>> good morning.

welcome to bloomberg daybreak: australia. >> the top stories this hour. investors jittery ahead of jay powell's congressional testimony. the s&p 500 its first today losing streak in four weeks. >> alibaba slips on its surprised leadership shakeup. >> in prime minister begins his first u.s. state visit, looking to leverage his country's growing strength in geopolitics and technology. >> u.s. futures just beginning to trade. we will see how that plays out in a few moments.

the session on wall street on tuesday of down the session before the fed chair's report to congress. the nasdaq golden dragon index slumping as well, 4.9% on the day. a lot of crosscurrents on this particular market. a little bit of fear on missing out. this rally may have gone too far. housing starts up nearly 22% month over month in may. the fed will be watching that number closely, especially after the bank of japan reserve bank of new zealand have to restart when their housing markets showed strength. we saw a little money going into treasuries today thanks to the drop off in stocks. the two year yield up to basis

points. commodities weaker. crude oil down. some of this is due to lack of detail on china stimulus as well. a couple of stocks to mention. fedex disappointed investors, shares down 7.5% after hours at one point. it announced lower global volumes and the revenue forecast disappointed. estimates for next year disappointed as well. the range took in the top end of the range. paypal down about three and a quarter percent. margins have been fending at the company. let's take a look at the market jitters.

our process that reporter is here. is it overextended? >> it is. a lot of the sell side notes were all about internals that the rally is getting overextended. the position and in the u.s. equity futures is the most bullish since 2010. some people said the moment tom is really strong and we could continue. i was looking at a note from a market strategist who pointed out the technology etf is looking overbought on its relative strength for the daily metrics and also the weekly metrics. the weekly numbers that a 76. the last time we have seen that level above 76 we have seen declines above -- of above that.

we could be due for a pause but it is up to the market to decide. annabelle: what do they tell us about how investors are chasing the rally? >> we saw flip when you compare equity inflows and bond inflows. investors were putting more money into bond etf. now we are seeing the year to date of net capacity inflows into equity etf. that compares to about 93 billion dollars for fixed income etf. you are seeing stock market investors chasing the rally. we have to see if this will persist or are these people getting in just as the rally is getting overextended. it is interesting to compare the performance this year. stocks outperforming bonds.

when we started this year, a lot of outlooks were all about bonds are backed and this is the gear to be overweight bonds relative to stocks. now we are seeing that strategists are dialing back. mike wilson is sticking to his bearish call. he is saying bulls are expecting the worst of earning declines are behind us. they are wrong. his models so far have been wrong. she has an s&p 500 price target of 3900. it is not the most bearish on the street. there are few that are lower than that. but he is going to this bearish view.

his take on inflation is interesting. the popular view was once inflation falls that is going to be great. this is such a headwind and we want to get it behind us. he says the inflation surprise i the downside could negatively impact topline growth. he sees that really hurting revenue growth over the next four months if we see inflation come down. he is pulling on these different economic data points to stick to his bearish view. maybe he will change. we have still six more months left in the gear. -- year. haidi: all of this will be fitting through to the asian session. annabelle: it is interesting what emily was discussing. the debate investors are having, is there more room in the rally

to run? the sentiment in the session was to the downside in asia. we have most futures around the region pointing to a weaker stock. the golden dragon index falling to a multi-month low in the session. off nearly 5% at the close. that is something that bill -- will be weighing on sentiment. let's change because there is still be opportunity for investors to look for opportunities. overlooked stocks in this market, baidu is highlighted by morgan stanley. they are looking for the best ai

place in china. a lot of the enthusiasm for investors so far this year has concentrated on names in north america and japan, korea, taiwan. but they are highlighting this one. they are ready have their own chatbot. the company says -- morgan stanley saying this is the top pick for the ai china trade. haidi: one to watch as we get into the trading session. alibaba turning to familiar faces to guide the company through a restructuring. daniel zhang is out as chairman and ceo. he will be replaced by eddie wu and job site. stephen engle more on this. what has stood out to you when

it comes to this leadership shakeup? >> it was a bit of a wow moment. i thought about it and it is not too surprising given the fact that alibaba was bought by international investors as a proxy to the chinese economy. they also bought into the jack ma narrative. he was a familiar face, he was friendly to the markets if you will. after the regulatory crackdown in october of 2020 it clipped the wings of alibaba. now they have to reinvent itself. daniel zhang announced a broad restructuring a couple of months ago. they will break this company up into six individual units that will be able to fund raise and list on their own right and be leaders in the cloud to

logistics to e-commerce. he announced that at a time when they have had three consecutive quarters of single digit growth. it has not been able to recapture that explosive growth they had pre-regulatory crackdown. daniel zhang had the job on his shoulders as jack ma hid in the shadows, retiring because of the regulatory pressure. it was a lot on daniel zhang. he will stick around and oversee the cloud division and perhaps some of the big ai initiatives. they lost ground to baidu. baidu has been able to roll out early -- for me chatbot. -- early chatbot.

the big challenge will land on eddie wu, who also founded the company. is that a good thing that they are going to the past to recapture the spirit or is that not the right mix? wall street kind of weighed that choice and that is why the stock was down 4.5%, questioning whether joseph tsai, very well-liked and connected on wall street. he owns the brooklyn nets. he has a sports empire. he invested in blockchain technology. he is an accomplished businessman. taiwan born and u.s. educated

cofounder of alibaba. does he have the ability to take on this restructuring in a very different china given the regulatory crackdown? it will be interesting to see joseph tsai and eddie wu, who was much more quiet, but it took will part of the e-commerce giant. vonnie: you mentioned it looks different than they did a few years ago. with these three, does it continue to be a china proxy? >> it will be seen as a china proxy. the chinese economy is very different. also, it is supposed to be a consumer driven economy now. it has not been able to capture that coming out of covid zero. consumers are more cautious now. alibaba has not been able to recapture the explosive growth.

it will be up to the new chairman and the new ceo, joseph tsai and eddie wu, to navigate this delicate balance of appeasing regulators, breaking up the company and trying to appeal to global investors to recapture that growth. it has to find value in those six divisions. vonnie: stephen engle, thank you. turning now to geopolitics. china's premier is in germany. the visit is part of their effort to stabilize ties and comes after antony blinken's tour in china this week. we have more in berlin. + a busy day for the chinese premier as he embarked on his trip to germany.

he ended in the day in bavaria. this was a meeting much more about signal banned substance. it was really about beginning these talks. in order to get a dialog perhaps going once again. the backdrop is very different from the angela merkel era. it leads to many german companies with huge exposure to china caught in the balance. i spoke to some of the ceos. >> i think there is no way around dialogue. it is super important to do that to get back to the table. the germans understand it is not always better or worse, it is just different.

reporter: all of the ceos watching carefully the signals from this meeting. vonnie: the indian prime minister is set to meet with president biden in washington. they won't discuss ways to work closely on semiconductor production. washington has restricted china's access to chips. prime minister modi is planning to meet with business leaders on this trip, including elon musk. he will host more than 20 high-profile individuals in new york. tesla and india revive talks on a possible factory. vonnie: coming up, the latest on

the titanic vessel missing. but first, there is no chance of the return to pre-covid rates on a sustained basis. this is bloomberg. ♪

haidi: our next guest says she expects no soft landing in the u.s. or europe this year. we have just seen a massive upswing in housing starts since -- in may. let's bring in our guest, sharmila whelan from westbourne research services. we saw housing chart up 20 2% in

may in the united states. when are we going to see this downturn? >> i think it has already started. we saw a big jump in those housing starts dated today which was quite a surprise, but if you look at the trend, and has been down. if you look at real wages in the united states, they are declining. retail sales have been as weak as they are. the labor market is holding up pretty well. labor is a lagging indicator. the cost of living crisis is eating through not only savings but also wages. haidi: fed chair jay powell will have to talk to congress in the next two days. will he be hawkish? other central banks have had to

raise. >> it will be interesting to see what jay powell has to say. on the one hand with the last meeting, a signal that we are not -- they are still open to raising interest rates. i think the fed is in a difficult situation. one of their own making i would say. they are in a bind. the greater the losses, the greater the risk it triggers a loss of confidence and a run on deposits, which would force the realization of the losses. if that starts to snowball you are looking at the risk of a systemic financial risk.

on the one hand they need to raise interest rates because inflation is not under control yet. the liquid to still floating around in the system. the stickiness of core inflation is another reason. haidi: when it comes to asia, you are going long on india and short on china. with indian equity indexes up, do you think it is too expensive? >> what looks expensive today, tomorrow might look cheap. if you stock up india and china together and compare, india is in a much stronger position from a fundamentalist point of view. this is when you look at the balance sheets. the reforms that the moody

government -- prime minister modi government has tried out, they have done the structure that china has not completed yet. the biggest beneficiary of the geopolitical tensions between the u.s. and china is going to be india. that is what we are seeing unfolding. vonnie: what types of companies are you liking about investing in india at the moment? >> definitely the banks come out property and anything that is high tech.

you can see with the u.s. and indian relations. haidi: thank you so much. that is sharmila whelan from westbourne research services. this is bloomberg. ♪

vonnie: a couple of corporate stories we are watching. the agreement as part of a loan commitment that allows private credit funds and paypal expects

the transaction to generate 1.8 billion dollars in proceeds. ubs is facing hundreds of millions of dollars in regulatory fines over credit suisse is dealings with archegos's. authorities can impose a penalty. ubs which took over credit suisse has inherited its former rivals entire litigation portfolio. haidi: let's take a look at fx. that weakness has been a heavy focus. we are continue to watch about today. the aussie dollar the little upside at 6792.

the dollar extending those three day gains. we are seeing a bit more of a resilience pitcher when it comes to trading in the yen. this months rate hike was finally balanced. also watching dollar china. we have seen a marginal improvement given these expectations from antony blinken's visit to china gave that came out better than expectations. still ahead, australians are taken a more positive view of china. this is bloomberg. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig.

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>> the relationship and the communication between the two leaders is most important. that is why they had a number of meetings and that is why we expect you will see more of that in the time i had. haidi: u.s. secretary of state antony blinken on easing tensions potentially. a new poll suggested australians see china as a bit less of a security threat compared to a year ago. we welcome the director of public opinion and foreign policy, ryan neelam from boao lowy institute. -- the lowy institute. >> thanks for having me on the program. when it comes to attitudes

towards china, we have seen a stabilization in the australia-china relationship and attitudes of the australian public. in the context of the last five years, things are still pretty bleak in terms of public opinion as a whole. there has been a rise in the number of australians who see china as more of an economic partner than a security threat. but when it comes to trust and confidence in china, attitudes are very low compared to five years ago. haidi: it is barely in the double digits. >> 11% say they have confidence in xi jinping. only 15% say they trust china to act responsibly in the world. half of australians said they trusted china to act responsibly

in 2018. haidi: i continues to come up as one of the issues -- taiwan continues to come up as one of the issues. >> two thirds of australians say a military conflict between china and the united states over taiwan is a critical threat. that is number two on the list of threats that australians see. it is second only to cyberattacks. haidi: what is the motivator at the moment? >> a number of factors play in to how australians proceed beijing. the very sour state of the australian-china relationship

over the last five years has played into how australians view china. the number of trade measures that beijing has put in place against australia since 2020 has also been present in the public mind. australians also watch how china behaves within its own borders. the way it reacted to the covid pandemic as well as what its posture looks like in the region. we have seen that become more muscular over the last 5-10 years. when we asked australians about the longer-term military threat, three quarters see china as likely to pose a threat to australian the next 20 or 30 years. vonnie: what are we saying about the attitude towards trade?

>> it is quite similar to public opinion in the united states. in australia, seven in 10 australians said they would support, they think the priority should be on ensuring supply chains run through friendly countries. even if it results in higher prices. we did not specify what the higher prices might be, but it is clearly an instinct in the australian population. vonnie: there has been a lot of diplomacy that we have not seen in previous years. how much will that need to be continued? >> it certainly makes a difference that relations between australia and china have taken a turn in the past 12

months since the election of anthony albanese. that was really the turning point where we saw china and australian relations start to change. leaders have started meeting in the past year. what we have seen in public sentiment is that as of the relations have stabilized, so too have the feelings of australians toward beijing. in this sense it is in lockstep with the wade the relationship has proceeded. it remains to be seen how much further the relationship improves. australians are taking a cautious attitude toward china. haidi: i think a lot of people

were surprised by how much came out of antony blinken's trip this week. this is still going to be the great strategic competition. australia is a middle country. >> when it comes to the risk perceptions, it is still quite clear that u.s.-china competition plays heavily into how australians view the relationships and the region. one indicator is when it comes to the perception of risk of conflict in the pacific region. we asked one question in the poll about how what australians react if the war broke out between the u.s. and china.

56% said austria should remain neutral. when we put a more specific question over conflict over taiwan, australians would support accepting taiwanese refugees and imposing sanctions on beijing and even sending the australian navy in. haidi: with prime minister modi most recently have been come to australia, do you see the shift in the recognition that there needs to be diversification when it comes to trading partners? >> what we have seen over the past few years as australia-china relations were rocky is that australian

exporters had to diversify. that has not always been possible. china is still australia's largest trading partner. on certain export commodities, china's australia's largest market. while there have been efforts to diversify, it has also been difficult. china also needs certain products from australia, including iron ore. the impact of the trade measures have been more pronounced in certain areas. haidi: we appreciate your time. thank you so much. ryan neelam from the lowy institute. dialogue is important to improve ties between china and germany.

this asked the chancellor meets with the chinese prime minister. let's get more of the interview. >> dialogue is super important to get back to the table. it is just different. we need to live with these differences. i would say we are getting back to a normal relationship which would be good for all of us. >> were you involved in many of the discussions yesterday and today? >> i was not involved at all in these discussions. everybody has the same interest to get back to a normal relationship. >> there is still optimism for a response to the inflation reduction at. what is your idea to nurture

that ecosystem? >> i do not think it is only subsidization because that sometimes puts the market into wrong dynamics. it is more the people, the workforce, an innovative culture and good surroundings. we went to get ecological energy because we need a lot of energy. vonnie: tesla added $44 billion in market value on the session on news rivian will adopt tesla's charging standard. that will give rivian drivers access to more than 12,000 charges across the united states and canada. tesla's network is becoming the

industry standard in north america, with ford and gm already on board. goldman sachs says the market for ipo's could be set to boom again. and about us with the details. -- annabelle joins us with the details. >> what goldman sachs is relying to gauge this is an internal survey which tracks a number of factors. a lot of different things that it is tracking to try to determine the appetite for ipo listings in the united states. to put it in context, the reading has climbed to 93. it was back at seven in september. that is a huge jump in that period.

we are getting quite close. goldman sachs in their internal barometer see that hitting near 120. in terms of what we have seen so far they have ipo issuance in the u.s. around 95% lower today than where it was back in 2021. we are well away from the highs. cava is providing quite a shining example. best that has surged since its debut. the shares nearly doubled on the first day of trading. it is looking positive for investor appetite in terms of listings. 2024 may be more realistic than the second half of this year. haidi: also looking quite

positive for bitcoin for a change. >> that is right. we have been stuck in a tight trading range. we just managed to get past that 20,000 level. -- 28,000 level. blackrock has filed for a bitcoin etf. this does have the heft of the world's largest asset manager. bitcoin up nearly 10%. we had a new exchange being brought to the market. this one is backed by citadel, by charles schwab. this is about traditional incumbents looking to grab market share. haidi: coming up, a missing

diving vessel caring people to the wreck of back titanic. details are next. this is bloomberg. ♪ what if we live to 100. i don't want to outlive our money. i keep eating all these chia seeds. i could live to be 100. we work with empower, even if we do live to 100 we don't have to worry. eh, not worried. take control of your financial future to empower what's next. when you automate sales tax with avalara, you don't have to worry about things like changing tax rates

or filing returns. avalarahhh ahhh >> it is a very complex search. we have teams working around the clock to bring all assets to

bear as quickly as possible. those search efforts to date have not yielded any results. vonnie: the u.s. coast guard on the search and rescue efforts for the missing submarine. it has around 35 hours of oxygen let's get more details. bring us up today on where we are. >> it is a submersible vessel. according to estimates from the u.s. coast guard, there is about 35 hours of breathable oxygen left right now. that is based on an estimate of 96 hours that he has in terms of capability. that is from the designer of the craft, ocean get.

-- oceangate expeditions. they are conducted extensive search operations and they have international crew on the scene. vonnie: was there a contingency plan? they had only the one vessel that was capable of traveling this depth. was there a contingency plan with what could possibly go wrong? >> i have not heard anything in terms of a contingency plan. we have been reaching out to oceangate expeditions. they have not gotten back to us yet. we have not heard anything about a contingency plan as of yet. the coast guard, american and canadian, french teams and the new york governor has sent the new york national guard out there. everybody's trying to get on

hand for an effort to recover. haidi: we continue to watch for any updates on that rescue effort. plenty more ahead. this is bloomberg. ♪

vonnie: raytheon says strong aircraft demand shows growth in the industry is real. >> probably end of next year. airbus, we are trying to stay in lockstep with airbus in terms of their production. they have many challenges besides engines. they have a number of shortages out there. we work closely on making sure they have engines when they need them. >> there is a huge amount of demand. is that demand sustainable? are we seeing some of these orders representing over ordering in order to secure delivery some way down the road? >> indigo is a great example, 500 aircraft. those aircraft will not be

delivered until 2030-2035. i am sure of this is securing production slots for the next decade, but growth is real. airbus came out with a study last week that said 44,000 new aircraft in the next 20 years. half of today's fleet of 20,000 gets retired. that means you will doubled the size of the fleet in 20 years. that is a law of aircraft. >> you bring up indigo. indigo is a good example of what people are talking about. india is a tough operating environment. does that put you behind in terms of competition? or do you think by the time you

get to delivery of aircraft, you will have the advantage? >> the issues we are having today, in these very harsh operating environments, where you have heavy particulate emissions in the air, we are seeing problems with deterioration in the blades. because all of these particles get sucked up and they close up the cooling holes. we will solve this. the advantage comes into service late 24, early 25. in 2030 it should be well behind us. there are been a lot of headlines about reliability. we know how to fix the problems we have out there. 75% of our operators operate in

benign environments. but if your in india or china or the middle east -- >> airbus is selling a lot of airplanes out there right now. >> it is an issue but we are going to solve it. we cannot get engines to the shop fast enough because of parts. we are averaging 70-80 engines per month coming into our shops. typically it takes us about 90 days. today it is 150 days. we have to solve the supply chain issue to get us back on track. >> there was a time when rolls-royce had [indiscernible] they walked away from it.

we talk to people all the time to say that alliance and the engines that came out of it were fantastic. >> the engine which came out of it is still going. it works and it will be a great franchise. the idea of partnering with rolls-royce certainly has an appeal. the investments necessary for the next generation are going to be so large that you will have to apartments. haidi: let's take a look at the set up when it comes to australia. the rba decision casts a little

uncertainty going forward when it comes to what we expect from that trajectory. we see new zealand going to that technical recession. this could be seen as a warning for risk assets, like equities. the aussie is a riskier currency. japan viewed as something of a haven. we will be watching that. much more to come as we count down to the major market opens. this is bloomberg. ♪

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