♪ haidi: a very good morning and welcome to do brick "daybreak: australia. i am haidi lun i -- i haidi am stroud-watts in sydney. annabelle: i am annabelle droulers in hong kong. we are counting down to asia's major market opens. shery: good evening from bloomberg's world headquarters in new york, i am shery ahn. the top stories this hour. microsoft sloughs an impressive price tag on new products. haidi: treasuries pairing gains as u.s. consumer social resilience, despite a retail sales decrease. traders are pricing in a rate hike next week. shery: the g20 remain split over russia's ukraine war, with no consensus yet on future debt relief deals. u.s. futures coming online in the is in session under pressure. this, after stocks gained ground in the regular new york session. we had investors digesting earnings beats, not to mention

disappointing industrial production and retail sales numbers. the banking index gained more than 3%, last day in more than six weeks, on results from morgan stanley and bank of america. looking in the treasury space, a bit of a mixed picture. not a lot of change. but the 10-year yield finished at the 3.79 level. also watching oil prices per pushing higher, $75 a barrel level. this, on that risk-on sentiment, russian crude flows sinking to a six-month low. not a lot of change in the asian session, but after hours we are following microsoft because it finished at a record high. we got the pricing details on those ai products from microsoft . already the stock had rallied 50% of this year. so not surprising we seeing the share price really jumping past average analyst price targets already. you can see the rally in the

past year or so. we had their earnings reports -- we have their earnings reports next week. haidi: yes, and of course we are watching that big banks. in the dealmaking doldrums, seems like wall street banks are finally seeing signs of life in the capital markets. bloomberg's su keenan joins us with details. these are signs of life in the latest results. su: yeah, a lot of green on the screens. many of these stocks soaring in a big way. bank of america sword after it exceeded expectations. morgan stanley revenue from trading slid 22% from a year earlier and that, combined with the dealmaking slump lead to results that were weaker than predicted, but the ceo said the second quarter was encouraging. also encouraging, the investment banking results. so these latest results really put a shot in the arm in terms of optimism for investment

banking, and area of wall street that has been a major slump. these latest results, bank of america and morgan stanley, they now join wells fargo and citi in beating earnings. -- they join jp morgan and citi in beating earnings estimates. while they have value at risk taking higher in the past for years, they had zero days of trading losses in the quarter. as for morgan stanley, the high point was executives pointing to an improved outlook. its stock rose the most in six months. the ceo says, again, the end of the second quarter was encouraging and that is what investors wanted to hear. they also said that they are overall in a better place and with a better tone. bank of america had a slightly improved outlook for its net interest income for the full year. again, this has been a bright

spot for the banking index, which got a big lift, 3% on the day, one of the biggest gains we have seen in a while. shery: you mentioned the hope of investment banking. when can we expect the turnaround? su: the ceo of morgan stanley says he believes we have seen a bottom. again, he had very encouraging words for the street and that is exactly what the street wanted to hear, when is the dealmaking slump going to be behind us? he said those words that everyone wanted to hear, he believes the worst is over. . i do believe it has bottomed -- he told bloomberg. he thinks the deals will pick up, but possibly not until next year. again, in terms of the reaction of the stock, that has been a lot of talk about who will succeed james gorman. there is a 12 month plan to announce that, but he said this was effectively a drop the mic moment for morgan stanley.

he jokingly said he should retire today on these results. meanwhile, bank of america, as i said, not quite as optimistic outlook on some of its parts, but it did have something to say about seeing a soft landing. that was also a positive for the street. and again, this is an area that many on wall street have been looking for signs -- when is investment banking going to pick up, when are these banks going to show strength given the tough year they have had, especially in the spring. these latest results seemed to be what the street is looking for. shery: bloomberg's su keenan there. the u.s. consumer is showing more resilience than expected last month, with a strong labor market and some easing in inflation offsetting high borrowing costs and rising prices that eat into paychecks. our global economics and policy editor kathleen hays is here with the numbers. earlier we talked about how

retail sales disappointed. but we are talking about the headline #know kathleen: when you look under the hood you see a slightly different picture. let's see how important retail sales for consumer accounts, about 70% of the u.s. economy. when you see the slowing there, you have to be worried about a broader slowdown in the economy. june retail sales, 0.2% on the headline, down from 0.5% in may, and down from the forecast of 0.5% in june. but there is a very important metric used to gauge u.s. gdp. this is what shows the more resilient consumer. it is a controlled group, what the commerce department uses when they are toting up gdp. it takes at restaurants, car dealers, building materials and gas stations. in the latest retail sales report, new car sales were not

as strong as expected, building materials were weak across the country. gas stations -- a nominal number -- partly because the price of gasoline fell. on the whole, the control group having a gain of 0.6% in june, double a gain of 0.3% in may. that is why people say this shows a resilient consumer. there was one less than resilient number out today, industrial production, down 0.5%. manufacturing, a big part of that, down 0.3%, second monthly decline in a row. manufacturing is where we are seeing weakness, and other areas where the consumer is concerned, still looking pretty good. haidi: treasury secretary janet yellen presenting something of a goldilocks picture on the economy and inflation. kathleen: certainly sounded like that today. she has been at the g20 meeting.

we had an interview with her yesterday. she still does not see every session. in fact, she thinks things are going pretty well for the economy. she said the labor market is taking some pressure off of inflation. she said the intensity of hiring demands on the part of firms has subsided. the labor market is crooning without their having in any real stress associated with it. what if inflation doesn't keep coming down and the fed has to raise rates more? that is the question going into the next meeting on monday and tuesday. remember, the periods gain was 209,000, less than 340,000 the month before. there were some downward revisions. but unemployment fell back to a 50 year low. so we can agree that the labor market maybe is cooling a bit on the payrolls, but still looking fairly tight. but janet yellen saying, not too

cold, not too hard. just right. [laughter] the goldilocks part. [laughter] haidi: kathleen hays, our global economics and policy editor there. we will be speaking with former dallas fed president robert kaplan and does he see a goldilocks economy? let's go to annabelle. annabelle: let's switch from the fed to the boj. kazuo ueda, the governor at the boj, also appearing alongside janet yellen at the g20 meetings in india, talking about the outlook for the boj. he says, unless the boj rethinks how it stably achieves the inflation goal, honesty settings are expected to stay in place for now. what does that mean for the dollar-yen? we could start recouping the recent weakness we have seen in the dollar trading versus the yen, heading back to the 139 level. what will traders be watching?

it is the japan inflation data you on friday. essentially when you look at the core reading, we are expecting the still be hovering around a four-decade high. speaking of inflation, the other big data set to this hour is inflation data from new zealand. the expectation is we will be seeing a sharp acceleration, under the 6 level. that would be near the rbnz target as well. they have been the front in the tightening cycle, so they will be to closely-watched. we are looking a little bit mixed in futures. still watching the chinese market. we will have more details from our exclusive interview later this hour, the imf essentially saying that china problem could be contained for now. still, they have room to be cutting rates and also pushing out a little more stimulus that is according to the imf. shery: still ahead, microsoft shares closed at a record as it

teases a new and expensive ai2 for its corporate software. details ahead. -- and expensive ai tool for its corporate software. details ahead. this is bloomberg. ♪

shery: traders expect the federal reserve to resume its tightening cycle next week, with a quarter point increase for the priced in for the first time since early june. this, after the fed left rates unchanged at the last meeting in june. the expectation is that this could be the last hike in the cycle. this, according to markets. that quarterly forecasts are showing a median expectation for two more quarter-point increases this year. let's bring in our next guest. robert kaplan is the former dallas fed president. our global economics and policy editor kathleen hays is also with us. robert, quote was great to have you with us. the key question is what happens next, and perhaps, beyond? robert: i think the fed would raise rates next week. if i were at the fomc, i would do that also. while inflation is improved and the economy is a mixed bag, manufacturing is weak and

anything interest-rate sensitive is weak. the services sector is resilient. the concern is that the service after inflation will be sticky -- service sector inflation will be sticky. that is the rationale for this rate increase. kathleen: the retail sales report, when you look beneath the hood, shows a very resilient consumer. still plenty of resilient consumer spending, and at the same time, construct that with industrial production down again. industrial output down for the second month -- in a row. what does that tell you about next week? robert: it tells you that in some sectors of the economy, it feels like there in recession. but i think the service sector has remained very resilient. part of the reason it has is the unspent arpa money being spent by state and local governments.

inflation reduction act projects being announced all over the country, infrastructure projects. i think those projects are the x factor that is stabilizing and making sure that the service sector around the country is still strong. i think that is what is going on. kathleen: and over -- offsetting the rate hikes today. but shery asked, "and after this meeting, what is going to happen next?" is jay powell going to signal we are watching the data and maybe this is enough? robert: i would be shocked if he does not keep the door open. if i was at the fomc, i would go along with a rate increase, but i would also strongly advocated that they do more work on the pipeline for, again, remaining arpa money at the state and local level which could be sizable, based on the data i looked at. the inflation reduction act

which will be announced, because we could be in the situation where even though they raise rates again, the services sector will be sticky and i want to have a very firm understanding on the calendar of these physical actions that may be, to some extent, planting some of our monetary policy tightening. haidi: we have had the contra-cyclical impact of chinese growth in previous cycles. we clearly don't have that now. how much of that is a wildcard for growth. you see that exported deflation risk at all? robert: there is no question that with china gdp being slow and their inflation being relatively tame, that tends to create more disinflation and slower growth in the united states, all things being equal. it is a factor to consider. shery: we are getting big bank'' earnings season now. beating expectations. low expectations, i might say.

but when you talk about smaller, midsized businesses, there is a lot of talk about potentially soft-ish landing being possible. what are you seeing on the ground? robert: big banks doing well is not surprising. if anything after this crisis, they attracted deposits. the small and midsize banks have stabilized vis-a-vis deposits. they have also done a good job controlling their loan growth, in some cases shrinking their loan growth so it is harder for small and midsize businesses to get a loan. they have adapted to this new environment. i think the pause by the fed was, all things equal, helpful. they have reoriented themselves and stabilized some. i think most small and midsize banks i talked to are still worried about the stress down the road and lament that their cost of deposits is up 250-350 basis points. kathleen: it is clear that your

thesis is the fed has mist how they should engage this fiscal spending, seeing it more of the federal level and not how it is playing out in the local regions. robert: so, i don't disagree with the punchline, which is they are going to raise rates in this meeting. the part i am encouraging if i were there would be respectfully to say, let's make sure we know where we are raising rates from here. . i think the thesis they have had is, "we haven't been restricted enough for long enough." i think without the government spending programs, we would have already been able to stop raising rates, i think the economy would be much softer than it is now. my concern is, i agree with the ultimate actions, but we are getting down to the last couple or three moves. i want to make sure we understand the pipeline of these government fiscal programs to make sure we know when we should stop and have a better grip on that. kathleen: i think that is one of the things that explains why the economy is so resilient to a 500

basis points of hikes, 10 in a role almost. i wonder then, in terms of how that is feeding into the local economy, what about wages? janet yellen seems very optimistic about some slowing in the labor market, information will come down and they will not have to do much more, but what do you see in the labor market and the will side of it? robert: governors a talk to ed mayers told me that there fiscal situation has not been better than this in a long time, in other words, they are flash. . they took some of the money they didn't need to use for covid and stockpiled it. they still have the unspent project money from arpa. in addition, whenever there is a big battery plant being announced in the state, it's like dropping a boulder in the pond. the ripple effect has a real impact on tightening the labor market. many of the jobs from these new projects are not coming from the unemployed, they are coming from

people who already have jobs, often in the service sector and who are moving. so at the national level it is tricky to track this through the federal budget. the money has already long been counted in the federal budget. even the inflation reduction act money is tricky to track so i, can understand at the government level you might miss it, but at the local level you can see it. my only suggestion would be track the spending more locally, and i think you will see -- the white house put out a map across the country of manufacturing and infrastructure projects. you see it pretty much covers pretty much across the united states. i see it in my travels across the country. it is having an effect on local labor markets and service-sector markets. shery: what income levels? robert: by and large, workers that make $50,000 a year or less. there are 50,000,000 or so workers. i called it the ground zero

of the inflation issue. there aren't enough of them. most companies tell you they can't find them. and by and large when they announce a new project in a city or state, they tend to take those workers who are making $25 an hour, and offering themd $35 an hour. when i talk to construction ceos, they tell me that is where they are getting these workers from. shery: roberta kaplan, always great to have you with us. former dallas friend president and chairman of the draper richards caps on foundation, and of course, our very own kathleen hays. more to come. this is bloombe ♪

shery: as the g20 finance chiefs' meeting draws to a close, the world's biggest and advanced, have failed to reach consensus over debt relief for distressed nations.

jodi schneider joins us. this was very high on the priority list for this meeting. what happened? jodi: it was high on the priority list and hide on the u.s. priority list as well. but what happened is that, another thing in which the u.s. and china are differing -- the u.s. basically wants to see -- they don't want multinational development banks have to take haircuts on these loans to these distressed nations. but china says, well, th government banks to which they are the largest official lender should have to share in this. janet yellen, as she was leaving the g20 finance ministers' meeting, said some progress had been made. they had gotten china to agree on the deal they were giving zambia, but then they can get that same deal for these other countries. she said she understands that china was being quite difficult in this recent round

of talks. they are on different places on this. therefore, you didn't see that framework signed that they all hoped would be something very tangible that would come out of that meeting for these distressed countries whose loans do need -- badly need to be restructured and soon. there was an agreement. though they did have intense talks, we heard, from the g20 finance ministers. perhaps they are on the road to an agreement. but no framework from that meeting. haidi: haidi: was there, and language found on ukraine and in reaction to the green new deal? -- any reaction to the grain deal? jodi: on ukraine, they are making progress. again, china differs on ukraine as well as on distressed debt. it is kind of a microcosm of what we're seeing with talks with china on a number of issues. we have seen it janet yellen making progress in terms of

diplomacy. we have seen john kerry there this week making progress in some claim with talks then at the same time, there is this push and pull on particular issues, and we saw that at the g20 finance ministers meeting as well. and we expect to continue to see it as talks on a number of issues occur between the u.s. and china. haidi: bloomberg's news director jodi schneider. we have more to come here on daybreak "daybreak: australia." this is bloomberg. ♪ 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 of any walk-in bath for easy entry and exit.

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shery: microsoft shares soared to a record after the company

revealed its new corporate ai tools called co-pilot will cost $30 per user per month. for more, let's bring in bloomberg's seattle bureau chief. this is on top of what most business customers already pay. guest: the trade. the co-pilot tools which microsoft unveiled and previewed back in march rai assistant tools for their office -- they are ai assistants tools for their office. they can analyze -- generate power points, and spreadsheets, things like that. people already pay if you are a business customer, monthly subscription fees. these would be on top of them. and the pricing frankly is a bit higher than i think analysts were expecting. haidi: we are also hearing that meta is partnering up with microsoft to make its own ai model, available for commercial

use. is this a monetary focus, or more to just get the tech out there? guest: both of these things were announced earlier today, u.s. time. meta has been working on a language model, a competitor to what openai and google has. meta's is called llama. they announced they would be making that available through microsoft azure. it will be designed to work well with microsoft windows. it is open source and freely available, so that is a different option. and we were talking about before, the pe further microsoft office co-pilot has investors very excited because, investors are in their heads totaling up the number of business office customers they know of and thinking well, if a decent chunk of those, the extra fee for the

ai would be preferable for microsoft. but that met our partnership, that is an open source product. shery: bloomberg seattle bureau chief dena bass there. those two stocks helped propel advances in the new york session, where u.s. stocks gained ground, led by big tech names. microsoft rising to a record. we are not really seeing the follow-through in the after-hours session. little bit of pressure in the asian hours, but we did see investors trying to digest the earnings beats coming from banks not to mention the disappointing retail sales numbers. we will be following more earnings to come. microsoft reporting next week as well, haidi. haidi: we heard from the ecb. big address at the g20 finance meeting in india, the class signaled officials could pause

their campaign of rate hikes. >> we will need to hike in july again. but from july onward, i think we have to carefully watch for the data, what it tells us on the distribution of risks surrounding the baseline. for july, i think it is a necessity. for anything beyond july, it would be at most a possibility, but by no means a certainty. haidi: joining us now is robert mead, pimcos head of asteria and co-head of aipac portfolio management. great time to have you on as bonds get interesting and appealing again. the ecb says it will not be a straight road, if we get tweaks, if we get a bit of easing, if we get a bit of pulling back. robert: other science suggest we are somewhere near the top of the cycle. when you think about it is already priced into markets. whether it be two more hikes, depending on the jurisdiction. we are close.

and from that point of view, bonds are exciting once again, they have become attractive for investors and there is lots of action. haidi: where do you see opportunities? robert: anywhere where the central bank is close to the end game, or where the market is pricing in the end game. almost all of the developed world is now in that zone. new zealand re-think has been there for a while and that is why they have been in pause mode. we think australia is well into restrictive territory, from the -- i think 4.1% is very restrictive. there are lots of changes happening in terms of how quickly that monetary policy will flow through to the economy. maybe australia is very close. and as we heard from the ecb, one more, and that sort of data-dependent. same thing for the u.s. shery: tell us what happens with the fed, especially with the hike baked in for next week.

policymakers seem to be signaling at least two order--point hike's for year-end. robert: yes. i would agree with you. july is pretty much baked in. then from there on, we become very dependent in the u.s. as well. as we saw last week, inflation underwhelmed in terms of what the market is expecting. much more header to alert fed targets. if we get data prints that suggest policy is gaining traction, then when we start to reach policy rates in the low-to-mid 5's, which we are pricing in now, it will start to have real economic impact. i think we're seeing that more clearly through the data. shery: we have also seen a mortgage delinquency rates going up. where do you see the casualties of this more restrictive environment? robert: it's a great question.

when we look across the investable universe for pimco, any borrowers that have been able to lock in long-term fixed rate funding, are very well protected. so the u.s. household would be one of those. investment-grade corporations which were given the wonderful opportunity to timeout their debt at incredibly low interest rates are also very well protected. we look at places like the australian household that is subject to very rapidly changing floating interest rates, they are much more vulnerable and i think if we get a miraculous soft landing where unemployment stays low and economies continue to grow even if it is at slower rates, it just means rates will be higher for even longer, which means all those borrowers who need to reset their coast of borrowing because of their floating-rate nature will have to be able to weather a much

longer storm. i think a lot of them have adjusted to that mindset. haidi: do you see japan anything earlier than expected -- doing something earlier than expected? robert: i think it is more a q3 or q4 style event. depending on what happens in terms of shorter-term inflation outcomes, that could be brought forward a little bit but it would still be in the later 2023 camp. haidi: going back to the rba, there is a lot of political risk involved at this point, especially with the reappointment of michelle. does that change the calculus of what they do from here? robert: it all changes at the margin, but i think having someone that has been inside the rba for an extended period, someone that understands the more recent policy actions, sort of a safe pair of hands, that is what markets look for. we want certainty and stability in order to make sure that the

policy traction is occurring in the way that the central bank hopes. i would also say, though, that communication is really key. understanding how bond markets interpret the communication, you could argue that was somewhat lacking, but otherwise i think we have ended up in the right spot in terms of monetary policy settings. haidi: if the assumption is a soft-ish landing in the u.s., janet yellen seems to think it's a goldilocks scenario, is this part of the cycle over for the greenback? robert: we would say yes. if we clearly got to the end of the fed hiking cycle, we have an outlook where other economies around the world will be able to adjust accordingly. we do think the dollar has probably seen its highs. as you said at the very start, we are looking for more volatility, for more sharks in terms of how at any turning point, how data -- for more

shocks. haidi: robert mead, thank you for joining us, co-head of asia-pacific portfolio management at pimco. we did have more elaboration from beijing about the multiple points to boost growth, particularly on the consumption side. let's talk about the strategy we heard yesterday. annabelle is here for morning calls. it's like waiting for godot, isn't it? in terms of stimulus. we haven't got it. annabelle: that's right. another day of disappointment, i guess you could say. you got it in a nutshell there. we heard so much talk of stimulus coming through. what will it take? we probably need more concrete policy. this plan announced yesterday is 11 steps.

one of the things it is focusing on is trying to lift spending on key household items. furniture is quite interesting one because of the sluggish spending on furniture, it has been one of the drags on retail sales in china. we had inventory piling up, well above historical averages -- this chart going back to 2017 -- you saw a drawdown coming out of covid. policymakers are focused on trying to encourage consumers to go out and spend money on their homes. if you change for her, bloomberg intelligence and others are also focusing on this, including the anz, essentially saying it will be tough for this to have any meaningful impact. the reason is that the sentiment among the chinese consumer is still so weakened. they say, go for some more practical policies. one of them is a pilot program going on in the eastern zhejiang

province, removing restrictions on household, one of the programs that they say will have a mormon for impact in trying to lift sentiment. shery: what about measures to support the property sector? annabelle: this is another area as well, because yesterday property stocks were such a drag on the benchmark there. there were a lot of different corporate stories coming through in developers unable to pay their debt obligations in time. this chart looking at home prices, we see that momentum picked up, but it is starting to stop. over bloomberg intelligence team is looking at this and they say the numbers were even weaker in the latest readings for june, so that is raising the risks of a hard landing. they say that the property sector needs urgent aid. the extension of support measures for developers is good but saga doesn't go far enough. they say housing investment needs to follow by 25% to align supply with demand.

the challenge is insuring the contraction is not so sharp that it stabilizes the economy. so when it comes down to consumers, household property prices, that is certainly a lot for policymakers in beijing to be contending with. haidi: annabelle there with a look ahead at what we could potentially see at the start of trading in china. speaking of china, we have breaking news when it comes to cutting of funding, the government is looking to cut the wuhan institute of virology funding. the biden administration is suspending all funding of the institute after conducting a months-long investigation into how the lab field to provide requested documents about safety and security measures to u.s. officials. this according to a memo obtained by bloomberg news. the intelligence investigation found no direct evidence that the covid pandemic stemmed from an incident at the wuhan institute of neurology, that

report was out three weeks ago. saying they couldn't rule out the possibility that the virus did come from a lab, but could not still discover the origins of the pandemic. we know that extensive work had been conducted on the virus at the wuhan institute, but no specific incident had been updated. we are seeing now the latest developments, the u.s. suspending the funding over this institute, the federal funding that is, after the lab failed to provide documents, according to a memo obtained and seen by bloomberg news. the department of health and human services is notifying the institute on monday of that, also advising that it is seeking to ban it entirely, since the chinese facility has not been compliant with federal regulations. still ahead, australian households are feeling deeply pessimistic ahead of this week's fresh employment numbers. we look at some of the cautionary signs for the rba, next.

this is bloomberg. ♪ fabulous surroundings... but everyone's looking at their phones for financial insights from merrill. is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and build a new home.

so they're talking numbers with their merrill adviser. she's not researching her next role. she's learning how to handle market ups and downs without the drama. personalized advice so impressive your money never stops working for you with merrill. a bank of america company. haidi: breaking news and actually a bit surprising, the numbers when it comes to cpi inflation out of new zealand, not quite as much as expected. we were expecting a gain of 5% when it comes to year-on-year.

the second-quarter number is 6%. inflation pressures slowing a bit less than expected. also seeing the quarter-on-quarter number at 1.1%, harder than the 0.9% expectation and just a deceleration from the 1.2%. whether the year on year number is slower than the pace we saw in the first quarter. watching the qb dollar, it will have a hard time -- watching the kiwi dollar. significant slowly in the first quarter. this supported narratives that the rbnz rate hike cycle will pause at the next meeting. australia's lead to indicator, meantime,, plateauing or going slightly lower.

households feel optimistic as mortgage payments rise for more on what this means further austrian central banker bank, let's bring in our next guest. you see headlines about how deeply stressed now increasingly more and more households are feeling. guest: that is true. we got the consumer confidence report last week which showed consumers remained in deeply pessimistic territory, which is quite worrying for the central bank because consumers are more than two-thirds of the gdp growth in australia. and they are heavily indebted, australian households are among the most indented in the world. debt-to-income ratio of 588%, which is huge. we have this upcoming fixed rate , which was fixed at very low interest rates in the pandemic.

there coming up for renewal. some of the renewals have already happened and it is an ongoing trend that will see for the remaining part of this year and that will have a huge impact on consumption as well. shery: what hints did we get from the rba minutes this week? swati: the rba minutes, the past couple of months when they raised interest rates that they said it was a balanced call. this month when they left interest rates unchanged, they said it was the case for -- the case for leaving the interest rate unchanged was a stronger one. that is what caught the attention for markets and economists. it kind of implies kind of a dovish message that we have been hearing from the reserve bank. we had the governors' speech as well earlier this month than the minutes, and they all have a dovish tinge to it. it implies that the rba and

policymakers are kind of focused on downside risks to the economy from these interest rate hikes, rather than the upside risks to inflation, which was their flavor in may and june when they raised interest rates. haidi: bloomberg's economics reporter swati pandey here in sydney. be sure to tune in to bloomberg radio to hear more from policymakers and get analysis from our "daybreak" team, broadcasting live from hong kong. listen now on bloomberg radio plus or on bloomberg.com. plenty more ahead. this is bloomberg. ♪

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booking.com, booking.yeah ♪ ♪ shery: some of the top stories right now, north korea reported launching two short-range ballistic missiles. south korea's military saying pyongyang launched a ballistic missiles toward waters of its eastern coast. the chinese coast guard sent two alerts over lunch is hours earlier. a u.s. nuclear armed submarine made its first south korean port call since 1981. the u.s. military says that north korea has detained an american soldier who intentionally crossed the border from south korea. u.s. officials say the soldier

is private travis king, aged early 20's. king had been held in north korea on assault charges and was facing multiple disciplinary actions. the u.s. is working with north korea to resolve the incident. donald trump says he has been notified that he is a target in the justice department's investigation into efforts to overturn the 2020 election results, signaling that he is likely to be charged with federal crimes. in a post on his truth social account, trump says he received the notice sunday night from his special counsel. he added he expects to be charged because such a move almost always means an arrest and indictment. we will be speaking to republican presidential candidate chris christie on "balance of power" tomorrow at 7 a.m. sydney time. haidi: looking like a mixed open so far on these asian assets.

really processing the new zealand inflation numbers. slightly softer actually in terms of that deceleration we were expecting. we saw a pretty big reaction when it comes to the qb as well. economists had been expecting a much deeper followed given the cost of central has gone down. the aggressive cycle of rate hikes has been seen to reduce price pressures. from 6% six point 7%, faster than expectations despite the most aggressive tightening cycle since 1989. we saw the rise in the kiwi dollar. also watching the sustained strength when it comes to the aussie dollar, we heard from pimcos robert mead earlier saying that in their view, the dollar strength has hit its peak at this point, particularly if we start to see a cooling down when it comes to the fed, and that goldilocks scenario of

growth versus inflation. janet yellen referred to further u.s. economy. sydney futures are up 0.5%, may be the outperformer's in what will be potentially a mixed session in asia. china growth concerns continuing to weigh on sentiment even as we saw pretty decent rally in the u.s. session. u.s. futures also higher. a bit of weakness when it comes to the yen as well. shery: shery: and those concerns about the chinese economy, reflecting in the stock markets in china as well, haidi, when it comes to the equity markets in mainland and hong kong. both really under pressure. when we talk about china, the largest emerging market economy, we have been talking about it as an anchor for riskier assets in emerging markets. well, that seems to be decoupling right now. china versus em's, this chart shows u.s. stocks have left em stocks behind, but em stocks

excluding china are leaving em stocks behind with china, that is. we have seen at the underperformance of chinese stocks versus emerging market years to about 16 percentage points this year or so. that would be the widest margin since at least 1999. haidi: is this a dead decoupling we should be watching, in terms of investor opportunity? typically, chinese risk assets have been so closely correlated as anchor assets for the broader emerging market complex. as you see in that chart that you brought up, that is clearly not the case anymore. we are seeing chinese equities when it comes to the msci china, dropping 4.3%. the em index excluding china is up 14%. definitely want to watch. -- definitely one to watch.

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