>> good morning and welcome to daybreak australia. >> we are counting down to asia's major market open. shery: the top stories, big tech leads gains in u.s. markets as investors gear up for a pause in one of the fed's most aggressive tightening campaigns in decades. haidi: a subdued cpi -- bond traders are misleading inflation. shery: top credit suisse executives will depart as they close the biggest banking deal since the financial crisis. u.s. futures are coming on in the asian session. a little movement. tech already led gains in the new york session but the nasdaq 100 gaining 2% in the regular session and s&p 500 also topping

the crucial market. s&p 500 leaning deeper into bond market territory, getting for a third consecutive session and at the highest level since last april. we are watching oracle. sales beat estimates which signaled to the cloud business is benefiting from a high demand giving another boost to the ai frenzy. treasury yields were broadly done in the in new york session. traders gearing up for a potential fed pause. a little upside in the asian session after falling to the three-month low on goldman sachs cutting price forecast for brent but it is all about the cpi numbers and how it will set the tone for the rest of the week. kathleen hays has the latest.

several fed officials have signaled they are ready to hold. could the cpi numbers play in? it's only the first day of the meeting. kathleen: it's the number they been waiting for. in the last meeting they made their move and many have commented that yes i might be open to pausing now but i will watch three important numbers. we got the jobs report and now we are getting the cpi report on the first day of the meeting. plenty of time for them to factor it in or finalize the decision. you could see on the monthly number a hefty drop in cpi. that used to be a normal number. if you look at year-over-year numbers which are effected by base effects, they have to look mellower now. -- have to look lower now. core cpi year-over-year expected

to come in at 5.2% from 5.5%. one big driver is commodity prices, something that is coming down. energy prices fell 3.1% last month, a big part of what we are seeing here. it is good but you also want to look at core prices, services prices. core services. services prices have been coming down. it is the super core, the green bar which is already come down and we forecast it will come further down. this is the number jay powell watches so closely. that is why people call it the super core. if you take out housing this is what you get. city strategists warning traders

are underestimating how much the number will drop. we will see. it could be that they are just not quite sure it will happen and they are hedging their bets for now. haidi: the fed seems to be backing away from wages when it comes to a driver -- major driver of inflation. does that play into the decision? kathleen: it could to a certain extent. research from regional banks have concluded that. not that it doesn't drive it at all but it is not as much of a driver and that would suggest to people who think the fed is too hawkish and could harm the economy, you do not need to hike rates, it will not help bring down rages because it will not impact inflation but the other side of the coin, when the fed looks at a hot labor market they seem to talk about final demand,

if you have a job, a good paycheck, you will keep spending money. if you do how can you bring down inflation. what we saw today was near term in the next year inflation expectations came down again. if you look at longer-term inflation expectations, they have not come down that much. the good news is they have come down for the next year but the problem is the year out expectations are driven by inflation in front of you. what you have experienced most recently. longer-term expectations are driven by what you've experienced over a long time so progress on both fronts, i think regardless of whether you are looking at tilting toward the hike above the pause or the skip, these numbers will all go into the equation you have to come to to make up your mind. haidi: kathleen hays there. ubs has completed the

acquisition of credit suisse. they say many top credit executives will leave and others will take on lesser roles. let's get more from allison williams. this has been a fraught few months for the industry and for these two banks. what do we know about the changes that will happen straightaway? >> i think we have seen some changes in management, for sure. i think the most important thing from here is to retain talent in the areas that ubs is looking to maximize so some areas are wealth management, obviously there is for sure different parts of asia that credit suisse brings to ubs and we have seen several banks aggressively

wanting to go after that business so i think it is very important that ubs stabilizes things, especially within that unit. asset management is another unit but also on the investment banking side we have been seeing a lot of stories about certain bankers leaving and we expect ubs, with some of the top talent they are looking to keep, that there are some retention plans in place for those bankers. shery: how much will the restructuring way on profitability for ubs and as the experience of a decade as top executive, what is he bringing -- what is our money bringing to the table? >> managing through uncertainty

and change. when our monte took hold the first time, if you recall, when he took charge of ubs and they were recovering from the trading scandal, there was a certain way of implementing risk management that is something that he brings to the table that is needed at credit suisse. he improved profitability but then we had several years of changing regulations, uncertainty, a shrinking environment, especially in investment banking but i think managing through significant difficulty is something he brings to the bank. haidi: and they have flagged the differences in risk appetite and differences in approach. does that reassessment extends

to their client base? >> credit suisse had already started a journey of reducing risk and pulling back parameters on some clients. there is specific guidelines being put in place in terms of different countries where ubs does not do business and they expect as credit suisse comes under their umbrella that will also be the case. culture is the biggest impediment to deals, especially in asset wealth management so that is the biggest challenge faced across the bank. with credit suisse also in a time of risk management, they were already on the journey but i think that is the biggest challenge ahead. shery: allison williams with the latest on ubs and credit suisse. it is a very busy week in terms

of monetary policy decisions around the world. let's get to annabelle. we have u.s. cpi numbers to look ahead to. annabelle: what is interesting is the bullish positioning we continue to see building into markets. looking at large speculators, mainly hedge funds, s&p 500 futures and shorts have been shrinking from a regular high. a reduction in the circle in yellow, 90,000 contracts. when you look back to 2018 it is one of the biggest five episodes of shortening we have seen so a meaningful shift is coming through from hedge funds who were bearish in 20. some will take it as a contrarian signal but it is a big week ahead of us. the major point is the cpi data

coming through from the u.s. but we are looking at futures in most markets looking to gain at the open, a few hours away from sydney, seoul, and tokyo and watching the japanese yen, trading close to the 140 level. haidi: we are watching what could be an interesting trading week ahead. let's get to vonnie quinn. vonnie: jp morgan has agreed to pay $290 million to settle a lawsuit alleging it knowingly benefited from sexual trafficking by client jeffrey epstein. this would settle a class action filed last year by an unnamed victim. jp morgan says the association with epstein is a mistake it now regrets. antony blinken says the trump administration was slow to counter chinese spying overseas.

the past administration was aware beijing was expanding intelligence efforts and failed to slow it down. facilities in cuba could be capable of spying on southeast u.s. italy's former prime minister has died. the 86-year-old was one of italy's most influential politicians but his career was played -- plagued by corruption on sex scandals. his business empire spans media, banking, and sports. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. shery: still ahead, the challenges and opportunities in emerging markets. in wy management sees post-covid management helping overseas

entities. and big central bank calls with bmo. why they think the fed will stay higher for longer. this is bloomberg. ♪

shery: we are seeing a little upside on nonstop 100 futures that had already gained --

nasdaq 100 futures that had already gained 2%. yields edging lower. traders gearing up for a fed pause but it is all about tuesday cpi being key for market sentiment. bloomberg dollar index holding steady. haidi: the markets are pricing a skip or pause by the fed this week that the our next guest is chief investment officer carol's life. -- carol schlief. >> this depends on how the data has come in. the fed has told us for a long time they are data-dependent and they will want additional data

to come in to support whether or not they decide to pause again and push the skip further out into the fall or if they need to feel as if things are still hot enough they would need a hike in july so our expectation all along has been that the market was overreacting thinking the fed would cut soon. at any point even this year. so we have been in the camp for a long time that when the fed tells us higher for longer, they mean it. haidi: how does that impact the way you are investing and building investment opportunities at the moment? >> it keeps us in a very balanced risk standpoint in terms of looking at where we are on the yield curve, what kind of opportunities there are in the equity markets and what alternative classes we are looking at and other things that might be less correlated to

actual economics near-term. so it us in a balanced risk composure rather than being too conservative or too aggressive, because the underlying economy is very solid, things are moving along nicely, the unemployment market has stayed steady and consumers are anchoring to higher inflation so it has not seized up the housing market, that has recovered. a lot of service demand remains strong but we are still paying for concert tickets and flights and restaurants. shery: why are we seeing more brats? we see the rotation into -- breadth? we are not seeing the broader gains we are hoping for that could be more sustainable in the long run. >> we saw an inkling of it last week, some rotering start to

occur but you are -- some broadening start to occur but you are right, realistically for the nice run we had in the market to continue it needs to broaden into different industries. it has been tough because more defensive industries have participated well. rolling small recessions in various pullbacks in different sectors but we really need to see additional ones come along. we think industrials and manufacturing sectors, you should see those improve. tech needs to broaden into broader parts of technology. you would think if the fed pauses you will see some stabilization and hopefully an uptick in some financials. shery: and then add said the fact that we could see a huge

tightening of liquidity as we see the unwinding of balance sheets. how much would that pressure the market? bnp says it could lead to a 4% decline in stocks. >> i'm not certain it will book it is a factor we are watching, the stickiness in liquidity. lending standards had tightened us some prior to the silicon valley bank issues and other bank issues in yet according to our commercial bankers and others, it is the dragging out of the process, not necessarily a pulling back so it is a natural ramification if you look past the few years, we have supply chains in better order, inventory is in better shape, a lot of things are settling in so companies are reevaluating and

bankers are reevaluating different scenarios so it lengthens the system and people are more careful and cautious of how they are lending out the capital they have got and asking for capital they need. shery: what does it mean for the sick -- cyclical sector of the market? if we are not expecting a deep downturn, could we see a another boost? encyclical gains we saw a boost last week. >> when the debt deal was signed last week without major damage to spending packages put in place, you have a lot of spending and important infrastructure t eight up, artificial intelligence, lots of different spending is teed up where contracts have not been

signed yet so there is potential to see nice, moderate, steady long-term growth which means cyclicals will get pulled into that environment. haidi: carol, always great to chat with you. we will be live from the aipac conference later. soon he gives us the asia chip outlook and we will discuss some factors accelerating ai. shery: you can get a roundup of all the stories you need to know to get your day going in today's exertion of daybreak. go to tv . customize your settings so you only get the news on the issues you care about. this is bloomberg. ♪

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haidi: taking a look at the day ahead for australia and new zealand, consumer confidence for june is due in two hours. a slump when it comes to reaction to the hike in government budget announcement. later, we will get business condition data and details from new zealand's new trade website. u.s. dollars, shery. shery: here's a quick check of the headlines. google is set to be hit with a formal antitrust complaint from the eu that could pave the way for massive fines. the charge sheet will target the core of the alphabet units

business model. google's advertising business account for 80% of their annual revenue. and a scaling back a brokerage venture with line group. nomura has invested 170 $2 million in the joint venture in says risk structuring will have almost no impact on earnings. another setback for tomorrow which has battled losses of the venture as it sought younger tech savvy clients. bank of america would consider another lender. the comments follow jp morgan zeal to buy first republic. bank of america was considering their own bid but ultimately dropped out of the process. deutsche bank's investment arm might bring back the managing director title after scrapping it over two years ago.

sources say frustration over the policy means the ceo is weighing whether or not to bring back director titles. we are told some staff have criticized the current policy for slowing career progression. coming up, barclays is downplaying a recent exodus in their investment bank. our exclusive interview with their ceo is next. this is bloomberg. ♪ hi, i'm katie, i've lost 110 pounds on golo in just over a year. golo is different than other programs i had been on because i was specifically looking for something that helped with insulin resistance. i had had conversations with my physician indicating that that was probably an issue that i was facing and making it more difficult

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vonnie: pakistan central bank

has left interest rates unchanged at 821% to stop growth from weakening and rain and inflation. price pressures are expected to ease this month. it hikes by 600 basis points in the last four meetings. netherlands is set to be working on legislation used to bar chinese students from university programs teaching sensitive technologies. the proposal would avoid mentioning china directly but is intended to limit beijing's access to dutch knowledge. they plan to screen students. the rules will be country mutual. vietnam has allowed factories to increase power as shortages begin to ease. manufacturers in northern provinces can operate for up to 17 hours. thousands of factories in vietnam were forced to limit

power consumption as blackouts rolled across the country. a slew of top credit suisse executives will these as usp exerts dominance following a takeover. the cfo and the investment banking cohead are on the list. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: barclays ceo says leadership changes at the firm's investment bank and refocusing on new growth areas has contributed to higher than usual attrition. we spoke with david westin about the banking landscape. >> we are losing investment bankers but not that much more than is normal in a turnover. the first few months of the second quarter when people have

been paid bonuses, there is musical chairs. it is a tradition in this industry. we made a management change in our investment bank and spent a lot of time last year thinking about what we expected the banking landscape to be over the next decade. we have rising interest rates, changing business models, the importance of sectors that are new to the economy, sustainability, climate tech, and then there is the different players and importance of the players in the parking -- in the banking market. private credit funds are getting bigger. as we began with an american investment bank and we grew in europe so we wanted to put more emphasis on europe so if you bring it all together and you are talking about us thinking

about the next generation of leadership of the investment bank. building on our strengths but growing in equities and m&a and europe and when you do that organization sometimes it has impacts. >> is there a strategic shift away from the u.s. and toward europe? the two cohead before are based in u.s.. >> now what is in europe and the other in the u.s. it is not a shift, it is an expansion. it is to give more attention to europe. u.s. remains critical to us and we want to maintain the position. shery: wells fargo is looking at opportunities in the sector. annabelle joins us with details.

we hear the so-called detour could be over. annabelle: this is really a statement we have seen investors and they are avoiding the sector but the view from wells fargo is one we heard from a veteran analyst but joining us to talk about the opportunities coming through in the sector and reflected in the chart is the two index versus the s&p 500 and you can see the over performance in the last four weeks and mark says this is the time now to jump back into the sector. when you have nearly 5000 banks in the u.s. it's par for the course but he is saying we will not see any more banks that are failing in the s&p 500. when he looks back at the bank failures from this year he says it was down to idiosyncratic risks in terms of top picks to he says jp morgan, citigroup and u.s. bancorp stick out to him.

he says bank park -- bancorp is a name that has been pummeled when you look at the quality of the lender. looking at another chart we see so much exuberance in the ai sector i'm a goldman sachs is in white. you can see the performance gap. the question is whether this will extend further or if we are looking at a dot-com bubble and that is the question we put forward to tam asset management cio james perry in an interview and he says the market has gone over and is trying to see stocks moving lower after a year of correction coming in and when you look at the rally it is led by a handful of names and if you change on now he says recession risks are continuing to build and you also have markets that perhaps need to come to terms with the expectation we had a

few years -- a few weeks ago the fed could be cutting rates so he says what is important is to follow a selective strategy instead of focusing on ai manufacturers like nvidia look at ai adopters instead. he says don't go looking for gold, look for investments in the tools needed instead to be digging it up. shery: google deep mine ceo and cofounder says artificial intelligence will greatly accelerate scientific and medical breakthroughs in the next few years with the potential to retreat illnesses like cancer and dementia. >> in the next decade i think it could be possible we could build ai tools to help world's experts and medical researchers make breakthroughs in these areas.

aqua fold was able to fold proteins. science at digital speed will come to a lot more fields including medicine. shery: -- warning of the existential threat of the fast developing not -- technology. a nonprofit says mitigating the risk of extension from a i should be a global priority alongside other risks like pandemics and nuclear war. >> the number one thing that needs to be done now is to put more investment into ai safety research and understanding what the systems can do, analyzing and interpreting them and coming up with things like evaluation benchmarks so we can understand what capabilities we want and what guardrails there should be to make sure that society reaps all the benefits of these

symptoms and mitigate the risks. shery: we have plenty more to come on daybreak australia, including the first half performance of emerging markets on what to expect for the rest of the year. this is bloomberg. ♪ thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

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have allowed to this year. the index only getting 5%, well behind the almost funds -- 12% gain in developed markets. but still upbeat on the asset class. let's discuss what is going on in emerging markets and what we can expect with matt burgess and tyra, who thinks the outlook is being held hostage by developments in the u.s. and china. matt, let's start with you and set where we are in emerging markets because there was euphoria at the start of the year. what happened? >> there was. a lot of the factors that have been occurring -- crimping gains have been the sluggish rebound out of china. there was a fast pick up at the start of the year but it was domestically driven over consumer spending.

not the typical china rebound people have come to expect where it has been manufacturing lead and property and infrastructure lead so it has crimped to gains in emerging market countries that export commodities to china so it hit demand from south africa, thailand, a large -- they have not seen a large tourism boost. so the first half has not necessarily played out the way expected but it does not mean it was a disaster. em stocks are up 5% so you have not lost money but you have not been the gains of the s&p 500 or nasdaq. we must stress when you look at the aggregate numbers, profits over performance, indonesia has

had a pragmatic central bank that hiked ahead of a inflated -- ahead of an inflation pause but leaned on indonesian lawmakers to help them bring down inflation pressures and division lawmakers trying to go up the commodity value chain so for export to refine metals they want to do it themselves so when you translate all of that you have indonesian currency and local bonds outperforms -- so far this year so things have not been too much but when you look under the hood, for example, there are some pockets. shery: tara, what does it mean? can we expect the record of

emerging markets earlier this year? you say the outlook is hostage to the u.s. and china. what is going on with interest rates and how the dollar could affect where em two? >> last time i was on the show i mentioned the em outlook was murky and it is still complicated because they believe the most important driver moving forward will be u.s. interest rates and dollar and the chinese economic recovery. i would caution that first you have to think of em as differentiated in terms of asset class and geography and making the distinction between em ex china and china itself. in addition -- indonesia is doing well and other emerging markets like brazil, india,

mexico, we are starting to see a slowdown of domestic inflation and [indiscernible] higher interest rates but i still argue the fiscal outlook is challenging for emerging markets. it is muddying the external debt picture in emerging markets. the general downturn in commodity prices thanks to chinese demand will eventually benefit but it hurts exporters and long term in the next decade [indiscernible] it is going to be in a downturn, a developed market problem but i will say china with their demographic decline is a leader of the productivity issue so those are complicating factors

that lie ahead. haidi: how complicated is the prospect of further u.s. dollar strength, especially as we see real yields topping 2.5% for the first time in 2008, how does it play into the outlook? >> that's a great question and [indiscernible] tomorrow morning and the fed, common consensus is the cpi would start to moderate but i do not think core inflation will remain sticky and the fed will probably do a hawkish stick -- skip where they might not hike this month but continue with at least one going forward as early as july and there is a possibility the -- we continue to see core inflation sticky and that is why it is difficult and

that uncertainty is why i find the em situation still complicated. haidi: matt what are you looking at in terms of how investors feel at the moment for the outlook? >> i would like to delve into specific asset classes to give you a sense of what is going on. on currencies [indiscernible] thanks to volatility so brazil, mexico, indonesia have had currencies benefit and places that haven't done so well like argentina and south africa currency have been losers because of internal dynamics but the chinese one is at a six meet -- six month low and that is an interesting aspect because it looks like the pboc is fine with one weakness at this stage and

this might mean strength for other currencies short-term but the question is if they will also have to keep their currencies competitively devalued against china. we are more cautious than the market about the large volume of rate cuts in places like brazil and mexico. inflation is coming down but we doubt there will be as much easing as currently priced in. and in other em we have seen a shift in pockets geared to the current fascination with ai. haidi: matt, where are the end -- where are the opportunities investors are looking for? >> it depends on the timeframe.

short-term to major risk events are coming up. uscp i and fomc meeting, federal reserve meeting in the next 48 hours will give direction on the u.s. dollar and how it will play on emerging market currencies. pboc is meeting this week so we will get another indication of how chinese policymakers are feeling about the economy. on the flipside if you look longer term five years down the track, idiosyncratic stories going on. indonesia and china china get up the hive commodity value change. reforms in india. it is a structurally positive story going on in the next decade.

india is probably 15 years behind china so pension funds have put money into infrastructure and apple and samsung developing and building the smartphones and exporting them around the world. talk they are looking to increase electronics production. so there is a structural story going on within emerging markets. it depends on the timeframe you are looking at. next week we could have an issue depending on how cpi comes out and u.s. inflation data comes out but in the next five years or longer, you want to have money in emerging markets. shery: tara, matt just talked about india and the structural positive stories in that market. what do you think of india? i have heard mixed comments,

whether it is too expensive or not the right time to get in. >> we generally agree with matt's thesis. it is a very solid long-term story not just because of economic growth but because india's digitization push has been impressive. they are taking manufacturing away from china and their public sector investment push is ramping up. moderating oil prices suggest india's inflation are poised to benefit and that should support indian assets as well. shery: tara and matt with our top story, top em go is your function.

this is the weekly emerging-market story we bring you on monday u.s. time. tune in to bloomberg radio to get analysis from the daybreak team broadcasting live from our studio in hong kong, listen through the apple or on bloombergradio.com. plenty more ahead. stay with us. ♪

haidi: a quick check of the headlines. sources say by jew has informed lenders they are primed to hold calls with indonesian debtholders. indian education technology signed a medical emergency to discuss a proposal. the company set [indiscernible] settlement talks. executives sounding more confident about ev's after years of caution going fully electric. toyotas chief officer said making the transition from hybrids is a good indication of where they will be in three years and that companies should be able to sell one point 5 million ev's by 2026. oracle sales increasing 70% and the cloud business is benefiting

from increased demand for ai workloads. the infrastructure revenue jumped 76%. shery: look at how u.s. futures are trading at the moment. a little upside and nasdaq 100 futures. tech lead the gains in the regular session and s&p 500 gained for a third consecutive session, topping the crucial mark and reaching the highest level since last april. and after a recession we are looking at oracle given their gaining more than 3%. sales beat estimates and all to do with the cloud business benefiting from ai demand. it is the ai hike continuing to push markets higher. the two-year yield below that and treasurer -- treasury

yields. a lot will depend on tuesday's cpi and how it affects sentiment this week and ahead of the meeting. that is it for daybreak australia. daybreak: asia is next as we head to the market opens with a little upside and futures looking a bit more positive. this is bloomberg. ♪ at morgan stanley,

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