has changed. - watch our conversation on peacock. >> good morning and welcome to

daybreak australia. i am highest-rated lot in sydney. these are our top stories this hour. taking a look at the u.s. and china taking cautious gaps toward stabilizing relationships as antony blinken wins praise from biden. sakkari is $169 billion wealth fund betting big here. we here exquisitely from the ceo in his first tv interview.

because the things you need to know about the session today, first, we had u.s. markets shut for a public holiday. we are looking back to is what happened in the european session. the main benchmark data. that is what happened in the asian session on monday. that was characterized by disappointment coming through from traders that we did not get any sort of concrete details around stimulus. quite range bound in the session so far. we are wondering what is happening with u.s. futures coming online. just a little bit of the downside. it is important to put these moves in context. we are seeing u.s. stocks coming off five straight weeks of gains. we have global stocks sitting on multi-month highs. investors maybe look into assess

whether the rather we have seen over the second quarter has further to run or whether the market is indeed looking a little bit overboard. the direction of bond yields here. we are seeing the global yield curve really deepening across the board here. this chart taking a look at the u.s., canada, australia and also european bonds and all of this in tandem. it is about flashing those recession signals. particularly as the economy or economic rebound in china has not been so forthcoming. that is what a lot of global economies have been banking on over the close of this year. chris we have all been much it comes to u.s. political tensions. the two sides agreeing to boost dialogue after antony blinken wrapped up his visit to china. both countries saying they had made good progress. steve has the details.

qwest 24 hours ago when i sat in the same chair talking about whether or not blinken would meet xi jinping and what signal that would send, they said they would be progress. there was about a four hour break in blinken schedule yesterday after his meetings with the top diplomat and when he was due to give a press conference and there was no confirmed meeting with him. as you can see right here, they did beat. i would be doing a disservice to say that everything is rosy now because of this meeting and the relationship is stabilized. after blinken left beijing, as soon as the plane left, the ministry of foreign affairs put out a statement saying the meeting between xi jinping and antony blinken was merely a courtesy. the level blame on the united states for causing a lot of the

frictions and the deterioration of ties between china and the united states. the foreign minister on sunday told blinken that the relationship between china and the united states was at the worst level since diplomatic relations were established in the late 1970's. there was lots of ground makeup. again, the meeting that xi jinping gave to blinken is a good sign. he did not have to do it. he would not have done it on chinese soil after tone was bad. that is how i lay out the assessment other. no deliverables other than small agreements perhaps on visas and flights and the like. not any specifics. the big issues still remain. let's listen to antony blinken when he addressed the media. >> progress is hard. it takes time. it is not the progress -- it is not the product -- the product of one. we will have better medications and engagement. that will not solve every

problem between us. far from it. but it is critical to doing what we both agree is necessary. that is responsibly managing the relationship. it is in disbelief -- interest of the united states to do that and in the interest of the world. can did raise concerns about tensions in the taiwan strait. he raised concerns about china's provocative actions in the taiwan strait as well as the south china sea. and for xi jinping's take, he said i hope through this visit, you will make more positive contributions to stabilizing china u.s. relations. this seemed to be a common thread among a lot of the communiques coming out of beijing and that the united states is to blame for spiraling the climate of china u.s. relations. in demanding that the u.s. stop hyping up the china threat theory. lots of issues remain

unresolved. completely unresolved. that is taiwan, tech export controls the united states has placed on high-tech exports to china and of coarse, lots of ambiguity with china support of moscow at this time. >> just looking at the possibilities in terms of silver linings, what are we sleeping on? what are we underestimating in terms of the low hanging fruit here? what is possible for the lowering of tariffs? >> far too premature to jump to that conclusion that the biden administration coming up into a new election year would all of a sudden lower sanctions on china. they kept them in place for a reason. it is a lever of negotiation and simply leverage. you can extrapolate is that xi jinping met with america's top

diplomat and it could be considered a precursor to a dialogue or even a meeting some point this year between biden and president xi. there was lots of optimism on the side of g20 and wally. they have not met or even had a phone call or a video call since then as oblations have deteriorated, exacerbated by some unforeseen events. lot has happened yet a lot has happened since. if this could lead to a phone call between xi jinping and joe biden sometime in the second half of this year, that is totally low hanging fruit. this is that in the barlow for expectations. that would be considered progress. >> under promise and over deliver.

it serves everyone well. see atl and the company's dependence on china more broadly. the lawmaker also helped here. chinese firms account for more than half of the ev battery market. they talked about what was changing over the past few months. one of these factors is obviously the deterioration of the china post-covid rebound story. something is missing. my sunday remembered on friday

we were really expecting a lot of participants hoping for that. we have not heard of anything since. >> we have not. the low hanging fruit just using steve's analogy is we did get more signaling. i think what they said if i'm not mistaken is this economy does need more forceful measures. it might come in the form of fiscal stimulus. certainly that goes into what we just showed our viewers there. the lowering of these growth targets. at least three or four bags. we are expecting 10 basis points in reduction. that is one. the other thing i want to bring

up as well is we had a conversation. i think it is the bts tent if i'm not mistaken. we were speaking with the chairman of the sovereign wealth fund and in fact, this was one very short term, the cyclical recovery to your point. number two, structural issues around the economy property, that is medium-term. longer he said the biggest where he has -- he said pick anything, what is the biggest risk to the global economy? this is what he had to say. >> the most important risk factor of the global economy is the decoupling of the u.s. and china. it proceeds like the cold war. i think it would have a devastating impact to the

economy. cripes he has. we will have more on our exclusive conversation with the cassie chairman coming up later this hour. we talked about why they are banking on things like alternative assets. they are really looking out -- they are looking to maximize because of the uncertainties out there and not because of this. although we did manage to but there's a little bit about. the largest restaurant franchise takes a big bite over in australia. we address the acquisition of pizza hut stores with the ceos. all those conversations are coming up this hour. a very good morning from the asia-pacific. this is bloomberg. ♪

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>> good morning, welcome back. you're watching daybreak australia. markets are sent overnight. there are indications ahead of the tuesday session in the asia-pacific. s&p futures are weaker. this is -- this is a substantial drop here. nick futures are reporting lower. in some ways, it is softer on price. a little bit more risk-averse. coming off three weeks of bliss and delight for risk assets. where does it set us up. let's bring in the global espn senior investment strategist. good morning from the asia-pacific. what is the short and medium-term advice right now? given that a lot of these equity benchmarks are trading.

>> what is interesting about the global markets today is the fact that we have a very different story across the different regions as it relates to a post-covid recovery, what that means for monetary perspective, from a fiscal perspective. there are all these different factors a little bit different across the markets globally. some that we are focused on our understanding all of the different things across these different markets and understanding how that is actually driving earnings. that is really important for us today. that has been a big focus for us as well. we are really focusing on those companies that seemed fairly valued especially given where the -- where we anticipate their earnings to go in the coming 12 or 18 months.

>> and glad you brought that up. a lot of when we look at the market right now and trying to figure out whether things are fairly valued and to your point, some do fairly valued. what are your assumptions on what those look like 12 months from now? >> we focus on the real estate market. one of those areas where we think earnings are fairly priced. one of the ways we look at this compared to the s&p 500 screens pretreat on multiple bases. especially as we look to private real estate markets, rates are really cheap here. when try to get access to your portfolio today, we are seeing a lot of really good opportunities for investors to finance that exposure and get that exposure to really interesting areas of commercial real estate. that is really driving and

housing all of the gravitational power for things like artificial intelligence. a lot of the data that is really running today are going through those data centers. >> when you take a look at some of these things, you look at labor market disruptions and the globalization trade, are you investing around some of these narratives more broadly? >> absolutely. you're talking about the coupling of u.s. and china and what that really means. what we see in the u.s. is a pretty big shift in narrative in terms of understand supply chains and rebranding supply chains as it relates to bringing more things nearshore or onshore and also creating some more resiliency in that supply chain. to make sure dependencies on any single given country are not too

outstretched. we have seen a big demand driver from that perspective on industrial real estate. to the point where it is the backbone of the supply chain for these companies. that has been the big driver on how companies are thinking about their supply chains to make sure they are being resilient. >> how should we be viewing this at the moment? japan for example has been the market here obviously. they are underperforming the broader topics. >> when we think about esg at summer square, our understanding of the way we think about this is really rooted in material, growth financial perspective associated with real estate. real estate assets that are more efficient assets are by default generating higher cash flows. the results in better valuations. we are thinking about the ways in which companies are managing their portfolios to maximize

cash flows and esg is one of those aspects. you have to be aware of risks that are relevant for the portfolio. you have to be aware of making sure you are adhering to local state types of standards as it relates to building code. and what that means for sustainability perspective. all these things end up making a pretty significant financial impact real estate. we are making sure we understand the value added. that continues to be an important driver. not only from a revenue generation perspective but an area within real estate that seems great to now. there is a company that has its on net zero target. that similarly helps her to move that target. that is driving demand for at least four industrial real estate.

that is more sustainable. we are seeing a drive demand, that is helpful from this perspective. it is resulting in higher cash flows. >> great to have you with us. this is where global esg leads. you can get around up of the stories to get you going in this edition of daybreak. terminal subscribers can find that. this is bloomberg. ♪

because we have always tried to be conservative in terms of net output. not to overproduce the market. no that is better pricing.

we are going to be responsible on responding to demand. it has to be done within the capabilities of supply chains. >> we don't have an option. as we have made it quite clear with the people we are working with, we don't have leases on existing aircraft. we don't have a network. we actually have to have those aircraft delivered on time. >> the both vp and commercial head tommy douglas there speaking to bloomberg at the paris show. they have already seen a record deal with indian airline. paul allen joins us now. travel was clearly going back. >> a staggering deal. one piece of information was missing. no financial details were disclosed. suffice to say this will be worth many billions of dollars.

it stole the headlines on day one of the airshow. 500 narrowbody aircraft there. it will probably be a mix of the larger a320 one. -- a3 21. >> no one has ever seen this in the order of this magnitude. it speaks to the potential of the ambitions that indigo is having. >> to his point, this really cements it. and he has domestic carrier early counts for 60% of the market. this is going to allow them to double in size by the end of the next decade. >> this is a massive deal.

it is just one of a huge number of recent aircraft orders. can they actually soak up what seems to be extra capacity coming online over the past couple of years? >> definitely. let's start with india to begin with. the domestic indian market will grow. we had air india just back in april putting in a massive owner -- order of its own. the margins are razor thin. we had that filing for bankruptcy earlier this year. it is a global phenomenon. we saw that hit earlier. they put in that huge order. we have seen deals for about 1500 planes over the past few months. travel is rebounding sharply after the pandemic. how long can it last? there is a bit of a herd mentality among airlines at the

moment. part of the reason for getting all of these orders in is you don't want to end at the back of a very long queue. >> yes. having to deal with some of your peers trying to borrow airplanes. paul allen live there out of sydney. markets are basically chin down as we speak. u.s. cash markets are shut overnight. there has been a little bit of risk appetite. yesterday we had that european session which in many ways is a proxy of how people feel. it does seem that whether that is technical or simply exhausting, the big move

overnight is really what happened in the u.k.. they're just nothing higher. this is a central decision. and leading into the session, we have everything from the rba minutes. that was after that surprise decision. it is a june meeting. primates out of china are due out these next couple of hours. coming up, our exclusive interview with the ceo and chairman of the south korean sovereign wealth fund. they are trying to navigate all the uncertainties out there. they are going quite big on alternative. they will explain why in just a moment. moment. stay tuned and this is ready to go online. any questions? -yeah, i got one. how about the best network imaginable? let's invent that. that's what we do here. quick survey.

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>> taking a look at the day had for australia and new zealand. others at the bank of australia are bullies in the minutes of their june policy meeting in about three hours time. new zealand, we are hearing reports that people are not an inquiry to the banking sector later today with a focus on profits and fees. the most populous state in australia may be on the verge of losing its credit rating. the new south wales treasurer set to issue that warning in this week's market -- margin update. cuesta had his point, you have the qe for example. some contest here. there is also the iron ore story playing into this. the dalian briefly above 142. we will see what that text looks like today.

that is still if hours away. bell is with us to talk about fx. some traders say we mentioned the end attractive around current levels. it better be at 142. request that is right. let's talk about what is driving that because it really is the story of the gap or differential between the fed and the doj. the question has been when is the doj going to be shifting away from its policy settings? a lot of different timelines being bandied about. some around the midpoint of the year. some saying it could be some time yet. the beer j focusing on signals of sustained inflation building into the economy. then there is the other camp as well. there is a bit of an outlier.

we know that did not happen. jim is a dnr attractive. he is doing the economic fundamentals of japan justify a shift again get -- a shift away from your pair of control any moment from now. he is saying that buying bn is a better way to access the market rather than betting against japanese bonds. cracks not just weakness in the end. >> a big drop on monday. a bit of a catch up later. we saw the dollar on friday. these concerns around the economic weakness we have in china likewise. when you look at the top, it is more interesting. the south korean one is the top performer in asia. up around 1.6% around us.

those chip names in particular on the ai frenzy. if you are changing now, the current time is driven around a couple of different factors. bloomberg intelligence saying the path against the u.s. dollar -- it will be hard for them to be appreciating against the greenback continuously. ongoing bertens around china, very disappointed by the lack of details coming through on stimulus. even though we have seen those rate cuts as well to try to spur growth in the economy. >> thank you so much. i was debating with myself. it was a good thing that i

waited. on dollar one, thank you so much. the reason we are here is it is the first ever interview, tv interview at the sovereign wealth fund. we spoke with the chairman and ceo. he talked about one of the things that stood out, this reading, this preference, this push. they are looking to max out alternatives away from traditional assets. >> i think it has to be lower. this is in the face of the economic slowdown. maybe the fourth quarter or the

first quarter of next year. >> is that the reason why you are more in favor of fixed income at this point? would you say fixed income over equity markets? is that your favorite asset class? >> i think the possibility is risky. in the fixed income interest rate is higher. what exposure would you increase?

>> the expansion of the alternative market. at the end of 2021, the ai, the alternative investment ratio is 17.5. but we increased 5% on -- 5% on the alternative investment. if you look at the returns as that, it is 17.5. now, 23%.

>> it is private debt and private credit. our portion is around 10%. we are trying to increase maybe 15% or about 15%. >> what type of yields are available for people looking for private credit? when you related to blue-chip companies, it would be very

attractive. >> are there any specific industries or sectors you are looking to be active in when it comes to private credit? what is the most interesting part to you right now? >> private credit, there is no specific reason for private credit. countries like the u.s. and europe are the preferred country. it is because there are a lot of opportunities and leading gps. quite a lot of people might be wondering -- he might be going relatively big on alternatives.

you mentioned 10 to 15% of that. if you could talk about the other 80 or 85% of alternatives, how do you want to organize that part of your asset allocation? >> maybe 50%, maybe private equity. real estate and infrastructure may be in 2025 and hedging the private debts. questions 25% of total asset alternatives. the target is 25. if you could increase it further, is that the current maximum you can go for example? >> it has limitations for the minister of finance.

they have some guidance. i think in order to increase the rate of alternative investment, we need discussion with them about this. >> i know this is longer-term but would you see a need in the future to have those discussions? >> as an investor, we need to increase the proportion of alternative investment 30%, 40%, maybe see ppi is over 50%. but we are also the keeper of foreign exchange. so we have to maintain our liquidity. i think maybe 25% may be appropriate for the time being.

request that was the crane investment corporation speaking specifically to bloomberg. the u.s. franchise operator is buying pizza hut australia. we will get more on the first international opposition next. bloomberg. ♪ ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪

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question want, welcome back. you're watching david australia. we will talk about consumer spending here. we are talking pizza. consumer spending in the u.s. may be finally starting to level off. the latest data actually showing inflation adjusted spending falling for the first time since 21. >> it is always a good time for pizza in my view but we got a slew of data out here in the united states last week. when he looked across the numbers, consumers still spend about a percent more in terms of retail sales on food as your

home. happened since early 2021. that is when we saw consumers it really reflects a lot of various companies reporting earnings about whether concern -- gives -- where the consumer goes when they are falling back on some but not all of those discretionary items whether it be electronics or other things. they are turning to the stables and increasingly going to grocery stores. that is not necessarily all bad news for restaurants. some people i still want to go out. maybe they just buy cheaper stuff. this is the picture we are sorting through.

this is a bunch of consumer data out on this interesting tidbit on whether or not people are still going to restaurants. flint is the largest franchise operator. >> we have considered this for a couple of years very seriously. we have not run out of opportunity in the united states for the last 2.5 decades but at some point it is a big world and there was a lot of opportunity out there. thinking about how to go international, i wanted to make baby steps and be a little conservative about it. australia is very attractive in the sense that it is the same language, cultural is similar. they demonstrated this.

the business we bought was already successful and pretty well established. in terms of the risk spectrum, it is on the lower risk end of it. for our first step out of the country, it felt really right. i look forward to going to australia. >> he talked about the risk factor. it has been a mixed couple of years. demand has been very strong.

last year, demand continued strong but we got hit hard in the middle of the piano. inflationary, fast on her input was so ahead of our pricing. we caught up entirely on that by the fourth quarter. we had an excellent first quarter this year. that has come back. demand is holding on this for our restaurants. i'm not sure that is true at every level but we cater mostly to value seekers. when i think about inflation, normally only to only two baskets. we are skewing a little bit lower on income. it was a mixed bag. i know we're in a really good place. crossing talked about how demand has held up. are you going to hold off on things like increasing prices or

increasing prices at us like number of your properties? how do you think about that right? first we try to be pretty sensitive in how we take prose. there are still inflation going on. we actually had a team of nine scientists led by a former partner that those very sophisticated analysis in pricing and elasticities of demand based on the past pricing actions. they turned that into a pricing strategy for each rescue -- restaurant item. we will raise prices very selectively in most places. when i look at the information we are seeing between aris experience, it is very different. some are still in the high single digits and others are going down next year. more than a couple of points.

there is no one strategy for taking the posters here. because i am glad you brought up your team of data scientist. the wall street journal has an article about them a couple of weeks ago. we were considering surge pricing and restaurants for some projects. telling more about this. is there something we could see happen? because i think it is something we are likely to see happen. you have any dynamic pricing in our restaurants right now. when you think about ai and the restaurant industry, that is likely to be one of the first effects we see, analysis of demand at a much more sensitive level to the context. the contest is part of time. then it will be the technology that allows you to change prices on the fly given the time of day or the customer you are dealing with or the product you're selling. i think within five years we will see very widespread dynamic pricing.

because it is really interesting. asking about having these price rises as a result of the proposed environment. you just mentioned ai, how does technology play into what you see in the future in the next few years? who was supervised by a bigger role? labor costs at the end of the day is one of the biggest drivers when it comes to rising costs. cluster must have only -- always try to get more efficient. technology has always been part of that. it is a low technology. as they get better and better, we will -- the industry will adopt. anywhere we can to make the customer trends better. to understand what customer

wants and how much they are willing to pay for, i think all of those are definitely affected by advances in technology and it is accelerating. cracks talk to me as well. i know you're pretty inquisitive in terms of the restaurant group. are you looking at any other geographies around australia? are you looking at any other kind of restaurant names? brands that you are pushing to? >> our growth over the last 25 years is in chapters. we did that for 12 years and got pretty big and pretty good at that. and then the next 11 years was diversified as u.s. franchise operator into multiple brands across all the segments of the industry. this next chapter i view as adding to growth channels. one is international. but i love about that is it is literally without limit. we have just taken a baby step

into it. as we learn more and gain confidence, sure, we will keep growing in that direction. the other one is edges and industries. consumer facing industries. it is a wide world of consumer franchise operated businesses. while we have gotten quite good at one of them, it is the one that is the largest consumer facing franchise. there are others. we will look very carefully at getting into strategic adjacencies. qwest i was grateful and joining us. great to have you with us. be sure to tune into bloomberg radio to hear more from the days big's makers get in-depth analysis on the team there. broadcasting live from our studio in hong kong. you can listen in via the app. morehead, this is bloomberg. ♪

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>> qwest global investment firm kkr has overhauled its asian-pacific private equity team. his asian-pacific head will become executive chairman for the region. the senior management changes come just two years after the rest of the biggest ever buyout

fund. the global market strategist making is leaving the firm after 20 years as part of cost-cutting measures. he announced his redundancy unlinked -- linkedin. the bank set aside severance for 5000 staff so far this year. qwest they have hinted at -- hinted that credit suisse may be due for a massive downsizing after the takeover. they wrote in the opinion piece that the adjustments reduce risks for the combined bank. he says they went through some of the steps in his earlier tenure. highlighting opponent corporate culture. that is intraday break australia. daybreak age is next. this is bloomberg. ♪

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