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 are watching "daybreak: asia."

haidi: we are counting down to asia's major market opens. the top stories this hour. disinflation becomes the buzz word across trading desks. it is a stocks -- asia stocks gunning for the biggest gain since january. love that fed's most hawkish voices is stepping down. jim bullard was the first to call for jumbo rate hikes. and philip lowe will not be reappointed governor. kathleen: speaking of central banks, latin america is in focus. peru central bank has kept its key rate unchanged at 7.75%. you can see across latin america over the past couple of years, very aggressive rate hikes. peru is having some success. their inflation rate, the headline number year-over-year, down to 6.6%.

even though headline and core inflation are slowing, they are still above the target. for peru, it is 1% to 3%. 2% is where they need to get. or bloomberg economics team does think the tightening cycle is over so we will watch very closely when we get the policy statement from peru central bank, how they describe the economy, how they describe the progress on inflation, if we see notes of caution on keeping rates where they are. but it is central banks around the world, the hot things to watch. the dollar weakening currencies, latin america is rising. i can help if imports are cheaper. a lot of things in the mix. let's take a look at the u.s. stock market. prices came in at the lowest rate since 2020, a day after the cpi was at its lowest, the

lowest since 2022. there are both low. we did see a rally. it is cooling off a bit, but certainly on the s&p futures and nasdaq, you have to say they are unchanged. the treasury futures are showing a bit of a pullback in prices, but there was a 10 basis point in the 10 year yield today. it is now down to 3.76%. crude came in at about $77 a barrel. bolivia's second largest oil field is set to shut down, even after we see the effect of the opec-plus cuts that all of this is keeping a bullish undertone in oil. one of the federal reserve's most influence of voices is stepping down to become a dean at the university of purdue business school. james bullard was among the first to call for jumbo sized hikes, including 75 basis point moves, in the fed's fight against inflation. we want to bring in steve matthews.

he has been covering jim bullard for years. everybody was surprised, and i believe that chris waller, who is speaking at the many marketeers dinner tonight, says he takes it at face value. one of the people there was talking to him. he got a good job offer, but everybody is wondering, he didn't have to retire, he wasn't 65. why did he go? steve: it was a little bit of a shock, and people are still trying to figure out exactly what happened. he did not have to go for another several years. this offer did come up. he is somebody who is really committed to academia. and if you listen to his speeches, half the time they are very topical on current events and current monetary policy. but sometimes, they get super

academic. he is somebody who can do calculus, econometric equations. but just like any other phd economist, he is very committed to the academic, scholarly work. in some ways, it is a natural fit to go back to scholarship. and this is in indiana. as has been noted, he was a phd graduate at indiana. this is not far from where he spent a lot of his growing up. haidi: how does that impact the rates this year, given how much of a robust presence he brought to these debates? jay powell has alluded that these have been pretty intense in terms of deciding the next step, or even the decision to pause. steve: that is an interesting question.

i think the general consensus is bullard is not a voter this year. bullard is very influential in terms of the tone of where things are headed. but probably no big impact in terms of the right path. chair powell has really strong control on the committee. it has been remarkable because he has been able to rein in the cats. everybody has come together. powell seems to have strong control. if you wants to hike rates further, he is going to be able to do it. kathleen: i just mentioned that chris waller was speaking at money marketeers. he and jim bullard were joined at the hip for years. graduate school for jim when chris was his professor, director of research, waller was, for jim's st. louis fed

presidency. he said policy will have to stay restricted for some time. he said he did vote to pause in june. yet to see if inflation improvement will be sustained. so, who will the st. louis fed be looking to? if it is true that the board has more influence in powell and the board and governors, what kind of person do they want to replace jim bullard? steve: that is a really interesting question. the first name that is going to come to everybody's mind and will certainly come to the search committee and the search firm's mind is of course the new governor, chris waller, because he was a longtime associate. he spent a decade or more in st. louis. there is no sense, i am told, that waller is unhappy at all. he likes his new job. he is happy in washington. probably not going to happen.

but he would be the first name that would come to your mind. the research director at st. louis is also somebody whose name will definitely be on the list. haidi: steve matthews there. from one central bank, we change to another big story we are watching in australia. who will replace governor phil lowe? bloomberg news reporting he will not be getting that three year extension that he said he is open to. rumors and speculation have been swirling for weeks and months now. perhaps we will finally get the confirmation today. we know the cabinet meeting is taking place, and following that meeting, treasurer jim chalmers will be delivering that announcement presumably with the choice of his successor. we know among the top candidates from treasury, steven kennedy, the deputy governor michelle

bullock seen as a continuity candidate. but it is interesting because so much criticism when it comes to mistakes being made in the rate hike cycle, the guidance that had turned out to be quite erroneous in ways when it comes to growth expectations. but it does look like after so many months of discussion, we may have an answer. we know the markets will want the certainty. kathleen: they certainly will. i am surprised that phil lowe did not get another term. there was a lot of pushback against being aggressive on rate hikes. inflation in australia is not under control yet. many would say it is moving in the right direction. overall, you might say that phil lowe did the right things. you wonder what is going on here, if there is some political element here. it is interesting to me that the opposition leader, to australia's government, peter dutton said we will risk compromising the independence if

it names a bureaucrat as the next governor. candidates considered front runners to replace phil lowe include the department of finance head, the treasury chief. i am confused about this reasoning as well, but the reasoning i guess is they need to break the mold to preserve the independence of the rba from the government. i think that is an interesting issue to raise because it is always a question with central banks. you do with the government wants, but you may not be doing with the economy needs -- what the economy needs. haidi: it would be easy to ignore the heavily politicized aspect of these conversations, in terms of questions whether this is really necessary for the government to be able to try to turn over a new leaf for the rba. it could be sooner than expected that we know. we've heard that the prime minister and treasurer will hold a press conference at 9:40 a.m.

that is in half an hour's time. we could get the announcement of the new rba governor after these reports that phil lowe will not be having his term extended. let's get to annabelle now. let's set up for the session. annabelle: it is becoming a very fun friday for us here in terms of market reaction. 9:40 and australian eastern standard time. we will get that answer very soon. in terms of the market reaction, we are not seeing anything so far, but we are monitoring for it. we are seeing in the bond space being led by the action in treasuries overnight. it is that disinflation theme that investors are clinging onto. aussie stocks clinging to gains in the open. this is looking to be the best week for asian stocks since january. take a look at what we are seeing around the region today because we again have most futures pointing higher.

kiwi stocks already online. quite a strong start. bonds continuing to track those moves we have seen in treasuries. traders pricing the end of fed rate hikes. the yen continuing to see the moves. some strength moving back into the currency, but we are below that 1.38 level. central bank action in focus in china because we have the pboc having a meeting of its own later this morning at 10:00 local time in beijing. they will be going through the first half financial data later this morning, perhaps setting the policy direction for the remainder of the year. but as we know, this is a country already seeing the deflation trend taking hold. perhaps it is a precursor to what we are seeing around the world now. kathleen: it will certainly make a lot of people happy if it is. still ahead, hollywood actors and writers are both walking up the job for the first time in six decades. we will assess the impact with entertainment attorney

jonathan handel. and secretary of state antony blinken raises the issue of alleged email hacking. with his counterpart.details just ahead. this is bloomberg. ♪

kathleen: asia stocks set to

follow wall street higher after another inflation report showing it is reaching and inflation peak. connect the dots for us. two days in a row, major inflation gauges in the u.s. came in even lower than expected. bonds are really excited, stocks are excited, and that the same time we look at china. we have a different kind of pressure on it. how do these things mesh? or are they at this point getting more and more independent? because some big economies are going their own way. pooja: the fact that the inflation numbers in the u.s. came out pretty tame is a good sign for all risk assets, including china. but the china recovery the last couple days has been news coming out of the government. the fundamental data is still weak. but the fact that the government is now back to encouraging the

private sector, having positive talks with tech company ceos, that is the first positive signal we have seen coming out of china. that is definitely helping assets. kathleen: so you are optimistic this is the real thing and it will continue. what does that mean if i am looking to say, where do i jump in, in china? pooja: i think this is just slow start. the government needs to do a lot more, the first being property, the second being consumer spending, and the third being some cooling down in columning of -- calming geopolitical tensions. the coming back to your question of where to jump in, one trade we like is buying high dividend yielding stocks in the region. if you look at some of the taiwanese companies that are tech companies, they have exposure to ai, but still yielding dividends of 5% to 10%. those stocks have done well over the last year. but the stocks are trading

cheap. that is where we are seeing a lot of opportunity right now. haidi: when it comes to china, it is sort of a divergent picture. the macro economic front is not improving, the broader economy, the properties sector, but we are seeing a lot of positive policy signals. what are you listening to at the moment? pooja: i think you are seeing that time lag between policy announcements and real impact. keep in mind, the macro data is weak because it is exposed to the global economy. with the u.s. and europe slowing down, exports in china are down more than 20%, and that is outside the government control. but they could do is prop up the domestic economy, and they are starting to do that and investors are reacting to that. it will take some time before those measures impact fundamentals. i think there is going to be a slow recovery before using the -- before we see the macro data picking up. haidi: do you feel more

confident when it comes to tech and broader that flowing into china ai as an opportunity, if you believe the regulatory woes are over? pooja: you have to be very selective in this sector right now because valuations are expensive and stocks have run up, not just nvidia and the u.s. but also in taiwan. one has to be very selective. that is why within these stocks, we are looking for companies that have high dividend yield. if there is a crash in the wrong way, you have support. for example, an electronics company in taiwan is very attractive because it has that dividend yield in addition to cash flows and exposure to tech and ai. kathleen: break it down for us, your positive view on korea.

the bank of korea held its key rate study, even though it's inflation rate continues to make its way lower. they are concerned prices will rise again. japan has been such a star, but korea has been left behind. pooja: i think it is precisely what you said, that korea has been left behind. it is still reasonably valued. korea is very geared toward a global recovery. as you see slowdowns in the u.s. and the fed hopefully pausing, you are going to see that appetite for risk assets pay in korea. korea is set up for a rebound. haidi: pooja, great to chat with you as always. pooja malik, partner at nipun capital. german or so -- terminal

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haidi: the top diplomats from china and the u.s. have met again as they try to keep lines of communication open. but allegations of chinese hacking of u.s. government email accounts threaten yet again to derail dialogue. stephen engle is in hong kong. how many steps forward and how many steps back? i suppose it is still an improvement from a few months ago. stephen: i don't want to add to the chorus of negativity on why these talks are potentially going to get derailed again. obviously, the spy balloon incident over the united states,

the visit to taiwan. the dictator, less so from biden, but china used it to its advantage. but the spy balloon and policy's visit to type -- nancy pelosi's visit to taiwan did put a freeze on person-to-person contact. we are getting out of that right now. we have already had janet yellen in antony blinken visit beijing. we had john kerry, the climate envoy, going to beijing this sunday. now you have antony blinken meeting for the second time in three or four weeks with his counterpart, china's top diplomat wang yi, this time at asean in jakarta. both sides called that meeting, which lasted about 90 minutes, constructive. the united states also said it was candid. the readout from the united states side was the exact same wording when blinken met in beijing with wang.

so, they are just trying to get the status quo on dialogue, trying not to derail it. but the chinese readout, a little more barbs. they did call it constructive, but they called it the unjustifiable and illegal sanctions, calling on the united states and urging blinken to call the united states to remove those "unjustifiable and illegal sanctions" on li xianfu and others because of what america says our human rights violations , the situation here in hong kong. and other issues have plagued them. this is a good step. they had candid conversations. this is a relationship that will

be fraught with missteps here and there. kathleen: bloomberg's chief north asia correspondent stephen engle keeping an eye on all things u.s.-china frictions. now let's take a look at stories making headlines around the world. the chinese coast guard says it repelled a japanese fishing boat in a disputed part of the east china sea. it describes the move as an "necessary control measure". in a statement, the coast guard urged japan to not send ships to the area. the eu is lifting import researches on japanese food products imposed after the fukushima nuclear disaster. the european commission president says it is based on scientific evidence and inspections. the curb on wild mushrooms, some fish species, and wild edible plants are now fully lifted. another big trip for janet yellen.

she is traveling to india and vietnam next week, seeking stronger ties with two increasingly important to us partners. yellen will first head to india for a g20 meeting, where an official says she will push for global lending institutions. it is her third visit to india in nine months among a push to strengthen trade and technology ties with china's gigantic neighbor. the icc says that women and men's teams well receive equal money. they made the announcement in south africa. england's men team won last year and took home one. $.6 million the victorian women's -- victorious women's side only got $1 million. major u.s. banks reported their quarterly results on friday, facing challenges on interest rates, expenses, and regulation. we will get a preview next with odeon capital group, and we will

find out why there may be issues particularly hard for the banks to deal with now, particularly after the federal reserve's vice chair for supervision william barr is pushing new proposals to make banks hold much higher levels of capital. this is something that along with dealing with the fed's rate hikes is an issue we will discuss, so keep it right here. those big bank earnings start coming out tomorrow, friday in the u.s. this is bloomberg. ♪

haidi: the big u.s. banks will report earnings later on friday. expenses under scrutiny. they are coping with the

slowdown and holding onto deposits. looming over those issues are existential questions about how much more capital banks will have to set aside to please regulators. let's bring in dick bove, the financial strategist at odeon capital group. dick, as always, great to have your with us as we look ahead to bank earnings. the banks are still in crisis. it hasn't passed. dick: no, it hasn't. if you take a look at bank stock prices five years ago, they were higher than they are today, and that is in a period of five years since the equity markets have risen aggressively. one of the problems the banking industry has faced over this time frame and even longer is that it continues to lose market share to other forms of financing. in other words, you find private equity companies, nonbank companies, fintech companies, and the capital markets themselves, all of which are taking share from the banks.

and they are getting that share because the banks tend to be a high cost provider of funds in a low cost provider of yields on deposits. i think that is a big issue. i think if you take a look at the capital issue, i mentioned a few moments ago, if you take a look at a bank balance sheet today, it is not telling you what the true assets of a bank are. in other words, there is a fair value of the assets which the banks hold, and at that is the stated value. the fair value is substantially lower than the stated value. in other words, at bank of america, if you took a look at their fair value, it is roughly $100 billion below the stated value. so if you don't have a valid, if you will, indicator of the true assets of a bank, you have to raise the equity. i would disagree with what mr. barr -- i would not disagree with what mr. barr is suggesting at all. kathleen: how challenging --

haidi: how challenging will it be to -- they are saying they should be put in line with international requirements. dick: that's right. basically, i think that the accounting that we are looking at in the banking industry is simply unacceptable. let's assume a bank has a huge mortgage portfolio of one to four family loans. the yields on those portfolios, for most banks, is somewhere around 3.5%. to say that mortgage portfolio is worth tar is totally unacceptable because it is. it is worth substantially less. first republic bank had a $22 billion overstatement of the value moving into the portfolio, which is why the bank could not be sold. if you go to the treasuries owned by the banks, you can find

tens hundreds of billions of dollars there, where the banks are overstating the value of these portfolios. if the banks are not going to give you an adequate picture of what the true value of their different fixed income portfolios are, then i think the regulators have no other option but to increase capital requirements. >> why would it be so hard? the bank regulators and examiners know how the banks work. they are not in the dark about this. wouldn't it just make as much sense as raising capital requirements across the board to make sure everything is transparent, that everything is properly valued where it should be, etc., and make it more transparent to the public so that investors and people are looking at where they want to put their money has a clear picture of where they are going and what they are doing?

dick: i think you and i would agree on that subject. basically, the accounting rules are just not correct. a knockdown, drag out fight 10 or 12 years ago when the accounting rules were put in place because they fought every inch of the way, and the accountants and government fought on the other side, and they came up with this compromise, a compromise which is absolutely absurd because think of three buckets. in bucket one, you have securities which are held in the trading account of the bank. those are marked to market and are the valid number. bucket number two is something called available-for-sale. that is also marked to market, but the change in value does not go through the income statement. then you have bucket number three. in bucket number three, the same security is not marked to market, it is just valued at par

no matter what the value is. if you are the ceo of truest, which is the sixth largest bank in the united states, or pnc, which is the seventh largest, you would say, do i really want to put all these securities in bucket number one and have it marked to market, or am i at going to put the securities in bucket number three and not have them marked to market? obviously they put them in bucket number three, so you are not getting the adequate statement of what the true assets are of that bank. and therefore, if you subtract what the fair value is from the assets, you subtract that same fair value from the equity, you find the equity to asset ratio is substantially below what they are published to be, and that cannot stand. it is not right, and it's got to be changed. haidi: dick, always great to have you with us. we appreciate your insights.

dick bove, financial strategist at odeon capita group. let's look ahead to these big bank earnings. in hollywood, writers and actors are on strike at the same time for the first time in 63 years. the screen actors guild announcing that walk out after failing to reach a new labor deal with the alliance of motion picture and television producers. let's bring in jonathan handel, entertainment attorney and author of "hollywood on strike." great to speak with you. less time, we spoke when it was just the writers on strike. what is so unusual about the actors joining best? jonathan: it is a pleasure being with you. this is the first time the actors have struck hollywood in 43 years, since 1980. i think the first time it is a double strike, the first time it has been a dual strike since 1960. i was at the press conference where they kicked off the strike. it was absolutely fiery, absolutely electric. fran drescher, the star of "the

nanny," has made herself a labor leader. she is absolutely outraged, and the way she has expressed it,. excoriated the companies there she is speaking. it was so electric that it felt at times like the press almost had to restrain itself from clapping as a number of actors did applaud. it was quite something. kathleen: where is this going next? so, they go on strike. we know that can hurt the production of netflix series, all kinds of things. in a good union dispute like this, when there is a strike, you've got two sides fighting, but they have to have a compromise. where is the compromise? jonathan: well, some of the fighting is over numerical issues, so you would think some of the compromise would come somewhere in between. but it seems like right now, nobody is in the mood to compromise. both parties, the actors and also the writers and the studios, view this as an

existential moment. from the standpoint of labor, these careers -- you have to remember, by the way, that you see a famous actor and think, they are making millions of dollars. a very small number of actors make millions of dollars. but that is not what this is about. they negotiate their own deals. their agents negotiate deals. but the terms in the union contract are the basic minimums that sustain middle-class and even working-class actors inexpensive cities like new york and los angeles, where they are trying to put food on the table and keep a roof over their head. from the standpoint of labor, wages are not keeping up with inflation, jobs are becoming more precarious. residuals, royalties paid for reruns, are not rewarding success in streaming shows. they are the same other the show is successful or not. there was the ever-present threat of people being displaced

by ai, which we should note is a 200 year old threat. it started with the industrial age. from a company standpoint, film entertainment is in. a difficult place theatrical box office, moviegoing is down 25% or more from pre-covid. television broadcast and cable are dying a slow death. the audience is dying out of the demographic that advertisers want. and competing with netflix requires enormous capital. netflix has easy access to capital as a tech company. money is not easy now in not easy for the legacy media companies. it is a tough situation. for many, it is existential. haidi: tough for both sides. does one have more leverage here? of course, we are seeing the industry still in a nascent recovery post-covid. jonathan: it is hard to know. on the one hand, it is hard to

discount the leverage that companies have by virtue of their size and their economic clout. this concentration of wealth, the degree to which executives are paid at the top, 2, 3, four levels of executives. enormous sums of money -- are paid enormous sums of money and shareholders are not uniformly distributed across the population. lots of people don't own stock in anything because they do not have the resources to do that. this is a problem of the entire economy, which is why sag aftra feels that people who don't have anything to do with the entertainment industry should be concerned and should care about the fight that is going on now, because it is a fight in common with a lot of people. meanwhile, labor is withholding its labor. that is what a strike is. that is obviously leverage as well. but where it strikes out, it is hard to know. it will probably last into the fall. haidi: really great to have you

with us. jonathan handel, entertainment attorney. that strike with the actors joining in with the writers in hollywood beginning at midnight. we are watching for further developments there. taking a look at what we are seeing across asia fx trading, we are just moments away from that rba decision of the leadership being announced by the australian prime minister and treasurer jim chalmers as well. fx, we are not seeing that much of a move when it comes to the aussie dollar. some of the strength in the dollar pairs have been going this week as we have seen that unwinding of the bloomberg dollar and broader dollar index, extending declines for a fifth straight day, hitting that daily low. all g10 advance there. we are also watching the yen at 138. we did hear from the top currency official in japan that they say the unwinding of yen shorts went significantly this week, when we are under that 138 handle this week.

and watching dollar-china as well to see if we have any reaction, given that we have seen supportive statements in boosting the private sector as the economy continues to slump. as we await the rba, this is where we are at. we have reporting this morning at bloomberg news that the rba governor phil lowe will not be receiving the three year extension that he says he would be open to and happy to after his seven year tenure. his tenure has been marred by a lot of criticism, the difficulties of predicting forward guidance of ray inflation -- rates and inflation through the pandemic. the government has been trying to seek a circuit breaker, and this is a circuit breaker we are getting. they are naming michelle bullock as the next central bank governor. this will be the first female governor we have had at the rba. she was one of the top

commanders. muscles and into the prime minister. -- let's listen in to the prime minister. >> thanks for joining us this morning. this morning, the cabinet has met and agreed with the recommendation from the treasurer, supported by myself, that michele bullock be appointed as the ninth reserve bank governor. michele will be the first female governor since the independent rbis was founded in 1959. after close to four decades of service to the rba, most recently as the deputy governor, miss bullock is eminently qualified to lead this national institution. michele will be an important job at an important time with the

challenges we face globally, challenges which have been discussed at the summit of recent days. disappointment follows a rigorous process, including consultation with the opposition. i also want to acknowledge dr. lowe's seven years of service to the nation, in particular his commitment to supporting australian jobs, incomes, and businesses during the depths of the covid 19 pandemic and global economic downturn. it was indeed an extraordinary time, and we thank dr. lowe for helping the australian economy face unprecedented challenges and the global economic consequences of russia's illegal and immoral invasion of ukraine. miss bullock is an accomplished economist with wide experience at the rba, including as deputy governor and deputy chair of the payment systems board.

the incoming governor will oversee the implementation of the recommendations of the rba review to make sure that we have the most effective central bank and monetary policy framework as australia and the world faces ongoing economic challenges. i very much congratulate michele bullock on this appointment, and i thank jim for overseeing the process to ensure we got at the right decision for australia. and i am confident we have done just that. >> thanks very much, prime minister. we are really proud to be announcing that michele bullock will be the ninth governor of the reserve bank of australia. her appointment will take effect from the 18th of september this year. this is a history making appointment. michele bullock will become the first woman to ever lead the reserve bank in this country.

michele bullock is the person best placed to take the reserve bank into the future. michelle is an outstanding economist, but also an accomplished and respected leader. her appointment best combines experience and expertise with a fresh leadership perspective at the reserve bank as well. this is the right call, but it is not an easy call, and i want to acknowledge that as well. this comes after months of deliberation and consultation, and we have come at this in the most methodical and considered way that we could. this is a big job. this is one of the most important appointments that we will make as a government, and so we have treated it methodically and in a considered way as well. i want to say as the pmd that we thank phil lowe for more than

four decades of dedication and commitment and service, not just to the reserve bank and not just at the economy, but our country as well. phil lowe goes with our respect, he goes with our gratitude, and he goes with dignity, and i want to make that clear. and on a personal level, i have really valued my working relationship with phil. i have known phil for a long time. he is on a personal level a terrific guy, and he has handled himself impeccably as we have gone through this process. and the statement that the reserve bank is releasing today in his comments are evidence of that. i have conveyed to him directly, and i am pleased to say to you as well, that i have said to him this week that the way he has carried himself has been characteristically kind and

classy and much appreciated by the government. obviously, and appointment ofthis magnitude, there is a lot of speculation, and i think it is a good thing today we can end the speculation about the next governor of the reserve bank. the decision was not taken until it was taken by the cabinet collectively today, and that is important, but it has been my view for a while now that michele bullock is the best person to take the bank into the future. it is a wonderful appointment, i think, and we are really proud to announce it today. it is a history making appointment, it is the right appointment, and it comes after lots of consultation. >> the decision with respect to continuity with miss bullock and the experience as you say, philip lowe wanted to do another two. why was he not given another time? was it because you believed he was not up to the reform task? >> first of all, of the eight

governors who have served to this point, five of them have not had their term extended. so, extending a governor's term has been, in historical terms, the exception rather than the rule. i think the average tenure for a bank governor is a little under eight years, and fill brings up -- phil brings up seven years. it is not wildly out of the norm that phil will finish up after seven years. i think michele bullock is the best person to take the bank into the future, and michele represents the best combination of that experience and expertise, but also a fresh leadership perspective. one of the things i have really admired about michele bullock as i have come to know her, and especially to understand her role and her contribution to the reserve bank review, is that michele has thought deeply about how we take the bank forward into the future. she does have a lot of experience at the bank.she

does have a lot of expertise as an economist. but one of the things i really value in this appointment is the style and nature of her leadership. she is an accomplished leader, a highly respected leader, and that is what we need at the bank. >> the rba review said the organization needed a shakeup. do you still think she is the one to shake things up at the bank, and how? >> michele bullock has made it very clear to us that part of her role is to make sure we can implement in the best possible way the recommendations of the reserve review. so, we have had a number of conversations about that. i know that michele bullock is committed to the rba review process, as am i, and there is a lot of work to do to agree to the new statement of conduct

this year and introduced legislation this year ideally as well. i think the fact that michele bullock brings that experience and expertise, but also that heft and gravitas, will be an important asset when it comes to the relationship with the various rba boards and when it comes to implementing the review. i think she's got the best possible combination of attributes to help us do that. >> peter dutton made it clear yesterday [indiscernible] he said the decision was made this morning. how much did that factor into your decision? >> zero. less than zero, it must be said. jim? >> i wasn't obligated to consult the opposition on this appointment, but i did anyway. not obligated under the old arrangements. not even obligated under the

recommendations of the reserve bank review. but i thought it was important i do that. i think angus taylor for making the time on multiple occasions to talk about this appointment. i have been forming a view for some time about my recommendation to the cabinet, but this is a cabinet decision and the prime minister runs a cabinet government, so the decision was not taken until today. when it comes to peter dutton, peter dutton is so relentlessly negative that he is now bagging things that are not happening. this is bordering on the pathological when it comes to his negativity. to describe people of the caliber of stephen kennedy and jimmy wilkinson, who have advised both sides of politics in a frank and fearless and impeccable way as somehow tainted, it is not those two who are tainted. we will not be taking lectures about the public service from the party of robo deck, for example.

so i say about jimmy wilkinson and stephen kennedy, this is the best of all worlds. we get michele bullock at the reserve bank, and we get stephen kennedy at the treasury, and jimmy wilkinson at finance. i could not have more respect for kennedy and wilkinson and bullock. we've got those three in the key positions, and that is a really good outcome. >> with regard to the public service, one of the things that i want my government to be characterized is lifting up the respect for the public service, which is an honorable profession. for the leader of the opposition to be critical of people of the caliber of stephen kennedy, who i remind people was appointed as the head of treasury not by the albany sea government, but by our predecessors, and jimmy wilkinson, who was the deputy secretary of the treasury under the former government and was

then appointed as the secretary of the department of finance, is i think completely reprehensible. i just support the comments of the treasurer. when i heard about those comments, i said, is there anything that this bloke will not play politics with and be negative about? >> the review was highly critical of the reserve bank's culture, to the appointment of an internal candidate as governor. >> we work closely with michele bullock, but also with the treasury, and we will consult widely again. by the middle of so timber -- september, we will try to make sure we have the best combination of talent and

experience. i don't want to artificially limit the field by coming out the way you have described it. but clearly, what you want at the bank is you want in addition to experience and expertise and heft and gravitas and the right kind of leadership attributes -- haidi: we are hearing from the australian prime minister and -- the deputy rba governor michele bullock becoming the ninth rba governor taking over from the outgoing governor phil lowe and becoming the first woman to lead the reserve bank of australia in its history. much more to come. this is bloomberg. ♪

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>> this is "daybreak: asia," counting down to may --

to asia's major market open. michelle bullock, considered one of the top contenders to take over the helm at the reserve bank of australia. after phil lowe was there for seven years or so. not a surprise but certainly an important moment for the rba, for central banks around the world. the first woman to take this job. she started as an intern in 1985 and became the deputy in 2022. phil's been criticized for the hiking and tight hawkish policy. looks like michelle bullock has not had any of that on her. stepping into an important role. everyone seems to agree she is highly qualified. >> a lot of criticism over the guidance when it comes to where interest rates would be. this is the second -- continuity

candidate but enough of a change. michelle bullock, hugely qualified. very well respected economist and the first woman to lead the rba. belle, what are we seeing? >> given the moves in the aussie dollar,, and the bond space this morning, you can see here, very little change even at the front end of the curve. the way that investors are interpreting this decision so far, then name of michelle bullock is an x rba governor, her term starting in september of next year, essentially telling us investors so far expect policy continuity to stay in place for some time to come. thus the reaction we are seeing as we get all see markets underway. a staggered start. 10 minutes to be fully online. not yet seeing the full price reaction. in the session today, it's also about what came through from the u.s. overnight, particularly the producer price numbers telling us perhaps a disinflation trend could be starting to take hold or at least if you change on, that is the narrative traders have been clinging to.

that's what we will be watching quite closely on the session today. you see the nikkei there climbing to one -- climbing 1% higher as we start the day's trading. we are continuing to see the yen at the 130 level. investors saying there could be upset pressure to come for the yen against the greenback here. we are on track for its best week against the dollar. so far this year, dollar weakness, another trend that's been quite persistent especially after those cpi numbers out midweek in the u.s. yields coming down, fairly steady. let's change on. we've also got korean trading underway. we are watching the start here, the moves in the cause that, fairly subdued trading here -- the kosdaq, fairly subdued trading here. the korean won, we have been

seeing that move throughout the course of this week, one of the biggest gainers in the asian fx space against the dollar. you can see we are well moving under that 1300 level. another key level we broke. so much breaking news today. we've also got the numbers coming up from singapore. -- out from singapore. >> single pole will be one of the markets to watch given that it basically had its best day all year when it comes to the index there. this could give it more about tailwind, just staving off a technical recession. this is what we are seeing when it comes to the gdp numbers. we are seeing .3% gain, beating expectations of a contraction of. .2%. . also bouncing back from the previous period. gdp year on year makes it a .7% gain. slightly better than what was expected for the second quarter.

staving off the technical recession. in an economy that is a city state and hugely vulnerable to external demands and slowdowns. when it comes to the concerns of a recession, materializing back in june, we did see the weakness in the industrials -- plunging 11%. domestic exports, also shrinking eight consecutive months on that slow down and external demand there. the mti, still expecting the economy to expand between half a percent to 2.5%. we will see of those estimates are updated. but for now, avoiding a technical recession for singapore. let's bring on the head of equity research for asia at upb. great to have you with us. a pretty significant amount to get through. top of mind is of course the change at the top of the rba, michelle bullock will be the one to usher in the

structural changes previously announced by governor phil lowe earlier this week. what are the implications for you? >> so, we think -- she's obviously the continuity candidate. they made a lot of addresses to the domestic political audience that she is the best qualified candidate, etc. of course she is. we would expect a continuation of policies we've seen out of the rba under the new governor. >> let's take a look back at this great chart we've whipped up over here. phil lowe's legacy at the rba. overseeing an aggressive tightening cycle. there was heavy criticism over the guidance he gave when it comes to inflation and rates forecasting through the course of the pandemic. so much of the criticism coming down through the pressure

. some overleveraged households are feeling out with this cycle of tightening. for australia and more broadly for most central banks, as we get into this end game, how much risk are you assigning to policy errors or even miscalculation of how data comes in at this point in the game? >> we think the biggest error would be to give up on tackling inflation too soon. central banks -- if central banks lighten up so quickly and inflation comes back again, this would be the worst possible outcome. overall, for central banks in general, we are coming to the end of the cycle we think for the u.s. it could be later this month. overall we are expecting next year inflation to come in globally around 2.5%-3%. core inflation one percentage point higher than that. if that is the outcome, we think

probably wear policy settings are coming to now is going to be right. inflation is not a political issue. so we want to make sure that it is tackled properly and finally. it is our view on this one. >> most investors think the central bank will do what the government wants. you're supposed to do was good for the economy. we've got two days now better-than-expected declines in consumer prices than producer prices, stock market continues to rally on that, bonds continue to rally, we see the short end yields -- the two-year and the 10 year coming down again today. one of your top conviction calls is within global stocks. you are overweight the u.s. right now. you are underway japan. a different call from a lot of people -- underweight japan. a different call from a lot of people. why? because it is speaking?

avoiding a recession? what is your rationale? >> we are neutral global equities but within that we like the u.s. better right now than for example japan or em, particularly china. we are coming to the end of the rate hike cycle. that is one. the last two days of that have been obviously pretty positive. -- data have been obviously pretty positive. the key is earnings. earnings start this afternoon or later tonight with the u.s. banks. it's going to be incredibly important to see what's coming out in terms of a few things. one, loan quality at this point in the rate hike cycle. also nims starting to peek for the u.s. banks -- peak for the u.s. banks. catching up with rising rates. obviously the commentary out of the heads of those banks, particularly jamie dimon. it will be key to watch. within that as well, since

march, there's been problems in the regional banks, if you bankruptcies. the first and if you years --. a few bankruptcies. the first in a few years. one to watch is commercial real estate. it is a problem of the regional banks. the most regional or local sector is realistic. most of the commercial real estate lies in the regional banks. that's going to be key to watch as well. >> so, it's interesting you say you are waiting for the fed's rate hiking cycle to end. then you will be ready to reduce your underweight on financials. so you're fundamentally positive here but it's timing. >> it's both. it's everything. at the moment, we think there's a bit of risk of a mild recession in the u.s. later into this year. that is one reason to be

underweight financials. the data coming out this evening will be key to that. one thing we have seen in previous aggressive rate hike cycles, in the six months after the last type, the sector which has most frequently are performed has been financials. that's obviously sort of alleviation of fears of higher rates dampening for the growth. -- further growth. if we get the last rate hike later this month, we could be looking at our performance in the second half from financials. we don't finally know when the last hike is until we got the first cut. there a bit of estimation. -- get the first cut. there is a bit of estimation. they are signaling potentially 50 basis points higher. 25 basis points 450 is within the range. -- or 50 is within the range. >> how are you feeling about

china at the moment? i want to throw out this quick chart throwing out the best performance we've seen for chinese equities since about january. as of this week. do you buy into the policy optimism? it is also set to perform -- to outperform global peers by a significant amount since that time as well. >> yeah, china obviously -- the trade that came out this week was pretty dreadful. for a long time, the market's been looking for a policy support. and china hasn't delivered as much as the market expects. for sure china is cheap. but the valuation itself is not generally a catalyst. we need to have an external catalyst. one thing perhaps might be performance itself can bring back global institutional

investors back into china. because it's been a little bit of taboo to be overweight china against the current political backdrop. overall, if we do get decent performance out of china and it is a significant part of global equity indices, that might force institutional investors back into china. the pain trade. that might be one of the catalysts. we've been waiting a long time for stimulus from the central bank and the government. and maybe we get it. maybe we don't. we've been waiting at least two years. they have a lot of options. >> the head of equity research at ubp. we are hearing now from the incoming rba governor, michelle bullock, the current deputy governor, speaking. saying a big part of this is leading the bank through challenges. we know that she will be the

woman to assure the rba into this next stage. some of those changes we heard already details from the existing governor earlier this week. more press conferences as well as greater communication, really coming out of that independent review into the rba that suggests some pretty major overhauls for the central bank, given all the criticism of his performance this rate hike cycle and throughout the course of the pandemic, saying that it's an absolute honor, she's making these comments as she meets with the prime minister and the treasurer, from the rba governor designate. she talked about being supported by strong executive team and strong board as well. she was seen as one of the continuity candidates to stay within the rba. we know in fact of course the two predecessors to phil lowe had all been elevated from deputy into that main position. this kind of follows on to that tradition. her realm of experience is not

necessarily within monetary policy. she very strong when it comes to currencies. issuance as well as payments is her area of expertise. but she is a well-respected economist. also seen as a good communicator, which in terms of what markets are expecting, hoping for from the rba, so many of them perceived missteps -- certainly the criticism has been for missteps on communication. so i strong communication ability will be key for this next incoming governor of the rba, michelle bullock there. we can see her meeting with the treasurer and with the prime minister in the parliament house as she becomes the ninth rba governor, and the first woman to lead the reserve bank. belle. >> that's right. communication is really the heart of the challenge facing michelle bullock. perceived to be one of the main issues facing phil lowe and his time at the rba as governor. you mentioned michelle bullock, seen as a continuity candidate.

that's certainly the reaction we are getting to one markets this morning. we are not seeing any sort of outsized moves in the bonds, the effects space. we could see bonds looking to consolidate. we are getting more analysts coming through. economists suggesting the rba should go on an extended pause with the official interest rate at 4.1%. kathleen, they will say that it's much easier if the fed hike is the last one in the current cycle. that we will likely get later this month. in terms of the market reaction, reiterating, nothing outsized moved. -- outsized moves. all see stocks, pushing higher this morning. -- aussie socks, pushing higher this morning. >> great to get this job. you can only imagine how great she -- how thrilled she is to

have it. at the same time not an easy time to be at the helm of the rba. phil low may have made some missteps. for a lot of central bankers, this has been a tough time. if she's a communicator, that will be fantastic. coming up, more on australia's appointment of michelle bullock as its first female rba governor ever. amp will join us to discuss what lies ahead for central-bank policy. and speaking of other female leaders, janet yellen heads to india for a g20 meeting next week followed by a trip to vietnam. pimco joins us to discuss what will come out of the talks. this is bloomberg. ♪

>> australia's central bank is getting its first female governor. current deputy michelle bullock, replacing phil lowe in

september. with us now from sydney is the deputy chief economist and amp. -- at amp. no surprise really. what is most important about michelle bullock getting this job? it's not an easy time to be running and i central bank. certainly not there were central bank of australia, in a country where inflation is still pretty high and still coming down rather slowly. >> i think it was the right decision from the government. my concern was that an outside appointment from the reserve bank would not say that continuity that i think is really critical at this current point in a cycle. because the task of getting inflation down is not yet finished in australia. is not yet finished around the world either. so as someone who knows what the reserve bank needs to do to get inflation down, someone that understands how forecasting works, how to manage inflation

expectations, it's really important. this is the right decision by the government. in terms of the implications for monetary policy, i don't think it has major implications in one way or the other. michelle bullock's probably a little bit more dovish compared to philip lowe compared to some speeches she's done in the past year but overall the messaging around the need to get inflation down and the risk to higher interest rates is still intact from here. >> so, you see a little more dovish, but do you mean basically she -- of course we have to remember that the central bank governor's's not the only person that decides what policy does at any central bank. so, if you're going to be guided mostly by how quickly inflation comes down -- is she going to be guided mostly by how quickly inflation comes down or is there something more dovish in her approach? >> and some of her speeches in the last year, i've taken out

that she's a little bit more concerned perhaps than philip lowe was or other members of the board about lags in monetary policy. monetary policy can take 18 months to work its way through the economy. i also get that sense she was a little bit more attuned to the risks to the household sector especially in australia where households are much more sensitive to interest rate changes compared to other countries. for example we haven't had as many rate rises compared to the rest of our peers. we've had the largest change in the outstanding mortgage rates. which shows you the passthgouh -- the past through his mustache are here. -- which shows you the passthrough is much faster here. >> the structural changes will be another sort of challenge. . what will be most difficult do you think? one of the communication piece with regular press conferences

is going to be huge change. >> to be honest with you, i'm a little bit worried is going to be too much communication from the reserve bank with these press conferences. i'll be at there will be less meetings and more speeches from the different board members. i'm not sure that we need more communication at the moment. i think a lot of communication the past two years might've potentially led to the problems we had with the 2024 communication issues that philip lowe was talking about. the other thing i'm worried about is also we are going to have too many outside appointments on a board, and the power of the reserve bank's going to be diluted, because it feels like we are moving into a long voter type of board where each individual member will vote on monetary policy changes, rather than the rba coming up with a recommendation to the board which they then endorse or argue about. i worry that at this current

point in the cycle where we need the continuity, where we need to finish the job around inflation, that individual members voting will not lead to the right decisions in monetary policy. that's the issue some central banks are facing like the bank of england. >> in terms of finishing the fight against inflation, it's worrisome, the expectations, we are at the point close to the end -- i do wonder, given the enormous criticism and pressures, not further -- not just for the guidance peace but also the sheer politicization of this time when households are coming under pressure, is michelle bullock going to have to deal with the same sort of criticism? >> i suppose she starts from a fresh perspective. she doesn't have the legacy

of the past few years. she might not get as much of that initial backlash. it depends on what the reserve bank those from here. it seems like the board themselves are quite mixed on where they take interest rates from here. the latest speech from philip lowe was actually pretty neutral. a tightening bias was a bit more water down. the next two meetings are definitely -- whether we will see more interest rate rises, it is up to debate. the markets price and -- price in a rate hike from here. the reserve bank will have to revise its wage forecast and that will persuade them to hike rates again. the board is purely violence at the moment -- pretty

balanced at the moment to where it takes hikes from here. >> what level of inflation would you guess michelle bullock is going to want to see before she puts her idea on the table, time to pause? the other part of it is, markets are dying to see all central banks pause, the next thing is a cut, but she may be stuck with the higher for longer like others. >> there's a few different things to consider here. first off, global inflationary trends are quite important. they've been talking about being worried about the outlook for australia and inflation based on what happened overseas. but actually overseas, and the u.s., inflation has been coming down as fast as it was going up. the markets are excited that may be the inflation fight is completely over in the u.s.

it is a bit too early to call victory but that is certainly the view have had in the markets the past few days. i think inflation in australia needs to be at the top of the rba's mind. >> thank you so much. the deputy chief economist at amp. plenty more to come on "daybreak: asia." this is bloomberg. ♪

>> taking a look at asian currencies, the aussie dollar, losing a little bit of ground. not much after michelle bullock has been appointed to be the next governor. the first woman ever to replace phil lowe. plenty

>> this is "daybreak: asia." here's a check on markets. the big thing investors are watching, a lot of breaking news around the rba.

essentially the main investment theme that investors are tracking this morning is still the story of slowing u.s. inflation. we have producer prices data out overnight that showed an uptick of just .1% on the year. the slowest pace we've seen since 2020. it's the disinflation trent that's really taking hold across the bond space as that continued retreat we are seeing in yields. we could actually see this boosted further if we see anything supported coming out of the pboc later today. 10 a.m. local time, discussing possibly its policy expectations around the second half of the year after what's been a very weak first half of the chinese economy. in the currency space this morning, it is still the move higher particularly being led by the korean won at .4%. one of the best performers in the asian fx space over the course of this week, yen strength as well.

something that eased weighing on japanese stocks throughout the session. the only ones declining so far among the markets that are online. otherwise we are tracking higher further kospi, the asx 200. we want to get to that keeney is of the hour, this is the big news, michelle bullock being named as the next rba governor. >> let's get some more reaction from bill evans, the chief economist westpac, and the and that everyone wants to speak to for his reaction, bill, give us your take on this appointment. >> i think it is a quality appointment. philip lowe was one of the great economists in australia for a very long time. his speeches in particular were incredibly insightful. we learned a lot from that. but michelle bullock has only been the deputy governor since half of last year. a very short time. but in that time, she really has impressed us. in particular, she is given some incredibly important speeches.

i recall in particular one very courageous speech a few months ago. she was prepared to identify where the reserve bank saw full employment, at 4.5%. she argued full employment, you need to get the unemployment rate up to 4.5% to be consistent with your inflation target. so that was amazingly insightful -- an amazingly insightful piece of communication. i think we are in store for someone who is courageous and who will be very well trained and is going to provide the stability that is needed to boost the reserve bank to its next stage given the reforms phil lowe identified earlier on in the week. >> some significant structural changes. in terms of being that a defendant, do you think they are more likely to pause on the balance of things with the new governor? >> i don't think that change

will be a significant change in terms of the direction of policy. the governor and deputy governor always work closely together. i think the key issue is, do they feel the incredibly tight capacity legislation we've got at the moment in the labor market, is not going to be the thread to inflation, a breakout of inflation? and there is still any to tighten further? i believe that will be the approach they will be taking. the market has been seduced by what we've seen in the u.s. the last couple of days. is moving away from it a about inflation risks in australia. >> one of the significant structural changes will be fewer meetings but more communication, more speeches, more interviews, more press conferences. do you think the risk is on the upside when it comes to more communication? >> you don't get 11 board minutes -- that's been a

critical aspect of communication. so i'm a little disappointed. because certainly those minutes have provided us with great clarification about where things are going. and i've had time to think about that. now is going to be pretty much straight after the board meeting you will have a press conference, and there is risks communication is not as fluent as when you have time to roger minutes. on the other hand, we will have the opportunity to explain thinking immediately. the developments that we saw earlier on in the week, i think all of them have merit. michelle is the right person to make sure they are implemented. she had a long career in various parts of the bank. associated with the payment system. she's very good at the management. that is the sort of thing you need in a governor when moving towards his new approach. >> and how many aspects there

are two essential banker, particularly one at the top of a bank, what you think the market sentiment is right now toward her? the people's sentiment? phil lowe miscommunicated at a very tough time. are they going to be more inclined to say, give her a chance? to say, we've got rid of phil lowe, now we've got michelle bullock. and be more ready to let her get her feet wet, and forgive her if she has any little missteps? >> look, the market is pretty unforgiving. and i have no doubt that in that rule there are always missteps. but what we've seen so far is that she's handled difficult situations in the last 12 months incredibly well. i don't think there's any reason to think she will be making missteps that will prove to be really damaging for the market.

to phil lowe misstep was to provide that guidance that rates would not go up until 2024. -- would go up until 2024. it was really just a justification for the yield curve control policy. but unfortunately i got into the general meeting -- it got into the general media and worked against him. >> do we think phil lowe made that decision and that communication independent of the rest of the rba, including michelle bullock? that's what i've always wondered. usually in a central bank when you come out of a statement and you have had a discussion to hike rates or not, this is something the board members have worked on pretty carefully. >> well, the policies that were underpinning the view rates wouldn't go up until 2024 were policies that were taken at the board level.

the extension of the yield curve control from 2023 to 2024, the decision into quantitative easing, the decision to lend the banks money at .1. those were decisions made at board level. the implication behind those decisions was they thought from their perspective that they could do that because they didn't think rates would need to rise over that three year period. he was really justifying those policy decisions on the basis of how it would look in the market. but of course he was called out, as most central banks were called out. if you look at the inflation forecasts of other central banks in early 2022, there were expecting it -- inflation would lift in 2022 and go back down in 2023. c&s temporary. phil lowe was in line with those forecasts. that is not what happened. and central banks around the world all had to pay a price for the. >> is a contradictory to you for

an rba insider to be driving the recommendations of the review? >> the rba insider, who are you referring to there? >> i'm just wondering for an inside appointment to be driving the many changes that have been suggested by the review, do you think that is slightly contradictory? >> >> not at all. i think michelle bullock's someone who understands how the reserve bank works. she's had a long career there. i think she's very popular among the staff. so they will follow her in terms of the changes that need to be made. it's very important, that the staff of the central bank that for many years was seen to be almost the best central bank that we've seen globally in terms of the achievement on inflation and full employment --

i think that is a really good choice to have someone who has got the confidence and the organization to implement these changes. it is what i would call rational, sensible changes. not issues that are controversial. i think they are all things that make a lot of sense. the meetings on the press conference thereafter, i think she is the right person to drive those changes. >> if you accept that politically phil lowe has been the forgot, does that mean abbas really does dip into a recession, the government now owns us a bit more? >> not really. if we look at how the inflation in australia evolved, i don't think this will be two different other countries. before covert, inflation was 1.8%. in 2022, 7.8%.

it went up by six percentage points. the most obscene suggest that around -- i have seen suggest around three percentage points. about 2.5 percentage points of that was fiscal policy. that is a common story around the world. only about half a percent due to excessive monetary stimulus. it is the central bank's job to contain -- to bring inflation back in line. phil lowe accepted that and did a courageous job. he did -- there's a lot more work to be done. but that is how the financial system works. fiscal policy in extreme times can be the most destabilizing aspect. but in terms of the inflation story, the central bank has a role to bring inflation back into line. >> tough job indeed. bill evans, thank you so very much for covering so many aspects of this departure of

phil lowe and his replacement, michelle bullock, formula deputy governor at the reserve bank of australia and now in the seat herself. let's take a look at the pboc, with an opportunity friday to lay out its monetary policy outlook for the year. speculation grows for more stimulus support. from where we bring in bloomberg economist david cu. the pboc needs to balance among so many things, what do you think about the monetary policy stance in the second half of the year? >> we have been expecting the pboc to be more active in monetary easing for the second half of this year. the main reason is we have seen the post-covid recovery is losing steam in money in june. within the pboc needs to work more. also we think monetary easing is more effective in raising the confidence in the economy.

now we expect the triple costs the second half of this year. >> a lot of discussion has been on limitations when it comes to whether pboc can do, what fiscal can do, how much space is there to stimulate? >> we think, yes, the pboc is going to ease more. but we have to emphasize here that we don't expect anything aggressive from the pboc. the pboc needs to balance among many things the high debt, the financial risks in the market, and also the need for policy easing to boost the economy. also, the exchange rate of the yuan. the pboc's room for easing is

limited. on the other hand, we think, on the fiscal side, they face some constraints. for example the high debt at the local government level. that is why we think both the fiscal and monetary sides need to work together. and deliver some stimulus from each of those fronts. >> it has certainly worked in places like the u.s. where there was a record fiscal and monetary stimulus during the pandemic. softer u.s. dollar, as investors are betting that the pico inflation israel, it is going to keep coming down. can that help the yuan's exchange rate? >> yes. to be accurate, i think that one help the yuan's exchange rate against the dollar. the story and one mind -- the story in my mind is

the softness in the dollar. it does mean strength in the you -- the yuan. the story of the exchange rate is on the dollar side. but if we go back to look at the fundamental side of the yuan's exchange rate, the fundamental factors are still pointing to a softer yuan in the future. because china's economy is still losing steam. we expect more monetary easing by the pboc. and also we have seen the chinese government needs to deal with the risks in the housing market. also related to the debt side. so this fundamental factor -- we don't expect strength in the yuan against many of the

currencies. in my mind, the strength of the yuan against the dollar is mainly a dollars story. -- a dollar story. >> coming up next, u.s.-china tensions, and focus. antony lincoln raises the -- in focus. antony blinken raises issues. this is bloomberg. ♪

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>> janet yellen will travel to india and vietnam next week, sticking stronger ties with two increasingly important u.s. partners. she will head to india for a g20 meeting where she will push for reform and global lending institutions. her first visit to india and nine months amid a push to strengthen trade and economic ties with china's giant neighbor. with her recent trip to china, let's discuss the u.s.-china relationship with our next guest, joining us from singapore, the head of public policy at pimco. janet yellen tried so hard when she was in china meeting with everybody on the economic side, charm offensive

presumably, she is so well respected. but then we have something like antony blinken meeting china's top foreign-policy official, having to talk about china hacking his own department. it seems like you get two steps forward and sometimes than two steps back so often in these u.s.-china efforts to get past the strife and move forward. >> yeah, well, nice to be joining a from asia. that is actually a terrific way of characterizing this relationship. just a sort of put a point on secretary ellen's visit, it was on the heels of secretary blinken's visit and gina raimondo's visit before that. very intentional and sequenced. the hope of the administration's to try to put a floor on the relationship, try to put some

guardrails on the relationship to really prevent it from devolving any further. but as you mentioned, there will continue to be some of these news events that will make that politically more difficult for the administration. but i don't think that is going to derail these efforts. the administration is incredibly focused on setting the floor in the relationship. the bar is very low. they are trying to restore some basic communication among principles which is not really existent right now. the bar is very low. we are not expecting any sort of pivot from the administration on tariffs or sanctions or export controls. we think those will continue. but the real intention here is to put a floor on the relationship. the bottom line here is even though these emails and what have you are going to be inconvenient interference, we don't think they are going to derail the broader biden administration's efforts here in terms of putting guardrails on

the broader relationship. >> an important house select committee hearing going on as we speak. tell us about that, please. >> this is something we are talking to our clients both in asia and also in the u.s. about, while there is a lot of focus on the administration is doing, for good reason, and also a lot of focus on who may be in the white house in 2025 as it relates to the u.s.-china relationship, the congress here plays a really important role. under the constitution, congress is just as important as the executive branch. on china in particular, they may be sort of a monolith as a body much less interested in putting these guardrails on the relationship. you've already seen criticism from both sides of the aisle of the biden administration on the heels of these trips to china. and the u.s. house select committee hearing putting an exclamation point on this, looking into businesses'

involvement in china. we are expecting some legislation possibly coming out of congress to really put scrutiny on outbound capital, this could dovetail into the administration's efforts to do the same thing. the point here is that we should expect congress to continue to be hawkish, continued to be more hawkish than whomever is sitting in the white house. and that just builds on a larger skepticism of china and the u.s. congress. honestly that's been around for decades almost. >> how challenging is it to frame the debate and the calculus of risk around investing around this relationship given that we know even with the best case scenario of these grown-up sort of relationships with guardrails if you will, that fundamentally, these strategic and competitive challenges, particularly now pertaining to tech, ai, are going to persist?

>> yeah, so, i think that's exactly right. it is a good point. on the one hand, the administration is going to be trying to put these guardrails, a floor on the relationship if you will, sort of nuances are not they will continue to do these things, as it relates to technology, really in the name of national security, maybe technological primacy as well, really under the guise of national security. and those do include what we expect to be more broader export controls. we've already seen those on semi conductors as of last fall. we expect that to be brought into. to encompass things that touch ai, not touch quantum computing and what have you. and again there will be the sort of outbound executive order that we are expecting anything from the administration that will have more scrutiny on outbound investment from the u.s. to china. the first of its kind honestly in modern history. so i do think from a u.s. investor's perspective, sitting

in the u.s., just the political risk of investing in china has increased. even if policy actions don't necessarily follow, just the narrative around this becomes more difficult for investors. that said however, china's an incredibly important market. we think investors will still find tactical opportunities to invest in china. but writ large, the political risk of just investing in the country has increased materially over the last few years. >> it is fascinating, the fact that obviously the dynamic is impacted by the domestic challenges, for both sides. for president biden, are you looking at just an elevated level of domestic political and economic risk going into an election year? >> yes, so again, the biden administration will ttemp

down the temperature on the relationship. they have some focus on the u.s., as you mentioned. obviously some warning signals from china's economy as well in terms of slowing. the u.s. economy remains incredibly resilient. however, we are starting to see some fragility and some cracks, it is pimco's view we will see a slow and going into the end of this year and the beginning of next year, whether that qualifies as a mild recession, we will wait to see. but we think the odds of a recession or higher them not at this point -- than not at this point. and the strong consumer in the u.s. that's been so strong and resilient faces some headwinds. even in the policy world they face headwinds. that is part of the debt ceiling deal that was signed into law last month. that will require the resumption of student loan payments again. the federal reserve estimates

on average that's about $350 per month for a federal student loan debts or or. that will be a headwind -- student loan borrower. that will be headwind. there are some headwinds going into the end of the year, though it looks very strong. >> always great to chat with you, libby. coming to us from singapore today. that is it for "daybreak: asia." markets coverage continues. stay with us. "bloomberg markets: the china open" is next. this is bloomberg. ♪

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