>> good morning. welcome to daybreak australia. i am haidi stroud-watts in sydney. we are counting down to asia's

major market opens. >> i am kathleen hays. the top stories this hour, stocks and bonds rise as a slowdown in u.s. inflation bolsters best that the fed is closer to the end of rate hikes. >> nato leaders tell ukraine's president to go down after his angry outburst on the timeline for membership. >> this is the latest sign of the end to beijing's crackdown. >> we do have breaking news. kathleen, crossing the bloomberg. we had that imax is going to take over the chinese subsidiary, seeking to buy out its hong kong trader chinese subsidiary in a deal that is valued at 24 $1 million.

they are offering to buy them at a price of 10 hong kong dollars each. we are seeing trading and the hong kong stocks last quoted at nine dollars, 12 hong kong. this was a subsidiary established back in 2011 as a corporate home for imax's and spent -- expansion within china with business accounting for about 24% of sales last year. the first theater open in 2007. we will be watching for a reaction if the stock begins retrading. but imax is seeking to buy out its hong kong chinese subsidiary in that $124 million deal. >> who doesn't cpi numbers that come in almost as low as traders dared hope for.

we did see a rally in stocks, bonds, even oil benefited from the new delhi weakening. you can see the gains we saw in the s&p, the nasdaq are carrying over that little bit of momentum there. attentive or percent on each of those. there was quit a rally at the short end of the market. the two year yield was down about 13 basis points. the sense that the fed is maybe not on hiking rates yet but certainly getting closer to being there. let me remind you of the numbers. cpi is up to a two-year low. the cpi hit that just a year ago. used cars, other kinds of goods and prices down. core inflation, take out food and energy. less than forecast, the lowest since 2021. the s&p jumping at the open.

of three quarters of a cent. the nasdaq out more than a percent. soffer cpi, a weaker dollar. tighter supplies on opec-plus cuts. i love this quote. it is too early to pop the champagne. he is talking about rate cuts. but not too early to start killing the bottle. janelle, for the fed, what does this mean? maybe they are getting closer to the end. they may have to hike more. what is in that inflation report to inform fed officials like them?

>> this is certainly welcome news for the fed. the numbers came in lower than expected both at the headline level and the core level. that is what officials have been watching more closely related to get a sense of the true direction of inflation. beyond that, there is a question of whether they are getting closer to being done. >> we saw you was after that more than expected easing. what does this tell you about where -- what investors are feeling? >> this was a great day for the markets. from the bonds perspective, we are seeing treasury yields down. it was up about 5% last week. it is really coming down sliding. this is based on the fact that traders are really betting on the fat -- fact that the fed

could slow down on its hiking cycle and showing from an equities perspective, we saw stocks really railing. the s&p hitting its highest level since 2022. a great day for the u.s. stock market. >> it seems likely that people have been divided over can the second half continue the first half of the year rally? what were the fed play. only a one-day reaction but what was the sense you got from your sources? quickly mixed across the board. but many traders are having -- they are hoping and praying this will continue at this next fed meeting. you are seeing traders trading off of that. and on top of inflation, what

were the takeaways from the fed beige book? >> the economy continues to grow modestly but the outlook is becoming a little bit more grim. so when you look at the districts, they are now expecting growth to start to slow down. those are the real main points from today's report. >> i guess the question is to you. what will be the next catalyst? if the fed hikes again, if we don't find out -- what will that make for the stock market rally? fresh me to throw to the beast? >> first cpi data. we have ppi data. that will give us a producer standpoint. everyone is been looking at jobs data as well.

we do have some more economic data coming in before the next fed meeting that will help traders assess where we stand and where the economy is. and of course we have major bank earnings kicking off friday. investors will be taking a close eye and analyzing how these bank earnings are coming in as we kickstart this earnings season. >> all right. now let's get to annabelle to take a look at the age of trades. we are waiting for the bank of korea meeting. we have these cpi numbers in the u.s.. lots going on in china. what are you focused on? >> the main focus will be on the inflation of his. the moves we are staying in bond yields, it is that continue to retreat in coming at the front end of the curve.

they are consolidating below that 140 level. level we are really watching is 111. we have not really cost about that in about a year. it tells us that story. it is all about the dollar retreat and the expectations around the fed as opposed to other major central banks. let's charge on. imagine china and the dollar weakness. we are seeing that back below

that 7.2 level. there are other things at play. overnight it was the story of the meeting with china's top tech giants. we are seeing that china is really starting to turn around and boost his private sector. we have china futures. cliff they remained steadfast. they soften criticism of what the earlier called nato is observed reluctance. >> we will not waiver.

our commitment even one that we can. >> our political news director joining us now from washington. the frustration from president zelenskyy. really apparent. request what a difference a day makes. even though they said they would remove bureaucratic hurdles. they would then be on the hook for security commitments. they still criticized the block very strongly. he thought it was a good summit. because he got some security guarantees.

i think he has changed his tune somewhat. 11 frustration with him. they are certainly standing by ukraine and continuing those commitments. >> what do you see as the next big challenge? does it continue to give weapons? weapons of various kinds? is there any endgame? what is the long-term result? the medium-term result? >> i think kathleen, it is really trying to show unity. but also on other issues. they came away with this commitment for sweden to join and they have been going into this.

turkey said it would give up its opposition to sweden joining. it is with many of these kinds of summits, these international gatherings. it is more about the optics -- we will let them in nato at some point. that is the message. a lot of it is geared toward that one man, vladimir putin. >> the optics of that against put in is what made this more fascinating. the defense secretary said people want to see gratitude. does that speak to the difficulties of united front as we get into this protracted part of the conflict?

>> i think you put your finger at it there. it is the protraction of it. we are giving all of this money halfway across the world. there was a lot of enthusiasm. president biden is not going to have to go back to congress. he will easily get what he needs in terms of sweden enjoy nato. but getting more money on a regular basis for ukraine is going to be increasingly harder. that is what all these countries are up against. they may be united leaving the summit to continue with the details of that support for ukraine, that gets trickier the longer this war goes on. >> the head, fresh signals that beijing's tech crackdown may be

over as the premier meets with industry leaders and we get the details later this hour. focusing on the credit markets and assessing how u.s. inflation is such an impact fed policy. this is bloomberg. ♪

>> this was a good report.

>> a good thing for the fed. >> the disinflation is starting to take hold. >> i don't think it changes the july meeting. >> i think the fed will hike in july. >> they can take their foot off the pedal yet. >> if this is the new runway, yes, it would call into question hikes beyond july. >> they could afford to skip again. >> the november rate hike is up for grabs at this point. >> they are commenting on this with the implications for fed policy. let's gt more analysis. both inflation or today, i just

want to throughout this chart. this takes a look at the fact that we are seeing a pretty broad-based pressure. the energy component is looking into using the headline and core, coming in below estimates. when it comes to market expectations, this happened last summer as well. do you think a lower inflation outlook is for real? >> thank you for having me today. i think there is a lot to be encouraged about with the cpi print. but there are nuances. core inflation remains sticky. we are going to need some component of that to fall more meaningfully. they shouted is what we are keeping our eye on. while it did drop month over

month, it is still much higher than core overall. that will be a driver that needs to come down. we are really thinking about inflation as something that the fed is committed to fight. it needs to keep rates higher for longer to do that. >> the economy is more of a multi-narrative storyline. >> i could not agree more. the market has not followed a single story year with respect to inflation or resilient labor market. adding jobs. i have seen hours worked. given oaktree's focus, given the average yield is around 10%, we are finding opportunities across the spectrum of performing

credit, mostly allocating to clo's, private debt. we are trying to stay diversified and prioritize underwriting our borrowers. looking for high-quality companies to withstand higher rates for longer. as rates die -- stay higher for longer, we see some tracks as the credit markets emerge. hours that have floating-rate coupons, they have seen their burdens increase. those could be particularly vulnerable. >> you focused on credit. that is what you do. i want to put the money there. do you recommend certain industries of investment grade bonds? where are the least risky, riskier junk bond sectors to look at? >> within high yield, i think you can prioritize quality while investing in strong double b credits. but you can do so in less cyclical sectors that are less

tied to the economy and might be able to withstand elevated rates that might slow down economic activity. that is one place. we really like clo's. we are investing in debt and going up in quality. adding exposure to higher rate once, even investment grade rated gives us more subordination but you are not trading off on income. they still offer a really attractive premium to high-yield bonds. private debt, i'm not seeing anywhere where we can originate our own sick here debt. very attractive terms. a part of that is due to generally tighter economic financial conditions today. >> in terms of the earnings season, if i am looking at corporate bonds but junk bonds as well, it is always a dual trade. you are looking at interest rates and liquidity you are also looking at individual companies. how do you think earnings

seasons results where there is a lot more focus than it has been in the past, what is that going to tell us? what kind of opportunities will it show? >> it is what one should be focusing on. they really focused on the underwriting, underwriting our borrowers we are lending to. and the first quarter of earnings is a surprise to the upside. they were better than feared. the second quarter earnings is probably too soon to tell. we need see companies report more. but generally we are feeling ok. we are looking at those companies that have floating-rate interest payments. where may that becomes more difficult for them to service the debt over time. another thing we are looking at is refinancing risk. something the market may not be fully pricing in yet. and high-yield bonds that you brought up, the vast majority of maturities are not coming until 2027. part of that is due to the refinancing wave we saw in 2020

and 2021. any cfo is not going to be asleep at the wheel and is going to look to refinance that debt sooner than 2027. probably looking to refinance in 2025 or 2026. the market being forward-looking may start pricing in as early as 2024. we could see some price volatility. >> thank you so much for joining. you could get a round up of the stories you need to get your day going in today's edition of daybreak. you can also customize your settings. they only get news on the industry and assets you care about. this is bloomberg. ♪

haidi: a quick check of the top global stories we are following right now. pakistan has won final approval to borrow $3 billion from the imf. the executive order approved a nine month standby regiment to support the country's economic stabilization program. it allows for investment of $1.2 billion after months of delay. the china state pension fund is said to be cutting it is exposure to bonds and private developers. sources say the national council for social security fund asked mutual fund to handle its money to sell from riskier debt after review. among the bombs mentioned were from the data settled port city of tianjin. the central bank of this -- of canada has raised rates. the bank is said to be prepared to hike rates further to get

inflation under control. officials expect inflation will gradually decline to the 2% rate in mid-2025, two quarters later than previous projections. the tail and print ministerial candidate and his move forward party arm facing legal challenges ahead of a parliamentary vote. the election commission went pita limjaroenrat disqualified for allegedly breaching rules by holding shares in a media company. the constitutional court will also he so... i know you and george were struggling with the possibility of having to move. how's that going? we found a way to make bathing safer with a kohler walk-in bath. a kohler walk-in bath provides a secure, spa-like bathing experience in the comfort of your own home. a kohler walk-in bath has one of the lowest step-ins

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haidi: breaking news when it comes to data out of new zealand. the manufacturing pmi for june followed her into contraction territory at 47.5, from 48 point nine. previous readings also revised

slightly lower. firmly in territory of weakness. this, as inflation pressures continue to weigh on new zealand. we have the rbnz keeping rates on hold as the economic outlook continues to show vulnerability given we are seeing recessionary conditions for new zealand. the rbnz flagging that policy would remain restrictive for some time. we are seeing that weakening when it comes to the forward outlook for the manufacturing pmi for june, falling deeper into restrictive territory as well. as we have seen it falling into contraction territory when it comes to the services pmi as well, in recent months. kathleen: letlow at the sharp slowdown in u.s. inflation. boosting bets that the fed is getting closer to easing retakes. however, boston fed president william dudley doesn't see an immediate change in policy.

>>. >> the fed should be pretty cheered by this, but i don't think it changes what they will do at the july meeting. i think they're looking at the totality of the data for the last three months going into the july meeting and the reality is, the economy really hasn't slowed down enough to make the fed feel confident that they will see that slide lower that they want. kathleen: let's bring in jeanette garretty, chief economist at robertson stephens. what do you see in this report? we know the big numbers -- the headline cpi, the core cpi definitely showed progress. but dig a little deeper, what are the trends inside of those big numbers that tell us what is going on with inflation now and where it is heading next? jeanette: actually i think most of those trends, one of the things that makes this a good report, is that when you look at those trends, they are almost all fitting the narrative that inflation is slowing.

the one that is not is shelter. what we economists call rent. it is a strange way that we in the united states bring that into the cpi. it has always been a bit controversial. that is the one that is out of bounds. it is the one also that almost everybody feels that they know is going to be a downdraft, if you will on inflation in the coming months. it has only begun to start to show up now. so i think overall, what we have really got, and i am going to because of the statement i just met about housing and what we expect housing to do in the future within the statistics -- i think both the core and the headline cpi really are consistent with the rate of inflation at 3% or 3.5 percent,

something like that. but i have learned you don't argue with the new york fed presidents, b-day called dudley or williams. so i agree with bill, i don't think there is nothing here to change what the fed or what the fomc want to do at the next meeting. the question is after that. kathleen: we heard from two federal officials today, tom barkin from the richmond fed, and neel kashkari from the minneapolis fe. tom barkin is neither dovish nor hawkish. he said don't get too excited. and neel kashkari, in effect, said it is good to see this news, but if inflation proves to be persistent, we will have to do more. what does that signal to you about how we should be expecting the fed to move in these coming months? jeanette: i think it signals what we have talked about on a long, which is that this is not a fact that is going to cut

rates very soon -- a fed that is going to cut rates very soon. they will err on the side of caution. which means i think it will still go forward with the 25 basis point increase in 10 days or so. i do think that another raise is on the table later. the timing may be being called into question based on the subsequent numbers that we get. the fundamental problem i think is that this is a fed which doesn't trust. and the reason they don't trust, they say they are data-dependent and data-driven, but they don't trust the data. part of the reason they don't trust the data is because we're looking over at the employment sector, the employment numbers, they are seeing a very tight

labor market. if the unemployment rate had started to put up more, then i think you would be a different story with these inflation numbers that we are looking at today. but because it is so tight on the labor market side, they are just saying, we can't take a chance that this may not be the real narrative. it could reverse itself and because it could reverse itself, we will keep, as you would say, the pedal to the metal here, and make sure we don't deviate from our inflation-fighting stance. haidi: i love the framing of that, because i think this rich cycle has given all of us trust issues. [laughs] i guess the question is also do you, think of that data shifting expectations, does that change where the terminal rate is? jeanette: i think a little bit. it will be interesting to see how that plays out over the next couple of days.

and i think there is probably a bit of an intermediary stance where people have settled into an understanding that rates aren't going to come down anytime soon, but the concerns that the terminal rate could be much higher than what anybody anticipated, may be those can be set aside. i think that will play through all the eventually. haidi: we have seen this extraordinary path to weakness for the dollar, really taking it another leg lower. is this a sustainable trend? jeanette: you know, there are also two thingso factorinto in the dollar versus anybody else calculation. if we are at the end of the rate tightening cycle and you still have the bank of canada raising rates, the e.u. under pressure, the ecb, that is going to set up

some important influences on the direction where the dollar goes now. i will stick to the great challenge of trying to forecast what the fed is going to do leave currency exchange rates to other people. kathleen: what about liquidity? what about the bond market. there has been concern about quantitative tightening and how it played into the financial instability we saw in the blanks earlier in the year. is that someday we can put to one side now? or is that going to enter more and more onto the fed's radar screen? jeanette: i don't think we can put it to one side simply because the fed is not putting it one side. they are very clear that they are very comfortable with the tightening they are doing. they intend to not deviate from that to a large extent. the focus on interest rates has taken attention away from what is going on there.

and the phraseology "sufficiently restrictive" has to do with what is being done with the tightening. nobody at the fed level is saying we have a reason to come off of that stance. they seem to be much less concerned about the impact on bank balance sheets, if you will , for what they are doing and what is going on in the bond market, but there is a lot going on there. some of this is very spencer:, i realize, that does some of this is very specific to the united states, really. the recent discussion earlier this week of raising the capital requirements and what the implications of that will be, it is going to be tough to be a banker for a good 6-12 months.

kathleen: jeanette garretty, thank you so much, with an insight on the cba report, but as move ahead to the fed's next steps. she is chief economist of robertson stephens. let's stick with her inflation fight for central banks and bring in elbow or morning calls. canada was forced in to hike. annabelle: that is exactly how it is being interpreted by traders and investors and economists, essentially, this is the bank of canada overnight lending rate and you can see we are at 5%. the hike overnight was 25 basis points added followed a period of a hold, the back of canada elected to keep rates steady over the course of five months and only restarted back in june with hiking again. exactly what prompted that is the concern a lot of central banks are having that information is just too sticky and isn't coming down fast enough. he asked about the presser, what

exactly economists, investors and traders are expecting. the prevailing thesis is that this was a hawkish hold that can -- hawkish hike from the bank of canada overnight. the expectation priced in is that we will see another hike in the upcoming meeting in september, 75% chance being priced in by markets. ing is talking about the market implications of this and saying that the dollar could break below the 130 level sometime soon. take of canada placed heavy emphasis on the strength in consumer demand and the tightness they are seeing in the labor market locally. haidi: the bank of korea is out later today. we are expecting a fourth straight hold there? annabelle: right, this is being expected by all the economists that we surveyed, definitely expected to stay steady. what is important is the messaging that comes out of the press conference later today from the governor there, because

the issue at hand is at a headline level, we have actually seen cpi continuing to retreat below the 3% mark as well. quite a big milestone for the korean economy and a good thing for the bok. but if you change on now, our bloomberg economics team is pointing out that there is another inflation metric the bok is watching closely, the trimmed mean cpi. it's a gauge that excludes the most volatile components of the cpi basket -- so it trims out 20 5% for the biggest and the smallest price increases to get a better sense of what exactly is going on. this is telling us a different story. the underlying inflation in korea is staying stubbornly high. so it tells about economics that the bank of korea is facing a very tough time. what is interesting are the central banks, the fed, also using the trimmed mean cpi

gauge, as is the rba. haidi: speaking of the rba, governor phil lowe announcing a slate of reforms at the central bank. it will not take effect until after he finds out if he is staying in the job, or be replaced. swati pandey has more. some of these measures had already been signaled, but it was a difficult day for phil lowe. swati: also because there were rumors that yesterday would be the day that jim chalmers will announce if he has his job, if he gets another term or not. in that context, he was giving his speech and answering questions from the media, and he knew that question would be brought up. the reforms that were recommended by the review were already expected to take effect from 2024. but nobody was expecting really for them to have discussed it at

their board meeting in july and for them to actually say that these will take effect. fewer board meetings, 8 instead of 11. they are moving the fed way. and then there will be a press conference after every single meeting, which is something everybody had been asking of them. and the governor said that this will complement their existing communication style, so they will continue to do speeches and other things and the press conferences will be in addition to that. they released the quarterly statement four times a year before, and that will be released with the meeting statement on tuesday, instead of the following friday that they do right now. and the tightening of the announcement remains the same, 2:30 p.m.. those were the main takeaways. kathleen: it will be so great when they do a press conference after. we will get so much more insight for the rba governor. speaking of the current rba

governor phil lowe, when i touched her treasure chalmers at the imf spring meeting, he sounded so positive on phil lowe. is it really going to be the case that they figure that >lowe has done his job and it is time to move on? do they have to make it clear that they are looking at a field of possible next governors so they can reappoint lowe and have everybody say, "you did it the right way?" swati: that is a possibility. every single time they have spoken to journalists in the past couple weeks, both the prime minister and jim chalmers have reiterated that governor phil lowe is very much a contender. they have said good things about him and how he is a seasoned central bank, and very

experienced and has done his job very well during one of the toughest times in history. so he is definitely a contender. there are other people of that shortlist as well, which the treasurer and the prime minister has not openly spoken about. but we know that there is treasurer secretary stephen kennedy, dignitary of the department of finance, and the current deputy governor michelle bullock is also being spoken about. there is also the former deputy governor who resigned in may of last year. he is seen as a strong contender to come back, with some private sector experience as well. haidi: our postal and economics reporter swati pandey, with the activity at the rba over the moment. we are seeing moves in australian and qb treasuries as well.

three-year yield dropping 11 basis points, following the moves we saw in treasury markets. yields sliding after inflation in the u.s. easing more than expected. the outlook for a rate increase after july is fading. also watching kiwi assets in the wake of the rbnz hold this week. we are getting further numbers after the disappointing pmi reading. still signs of some inflationary uptake. the month-on-month food prices for june jumping 1.6% from a prior zero point 3%. also seeing a retail card spending seeing a gain of 1%, reversing may's contraction of almost 2%. still signs of resilience that comes to the food inflation as well as credit card spending in new zealand. coming up next,, we are getting more signs of china's crackdown on big tech coming to an end.

we will get more details on premier li qiang meeting with tech firms and his vow to support them. ♪ this is bloomberg. ♪

kathleen: chinese tech stocks rally, more signals that beijing is ending its year-long industry crackdown. premier li keqiang met with tech

executives on wednesday and the national government and reform commission approved the companies for supporting china's tech and novation. for more, let's begin our chief north asia correspondent stephen engle in hong kong. what was the premiet's key message? stephen: beijing needs the private sector. particularly the companies that were trapped down to size during the years long regulatory crackdown that really began in october, november of 2020. we are talking three years now of regulatory pressure. that has really damaged a lot of confidence in investment, both by those companies obviously as they have been restructuring -- alibaba has been cut down into six different divisions that need to unlock their own value and raise their own funds. they are not the behemoth giant they were, but that was the goal of the crackdown, under the

guise of antimonopoly behavior. -- anti-monopolistic behavior, i should say. so it is a different netscape now. also coming out of covid zero, china's economy has not picked up steam as anticipated. you can kind of see, if you bring up charts of alibaba or pinduoduo or tencent, the year-to-date charts show what i have been talking about consistently, and that is fits and starts of confidence in these platform companies. not that upwards that some would have expected. because, again, we get signals that these crackdowns are ending. then the stock goes up. then we get something else that drags it down. right now stocks are going up because it seems like everyone is in unison at beijing, talking up the need for the platform economy and the jobs that they potentially could create.

keep in mind, youth unemployment is at a record high in china right now. the economy cannot seem to get much momentum right now. so li qiang met with the top executives, just yesterday, i believe it was, including alibaba, including bytedance, the parent of tiktok and douyin. jd.com, food-delivery companies, pinduoduo, they gave written input in that meeting. essentially, li is urging local governments to provide support to the internet firms, calling them "trailblazers of the era." so now they are talking up the platform economy and asking local governments to do their part, but this is, again, a part of the bigger story. the local government financing vehicles, do they have the capacity right now with their debt issues to support the platform economy which was, in

turn, chopped down to the knees by the government in the first place three years ago? haidi: our chief north asia correspondent stephen engle there with the details. clearly the big story heading into the start of trading in greater china today. what's more to come here on "daybreak." this is bloomberg. ♪

haidi: let's take a look at some of the corporate headlines today. imax has offered to buy out its hong kong traded chinese subsidiary in a deal valued at $124 million at 10 hong kong dollars a share. which is a 40 9% premium of the 30 day average closing price. trading in imax china shares will resume later on thursday. disney has extended the contract of its ceo for another two years. bob iger will remain through the end of 2026, giving him more time to implement his turn around and find a successor. iger returned to disney in november after previously serving as ceo for 15 years. australia's richest couple have separated after 31 years of marriage. the financial review says the forrest's fund will not be

affected. and shares were transferred last month into a new company wholly-owned by nikola forest. coming up in the next hour, defiance etfs believes travel trade is on fire. she joins us to discuss thailand's upcoming prime minister ministerial vote scheduled for today. that's it for "daybreak: australia." "daybreak: asia" is next. this is bloomberg. ♪ what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

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