♪ haidi: good morning and welcome to daybreak australia. annabelle: we are counting down

to asia's major market opens. rishaad: the top stories this hour -- the european union says china is postponing a beijing visit. and the u.s. supposedly looking to curb china cloud services from microsoft. haidi: new crude suppliers after saudi arabia and russia's latest output cuts. rishaad: airbus urging chinese customers to rush orders or miss out. we speak to the playmaker china ceo. annabelle: we have the open of u.s. futures. we had markets shut tuesday for a public holiday so not a lead in but essentially, we are seeing it point of little bit to the downside. muted trading in the session, something else that will be weighing on sentiment. not a lot of activity just yet. in terms of our we are

generally, we are in the second half now. investors are trying to assess whether that lead up, that run-up we have seen in global stocks off that stronger-than-expected u.s. data coming through. there are expectations around china stimulus. global factors have been at play which has driven the rally, plus the enthusiasm around a.i. now the big question is whether this can be sustained into the second half. that is the state of play as we look ahead. u.s. futures coming back online, but a public july 4 holiday on tuesday so no trading in the session. if you change on, you take a look at what's happening on the asia complex. we are referencing what happen in the european session but very muted. a little bit of activity mainly in the real estate stocks, but generally, it was a really range bound session. it does paint that same picture. we have aussie futures a little weaker. we saw them a little more active

after the rba decision yesterday. opting for a pause of the central bank. spiking off that but steady in the session. kiwi stocks in focus. we also have the yen still holding around the 144 level. this has been the question of that yield differential in play between the boj and the fed. the other thing to note is how much of those geopolitical tensions in the session continue to play out. rishaad: thanks for that. we saw volumes, down about 45% than they would be, hence the price action being what it was. let's move along and have a look at what's been going on with the aussie dollar. we had that rba move, not to do anything with interest rates, but we also have the aviation sector at the fore. looking at that later on, and

also looking at this story as well. china has postponed a trip to beijing by the european union's top foreign affairs person. now, there have been due next week. let's find out the story behind this and get to stephen engle. what is this all about? stephen: well, the foreign affairs chief was supposed to be in beijing as of monday. he was supposed to meet with his counterpart here before a minister of china but we got a statement saying that the trip has been postponed and no reason has been given. i am sure the europeans might know why the trip was canceled. it could be for many different reasons, but you can extrapolate and say there are some sticky issues. beijing is trying to convince the european leaders to not necessarily be as hawkish as the united states on some of these export curves and its stance on

de-risking from china. so, this was going to be an opportunity for borrell to meet with their chinese counterparts and talk about strategic issues. obviously, the war in ukraine would come up, as well as export restrictions and the so-called bifurcation of the tech supply chain and de-risking as the german chancellor has sort of coined that term and has been taken up by others including the u.s. a term that china says, at least last week at the world economic forum, they say de-risking is a false proposition or false narrative. it was an opportunity for the europeans and chinese to meet face-to-face. not going to happen, we don't know why. we don't know when it will be rescheduled. haidi: we have been talking about china's decision to restrict critical mineral exports, which is putting europe target change -- climate change targets into jeopardy. stephen: i mentioned the war in

ukraine. moscow's move in ukraine last february put europe in an extremely sensitive situation. is this a recurrence of that with these restrictions, export restrictions going -- coming from china as of august 1 on two key metals, which will need export licenses to be sent abroad. that does put europe's more recently stated climate goal -- climate goals in jeopardy because these two metals are used in key technology's, including key decarbonization technologies including electric vehicles, as you can see here, solar panels and the like. it does put europe's green deal to be climate neutral by 2050 in jeopardy. it also kind of rehashes some of the things that european

members, the bloc has had to deal with over the last year and a few months because not every bloc member has been on board with the china restrictions or with some of the moves on russia as well because of europe's overreliance, if you will, on oil and gas. it was taught a difficult lesson when russia invaded ukraine. some of these concerns are resurfacing again right now. keep in mind that the eu gets 71% of its gallium of china, 45% of its germanium. my twitter feed, i have to say, kind of blew up last night with many people talking about, here we go, china is making its move now with -- doing its own export controls. the concern is could this go to even more critical elements like lithium? that would put europe's climate change goals of 2050 perhaps in

jeopardy until they can friend shore, like the u.s. will have to do to get other suppliers from around the world. getting mines up and going when they rely on cheap exports or will be a long proposition, maybe upwards of a decade. haidi: stephen engle there in beijing. taking a look at the reaction to the rba and the aussie dollar set to remain on the back foot. that decision to hold, leaving the currency vulnerable to differentials favoring the greenback. this does not necessarily mean the rba is done, but it certainly pushes us closer to the end of the cycle. how many more hikes are likely? swati: economists have not changed their expectations after yesterday's rate decision. we are still expecting between one and two more hikes. we are towards the end of the tightening cycle, but economists

are saying it is too early to say the rba is done because we are still seeing high inflation. that is how the rba described inflation in its statement as well. they called it too high. we are seeing pressures internationally as well. we have seen bank of canada resume hiking out of these concerns. it is too early to say this is the end of the tightening cycle. we cannot expect -- we can expect another one or two interest rate hikes from the bank. rishaad: we have had it more sustained tightening cycle in the west and australia seems to be a bit different. we had that long pause. you could argue that it was bad messaging going on and they perhaps got it wrong, but it is a case that they are on a go slow path. why? swati: yes.

if you see what the rba has done, four percentage points of hikes since last year, that compares with 5.25% by new zealand, 5% by the fed. other central banks like the european central bank started a bit late, but have moved about the same amount as us. yes, definitely, the rba is on a road to path. one big difference is the fact that governor philip lowe has repeatedly say he wants to engineer a soft landing. he wants to make sure that in this battle against inflation, he's able to preserve the employment gains. also over the past month, the recession rhetoric gained momentum in australia. we also saw in our bloomberg survey, the recession -- the probability of recession rising to 50%.

that has been the highest since the pandemic. australia has not had -- if you remove the pandemic years, has not had a recession in 40 years. it is a sensitive topic, i guess. the reserve bank is cognizant of the fact that they don't want to be seen as being responsible for driving a recession. this is something that philip lowe has repeatedly said as well. i think that is what really sets them apart compared to other central banks, including new zealand where the governors and other policymakers have said they will go to any length to make sure that inflation is brought under control. rishaad: thank you very much. swati pandey joining us with a look at the fallout from the rba. let's take a look at some of the headlines we are keeping tabs on. the organization for economic cooperation and development, oecd, saying inflation through advanced economies has fallen to the weakest since december 2021, despite underlying price growth

showing a bit more strength. oecd members apart from the netherlands, norway and u.k. have seen slowing consumer price growth. the group of seven, inflation is at 4.6%, the lowest since september 2021. abu dhabi set to be in talks to create a chemical giant worth $30 billion. they are discussing merging borealis which is 75% owned by omv. the move would fit with a wider plan by uae to attract investment and build new manufacturing capabilities. the greek prime minister saying his country will repay two years of bailout loans ahead of schedule. greece has repaid funds provided by the imf and started early repayment of bilateral loans from european countries. he told bloomberg exclusively he wants to regain greece's investment credit rating this year. >> we will be able before the end of the year to actually

repay ahead of time for the next two years. i think this will also send a positive signal to the markets that not only are we focused on growth, but we also want to make sure that to gdp ratio continues to decline at a very rapid pace. rishaad: the international atomic energy agency says japan's plan to release wastewater from the fukushima nuclear disaster site is in line with global safety standards. the agency finding proposals for gradual discharges into the pacific ocean and suggesting it would have a negligible ideological impact. the release could come as soon as august. airbus urging chinese airlines to place orders for its biggest aircraft because huge purchases from other carriers are extending wait times in the post-covid travel boom. also delays. the ceo spoke exclusively in

shenzhen. >> we have tried to accelerate this discussion with our chinese operator customers. have a more far-reaching and trying to place the order as quickly as possible. this is clearly something we need to do together with our customers in order to reach this gap between demand and supply. haidi: still ahead, oil gains to put mounting concerns around economic growth and the demand side of dominating markets. we will take a look and said that with anz. first, we will hear why ig says the strength of u.s. stocks is likely to continue into the second half of the year. we will be talking investment strategy next. this is bloomberg.

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♪ rishaad: u.s. futures just a modicum of a few points lower as it was a public holiday. let's find out what's happening market wise and what is happening. hebe chen joins us, market analyst at ig. we've had of a massive rally for the s&p, nasdaq and u.s. stocks. is it a full's -- a fool's errand to get back into this market and chasing it? hebe: it looks like when we are entering into the second half of this year, i feel a bit more positive compared to about six month ago. the reason being you look back at entering this year, we have

more certainty today than six month ago. before we entered things here, we had no idea how much the fed would hike and now we know it will likely be two times. we also had no idea that a.i. what contribute such a big power to drive the tech stock rally. at this stage, there is a catalyst for the rally. i am still positive about the second half of the year. the only risk if there is any is whether or not the market has already priced in the potential for how fast and how quick their stock is moving higher. in terms of direction wise, it will be quite similar. rishaad: of course, it comes to what you want to buy within these markets and we have not had that much breadth. can you go to the laggards of some of these markets and find value there? hebe: yes, but fundamentally, we

are looking at the valuation. it has good values or just taking the a.i. or tech stocks for instance. we have seen wide divisions in terms of pe ratio. nvidia has been up. alphabet and microsoft, some reasonable values. i think that is the way of looking at the upside potential with interest in the tech stocks. haidi: do you see any catalyst from outside when it comes to china? i know you talk about this confidence trap that is affecting just about every sector. hebe: yes. i think the confidence trap refers to the situation where consumers are not confident about the outlook of the economy environment, as well as the families financial well-being. it will make them less likely to

spend money. that is why we are seeing the cpi, the retail sales underperform. that also explains why we have seen the property market still not rebounding strongly as expected, as households are more reluctant to spend a big chunk of money to get into the largest. i think it will be the key issue . so, that will be the major issue we will see whether or not the chinese government can help to solve this issue through the second half. if not, there will be issues moving forward. haidi: we have seen very frequent developments when it comes to chip curbs and chipmaking equipment crubs. -- curbs. how would you be playing the geopolitics of that within asia? hebe: yes. the message from china is quite powerful.

in terms of china signaling city -- especially to the u.s. and the eu, that is the worrying part. on the other hand, given the timing, another layer of complexity. it looks like that china is trying to increase its bargaining power when they are meeting with janet yellen. to negotiate. either way, it is sort of a warning sign for me that the tension will stay and there will be more to come. on the other hand, i do believe in the longer term that these sort of restrictions could be resolved for the chipmakers in the u.s. and eu. it is just a matter of time. rishaad: very quickly, just thinking australia, is the rba done? hebe: the short answer is no,

they are definitely not done yet. there are more hikes to come. if you are looking for the future markets, 4.6% is there terminal rate. we are at 4.1%. i think more likely, we will have another two more hikes. but even saying that, when i look, it appears to me the rba is more confident than the past month. they are trying to stress and highlight the positive side of the inflection story. so, for me, i think the rba is near the end of the technique and we have a few more to come. rishaad: good stuff. thank you. hebe chen from ig. a lot more to come on daybreak australia. a full market check as we count you down to the start of the asian trading day. this is bloomberg. ♪

haidi: the chairman of bnp paribas says france's biggest bank is ready for the rebound. he told us exclusively of where the lender is seeing these growth opportunities. >> on market reaction, you know, it is a long debate. we have a long debate about the valuation of stocks, the difference between the u.s. and europe. you know it well. we have a reasonably high dividend. we serve well the shareholders. it is up to the market the value they want to give but we would welcome a better appreciation. on the point you have made, which is what are we going to do? the main trend in bnp paribas is

to support organic growth in a well diversified business model we have all across the world, notably in global market activities. you know that we have sold bank of the west. we are going to use the money of this operation to support the business but mainly in an organic way. >> mainly the focus on that organic growth story. can i ask you about paris as a financial services hub? it does seem in terms of continental europe's attempt to build up competition to london, that paris has done very well at attracting banks to expand. goldman sachs, j.p. morgan, citigroup. is this putting strain on any of the infrastructure? is this something we will see more of? >> well, as a whole, the

continent has done well. you have paris, amsterdam, dublin, frankfurt. all of us, i think all the financial places in europe have done well after brexit. for obvious reasons. clients are on the continent and it is easy to operate from the continent and to show the clients in -- serve the clients in the continent. that is why most of the staff has shifted staff and skills to the continent. bnp paribas is leading this which is positive for my point of view for various reasons. it will continue. you have raised a very important question which is the quality of financial infrastructure in the euro zone. we should never forget that since the decision was made on brexit, the competitiveness of the continent, the work has been delivered. in the continent, people are working hard to build up better,

stronger, and faster financial infrastructure. time is running away, and with this, we see increased competitiveness. i know this is a debate, a sensitive debate between the u.k. and the continent. but, people are working hard to improve and they do. and we see the results. rishaad: the bnp paribas chairman speaking exclusively to anna edwards and tom mackenzie. coming up, sharing outlook on oil after saudi arabia and r

rishaad: this is daybreak australia. we are looking at oil markets, very much the core of things with opec members convening in vienna on wednesday for a conference. in a speech by the saudi energy

minister, it will be closely watched after he promised to keep traders in suspense on a future. oil rallied after saudi arabia announced it was extending output cuts, while russia announced fresh productions but prices do remain stuck between 70 to 80. you can see the price at the moment. brent crude a bit more sustained in terms of the gains we saw after the last time saudi went off on its own. the oil market has gone deeper into degradation. asian refiners have also been seen as a source of crude for markets outside of this opec alliance. haidi: yeah, let's get more perspective when it comes to the oil patch with daniel, a senior commodity strategist at anz. always rate you happy with us. we have seen the fading impacts of supply announces like this. we are the announcements from

saudi arabia, russia and algeria. it is still the demand side over global growth that is the swing factor now? daniel: certainly, i think markets more broadly across the commodity spectrum have really been focused on that macro backdrop. it has obviously been impacted by the entire monetary policy from central banks, but certainly, china as well. that lack of strong rebound that many were expecting post the lockdown measures be eased has really disappointed. it will take some time for perception to be reset, and that will drive, i suspect, the direction of commodity prices but oil specifically. it's actually been more about the supply issues in the market. obviously, all the focus has been on those opec production cuts, but we have actually seen

better than expected output from a lot of other sources which have probably gone a little unnoticed. i think it has eased the tightness in the physical market and really resulted in a lack of signals to investors that things could get potentially tight. those being obviously the output from russia which has clearly outperformed against expectations. but other ones like iran, venezuela have all been pumping a little more oil into the market. it has just gone unnoticed amidst those announced cuts from opec and saudi arabia. haidi: on the demand side, what about india? there are all signals that that is market nearing peak demand? daniel: i actually hold pretty strong feelings that we will see

that continue to drive over the medium term. at least in the shorter term, there are obviously some headwinds but ultimately, this is still a developing economy which i think has got a lot of upside to it for commodity demand quite specifically. i think we will continue to see strong growth in imports in particular. that is why we have seen russian supply really perform strongly in the market with india really jumping in and purchasing as much as it can. certainly demand wise, and actually hold some good upside for commodity markets. rishaad: demand is at the heart of it and demand from china is crucial within that. the chinese slow down actually is playing out. the commodity index down 10% since the start of the year. and we lay to the doorstep of

what's happening to that? daniel: i think that is really the crux of where the market was expecting at the start of the year. although, you look at the data and gasoline, broader implied demand in china itself has actually rebounded quite strongly. i think those expectations were obviously much greater. that was potentially going to be supported by further stimulus measures. we have been disappointed with what has been provided so far and certainly at the start of the year, we saw beijing announce a relatively conservative target for gdp growth at 5% for this year. that clearly resulted in a recalibration, i suppose, of the potential upside. i still don't think the markets have really adjusted to that fact yet. it will take some time before

that happens. i think we can sort of focus on some of those longer-term issues within the market, which still i think points towards fairly strong demand but certainly at lower levels than we probably would have expected. rishaad: with the world facing these three d's, decarbonization, demography and decoupling, how does that play into the narrative of commodities and what do you look at in particular longer-term thematically? daniel: i think these issues coming to the fore quicker than we expect -- when we look at the oil market, for example, the impact of electric vehicles on demand is clearly accelerating. we have seen a trend where energy efficiency, for example, is resulting in lower demand per

usage. cars are getting more efficient. the transport fleet is getting more efficient in total and that is reducing demand. yeah, the growth in demand for energy in particular is going to slow down, i suspect, in the medium to longer term. certainly, the decarbonization trend is really tightening those up significant leap. i don't think the markets have grappled to the full extent the amount of additional supply we are going to need to really fuel this energy transition. that will come to the fore a lot earlier than people suspect. and partly a reason why we are starting to see these export controls from various countries, lease not china where we saw those critical minerals placed under scrutiny this week. it is going to be a challenging

time for commodity markets. i think there will clearly be winners and losers from it. rishaad: all right, daniel, thank you so much. daniel hynes from anz. we will have a look at the morning calls ahead of the asian trading day. the allianz chief analysts saying the prospect of the u.s. or eurozone policymakers might overdo tightening is now one of the most prominent threats to the global economy. this especially as policymakers from advanced economies show concerted bias towards more interest rate hikes. also warned of lingering risks of the financial system being cautious and still seeing a lot of leverage and concerns around credit risk. haidi: mckenzie investments is less optimistic about stocks and sees a value in bonds after the 13% global equity rally in the first half. it thinks rising borrowing costs are having an impact in the economy and will force investors

into a more defensive mode. the firm's strategist recommends adding investment-grade debt and going underweight on stocks. rishaad: haidi, just having a look at what's going on with the u.k. huge inflation. essentially a triple whammy if you are in the housing market. pricey borrowing now, economic uncertainty, and you have a terrible cost crisis as well. markets expected to don't interest rates up by 6% to bring down inflation. that cheap money for homes goes. you have these very low fixed mortgages. what we are having now is in the second half of this year, something like 900,000 of those mortgages coming off fixed and going into flexible. that could be very painful. rent is one thing, but mortgage

costs is quite another as well. haidi: the rental crisis is something that has been playing out in major cities in australia. the city market has been gangbusters and the expectation we will see further tightening in rental as well as buyers buyers markets as we get more immigration. take a look at how this impacts women in particular. you spoke about london rents

rise up this morning. my wits. the rising sun. really? the bed. is by my doorstep. singing sweet song of melodies.

i was told my small business wouldn't qualify for an erc tax refund. you should get a second opinion from innovation refunds at no upfront cost. sometimes you need a second opinion. all these walls gotta go! ah ah ah! i'd love a second opinion. take the first step to see if your small business qualifies. haidi: some of the top stories we are following out of australia. india's first visit to australia in three years. the president discussing boosting economic corporation and climate plans with his counterpart, saying it will extend indonesian business visas to five years from three years. the tunisians announcing a $33 million climate partnership initiative.

a new report from the ieaf says the fossil fuels sector has grossly underreported is methane leaks. it has likely been underreported by 90%. the figure for coal was 80%. it signals the urgent need for many large industrial facilities to double the rate of decarbonization. rishaad: looking at chinese tech giant alibaba now and it is wading deeper into its plan to revamp its structure. the company shifting its attention to allude -- of business. annabelle: two names that are standing out in particular. the first is you call and another. a bit of context because if you want to put it into perspective, it is really similar to youtube. i had a look earlier and you can see --

a little bit like tiktok. when you go on, it is a chance for people to upload their videos but you can host entire video shows. they also streamed live sports events. tudou something similar. it is again quite similar. those two merged in a deal back in 2012. essentially, what we understand is this is the latest step in alibaba proceeding with its big restructuring plans. now we understand they are looking at these two different assets in particular. what we're hearing from sources as they are conducting a strategic review into the names. rishaad: it sounds a bit like another company. not saying anything, no. >> that's right. it is similar to youtube. alibaba could essentially be injecting both of them into alibaba pictures. that is the option.

haidi: to be fair, that has been around for a long time. i used to use it back in the day. what are the other options we are hearing about? annabelle: that's right. so, essentially, there are options underway. other ones that can be including a debt -- separate listing for the video platforms or not to proceed with any deal at all because it is the deliberations in the early stages. yes, as you say, it is a very large company inside china. it has really contributed quite extensively to the growth or profitability and bottom line of alibaba's entertainment arm as a whole. it really is just about how they can try to unlock further value for investors in the company. so far, the focus has been on the cloud division and then moved into the grocery and logistics arm. this is the latest step in what we know is the six way restructuring.

haidi: annabelle in hong kong. let's take a look at how risk assets in australia are setting up as we get into this session. still percolating through is the impact of that hawkish hold from the rba we had yesterday. that put the aussie dollar on the back foot. pretty whipsaw session when it comes to the aussie on the back of that decision. we saw the bloomberg dollar drop for a third straight day. we did see some strength coming back into those commodity currencies against the greenback. pretty thin flows into spot options. as we have been seeing, trading in cash treasuries have enclosed for the independence day holiday in the u.s. taking a look at the aussie trade, 67 u.s. cents at the moment. we are watching dollar-yen pretty close to that 145 level. we have seen intervention in the past. rishaad: a quick look at what's going on at aussie dollar

unchanged right now after that pause, or should i say, lack of movement by the royal reserve bank of australia. and haidi was saying, we have the yen at 144.46. this is what we have coming up. a massive a.i. potential in japan. plus, we will get an outlook on the aviation industry in china. that comes courtesy of ascend. ♪ ♪ 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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rishaad: this is daybreak asia