>> welcome to daybreak: asia we

are counting down to asia's major market opens. haidi: top stories this hour, the yen gains, will discuss tweaking at friday's meeting, asia stocks are to open under pressure after it slides with the 10 year yield touching 4%. christine lagarde says the ecb may hike a hold after a night of straight rate increase. intel shares gaining after a bullish revenue forecast, fueled optimism for chips. breaking news when it comes to south korea industrial production, a month-to-month number for june, coming in at a slightly stable contraction, expected a fall of 1%. expectations with the contraction of .9%. it reverses the gains we saw of signs of a strong rebound of almost 3% in may. the year on your number is a contraction of 5.6%, slightly worse than expectations. this, as we did see expectations

but would cease flowing from the previous month and extending their decline on a year on year basis for a ninth straight month. we saw early indicators pointing to a modest increase in output. but, exports fell at a slower pace. still, exports continuing to fall in terms of the bigger picture, running at 6% below the year earlier level suggesting we could see, going forward perhaps more major chops across the industrial production. so, kathleen, that is, in case the market here in terms of a serbian asia needed more bad news these ip numbers out of north korea may help. kathleen: a bit happen in the u.s. stock market, we will check on the futures targeted you can see green across the equity markets gains, they were up a lot. the nasdaq was up as much as 2%

in the early trade, after central core gdp, jobs orders, jobless claims in late stronger-than-expected -- in stronger-than-expected. traders saw the story from japan that the boj will discuss tweaking why sisi, that hit the bond market, 10 year treasury was up 4%. you can see that the rally there -- that is the first of it, we're getting a rally in the price. it moves in the other direction. crude oil, as a matter of fact was up, close to above $80 a barrel on this optimism from the economic data, suggesting that yes there will be more demand. now, it is pulled back from highs. there so much going on after the fed meeting. the ecb are waiting for the bank of japan and what that can do to markets around the world, haidi. haidi: it is a big friday. this underscoring the question of what sort of massive reaction we could see across risk assets

globally. we have an unexpected decision from the bank of japan, that is something we should not be underpricing. take a look at the future set up, it is muted given the position we had on wall street overnight. this is the picture. sydney futures down by .6%, into the final session of the week. we're getting the rba decision as well. we are seeing moves across the margins in terms of expectations there. kiwi stocks down marginally. watching the chicago nikkei futures, looking flat at the moment. it's likely to be a turbulent session when it comes to japan. i should mention looking ahead to china things are looking burdensome as well for the futures picture despite the conversation around how much support we can get from the property sector. front and center, it is about the boj. kathleen: no quiet ending to this week. we are watching yen ahead of the bank of japan decision, after the sneaky report, that policymakers will at least have

yield control. let's ring and are chief markets editor -- bring in our chief market editor. david ingles. you expect something that could be a bit ugly. david: well, i suspect equity markets lay the region, by the way we are seeing in the bond markets in australia, you're are pointing out with this massive move up in yields, we will need to adjust to the chart action we had overnight. you talked about the strength coming through in the yen. this is the selloff that took place at about the time the nikkei report came out. four our viewers just joining us, that came out about six hours back, a cascade lower in yen -- in global stocks. so, this is want to watch as we make our way through the session. futures were substantially lower in tokyo. the nikkei report, to re-cape -- a recap that, i will read that, there is a nuance to be touched upon.

the boj will be discussing allowing longer-term interest rates to rise beyond this current cap of .5%, and under this more flexible policy being considered and being discussed, nothing yet has been decided. the boj would permit gradual increases above the threshold and still clamped on any sudden spike beyond the ceiling. silver lining, i guess, is the boj now knows what the market feels, over any potential move. and arguably that sort of pressure valve has been released somewhat, going into this boj meeting. in many ways, possibly, we could have seen the bulk of the market move. let's see. these next few hours will be critical. haidi: how critical? what are we hearing from analysts? david: it depends who you ask.

economists are not expecting anything. , most if not all the calls before the nikkei report. as far as markets go, a couple of things we were able to figure out. jeffries says this move that we are seeing currently, yen strength, pop up in yields, the move may be short-lived. that is what they are calling the cibc. the extent to which ycc will be adjusted and cibc says if you get a 25 basis point adjustment above .5%, the 10 year yield will be allowed to move point-to-point 7.5%, that sends dollar-yen to 135-136. if ycc is abandoned completely, that takes dollar yen to 120. we are at 139 right now. even before this, we were trading into 140's in dollar-yen, we were trading to 155. a couple of other things to track. kathleen: i want to know what you are watching when the

statement comes out. when i listen to that, the actual news story, it almost makes you think, are they even saying, maybe they would allow not even changing the top of the band but letting it go up and down, being more flexible about it? david: not to be a stickler, on .5%. the fact that they are talking about talking about adjusting it, i think is one thing. really getting the market reaction and just seeing how the markets would move on the back of just planting that idea is one. obviously, whether they will do it is another thing altogether. that will be contained in the statement. the press briefing as you know, that follows a few hours after the statement comes out. whether the pushback at any hawkish indication the market gives, that is out of the boj governor himself, they're looking at new price forecast on inflation. that gives you an indication, how far along the train has left

the station. this hour, a couple of things to watch, jgb futures are trading in a couple of minutes. some of these future contracts in japan, as we approach the open, overlay tokyo, it will follow through what we are seeing in the bond markets right now in australia. 11 basis points now in the 10 year yield. kathleen: that is a move. i know that i am not going to be awake at 3:30 japan time, 2:30 eastern, but i'm sure you will, and you will be watching that. you can tell me all about it tomorrow. david: with a beer in hand. [laughter] kathleen: that was coanchor and markets editor, david ingles. a look at the u.s. economy, picking up steam in the second quarter, while pitting home sales climbed unexpectedly in june. let's get more on what this means for markets and policy with garfield reynolds. seeing those numbers, while, everyone was just -- i would not

call it shocked but that was quite an unexpected move especially one day after the feds leave the door open's anything at the september meeting. -- leave the door open to anything at the september meeting. garfield: maybe it will help, the potential, helps explain why the market responses to the fed's meeting were fairly muted. we got a modest gain in treasuries on the day. but, those gains got taken back pretty rapidly. when -- after powell spoke. even though he did not sound particularly hawkish, he did sound pretty determined that there is no scope for rate cuts and a rate hike would remain on the table depending on the data. so, to some extent, those

concerns came through. that sort of data is definitely not something that fits in with the idea that the fed has definitely done enough to cool down the u.s. economy in order to cool down inflation. anza, i found it was our cash and i found it bizarre -- i found it bizarre in some of the commentary, that inflation is the lowest it has been since 2021. it is like, well, yeah the lowest it has been, more than double on core inflation, the fed's target. why that would have the fed going we are comfortable, we can stop, and definitively draw a line on that, to say, this sort of data is exactly the reason for that if you continue to strengthen the economy and you have inflation still at levels that are beyond the fed's wildest nightmares up until the

last year or so. why would they say, ok we are done. haidi: why would the ecb say that either. it seems like optionality again, that is what every central bankers hoping to get. garfield: very much so. i also think the bond market and other markets are getting a bit too complacent about the rba for next week. because the basic story is that markets are always keen to work out when a cycle is over, whether it is cutting or hiking. once they think that cycle is over when does the next cycle begin? central banks have a different view. after raising rates as much as they have, they have expressed themselves concern policy with a lag, we want to make sure we don't go too far, unless we need to. that is a different stance from the markets who are busy saying,

well they have done so much, we can see some impact in various parts of the economy. they feed the interest rates into their models and say ok, this is enough, or close to enough and the economy will crack. they may be right. but the fed wants to see,, the fed and the ecb and the rba they want to be sure that they have teamed inflation. and the stock sign for them is when they see their economies actually cracking. for the moment, that is not the picture. the picture is there a pretty strong inflation drivers remaining in developed markets. and that would give them cause to keep their powder dry. ironically, if the bank of japan does policy -- tweak policy and it follows through so there is a stained lift and global yields

-- sustained lift in global yields, that will lead to a slowdown in rate hikes elsewhere, because the boj moving, would be acting to slow economies elsewhere to help drive up rates. kathleen: thank you so very much. our chief rates correspondent for asia garfield reynolds. let's move onto another big story at the close of the trade in the u.s., until shares are jumping i aftern hours trading, indicating a comeback may be underway and japan for computer chips. su keenan joins us. the analysts expectations were low. this beat them by a good mile. su: the big case was things cannot get worse. intel hurt by the pc slump. to turn profitability after two terms of losses were welcomed. take a look at the start -- a stock, it was up 7% right as the

news hit the tape. and have held that gains -- those gains through the conference call. the management promised the second half which improvement. there is fresh evidence the company is still in the urging stages of turnaround, which changed on its ability to once again show a bulletproof lead in chip technology. third quarter sales will be as much as $14 million. margins s -- are set to improve and a surprise and second quarter profit, came in at $.13 a share on an adjusted basis. analysts were expecting a loss. this is improvement, but is is important -- it is important to point out intel has seen a decline in earnings for seven quarters. it has seen a decline in sales for six straight quarters. not all investors have yet to fully buy into the turnaround story. rivals, nvidia, and amd have seen their stocks surge on the

ai story. a lot of green after hours. guess what, on the conference call, we saw the ceo talking about ai. intel believes ai will help drive pc sales. pc is set to become an important ai device, and near-term, they are seeing a big surge in ai training. they are saying cloud customers spend big on this, although they believe it is a short-term phenomenon and will eventually balance out. investors seem to be cheered that the chip giant appears to have turned the corner and the worst behind it. haidi: bloomberg's su keenan. coming up next, why they are increasing their exposure to tele-market bond markets, for more on alliance's investment strategy, this is bloomberg. ♪

haidi: take a look at something we are tracking into the bank of japan decision. a big jump in the yen, gaining against every g10 pure, 1% against the greenback, i was even against the backdrop of a stronger u.s. dollar in line with the second-quarter growth figure stronger-than-expected. this, coming on the back of a

report that the boj is set to discuss yield curve control and its decision today, according to the nikkei. they will discuss tweaking ycc, thousand often set these significant -- that was enough to set the significant moves. we'll be watching bond futures. after that report playing in when it comes to the big move in yields, not just in japan or treasuries. we are seeing those moves in australian bonds. 11 basis points for the 10 year. brad gibson, joins us from our hong kong studio. great morning to have you with us. this boj decision is turning out to be a whole lot interesting and potentially, how much pain can we see just shatter these markets if we do actually see a surprise? brad: yes, good morning. it is probably a harsh word but we got to the end of the week

with expectations for what central banks were going to do being delivered upon it in this last-minute hurdle of the boj, it seems to be higher. it's a nice surprise that the bank of japan should be considering a tweak to their ycc, policy given the growth, the level of inflation. let's not forget there is a political dynamic in japan. with the unpopularity rankings of the incumbent prime minister at the lowest levels, there is some sort of demand fora changed policy -- for a changed policy -- chang to policy -- for a change in policy. markets in australia, where there have been holds, we could see underperformance in markets like that in the short-term. haidi: is that your best case scenario when you're expecting or pricing in for today? brad: our expectation heading into the bank of japan would be no, that they would not be tweaking. ultimately they're going to have to. even then, a tweaking policy, if

you think about the significant interest rate differentials that exist between the boj, ecb and the fed, that unwinding of carry trade, where investors are underweight, the yen overweight, versus the whole wide of yield currencies, the boj tweak may be an opportunity to reengage with the trade rather than unwinding them. kathleen: i am curious what you think about the bond market. we're talking autofocus in the 10 year jgb. this kind of action, from central banks in -- feeds into markets. where do you stand on where we should be, if anywhere, on fixed income? brad: we should be adding. there's a few reasons for that. we will use the u.s. as an example. the level, the u.s. two-year bond, getting towards that 5% level, with the policy rate of

5.5%, is pricing in quite a significant sort of stable economy, rather than a typical shiftoficy for six to 12 months of stability to an easing of policy. the market is not priced without any longer. there is value in the short end of the yield curve. when we think about longer-term valuations, if you look at the level of real yields around 2% in the u.s., even if investors are worried about inflation, in some markets, you're getting some reward in the bond and getting the inflation risk off the table. kathleen: what about china? everyone is waiting to see if more stimulus comes to boost the economy or the government is going to keep dragging his feet. you're looking at securities, investments, where should i be? brad: you probably should not be in chinese government bonds, which is a pity, given our exposure there. we have been reducing it since the middle last year. there has been volatility, with the waxing and waning.

we think policymakers commitment to stabilizing the economy is quite powerful, given the announcements we have seen, and the potential further announcements in the next couple of weeks. the chinese government bonds, are likely to reduce back to the 3% level rather than 2.5% level in 2024. that is a market that you will be underway to your portfolio, rather than in the markets in the u.s.. haidi: when it comes to the rba, we are seeing complacency in bond markets at the moment. brad: yes. i think the australian bond market it's a happy hunting ground for investors including japanese investors. there could be volatility. i guess that is another ingredient into why we probably don't choose australia has a market to be overweight, such as the u.k., canada, and the u.s.. core inflation in australia remains a sticky.

it was lower than expected, but still above 6%. we do think, the australia bank has more work to be done. a market where playing a more yield curve and spread positions rather than outright buying durations is australia. kathleen: fred gibson, head of asia-pacific fixed income at alliancebernstein. plenty more to come on daybreak asia. this is bloomberg. . ♪

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haidi: let's take you across our top stories we are following. china's top housing official is putting pressure on financial regulators and regulators, pushing efforts for the airline sector. the housing administrator met with homebuyers who paid off

previous mortgages to be considered first time buyers. french prosecutors are said to be investigating several french and chinese it is in for allegedly selling key chip technologies with foreign powers including china and russia. the suspects are executives who worked for the u.s. owned semiconductor company. the french ministry sad the perpetrators have been stopped. plenty to come on daybreak asia. this is bloomberg. ♪

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but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works. kathleen: we are getting important news on inflation and japan. the tokyo cpi for july coming across the board on all key

aspects of it, higher-than-expected. let's start right at the top, the headline number, 3.2% above the previous number. it is right in line with the 3.2%, but well above the survey. people keep waiting for inflation to come down in japan. that is why the boj does not want to make changes to yield curve control, because they are not convinced inflation will stay high. you take out fresh food prices, actually, down a bit. we have to give them credit their, but still at 3% year-over-year, down from 3.2%, take out energy as well. you get an actual number, 4.0%, year-over-year up from 3.8%. what about the national cpi? it is viewed as the indicator of where the national cpi's going to go, because tokyo is a large part of the population in japan. maybe a bit of a mixed bag. but inflation if you get any

kind of signal from the tokyo cpi, it is telling us that inflation is still holding up. haidi: let's get more analysis when it comes to the implication for the yen. we saw big implications head of the bank of japan decision. michael wilson joins us now. michael, what a session it really was overnight. what does it tell us about how much volatility we can see, how much does the strength really hold? michael: that is a good question. if you look at when the nikkei report came out about the possibility of tweaks in today's meeting, spot dollar yen fell about 1.6%, it fell from 4110 down to the 138 session low. having said that, people are on it and they have an area where

they did not deliver it. we will find out later. it just shows you the reaction function of the market. i think they want the markets want this to happen. i'm not sure if they can get it. but the volatility is still quite strong, look at one month in the dollar yen. they were in a three month high. there was a lot of buyers, a lot of fomo out there. people don't want to miss out on the street. -- on the trade. kathleen: so, looking at the other side of the coin, the dollar broadly, you have the fed decision of leaving the door open to hike or hold in september, same thing for the ecb. everyone with with the -- with the dollar broadly.

michael: they talk about goldilocks numbers last night. i think there is a soft landing, he will protect that. he's got the luxury of inflation heading in the right one, heading in the right direction. so, he has the luxury of maybe pausing, and he is going -- has a u.s. economy under steam, right now. if they have to pivot, and pull another 25 basis point hike, it comes to the point where the economy could probably wear it, and wear it well. that's why the dollar had its best night last night. still cannot get above the 1220 area. that would be a good thing if it close tonight. the boj might have some impact between now.

as for the euro, christine lagarde is maybe overplaying her confidence. she thinks she is left the door open wider, for another ecb hike next month. but i wouldn't get too excited until you see the ecb projections in september, it is a long time to wait but if they ramped up moderation, looking at the data in germany, you really can't see those projections getting ramped up. if they get dialed back you may see more sanity in the ecb outlook emerge. kathleen: thank you so much. bloomberg fx reporter michael wilson. the ec president saying officials may hike or halt the next meeting after listing interest rates by another quarter-point. >> we have an open mind as to what the decisions will be in

september and in subsequent meetings because, this determination, based on data might very from one month to the other. kathleen: joining us is irene a professor of international and public affairs at columbia university. it's great to have you back. the two big central banks one on either sides we could hike or will we can hold the ecb difference seems to be the economy in so many ways, the eurozone looks weak and is getting weaker. what do you expect is going to happen at the next meeting in september? it is two months away. >> i think it is hard to know -- let me put it this way, unless something dramatic happens, probably christine lagarde is right on track. she is doing exactly very close

to what jay powell is doing, being pragmatic, making some small changes, but not announcing in any way that anything dramatic will occur. the real concern in europe is that it's also much the economy is weak but it is fragile it is fragile for economic reasons. it's fragile because of a lot of unrest, because of the fact that there are not many strong leaders in europe at this point. that puts more pressure on whatever decisions about plans to make. the really important issue however is just as in the u.s., but more importantly live -- in the eu, the eurozone, inflation is coming down. we're looking at 5.5 inflation, which in many ways is an outrageous number. that's considered a very positive sign, from the seven or even 10% that was happening

earlier in year. this is where the biggest challenge is. what will be the levers, to slowly bring it down to ideally at least 3%. kathleen: is the ecb, is christine lagarde and her fellow councilmembers, are they willing to move ahead to another hike if inflation is not coming down? and at the expense of the economy, at the expense of the economy weakening, is there something in the european central bank that will tilt them and that more hawkish direction? >> we have to remember that the european central bank was built on a hawkish position. the concept of price stability is written into its mandate. it was originally written in the original treaty of the eu. the idea of a beloved 3%

inflation is almost sacrosanct in europe. this is all sorts of psychological impact. christine lagarde is aware of the history, but the problem is the german economy. which, right now, not only is it relatively weak in terms of manufacturing sectors and indicators, but there is also a lot of weakness in consumer sentiment. i think this is an important factor. what inflation does, it erodes overall consumer sentiment and even potentially business sentiment. this is something where she will have to be very careful how she balances it. on the other hand, can she be comfortable and simply pause if inflation remains at 5%? i don't think soone way or the other -- i don't think so, one where the other it has to come down at least a something vaguely respectable, let's say within the 3% range.

haidi: this is the recession mindset that either could become anchored. there are real expectations that we see germany say in a recession. what does the balance look like? does it look like a more elongated tightening cycle where there are longer pauses between meetings to give time for transmission? higher for longer? >> i think that is possible. the main concern will be that what you mention what she will do or not do in december -- september. it is important to realize the timeframe. august is a quiet, deaf time, in terms of economic activity. one september -- once september comes back, everyone is returning to work. that is one it will become interesting to see, do they continue to see a positive downward trend. and do they start to see a bit more stability in overall

consumer sentiment across europe. german economy is a problem. the french economy is doing better. but, the constant unrest, and political turmoil in france is not helping. this is adding onto tensions. a lot of factors are playing into this. i think she will have to consider all of them, when she makes her decision in september. does she just decide? haidi: i was just going to ask, what is happening in other economies and how that ways in as well? this depends if we have a meaningful revival out of chinese demand. >> i think there is that. i think also just within europe, the larger europe, there is also the issue of how well or how bad you can economy performs. this fight -- despite brexit,

there are connections and linkages. across europe, we see the italian economy not doing that badly in other words we have a situation which is not dramatic but, a situation which is fragile. that is very troubling. what i found fascinating is even the imf mentioned that maybe the ecb needs to reconsider the rigidity of the below 3% inflation rate, maybe 3%, or higher, it can become the new norm. that is another big question. are we stuck in a scenario which may no longer be totally viable? haidi: many big questions. we appreciate you spending the time, going through them with us. irene finel-honigman, professor of international public affairs at columbia university. much more to come on this boj decision. this is bloomberg. ♪

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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: moves when it comes to the 10 year jgb. the 10 year yield rising above the bank of japan for the first time since march. this, as we see the repricing across a number of different bond markets in australia, we have seen bonds slumping across the curve. the 10 year yield jumping 11

basis points, all on this report that the bank of japan may consider tweaking it sealed control curve. we are seeing a nine basis point move for the 10 year, and now the 10 year yield in japan rising above that boj cap, for the first time since march. following u.s. treasuries, the 10 year hitting 4%, as we see the bank of japan concerns, over a potential surprise announcement today creating that broad lift to the yen. kathleen: maybe they were trying to engineer this so they can say the bond market make -- made us do this. we expect to catch up to us. -- volkswagen expect to catch up with its peers. the cfo tells bloomberg about how much the china market can benefit from the expertise. >> we are very strong in china

in the combustion engine business. the market share is about 20%. we after catch up in the ev segment. in order to catch up, we came up with this, three pillars, two we have discussed already. let me recap. one is more local for local development. we opened and found a company in china that will eventually of 2000 people. they will develop china for china, closer to the customer, 30% more speed. this will bring the first type of competitiveness. second, we team up with local technology partners to step-by-step improve our current platform. for example, together, we improved driving assistant functions, we improved entertainment, with deutsche bank, we improved the cost of our batteries. now, the third step, let's call

it local product partnerships, with that local product ships -- partnerships, we take into account the chinese ev market is developing rapidly. we bring it in as early as 2026, to a new electrical models, local for local, in the upper make segment -- mid segment, to have a stronger set up. the same is true with audi. we have the three pillar strategy, and we are confident with this strategy. we will catch up, at least in the midterm. >> of course, the message from the government in germany has been de-risk, the risk, de-risk. this is the opposite. how do insulate yourself to some of the concerns that the german government is flagging on china? >> from our point of view, this fits into the strategy because

all the initiatives i mentioned, more local, more local for local, local tech arner ships -- partnerships, they work on local for local strategies. these products are not meant for the global market, but improve our competitive position in china. from our perspective, they fit into that strategy. kathleen: the volkswagen cfo speaking to bloomberg. now, watch us live, see our past interviews in our interactive tv function, tv . you can dive into any securities or bloomberg functions we talk about, plus become part of the conversation, by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

if you're trying to get a view of the whole organizational financial health and you're trying to do that through multiple systems, that makes it very, very cumbersome. ♪ it's not just tech, it's not just people. it's how they work together to provide that experience to the customer.

as a finance organization that is what you want to do. ♪ 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. haidi: bloomberg intelligence analyst the japanese exchange traded funds may see little growth as the boj limits its etf purchases. let's get the details from our etf analyst. how is what we get from the boj, going forward, today and going forward, going to affect the broader etf landscape? >> so, there is really three

options, that the governor has. the first is to do nothing and maintain the status quo. that is what everyone expects. the reason for this is they have a mast a large position, more than 85% of the etm market in japan, if he starts reducing, it will send a shock to the market. it will be option two of reducing, that is unlikely, that will cause a huge panic to the market. the third option is potentially increasing his position, like his predecessor. this one is very unlikely, since he has been in office, they have only had to purchases of etf's this year, that was in march. this is a record low for them, since they have launched the program in 2010. kathleen: there seems to be uncertainty here. what about flows we are seeing in japanese etf's year to date, do you see impact of people not being sure about what will happen next? >> from a flow perspective, japan has done well. anyone that has bought japanese stocks should be happy.

the nikkei 225 is up 26%, the topix is up 23%. we see record inflows. this year alone, japanese etf's have gotten 11 billion worth of inflows. one year ago, they only had 9 billion. this is significantly more. if we look at launches and impact, ishares had the largest most successful launch, last month in japan, they launched the ishares climate etf that got 800 million. from a flow perspective, we are seeing interest, and not only onshore, but for investors investing in the japanese market. haidi: what do we expect the governor to do with regard to the etf purchase plan? >> i think from the purchase plan, we expect him to maintain status quo and not do anything. the reason for this is in asia-pacific, the etf announcement -- landscape for

japan, they rake number one for assets under management, they just surpassed 900 million. the other first in the region to launch etf's. from a central bank perspective there one of the largest owners of etf's. they have roughly 400 billion in etf's. he is going to maintain the status quo, he will not reduce the etf purchase plan. they may not add to it. it's ultimately, what they're trying to do, to have more foreign investors and grow the system and grow the market organically. we expect that he will continue the etf purchase plan, but not add to it. they have already reduced the cap and how much etf they can purchase last year. we expect to see a reduction from the bank of japan. ultimately, they are trying to grow the market organically. kathleen: bloomberg intelligence etf analyst, rebecca sim. more on the massive market reaction to report boj policy

makers, that will discuss tweaking ycc. their meeting in a few hours. earlier we spoke with the executive economist at nomura research institute, he was previously a board member of the boj. >> i don't know that the boj may decide today. if they don't decide today, i think they may decide in the coming meetings. it's a very realistic approach. kathleen: let's ring in our markets coanchor and chief markets editor david ingles. what is the latest? i have to interject, when we spoke to him in april, he was not looking for anything until maybe next year. now he seems a bit more open, maybe even a small tweak. david: that's right. i would imagine, pick your economists yesterday would've said the same thing. they're probably rethinking the

magnitude of the statements now, given the report out of the nikkei, about seven hours ago, and given the market moves. certainly, cross asset gyrations, we are feeling it still. i would even go as far as saying going into the japanese open in couple of minutes, we are extending that move across many assets, pride -- price action. you look at dollar-yen, we are at session lows. we are at the lowest in over 48 hours or so, trading range. you're looking at futures. 400 points lower on the nikkei 225. we are going to see likely some sharp losses at the open. you mentioned this already, we are already testing, if not just above that current threshold on the 10 year yield in japan. futures coming in line, bond futures in september. as you can see, seeing pressures. that contract coming online,

these last few minutes or so. we are watching the banks, very much in focus. this has been a group that is rallied on the back of the broader rally in japan. also, on expectation that any change in the boj, policy settings will be constructive for the banking sector. apart from that, i know we can be zeroed in on japan today. watch for what happens across global bond markets. we are already seeing some stress coming through across australia and also treasuries come online in a couple of minutes as well. haidi: bloomberg markets coanchor, and chief editor, david ingles there. the market opens, next.

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>> this is "daybreak asia",

counting down the ages major market open with all the focus on japan, on the yen, on the bond market, on the stocks as we wait to see if it happens to turn out that the boj, the bank of japan is actually going to consider, talk about the tweet to yc see, yield curve control and one cat saying maybe there's a 50% chance a former boj board member doesn't necessarily expect up put the goods possible. got their tokyo cpi showing even though the core number is a little bit lighter. we just have to wait and see but this has turned out to be an extra exciting preview or market into the boj. hi to: -- >> service property stimulus for china, we are watching that as well as retail sales numbers. ppi ahead of the rv and week as well. but it is really front and center about japan. let's bring back our chief markets editor david inglis. we've got the 10-year ggp yield

chip -- busting through the cat. we have more renewed strength in the yen, what's going on? stephen: we are adjusting -- david: we are adjusting to something, we are expected by yen traders going into today because the hedging cost is really protecting against strength and the japanese currency where we reach multiyear highs. also, this is something that came out of the blue in terms of the timing itself. global timing came at 2:00 in the morning, tokyo time, hong kong time. the u.s. markets were all up and running at that point. at that point, you actually see a point in time when everything diverge, the stocks fell, bond yields soared, curie yen. through the floor. nikkei 225 trading at 30 24, we closed at 30 to a yesterday. 1.4%, fairly consistent i should note with what futures were telling us yesterday. dollar-yen is coming outflows off the session.

this is what you will watch very closely today. your 10 year bond. 10 year bond futures right now. we are trading at about levels where that ceiling is on the 10 year yield. earlier on we breached that for the first time since march. the question is the markets basically playing ball to the nikkei report, which essentially said that this statement that's coming out in the next few hours or so, there are discussions of any week to yc see that my allow the tenure yields to trade above the .5%, but at the same time, predicated on the threat that the boj can come in at any point to stifle off any undue selloff we see and come off and anchor yields. tenure yield has resulted in a big story. this takes you global, back about four years -- and the for your treasury. nikkei 225, let's flip the board and have a look at the bags. let me just look under the hood. we are down 1.5% on the nikkei.

180 down, broad-based selloff we are seeing. banks, as expected, moving against the grain here. on the back of this report that a step closer or potentially a step closer to normalization is certainly good for banks. that's how we look up 1% or 2%. very quickly, i alluded to what is underneath the hood on the nikkei 225, there we go. session lows, 181 stocks are down. 225, down 500 points in the opening to minutes of trade. i will be back in a couple of minutes to give you the market update. kathleen -- haidi: don't go far, dave. anything can happen. our chief markets editor david inglis. with us now is the chief global strategist at nico asset management. great to have you with us. in the volatility we've sought -- we saw overnight, should

investors -- are we seeing the complacency that led up to this, and it gives us an indication of what we could see turn with risk assets if we get a surprise from the boj? >> i guess we've already gotten the subplot -- the surprise in a way, the leak overnight was a surprise, especially not the fact that they were discussing the yc see, because i thought that would happen, not that they would be doing nothing, which probably won't happen either, it was the allowing the jgb 10 year yield to trade over 50 basis points, which was a pretty big surprise to me. i think the markets are overreacting a bit. it doesn't seem like it's going to ba huge change in yc see policy, we still have it in the fourth quarter, as you might remember, i've been quite skeptical of the need to boost

the training band for several needs now, the pressure is now increasing quite a lot, especially from the state so they say no recession and higher interest rates overnight. is putting more pressure on the bank of japan to do something earlier that is our call. haidi: we are seeing the yen jumping from strength to strength this morning, do you see further upside? >> yes, by the end of the year, our house view is for 135, and that will help reduce inflationary pressure in japan. and then we have it going to 131 by next june, so it's a big move overnight, this really was a surprise for this nikkei article, which has reversed the trend that was showing some

weakness in the yen over the last few days. kathleen: it seems to me one of the issues for the bank of japan is big emphasis on communication. new boj governor, that's one of the things he has to get right, guidance, what is this going to mean for markets. particularly, when you look at the japanese government bond the architect -- bond market, does that reshuffle people's expectations or at least make them realize that there could be a shift, if it doesn't happen today, happening very soon? >> they don't envy the bank of japan in terms of communicating what they are going to do, it's a tough job, i wouldn't want to be a boj governor in this situation. it's not easy for the fed or the ecb either for that matter. this economic upturn and conditions is very different

from everything that we are used to, and it's a mini stagflationary environment which central banks are not used to, and they are trying to -- bank of japan has been desperate to try to avoid raising interest rates right before a recession, a global recession like they've done in the past, they've gotten criticized for, so they are very hesitant to raise rates in many ways, i don't have a clear view of how they are going to communicate this change, if there is an official confirmation of the nikkei article that they will lit the jgb trade above 50 basis points period is quite a significant challenge. kathleen: another big story today which actually caused u.s. stocks have a lovely rally. nasdaq as much as 2% -- up as much as 2% in the early morning

in the u.s. then, we got this news out of japan. in terms of your view on the fed, if the domestic economy is still so healthy, in some ways it looks like it's picking up some steam. what is that going to mean for investors, not just in the u.s., but certainly in asia as well? >> a thicket means it's rates are going to be higher than people expect, especially for bond yields. people have been expecting recession, fixed income investors have been expecting recession and stockmarket investors have not so much. they've been risk on for quite some time, so higher interest rates, and that does affect the sector selection, it will be a bit of a headwinds for stocks as we sort of sarlacc night that central banks being more hawkish than expected can be a problem

for risk assets. it has sort of been in the honeymoon time in the last couple months for stocks where central banks were basically kind of a little bit more dovish than expected, but the economy has been stronger, so the end of that honeymoon is sort of upon us, it seems to me. haidi: chief global strategist at nikkei asset management joining us as we count down to the bank of japan decision. great to have you with us. breaking news crossing the bloomberg, according to the washington post we are hearing the u.s. government is set to bar the hong kong chief executive from november's apec summit which is set to be hosted in san francisco. this is according to the washington post saying that the white house has decided to bar hong kong's top government officials from attending a major economic summit in the u.s.. that's according to three u.s. officials familiar with the matter. this is seen as a latest test of president biden's bid to reset relations with china.

there has been a flurry of diplomatic engagement and a detente when it comes to the tone of that engagement and now we are hearing reporting that the chief executive along with 10 other hong kong and chinese officials, potentially being affected from the sanctions that were imposed by washington in 2020, on them after implementing a national security law by beijing that really enabled the targeting of pro-democracy leaders, that has really led to reputational questions for hong kong's courts and international condemnations there. we are now seeing some of the consequences and the white house deciding that it will be barring hong kong's top government officials chief executive from attending that major apec summit to be hosted in san francisco, november. this is really something that comes in the middle of what is in a tenuous fall in that relationship between the u.s. and china. coming up next, china is

stepping up pressure on financial regulations and lenders to revive its ailing property sector, we get some details with the latest measures and guidance in next. this is bloomberg. ♪ start your dna-powered health journey today with personalized insights from 23andme.

kathleen: we count down to the bank of japan's policy decision, which has been heated up by a nikkei news story in the last several hours, suggesting that they are going to talk or at least discuss tweaking of the yield curve control band, and it now looks like we saw the 10 year jgb pop above the top of that .50 on either side of zero band. so the markets are taking this very seriously. looking at dollar-yen over the last couple of days. you can see that the yen definitely is in a strengthening mode, a little bit of volatility here, bouncing back a bit, but definitely, we've got that key level in around 140, got as low as 138, so, yen moving up, dollar weakening and everyone taking this news story of what it could mean very seriously.

for more on the boj's policy decision in the next few hours, we are joined by our effects and great strategist david. first of all, your reaction, your thought on what this can mean, are they going to do something, and if so, why? >> i don't think they will do something, the main reason for that is the credibility of the boj. the governor is obviously new and has only been in a few months, and to see him very recently to say that you won't do anything to inflation is trying chinese looking for 24 to 25, that it's early to turn around into a u-turn would not be good at all for his -- how he's viewed moving forward. particularly governor governor kuroda in december, how he blindsided markets. i'd be very surprised if they did do something, the market has to taken this factor in this risk. if they were going to do it, there's not a lot of sense to do

it right now. yes the tenure yield just jumped to date because of this but before that it was .44, .45 so it wasn't even threatening the .5% threshold. so to do it now you could go on with doing it in advance, the market goes very quickly. if you even see changing why cc policy, the market will go that is the start of the removal of why sisi, and we will move very quickly without peer pressure change the bonds, the yen will move very quickly. the market is forward thinking. i don't think they will, but given the sense that market has said that, it has to factor in that this is a risk. it may be much ado about nothing, but for the moment you have to take it as a risk. haidi: we saw the vix jumping on risk assets seeing that massive reaction. this may be specific to the bank of japan to what extent do you extend this to the fact that the

optionality that central bankers are wanting to keep right now is just going to add to more volatility more broadly in the months to come? >> certainly, if you look at the fed this weekend obviously ecb yesterday, they were all, we may or we may not, data-dependent. there's a lot of data out between the decisions this weekend and once in september that's basically to cpi reports, employment reports. so the markets have been very data depended its self and that will add to the volatility. every piece of data, even the central banks have set themselves, is important. when you come to the ecb, they don't have to wait to receive some important data. today your french and german cpi, which would be good precursors for what your zone cpi will come out on monday. that will add to the volatility today in then next week you have u.s. roles, ism data, there is no shortage of data coming in for the future, let alone the bank of japan's decision. it will add to the volatility

and keep it elevated from an option perspective. the policy in the near term is one week in one month that's going to be elevated, and particularly, you look at the one-month, let's not forget jackson hole. the fed meeting is two months away, but fed chair powell speak at jackson hole, which is one month away. hence, they will be looking for guidance there for the september meeting. all around, we have all the data and everything, in terms of the option markets, you have to expect volatility to stay big certainly in the near term. haidi: bloomberg's effects strategist there as we count down to the bank of japan decision. take a look at how futures are coming up in europe. pretty hectic and positive session in the wake of the expected increase from the ecb, but it was that optionality that we were just discussing earlier, opening the door to a variety of outcomes come the december soup -- december decision from christine lagarde that saw the optimism when it comes to

european stocks. this interpretation that the end of the rate hike cycle could actually be near and it would be more of a dovish approach going forward, given some of the eco-prince, particularly the recessionary and germany seeming to make a very difficult for christine lagarde to be very hawkish going forward. this is the picture when it comes to the future set up looking a little bit more muted. the volatility we saw the wall street session i adding to investor confidence. u.s. stock 50 futures down by half a percent. we are seeing weakness when it comes to german stock futures. watching trading when it comes to the euro, we saw that big jump in the yen against the euro back to percent, so certainly, a lot of these currency pairs with yen are the ones to watch. kathleen: does move on to china, top housing official wanting to strengthen efforts to revive the countries ailing property sector. let's get more from bloomberg chief asian economist. what is the growth outlook now?

>> the growth outlook, we just revise that downward, this is principally because of a big mess in second-quarter, looking forward for the second half of the year. we do see the possibility of a mild. we have -- of mild. we have hot summer travel. in terms of the summer travel, i've been talking to travelers in beijing and shanghai, and every one i spoke to has some plans to take their children out during the summer. so that could give services a recovery, a bit of lift. in terms of policy, we have seen signals coming out from the government to support consumption, the private sector, and there could be more macro support. so your overall terms, some mild pickup in the second quarter,

offsetting the checks from the housing sides. but overall, we revise the for your growth from 5.8% downward to 5.4% for 2023. haidi: how much of this is a big city versus smaller city, lower tier city situation? at is that policy adjust the fact that we are still seeing a lot of policy hanging over leverage and the smaller areas? >> you're absolutely right, that's great divergence between bigger cities, particularly at first sure cities and other cities. in the government, the central governments housing policy has tones that are much more supportive, as we know, over the past few months, and at the local level, the governments have been doing quite a lot, a lot of cities, lower tier cities

have relaxed transaction constraints. but in top tier cities, broadly, the housing market is holding up. going forward in terms of housing policy, there could be more relaxation across lower tier cities, in terms of housing purchase laws. the top tier cities, we think this is less likely. we don't really see that beijing, shanghai and all of the big cities to completely relax purchasing rules. but there could be some sort of relaxation on the margin as some reports indicate, perhaps, and what counts as a second mortgage, that sort of rule may be relax, but overall, the huge divergence between the top-tier and other cities will continue.

kathleen: certainly anything that helps a homebuyer buy a home is very important no matter where you are in the world. bloomberg's chief asian economist. and you can get a round up of the stories you need to know to get your day going in today's edition of daybreak, bloomberg subscribers go to dayb on their terminals. it's also available on mobile in the bloomberg anywhere app, and, you can customize your settings and only get news on industries and assets that you truly care about. this is bloomberg. ♪

>> -- kathleen: big story today should trade after intel's forward guidance on revenue was boosted a lot, let's just look what it's doing to the major chipmakers across the board.

sk hynix is up nearly a half percent. at samsung's down. they are in a different position from these other chipmakers. advantage is up a third of a percent. tokyo electron, 1.8% clearing and on to bring a percent. let's get into the intel story, shares grabbing the spotlight in after-hours trading after intel, the world's biggest maker of b desk pc chips indicated and may be over. bloomberg su keenan joins us. that bullish revenue is the thing that got investors going. su: going into this the intel bulls were saying it really can't get worse. this is the first prophet after two straight losing quarters in the shares show that investors really happy to hear this. again, investors have really been interpreting the surprise second quarter profit beating the strong first-quarter outlook as a sign that the long-awaited comeback may be underway. management had promised the

second half which show improvement. this is fresh evidence. third quarter sales could be up to 14 billion in the current quarter. the margins improving, a surprise second order profit really shows that things are improving, although it's important to put things in perspective while there is improvement in the earnings picture, or until you see a decline on a year-over-year basis for the past seven quarters, sales a been declining for six straight quarters. so company factory network is crucial, the ceo as promises going to have the best production in the industry again by 2023, but investors have yet to fully buy into the turnaround story. look at the rivals nvidia and amd are up as well, but they have been high on that ai story. haidi: unavoidable when it comes to that this earnings season.

our bloomberg su keenan there with us. let's take a look at trading when it comes to effects. the yen in full focus as we continue to see these big moves when it comes to jgb's, when it comes to bond yields elsewhere across the region and when it comes to trading in these yen pairs. dollar-yen sitting up at 139 handle. really, the yen jumping on the report that the boj will be discussing yield curve control at their meeting decision to be announced today, and all of this seeing that overnight reaction against the euro up about 2%, further strength seeing against the u.s. dollar. also watching the aussie dollar also watching the aussie dollar of retail sales as

all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. haidi: you're watching daybreak asia, 30 minutes into the start of trading in tokyo. let's look at the latest market

action with david and there's been a bit of action already, dave? david: it feels more than -- more like 30 years than 30 minutes. we been holding hands together into the journey towards the week and until the boj happened. the big news of courses out of the nikkei report. what we seen so far in the bond markets in japan in particular is the 10 year yield, one specific bond, that's the june 2023 bond top the yield and that topping the boj ceiling. really, the market simply just playing ball with that report. so we are seeing that play out, you look at what's underneath the hood as far as the nikkei is concerned. it is a broad-based selloff, but we are approaching session lows, the yellow line that's an inverted yield. 206 stocks are down, 19 are up. this is unsurprising given the move we've seen with risk assets, particularly you have to factor into the influence of a

stronger japanese currency. we are also looking into banks, for example. surf air looking for a bright spot, that group is actually moving against the grain today. as well would expect, as well, the global read here is, really when you look at whether that's yen strength against its peers, or the selloff we are seeing in parts of the asia-pacific market, we are stabilizing on the u.s. ten-year treasury that top 4%. you can see australia and new zealand might simply be a precursor to what we will see when other markets open up and the rest of the region. kathleen: i wonder what analysts are saying about this market move. i have this image of like a sleeping tiger or something just great -- waiting to burst out. look what happened with the bond market is trade got underway, what are you hearing from your sources? david: clearly, a couple of components here, yesterday we were talking about -- with the

graphic that showed us that, this wasn't at all it complete surprise, let's put it that way. their hedging costs to protect against the strength in the japanese currency were at a multiyear high. that was something, implied volvos another. in some ways people were hedging, and they were willing to pay a lot for those hedges, i should know, in the event that we did get something. and 1:00 in the morning hong kong time, the boj slid something in. where we go from here? jeffries says what we're seeing in the yen, field the yield surge. if we do get head adjustment to icc, in other words, if the bank of japan allows 25 basis points above .5%, that sends the exchange rate down 135, 136. if you completely abandoning why

cc, power back to 120 on dollar yen, and obviously there, here is what we're seeing right now. this sort of global -- this sort of pivoted up across global yields. you could see 139 and your screen. we are watching a lot of things, it's going to be a long morning for us. kathleen: and an exciting one. we get the statement, a few hours from now, what specifically are you looking for? david: i don't know if i will be up bright and breathing at that time, i'm kidding. hopefully i will. first, whether or not the nikkei report was accurate, to what extent -- if it is accurate, to when asked -- to what extent they will be allowing guilds to play above the .5%, because i think the warning the nikkei report used was, to a certain degree, something along those lines.

so what would be from a fundamental perspective, as far as the economy is concerned. 60 minutes back you guys were talking about tokyo cpi coming in higher than expected. what do the revised inflation forecasts look like out of the bank of japan, because they gives you an indication of, to what extent the train has left the station and how far we actually are, and to other forms of normalization as far as policy is concerned. but we will simply have to wait and see when the statement comes out, and what they say at the press briefing hours after the statement is dropped. kathleen: bloomberg markets coanchor and chief markets editor david ingles. another thing for the boj to consider, inflation in tokyo is hotter in july than economists were expecting. they view price growth may slow below its target in the coming months, and this code have been patients for the boj decision. joining us now is a professor of economics, she previously served

as a board member at the bank of japan. it's great to have you back on boj decision day. this story and nikkei news, one of those newspapers that gets those kind of signals from the boj, that they are going to seriously discuss why cc yield curve control altering it a bit, at least discuss it, we don't know if they are going to move. what do you think they are planning to do? do you think there is something to this? --- >> i think the boj is going to make a major change. i think with the nikkei is saying, probably the boj is going to get rid of this continuous fixed-rate gdp corporation and probably make it flexible, and that is the 10 year yield a little above 0.5%. so, this is quite a minor

operation, but i think it may be to the next round of stipulations. meaning that this is just the beginning. the next step will be expanding the 10 year yield target and eventually the 10 year yield target. kathleen: you are saying you are thinking it could just be that they are going to stop buying bonds as aggressively? you know how the market could be. you remember what it was like glass autumn when the market was pushing the yen, pushing the jgb yield higher very aggressively. once they make a little change of any kind, it's very possible that markets are just going to keep pushing that tenure jgb yield even higher. >> exactly. so before march of 2021, the bank of japan used to say there is flexibility up and down. but in the march of 2021, they

introduce continuous fixed-rate operation and last april they said it was every business day. i think now it's done to get rid of this kind of stringent control. so probably they maintain plus or -0.5%, but also some 10 year yield going above 0.5%. bad as you said, to what extent the boj would allow this flexibility, so it might invite a new round of speculation. haidi: when you take a look at the more global pulses for our inflationary pressure you start to see energy to cup again. to see agricultural prices tick up again as well. does this complicate the outlook? does this give the bank of japan a little bit more of a lift when getting more sustainable

inflation levels? >> right now, inflation -- it accounts for 70% of inflation. in inflation is coming from eating out, restaurants. so, meaning that 80% of inflation comes from food. food inflation starts to come down toward the end of this year, is very clear if we look at those prices. so eventually, we would start to see a slowdown in inflation. i think it's a bit too early for the boj to make a policy adjustment until there is a more positive price wage cycle. haidi: how problematic is the yen to be? >> i think at this time, the boj has a small operational adjustment, and the market is calm, and there might be some concern with regards to the

under evaluation. so just kind of a small tweak. still, there is a huge gap between u.s. and japan and there's a lot of uncertainty as to what would happen to the fomc's next move. they might have the interest rate. at this stage a think there is no huge concern with regards to the possibility of leaning to the sharp appreciation with yen. kathleen: what about the governors communication? as the governor was stepping down, he was getting ready to take over, there was a lot of commentary that his most important job would be cleared to markets. if you make the shift, even a small one now, the markets says of his being a good communicator. quake say think he is committed to achieving 2%.

he doesn't want to make a mistake about this. therefore, he will be very careful, in terms of making a big policy adjustment and only a couple of days ago he said, he wanted to support companies by helping grow interest rates. so, making that adjustment, for example, expanding data present to 1%, or to remove that, it is a bit challenging, you have to see the positive inflation pick up next year. right now is just across inflation. so he has to check the positive inflation to come out of pick up next year. i think a possible move would be next year. kathleen: and what would be the final sign, the final evidence that it is time to move on inflation, will he wait for the wage negotiations to see how

those come out? >> in april it was quite significant when 2.5%. it is good. but they have to make sure this kind of nominal wage growth will continue next year and the year after so that the consumer feels that wages are picking up so that they may see more. so after they see that, it has been very difficult to see 2% inflation target. haidi: always great to chat with you on boj day. you can turn to your bloomberg for more on the boj. tliv is where our team of expert editors are poised and ready with a commentary analysis as well as live reaction as soon as that decision crosses the bloomberg.

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haidi: we are 45 minutes into the start of cash trading in sydney, solon tokyo where we are

waiting for that seemingly more than contested bank of japan decision. this is the picture when you look at the breakdown across asia pacific equities. not a lot of shares to be found. a little bit in the financial sector, a little bit in real estate. there really around these broader sectors you are seeing wholesale weakness. inflation technology on the account of some concerns about rising rates, even though we did see that fed term bounce in the european session following the ecb decision. we are seeing a down 7/10 of 1%. materials are lower by just about 1%. still so much of that concern when it comes to the weakness of china, weakness of commodities, and still demand out of china even as we get more support being vocalized for the property sector, potentially really kind of returning to speculative buying by giving a little bit more leeway for those who are not first-hand homebuyers to be treated as such by developers. we are also watching consumer staples down half of a percent for australia.

that will be key. we are expecting those retail cell numbers to play into what we get from the rba next week. certainly market pricing for the rba decision, getting that ppi inflation number out of australia as well. some expectation that potentially the rba could surprise next week with not as much certainty as you would think going by market pricing into the reserve bank decision. also watching industrials down by 7/10 of 1%. all in all, we are seeing a lot of risk aversion going into the start of trading in china, where that property stimulus question is going to be key. kathleen: it looks like interesting changes could be afoot. let's look ahead to fridays trading at hong kong on the mainland with our managing editor. we saw the decline in chinese dust euro profits ease in june, what does that tell us about the health of corporate china, particularly at a time when someone is so concerned about the recovery and what will eventually pick it up again.

>> at some marginally positive sign for the chinese companies. it's better than the 19% drop in may, but we are still seeing a 17% drop. that's no small matter. it's really not enough to boost investor confidence at this stage. many market participants are now cult -- calling for swift follow-up measures after the broadbrush statement from the politburo early this week. that has led to a rebound in chinese stocks. those participants are saying that these measures will be key for the rally to sustain. and we have seen many times in the past two years, where gains didn't last because investors were eventually disappointed by the stimulus measures. kathleen: most mainland companies have reported preliminary earnings for the second quarter, has it been better than expectations? what were the key takeaways for you? >> it's not a pretty picture, morgan stanley did data consolidation.

their negative profit warnings have outnumbered positive alerts. according to china's emerging securities of over 1700 mainland companies that have released preliminary results so far, 45% forecast a year on year improvement in their bottom line, and that is down from 70% in the previous time. so weaker earnings are just another reminder as we were discussing before, that reason rebound in chinese stocks may be built on shaky ground, and less the environment really fundamentally improves, but at this stage, it's probably not very likely because a lot of economists are lowering their forecast for chinese gdp growth next year. kathleen: that was a very big story this week on bloomberg survey. that's bloomberg's managing editor for asia stocks. let's check some of the top political stories we are following, the washington post reports that the u.s. will bar hong kong's chief executive from attending the apac leaders summit in san francisco in november.

lee and other top hong kong and mainland officials were sanctioned in 2020 for their role in the crackdown on civil liberties in the city. they cite three unidentified labor officials who say another senior representative will be allowed to attend. former u.s. president donald trump gets hit with new charges over his handling of classified documents. it includes a new allegation that he and two employees attempted to delete surveillance video footage at his mar-a-lago estate last year. it also includes one additional count charging trump of national defense information. french prosecutors are said to be investigating several french and chinese citizens for allegedly sharing key chip technologies with foreign powers, including china and russia. the newspaper reports that the suspects are executives who work for the u.s. own semiconductor company. the french industry a minister told a radio show the alleged perpetrators have since been stopped. haidi: take a look at energy, we

have been talking about this since one complicating factor for central bank as they enter this last phase of the tightening cycle. we have seen energy prices pick up. that in oil prices powering to a fifth weekly advance as market shows signs of tightening. charter stimulus support as well as better than economic outlook supporting the demand outlook for crude. it is stockpiles continue to drop, we see the longest winning run of weekly gains in more than a year for crude more broadly, and we heard from bank of america, speaking to bloomberg saying that rally could be set to escalate if russia cuts exports even more, if they continue to curtail crude exports, we could see that further pressure when it comes to the supply side and it would potentially even offset any demand slow down as a result of monetary tightening. we are also watching gasoline prices in the u.s. they hit an eight month high,

the highest since november, it is proving to be quite a political challenge for president biden and has increased $.12 over the past three days, the second-highest for this time of year over the past decade. more to come here on "daybreak asia". this is bloomberg. ♪

haidi: continuing to monitor these big moves bc and japanese assets, that chemo we saw in japanese government bond yields, that 10 year yield piecing through that zero point 5% cap by the bank of japan. but it was really momentous as we continue to get this widening gap between what the markets are potentially bracing for. you take a look at this as well as yen trading, which we will get you in just a second, this is what economist and the bank of japan, including the governor have been steadily communicating that they don't believe inflation at this point is sustainable. they don't see, according to the economists we have spoken to, they don't see a tweet to icc until next year. that has been really thrown into question without reporting from the nikkei that they are at least discussing a tweak to yield curve control at today's meeting. you see that reaction across -- trading across yen pairs. reside 2% gain against the euro, 1% against the greenback. even a stronger greenback that

had that strength as a result of the second quarter gdp numbers. or the growth numbers. and we are really seeing that next blake up, if you will, when it comes to yen strength continuing to play out. kathleen: we get the decision from the boj. let's move onto another story. standard chartered reporting second order results friday the analyst focused on the potential for a fresh buyback announcement. let's bring in bloomberg finance reporter in hong kong, what can investors expect? >> as you mentioned, the buyback would be the main focus, they said that they plan to return over 5 billion to shareholders by 2024, they are somewhat moving towards the process, we've incurred about 2.8 billion. morgan stanley has $500 million buyback. that something people should be looking out for. other things they will be looking out for is bonds, rising

rates, and standard chartered is a big lender in hong kong. we've seen the benchmark rival that. that should benefit them in their businesses by transaction banking. the other thing is is the wealth business, which is a good bond for strong momentum in the last quarter. people crossing the border. so they will be watching us through the actual revenue. haidi: what are the potential downsides? >> i think one of them could be the china real estate situation. they've taken quite a few hits against the china -- in the past. i think to stabilize that while the situation is not getting good, it's also not necessarily improving.

i think that something to watch out for. and also, yield growth is still quite weak, generally, so i think that's another factor. and of course, any on the buyback that would also be the price. kathleen: that's bloomberg's finance reporter in hong kong. let's take a quick look at the markets as we wait for that bank of japan decision just a couple of hours from now. you can see across the board, decline in the nikkei, and the kospi, australia, new zealand, everyone is concerned about the weakness we saw overnight in the u.s. in stocks driven by the story about the boj tweaking could spill over. coming up next, more bloomberg. ♪

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