haidi: good morning welcome to deborah kostroun. -- daybreak australia. shery: the top stories this hour. the fed leaves the door open for further hikes after unanimously raising rates. jay powell welcoming cooler inflation and says further calls will be data-dependent. >> has noticeable slowdown in the later forecast but given the resilience of the economy recently, they are no longer forecasting a recession. haidi: quarterly sales for meta beat estimates. shery: we will hear exclusively from the executive vice

president of samsung. looking at how u.s. futures are coming online, we have a mixed picture with the s&p 500 being pressured after the fomc decision. we had a slightly higher, but then jay powell started talking about how we would not achieve that 2% goal until 2025 that was perceived as hawkish. at the same time treasury yields across the board, saying that not every meeting would be a decision to height rakes -- hike rates. there was a little bit for everyone involved. we had a mixed picture when it came to the u.s. stock as well. the infotech sector leading declines but same time the communication services sector led to gains. that thanks to better than expected earnings from alphabet pushing that stock higher. looking at alphabet or meta, it's a busy earnings season just this week you're talking about

170 companies on the s&p 500 reporting earnings and you see the huge surge in meta. also we had the search in the nasdaq 100 futures which was a diversion's. this after we saw them performing well. second quarter sales beat estimates and their outlook for the current quarter rose -- rosier than expected. also the fact we are looking at that enthusiasm over ai being felt across meta. this was really about the fed policy decision. >> and where to next given the outcome for this meeting was so well flagged but jay powell pointing to encouraging signs that rate rises are working after the unanimous decision to hike again by 25 basis points. he says the economy has stayed resilient during the most aggressive monetary tightening in decades. >> the staff has notable -- noticeable slowdown in growth in

the forecast rate or this year but given the resilience of the economy this year, they are no longer forecasting recession. >> with us now is the former richmond fed president. kathleen hays also joins us. when it comes to the fomc statement, will we see a change from the june statement. does this mean further hikes later this year? >> i think so. chairman powell was careful to play it down the middle not to commit to zero hikes or any hikes. he said specifically we might raise rates in september, we might not. i is the think it's notable that the statement did not change its characterization of inflation as elevated. we got that better than expected cpi print for june with core

inflation coming down to 1.9%. month over month on an annualized basis. that has put the wind in the sales of dovish sentiment in markets but i think he downplayed that and rightly so calling it one month's data and not really citing any downward trend in inflation as a result. i think he played it down the middle. >> you note that jay powell said policy is restrictive, but not sufficiently restrictive for long enough. you think they could have to put the rate up to 6% even 7% but any messaging we have had going into this meeting from the fed has been something like one or two more hikes it seems like for them that would be a bit of a stretch. jay powell didn't give us any hints of what he's going to do next.

do you think the fed would be open to that? >> i think they are trying to do as little as they have to. to get inflation down. i'm just going on past data come on the record of the number of times inflation has been this high or higher and the fed has acted to get inflation down. when it has done so, is had to raise the real rate to above 2%. right now, the real rate is between 1.5% and 1% depending on how you measure it. i think the fed will try to escape by and have the real federal funds rate rise due to declining inflation in the second half of the year rather than raise the nominal federal funds rate and get it over with. it wouldn't surprise me if they do one more hike this year, maybe two if inflation rises back up again. they might pause here, they

might stand pat here if the next couple of data releases are favorable. >> what's the risk in that? is that not the prudent thing to do if you see the data still not definitive maybe inflation isn't coming down that much but it's not going up or is there some potential danger, damage from doing that? >> core inflation has been running over 4.34 -- 4.75%. the last month has been the only one below 4% in the last year and a half. it's not trend yet and wage gains are still proceeding at a healthy clip far higher than is consistent with 2% inflation so they have a ways to go. he said that also, they have a ways to go before inflation gets down to do percent. the danger is the tail off, pause here, and inflation slugs along at 3.5% then later on,

they have a situation where they have to raise rates and start another hiking cycle to get it down to 2%. >> when it comes to the recession predictions no longer in terms of fed staff predicting recession, does that make it more uncertain as to whether or when we get rate cuts because jay powell was remarkably almost circular when it comes to that. >> their interest is in the market pricing in as few cuts as possible and as late as possible. he would like them to push that off because it keeps the yield curve up and helps the cause of tightening policy getting inflation down which is the first order of the day. yes, the room and the forecast

now the fact that they are no longer forecasting recession means they have some leeway, some headroom in order to raise rates if they want to. and not drive up the risk of inflation so much. i think it gives them more flexibility on the upside is the way i would read it. >> we have a longer interval until the september meeting. what would you be watching out for during jackson hole? >> i.s., jackson hole. it depends on what he chooses to address in his speech. he may signal something about policy, he may not have a strong view he wants to signal in which case he wants to talk about long run productivity growth for example. it remains to be seen. i think we get to inflation reports, we get the employment cost index which is very important report for the second quarter, that will be something

i will watch carefully. then to employment reports of course. >> stepping back from all of this, trying to avoid getting pushed into forward guidance that markets could move on a direction that doesn't like, what is your sense of jay powell himself? he is the chair. if he comes out after the meeting, he asked it reflect the view of the entire committee to a large extent. what is his view? is he leaning more toward rate hikes trying to please everybody but realizing there still a long way to go? >> i see him is more aligned with john williams. i used to talk about the centered of coalition. on the dovish side of the center. i don't see him as chomping at the bit for rate hikes and having to be held back the does, i see it the other way.

>> do you think that, is there any sense it seems like a perpetual election year, there's a lot of questioning about causing unnecessary job losses. is that one of the things weighing on jay powell's thinking that is putting him in this place where he doesn't want to commit, he doesn't want to go all out and be more ready to hike rates like chris waller and others? >> i do, i think that's part of the reason, i feel like a big wing of the committee wants to do as little by the way of rate hikes as possible. they want to see what they can get away with, see what they can do to get inflation down raising rates, without erring on the side of higher rate increases. the danger they are running is inflation comes down a little bit persists for a while and i

think that's what we are facing now. inflation may be coming down, but it's not headed to do percent any time and he signaled that that inflation will not be less -- it will not be at 2% until 2025 at the soonest. that puts him in a situation where inflation is hanging around too high next year. have raise rates, what did they do? do they sit there and let inflation go along at 3.5% or 4%? they will be reluctant to take action and shift to rate increases in the middle of next year. there's this window. if inflation motors along 4% for a couple of years, it will be tough in 2025 to get it down. >> could it get worse? chair powell didn't seem to be concerned about the ukraine russia grain deal but we have been talking significantly about extreme weather as well like el niño.

>> they are always vulnerable to supply shocks. what they have seen is a big negative supply shot in 2020 and 2021 with the war and energy prices. that has come back, so they have had beneficial supply situation. over the last year, year and a half. they are vulnerable. if something happens it disrupts the grain trade or the oil trade or oil prices edging up, that could throw headline inflation up and that would pass through to core make the process of disinflation that much more difficult. they are exposed to that risk the way they are running things now. if that happens, they might have to respond with a steeper rate path to respond to that. >> this as we are watching

gasoline futures at nine month high. always great to have you with us on a day like today. reacting to the fed. that was the former richmond friend -- fed president joining us as well as kathleen hays. this is the picture when it comes to australian futures as well as the aussie dollar. we are seeing flat trading when it comes to sydney futures ahead of the cash open. not much of a move. this as we had seen a time of outperformance when it comes to the aussie dollar so much of that has been following on the proxy trade for china. stimulus optimism and perhaps deciding to be fully priced in as it were. we are also watching the money sector today as well as energy. we were just talking about gasoline trading at nine month high.

kiwi stocks down .2%. still ahead are exclusive conversation with an executive vice president of samsung about how the smartphone maker is countering sluggish market as it unveils new devices. this is bloomberg. ♪

>> samsung is introducing the fifth generation of its affordable -- foldable smartphone. the executive vice president and head of customer experience told bloomberg exclusively about the development of the new devices.

>> before the design, we enlarge the ecosystem. we engage more developers and the productivity domain. we have this incredible performance in an capability with the new processor. parks samsung has this open collaboration environment where a culture for galaxy and google is part of it and microsoft and data. -- meta. they all have some sort of agenda about their own generative ai tools and now that apple is joining the race, is there any samsung effort to do that. >> there is a lot of intelligence ai in play already. we are working on the partnership for a long time and we have a culture to foster the innovation together. parks chinese smartphone makers

are all rolling out their own version of full double phones. with cheaper phones -- cheaper prices. is there a chance samsung would like to provide more affordable prices for foldable users in india or china in the near future? >> some analysts predict the market to grow in the next three years. we plan to capture a lot of the growth. it's a growing category and and its quality and innovation. >> is there a chance you will add more feature about the flip after the fifth generation? >> on the software and experience side, we continue to improve experiences. this is just the beginning i would say.

we are still at the beginning and very excited. >> many people are very interested in your headset and any kind of new formfactor fourfold will phones. would you give us hints and updates about the latest developments about these new devices? parks are pushing the boundaries for the whole ecosystem. whereas week continue to innovate formfactor, you have seen that we have made great advance on the wearable with the watch tablet. we announced recently on the partnership with google and qualcomm. we announced the start of the work on to elegy and ecosystem. parks that was samsung executive vice president speaking exclusively to bloomberg. simpson unveiling those new products ahead of second-quarter earnings release that is

expected in the next couple of hours. let's get more details from our chief technology correspondent, our government. how bad could it be? >> it could be pretty bad. last quarter we had pretty bad results come up had their worst decline in more than a decade for june. they warned that they would see their worst decline during the june quarter and that will come out to include operating profit. that would be a 90% decline. sales will still come in pretty strong about 62 trillion one. revenue still is strong despite its worst decline. that's because they are getting pinched on production, supply. it's becoming increasingly difficult to get their customers to buy their components come up

the components are becoming more expensive to make. that's why you see the difference. then you will also see a pretty big operating loss on their chips business about 2.6 trillion lost their in terms of the multiple devices mobile devices, they will represent about have of their overall profit. about 450 billion. that's because of the foldable devices they were just speaking about. it starts at $1800 u.s.. those are highly profitable funds using tech knowledge of samsung are now is only reserving for itself. >> one of the stocks we are watching after hours is meta still close to the initial pop that we had after earnings were released.

the earnings call has just wrapped up. they are still up 7.6%. let's get a further breakdown and analysis of the numbers from our social media reporter. what was the biggest driver when it comes to the revenue beat? >> a lot of things. the main thing you touched a little bit about ai. helping to drive recommendations on platforms like facebook and instagram. think about the content you see, that has been helpful. then they managed to get a lot of advertisers. one of the things they struggled with what's getting advertisers to create ads that would fit the video format. reels are very similar to tiktok.

is more challenging to make ads for that format so they seem to have figured it out and that drove a lot of the earnings. then the forecast moving forward. in short, they are seeing better monetization of their form video and ai is helping a lot in terms of getting users to see the type of content they want to see. >> all is great, but what is happening to the metaverse? >> it's a great question. zuckerberg has continued to double down. reality labs is the division that makes those headsets is still losing billions of dollars every quarter. zuckerberg says they will continue to expand and invest their. he's not sure if he is correct on this bet. i don't know if we have heard that doubt from him before but the company plans to continue

investing and spending their. >> we have much more to come on daybreak australia. this is bloomberg. ♪ 3anhealth customers surveyed

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reacting to the fed decision leaving the door open to a pause or delay in september. this remains data dependent if you listen to jay powell consistent messaging.

reflecting more than expected slowdown in price pressures and that potentially boosting the conditions for the rba to pause again. the biggest moves we saw as we saw the following when it comes to u.s. dollar strength was in emerging markets. stocks as well as currencies gaining as the dollar took a tumble. others extended earlier gains. watching the yen at 1.40 holding steady ahead of the bank of japan decision the end of this week. much more to come, this is bloomberg. bloomberg. - [mo] if you're thinking about going back to school,

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but given the resilience of the economy recently, there are no longer forecasting recession. we will be comfortable cutting rates when we are comfortable and i don't think that will be this year. it's a question of how do you balance the to risks and we are coming to a place where there are risks on both sides it's hard to say whether they are in balance or not. i would say it is certainly possible that we would raise funds again at the september meeting if the data warrant it and it was possible that we would choose just to hold steady. >> that was fed chair jay powell. look at the implications for markets. a senior u.s. equity strategy at ubs runs us. does this change your calculus

at all on it comes to how you are building a portfolio and expectations going into this meeting? >> no it doesn't. the messaging and the fed was right about expectations, we were looking for 25 basis point hike and for the to maintain that optionality and for jay powell to be very careful with his words. he stuck close to his script. there is clearly some discord within the fed and -- woman look at the fed dots and works of dispersion even though that -- [indiscernible] at this stage it becomes even more challenging when we are at the near end of the hiking cycle . the fed doesn't want to do too much but also doesn't want to do

not too much. we will be closely watching upcoming job reports and cpi as well as on friday the implement cost index will be important as well. >> is the key risk still more elongated into this cycle because we are looking at this at a time when we see energy costs key grain costs, gasoline futures in new york winning 20% on those contacts. it's stickier inflation or a resurgence and inflation and a longer rate hike out -- rate hike cycle something investors should be looking at? parks absolutely because we are seeing a continued strength in the job market and around wage growth which we know will be the stickier component of inflation. i will say we are seeing some encouraging signs in terms of inflation. we aren't out of the woods yet as the fed has said. they want to see credible and

sustainable decline in inflation before they determined that all is clear. we are seeing some signs in the lead up indicators particularly around producer prices those are starting to show disinflation. even on a wage growth, we saw a wage growth tracker also still elevated but it is coming down. to us it feels like we are on the gladback to superset. it will take some time but they don't need to be at 2% inflation to stop, it's just the path to 2% inflation. for pce this week we are looking at 4.2% as we get into year end, we are looking for that to come down to around 3%. again, making progress we are still not there yet, but we are on the way. >> how are you factoring in this earnings season where it seems like we are beating expectations but they were pretty low from the get-go? parks absolutely. i think the estimate from the

analyst community quite low. but from the investor community, the far more elevated particular because we have seen a strong rally. from our expectations companies are beating that lower bar but you are not seeing the same sort of share price reaction. we think this is where the rubber meets the road and companies have to deliver in order to get the follow-through in price. our expectation is for earnings to decline 3%-5% for this quarter. a little bit better than what the consensus was looking for but i think the key question comes about the outlook and where is to growth going and can we get growth in the second half of the year? right now, we are skeptical because the consensus expectations are for high single digits to double digit growth into 2024. we think there's going to be more trimming and those estimates because we look for more subdued economic growth in the back half of the year.

>> when you look at tech, it has been a mixed bag but meta was encouraging. the earnings and the way ai has played out in terms of profitability, what does that make you more encouraged to be constructive on? >> in tech, so far i would say the earnings makes the expectations look elevated. i think what we have heard so far during this earnings season still bring challenging for i.t. spend and budget. we've heard that from some of the global i.t. consultant services companies and even this past week from the software companies. we are a bit concerned about that. specific to a i, of course there are longer-term opportunities in ai, but i think a lot of the deployment and adaptation might

take longer the people expect and might not be a seamless is the rally would suggest. what we talked to the clients about is really rotating out of some of the more early cycle place like semis and -- rotated into the midcycle place in terms of software for instance. >> i know you look at the u.s., but are you looking a companies that have global exposure? are the themes like the chinese consumer emerging-market strength we have seen as perhaps being more opportunistic than the mystic stocks? >> absolutely. emerging markets and our referred regions. we have seen data coming in from china in terms of not really meeting those expectations in the last couple of months, but we do see opportunities and broadening emerging markets.

some of those countries are further along in the right cycle. they were aggressive terms of raising interest rates early in the cycle so the development world is still in the rate hiking cycle. some of the emerging markets are positioned to ease monetary policy and we think that could be a tailwind as well. we are now starting to see a weaker dollar which we think could be beneficial for em. >> thank you so much for your time. the former new york fed president says the fomc seems to think it may only need one more rate hike or non-after today's decision. the colonists told us how he thinks jay powell's latest comments on rates will impact bond markets. >> very clear in the press conference he doesn't see the need to go that much further.

the very fact that it is meeting now tells you he thinks maybe there is one more rate hike. that's a very different story than what it means for the bond market because bond yields are low relative to short-term interest rates. inflation is probably not going to average 2% over the next 10 years, it will be higher because the fed has asymmetrical where when they miss inflation to the downside, they try to offset to the upside but not the other way around. also if you look at the savings investment balances, it's not as favorable as before. we had a lot more investment programs in savings is also affected by the large fiscal imbalances that the u.s. is likely to run for many years. that implies that perhaps the neutral federal funds rate will go higher than the past.

lastly before it was all about i could hold on's and if we end up in recession and the bond market would protect. now we are a long way from lower bound so the risk of getting stuck seems diminished at this point. >> john and isabel reported on the strategy world and how absolutely it is brutal it has been for wall street strategists. how clear is the doubly crystal ball right now? what is the vision you have? are you making it up as you go? >> i am less clear now than over a year ago.

now they are at a restrictive setting and the question is how high do they have to go to be sufficiently restrictive and how long do they have to stay there? that kind of news has been breaking in a favorable direction in the sense they are getting quite a bit of this inflation without affecting the growth rate very much. or without putting a lot of people out of work. the fact that inflation has come down and unemployment is still 3.6% is good news from the fed perspective. my own view is i think the fed will have to be tighter for longer and i think they will emphasize longer. if you look at their forecast, you don't see inflation getting back until 2025. >> more to come, this is bloomberg. ♪

preparing for new regulations that could erase more than $100 billion in the exes capital built up over the past decade. for now let's bring in vonnie quinn. this could be the biggest revamp of capital rules since the financial crisis. >> it's the next step toward the implementation of basil three rules.

it was all begun but the vice president of supervision for banking at the fed. it's part of his sweeping new rules. essentially what will be proposed most likely is banks will have to re-wait risk assets. it may actually mean the banks have to hold two dollars more per $100 of risk-weighted assets. that's a lot of to dollars per $100. in fact, it may even amount to erasure of $121 billion built up over the 10 years by the 6-8 biggest banks. if these proposals go ahead and banks have a lot to say about it so it's going to take some time, that's what will happen. several questions get raised. for investors, what does it mean for buybacks and dividends?

one says don't worry this will take time to implement, banks will have time to build up even more of a cushion but investors are saying i like my dividends every quarter i don't want to see that go away and i don't want buybacks to go wait. it also raises questions for the end-user, will loan activity have to be crimped? will banks have to loan to lesser collaborators -- buyers? he says this is great news for hedge funds, private equity, private credit, apollo, blackstone, they are dancing in the streets because depending on how the market reacts the markets may have to pull out certain types of exotic derivatives or fee generating activities from em products to securitizations. >> what happens after the vote on thursday? >> we will get more details even before the vote, hundreds of pages from the different

regulators on what these proposals are then the vote which presumably will pass although lawmakers on both sides will have something to say about this no doubt. then there's a 60-90 day formal response time. banks are getting ready to respond. we have already heard from many of them. one of citigroup said recently it is an open question as to what exactly will be impacted. also an open question for the smaller regional banks because michael barr has said he wants this to impact banks from $100 billion in assets up and that includes banks like huntington, keycorp. then after that, it will take about a year for it to be implemented but you can bet something is going to be implemented that will erase the $121 billion built up. >> the latest on the capital rules. we have more related to banking.

jp morgan will by $1.8 billion worth of mortgages to facilitate bank of california's purchase of pac west. sources say jp morgan has entered into an agreement to buy the single-family residential loans at a discount. it is not immediately clear if it plans to keep the loans or sell them to other investors. blackrock is making another attempt to enter india's asset management industry this time with the help of a billionaire conglomerate. a deal with the financial services unit will form geo blackrock. the two companies are targeting initial investments of $115 million each. blackrock exited a previous venture in 2018. evergrande new energy vehicle group had a loss for 2021 and 2022.

warning of its ability to continue as a growing concern. the ev unit of evergrande reported financial results for the first time in two years. the company says it is negotiating with banks and other parties about renewing existing borrowings and corporate bonds. a striata and new zealand are warning that china's new policing agreement with the islands undermine security in the pacific. these comments were included in a joint statement from the prime minister's of both countries as they wrapped up annual talks. paul allen joins us with more. this deal has been ongoing, we have been mulling it for a while. is anything practical that austria and new zealand can do? ask you can say these things, you can apply mimetic pressure but the solomon islands is a sovereign country and the prime minister has not been shy about making his feelings clear. just last week he accused austria of being on neighborly

and delaying financial assistance. china is helping them out. these are all points that australia rejects. australia and new zealand pledged to update the defense relationship. it's pretty clear they are concerned about china's diplomatic overtures in the pacific. he also said during the meeting that when austria provides support to its pacific neighbors, it comes with no strings attached. the subtext that if you do a deal with china, there will be strings attached. this will be raised at the pacific islands form, that if you make a deal with china you have to have that in the back of your mind. >> australia and new zealand also exploring the idea of a more civil fight border. it was the plan? >> the border is already pretty simple. check early if you are citizen of either country traveling in either direction but the idea is to make it as seamless as possible. that might include pre-arrival

screening at the point of departure even easier use of smart kiosks smart gates at both airports. the idea of a common passport gets raised time to time or passport free travel between the two countries. they making it pretty clear that's not on the table at the moment. there are risks around plans like this in terms of security, bio security and quarantine to protect the biodiversity of each country. this meeting that took place over the last couple of days was important, it was the 40th anniversary of close economic relations which is an old free-trade agreement. the countries putting forward roadmap to make it even broader even deeper and this idea of a seamless border is part of that. >> tune into bloomberg radio where you can hear more from the days big newsmakers and get in-depth analysis from the

daybreak team. you can listen via the app or bloombergradio.com. this is bloomberg. ♪

>> this is a darwinian theory. you don't adapt to a new world, a world of electrification,

world of very strong demand for quality and with a certain number of attributes, if we don't adapt, stellantis is adapting to a new world and we are inviting our suppliers to come with us and learn as fast as we are learning for ourselves by showing them what we are doing. >> stellantis ceo speaking to bloomberg. we learned it says it has no regrets over its decision to downsize in china. it says their rivals volkswagen and general motors are under pressure in the world's largest auto market as competitors/prices. it shuttered it's only factory in china last year citing meddling by local officials. volkswagen said it is investing $750 million in the company.

audi will also deepen ties with a long time partner to boost the ev lineup. bw had been top-selling in china since 2008 when data first became available but now it trails behind byd. a cargo ship carrying nearly 3000 automobiles is on fire off the coast of the netherlands. 3000 cars made by mercedes-benz group. the dutch coast guard is working to contain the blaze. people have one been evacuated including one who died. the ship was on route to egypt. >> look at how commodities are trading. wti rebounding a quarter percent close to the $79 per barrel level after the new york session we saw it fall from the three month high.

we had seen u.s. crude stock piles falling less than expected. we are talking about declining only 600,000 barrels. the losses were limited as inventories at the u.s. hub continued to hover at the lowest since may. traders assessing what the fed did with the interest rate hike and what that means for the u.s. economy and the aftermath and aftershocks in the global economy as well. we are expecting brent to open in the next few hours but this at a time when we have already seen gasoline prices in the u.s. surging and this is interesting because we haven't necessarily seen oil move as much but prices at the pump have surged about 20% already year to date. >> we are getting breaking news when it comes to the singaporean lenders. numbers including the margin

always key at 2.13%. the ratio on .6%. the second quarter net including one off costs at 1.42 billion dollars. the net fee income a little bit shy of expectations at $524 million. profitability was seen to be rising even as we see him growth potentially seeing more of a slowdown. when it comes to goldman sachs, the ceo one of the best positions of the singapore banks. they are less sensitive to margins. is bloomber

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