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shery: you're watching daybreak: asia coming to you live from new york, sydney and hong kong. annabelle: we are coming down to major market opens. haidi: asian stocks are set to fall as surprising why strong u.s. hiring rattles wall street. friday's payroll numbers could give more clues on the fed's next move. janet yellen is said to hold talks on friday in her beijing visit appeared samsung set to report its biggest quarterly revenue plunged in nine years reflecting the deep slump in demand for memory chips. that is such a key component of how we see economic growth in korea and the performance of the kospi. we are getting the current account numbers for korea. for the second month the goods trade surplus to 1.8 2 billion in may. account surplus sitting at point

three 9 billion. this for the first time since september 22 we saw that swing to a good surplus in april. we did see that being exceeded by deficits when it comes to services and income balance. we will have a look at the baker -- at the breakdown in those numbers. that continue downward pressure on the currency is likely to keep in import prices elevated. the bank of korea potentially having more of a reason to keep its policy tight going forward. some of these bets when it comes to the be ok easing have started to be repriced. we have seen the yuan snapping the three days of gains. quite a it of weakness after a downgrade to economic growth forecasts. shery: take a look at how u.s. futures are trading. this after u.s. stocks and treasuries fell on the wall street session.

they did pare back some of the losses. the s&p 500's may. the surprisingly strong private hiring data. also we had data showing the services sector expanded in june at the fastest pace in four months. we had treasury yields rising across the curve. talking with a two-year rate climbing above 5% at one point. the 10 year topping 4%. the highest level for the first time since march. oil at the moment seeing a little bit of upside. saudi arabia raising its crude prices for asia, europe and the u.s. it was the broader risk off sentiment. what will the fed do? will they have to continue to tighten? we continue to beat expectations. this is the u.s. economic price index climbing higher as we got the adp numbers. u.s. companies adding the most jobs in over a year. talking about half a million

more and that is double the median estimate. we are headed toward the friday payrolls numbers. let's discuss all of this and bring in the blue brick senior editor for markets john authers. it was about the treasury markets. what happens when yields are this high? >> they're not that many examples of it. her only 65 cents -- there are only 65 days in total when two yields have gone above 5%. we have hit the highest since 2007 at one point today. unfortunately i was around to write about the spike in 2007. what is -- what has happened is the global financial crisis. you saw a rates finally begin to rise. they broke 5%. a breakout similar to the one we had today and the response was

for people to begin to get out of all of the structured credit which we now know caused the crisis. they went back into bonds. the bond yields went down. it turned out to be a fantastic time to buy bonds and sell everything else. i have a nasty suspicion that might be a blueprint for what happens this time. on that occasion it was literally -- it was less than a week that yields state at the high level and you sell a dramatic turnaround in the entire market. what haidi: does all of this mean for the fed? i was reading your column when you said the first half was one of the weirdest periods of market action and a narrative that you can remember. does that mean we see more bifurcation for the second half or was it more of the same? >> that is obviously a critical

question at this point. i think if you look at what the fed -- the signals we have had from the fed for the last few days, a kind of used their minutes as they have done in the past to layer a landmine. revealing the decision not to hike rates last month was unanimous. it was only unanimous after quite a lot of people who were happy to hike agreed to go along with pausing. and we have had more fed speak from lorie logan at the chicago fed saying she would be happy to hike and thinks they are going to need to do so again. the chances that the fed tightens, that it does not have the necessary room to maneuver, not to tighten do look that much stronger. it is that calculation that is

leaving the bond market higher. we have to see whether that creates one of the standard cliches is the fed has to tighten until something breaks. when lights let -- when rates last got as high as in march, svb failed followed by credit suisse, signature. either something will break quite quickly or you would expect the fed to have to keep raising rates for a while. shery: and it is not just the fed. we are seeing this hawkish repricing when it comes to european bonds. how fast can things break when you have economic data showing so much especially in the labor market and pockets of strength continuing his bite the fact we continue to call for a potential recession coming soon? >> and in particular when you have so much excess savings in consumer pockets. that is the big question.

if you have deposit flight from banks, the vectored become an issue even if people are still rich. thing across to europe, the european economy is definitely looking much weaker particularly in the case of the u.k. and in the u.k. it is alarming we had another big rise in kilts today. higher than any point in the crisis when liz truss was minister last fall. they have been as high as they were in 2008. the german bunds had a lower level because that economy has been slower for a long time. had their highest rise today since march. they are very nearly through the high they made in the bank crisis in march. as is a global phenomenon. you are right. the imponderable is the

employment market remains remarkably strong which is why the fed needs to do what we all assume it needs to do. there is a lot of money in people's pockets despite all of these signs that we should be bracing for recession very soon. shery: it is a difficult conversation. it is not the most uplifting one but always a treat having your with us. bloomberg senior editor for markets and opinion columnist. let's see how we are setting up for the asian market opens. annabelle: no surprise of course we are also tracking what is happening under the bond space in asia. we are seeing spikes in yields across the curve but being a little more led by what is happening at the front end in the aussie year and the qe2 your yield. it is the stronger jobs data that came through setting us up for a robust nfp data set later today. this expectation the fed and other central banks need to do

more to rein in inflation and the stronger economic growth we are continuing to see. what is interesting is when you change on and take a look at what is happening in the currency space. you have that expectation around the fed and how yields, it does tell you the japanese yen looking a little bit weaker that in the session today, we are drifting below the 144 level. we did hear local media reporting the deputy governor urging for so-called violence on yield curve control policy. that is something that is helping to keep a bit of a lid on the yen weakness so far even though we had the likes of mr. yen saying it could reach 160. watching for any signals around intervention. take a quick look at the equity space. we are setting up for risk off trading should the open ahead in under an hour for sydney, seoul and tokyo.

something else we are monitoring is the geopolitical tension between the u.s. and china. haidi: in the flurry of diplomat activity over the past few weeks. u.s. treasury secretary janet yellen will meet with china's premier on friday as her beijing visit gets into full swing. our greater china senior executive joins us from beijing. she is meeting with the premier appeared also meeting with the former vice premier and the former pboc governor. is this something we are expecting deliverables on or is there catch-up of old friends almost? >> i think the primary objective of this trip is to reestablish lines of communication when it comes to the economic policymaking in the two countries. we have had three or four years of covid the cut off all of that communication. on friday the secretary is having a mix of past and present.

the new premier took over in march. she is meeting the former vice premier. so when she knows very well. as been a the policymaking apparatus and a beijing for many years going all the way back to the financial crisis. he acted as a liaison for the united states and china. she will be meeting with the former central bank governor when secretary yellen was leading the fed. they have a close working relationship. have had so for many years. it is an attempt to reestablish some of these lines of communication. shery: those lines of can occasion are opening up on the climate front. we are hearing the u.s. climate envoy will be headed there too. >> we do understand john kerry will be traveling to china sometime in the middle of this month. obviously any progress when it comes to global climate initiatives needs the united

states in china, the biggest economies in the world and the biggest ring house gas emitters to sign on. that is a point of mutual consensus. one of the few that exists between washington and beijing. trying to get some progress on the climate front is i would call low hanging fruit at this point. haidi: we also saw some developments when it comes to the restrictions on two key metals critical to semiconductor manufacturing and tv's and telecommunications moth, saying it has had to band -- these restrictions are not target any specific country. we are hearing the e.u. where policy officials are trying to work on during restrictions. does that signal a step down from what we thought was perhaps a blanket ban and and aggressive move? >> it could be.

it is hard to tell without knowing what the detail in the outcome of the discussion between beijing and brussels will be. the europeans would like to see very distinct detailed outlines about what uses will be barred when it comes to exports of those metals. they also want to make sure whatever rules are put in place are aligned with wto commitments china has made. whether or not that happens, we have to wait and see. it will be a process of negotiation if anything else. although the ministry have commerce has tried to say this is not targeting anyone country, it is hard not to note this has happened after a litany of limitations were put on china's access to semiconductors. most recently, european limitations on what equipment asml, the important maker of chip adduction equipment, what

sort of machines they can ship to china. it is hard given the timing to keep those two things separate. haidi: our greater china senior executive editor joining us from beijing. coming up, a senior fellow from the council on foreign relations says china is sitting on too much money and that could present a risk to the global economy. we get more on their outlook later this hour. but first, wednesday capital management says recent data out of the u.s. does not necessarily seem recessionary. an interview with their ceo is up next. this is bloomberg. annabelle: -- this is bloomberg. ♪

>> i would be concerned about whether inflation will return to target in a sustainable and timely way and i think more restrictive monetary policy will be needed to achieve the fomc's goals and maximum employment. haidi: that was the fed president lorie logan on the fed's policy. on a skill sees a leg in policy transmission when it comes to inflation and when it catches up to reality. let's discuss with david could let who is a ceo and chief investment strategist at wednesday capital management. always great to have you with us. do i extrapolate from that that

you think there is still a bit of runway when it comes to being risk on, may be overweight on tech and some of the same themes we sell drive the rally of the first half in the second half? >> i think there is runway left and i think technology is the place to be. growth stocks are still the place to be. certainly did well in the first half of the year. today is going to give everybody some paused to give everybody some paused see a day like today with yields spiking the way they did. if we look at the second half of the year, we look at a constructive environment for stocks and especially growth stocks and technology. if sent seven as we all been. -- the magnificent seven as we call them. they are more immune to -- today microsoft and apple were both positive. haidi: evaluations at this point in that space are ok for you? the the evaluations -- are ok

for you? >> the evaluations are high. when we look at how we trade stocks and what we trade based on, there is concern there would begin earnings crash and the earnings for these companies continue to come through. could we see a correction or more significant correction in some of the high flyers? we certainly could but looking at a long-term secular growth study, that many of these stocks have, there have been comparisons to the.com era but these are established companies that are going to benefit from the ai technological revolution. we are seeing the leadership start to broaden out. saul small caps do a little better in june. we are seeing an overall broadening of the breadth of the market. shery: what would you be watching out for as banks kickoff earnings season next week? >> we expect certainly with the stress test they were able to do some things with dividends.

that was a positive for banks. we are still concerned about the financial services sector are simply because we don't know we are out of the woods. the fed has created a problem for the banks. that is what happened with svb and a handful of others. that risk is still there. i think the earnings for some of the powerhouses like jp morgan will continue to do quite well. the regional banks, we would continue to avoid those. there have been periods where they spiked off the lows but they are still a risk because the fed has created a problem with these high rates that they cannot bring their money market rates up to without suffering losses. shery: geopolitical tensions now at the forefront with secretary yellen in china this week. are there any themes you would invest into that could benefit from the de-risking, decoupling of these two economies?

>> if we look abroad, if we look at let's take japan, china and broader asia, in china tensions are so high, you could arguably -- the differences between china and the u.s., the relationship is at a very low point. internally, there are problems with china in terms of growth and so forth. take japan, japan and other asian countries are benefiting from that somewhat. there are flows out of china. there are capital flows into japan. the tokyo exchange has urged them to implement more dividends , payouts and buybacks. in japan and with the diverging monetary policy, short-term rates still at 1/10 of a percent versus the aggressive rate hikes of the fed, ecb and other central banks over the past year

or so. japan is attractive. we think other asian countries are attractive but the emerging market countries do need china and china's economy to perform. shery: those capital outflows from china already pressuring chinese assets. can you find any opportunities for bargain-hunting in this environment? >> i think there will be. we would not make that big move yet. we still see these concerns. we have had these u.s. officials that are going over there right now to talk. at the same time, we have these sanctions on reticle materials. -- uncritical materials. we are limiting what we are sending to china in terms of semi conductors and they talked about limiting the -- the materials we need to make semi conductors. we are going back to the type of environment is that of working toward a more constructive environment. even the language used, we talk

about of the risking of a global supply chains because so much coming from china affected our industry and the global industry and what we call de-risking, officials are calling decoupling. there are some real issues to work through on that front. that spills over into the markets and help people feel about investing in china right now. shery: always good catching up with you. ceo and investment strategist at mainstay capital management. all of these topics we just discussed, you can find them on today's edition of daybreak. criminal subscribers go to dayb . also available in mobile on the bloomberg anywhere app. you can customize your settings so you only get news on the industries and assets that you care about. this is bloomberg. ♪ fabulous surroundings... but everyone's looking at their phones for financial insights from merrill.

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haidi: corporate headlines we are tracking. full approval from u.s. regulators. a milestone for treatment of alzheimer's. it is seen as paving the way for broader insurance access for americans. the drug is currently priced at almost $27,000 annually. it is not a cure but studies suggested help slow the disease. said to be selling socially conscious debt denominated in dollars. the japanese carmaker is raising one and a half billion dollars in benchmark-sized attainability bond in three parts. the longest portion is a 10 year security. said to yield 1.08 centage points above treasuries. softbank has joined 170 million dollars funding round for tell existence after the founder said

he is going back on the offensive and investing. tell existence said the series b round was owned by softbank. ct bc financial and globalists p the robot arms help stack shelves across 300 family mark convenience stores. more to come on daybreak asia. this is bloomberg. ♪ hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician.

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xfinity rewards creates experiences big and small, and once-in-a-lifetime. haidi: we have breaking news out of japan. we are adding the labor cash

earnings year on year growth of 2.5% for the month of may acceleration faster than economists expected. also in acceleration from the previous month. this is not that surprising given it was reflecting the races agreed in the spring negotiations. it is still higher than economists expected. when you take into account the rising consumer prices across japan and you look at cash earnings, you're on your is a contraction of 1.2%. a smaller contraction than the previous month but still a contraction given inflation continues to rise and is sapping household spending power so we'll cash earnings in japan have stayed in the negative now for a 14th consecutive month. look at household spending numbers. you're on your contraction of 4%. this number is much bigger than economists expected of a contraction around 2.5% for the month of may.

this tells you you have inflation rising and that is affecting household spending power. people are not going shopping as much. you can take a look at the japanese yen holding out the 144 level. let's turn to annabelle for a check broader markets. annabelle: adding more context because our bloomberg economics team came out with an interesting report this morning saying japan is facing a greed deflation risk. different from what you see in the u.s., europe. corporate's have been accused of ramping up prices to consumers and that is something that is said to have added to the inflation problem. japan is a different story. you can see it reflected in the household spending numbers. real wages as well. given that japan had been keeping price hikes a little bit higher but broadly to a minimum. what has been on the bottom line, what has allowed them to do that is to hold down wages as

a result. labor compensation as a percentage of gdp, we have seen that metric declining in japan pay increases. trailing inflation as well. the mystic demand not something that could end up powering meaningful steady inflation gains insight japan and could keep the boj on course to stick with its easing policy settings. more context on the wages data out. let's take a look at the asian landscape. just under half an hour away from the in tokyo, sydney and seoul. so far, the nikkei futures contract coming online. weaker start for 1% of the downside. also stocks futures saying the same thing. below the 144 level. watching what is happening in the but not -- the bond space. the adp figures pointing to a

robust labor market. we are seeing yield spiking as a result. the aussie year yield up nearly 10 basis points. shery: we are watching the chinese market opens where the yuan has really been weakened against the u.s. dollar. disappointing eco-data not to mention a divergent policy path between the pboc and major central banks. we are watching china's official reserves flatlining over recent years. our next guest says the hidden variety have likely pushed higher peer the council on foreign relations says this could present a new kind of risk to the global economy. great to have you with us. how much money are we talking about in these hidden reserves and why are they such a big risk? >> i think there is a couple trillion dollars if you want to take a broad view.

an additional foreign assets under the control of china's state. that includes some of the funds that have been set up under the control of the state agency for foreign-exchange safe that includes some of the entrusted loans that have been provided to allow the policy banks do a lot of external lending. it includes a roughly trillion -- $1 trillion foreign asset position. that has moved in some ways and the same way you would expect reserves to move if the banks were being used to help manage the yuan. i personal view is the $3 trillion number you showed is an artificial number. it is shows -- it shows what china wants to show the world. it does not show the true position. shery: hold on a second because we are getting breaking news at the moment. you're getting more details on the schedule of secretary yellen

in china. we understand she will be meeting with the chinese premier at 4:30 a.m. in eastern time. we'll also be meeting with the vice premier -- the former vice premier at 10:00 a.m. central time. she will be attending dinner at 6:00 p.m. in beijing with think tanks he of 40. the key one we are watching in terms of policymaking or throwing bilateral relations is the meeting with the chinese premier wing chun in this visit to china. of course they now expected to discuss challenging issues between the two sides and one of them including debt relief for developing economies. tell us about why the hidden reserves are so important in terms of what china can do with them in terms of providing this credit to the world. >> the key source of hidden

reserves was a decision china took in 2010 to diversify its reserves using the policy banks, using some stay investment funds. in my view the underlying source that has fueled the expansion of chinese credit globally over the past 12 -- past five years has been money that has been provided to the policy banks out of reserves. that would imply a policy banks, the straight administration of foreign exchange, the pboc the, the central government has a certain amount of leverage over the policy banks if they wanted to push the policy banks to take losses. i think it does suggest along with the recent deal in zambia there is a little bit of hope for a constructive path forward. haidi: what do you inc. of the local government debt tuition? we know leverage when it comes to government debt was an issue

prior to with zero and we know covid zero put on in our midstream. does that play to the idea there is plenty of fiscal buffer? >> i think you have to differentiate one thing about china's fiscal capacity between the local governments which are very constrained. they are going to be adversely affected by the downturn of the property market. that is well understood. there dependence with the real estate sector and revenue from land sales and the like. trey -- the strange thing about china is almost all of the stimulus has come from local government vehicles. the central government has a pristine balance sheet. the central government debt is only 5% of china's gdp. compared to other major economies, that is a low number. china's central government has physical space. local governments do not.

it is a matter of finding a way to use the central government's fiscal capacity to provide a bit of stimulus. you cannot rely on the local government financing vehicles in the same way because they build up a substantial stock of debt. the government and our without limit in my view. haidi: this is what is fascinating but also i am sure frustrating because it is structured like that for a reason. no a good time there is a directive from the central government to do something to bring up gdp to stoke economic activity the local government -- largely in recent years unproductive investing. in that sense, does it matter, the split between local and several government debt given it is so centralized? it is actually -- it does matter because it is not fully centralized. the central government does not backstop directly local governments.

it could if it wanted to but it has chosen not to. indirectly, the chinese state banking system provides a lot of support for weaker local authorities. the central government just needs to in a sense make a decision. it does matter because the central government has preserved a lot of space. it does not matter if you never use the space you preserve so it is frustrating. china has repeatedly relied on who governments to provide macroeconomic support that really should have come from the central government. the consequence of that is local governments are stretched. balance sheets are stretched and the central government does not have that much domestic debt. as i have tried to illustrate in my research, it has even more foreign assets than is common we understood. -- than is commonly understood. shery: i know we have been focusing on head and debt,

hidden reserves, local and central government debt. property market in china highly leveraged. for you, what is the biggest financial risk china is faced with right now? >> i'm not sure it is a financial risk because i do assume within the state financial sector. there is a capacity to provide some relief for the more indebted local governments. what worries me is china's investment committee growth model which adopted after the global financial crisis which has been in place for over 10 years seems to be on its last legs. you cannot get another leg of growth out of the property market and property construction. it is going to be difficult to get another leg of growth out of locally government financed infrastructure investment. there is probably too much of that already. if china does not find a way to pivot its economy to grow on the

back of household consumption which will take some big structural reforms. cutting regressive taxes. providing direct fiscal support to households. china does not do that, i worry that china's economy will remain somewhat stalled. it will have a weak recovery and china will try to draw more on export which for me is a risk to the broader global economy. that is the risk that worries me. china's financial system is still fairly self-contained. china does not have much external debt. there is a lot of internal debt that is mostly within the state sector and china has showed a capacity to manage those debts without generating a financial crisis. i expect that to continue. i do worry china does not ever seem able to use it central government's fiscal capacity and in broader sense, china resists letting the yuan go up when conditions are good.

that is what my research shows. they take some of the money they get from intervention, move it off the balance sheet of the pboc, hide it. but when the economy turns, there is a temptation on china's part to let the yuan we can, to rely too much in exports. i do worry we may end up with a new form of an unbalanced chinese economy. haidi: such a fascinating conversation. to have your thoughts and your research. senior fellow at the council on foreign relations. we have breaking news when it comes to samsung. these numbers are little bit better than expected. second quarter accelerated operating profit beating expectations coming in at 600 billion yuan. the estimate was for 530. we are seeing the consolidated operating profit beating the average analyst estimates. sales coming in at 60 trillion. a little bit better again than estimates. keep in mind the consolidated on

operating profit numbers delay decline of 96% year on year. we had been expected to see the biggest clearly revenue fallen in nine years reflecting the depth we have seen in the slump in demand we have seen for memory chips. we did see samsung looking likely to report only a 20% slide in sales. a contraction of 22%. the last time we saw revenue fallen by that magnitude was in 2014. ring in for some more from our asian stocks reported. tell us what you make of these numbers. obviously not quite as bad as expected but the overall trend line seems to be the same as what we had been expecting. >> good morning. yes. 600 billion yuan in operating profit. that is better than expected but it still represents more than 90% full year on year when

samsung posted more than much better result a year ago. the result today showed probably the worst in memory chip laws might be behind us. that is what analysts at goldman sachs said. it also said -- but it also shows samsung may have been shipping more memory chips in the last quarter than it was expect to the company did not say much of its result as is to go for the luminary results. it did not give us a breakdown on the results but what analysts have been saying is there has been more than 2 trillion yuan in memory chip and semiconductor division loss in the past quarter. shery: so is this just part of the broader cycle in the semiconductor space right now? the reason why they are under so much pressure and when can we expect them to recover? >> that is the million-dollar

question. everyone is looking for the answer to that. because the demand, global demand for the memory chip smartphones, pc, computer have an muted, we don't know when the recovery will be coming. we are looking at the possible global recession. it makes it much harder for us to estimate when recovery would start to kick in. that is something analysts will be asking when samsung hold its conference call on july 27. and how do we know samsung estimates the demand recovery is how much samsung is going to cut itself would've memory chips. company has already studied the first quarter. it is going to adjust the memory chip out what to a meaningful level. what investors are looking for is what stashes withers samsung had to cutting its memory chip output and to what extent the company would do that.

that is going to help the weak demand by adjusting the supply of the membership which is very vulnerable to the supply and demand situation. shery: a breakdown of samsung's results today. we have plenty more to come on daybreak asia. this is bloomberg. ♪ 76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state.

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shery: a group of banks led by j.p. morgan and goldman sachs are lining up around $9.4 million of debt to the buyout of payment processor worldpay. this would make it the largest buyout financing of more than a year. tell us more about the structure of this deal and its significance. vonnie: these banks are backing the private equity term debt firm gtcr based in chicago. also other names involved include deutsche bank and ubs and wells fargo. the ohio they piece of the pie. they are lining up about a $.4 billion worth of leverage loans and high-yield bonds. and another 1.25 billion dollars in a revolving credit facility. that would value the target which as you said is world pay $18.5 billion in total. currently worldpay is a unit of

fish. fi us acquired it in 2019. it wrote down its acquisition by $17.5 billion. at the time, fis but it would spin off the business. now it is a leveraged buyout. it has been called a separation passed by the newly installed ceo. who is trying to engender a turnaround because fis has been suffering by having will pay which handles car payments from businesses all over the world and has huge volume. volume last year was $2 trillion. it has not been able to keep up with all of the upstarts from the tiny companies to singapore to stripe in the united states which are also still private. haidi: the deal has a broader residents on wall street. -- broader resonance on

wall street trip vonnie: the banks are happy to pass it on. they have some clients lined up. some institutional clients. if you think about it, the last time we saw a deal bigger than this was a year ago and that was twitter. that was the twitter deal and we know how that turned out. rings were not as enthusiastic about that deal but they are very enthusiastic about this deal. it is a little smaller. a .5 billion versus the 13 b agreed to lend elon musk for his takeover of twitter. this for a change is quote unquote normal deal. worldpay has a good rotation. the banks are happy to provide this financing. i guess they are looking forward to syndicating. if this is a tiny sign of the nascent recovery and dealmaking we were looking for, that is good news all around and making things a little more enthusiastic for the dealmakers on wall street.

haidi: vonnie with us. sure to tune in to bloomberg radio. you can hear more from the day's newsmakers. we broadcast live from our studio in hong kong. you can listen via the up on bloomberg's or bloomberg -- bloomberg plus or bloombergradio.com. this is bloomberg. ♪ behind all the regret, disappointment, and years of battling opioid use disorder is the same third-generation firefighter

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shery: sica was much seen as one of the staunchest advocates of blockchain gaming but it is pulling back from an arena devastated whether global crypto industry mental. --global crypto industry meltdown. >> remember sica? after being a rival to nintendo in the 90's it has largely disappeared from investor radars until recently. in april it bought rovio for 776 plan dollars and microsoft at one point considered buying sega to beef up its game pass. now it is looking to web three with a way to generate buzz. i spoke to the head of the videogame business. >> game business has been growing.

web three definitely can be a potential contributor to that growth. we have been looking for the opportunity carefully. >> it has also been teasing what executives have called a super game set to be released in 2026 that would combine multiple franchises and could incorporate an fts and web three. with shares jumping to their highest in 15 years, investors are suddenly again eager for more sonic. shery: of course the stocks will be watching when trade opens in japan, korea, japan and australia. keep an eye on samsung. reported a profit for the second quarter beating average analyst estimates. the drop was much smaller than expected. the alzheimer's drug has gained full approval from u.s. regulators. it should help widen insurance

access to the first drug clearances of the progression of the disease. softbank has joined a wondered $70 million funding round for a robot maker. the market opens in tokyo, seoul and sydney are next. this is bloomberg. ♪

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>> we are counting down to the major market open in asia. we continue to see a deepening bond move. ahead of more jobs numbers out of the u.s. on friday. we have plenty of data and earnings out of asia today. >> we are also watching geopolitical developments. janet yellen set to have meetings in beijing as part of her trip. we are watching for further developments when it comes to tensions and restrictions and curbs from beijing this week. let's get a look at the market open this friday. >> certainly a lot of investors this morning. we have the opening of japan, australia, and south korea. kicking off with what are we seeing in seoul today.

pricing from samsung. essentially we see it coming online a little bit to the down side at the start of trading. the key headline is samsung reporting a smaller than feared drop in profit in the latest quarter. adding to the signs that there is easing in the memory chip glut after more than a year. operating profit down 96%. in the three months ending in june. that beats analyst estimates. sales down 22%. that lag to average estimate. certainly a stock we will be seeing throughout the session today. samsung just coming online where we are already seeing it slip. other thoughts of moves in the session including what we see

with the korean yuan here today. we are past the key 1300 level. that was the current account surplus that we actually saw coming in at the top of the last hour. that is a surplus that we saw for may. something that could yuan even though we see it as a little bit weaker against the u.s. dollar. we will get more of that in just a moment. let's take a look at what is happening in tokyo with the start of trade today. the nikkei coming online. data also to note in japan today. may cash earnings rising far more than expected. coming in with a growth of 2.5%. still in negative territory. that is something that could force the boj to edit its policy

settings. that -- we are watching what is happening in the cash treasury space. they are just coming online. the two-year yield spiking above 5%. that was before we had the adp jobs numbers coming in showing u.s. employers added around half a million jobs in the month of june. that points us ahead to a very robust nfp data set later on friday. we are watching those closely. telling us that the fed still has a way to go. australia coming online. weaker at the start of the day. we will be watching for foreign reserves data. we see the 10 year yield. that is a little bit unsurprising when you see it.

a little bit unsure what to do with these mixed signals at this stage. >> let's bring in our next guests. he remains wary of the risks around the u.s. and china. thank you so much for joining us. we know it is really difficult to quantify geopolitical risk. especially when it is unpredictable. what we could see from here on out. how do you hedge your investments? >> that is a great question. this is something that we as a team spend more time thinking about. this is hard to quantify. we can think of long-term. there are risks. this is one of those events where the escalation of tensions between the u.s. and china might be a low probability, but it

would be quite impactful across sectors. our allocation to the semiconductor sector has been a little bit lower. if you look at that sector broadly, this is part of a lot of the tensions. we are well-positioned but in memory and spe it is hard to be there. it is hard to quantify. sizing is important. the time horizon you are looking at is also important. >> are there any opportunities in the semiconductor sector within china while we are seeing disappointing economic recovery but also this bifurcation when it comes to tech with the u.s.? >> not just there but in factory automation as well. you can broaden that out into renewables. the battery supply chain. we are seeing a lot more opportunities in china. the question we often get is amidst all these tensions and

the data that wanes to an economy that is not as robust as people expected in china, is it a market worth spending time on? we do not invest in the market. we invest in companies. we see plenty of opportunities in china. there are opportunities in the semiconductor sector. >> tell me about some of those other opportunities. o'er the narratives or thematic's you are finding compelling for china? >> i will mention where we are. where we are focused as domestic consumer brands. semiconductor companies. we feel like the appreciation for chinese technology in the ev space is not where shirt -- it should be.

we feel like the volumes and the contributions of volumes sold per year will continue to rise. that is where we are spending a lot of time. >> what about other emerging markets? we talked a little bit about whether or not china plays that anchor role for sentiment. i know india is a market you watch very closely as well. >> i think all global investors should watch that market very closely. with the passage of time, it would not be good to be short on this market. for the bottom up opportunities that we see across sectors. there is a lot that we like in india. we expected coming into this year that the diversions between their performance would not be as great as last year.

over the last 20 years, it is an index that is up about 15 times. it is up about 7.5 or eight times over that time. might a continue at that pace? probably not. but this is a market that will be good for long-term alpha generation and return investors as well. that is based on a broadening year-by-year. financial services, we can go on and on. there is a lot of opportunity and that market. this benefits from the tensions we are seeing in eastern asia. assembling, manufacturing. if you look at the share of apple phones that are made in india. >> one line in your notes that caught my attention was the fact

that you are not spending much time worrying about fed policy because your focusing on the opportunities in asia. now that we are seeing this global bond rout, the spiking yields, the stronger dollar, pressure on asian currencies, healthy stabilizing could a more hawkish fed and other central banks become for asian assets? >> it is a valid question. for short-term traders, it is more of a valid question. let's go back to india for a moment. historically they have been very sensitive. just as many emerging markets are. there are thousands of companies. they have market caps that are high. even if you just look at liquidity and founder stay holdings, there is a lot of opportunity there. that means in every sector there are companies that are well represented. if you do your homework and sit

tight in that market, the best companies will figure out how to navigate these environments. if you look at the long-term trends in asia, it is hard to make a case to underweight that market. most of them in the region in general. >> it is really great to have you with us. the asian equities portfolio manager. one thing we are watching very closely is samsung reporting a smaller than feared drop in profit. it is a sign that the memory chip glut is easing. not as bad as expected. but is it enough to give investors some hope? >> good morning. samsung announced that it likely posted a 600 billion operating profit. that is slightly better than investors expected.

we might see some investors taking a sigh of relief. the latest result might show that the worst of the memory chip quarterly loss might be behind us. that is at least what goldman analysts have said in the reporting in late june. samsung did not give us the breakdown between their divisions. among semi conductors, smartphones, and other businesses. the company probably posted nearly $2 billion in operating loss in the semiconductor division in the second quarter. many analysts and investors believe that that is probably going to get better in the coming quarters as the memory chip prices deteriorate eases. >> why is this stock down today? >> samsung is down about 1% this morning.

that is largely because of the strong data rattling wall street. it has been rising. that was on the expectation that the memory chip division would be posting improvements. from now on. >> what about the competition in terms of that land state -- landscape? >> the industry is tightly controlled by three global players. that has been moving in line with the membership prices.

it is set during the first quarter. the memory chip prices will stabilize. that is what a lot of analysts expect going forward. investors will be asking sam son this month when a host a conference call whether samsung is still committed to adjusting the memory chip output and how much it will cut the output. that will affect the memory chip prices and enhance the earnings of the three producers. going forward. >> the latest on samsung's results. let's turn to other companies reporting earnings today. we are checking on the movers in the markets. >> that is right. not just a focus on sam son in this session korea today. we have a couple of other big names reporting. lg electronics is another one of those.

another stock we are focusing on. this one expected to post triple digit gains on the year. when it reports second-quarter earnings later on friday. morning -- morgan stanley says this will be largely in line with expectations. jp morgan is saying that the company will continue receiving meaningful battery orders from tesla. lg energy is one of the biggest suppliers to tesla. we have seen that carmaker putting out a record number of cars. another stock we are focusing on is the japanese pharma company eisai. it is down a little bit. overnight it got full approval for an alzheimer's drug that it develops. this approval is not so much of a surprise. but the reason it is lower today

is interesting. our intelligence team has put out a note on this and what they are saying is there is language in the product label that essentially adds another screening were firemen. -- requirement. so anybody looking to take this has to go under additional testing for brain swelling. that is one of the factors for why the drug could contribute to a slower rollout. that is perhaps why we are seeing eisai down at the start of trading. another stock in focus is nintendo at the open here. this is just received a buy rating from citi. they are lifting the operating profit forecast for the company after meeting with management. they have listed the price target to 8100 yen. they were trading around the 6400 mark. it is gaining 7/10 of a percent.

>> still ahead, we look at ipo's. we see why there are more deals on the horizon. but first, janet yellen has a busy appointment agenda ahead. her china visit getting into full swing with some critical meetings in beijing. this is bloomberg. ♪ at morgan stanley, old school hard work meets bold, new thinking,

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♪ >> some crucial meetings on the agenda for janet yellen. they include talks with the premier. the economic recovery is at a critical stage. let's bring in our correspondent.

an hour china economy editor. in terms of expectations, it is interesting that she is not just meeting with him but also the former vice premier. >> it is certainly worth noting. she is going to speak with these newly appointed leaders. it is part of that relationship building. he is widely viewed as being friendlier to the international community. he reportedly pushed back on some of the more extreme and rigorous property measures, for example.

he is still really very much on the scene. >> this visit coming at a time when china's economic recovery remains weak. what are we seeing in terms of policy makers trying to voice -- boost the economy? >> the latest development that we got was in state media reports late last night. he is promising targeted measures to help stimulate the economy. for quite a while now economists have warned us off of the idea of any big massive stimulus in china. i think these remarks so far from the premier are pretty much in line with that expectation. if there are any measures that china rolls out to stir up economic every, it will probably be something a lot more targeted. we have seen mounting data suggesting that economic recovery is continuing to lose steam. we got some reports from private survey data about the services

sector earlier this week showing the slowing down of the expansion more than we expected. the manufacturing sector continues to struggle. the property market is still pretty tumultuous. we had been expecting some kind of stimulus to come from the government. these comments are still pretty vague. we don't have anything we can describe as concrete. but it is at least something for the markets to chew on this morning. >> can we expect any type of progress in terms of cooperation with the u.s. and china? given that we still have tariffs in place on goods from both sides. and new export restrictions just announced today. >> expectations overall are relatively low. potential restrictions on a couple of different metals.

it is hard to ignore. distressed nations have borrowed from that debt relief. we have seen progress in the zambia deal as well as climate change. >> domestic economy and policy matters as they come together for these talks. is there potential implications for the fed? >> definitely. on thursday we got some pretty resilient jobs data out of the

u.s. that showed the labor market is really not cooling off . we are looking forward to the jobs report on friday. we have really leaned into the sentiment that the economy is not cooling off. pair that with stubborn inflation and it all points to solidifying the case that the fed is all but certain to hike interest rates at its meeting later this month. at this point economists have said that rates are already in a very restrictive range. it has created a lot of tension for markets to look out for. jay powell has said he could price into more -- in two more rate hikes this year. investors are split on if the second will actually come to fruition later this year. it on what the data shows us. fed officials have made clear they are looking to the data to

guide their decisions this year. the jobs report will be a key factor. >> our top stories on china and the u.s. you can get a roundup of all of these stories that we just discussed. bloomberg subscribers can go there. also available in the app. you can customize your settings so you only get the news on the industries and assets you care about. this is bloomberg. ♪

♪ >> taking a look at some of the other headlines we are watching from around the world. the president of china has told the military branch in charge of the taiwan strait to strengthen drills and boost their capacity to win wars.

the security situation faces greater instability. china has ramped up military activity off the coastline during tensions with the u.s. over taiwan. president biden has agreed to send cluster bombs to ukraine. he is ignoring concerns about the potential harm to civilians. more than 100 countries including france, germany, and the u.k. are party to eight street -- an agreement banning the sale and use of such weapons. lukashenko says per goes in -- prigozhin is back in russia. he was supposedly exiled to belarus under a deal to avoid russian prosecution for armed mutiny. a group of banks are backing the purchase of worldpay.

it would be the largest buyout financing in over a year. they will require a 55% stake in worldpay, which handles payments for global businesses. the company is valued at $18 billion. this is bloomberg. ♪

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♪ >> oil futures study after the

pullback we saw in u.s. assets and the price hike that led to a choppy new york session. we have the latest. should we start with the saudi price hike and what was behind it? >> they believe the way to stabilize oil prices, they have been concerned about the study dropped this year, is to keep them higher. their production cuts are one way of raising prices. however unexpectedly that might be to customers. they are now boosting prices to the u.s., asian, and other customers. mediterranean customers will feel the brunt of large prices. the price to asia was also lifted unexpectedly. they are saying a couple of

refineries are limiting their limits for saudi oil. robust jobs data indicates the fed might keep raising rates. this is coming. this price hike. in a week that we learn that not only were they extending it in august, but also that russia is reducing exports by half a million barrels. a lot of weighing on price right now. >> we are seeing those cuts not necessarily having the same impact as before.

>> that initial surprise drop in production by the saudi's which was initially set to take effect in july and now they are rolling it into august. that was not initially sustained. so we are seeing these other actions which might explain why they are extending the cuts and boosting prices. there is a view that these actions may cause many refiners and others to stop looking elsewhere for sources. the u.s. has just one source where it has continued to pump oil as the saudi's have cut back on production. you have tighter monetary policy. the lackluster recovery in china. and resilient russian exports. there is still a bit of oil on the market where this is open pressure on futures.

in the u.s. and the latest session we had data showing that food stock piles have dropped for a third week. we also saw a drop in inventories in gasoline. market watchers are saying that another factor in addition to the summer driving season in the u.s. is that higher costs are leading to a greater drawl down in inventories. this may set up a market spike down the road. the question of all of these move by the saudi's and now russia will move prices higher when you have other pressures having an impact. >> the latest on oil. when it comes to those production cuts, the energy minister of the uae says voluntary reductions should be enough to balance the markets.

he told us output is already sufficient to cover demand, which is set to run at a high pace this year. >> there is no decision on that. it is voluntary cuts. we recognize and thanks the countries that have done it. i think what has been done is adequate. for the time being. there were no collective efforts. everyone will come and meet. >> if the pressure came in september and the tightness was not there and you were in -- asked to contribute, would you? >> there are tools for opec and opec-plus. let's hope there are no requirements for them. if there is a requirement, it is

a sovereign decision. >> if those deficits do not show , that has 2023 written offer delivering deficits. >> there is a place among the opec-plus countries. the meetings are happening. trust us with this. >> i have to trust the data. >> some of the data is not accurate. it is not driven by professionals who know the market. i don't know who the market should trusts. they need the fluctuation to be

happening. i don't think that is the way we should look at the market. >> how about the market for the data. please clarify for me how poor the recovery is in china or not. >> when we hear that during this session, he was referring from 2019 to 2023. the growth in demand in china. that is 23% growth. >> do you see 23% growth? >> i am saying china. growth and demand in china. you asked me a question about china. so i am answering you. chinese growth is healthy.

if some people are saying it is not what we expected, that is what they are referring to. the price is complex, as you know. it was chosen by so many parameters. the interest-rate and so many other things. i am cautiously optimistic about the second half of the year. as i mentioned to journalists. if we remove some unjustified speculations, i think the market will be bright. the growth is high. the growth and demand.

just look at the world demand. there is a growth of at least $2 million this year. we have not seen 2% growth. not in one single year. the growth is there. >> that is the uae energy minister talking to us. annabelle: we are at half hour into the session for sydney, seoul, and tokyo. the session is looking risk off. not surprising given what we had in the wall street session overnight. the fed is likely to need to continue to hike rates.

we saw yields spiking. today you can see bond yields rising. you have the key we, the aussie 10 year spiking. it is a story of a slightly firmer dollar. you can see currencies are really leading losses. we are also keep an eye on what is happening in the equities picture. the nikkei is into a fourth straight day of losses. we look at futures and we see a weaker start. >> staying with hong kong, we are watching bank stocks very closely. annabelle: that is right. these have really slumped. there is certainly a big effort

we have been hearing from chinese state backed -- outlets. talking about the reporting or the pboc. today just coming out of the last few minutes is an editorial in the security times in china. they are essentially saying that the market should not be taking a bearish view of chinese banks. that was on a dividend risk. it was downgraded based on assumptions. that is down to shadow loans and corporate debt. yesterday these bank stocks were really being led lower. reporting that chinese banks are buying that in the chinese

free-trade zone. it really began to pick up in the second half of last year. they have been active in that market. financing vehicles. they have been really active in the market. it is a way for them to raise money for local infrastructure projects. whether you have things like a weaker economy. the chinese bank is one to watch when the market opens in about 50 minutes. >> some of those broader stocks we will be focusing on. you can hear more on bloomberg radio. and get in-depth analysis from our team. broadcasting live from our studio in hong kong. more ahead. this is bloomberg.

♪ >> that is down more than a third. compared to last year. let's bring in our next guest.

always great to have you with us. obviously it has been a difficult environment when you come to financing deals. >> thank you for having me back. in terms of the process, we are down over a third. we see a lack of mega ipo's. we are seeing a lack of these very big deals in the market. looking fed for the second half of the year, last thursday they

were seeing those coming back. the pipeline is growing and growing. it is not yet at its peak. everyone expects that the interest rate hike will come to a close. for the end of the year. we are also seeing a large ipo. they are of a good size. in eastern europe and romania hopefully this month as well. hopefully the market is not high. that is ideal for an ipo.

they will need to be more stabilized. because of investor sentiment. which is considered to be a higher risk of investment assets. >>'s confidence higher for the asia-pacific and certain emerging markets as well? >> surprisingly, so far this year, they have been doing recently well. their number one and number two. india has the largest number of deals globally. indonesia has been an excellent ipo market.

for the the vehicles. -- ev vehicles. hong kong has been relatively disappointing. hopefully with some bigger deals coming out from china we expect to see hong kong climb back up the ranking a little bit. >> walk us through what is happening in china. there have been some spinoffs of some big tech giants. it is pretty pessimistic. what is the outlook? >> you are totally right. this will take time. they will need time to prepare.

they will probably need to wait until the market sentiment returns. this is probably not what these tech companies want. >> market sentiment has been pretty exuberant in japan. has that translated into the ipo market? >> yes. given the topics. that has actually helped. there has been a lot of talk about the ai. they are more developed in terms of ai technology. into a lot of business applications.

these are not very large ipo's. >> always good to have you with us on an update. you can also watch this conversation and dive into any of the securities and functions that we talk about. by sending us instant messages. this is for bloomberg subscribers only. this is bloomberg. ♪ he snores like an angry rhino. you've never heard an angry rhino. baby i hear one every night... every night. okay... i'll work on that. the queen sleep number 360 c2 smart bed is now only $899. plus, free home delivery when you add an adjustable base. shop now only at sleep number. i was told my small business wouldn't qualify for an erc tax refund.

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♪ >> time one looks to bolster protection of its communication infrastructure. there is one clear solution. it is proving to be problematic. let's discuss all of this. where do we stand when it comes to this potential tie up given there are so many challenges? >> the last that taiwanese

officials heard from anyone from spacex was in september of last year. elon musk said beijing had made clear to him that they were very concerned about the way that starling was used to help ukrainians circumvent russian hacking. the taiwanese are very suspicious or wary of the intentions of spacex and the authenticity behind this campaign because they know elon musk is so connected to china. anything he would do to help taiwan in event of a war with china is something they really do not have complete confidence about. right now spacex is not saying anything. we are still waiting to see where things are going. but they are not going to wait. they're going to look at other options as well. >> give us more backup on this

story. what is taiwan once this, need this? what are the alternatives if this deal with starling does not go through -- starlink does not go through? >> in february of this year, a couple of vessels flying chinese flags severed cables. in the aftermath of that, some of the islands closer to china were left with barely any internet. it was a clear example to taiwan about their communication needs. they do not have a lot of options. they are an island. they cannot run a cable overland to neighboring countries. they would really be relying on satellites if not undersea cables for their conductivity. they have gone on this big exploratory mission. they have spoken to partners and

vendors including ones in london. to see what their options are. they also expect to launch their own self-made low-earth orbit satellite in 2026. the problem with all of these is they are not as immediate and illiberal as starlink is. that is where the tension is. >> the latest on taiwan and starlink. a reminder on our exclusive interview with the stock exchange chairman of taiwan. that is happening monday in taipei. we will talk about the markets and the possible impact of the coming taiwan elections on investor sentiment. take a look at how u.s. futures are trading at the moment. stocks and treasuries were down. we are not seeing a lot of movement in the futures market.

this is as we continue to keep our eyes glued to the global bond rout as the stock and bond markets aggressively reprice the likelihood of higher global interest rates as we head to the u.s. jobs numbers on friday as well. we already have plenty of data to digest out of asia. japanese household spending contracting. south korea seeing an account surplus. we are watching samsung very closely after their profit dropped less than feared. this is bloomberg. ♪