5-hour energy after. your stomach will thank you. discover 5-hour energy. ♪♪ >> a very good morning, welcome to daybreak australia. >> we are counting down to asia's major market opens.

>> with traders awaiting earnings. >> 35 speakers -- three fed speakers, more rates hikes are coming. big rally in bonds. traders are betting that the

cpi's going to show as lee -- at least as good of a drop in inflation. the monthly survey shows inflation expectation down to the low distance april 2021. you can see again that we have the green arrow showing the price is still holding up. the dollar down fractionally. yields a little bit lower so that made the move to the dollar lower easier. oil $73 per barrel. let's move on to turkey. drop in its opposition to sweden's membership bid. more details from jodi schneider . what happened? turkey suddenly agreeing to allow sweden to join the

organization. e-tailer this was really a breakthrough for that alliance. they will be meeting for a two day summit in lithuania starting tomorrow. president biden had just gotten there from the u.k.. he landed to this news. these talks have been going on for months, whether turkey will allow sweden to join the alliance. it is unclear what the final decision-making factor was for turkey although president biden said over the weekend that turkey about purchase of f-16 fighter jets was in play. it is unclear if that was the final deciding factor, but turkey has agreed to allow sweden to join. this really strengthens the alliance against russia in its

war against ukraine. this is a bad day for vladimir putin. a good day for western leaders. and a pretty good day for president biden as he arrives at the summit. >> can we frame this as a win for president biden? >> yes, i would think this is a win. he would have to go back to congress and get them to agree. at the same time, he is now being able to go home and say our alliances strengthened. this is something he has been pushing for. a bipartisan group of senators said they could not allow for any sales of the fighter jets to turkey and told turkey gave up its opposition to sweden as part of its alliance. this now has the whole baltic as part of nato and that really is a big detriment to vladimir

putin and his designs on trying to separate some of those countries. there is a separate question about ukraine entering nato. president biden said we will see about that. we need to have more discussion. but sweden joining is certainly a win for him and western leaders. they go into this with a big win, being able to say we are going to get sweden. turkey drop in its opposition, president erdogan and president biden are set to meet. >> how could this affect russia's war in ukraine? >> first, they are solidified. the nato nations, there had been a lot of talk about how long they are going to be able to keep up the strength of this alliance with no cracks in it.

this is certainly another way to bond them together on these issues. having another baltic member is very important geographically. hungary, which is the only other country that was in a position besides turkey to sweden joining the alliance, came out and said it looks like they are also dropping its opposition. that is important going into discussions which ukraine will dominate in the next two days. yvonne: three fed officials have warned interest rates will have

to. the drumbeat on this message and continues. >> a very much cemented view that u.s. interest rates will go up as the fed meets. rates still have a bit to go. mary daly from san francisco fed making the point she is on board also for rate hikes. they are all sane inflation remains the number one issue. we will get u.s. inflation numbers again this week on wednesday. the big number will be the meetings. it is going to be well above the target indicating the fed has

more work to do. probably a bigger debate will arise. kathleen: china on the opposite number. big news the government is ready to take steps to shore up the property market. is this what china needs to turn deflation into inflation to get back on the road to a strong recovery? >> the real estate sector has been one of the big drags. the government put out a release, making a point that they will take pressure after repaying loans for some developers, to ensure that construction projects get finished or one of the big concerns when all of this got started was whether or not apartments would be finished for those people who put the money down. the reaction i have seen come i think economists are saying this should be enough to turn things around.

after a brief bounce earlier this year, 25% of economic activity goes to the core of why china is struggling. all the warnings are of deflation. i do not think these measures are going to be enough to turn that scenario enough. -- around. kathleen: major u.s. banks are facing one of the biggest regulatory overhaul since the financial crisis. it centers around the amount of capital have to put up. what does michael barr want to see from lenders? >> he wants to see a more standardized way these major banks estimate credit risk rather than relying on their own estimates. that does mean raising capital requirements, a controversial issue. also, making the stress test

banks go through tough. let's talk about what the larger banks would be required to hold in terms of putting capital aside. it would be an extra two percentage points of capital. the changes as proposed would be phased in over a two year period. it would include more risk, to better capture the dangers that firms actually face. this was in a speech that michael barr gave in washington just days before the major u.s. banks are set to report bank earnings. and these changes stem from much larger rules. it is important to note that while he wants to see higher capital requirement, the real increase is coming for the most

complex of the banks, banks with more than $100 billion in assets. currently such restrictions apply only to firms that are globally active or have about $700 billion or more in assets. having these banks put aside more money is controversial and michael barr is open to hearing comments, which he will likely get on the issue. haidi: what are the likely next steps? >> we do know that the bank industry titans have long opposed higher capital requirements. this became a political lightning rod right after we saw the collapse of silicon valley bank and a number of other regional lenders in the spring. we know that michael barr says an examination at the time found the system was sound but that changes were needed. he is saying changes will only take effect if they are approved by the regulators out there. that includes the fed, the fdic

and the office of the comptroller of the currency. there is a lot of red tape ahead . an initial plan could be released as soon as this month. actual changes would not likely take effect for months, if not years, depending on the details in that public comment phase. stay tuned. haidi: let's get a check of how asian markets are setting up. annabelle: we are approaching earnings season. wall street lenders kicking us off friday. the biggest week is about a fortnight away for us. this is the big theme that is starting to dominate. the expectation that earnings are really going to have to surprise to the upside in order

to extend the rally. you can see here that is the proportion of analysts that are raising their earnings forecasts versus ones lowering it. now in negative territory, which tells us most analysts expect the s&p 500 to go lower. investors starting to brace for further declines here in markets. that is when we are trying to look at as we approach earnings season. let's take a look at futures this morning. a couple hours away from the openings in japan, australia, korea. mostly pointing to the upside. a really big bearing on a lot of these economies that are sensitive to what happens in china. that appears to be a key thing to watch today. kathleen: still ahead, we discussed opportunities in emerging markets bonds.

up next, wincrest capital share some of their stock picks. this is bloomberg. ♪

>> my view is that the fund rate will need to move up somewhat from its current level and hold there for a while as we accumulate more information on how the economy is evolving. >> as we get closer, that is part of positioning ourselves so that we can get to the target level in a careful way. >> one of the surprising things about the economy is how much momentum he continues to have. we are likely to need a couple more rate hikes to bring inflation back into a

sustainable 2% path. kathleen: fed officials speaking today ahead of the u.s. june inflation print out to on wednesday. let's bring in the ceo of wincrest capital. when it comes to the fed, you raise the possibility that jay powell and his crew may keep rates higher for longer. and that might be the catalyst that deflates the u.s. market and reinflate emerging markets. you are frustrated that capital has not left the united states. >> that is right. if you look, a has gone sideways for the last 10 years. if you look at emerging markets, there is a 63% discount. these are all-time extremes.

you would think it would be unsustainable. i think this year we have had sector rotation, the money has gone into tech and out of banking, but has yet to leave the u.s.. what is the catalyst? kathleen: how does that determine where you are putting money right now? >> even if you have a great stock, it is not going to be in the investment, so we are not chasing the nasdaq. we do not like the overconcentration of the mega-caps in the s&p either. we really do look for three things. one, business models that do not depend on interest rates because anybody's guess is as good as mine as to where they might be. we want things that are mega trends.

if you look at united rentals, you have this tailwind of the infrastructure. two, we want deeply contrarian ideas. all of the money was chasing a i. what has been left behind? right now there is this view that ai killed the call center operator. so we look at a company like tele performance, the largest outsourcing company in the world , and its share prices back to where it was in 2018 even though profits have doubled. their guidance this year's margin expansion and earnings growth. we think that is an interesting story. the third place we would look as fallen angels. a stock we know very well is doc morris. this is a company where we have a catalyst.

it is mandatory that prescriptions go online in germany. their total market cap is 630 million francs today. those are examples of idiosyncratic stories that can do well irrespective of her interest rates or a cooling economy. haidi: i wanted to go back on emerging markets. i think a lot of us have been scratching our heads as to why they will be there time to shine. how much does this still depend on what happens in china? and where the u.s. dollar heads from here? >> one of the things i have had to get my head around is how its possible we are in the manufacturing recession.

china came out and showed industrial weakness weigh in on consumption. what we missed was the enduring effects of covid stimulus. the consumer had $2 trillion of excess savings after covid. it is estimated they still a 500 billion dollars today. as those unwinding you get quantitative tightening, we see liquidity dreaming. -- draining. and that i think will make people move to emerging markets. haidi: the other thing you talk about is the problem when it comes to the lack of breath in the rally. do you accept that the ai narrative will endure?

if so, how do you get exposure to that without putting all your eggs in with the same darling stocks that have gone up so high already? >> it might, but i think there are so many better opportunities out there. that is expensive. if anything, you have to spend more to get the savings. will that make people more productive? sure. but is that any reason to go and chase nvidia? i do not think so. the impact of higher rates will change the business models. the ai phenomenon made people forget for a moment that they invested on narrative, not valuation. none of it has been textbook. higher rates normally meal -- mean lower prices.

typically when you have levels that pop, they do not reinflate. and this year they did. all of this means out with the textbook and really be nimble and listen to the market and what it is given you in terms of opportunity. kathleen: what is the number one thing you are looking to find out from this earnings season? >> i think earnings expectations will really matter.

multiple people will pay. one sales come down, you get operating deleveraging levels. six companies of the 80 tech companies that have reported, you have sales growth down 4.5%. the operating deleveraging is very real. i am really watching for that. haidi: great to have you with us. you can get a roundup of the stories that you need to know to get your day going on dayb . you can also customize those settings so you just get the news on the industries and assets that you care about. this is bloomberg. ♪

haidi: bloomberg has learned

that the cfo is planning to leave the company. he has informed the ceo of his intention to move on, though the decision on timing has not yet been made. the company went public in 2019. uber said he would not comment on and executives career decisions. shares in icahn enterprises have jumped their highest since may after its restructured loans. the stock had fallen by more than half in may after a hindenburg report said the company was overleveraged. warren buffett has taken control of the liquefied natural gas export project in maryland. it has agreed to by dominions energy stake, boosting its limited partnership ownership to

75%. the deal gives berkshire control of one of just seven operational lng plants in the united states. this is bloomberg. ♪ we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? f what, we have a ton of mulch.

some of the top stories we are following. the kremlin says russian president vladimir putin met with bob merely to you jenny promotion. -- wagner leader promotion.

the meeting raises fresh questions about the revolt. china has issued an unusual warning to its citizens traveling to the united states to be aware of entrapment. it characterizes the actions based on fentanyl issues. deadly flooding swept through the lower hudson valley. more rain is forecasted as a weather front made its way through the u.s. northeast. as much as 20 centimeters fell at the u.s. military academy, west point. at least one person diving or county, new york. -- died in orange county, new york.

haidi: we know so much of the diplomatic interaction has been building up. what could be the reason for the delay? >> it is understood that china has been pressuring australia to lock in the dates and australia has not done that bama. -- done that. the sydney morning herald has been reporting that they have been sounding out australian business officials with close contacts of china about how a possible delay might be received. a number of issues would be good to be resolved first. there are a number of trade strakes against study from china. anthony and belize has a path -- anthony albanese has a packed agenda coming up. domestically, there is a referendum on the indigenous

parliament coming up in october. there is the issue of the current ambassador whose four-year term expires in august and there is the matter of replacing him. kathleen: one might australia appoint a new ambassador to china? it is a much hotter topic. >> it has been a very tough for years. he has been there through the pandemic and all of the trade strakes that i mentioned, the diplomatic freeze as well. a very important and challenging appointment. relations are gradually falling, but this is one that you do need to get right. as to who it would be, probably a senior civil servant. somebody with language skills who is familiar with politics as well. it is possible somebody has already been selected.

no an announcement could come soon and that would remove one barrier to a visit from the prime minister to china. haidi: so much changing on this visit. paul with the latest. let's take a look at how currencies are treating. -- trading. we did see the dollar drop, weakening as traders cut the expectation on further bad rate hikes after the u.s. consumer borrowing data slowed to more than a two-year low from may. we are sitting at the 141 level. really taking the pressure off these expectations that have built. the dollar china also one to watch as well as we get closer

to the full level of deflation. but deflation risk with cpi and ppi numbers out. we also had a little bit more of a lifeline extended to property developers. we will see how some of these developers trade in the session today. a rising number of senior staff have been quitting australia's central bank. let's bring in our australia/new zealand editor. does this speak to some turmoil at the rba? >> you have obviously had the question whether the governor would be reappointed.

you have had the sexiness of staff. -- exodus of staff. i think more opportunities presented themselves. the combination is a lot of corporate experience that has been lost. whoever takes over will have to implement major reform of the bank. you want your corporate memory they are. if it is a new person, perhaps a makes it more challenging. haidi: you have hinted that it will hang on the next rba governor. how does the political pressure work in terms of who the political appointee might be? >> i do not think anyone could say who it will be. the case for change is strong

because of the upheaval that has been going on in the central bank. it will look uncomfortable if the governor is removed given that he is in the middle of a tightening cycle. but there is a case of bringing in a treasury secretary. the other person spoken about is a potential first female head of treasury. that would be my sense but i have no more idea than anybody else. haidi: nasdaq is taking steps to curb the influence of big tech. annabelle has the details. this special rebalance, given how much we know about the

impact of big tech. annabelle: when you look at the gains in the nasdaq, pretty much all of it has been from the key players in the index. all of these names really have contributed so heavily. there is been concerned about the breadth of the rally given that it was so narrow. nasdaq is taking special steps to address this because it is becoming too hard to keep up. so they will proceed with what they call a special rebalance. the details is a little unclear, but it is about trying to reduce the dominance of these big names on the index. investors are really reacting to this. it has been one of the things that led to a bit of the underperformance in the session on monday.

this is really a good move overall because it could be something that stops these mega names really dominating the space as much. but it also means that at the lower end of the scale, those names will perhaps need to do more to entice investors. kathleen: what about the dominance of crypto -- bitcoin in the crypto sector? kathleen: bitcoin as well has really driven so much investor interest in the crypto space. we have seen a lot of money moving out of alternative coins are going to bitcoin. of course we are wall off the record high of nearly $69,000 from november 2021. essentially there has been a bullish forecast from standard chartered. they are saying it could reach

$124,000 by the end of 2024. essentially, why they are saying that is because they are citing mining profitability. minors are incentivized to validate bitcoin transactions an blockchain. they can make more money per token and there incentivized to sell less. that is one of the reasons they are saying bitcoin prices could rise even further from here. kathleen: too late for me. coming up, we discussed opportunities in emerging market bonds with ubs asset management. this is bloomberg. ♪

haidi: investors. with bonds from countries that defaulted are now seeing double-digit returns. some of these are posting 25% returns for investors. how much of a rally have we been seeing when it comes to these distressed credits? >> we have seen both defaulted

countries as well as deeply distressed credits having returned 20% to investors and that is compared to just over 1% across emerging markets. kathleen: what is driving the outperformance? some of the countries in this bucket, egypt and nigeria, it is a surprise, very pleasant surprise. >> what is driving the rally is interesting because it is unusual for distressed credit to have such a rally this late in the fed hike circle. when you look at the countries, some of them had reached a milestone when their debt talks. they recently reached a deal to restructure $6.3 billion of its debt. pakistan struck a deal with the imf to receive $3 billion. sri lanka is repaying some of

their local bills and debts too. haidi: what is the most significant aspect of this rally? >> i think what is significant is that these are driven by some idiosyncratic factors. what has happened in zambia has set an example for other distressed countries that if you are proactive in talking to lenders, and zambia as the first country that has reached a deal under the common framework, it is given hope that these countries are pushing along with their debt talks. kathleen: what countries are investors watching closely? are there any names they're avoiding? >> argentina, nigeria, egypt, sri lanka and countries investors are watching. but of course there are also avoiding countries like ecuador. because of the upcoming election

in the political uncertainty is too much risk. kathleen: let's bring in shamaila khan from ubs asset management americas. it is great to have you joining us today. i have to ask you, this looks like a significant step. what has changed? what is driving these countries that have had these debt problems for years to make very significant changes? >> you said it spot on. many emerging market countries are using this crisis as an opportunity and bear using it to pass structural reforms to have more fiscal discipline and many countries, especially in the frontier space, have undertaken very difficult currency adjustments. to basically balance the supply

and demand of their countries at the high cost of inflation. those are the reasons why the news on emerging markets has been quite positive and leading to a significant rally across the board. kathleen: let's look at a couple of countries. let's start with egypt. they have been a distressed country for a long time. they are selling state firms. they are privatizing. how convincing is this? are investors buying it? >> they should be buying it in our opinion. they are serious about privatizing. they have taken their time because they want to make sure they are selling at the right price. we do think there will be positive announcements from egypt. this is what i am talking about. these countries are doing very difficult things, like selling their prized assets.

the willingness to pay among emerging markets is the highest i've ever seen. haidi: so many investors have been burned before and are perhaps adaptable -- skeptical. >> that is where the analysis comes in. we have done stress testing to identify the countries we think go through this period of difficult central-bank adjustments without defaulting. this is something you have to be analyzing very carefully, not the time to buy the index passively. haidi: one thing you do point out is the role of china and of

the fat and the dollar. is that still equally split? the growth outlook is not improving in china. >> i think for the flows to come back to emerging markets in a convincing way you need to get clarity on the fed coming to an end of their hiking cycle. we do think we are closer to the end of the hiking cycle and we believe you will be seen more measures out of china in order to not over's -- overly stimulate growth. kathleen: have to ask you about nigeria. particularly when you talk about the fed and rate hikes. they are dealing with a new president who wants to amend all of that, they are going to go to

one currency system. however, the imf is not moving ahead very quickly now. they want to see some results. how do you assess them and what do they tell us about this broad process that is happening? >> that is the important part. you are seeing many countries taking these countries for positive policy adjustments. with the imf you are seeing countries doing that felt the imf. -- doing it without the imf. the policy framework is positive across the board. kathleen: i have to ask you about the imf imf and the world bank. china not getting on board sufficiently. what have they done differently at the imf? david malpass pushed hard to get

this going. what happened in that part of the puzzle? >> not only are you seeing these positive adjustments, but multilateral lenders as well. imf has increased the sizes of the programs. they have introduced new programs. they have been flexible in these countries that are in default in terms of allowing them to emerge out of default. that is another piece on why these countries are doing so well now. the creditors are working much better together. kathleen: thank you so very much. it is a very positive story. we look forward to having you back. shamaila khan from ubs asset management americas. be sure to tune into bloombergradio to hear more from the day's big newsmakers.

you can listen via the app or radio plus or bloombergradio.com. there is plenty more ahead. stay with us. this is bloomberg. ♪

♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ haidi: australia and new zealand bonds following the treasury yields, declining.

investors concluding the selloff we saw last week was excessive. australian yields lower in the 10 years. we saw that move and adjusted both in terms of the deepening of the curve as well as the aussie dollar reacting to worse than expected china inflation numbers, particularly the ppi number, pushing the chinese economy closer to the brink of deflation. the rbnz is expected to leave the cash rate unchanged and the one state decision after 12 consecutive rate hikes. kathleen: let's move on to hundreds of fast food across the u.s. have an ai chatbot. millions of jobs may be at risk. our reporter put one of the

chatbots to the test. >> what can i get for you today? >> can i have the case of please? >> sure. >> can i also have crinkle cut french fries? >> got it. >> i just went through the drive through, but the difference is that an ai voice took my order. it has installed the technology at 300 restaurants across the country. >> taking speech and converting it to text. it has been able to have a dialogue the same way a human would be able to have in terms of figuring out what it is you want. our system can upsell our customers. >> it will provide more insights for restaurants.

ai has the potential to replace a lot of jobs in the restaurant industry. more than 8% of the american workforce is employed in food jobs across the united states. that includes 3 million fast food workers nationwide. >> we are back for the tackle that i order. can i change that? >> sure. what else? >> i even asked at the bow food allergies and food modifications. for most of those attempts, the ai redirected me to a human employee. >> i think we were very thoughtful about that. we purposefully want to drive that to a human because that is not a question we want to have any margin of error on. >> the ones where we have to intervene, we are easily able to do that. >> the ai got my order right.

that looks right. note tomato. -- no tomato. haidi: that is it for daybreak australia. daybreak: asia is next. this is bloomberg. ♪ i was told my small business wouldn't qualify for an erc tax refund. 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. fabulous surroundings... first step to see if you're a small business qualifies. fabulous surroundings, but everyone's looking at their phones for financial insights from merrill. is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and

build a new home. so they're talking numbers with their merrill advisor. she's not researching her next role. she's learning how to handle market ups and downs without the drama. personalized advice so impressive. your money never stops working for you. with merrill, a bank of america company, what would you like the power to do? i have to cancel my tour because i couldn't finish the paperwork in time. guys, the money is still available. no

back in the day, sneaker drops meant getting online to wait in line. now with xfinity mobile... ...we get the fastest mobile service and can get the freshest kicks asap. i got this. save hundreds a year over t-mobile, at&t and verizon with the best price for two lines of unlimited. nice job, little sis! they grow up so fast... i'm a fan. from xfinity. hi, i'm lauren, i lost 67 pounds in 12 months on golo. golo and the release has been phenomenal in my life. it's all natural. it's not something that gives you the jitters. it makes you go through your days with energy,

and you're not tired anymore, and your anxiety, everything is gone. it's definitely worth trying. it is an amazing product. it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world,

and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. ♪ >> you're watching daybreak a shell live from new york, sydney and hong kong -- asia. were coming down to asia's major

marke