>> good morning and welcome to

daybreak australia. i am paul allen in sydney. we data is major market opens. >> i am sorry. the top stories this error. the sec accuses by nance and shopping was out of deception and mishandling customer funds. the lawsuits ending bitcoin to its biggest lie in months. crispy u.s. banks they have an average of 20%. , decision for the rba when economists expect rates to stay on hold despite a jump in monthly inflation. this after we saw a pretty muted training session today. we had earlier gains being paired back. we actually had the s&p 500 pulling back and away from the borough market territory after briefly rising 20% from october

alone. we have the tech stocks peering back. all of that really leading downside pressure. the services gauge is falling unexpectedly to the lowest level this year. really lead into a concerns about the broader economic outlook. we are seeing that continue in the asian session after we had a little bit of game for the wti in the new york session. plus let's look at how we are shaping up for the asian open. a little bit flatter after that week lead here in australia, futures pointing south. it his rba decision day here in australia.

we have the aussie dollar a little changed right now. traders kind of split on what the rba is going to do. we have new zealand returning to some modest early gains. playing a bit of catch-up there. the end still showing a relative degree of weakness just below that 140 mark. let's look at what is going on in the crypto world. a big store we will get to in a moment, finance having a 136 age complaint including allegations of co-mingling customer assets. they had some pretty down things to say about it. the worst day since march and

the other joke is not faring too well either. >> let's bring in kaylee lines joining us from washington. what do we know at this point about the charges in the case the sec has against by nance and the ceo? >> is built by by nance. there are 13 simple charges here. this was 136 pages long. the allegations ranging from noncustomer rules, violations that finance was allowing u.s. individuals and businesses to create accounts in trade and finance.com when it was supposed to be operating independently. alleging that independence did not exist. this is a form of manipulation where the same entity is buying and selling assets, alleging that by nance was able to inflate token prices via that manipulation and that they weren't fully transparent about protections that they

misrepresented trading draws. this is a consistent pattern we see in sec enforcement actions. they are talking about finance selling assets that are unregistered securities. these are two of the native tokens. they say they failed to register that with the securities and exchange commission before selling them. a bevy of allegations here. we should say that by nance put out a pretty lengthy statement in response to this saying they are risk -- disappointed with this new response and they do plan to defend the platform vigorously. >> this is not the only one that finance has. is it? >> it is not. this is one regulatory agency here. we had cftc, accusing finance of violating derivatives.

and you have a second investigation that the department of justice is conducting into sanctions. they are really kind of getting hit at every end here potentially, just larger regular tory headaches. not just for the exchange itself but they really did finance push back against the sec charges to the regulatory uncertainty here. they are trying to put some of the blame back on regulators themselves. because what implications does this have for prices? because the implications could be very large. certainly volume implications if the sec did ask for an injunction in this case. this will be a freezing of the assets that could actually disrupt operations of the exchange so that could have an impact. when it comes to some of the

specific winds that are traded on by nance, the legs of solana for example where they were alleging these were unregistered securities, they could have broader implications across other exchanges as well. that is why you started showing up in some of those talking prices. pickling itself fell as much as 7% so we are starting to see some signs of recovery. it is something that really did -- dampen risk appetite. regulatory scrutiny is still very much intact. >> staying with that regulatory narrative of course, we have been following what is happening with large u.s. banks. they may be posting their capital by an average of 20% and could be facing tougher restrictions given this new draft plan from u.s. regulators

and this coming at a time when we have already seen significant pressure for banks so we had regional banks falling by almost 3% on the news of this specific -- these specific increases. and banks with at least $100 billion in assets could have to veer to these new requirements according to people speaking to bloomberg. of course, coming at a very difficult time also for banks given that we will see this coming from treasuries that could send interest rates on alternatives even higher and the number of strict mother banks were already struggling to keep deposit attractive. oxford data showing let me number. the treasury general account just $20 billion away from being

empty. this will increase apply by 90 billion. it will be interesting to watch liquidity from that. money markets divided on which white australian central banks will move later on tuesday. let's talk about this and similar with our e-commerce reporter. >> we don't know which way the central bank would go. we have had a wage price decision which is a strong 5.75%. on the other hand we have had slowing employment growth. and signs of a slowdown in consumer spending so the reserve bank could put focus on either of those and decide to do what it does with inpatient remaining a concern and a lot of

economists have also been pleed with the forecast. even if they don't do anything this month, there might be something in the coming months for them to do. request that decision from the reserve bank of australia and 2:30 local time. >> thank you and good morning. russia and ukraine have reported widespread fighting on the front lines as anticipation bills for the long-term counteroffensive. ukrainian officials say the russians are spreading this information. moscow said its forces defeated large-scale ukrainian attack. the former u.s. president -- u.s. vice president mike pence has entered the race for the white house. sources say the 63-year-old will formally announce his candidacy on wednesday in iowa. the former vice president and

indiana governor has been laying the groundwork for a white house bid for more than a year. the biden administration says military interest maneuvers by chinese ships and lands suggest growing aggressiveness from beijing. the national security council spokesman says these actions risk an accident that could result in injury. the pentagon says a chinese worship crossed a u.s. navy vessel at a distance of less than 150 meters. question will be long before somebody hits it. that is the concern with these. they can lead to misunderstandings. they can lead to miscalculations. when they operate that close together, it would not take much. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> apple debuts its first major new product in eight years. a closer look at it reality

headset and the eye-popping price tag. investors look ahead for next week's fed policy meeting. this is bloomberg. ♪ mmmm, your morning ce holif but by the third or fourth cup, your stomach might not feel so good. if that sounds like you replace your afternoon cup with 5-hour energy. it's perfect for when you're feeling coffeed-out. coffee in the morning... 5-hour energy after. your stomach will thank you. discover 5-hour energy. ♪♪

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displays pressures >> excluding energy and food. they declined to 5.3% in may from 5.6% in april. that is what we call core inflation. upside pressures on both headline and core inflation are still coming from the pass-through of past energy and supply bottlenecks. >> on the battle against taking inflation. here in the u.s., the federal reserve will probably skip a rate hike this month. that does not necessarily mean it is done tightening. they join us now from newport beach, california. always great to have you with us. given the mixed signals we are getting from economic data, all

against improving pmi's, the mixed jobs report, how difficult is the job of the fed right now? >> it is difficult. i think it is time for them to skip. i think the market is anticipating that. they need to skip. they are going to be more data dependent. we are having conflicting data or numbers actually went up a little bit. of course, we have cpi the day ahead of the actual for decision. we need to see what happens in the future. they will skip engine. possibly they will see what happens in july. cracks with maximizing, doesn't make sense to keep adding to tech stocks? we have seen that huge rotation back into these giant. cracks yes.

they still have the most predictable earnings. they are still growing. the amount of interest rate increases is so small compared to the five" percent interest rate we had last year. even if the interest rate went up another quarter of a percent, it is not like they would derail railings -- earnings like at their the market is definitely -- they have taken at a much higher levels. i think there will be home a bit of a pause in those for a while because they have grown up so much. long-term, tech is a place to be for sure. cracks more broadly, we have a record amount of chores on the s&p at the moment. does the market look overvalued to you right now? cracks we are still avoiding the financials and interracial banks with the news today with the initial deposit the left make.

this is an area that will not perform well. the market has been -- maybe seven stocks have contributed to the upside in the s&p this year. we think it is time for us to recover. >> in terms of energy, we have a production cut from saudi arabia and opec class. what is the outlook for the oil prices this year? >> it could firm up a little bit from here. there may be more cuts from the opec countries and there is significantly more demand for energy is.

although china has not come about that we thought it would, china may have a similar package to increase its gdp and the use of energy. we think there is some upside from here. there were certainly some upside. because of point of support has come from strong earnings. now they are getting calls from morgan stanley that we might see a sudden pullback when it comes to corporate earnings. should we start becoming a bit more concerned and position were defensively? >> people have been saying that all year and they have been calling for recessions and we don't see it. we see a higher gdp. there are still 500 billion dollars of savings that investors have to spend. certainly, implement, there are jobs, 1.6 jobs for everyone looking for a job. there are lots of jobs out

there. earnings should follow. the recession everybody thought would happen, it looks like it will not happen. that is where the market is behaving a lot better. everyone thought we would have a little recession by now. earnings should do better because we will not have a recession. >> layla pens, thank you for joining us as always. still to come, apple shares slipping as investors balked at the price tag. we have more coming up on this first major new product category since 2015. this is bloomberg. ♪ 't have to worry. eh, not worried. take control of your financial future

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>> here is a quick check of the latest business/headlines. it is counting improved net debt to earnings and a higher cash balance of $4.9 billion. china ever grants property unit has delivered a delayed earnings report that may bring shares closer. >> property services group reported a net profit of just under $200 million for 2022. the reversed a prior year loss but fell short of 20 20's results. >> demand is booming in australia and north america compensating for we demand in

china. >> an imbalance between supply and demand. that is corrected over the next few. over 100% of pre-covid capacity, the next marsh you get to international. we are seeing revenue come down. we think our numbers have had a step change in economics. cuesta makes it so different. let's start off with this. why is business coming back so slowly? >> i think part of it is people not being in the office and getting people back to the office, getting people to do trips. but we are back at 80% corporate

level on the trial. that is the one that is here. the other sectors have compensated for that. they are running massively ahead. there are people working from different locations. half of them are working there so we are getting a lot more of those trips compensated. cuesta centered -- central bands are trying to slow the economy down. they are height aggressively but

as we do the research. people are cutting back on other areas. when you look at the margin of travel. that regular out here this morning saying there is not enough competition. the reality is there is more competition in australia. for decades, reduced to just two. this year alone, they are extremely low for airfares.

that is with the supply still being an issue. next year will go to 115%. >> what is chinese demand like? >> very weak at the moment. probably half of what it was before. i don't think comes back to where it was before covid. we are seeing other markets filling in the gap there. they are blooming. i think for us, we taken better growth prospects in china. other markets are going to compensated. >> there is the ceo, ellen there. look at how we are signing up for them asian market opens. we had the japanese yen. the lowest level that we haven't seen in a few weeks given that

we are expecting those numbers to come out on labor cash earnings data that could perhaps reunite -- read on more speculation at the doj might tighten. we can see a little bit of upside there. all of this nick a futures hold steady. a close call when it comes to australia as well. we get the rba rate decision, the consensus right now is for a whole but we did get that 25 basis point surprise rate hike. we will discuss the outlook for australia with rbc capital markets next

>> it is decision date for the reserve bank of australia. it really does stand on a knife

edge at the moment. trade is 50-50 as to whether or not we will get a cut. analysts put as well over the temptation to suggest a prize this time around. we really don't know. join us to shed a bit of light, the chief economist of rbc capital. they keep so much for joining us as always. very much a live meeting this one. when you see the rba hit it? >> i do think it will be a very close decision. on balance, we think that the evidence tips toward a 25 basis point hike. there would be the prudent thing to do really. in terms of taking policy or restrictive to get on top of inflation, we have a very tight labor market, rising wages and labor costs. and what is likely to be ongoing

stickiness. it does look like the policy needs to be more restrictive. to ask if we see that, that will be 400 basis points of tightening and that was -- that would be in 14 months. do you think there would be more to come in the second half? >> we still think there is a risk, we get a little bit more beyond that. we have to lifted out to the normal forecast for the rba. another 25 point hike beyond a possible hike this afternoon. the timing is difficult. do i wait and pause as they have done previously? wait for a little bit more evidence and then maybe july and august? there are a number of possible condemnations. because he probably needs to be

more restrictive. the labor market needs to loosen up a little bit to get on top of inflation. we see this challenge right around the world. they are all grappling with how restrictive rates need to be to get inflation on a downward trend. across how much will a hike in the national minimum wage influence the decision from the rba? not to mention just broader inflation in australia? >> i think that minimum wage decision will be one of many factors the bank deliberates on today. thought about what the appropriate stance is. in our mind, it is likely that the 5.75% increase that applies to about a fifth of australian workers was on the high side. we think the national wage case decision will add about 24 to gross annually.

that is a little too high. this is against the backdrop of what is still a very tight labor market. broadly i would pressure on wages. that is the crux of it when you have a request that a very elevated. i think the minimum wage case decision as to the case to take rates a bit more restrictive in australia. that is important to bear in mind. the minimum wage increase was the lowest paid, there is a case for that to have lifted. it just occurs at a time that is challenging on the wages and inflation front. >> australian households are among the most leveraged in the developed world. how much of a risk is this?

>> the higher rates go in australia, the greater the likelihood of a slowdown and possible recession. that is not our base case. we think that when you look at some of the biodynamics in australia, the strong net migration and publishing flows, the huge amount of savings still sitting there that can be deployed, still what is elevated in commodity prices in terms of trade, there are a number of reasons to think australia can avoid recession. even if rates go a little bit higher. no doubt there will be a slowdown in moderation activity but that is the whole idea of taking rates to a more restrictive territory. we need to see domestic demand, particularly the consumer. after a couple of years, and extraordinarily strong consumption, 6.6 5% annually. we need to see that broken point materially.

rates are starting to have traction. we know that that will add to tighter conditions. we will see a slowdown. it will be fairly material and we think growth will be a little bit above 1% this year. there is good reason for australia to avoid outright recession. particularly when you have the strong population growth story and a very healthy starting point for your labor market. qwest before we let you go, i want to ask you about house prices. you make the point about rising migration. prices just keep going up. how sustainable does this rally look to you? what request they have clearly bottomed.

house prices in australia have risen for the last three months. it is not entirely coincidental that they begin to lift around the time earlier this year when they thought maybe rates had peaked. that signal may have brought some households in to start looking at housing again. what is driving this, it is not so much the right side. it is the supply side. the lack of established housing in particular. the demand dynamics are strong with the migration running at 1.5%. pushing 2% annually this year. supply white constraint. that is a recipe for higher rates and that is what we are seeing. it is one of many factors the bank and think about as a deliberates on policy today. i doubt if they would

particularly demand this lift in house prices. that might have been stronger household consumption. >> good to have you with us. thank you for previewing that rba rate decision today. let's get to the first word news with bonnie quinn here in new york. >> inflation pressures remain powerful. the comments cement expectations for another interest rate increase. with full effects of the you see the monetary tightening. they reiterated there is no clear evidence that underlying inflation has peaked. >> indicators of underlying inflationary pressures remain high. although some are showing signs of motivation, there is no clear evidence that underlying inflation has peaked.

>> the sec has accused by nance and a.c.l. of mishandling consumer funds. they flouted basic know your customer rules by americans who properly opened accounts and trade. finance misled investors about controls to prevent manipulative training. a new regulatory plan may require large u.s. banks to boost their capital by an average of 20%. sources tell bloomberg that the proposal may cover $1 billion in assets. in these dozens of regional banks may have to meet the new standard. a part of a global overhaul of banking rules. the u.s. service after nearly stagnated here. a measure of prices. sent to a three year low.

they fell to 50.3. that is the biggest level this year. barely above the mark. they dropped to 56.2 in may. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am bonnie quinn. this is bloomberg. >> thank you. apple shares raised and after getting a record after the company announced its mixed reality headset. treatment $5,000 for this headset. who was the target market? >> pretty pricey. this is at the very high end of the market. geared towards creators, professionals, app developers. anyone who has some spare cash to spend on the latest and greatest technology. this is the latest and greatest. this is the beginning of a whole new category of spatial

computing what they see one day replacing the mac for the ipad. this is the beginning of apples post iphone days. this is a new era for the company using and and i control, doing everything you would do today but doing it right in where you are looking. it is a next-generation computing platform paradigm that no one has really seen before at the scale with this amount of technology. >> why weren't markets impressed? was this all about being spiked by the price tag? >> i think the market sees this is not something that will change the game for apple revenue was in the short term. the market tends to operate on the short-term. this is an extraordinary, long-term initiative you could say. this is not something you are going to see the fruit of revenue wise. probably for three years. not until they bring out a cheaper model. they will start to see sales

flow when that happens. this is so nascent. the killer apples unclear. at some point, apple will pull it off and it will be a success. class coming up, google advisors explain why we remain concerned over emerging-market debt. more in our emerging action segment next. this is bloomberg. ♪ ♪

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>> wall street has been caught by surprise by a rally in global emerging-market debt. and as a class that has been largely abandoned by foreign investors. let's discuss this year's vm winners and bring in our next guest. the chief investment strategist here who has a more cautious view on emerging markets. domestic currency bonds have been the surprise winners this year. what is behind this rally? >> emerging-market local currency bonds have given investors returns of about 3%. that is about as much as equities. it is not really that much of a surprise. it is a trade that we had been hearing about for the last year.

they were -- there were timing this trade. u.s. inflation is going to be looking at volatility in u.s. rates. >> what is more impressive is that when you look at it on your regional basis, uc latin america is the performer. it is local currency bonds from the region that have given investors 60% so far this year. it is also not a surprise because interest rates in places like mexico or brazil are at 11, 13%. and wall street investors are telling us that the rally can go on as the dollar continues to weaken. >> what do you think? can the rally continue? especially as we have seen such eye-popping gains? >> when we think about performance, listing about where 50 or 60% of the returns come from. i think there is little room on

the latin case to see more spark. when investors make the choice, they get into a full asset class. you have that none one side. then you have performances that have not been as strong as what we have seen. to your question about how investors think about emd, i would say i share maria's view. the dollar will decline. investors do make money. as you look at the risk immediately, macro risk around inflation, rates, the same thing as reasons for being positive but there is nothing in those areas right now.

the fed will do tightening conditions. near term, we do think there are some risks and whenever there is a rise, investors do much for the dollar. >> u.s. dollar strength is very much a theme. it seems to be very enduring as well. how enduring do you think this will be? what is the effect on emd? >> longer term, given the fact that the u.s. runs a massive deficit, we do expect them to decline. something even lower as we look at this basis. near term, there is some support because the fed is holding rates and it is likely to hold on longer than anticipated.

that is not as much of an expectation in 2023. we are still in an environment where there is a lot of risk. it will decline but it will be bumpy. i think given the near-term risks and the fact that liquidity has been really tight in every environment, we need to remind you that in march we saw 100 basis points in u.s. treasuries. that means a small jolt for anything in the volatility means they would be wiped off in a couple of days. that is what keeps us on the sideline. quick foreign investors have missed out on this rally. what has happened? is this risk aversion? >> is kind of interesting.

it is kind of risk aversion. j.p. morgan strategists are sinkable investors have to come back to emerging markets. they are as excited as the emerging-market investor base to be in local currency. if you're u.s. economy is not going to be as strong as it has been in the past. >> the expectation for china, the biggest emerging that investors care about has been pretty disappointing as well. how will this picture with equal data expected at this week affect the broader em space? >> it does matter. there have been concerns both on the recovery and concerned about the nature of the changes in the chinese economy moving toward consumption. less on exports. that factor at play. and you look at the change they

keep on occurring on the revenue, all of those are concerning and it does affect how they view that asset class. if india would have made his way into the j.p. morgan index but it was pushed out. you can see to some extent that in equities. especially as you go from large to small cap. but as far as emd is concerned, the effect of china imparts a major, i think that is important. >> when it comes to emerging-market debt, you are waiting and in contrast to other choices out there. what do you like right now? >> there are three things we have as we think about the rest of 2023. we will see whether that is only cash or only intermediate bonds. or even dividends for that matter. they are not dependent on debt markets.

the second is we do like the team of non-us. we do think that investors should stick to europe. europe is a better place to go to get is going on the equity side and then the third thing was just trying to find ways to mitigate risk. they're looking at other volatility protection strategies as being a third -- a good thing. and while our take on the fed is that the fed should definitely pause, they should not be thinking about rate cuts and tilting, we know the fed is really tied to this cpi number which means that they could tip the economy into a mild recession. against that backdrop, the three

main things we see is chinese investors to look into in 2023. >> that was state street global advisors and bluebirds elana. of course, be sure to tune into bloomberg radio to hear more from the days big newsmakers. now broadcasting live from our studio in hong kong. listen through the app, radio plus or bloomberg radio.com. stay with us. ♪

>> airlines are expected to do pretty well this year. all of this on the back of a pandemic. we are now talking about a surge in profits. we have seen those ticket prices go up, everything is flying to north america to europe. they are driving those gains. they are not thinking we could see more than double the $4.7 billion forecast they had in december. december risks include rising rates and geopolitical tensions as well.

>> absolutely. it is amazing what happens. you jack your prices up. >> we are paying all of it. i just booked my voice to mexico. >> that is absolutely right. it does beg the question who pays at the end of the day, it is the consumer on that particular foodchain. it put airline executives in a really good mood. on the conference in istanbul, we did this with the co alan joyce a moment ago. singapore airline also announcing record profits. i will tell you who is not getting in on all of this. we have fees, tariffs, fixes. that is giving a bit of attention to airports. staff shortages want a better deal.

>> don't miss those big ones coming up throughout the day. that is it for daybreak australia. daybreak agent is up next. this is bloomberg. ♪ is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and build a new home. so they're talking numbers with their merrill adviser. she's not researching her next role.

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