♪ betty: a very good morning and welcome to "daybreak: australia." i am haidi stroud-watts in sydney. 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. alphabet leads in big tech earnings with the revenue. , as its flagship search business holds of the competition. investor disappointed by results from microsoft, snap, and texas instruments. haidi: u.s. stocks closing higher before this report, the s&p 500 just 5% off its all-time high. the dow it on longest winning run in five years. shery: china names wang yi as foreign minister, but gives no information on the disappearance of its now-former top diplomatic qin gang. u.s. futures gained early in the asian session as we have u.s. stocks seeing the upside in the trading session. we had a lot to digest, including earnings and some beats coming from ge and 3m. 80% of the other reported earnings so far have beat lowered expectations. of course, that is the caveat right there.

and this is in the eve of the fed's rate decision. we have been following treasures. a bit of a mixed picture. the 2-year yield down. 10-year yield higher at that three-point 88 level. investors also trying to digest data, consumer confidence at around a two-year high. oil prices under pressure in the new york session, this, after we set a supplies. wti closing above the 200-day moving average, leading to that bullish outlook. take a look at after-hours trading, it is about the tech giants. microsoft and a little bit of pressure right now. actually gaining ground 0.6%, reversing the losses we had seen earlier. investors initially thought that perhaps sales growth slowing, their cloud business slowing was not sitting well with them, but now we are seeing a rebound of

0.5%. we are seeing alphabet continue to gain ground, about 6.5%, this, after reset the ad business on google search resilient, despite the fact that we have the ai chatbots now available. . texas instruments continues to be under pressure. they had a week forecast. there end market products, most of the segments were pretty weak. the residence when it comes to the chinese economic recovery. one of the reasons we are watching texas instruments as we have sk hynix later today also reporting earnings, not to mention samsung later in the week. haidi: yes, massive bellwethers as well as industry heavyweights. let's get more details, as big tech earnings releases. bloomberg's julia love and jackie davalos join us. what stands out to you when it comes to the microsoft numbers? jackie: they were a little disappointing. we look at the headline numbers on its cloud computing business,

growth is 27% isn't nothing, but compared to the prior growth in the last quarter at 30%, and in years past during the boom years of cloud computing, those numbers have been decelerating and the market does not like that, especially because they are poised to use that unit benefit from a lot of this ai boom we are seeing. so those numbers were not worthy needed to be. at the bar has always been set pretty high for a company like microsoft that really sets the tone for other cloud computing giants. shery: like alphabet and their cloud unit also seeing a second profitable quarter, what else stood out to you, julia, when it comes to the parent company of google? julia: they had a very strong performance from google. there has been a lot of handwringing in silicon valley that chatgpt might start to

siphon away users from google search. but you wouldn't know that from looking at the company loads results today, search was fully the driver of their growth. growth after a few rough quarters if. and ruth porat, the company's longtime cfo moving into a new role as president and chief investment officer, which really segments her role as one of the most powerful women in silicon valley. haidi: does that change in leadership shift strategy at all? julia: of herbert is really stressing that this is a continuation of the course. ruth will continue to serve as a cfo until her successor is named.

shery: jackie, what are we seeing in terms of the broader ai trend, and how long this frenzy over this new technology will last jackie: one of the next steps investors have been looking for and management comments from both companies really have guided school of those perceptions a little bit more so. how will ai actually trickle down to the business? from microsoft, it is in that microsoft office 365 suite, that gets major demand from business and corporate clients that by the technology for their employees. it is looking to incorporate the tool stemming from openai's chatgpt into them, to make them easier for people to use. that will be a big revenue driver, they have already attached a $30 price tag on some of those tools. they are not widely available, but it is almost teasing investors on what is to come. on alphabet's front, they have a

lot of potential but it comes to how they can incorporate their own large language model. google barred into their existing search business. for microsoft, it gives them a chance to incorporate openai's large language model into their search engine and potentially chip away at the dominance google has had for years. but again, a lot of these are in the early stages. what investors are looking for is, what can we expect when it comes to monetization? think both companies are starting to show that. haidi: bloomberg tech reporters jackie davalos angeli and love there, covering everything on google and microsoft earnings. let's look at how this is filtering into asian markets. a couple of earnings to watch out for, samsung, sk hynix, really looking for gauges from these bellwethers as to where the chips act are in the pricing -- chip sector in the pricing

will go. futures are looking positive at this point. we are seeing gains of about 0.3 percent. that aussie dollar also pulling steady. we saw the dollar slipping after chinese policymakers signaled renewed support for the struggling economy. that sent a bit of a rally through to risk assets, especially china proxies like the aussie dollar, leading the group. we are seeing a bit of moderation when it comes to the aussie. the kiwi is up. the dollar-yen falling, just shy of 141, as we continue to get that drumbeat towards the bank of japan. of course, a lot of focus today will be on implications of the geopolitical, as well as the developments at the pboc invasion. shery: , china's

announcement that it has removed the foreign minister, little to answer. more fundamental questions about the demise of one of president xi jinping's handpicked officials. for more, let's bring in bloomberg's greater china executive editor jean-luc. he saw this fast track promotion, qin gang. he held a position which is senior to the foreign minister, of state counselor. what happens to xi jinping's diplomatic policies now? john: unfortunately, shery, the answer is we don't know yet. if and only had mr. qin gang replaced by the former foreign minister, wang yi, we have not gotten expiration or detail about what exactly happened. we may in the future get that. if there is some sort of -- and we don't know if there is some

sort of investigation of qin gang. the practice in the past has been to announce that, so we think there would be some sort of announcement. if there is a health issue, as the foreign ministry said in the past, there would be trying to explain why qin gang was not going to the foreign ministers meeting in indonesia. that might be announced later as well, but there is no guarantee that we will ultimately find out exactly what happened. haidi: he keeps his role as state counselor, at least for now. does that tell us anything? there's not a lot of certainty as to what this means, that this is a temporary arrangement, whether wang yi is here to stay. john: i wouldn't read too much into the fact that there was no announcement made about him stepping down from that role. it may just be sort of a procedural, bureaucratic issue.

an announcement may come later. he is also a member of the central committee of the communist party of china which is made up of approximately 200 of the most important officials in the country. so, in the next, coming days, maybe weeks, we may get announcements about whether or not he will retain those positions as well. i think what is very clear from the way this is unfolding, the lack of information, the fact that wang yi, his predecessors coming back into the role and let somebody else, is that whatever happened here happened, in that relatively surprising and unexpected way. haidi: and as to whether wang yi, of course, such a prominent holder of this position for a decade prior, whether he stays in a permanent role, as a placeholder, does this mean more of a return to the will warrior diplomacy that he was known for? john: i think, number one, it

provides a level of continuity that you would not have had if it was somebody else in the role. wang yi is a diplomat who has had years of experience. he has been foreign minister throughout xi jinping's time as president. he has dealt extensively with the united states. he has had a number of conversation with the national security advisor of the united states, so there is a level of familiarity, continuity. that is very valuable in the relationship as tense as the one between the u.s. and china right now. whether he stays for longer or shorter, we will have to wait and see. shery: talking about personnel changes, also at the pboc, right? we are seeing pan gongsheng as governor of the central bank, something that was sort of expected. is this another set of continuity when it comes to public policy? john: i think it is a sign of continuity. mr. pan gongsheng has been at

the central bank for many, many years, spent 13 as the head of the administration of foreign exchange. but we are obviously at a point of tremendous economic uncertainty. the recovery has fallen way short of expectations. so i think there is a desire for there to be a trusted pair of hands at the real in terms of getting the economy back on track in the second half, anything that is where we see pan gongsheng chosen to lead the central bank. obviously the naming of the central governor role was after he was named secretary of the central bank. haidi: jon luther, bloomberg's greater china editor. we will continue to get analysis and track the ski story ahead of china's markets reopening this wednesday. strategy risk ceo isaac stan:

joins us to share his views. coming up, we count down to the fed's rate decision. economies remain divided over whether the fed will continue its aggressive hiking path. we will have an interview with the university of michigan. this is bloomberg. ♪

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>> the biggest threat remains inflation. we have had some good news on growth. we revised upward a little bit and there was quite a bit of resilience in the global economy especially in the first quarter, but the momentum is slowing down and this is why at the end of the day, the revision is not stronger than it is and why we are going into next year also with relatively modest growth. shery: the imf chief economist speaking, after the lenders global economic outlook announcement, and that forecast revised for global growth 3%, from 2.8%. this coming on the eve of the fed's rate decision. u.s. markets seem to have priced in another 25-basis-point rate hike. let's discuss the outlook with the professor of policy and economics at the university of michigan, dr. betsey stevenson. our global economics and policy editor kathleen hays is here as well. great to have you with us. there seems to be an

understanding that perhaps we will see a hike this week, but what happens next is the question. a pause or a skip seems to be on the mind of markets right now. what do you think? dr. stevenson that is absolutely right, the fed: doesn't like to surprise markets, it made it clear it will hike this week so we know a 25-basis point hike is coming. they will not surprise anybody by doing 50 basis points. i think we can be pretty certain about what will happen. what we will all be listening for what are their next steps? do they think they have done enough? do they want to take a wait-and-see approach? how do they view the cooling of inflation that we saw in the june report? those are the things we are listening for so that we can forecast just how high will rates ultimately go. kathleen: great piece on bloomberg.com today looking at hawks versus doves.

seems to me when you look at our great chart with all the pictures, we have more hawks than dogs right now, which means we will be more inclined to get that hawkish sense. maybe they pause, but leave the another rate hike? dr. stevenson: i do agree that they are leaning hawkish. one of the reasons for it is they finally got caught with their pants down when they said transitory inflation. and some of it was transitory, hs turned out that period was much longer than anybody anticipated, so they don't want to stop until they feel confident that information will hit the target rate of 2%. so i wouldn't be surprised to see a pause. i think they need patience right now, but i do think they will indicate that they are going to stay vigilantly on the job. haidi: i suppose a big question is also have they done enough, and is 3% what they should settle for at this point.

dr. stevenson: you mean should they change their inflation target from 2% to 3%? i think that is a reasonable debate for everyone to have, what is the right inflation target, but the fed will not debate that when they're in the middle of fighting inflation. they will stay committed to their 2% target and stay committed to feeling like that is within range and expectations have been shifted. will they ultimately decide that may be getting to 2% is too hard and 3% is good enough? maybe, but i think they would have to see more improvement before they even begin to have a conversation. shery: a couple of risks that bloomberg economics is flagging is potentially widespread labor strikes, and even weather-related global food price shocks. are these some of the factors you are watching, or that policymakers will be looking at as well? dr. stevenson: policymakers are going to be focused on what are the global headwinds the u.s.

potentially faces. i think they are also going to be looking at the data, what is happening in the united states, what is likely to happen. with inflation come down? the thing is everybody looks at the fomc from a global perspective, but their job is to balance labor markets in the united states with getting inflation at the 2% target. so they want price stability, they want full employment, and they will have to assess the data to figure out what is the risk of continuing to raise rates. we haven't seen the full effect of the tightening they have done so far in markets. in fact, we haven't even seen for tightening, right, more tightening is, tomorrow, so it is hard to know if what they have done so far is enough yet. i think the most important thing for them to continue to emphasize is they will be data driven and will make decisions based on the data coming in.

you can expect to hear that from them tomorrow, but what you will want to be listening carefully for is, how do they interpret the data they have seen in the last two months. kathleen: we are never quite sure what exactly people are looking for. what is most important here is fed policy only got truly restrictive recently. the headline has come down but the core numbers are still high, 4.5% on practically all the measures. can the fed consider pausing and thinking they have done enough? do you think they have done enough with core inflation still so high? dr. stevenson: there was a lot of anxiety because core inflation it looks like it had plateaued and that was worrisome, then we saw it come down in june. if it continues to come down that i think maybe the fed will have done enough. that is what we don't know and that is what it means to be data-dependent, is to be looking

at what is happening to the data. we saw last month, food prices for food at home rose zero. nothing. that is the kind of thing that matters for families. we are thing inflation in the kinds of goods people by of calm down. one of the risks is that we will continue to see rising prices associated with services, particularly things like health care services or childcare services or wages that percolate in the service industry that are just a large share of the cost and so that will percolate onto higher prices. that is what we are looking for, is are we starting to see inflation become difficult to fight or pick up those areas where we have been seeing bad inflation so far? shery: betsey stevenson, professor of public policy and economics at the university of michigan, and bloomberg's

kathleen hays with us. more to come on "daybreak: australia," this bloomberg. ♪ 76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

haidi: let's take a look at some of the top political stories were following. pakistan's election commissioner is inserted toward former prime minister imran khan with contempt. he had been asked to attend a hearing on the case next week, although he may skip it. he is accused of making contemptuous public remarks against the commission and it had. khan was ousted last year and faces more than 170 cases, ranging from corruption to murder. moody's investment services says political tensions is weakening israel's judiciary, and roadway on the country to cruise economy and security. hundreds protested the passage of the netanyahu government bill.

moody's says it will disrupt checks and balances. senior chinese and russian officials are visiting north korea, becoming the first foreign delegation there since the pandemic began. defense minister sergei shoigu is leading the russian team. and one politburo member leads the chinese delegation. shery: take a look at how currencies are trading. we had seen pressure for the u.s. dollar as the chinese yuan rallied on expectations of more stimulus, but we actually saw the dollar gained ground in the new york session and able to rise for six consecutive session. that would be the dxy. the bloomberg dollar index, though, seeing a bit of pressure, down 0.2%. the aussie is holding steady at $.67. a lot to do with what is happening in china. and the yuan rally. the kiwi holding steady.

format high for the japanese currency as we head towards the boj policy decision -- a four-month-high the japanese currency as we head towards the boj policy decision. shery: and shery, alphabet posting revenue beat. we get a further debrief and further analysis when it comes to the key tech earnings, next. ! bridgett is here. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright. xfinity rewards creates experiences big and small, and once-in-a-lifetime.

haidi: taking a look at u.s. futures, struggling to find traction in early wednesday trading. microsoft, of course, seeing the slide in the after-hours session. tech stocks across the region

are likely to be the focus in asia. s&p futures flat. nasdaq 100 futures up 0.3%. looking like a muted open. shery: we are seeing fluctuations in stocks like microsoft and after-hours session, which were down, then slightly higher, then down again. we are seeing a loss of about 4%. we saw tepid sales growth in their earnings results, the cloud business slowing. they are also trying to wait for revenue from that excitement that we saw over ai tools. put it into context. we are talking about microsoft gaining 18% in the past three months already. just last week they were at a record high because of that ai frenzy. despite that frenzy, we actually had alphabet holding on pretty well and it came to their search business, and really resilient despite the fact that we have those new ai chatbots. take a look at texas

instruments. it continues to be under pressure. they had a weak forecast. . most segments were down. recovery in china was not too pronounced. we are watching closely because we have sk hynix reporting later today, not to mention samsung later in the week, heidi. haidi: yeah, a lot to look forward to what it comes to the focus in asia. the director of research matthew kanterman joins us. the big thing was how much of a exuberance is actually translating to the bottom line. at this point, what stood out to you from these sets of earnings? matthew: not that much yet. there microsoft cfo basically came out and said this is a process, it will take a couple of quarters, expect more revenue from these services in the second half of their fiscal year, the first half of 2024. we are still a few quarters away. what we are seeing is their

investment cycle, they said they would ramp up capex and increase every quarter -- they just reported a 35% sequential increase in capex, money flowing to nvidia, for the supply chain for gpus and accelerated computing systems. global said they will start stepping up capex as well. even though the revenue is not. , we are seeing the investment cycle plate out. the cloud business at microsoft, 100 $10 billion business now, they are investing because they see more demand on top of that. haidi: are the ways they are trying to monetize at this point by rolling out the products they have at the moment, will that counterbalance the heavy investment in future ai capacity and opportunities? matthew: we think that longer term, yes. the opportunities particularly for a company like microsoft real and sizable.

they are not the ai service microsoft 365, if even only 10% of their subscribers upgrade to that deer of aa services, that is more than $10 billion of revenue. huge opportunities. microsoft is one of the company's most uniquely positioned to do that, to leverage its subscribers and upsell them on ai services. google is trying to do this in certain areas as well, but a lot of the investment is going into defending their search position. microsoft has this microsoft business that uniquely positions them to upsell. shery: how positive is it, though, that the google business did not necessarily suffer from those ai chatbots? matthew: it definitely shows relative strength. it doesn't mean that ai search race is over, but they are seeing improving traction on

their advertising business on google search. what we haven't really seen yet is any real penetration of aa search on mobile. -- ai search on mobile. when we start seeing it go from desktop to mobile, we may start to see some shift in the market shares. that is what we are watching for. but, as of now, google defended their market share, the improved optimization on search. it's all good for google and i think the market is reflecting that, both on the top line and the bottom line and how their shares are performing in after-hours. shery: they also see a second profitable quarter. could that optimism over the cloud unit be derailed by those ai investments as well? matthew: i think google and microsoft are both doing a good job of, even though the are increasing investments, they are highlighting that they are maintaining or still improving profitability. that is important. meta's reports tomorrow.

mark zuckerberg said it is the year of efficiency for them, but a lot of companies are taking the optimization and cost-cutting mentality to heart and he will see that in the results, the slowdown in cloud spanned and the optimization there. i think their ability to continue to invest where they see the demand coming, and at the same time maintain profitability in other areas is really encouraging for investors looking at these companies. i know microsoft is down after hours because treasurer growth numbers were not as good as people wanted them to be. but these companies are some of the most uniquely positioned to drive substantial profitability and value for shareholders. shery: you mentioned that we are of course waiting for meta as well. what will you be watching for? matthew: it seems like even though there is a lot of marker uncertainty right now, it has not derailed the advertising market like in 2021.

so that is encouraging for meta. . there are still some headwinds in terms of platform changes, and more from apple, but it seems like meta has made improvements there. that is what i am watching. there is also investment in the metaverse, we have that etf that tracks metaverse. it has always been a question of what is the right cadence of investments. similar to ai, you need to invest in front of the expected growth but what is the proper cadence to get there? ai seems more real in terms of future revenue. metaverse is still years away, so how much more diligent will they be about the investment cadence going forward, and pulled back on that reality spanned? haidi: texas instruments numbers suggesting that slumps in certain parts of the sector will continue. what are you looking out for when it comes to sk hynix, and

also in terms of the broader slowdown in china and how that will weigh on demand for all sorts of things, from hardware to software? matthew: the 18 market as a whole right now is very much a haves and have-nots market -- the i.t. market. ai is that haves, for any company involved in ai. but for cell phones and pc's which are relevant to chipmakers like sk hynix, it is still software. we are not expecting recovery in those markets until 2024 this point, tsmc basically confirmed that last week. there is upside for ai, but on a volume basis, it is still smaller than pcs or smartphones and until there is a signal for recovery there, it's hard to say there is new growth ahead. when we look at the chip space over all, you look at markets like automotive's are doing really well. texas instruments called that out, but the other industrial

segments that are weaker and that is why you're seeing those shares under pressure. there is pockets of strength and pockets of weakness. shery: round hill investors director of research, matthew kanterman, thank you very much for joining us today. you can also turn to your bloomberg for more on the big tech earnings. of course, we discussed meta's, it is reporting tomorrow. quota tliv to get commentary and analysis from bloomberg's expert editors. haidi, we were talking about sk hynix a moment ago. it's the big one that we are awaiting tonight. haidi: and as mattie mentioned, there may be hopes of recovery -- as mattie mentioned, there may be hopes of recovery in the sector due to the enthusiasm over ai, but we're still expecting downside. take a look at this chart, the worst revenue drop in the second quarter. that chipmaker continues to face that downward pressure. first quarter revenue was a record year on your drop.

-- year-on-year drop. sk hynix is expected to report sledding sales. it builds the picture of the delay in the long-anticipated chip recovery. we know that declines are slowing, that is good news. but demand is still weak. companies are still working through the inventory. and the broader i.t. slow down perhaps is just getting started. shery: and of course we will see more details from samsung earnings. already this month they posted the worst decline in quarterly sales. we had tsmc cutting their outlook and postponing production. those exports of chips are not getting better when it comes to career trade numbers. so, yeah, haidi, we continue to see the bottoming out to come at some point. haidi: [laughs] we do have all of that. watching sk hynix in the next

hour, and lots more to come here on "daybreak: australia." in the thick of earnings. kehe obloomberg. ♪ you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪ 5-hour energy. think of it as 5-second coffee. for when you wake up too late to make it. or you don't have time to wait in line for it. or you're just too busy for a coffee break. 5-hour energy.

the 5-second coffee. shery: more now on china's removal of she nghe an her in ministry. he disappeared from public view into -- qin gang. student media gave no explanation for his departure.

will be replaced by his predecessor, wang yi. let's discuss with isaac stone fish, ceo of strategy risks. always great to have you with us. we were talking about the opacity of china and the concerns this is causing around the world right now. isaac: it makes it more difficult to understand what is happening inside the chinese system especially at the top, when you near the politburo and the standing committee. this is not a terrible surprise. i think it is surprising that we know so little and we're are discussing what is going on here. shery: does it matter that this was supposed to be a person who was fast tracked through the chinese leadership, that he got really two positions, not only foreign minister, state council, and even more senior position in such a short time. and perhaps was a really close confidant to chinese president xi jinping. isaac:. isaac: it might have been. or he might have made a lot of

enemies as he climbed and one or many of them are in the process of taking him down. i do want to caution that we don't know what happened, it is possible that these are medical concerns. one expects it has to do more with corruption or incompetence, but we can only speculate. shery: implications for president xi jinping to carry out his policies? isaac: i don't think this will really hurt him, especially not internally. the position of qin gang was relatively low, it's not like a politburo standing committee member. foreign policy came from him anyway and he was sort of seem to be crude about it, a puppet of xi jinping anyway. the guy replacing him is seen as more distant from xi jinping's fears. haidi: saw in terms of bringing back wang yi, this is a steady hand, right? kind of a continuity option regardless of whether he is a place maker or here for another full term, doesn't mean we will

see a return to the policy he was really famous for? isaac: things did not really changed that much under qin gang compared to wang yi. they are a lot -- they are both more anti-american than chinese policymakers have been in the past. it does feel like we will not see that much change and if we do, it will likely be because of the personnel shift -- it will not be because of the personnel shift, but from the man in charge, xi jinping. haidi: the pboc change was much more predicted and less controversial, that is also a continuity candidate. there is an an enormous much of pressure and struggle at the moment in terms of how much more policymakers can actually do to sustain economic growth. isaac: absolutely. it is so much about animal spirits both here and there. they are trying to present this feeling of confidence both to chinese entrepreneurs and to american investors, and i think american investors are going to

be easier to convince than chinese entrepreneurs, who have been very, very burned to the communist party, especially in the last few years/especially given the announcements from the politburo they do not really, give us details of the policymaking in terms of boosting the economy. isaac: that is absolutely right. i think chinese entrepreneurs are very sensitive to words, words, words, as opposed to actions, which we haven't seen too many of. shery: isaac stone fish, ceo of strategy risks, thank you. we have seen the imf also raising its world gdp growth forecast this year to 3%, up from 2.8% in april. the chief economist pierre-olivier gourinchas told us more about where the fund is seeing improvement, and ongoing risk. >> this threat remains inflation. we have had some good news on growth, we revised upwards a little bit and there was quite a bit of resilience in the global

economy especially in the first quarter, but momentum is slowing down and this is why at the end of the day, the revision is not stronger than what it is and why we are going into next year also with relatively modest growth. behind it, we are seeing headline inflation is coming down because energy prices are coming down, but below the surface, if you look at underlying inflation, core inflation is proving more persistent. that persistence is a challenge. it mean to banks' monetary policy need to remain in contractionary territory, it needs to weigh on economic activity to bring inflation back to target. that is clearly the main focus and should remain the main focus going forward. >> the question remains whether or not central banks in doing so, keeping policy tight to get information back to target, will ultimately come at the cost of every session. as you talk about growth that is moderating, even moderating

growth is still growth. take your forecast for the u.s. specifically, one point 8% growth this year and next year. is your anticipation that we avoid recession here, that the fed can achieve a soft landing? >> that's right. inflation is not in our baseline forecast. when you get to a growth rate of about 1.1% as we have for the u.s. for next year, it's a fairly low growth rate and it wouldn't take necessarily much of a shock, external shocks, increased energy price or whatnot, to lock that trajectory off its rails. so in a sense, what we are saying is that it's a narrow path, but it is achievable. we are seeing it is a slowdown on the economy. core inflation remains high, but expected to decline. we are seeing monetary policy weighing down on the economy overall as it needs to do. so if we can stay on that part, we are extending a hard landing.

>> you said the euro area is set to decelerate sharply. how sharp? could we look at a more trouble recession? >> the slowdown in the euro area is much sharper. projecting growth that will come down to 0.9% this year. but there is a lot of variation between european economies when you look at underneath the surface. some economies like italy or spain are doing better than expected. what is driving this is how global demand has been rotating away from goods into services, including tourism. countries that are big manufacturing countries like germany are suffering. countries that are tourist destinations are doing slightly better.

haidi: that was the international monetary fund's chief economist speaking to bloomberg's kailey leinz. tune into bloomberg radio to hear more from the day's newsmakers. you can get more analysis from our "daybreak" team broadcasting live from our studio in hong kong. listen now on bloomberg radio plus or on bloomberg.com. plenty more ahead. this is bloomberg. ♪ fabulous surroundings... but everyone's looking at their phones for financial insights from merrill.

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shery: this chairman is a bargain-hunting investor, says he sees opportunities in the commercial property slump. the billionaire told bloomberg that the real estate sector is in a category 5 storm. >> anything with a fixed income stream is worth less when rates rise. it's an interesting situation because the rise in rates, usually realistic is the culprit, we often cause calamities in the economy. banks get overzealous. that in this case, really we were an accidental consequence of the fed's actions. we didn't really cause this problem. banks had not over levered their loans, they hadn't stretched loan values. the underlying fundamentals in most of the asset classes real estate right now are ok.

industrial logistics market, the hotel markets are all in good shape. but there is no question that the fed has reacted dramatically to try to slow the economy down, quite late, obviously, and that impacted real estate values, yields on properties are moving up to reflect the higher interest rate, and the supply of credit to the industry has curtailed dramatically. so i like to say it is the hurricane over real estate right now. we are in a category 5 storm and there is a blackout hovering over the entire industry until we get some relief or understanding of what the fed will do in the longer-term. haidi: you can catch more of that interview on bloomberg wealth with david rubenstein wednesday night at 7 p.m. if you are watching out of hong kong. let's look at some other corporate stories were following singapore's sovereign wealth fund gac reported its worst

five-year return since 2016. a post that analyzed nominal returns of 3.7 percent in the five years ending in march. it attributed it to a slowdown in the global economy, warning that the effects of higher interest rates have not fully played out. ceo liam choquette added that the firm is not out of the woods yet. pacwest will be bought by banc of california as part of a rescue deal. pacwest stockholders will get 0.66 of a share of banc of california common stock for each of their shares. deutsche bank will resume share buybacks of as much as $500 billion this year as part of a pledge by the ceo to return capital to shareholders over several years. the bank is expected to start in august, and will be completed the program by the end of the year. binance founder and ceo changpeng zhao says that crypto

exchange will roll out new services in japan in august. the company could also start stablecoins in japan. binance has taken steps to expand its asian footprint elsewhere, including in south korea and thailand. still, it remains under intense regulatory scrutiny in a range of other jurisdictions globally. shery: take a look at how wti is trading. downside, $79 a barrel. this, after it actually held to recent gains. it was a light trading session in new york helped by tighter supplies. wti closing above the 200-day moving average, really helping the bullish outlook, but in the asian session, it is under pressure. brent coming online soon. copper saw gains broadly in the commodities space that we had the china progrowth shift in tone when it came to the property sector, especially after the politburo meeting.

so the bloomberg commodity spot index now extending it to its highest level since april. we have been watching gold. it has been consolidating above the $1950 level. it has to do with where the fed goes, where the rate hikes and the dollar and step. that is it for "daybreak: australia." "daybreak: asia" is next. futures trading slightly higher at the moment. this is bloomberg. ♪ ♪ 76% of 23andme health customers surveyed

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♪ shery: counting down to asia's major market open haidi: top stories, alphabet