musk is expected to visit tesla's shanghai factory and potentially meet the new premier. hewlett-packard enterprise shares fell with projected

revenue for the quarter fueling fears of slowing growth. the company also trimmed its earnings growth forecast for the fiscal year. >> let's take a look ahead. we have the rba governor said to appear before a senate committee today. we are also watching for us trillions latest cpi numbers. bloomberg expects april numbers will likely show inflation easing to 6.4% year on year. also due today, the private sector credit data for the month of april. let's take a look at markets at the moment. it looks like the relief rally we saw off the back of the debt

deal well and truly over. futures across the region are flat or pointing down to some degree here in australia. we are expecting to open one half of 1% lower woman get going in 90 minutes. a similar story for japan, nikkei futures off facing a few headwinds. s&p futures looking flat as we keep an eye on what's going on in washington, d.c. as the debt limit deal works its way through to what is expected to be a conclusion. a quick word on currencies. we have the yen looking week now. we heard from the top currency official saying action might be needed if the yen continues to weaken. >> near the six month low.

take a look at u.s. futures under a little bit of pressure after the dollar weakened today. treasury yields falling on the hopes that the u.s. congress will be able to pass the debt deal and had off a default. yields on securities payable early june resuming their drop. you can see dow jones futures down. we had a mixed close given that the s&p 500 fluctuated around 4200. that optimism over anything related to ai but at the same time, energy companies wait on the index. we had seen oil falling below $70 per barrel. more to come on daybreak australia. this is bloomberg. we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams)

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su: you are watching daybreak

australia. the u.s. says one of its reconnaissance aircraft has run into an aggressive encounter with a chinese fighter jet. it says it was an international airspace when the chinese jet flew directly in front of it. >> we are not looking for a new cold war. there is a demand signal from countries around the world that china and the united states managed relationship responsibly. that we take every reasonable step to make sure the competition we are in does not veer into conflict. su: vladimir putin has demanded stronger air defenses in moscow following the biggest drone attack since he ordered the invasion of ukraine.

the defense ministry says eight drones were intercepted on tuesday and blamed ukraine for the assault. the strikes on moscow followed another night of attacks on kyiv, the second -- 17th this month. the eight party alliance will meet weekly until they formally take power after move forward publicly scrabbled -- squabbled. it's the second largest party in the coalition. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: a is said to speak at a bank of japan conference today as the top currency official warns of government action to

shore up the yen if it keeps weakening. kathleen hays is here with the details. what are we expecting? >> we are not expecting a lot unless we get really lucky. this is a big conference, it's their annual international conference. there will be central bankers around the world. he is getting the opening remarks, he is not scheduled to give any kind of speech. there is a lot of this conference not open to the public, not open to the press. let's put this in context. the yen hit its lowest level since november versus the dollar just yesterday. then there was a meeting held by the ministry of finance, the bank of japan the financial services agency and the vice minister for international affairs, the chief currency

official said after this meeting he noted it's the first meeting that has been held under the governor leadership. he said it's important the foreign exchange market reflect fundamentals when you look at this chart, that is the question. also the mof will take appropriate responses and necessary. it's basically currency intervention if needed. one of the big things hitting the dollar yen now is in september and october last year when the governor was still at the head of the boj, that's the fact that there may be at least one more fed rate hike. that's the kind of thing, the action we are seeing now and that gets us down to the boj in particular. he spoke last week and made it clear it was a press briefing. but, he made it clear that he's not ready to do anything.

because inflation is not to percent sustainably at target. it's not stable there and that's the kind of thing that would prevent him from making any kind of move. traders are starting to think what if there is any indication that this kind of pressure being put on the yen could face the same kind of pressure it did last fall which is why not peak yield curve control? why not widen the band for the 10 like the governor did when he did his famous tweak in december. is anything like that going to happen today? it doesn't seem likely it's not that kind of event. again a lot of this is not want to be public. that's the kind of thing people wish they could hear, we will be watching everything that comes out that we have access to and bring quickly as we can get. paul: keeping on the boj.

bloomberg subscribers can watch the speech later on. a reminder we will take you live to j.p. morgan's global china summit that gets underway in a few hours. don't miss our exclusive conversations with jamie dimon and other executives. wells fargo says low valuations for bank stocks are not justified. annabelle joins us for morning calls with the details. with names like jp morgan being overly punished? >> that's the call from mike male at wells fargo. what this chart shows the p/e ratio for bank stocks. it is tumble, it's what the levels that it was at before the banking crisis. he says they said at these levels bank stocks in particular the names like jp morgan,

citigroup, b of a, they are at entry-level points for investors. he is basing this off of a couple of factors. he says investors are pricing in is essentially the worst we have seen. the bigger names of picked up flaws from regional lenders that continue to be under pressure. he says easing levels of inflation or enough to justify higher bank valuations instead he is seeing other catalysts that could lead to a re-rating a bank stocks. among them a shift in fed policy that can lead to lower deposit rates. then you have lower term rates that could feel buybacks. then the so-called soft landing still holding out hope. >> any other valuation calls that have caught your attention? >> this one is for twitter and is one of the most read stories. this is fidelity saying it's

worth 33% of the price that elon musk paid for which was $44 billion. we know the fidelity first reduced its valuation back in november. elon musk himself has admitted that he did overpay for twitter. this is a huge reduction that is also playing out into elon musk's wealth overall. he has lost around $8 billion just from the twitter purchase alone. it's a company that we know has struggled to get advertising revenue also to convert more subscribers to their paid platform. shery: we have more to come on daybreak australia. stick around, this is bloomberg.

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paul: hakeem jeffries says the democrats are going to make sure that kevin mccarthy holds up his end of the deal. >> support the biden administration's resolution in that it will extend the debt ceiling for an additional two years and avoid the country being in this kind of hostagetaking situation for the rest of this congress. the other important resolution that was brought about as a result of the leadership is that some very important democratic priorities were protected. social security protected, to care protected, medicaid protected. veterans protected.

medicare protected. the american people protected from the types of cuts the republicans were trying to jam down the throats of the country as a result of the hostagetaking situation that has been underway for the last several months. >> it sounds like you are a yes when the bill comes and that's how you are going to vote. how many other democratic colleagues do you expect also vote yes alongside you? >> we are in the process of engagement right now. we had three hours of virtual meetings with administration. three hours of virtual meetings underway today with the in administration. we will also have a caucus meeting tomorrow in person at the house where members of the administration will be able to continue to talk to members of the house democratic caucus. it has been a collaborative and cooperative and communicative experience over the last few days.

the question everybody should be asking in terms of what's gonna happen on the house of the -- the floor of the house of representatives, how many votes will republicans produce? this is an agreement that at their insistence, they negotiated with administration. it is our full and complete expectation that they are going to produce at least 150 votes. we as democrats are going to make sure we do not default on our nation's debt. america should always pay our bills. as important for republicans to keep the promises they made. no one seriously believes that 95% of house republicans are going to support this agreement. that's a number that i believe had been floated in the public domain. it is reasonable to expect they will produce 150 votes on thursday. shery: that was hakeem jeffries. the debt deal has less than one week left to win congressional passage before june 5 default deadline.

a brookings institute senior fellow joins us now for more on this. it's a tight timeline especially if you send the bill to the senate. you have one objection and that traders a set of technical procedures. how will this play out? guest: i think it looks pretty good. the negotiations were a lot better, they came out a lot better than some of us expected. i'm thinking they will get the deal in time. shery: what do you make of the deal itself? it does suspend the ceiling until the beginning of 2025 but then you are going to get another fight in the middle of that. guest: it does suspend the ceiling until after the election. then, just as the ceiling hit january this year, but it's only in june it was going to bind, you have another six months where you do these so-called stored very measures so it's a two-year extension which is not

ideal. i personally wish the debt ceiling did not exist, but two years is better than some of the things we heard before where it might just be a few months. it puts the uncertainty two years into the future which is not terrible. that's a really good thing. the other thing is it also gets her the possibility of a government shutdown in the fall. a lot of us were right about that as well when we had a fight over the appropriations. they had a deal that said if they don't finish their work, the spending automatically gets cut one -- 1% from last year's level. that's an incentive, but it also guarantees there will not be shut down. it does make some cuts to nondefense discretionary spending. it raises defense spending, but cuts nondefense discretionary spending and that's why some people in the house don't like the mix.

usually the republicans want to raise defense spending so in that sense, the republicans got what they wanted. the cuts are not that bad. they basically will keep spending in 2024 at last year's levels and have them rise in nominal terms 1% thereafter. when you look at what nondefense discretionary spending will be as a share of gdp, it will be around 3.6% which is about its average since 1980. it's not a bad deal in many respects. paul: the democrats wanted more funding, the irs ended up losing money. what are the implications for making sure the wealthy pay their fair share? guest: it's not clear that the reduction in irs funding is

going to matter very much. what the irs got and the inflation reduction act was $80 billion extra in funding that they could spend whenever they wanted. the $20 billion in cuts may be they will pull forward the money they were going to spend so the spending in the next few years will be affected at all then after that, they can go back to congress and anything can happen. we don't make the increase in spending for the irs that was expected to happen this year and years after will be affected at all. paul: you mentioned that this deal takes us through to 2025 past next presidential election. but we are going to have another fight over this in the future. with the political landscape going to look like in 2025? it's not hard to imagine brinksmanship being even worse. guest: it depends when you have the democratic house and senate,

you don't get this. this only happens when you have divided government. and it's being used as a tool. so it could be worse but it's the best they could get for now and it's a lot better than some of us expected. it's good to have that uncertainty at least in the near term gotten rid of and knowing the u.s. will not default on its debts. shery: we are seeing in this bill new work requirements for government benefits. what are some of the parts of this deal that will have the biggest implications for the economy in the u.s. going forward? guest: in terms of the work requirements, they increased that for the program for food stamps to help poor people to buy food.

they also reduce some work requirements. on the whole, it's a wash. they didn't put any work requirements on our health insurance for medicaid. in terms of the effects on the economy, i think they're going to be very small. when i look at what's going to happen to spending relative to what the office had written down as their baseline, i think it's when to be about $50 billion less in 2024 funding and $80 billion in 2025 when you look at the rate of spending from that funding. that's when to translate to a reduction in maybe .1% of gdp in 2024 and .2% of gdp in 2025. it's not very contractionary. frankly, the fact that we have resolved the uncertainty about the debt ceiling is good for

economic activity so i think it's basically a wash. shery: what about the things that should have been in the deal but work like reducing more future debt? guest: i don't think we are at the plug moment right now to really tackle any of the long-term issues. until the sites are serious about doing that and want to do that in a productive manner with everything on the table, i don't think that's when to happen. for example, there's no way to address the long-term issues without burning taxes into the issue. those are things that eventually will have to happen. honestly, the political environment is not one where we're going to make good progress on fundamental changes in our entitlement programs or tax structure. paul: thank you so much for joining us. be sure to tune into bloomberg

radio to hear more from the days big newsmakers and get in-depth analysis. now broadcasting live from our studio in hong kong. you can listen via the app. play more to come, stay with us. ♪

>> the regulations the americans put out last october tempted to stop china from advancing on any semiconductors as well. >> it's about diversifying. >> the demand for semiconductors coming from iot, renewable energies is spectacular. >> you have to look at the whole ecosystem in the supply chain. that's potentially the greatest opportunity. >> i don't think there is any regulations that can resist and hold and stop us from doing business. >> how do you see this playing out and what would be the key issues? >> the u.s. and china could find a way to work together well, the future could be great. >> i think we could see incredible value over the next 10-20 years.

paul: a taste of our upcoming series directions. that premieres wednesday night 7:40 pm hong kong time. thursday night 9:30 p.m. new york. fidelity says twitter is now worth one third of what elon musk paid for the platform. fidelity recently marked down the value of its equity stake in the company. elon musk has acknowledged he overpaid for 20 -- twitter. nvidia's market valuation fleetingly crossed the $1 trillion threshold after the ai prospects vaulted it into an elite club of five american companies. alphabet, amazon, apple, and microsoft are the only u.s. businesses have $1 trillion

valuations. fewer than 10 companies globally have achieved that distinction. financial terms were not disclosed, sources tell us that gic is paying for less than 25% stake. messer is using it to gain full control of messer industries. we are a little bit over one hour away from the australian open. let's take a look at how futures are tracking. we are shaping up for a weaker opening. the futures right now -- we have new zealand trading at the moment flat. little change in the aussie dollar. that is been slowly grinding over the past month. at the top of our, the reserve

bank of australia governor will front the senate legislation committee. you can watch that testimony here on bloomberg on the terminal. we have the yen in focus today. we will be hearing from the boj governor later on. some policymakers in japan saying if the yen continues to weaken, the government may need to do something about it. the s&p futures right now looking flat. that is it for daybreak australia. daybreak asia is next. stay with us, this is bloomberg. ♪ hhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh

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