>> welcome to "daybreak: australia." i'm haidi stroud-watts in sydney. we are counting down to asia's major market opens. shery: good evening, and shery ahn. the top stories this hour. shock bowls on the stars as they deliver the longest monthly gains in two years despite worries about an overheated market. haidi: australia's d celebrates -- decelerates as they divide markets and economists. shery: chinese stocks finished july on an optimistic note, but doubts are growing about the effectiveness of government support. look at how u.s. futures are coming online in the asian session. we are seeing outside after fluctuations throughout the session today. we have the s&p 500 finishing at the 16 month high. we are talking about the longest monthly gains since august of 2021. for the nasdaq 100, the longest

since august 2020. we have more optimism about a potential soft landing in the u.s., even morgan stanley's mike wilson talking about that rally running for longer. we are watching the treasury space stall. traders bracing for the $100 billion treasury bond sale coming up. we do have the quarterly refunding plan out of the treasury on wednesday. we are seeing crude prices under pressure. we saw it again in the new york session. when it comes to monthly gains, we are talking about the biggest increase in more than a year. the risk on sentiment also helped in today's session. despite the gains, valuation worries have resurfaced with the market trading near overbought levels. for more on the moves, let's bring in equities reporter alexandra simmon of. we had this foam a rally happening in the u.s.. it wavered a little in today's

session, still finished in the green. alexandra: stocks had a lackluster start to trading. compared to what we have seen in recent weeks with investors piling into this rally. it is not unusual for investors to take a step back and catch up for air after the run we have seen and equities. outside of today's subdued trading. what has been driving the market higher is expectations for a soft landing in inflation coming down. you had jerome powell say the feds economists no longer see a recession. that adds to the wall street banks that have is up -- have revised the recession forecast. that has fueled optimism over where stocks will go. this quiet trading is also a pretty typical u.s. trading week. we have apple and amazon inc. reporting results. we have the all important jobs report. investors are sitting out of this market before any big moves ahead of those events. haidi: we have heard the biggest market voices weighing in as

well. one of the biggest bears changing his tune. citigroup lifting their target. alexandra: morgan stanley's mike wilson, one of the staunchest bears on wall street, appeared to be showing signs of capitulation. he is someone who sees the s&p 500 ending the year at 3900. a substantial drop from its current levels. and of course, he missed out on the rally we have seen in the first half of this year. you cannot overstate how significant it is for someone like mike wilson to change his outlook. he said today that he sees the u.s. stock market resembling the rally we saw in 2019 when the s&p 500 returned that to investors after a down year. he said the analogy implies more upside. he is someone who has continued to maintain his call for an earnings recession. he said that they ai you euphoria is unlikely to last.

last week, he admitted he was wrong and is saying he sees more upside. that was followed by a change in citigroup's price target, scott krone revised his s&p 500 year-end target to 4600 from 4000 previously. last month, he said as enticing as it is to follow the tape and changes target, he didn't see any fundamental case for it. . but now he says the soft landing optimism is set to fuel stocks, looking ahead to earnings growth recovery next year. haidi: not everyone is convinced. a lot of this is wishful thinking? alexandra: arco colonic appears to be the few remaining bears who is not being cornered by this rally. he said stock valuations are so lofty, it suggests that it is pricing in a no land scenario. and he says that is wishful thinking. it could catch up to the stock market.

he sees that equities and investors are overly optimistic about inflation. and that inflation will not reach the central bank's desired targets and policy will have to remain restrictive. that could weigh on stocks. he is maintaining that call. haidi: alexandra semenova with divergent views, when it comes to asian markets. we are heading into a divergent rba decision, a huge gap when it comes to market expectations and what economists and analysts are seeing as to whether they go for the 25 basis points or keep that card in the back pocket. for the aussie dollar, looking at the necessity of a rate hike to sustain the latest gains. we saw the aussie rising 1% along with rising metals, prices ahead of a potential high from the rba. a similar gain in the bloomberg industrial metals index. on some of these, china stimulus optimism. we are seeing because a 10 year

bonds around 10 basis points. we could potentially see without that local yield premium, the aussie start to falter. that is the key story we are watching. the bank of australia could be making one of the toughest rate decisions yet. inflation is declining, but twice the -- but twice the interbank's target. kathleen hays is here. there are reasonable cases for either side. kathleen: there are. that is why this is so very close. even in terms of the economists that bloomberg has surveyed, every day we get a few more into our survey. the latest one is 18 of 30 saying no, they are going to go ahead. they will go ahead and do one more rate hike. that will take them from 4.1%, 25 basis points, up to 4.35% after a pause, waiting to see how things play out. in terms of what the markets are looking for, you can see that they see possibly no more hikes

at all. that they think may be the hikes -- the rates have peaked, and in terms of retail sales, the latest report showing the consumer is getting hit by aggressive rate hikes. we are seeing the housing market having taken a hit. some of the leading newspapers in australia saying hey, why will they risk a recession at a time like this? they could just sit back and wait and see. let's move onto to a very important side of this, and that is what economists see in inflation. that yes, inflation has come down. the quarterly number came down more than expected. . the second quarter at 6% year-over-year, down from 7%. that is still more than double the top of the rba's target. it is still too high, one of the main reasons why a majority of economists say no, they will have to move today. last week, the federal reserve came back on the rate hiking path with it what he five basis point hike. . the ecb did its rate hike for

july. why wouldn't the rba look at the same situation? yes, inflation is starting to come down. but it has a long way to go. particularly on core inflation. another reason for them to go ahead and hike their key rate again. it is a bit of the market volatility, up a little bit overnight. markets are watching this. not just in australia and asia, this is an important g10 central bank, an important g10 currency. there are a lot of investors waiting to see what happens. shery: it is interesting how we saw the aussie dollar being boosted by the fact that the japanese yen fell to that seven-month low. a lot of it because of these unexpected bond purchases that had people speculating, wait, is the -- are they not letting it sort? economists thinking that week we saw, perhaps a loss policy move? kathleen: it was very interesting. everyone has been wondering if

it was intended but this unexpectedly early tweak. and one a lot of people did not quite understand. if you are too can, why do you say you will keep the 5%, the .5% for the 10 year jgb as your anchor, but you will get it go as high as 1%? got as high as .6% on the yield overnight. that did prompt those unexpected bond purchases. are latest survey convinced that this is the move for the boj. more than 90% of the 41 economists surveyed say that this will be the last week the boj does for the rest of the year. 26% see april of next year as the most likely month for the boj's next shift. what are they looking for? 78% of economists see the boj's next move as getting rid of the yield control. . that would be the best thing to do because for many people, they view this as a murky outlook for what their aim is. 59% of economists see the boj's

next move as raising the key rate off the negative rate. most watchers, most former boj member saying, that is the true policy move. changing why sisi is a tweak. when you race off the negative rate, that you are shifting policy. one economist criticizing this move, saying they are trying to do too much at once. you can't control interest rates and capital, everything at once. and exchange rates. he thinks it is the end that will feel the brunt of this. the yen will weaken. he thinks it will get to 145. i like what he said. he said, it was a halfhearted attempt to do something, have the boj. i think they squandered a lot of credibility for a whole lot of nothing. i think there is a lot of confusion, has scratched going on. interesting that for now, people feel that the boj has done what they can, and done what they will do for 2023.

shery: global economics and policy editor kathleen hays. we are expecting more incoming data from china. pmi expected at 9:45 a.m., beijing time. this after official pmi numbers showed more concerns about the economy, a weakening recovery. looking to boost consumption now. but stopping short of providing direct fiscal support to increase spending. >> the momentum of some consumer goods is still not solid. some consumers lack confidence, in have many concerns. the consumer experience in some areas is not good. all of this requires further stimulus. because -- because of the central committee, the rnc together with other relevant departments have conducted in-depth analysis and plans to formulate a series of policy to

promote consumption recovery. shery: china state council has also called on cities to introduce policies to ensure the healthy development of their property markets. let's discuss all of this with our chief economist, tom morley. we are starting to lose count of all of the measures that have financed in china for the past few weeks. i guess the question is, what is the latest and does this make a material difference when it comes to boosting the economy? tom: great question. continued concern by china's growth with the pmi data suggesting that momentum is decidedly lackluster. as you mentioned, we now have more indications of support. li qiang, china's premier, urging china's cities to do more to support the healthy development of the property market. and china's state planning agency, the national development

commission, signaling more support for consumption. there has certainly been a steady drumbeat of progrowth quality -- policies. signals of support for the private sector, signals for further property sector, signals of court for consumption. there has been some substance as well. . we have seen the pboc moving to ease borrowing costss, for example. relative to the magnitude of stimulus that we have seen from china in past turns, and relative to the magnitude of stimulus that will be required, so far, i think even though there has been a lot of announcements, markets are wondering what the substance of this is going to be. and indeed, given the constraints china has from high debt, high overcapacity in the property sector, problems with local government palance sheets

-- balance sheets, whether beijing will be able to deliver that substance. haidi: is it an issue of managing expectations? ? when you look at the structural, cyclical issues with the property sector, does it matter that the stimulus measures may not be transformative, because we know china's growth is ultimately slowing? tom: i think you are certainly right, haidi. that the best that china can hope for in 2023, and in the years ahead, is putting a floor under the slowdown. we are not talking about boosting growth back above 6%, backup to the 7%, 8% we saw in the past years. we are talking about managing the slowdown in china's growth. even so, managing that slowdown is going to require more than good intentions. it is going to require more than a series of positive signaling

policy statements that does need to be additional substance. we are looking for the pboc to do more over the course of the year. we are looking for more cuts from the medium-term lending decision. we are looking for cuts on the reserve requirement ratio, enabling banks to lend more. we will see what cities start to do following li qiang's announcement, that they should do more to support the healthy development of the property sector. so far, even though we are seeing the markets taking a positive view on this, and the signal is certainly there, the substance of stimulus is still to be decided. shery: tom orlik there with the latest on china's multitude of measures. coming up, hear why angela's investment is not ruling out a recession, despite economic data surprising to the upside. 's ceo joins us next. this is bloomberg. ♪

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shery: bulls are back in charge when it comes to the u.s. session overnight. . look at the futures picture. as we get into start of trading in asia, we are seeing s&p futures looking higher. nasdaq 100 up by .1%. stocks finished higher on the final day of july. as into 500 launching its largest rig of monthly gains since august 2021. billy defying these fears about an overheated market. let's talk about what lies ahead with our next guest, michael rosen. you see the likes of mike wilson really changing his tune. at the same time, marco klein of is saying that the expectations of investors for market conditions and economic conditions might be wishful

thinking at this point. where do you fall on the spectrum of optimism versus pessimism? michael: it is good to be with you. one of the things driving this bull market has been the wide level of pessimism among investors. trillions of dollars of cash sitting in investors accounts. some indicators were very bearish a couple weeks ago. it is one of the reasons why markets have moved higher. the real reason markets have moved higher is earnings. earnings is the reason you own equities in the first place. it is a claim of the future profits of a company. earnings are coming in strong. about half of the companies in the s&p have reported a second quarter earnings. three quarters of them are beating earnings estimates by 6% or so. earnings are coming in stronger than we are seeing from overseas companies. i think that is largely what is driving a lot of bubble market that is happening now -- the bull market that is happening

now. the other aspect is the economic data are surprising on the upside. the consumer spending in particular, which tracks 70% of the u.s. economy, is very strong. i have been traveling around the country this summer, and i have not seen any empty airplane seat. it is difficult to find a hotel room. . hard to get restaurant reservations. impossible to get taylor swift tickets. the consumer has money and is looking to spend it on a lot of things, and a lot of that is driving the economy. a combination of strong earnings from companies and good economic data is really what is behind this bull market we have seen the last couple of months. haidi: i think the taylor swift economy is onto itself, something separate from the rest of the world. when you take a look at expectations for august, we typically see lower gains for global equities. we typically see more volatility. bacchus tends to be the most volatile month. is history a useful guide, given

how much we have seen expectations be upended today? michael: this swings around. there is certainly volatility here. we have had five consecutive up months in the u.s. market. if we see a pause or a retracement, that were not a surprise and it should not be a surprise. i know september is usually the more dangerous month than august for whatever reason. it would not be surprising to see the market have a little pause at some point. but what really matters, what drives investors returns will be earnings. . as long as earnings are coming in strong, which they seem to be, market is basically in good shape. the bears have been wrong for a long time now. we just don't have evidence that that has changed. shery: in this environment, we are now seeing the dollars

monthly performance down for two consecutive months. at the same time, given that the trajectory of the fed still remains in question, what are the locations of its path this year, and your investments overseas? michael: that is a great question. and good to see. -- and good to see you. the dollar has an impact on u.s. investors investing overseas. a weaker dollar, investments, stronger dollar favors u.s. investments. one of the reasons the u.s. has outperformed the last few years or so is because of a stronger dollar. that has helped from a u.s. investor perspective. and a lot of what is driving the dollar is interest rates and monetary policy. monetary policy has been tight in the u.s. and higher interest rates here then we see abroad. and honestly, better performance by the u.s. economy, and better

performance by u.s. companies is drawing money in from overseas, all supporting the dollar. again, it would not surprise me to see some correction here having seen some strength in the dollar. again, the on relying economic drivers of markets, including the dollar, remain favorable for the u.s. and u.s. investments. in our portfolios, which do invest globally when we have investments all around the world, relative to the global benchmark, we are overweight the u.s. shery: we also saw treasuries stalling, given that we do have the quarterly refunding announcement by the treasury on wednesday. what are the implications of that $100 billion wave of bond sales? michael: that is a great question. i think the biggest disconnect that we see across all markets is in a fixed income. the market or rather the yield curve is steeply inverted, meaning very low, long-term

rates, relative to short-term rates. that indicates the market is expecting the fed to cut interest rates very quickly and substantially. i think that is really where my biggest disconnect is. i think the fed is likely to maintain a tighter policy for longer. that has been the case for over a year. the market has been wrong in terms of expectations of fed policy easing in the short term. and i think the fed is likely to keep a tighter policy, meaning investors should continue to stay with a shorter duration in their fixed income, earned that higher yield, and i think the risk of a fed cutting interest rates substantially in the near term is pretty minimal. i think keeping a shorter duration in fixed income portfolios makes a lot of sense. shery: michael rosen, good to have you with us, with his market calls. we have more to come on angeles -- more on "daybreak: australia." this is bloomberg. ♪

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haidi: take a look at how we are setting up for the major opens. kiwi stocks were versing yesterday's gains. we saw the kiwi dollar rising, helped in part by the bank of japan's's announcement of the unscheduled bond purchase operation, which sent the aussie dollar higher. you are looking at trading of .6719 u.s. cents. the best performer today. you are looking at sidney futures up .3%. more to come. this is bloomberg. ♪ (announcer) enough with the calorie counting, carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy.

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haidi: ahead of the rba's cash

rate decision, traders are expecting a hold after weak data. economists seeing a basis point increase as inflation remains above targeted. look at this chart, showing potentially the rba, compared to other major central banks, has more room if they wanted to, to push through another 25 basis points. rba rates are seeing it behind inflation. tossing up as to how long this pause potentially lasts. joining us to discuss is the chief economist at rbc capital markets. this is a really interesting one. you can see from both arguments that there are good reasons why they could hold or why they could go now. >> there are indeed. i mean, we are quite divided in our views when we talk to clients, when we talk to our colleagues and others. there is no doubt that this will be a close decision today between pausing again or another

25 basis point hike. at the margin, we think the odds favor another pause today. like i said, very close. for us, we had a hike penciled in, a final hike for today, and we have pushed it out on the back of two key developments over the last week or so. the first is the global central banking cycle. i think what we saw and heard from the fed last week, the ecb come at the bank of canada minutes, all seem to signal that they were pretty close to done, if not completely done. and we think the fed's rates have peaked here, that the ecb also at 375. our european team took out there last hike there, bank of canada and the reserve bank of new zealand also had done so. the global backdrop is important for the reserve bank. the fact is that a signal probably a pecan global terminal for a lot of those banks supplied here.

inflation high but moving in the right direction. and the second really is the domestic data over the last week or so. while inflation here remains high, it too is coming down. i think more importantly, inflation for q2 was below the reserve bank's forecast, headlined below. we had a weak retail sales print for june. quite a lot of droppers, it garners more attraction, and lending aggregates as well wakening. when we put all of that together, there is enough in there that the rba to pause, if it wants. if it wants an excuse to move, there are a couple of key development globally and domestically. yes, a finely balanced decision today. shery: finely balanced will be the communications. how hawkish with a hold have to be in those communications to convince expectations, with or you were about traders or economists, that they may still

go again? su lin: i think the rba, if it talks to pause again, we have termed it an uneasy pause. despite everything i just said, we know the labor market remains supertight, and wages and union labor costs are rising. and that will keep pressure on inflation, particularly the key component of inflation. i think it will be an uneasy pause. they will suggest again that they -- that there may be the need for additional tightening. that is possible. but markets will very much latch on to any suggestions that policy is very restrictive. that there is a lag in the impact of policy and policy traction. in particular, that the rollover a fixed rate mortgages, the step up we are seeing in the second half of this year will also be through to the economy. we know that activity is slowing, consumers in

particular, activity indian expenditures pulling back. discretionary spending especially is declining now. it does definitely come down to statement. a door that will probably stay open if needed. further tightening if they pause. but a clear acknowledgment that policy is restricted. if they do opt to hike today, it could be a definition hike -- eight dovish hike. i think we have also said that this is a bank that appears reluctant to move too high, that wants to preserve the gains of the main -- of the labor market, are not prepared to push demand extraordinarily, and into contractionary territory. shery: how much of a factor is the current backdrop of global central banking activity? and is there a temptation right now from the outgoing governor that you might want to provide a clean slate for incoming governor michelle ballack?

su lin: i do have some sympathy for that view. whatever happens today, we are likely getting closer to the end of the cycle. if the rba feels policy needs to be more restrictive, to be more confident that inflation will move back within a reasonable timeframe, they may well opt to move sooner rather than later. either today or next month. we are close to the end. it gets the new governor a bit of a clean slate, as you suggest, to really focus on a number of other important aspects of the bank. the limitation of the recommendations of this independent review, there is a lot of work to do their over the next 12 months. a lot of change coming for the rba in terms of or structure, communication, new practices. that will be very much her focus for the next six to 12 months. having policy settings to do the

job in terms of maintaining employment gains, as well as getting inflation lower. if we can get the settings right sooner, it gives her, and the new team at the rba, more time to focus on some of those other issues. shery: we continue to see these series of announcements coming from china on how they want to support economic growth, given the linkages between china and the australian economy. how much does a potential recovery their factor into the rba's calculations? su lin: china is always important, but it is one of many factors that the rba thinks about as it figures out its policy and get the most important stats and how restrictive it needs to be. the sense of the moment is clearly, a weaker china, possibly one that does not meet its growth target this year. more importantly, a policy response there that is different from the traditional response of

supporting activities through infrastructure spending and housing. those are very resource intensive and generally have been supportive for australia. the response now seems a little slower, seems more wrist on the consumer. some of the measures will be helpful but probably less so than what we have seen in the past. the uncertainty over china, the risk of a softer outlook, and a different policy response, it is something the rba is taking into account. again, at the margin, it may lean towards a hold today. and a central bank that is also closer to the end of this tightening cycle. haidi: china's stimulus is one factor, but there are other global forces creating inflationary in energy markets, grains markets, agricultural prices at the moment. does that skew the inflation risks to the upside for you? su lin: there is lots of moving parts in the inflation future

for australia. we know we are lagging a little versus a number of other countries. inflation has peaked. but core inflation is below and is higher than most other parts of the world. some of those swings, particularly in food and energy, they will hit headline. less so for cora. but we are mindful that the core measures are high. they will come down. but the odds are they will remain above the reserve bank's 2% to 3% target range for the next six to 12 months. it will come in many ways, limit the extent whether the rba can deliver cuts later next year. we could see rates stay higher for longer in that scenario as well. particularly if some of those shocks become more embedded into inflationary expectations and wage expectations. it is a complex picture. if a straining cash rate around

these levels, may be higher, 435, our base case still, it is below and other parts of the world. it does limit the scope. and there are clearly pressures on the inflation side. haidi: always great to have you with us on a very important rba day. chief economist and rba city council markets. we have more to come on "daybreak: australia." this is bloomberg. ♪ 76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

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>> one of the year's toughest income trades is facing a juncture in latin america is bond investors attempt to time pivots in u.s. and local interest rates. for more, let's bring in bloomberg reporter. what are the risks ahead for the trade of the year after that 25% rally in ian m bonds? >> at this point, emerging-market banks have already started their easing cycles paired for example, last week, chile had slashed their rates by one percentage point and brazil may follow this week. that might be taking away the drivers behind the local currencies that has rallied so far. also, adding onto the risk is the uncertainty around u.s. rate cuts. because the fed is taking a data-dependent approach. many investors are actually

pairing their exposure to local courtesy bonds. haidi: the boj policy stunner also threatens a carry trade. we saw a rally in the brazilian royale. >> for sure. the trade here works when the yen is at an ultra low interest rate policy, and investors tend to borrow yen and then invest in higher yielding currencies. in this case, it is brazilian real and the mexican peso, because they have high interest rates in their countries. the fact that the boj is loosening its grip on policy rates and letting the yield to rise more freely, that may cause the yen to appreciate more. making the trade to be less profitable. we know that mexico and brazil have high interest rates and the boj will do things more carefully, which will let the yen appreciate more in gradual. that way, the trade may still be

worth it. shery: bloomberg's emerging-market reporter zijia song, joining me here paired let's bring in the next guest whose preferred em exposure was -- is in latin. great to have you with us. evan all of these risks, could we see some profit taking in these trades, especially when valuations don't seem as compelling as they were before? jack: sure, you could see some profit taking. we have done some profit taking. that is it. you are just paring back an overweight position. you are still maintaining a significant overweight position. i don't think anything fundamentally has changed. some of the central banks, with chile and brazil and others will go down this path. they are going to go slow. they are doing it because inflation has come down. they are not doing it because

their economies are starting to drop off a cliff. i think that reinforces the view they may get more of that soft landing. we all know the develop market in central banks are aspiring to get soft landings. i'm not sure they will be able to do that. shery: how is your view of the chinese economic recovery actually affect what your preferred calls are in the end? jack: it affects it affects and on two fronts. one, at a high level. i actually take u.s. dollars that come under pressure this year, if we are right about china doing more stimulus coming getting more stability, relative growth shifting in favor of china versus the u.s. slowing down. that will be the u.s. dollar bear. going down another level has -- as china stabilizes, the demand for commodities, countries are commodity exporters. they will benefit from china.

we know china has the biggest global footprint in terms of the economy. a stabilizing -- i'm not saying china is off to the races, but that will be a good backdrop for global growth in the emerging-market space, and in latin m. haidi: has china's role in the complex, if you are looking at stocks or currencies has that weak,ened in recent years? jack: it has weakened from a significant level. domestic demand has become more important, and it should. china is still a dominant theme. the two big drivers of global growth are the u.s. and china, in terms of the ultimate impact on the commodity oriented em's. china has a bigger put -- a bigger footprint. haidi: ai obviously has been a dominant part of the training -- trading narrative. could we see emerging markets benefit in a different way,

perhaps in a less costly way through the consumer? jack: yeah, this is probably the $64 million question. and i don't have the exact answer to this. because this is also relatively new. i was thinking about it in the developed world, certainly the markets is getting a lot of attention. in the emerging economies, i think they are well-positioned to benefit from that. technology is a great way of enhancing productivity. and it is certainly emerging economies that are able to do that. they can leapfrog a lot of the things we have done in the developed world, building a more traditional infrastructure, for instance. bricks and mortar banking versus online. i think ai is going to be interesting to see how it impacts emergent economies. i don't see it being a negative. shery: are you looking at that call -- at those calls over ai on the macro sense, or do you like certain companies in these em spaces that have potential?

jack: i'm not going to go down to companies specifically. my mindset is that it is not necessarily the producers of ai, it is the consumers of ai. we saw something similar in the late 1990's when we had the internet bubble, etc. -- australia was a great example of that, they don't produce technology, but they are big consumers of that and that enhanced their productivity. i expect we could see that in the development. it is not a 2023, 2024 story. . this is setting the stage for the next 10 years, which i'm still constructive on the developing world, given some demographic issues. but it would be another tailwind for attracting assets -- i should say, attracting capital into some em assets. one last point. i feel as though given the performance of the last decade, global investors are just structurally overweight u.s. assets. i think that could shift over

the coming decade. shery: talk a little bit about inflation. prices have always been an issue in many of these emerging economies, especially when it comes to food inflation, given that we are expecting the el niño weather event. are you concerned the central banks that are now starting to cut will have to reverse trend? jack: you nailed it in the sense that inflation is the critical variable for 2023, 2024. i'm actually more constructive. again, inflation is still at high levels. it is moving in the right direction. although in the case of brazil, it is not at high levels anymore. they have done a great job tackling it. food energy is a big component of the inflation baskets and a lot of emerging economies. but we have seen improvement in that particular. by and large, we have seen inflation come in below expectations, on a steady basis

for much of this year. i'm still very constructive on em assets. they have done extremely well. again, you can rotate, asia em is lagged. it is interesting. you don't have the carry you do in that. i think the em central banks are in a position to cut rates is good for growth, and that will not deviate capital gravitating toward em markets. haidi: great to chat with you, jack mcintyre, portfolio manager, all things em's. we are looking at some data across the bloomberg when it comes to new zealand, building permits. perhaps a lack of confidence starting to build when it comes to construction. we are seeing building permits for the month of june, staging a little bit of a recovery from the previous reading which was a contraction of over 2%. we are seeing a gain of 3.5%. the broader trend has been seeing homebuilding approvals

and permits falling in a sign of the slowdown we have seen in kiwi construction sector, that is set to weigh on the broader economy. . we also had new zealand saying -- seeing its lowest listing since 2007. economic uncertainty also causing vendors to hold onto homes, according to real estate.com. much more to come here on "daybreak." this is bloomberg. ♪

shery: welcome back. bloomberg has learned ubs is planning to dispose of billions of dollars in loans to credit suisse clients in the asia-pacific region. this as the swiss bank works to reduce risks from the defunct lender. su keenan joins us with the latest. what kind of high-risk loans are we talking about? su: these are structural loans, a quarter of these loans to these wealthy asian clients were structured and complex and they were inherited by ubs in the merger with credit suisse. sources tell bloomberg that ubs wants to neutralize the risk to its profitability and be patient. it has been scrutinizing the approximately $86 billion book of loans made to rich clients globally. sources say they have keyed in on these loans to the aipac clients. they say the bank intends to wind down or selloff most of the

credit cease -- credit suisse structured loans in that region. and they say these riskier assets are to be placed in a so-called non-core unit for businesses that ubs, according to the sources, no longer want. about a quarter of credit suisse's's lending portfolio is in its global wealth business structure in nature. half of it consists of lower risks playing lumbar loans. it is important to point out that prior to the ubs takeover, credit suisse had pursued a decade-long push into southeast asia where it lend to billionaire business families, and that help make credit suites the -- make credit suites the bank they went to. sources tell us the client list and the asia-pacific region also includes some clients and structures of loans which include both individuals and the companies together that ubs may not want to do business with now. we will hear more about this in

their earnings call. shery: all of this is happening, and we have seen ubs facing an exodus of credit suisse top wealth managers. su: sources tell us at least six high-level wealth managers from the credit suisse side in hong kong have now left the merge unit. this was not entirely unexpected. it was just earlier this month that credit suisse wealth staff was told to dust off their resumes ahead of a selection of new managers. it is typical in situations like this but the first to leave are the most valued. sources say this latest round of exits does include prominent individuals such as martin low, market group had for china, and joe lau, a 16 year credit suisse later. -- leader. again, this is part of the

merger situation. but it also shows some of the talent at credit suisse also leaving, as the dust clears in the merger and takeover. back to you. haidi: bloomberg's su keenan there. coming up in the next hour, winthrop capital warns investors have fallen victim to the phone mode trade and ignoring valuations at this point. and our guests join us to discuss china's economy and their interpretation of the policy support we have seen so mark -- so far. that is it for "daybreak: australia." "daybreak: asia" is next. this is bloomberg. ♪

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