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you're watching daybreak. asia coming to you live from new york, sydney and hong kong. we're counting down to asia's major market opens the top stories this hour. asian stocks set to follow wall street lower as strong us retail sales signal rates may be higher for longer. dollar strength sinking apac currencies to this year's low decision day for the reserve bank of new zealand. with cooler inflation and higher unemployment supporting another hold. plus, china said to mull cutting stamp duty on stock trades as defensive reaction to a surprise rate cut shows president xi facing more tough choices. let's take a look at us. futures now down. the stock market had kind of a tough day today. we're seeing now some green on the screen. however, just basically still pretty much unchanged. and in fact, the the feeling here was that retail sales in the us stronger than expected. why wasn't that good for stocks? because neel kashkari, part of

it at least, president minneapolis fed says he doesn't think the fed's done enough yet to bring down inflation. well, if the consumer is so resilient, how is the fed going to stop hiking rates? that's what hit stocks today. in terms of the treasury market, the two year actually gained amid a global bond sell off. there's more concern now about rates having to stay higher for longer. uncertainty now about china in its slowdown. that surprise rate cut in china overnight. and then oil, it's very simple. if there's going to be less demand from china and if there's also uncertainty about what the fed's doing on rates, well, not not doing much now, but a bit of a wait there, too. so let's move on. this big fed story, a top fed reserve, in fact, saying he's not yet convinced enough has been done to curb inflation. those rope bust spending numbers showing rate hikes have not done too much to slow down the consumer. not yet. let's bring in bloomberg's executive editor for asia markets, paul dobson. so, paul, the number is so interesting, isn't it, when you get a strong spending number, boy, that looks like the economy

is holding up, but not good at all for stocks. let's start, though, with with linking that to neel kashkari and his comments about not having done enough yet to bring down inflation. what do you make of that? yeah, well, you know, the fed board seems pretty split at the moment between whether there's a need to to carry on going or at least hang that prospect out there or whether now is the time to sit on the hands a little bit and just let that seep through out into the rest of the economy and watch the effects roll on? i think, you know, we'll probably hear quite a lot in the build up to jackson hole and that will probably give us more of a sense of whether we can still tighten even further or whether, you know, at the very least, we're going to see that kind of message coming, that interest rates are going to stay higher for longer with the fed guiding the way. and i think the way that that's seeping through into markets, kathleen, isn't just on higher outright yields, but on higher

real yields as well. so once you strip out the inflation element, we're seeing an increasing risk premium into the market as people expect that, you know, we're going to see that interest rate risk feeding through for longer. and i think that's probably why the retail sales figures were seen as particularly negative for the equities market today. yeah, so a strong set of retail numbers. the consumer obviously holding up pretty well. but i guess the question is, can it last? haha yeah. well that's that's always been the question. you know, many of us probably expected that we'd be heading into a recession by now. that hasn't been the case. the labor market still looks pretty good by most metrics. the the economic data, you know, like the retail sales also good this one seems to have more of a tilt towards goods rather than services. but all the same, you know, the spending is still going. so, um, if that continues then

it's very hard to, to, to be convinced that you've managed to get inflation under control already and the inflation expectations as well, which is why the fed just needs to keep on pushing right now in order really to just, just cool that, just, you know, kind of bring everything right back into into the ballpark and under under its firmer grip. so, paul, you know, people are talking a lot about jackson hole and it is true that the fed chair at this annual gathering, the kansas city fed's supposed fiom the fed chair, can choose to send a strong message. george, what do you think people are expecting or hoping to hear from fed chair jay powell in what, just about a week and a half now. um, i think the the consensus expectation will be very much that he's going to want to stick to his guns, that he's going to want to say we, you know, we might be near the the end of the hiking cycle, but we're certainly not near the beginning

of the cutting cycle would be the standard expectation. you know, if it's possible to put any kind of a time mark here or use some kind of nuanced language to suggest just how long it might be that interest rates are going to need to stay high there, maybe you know, that will give the market more of a sense of where we're going. you know, so it depends whether he really wants to put that forward guidance out there or not. probably not, because, you know, the fed has been telling us that it's more data dependent now and that it really needs to see the evidence coming through in the in the inflation readings, in particular, the inflation expectations and and the and the and the and the labor market data for that matter, in order to be convinced that it could start to take his foot off that gas just a little bit and allow a little bit of easing back into the economy. all right. bloomberg's executive editor for asia markets, paul dobson there, the reserve bank of new zealand is expected to keep policy on hold for a second straight month when it makes its call in just a few hours for more, let's bring

in bloomberg, economist for australia and new zealand, james mcintyre. so, james, no change expected today, but inflation is still above the target band. is the lagging impact of the tightening we've seen so far going to be enough to get the job done for the rbnz? well, we think there's no change today. and yes, we think that it's actually going to be coming through and it will come through in a big way. we've already seen new zealand's economy tip into recession, but it's not the real recession that's going to hit new zealand that's coming soon. these mortgage rates in new zealand mortgages are going to be reset or refixing. around about 30% of the total outstanding mortgages over the next six months. and they're going to have dramatically higher rates and that's going to see that consumer recession that we've already got deepen over the course of this next year. and really pull that inflation down domestically. we think they've got a chance of getting there with what they've done. so, james, how do you think, adrian, or at the press conference conference after the decision is going to play this, because some people think he's going to want to leave a little bit of a hawkish note. inflation is still a 6% year

over year after all, and it's also the fact that inflation expectations have risen a little bit versus questions about recession questions about what you just said. isn't it likely, isn't it possible that all these resetting of mortgages is going to push the economy a lot harder in that downward direction? that's right. we think that's what will happen in terms of the economy. but what will, adrian or say today is is is the big question. we have seen those inflation expectations, as you said, on the business survey tick up a bit. today's household survey, we've seen them fall down, but they're still short of where they need to be. they still need to come down further for the rbnz to truly be comfortable. but the other thing that's been coming down that might also make the rbnz a little bit uncomfortable and really bolster adrian orr's, i guess hawkishness today is the currency. we've seen the new zealand dollar dip below $0.60. that would get the rbnz a little

bit worried that they might get a little bit of an imported inflation pulse coming through and and i guess putting a bit of sand in the wheels of that inflation decline that the domestic economy, the recession should be delivering. but if we do get that pass through that imported inflation, making that process a little slower, that could be a point of discomfort. so really trying to talk things up or maintain hawkishness in order to keep those inflation expectations falling, but also to try and make sure that currency doesn't go too far and give them too much of that imported inflation pulse. i think that's going to be one of the key things. on adrian orr's or the key things from his perspective today. yeah, we'll hear from that in just a couple of hours now. very, very tricky to navigate at these turning points, isn't it? james, thank you so very much. that's bloomberg's james mcintyre getting us ready for the rbnz decision. just coming up shortly. well, moving on to a deluge of disappointing economic data from china, spurring investment banks around the world to cut their growth outlooks for 2023.

we see barclays, jp morgan, japan's mizuho, have all slashed their forecasts. what could signal a fresh round of downgrades? joining us now is our greater china senior executive editor, john liu. you know, john, it's tough to know where to start in the past, what, 24, 48 hours we've had the surprise rate cut. we had the latest data dump, the industrial, you know, the economic activity numbers coming in even a bit less strong than expected. these downgrades aren't much of a surprise. what does this where is the chinese economy now? is it is it decelerating? are people overreacting? how do you see it? the the economy is obviously decelerating. growth is slowing. it's not where we had expected it would be at the beginning of the year. i think it's really interesting the cuts that we got from barclays and from jp morgan, because it takes the rate of growth below 5% and that is the official target for 2023, 2023 from the government. as we go below that 5% target

for the year, i do think we will see the government taking more steps already after that surprise rate cut from the pboc yesterday. we've seen calls by other analysts for more action by the pboc. so more rate cuts, cuts to the reserve requirement. and so we do expect more action, not only on the monetary side, but also on the fiscal side and the government taking a much more proactive approach to try to make sure it hits that 5% mark for the year john, we spent a lot of time talking about the youth unemployment problem in china, but government's got an elegant solution to that. just stop reporting the numbers. problem solved. right? well, we what we know is that the statistics bureau said they needed to quote unquote, optimize the statistics on youth unemployment. but before they could put those numbers out again, whatever the motivation is, the perception that that is fueling is that

china is reducing access to data at a time when that data makes the economy look not very good. and so that that is making especially markets and investors more jittery about how investable china is and how much they can rely on the information they're getting. so tell us about about the fact that chinese authorities are considering cutting the stamp duty on stock trades until a story like this comes out. i don't think a lot of people outside china are really focused on this. but it's potentially a big deal. are they going to do it and what will it do for the economy? well, a cut in the stamp tax on stock trading is something that the brokerages and investment houses here in china have asked for for. we do understand that the central government is considering such a plan. some of the ministries, including the ministry of finance, have been asked to draft a proposal to do that. it does not mean it does not mean that beijing will necessarily decide to take that action, but it is something that

is being considered the motivation for doing that would be to instill an amount of confidence not only in markets but in the consumer. when own stocks go up, people feel a little bit wealthier and potentially they will spend more and potentially that will help this economy get back on its feet. all right. that was bloomberg's greater china senior executive editor john liu there. all right. we're counting down to opens here in australia. also south korea and japan, annabel's here for a look at what's been going on in markets. bell thanks, paul. yeah, a lot of our focus, of course, in the session today going to be what happens in china given, as you were just discussing there with john, that scoop that we had around possibly cutting stamp duty on stock trades. now that could be something to really boost out trading activity. and indeed, we did actually see the csi 300 still ending the day in the red, but certainly improving off the lows of the day. but this chart here showing how much trading activity has

slumped. turnover has now been below that 1 trillion mark since around may of this year. so certainly trying to boost that does hinge on more reform measures coming through. so a scoop that we're be watching very closely. let's change on because it's not just the focus on china today. lots of different currencies we're watching in the session today. the aussie dollar, the kiwi dollar, the offshore yuan and also the japanese yen trading around their weakest levels of this year. this chart here taking a look at dollar yen implied volatility that is sitting around a year to date low. now what that tells us is that traders out there are not really that fazed by this risk of intervention from japanese officials. and yesterday we actually heard from the japanese finance minister, suzuki, saying he is watching the moves very closely. they are prepared to act. but the likes of credit agricole, for instance, saying that they're rating this around a four out of seven on their scale of intervention. so we aren't really seeing too much of a reaction just yet. the yen right now trading very

close to the levels at which officials last or first started to intervene in the currency in september, paul, of last year. all right, thanks, bell. still to come, we're going to have some more analysis on china's economy with credit agricole, their thoughts on the larger than expected rate cut and the direction of the yuan later on this hour. this is bloomberg. with butcherbox. we deliver grass fed beef, organic free range chicken, humanely raised pork, wild caught seafood and so much more. sign up for butcherbox today.

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powerful, easy to use tools power. e-trade makes complex trading easier. react to fast moving markets with dynamic charting and a futures ladder that lets you place flatten or reverse orders so you won't miss an opportunity. e-trade from morgan stanley. right now, inflation is coming down. we've made some progress. some good progress. feel good about that? it's still too high. the good news is the labor market has remained very strong, but it's a little bit of a double edged sword because the question in my mind is, have we done enough to actually get inflation all the way back down to our 2% mark or do we have to

do more? minneapolis fed president neel kashkari on the current state of us inflation certainly catching the market's attention today, particularly after the retail sales numbers in the latest month came in on the stronger side than expected, suggesting that more of a 500 basis points of rate cuts is still not taking the steam out of the us consumer. you can see that after a late day slide in stocks, things have steadied. now we wait for the opening to see how that will feed over into the asia trade. right now, everything pretty much a little bit of green, but quite flat. so let's get on to our next guest saying de-risking signals across industries and sectors in the us. aaron gibbs is president and cio at gibbs wealth management. we are so happy to have you back in studio with us as always. thank you. so, aaron, let's before we get to the risk signals, i mean, guess what kind of signal is it when you see retail sales holding up? neel kashkari saying inflation is still high. we see some progress. i mean, how do you add that to your list? is it is it a big risk?

is it a no risk? so i think what i'm talking about de-risking, i'm really talking about how the equity markets are pulling back and just sort of pulling sort of having a countertrend moment as we from the first half of the year. and so the fact that the us consumer is still spending so well obviously adds a lot of fears to the fed continuing to raise rates and that that more sobering effect of, wow, we're going to keep getting more hikes for quite some period of time. the us consumer just won't stop, which is which is wonderful. but you know, it's one of those good news bad news type of things. so for the past six weeks or so, we've really seen a shift in how the equity markets are changing. we've seen a shift in leadership and we've really seen a lot of defensive plays just become the leaders in the past few weeks. and this today, it was just a big sell off. i mean, everywhere across the

board, there was no safety. there was no defense today. so i think that it just spells sort of the fears about having interest rates much longer than we previously hoped for. so what does that mean then, when we take the sum of all your risks, the s&p 500 technology peaking and price and valuation, s&p 500 growth following broader selling data. is this is this it? for a while or is it one of those pause, those pullbacks that refreshes you get into defensive plays for a while. you sit back, wait for the dust to settle and then go, go buy again? yeah, i believe that this would be more of a counter right now. i believe it looks more of a short term counter trend. one of the reasons is because we're really not seeing a ton of fear in the market when you look at things like the vix and futures, we haven't seen that spike that we would see where we're looking at a really more deep type of bear market. in fact, the vix is at 16. anything below 20 means we're safe. there's still a lot of consumer confidence out there just like

as we see in spending. so i think this is something where you could potentially use it as just a 1 to 2 month short term trade or if you really do have stocks that you strongly believe and i still i'm not going into caps. i'm not saying, okay, go back into all your mega caps, go into those high growth names. those valuations were extraordinary high, especially when we're considering a multiple rate increases. i think still be very selective. i think we're still going to see a change in leadership. it's just not maybe quite as defensive of what we've just seen in the past two weeks. so short term trades manage health care, energy stocks, you can use it for the next four weeks, but we'll see how that plays out for when we're getting past summer back to school aaron. i know another thing you're keeping an eye on is rising bankruptcies. and when you sort of keep that in mind with the potential of a recession risk, where does that leave you in terms of forecasting potential rate cuts from the fed? right. so i think when we're looking at

bankruptcies, also another indicator is much lower m&a activity. i think that really for now is is still a small amount, but we're seeing a big jump in bankruptcies. more on the or the percentage wise on the private equity side versus it's still a very small percentage on the public. corporate side. and so i don't think that's going to play a big factor when it comes to the fed. as we know, they're very focused on inflation and unemployment. i think that's really going to be more a play on how companies do some of the capital spending, how it's going to impact financials, particularly some of the bigger banks if they're seeing less m&a activity, less capital activity. and so it might be a sector that you really want to avoid until we see stronger economic news. we've been focusing pretty closely on the disappointing data that we had out of china. i'm just wondering to what degree you see china exporting its problems. i mean, deflation being one of

them, that's probably helping develop central banks. but what about some of the other problems in terms of weak demand for commodities? right. so it's it's a it's an interesting phenomenon right now because, of course, we're happy to see weakness in commodities as if that might mean that the fed won't raise rates and certainly a lower oil price. we know that, you know, even when we're looking at core prices, the price of oil gets passed down through through everything. and so that would be a benefit when we're just looking at the us market. but obviously we are always tied and so slowing growth particularly really detrimental, you know, negative growth from china will have a negative impact on global growth. and obviously large corporations. so i think that might be a real benefit where for a slowing china would be more detrimental to our very mega cap or large multinational companies, but more of a bonus for those smaller cap companies because one, we won't get the rate increases that helps the

benefits of mid caps to they have a less exposure to china and so i think that's one way to play it. if we see this as a longer term trend, you know, a lot of people are so excited about ai, certainly evs, electric vehicles, et cetera. do any of those enter into your defense of pullback, go there for a while? you say, wait, see how that all plays out and then see if you want to really get into those more heavily. i'm looking at, yeah, really being cautious about your entry point because i think with some of these higher priced stocks, it's really about where you buy it and that's going to be whether you can really make money. so you're looking for a big pullback and i want to see reasonable valuation gains in some of these stocks. so not trading at 100 times earnings, looking at some scaled back expectations into 2024. and there are some few quality nvidia still. look, if that comes down to resistance, i think that could be a great play. obviously a very stable company. it's a semi though. you've got to be able to move and get in right at the exact

time. all right. well, i think that's comforting to a lot of people. wait and look for good valuations. don't dive in when it seems like it's way over your head. thank you so very much. that's erin gibbs. she's president and cio at gibbs wealth management. plenty more to come on daybreak, asia. this is bloomberg. bloomberg television is brought to you by get refunds dot com. see if your business qualifies for an refund today. good night. a corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. rock stars, please. you know what it takes to be a rock star? i've trashed hotel rooms in 43 countries. was on the road since i was 16. i've done my share of bad things. also, your share of bad things. we know that using workday for

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sydney, seoul and tokyo. and you can see from the look of this futures board behind me, we are setting up for risk off trading across the region in asia today, even though us futures now trading fairly flat. what is going to be driving that well, there's momentum, of course, but also what came through in the wall street session overnight. and the key headline really was around retail sales. they came in better expected. and so it reinforces why the fed may need to hold higher for longer. also, of course, we heard from the minneapolis fed president, neel kashkari as well, saying words to that effect. so this is the state of play as we head into the open sea. nikkei futures just coming online, 1% to the downside changing on because i mentioned momentum, but we do see that 50 day moving average for the s&p 500. and when you take a look at that, we've actually just broken below it for the first time since march. so a key indicator again, of that more bearish sentiment perhaps starting to take hold. the other part of this, of course, paul, does relate to what's happening in china because we've seen that lower

turnover coming through. we saw more support measures yesterday coming through in the form of rate cuts, not enough substantially to lift market sentiment. yeah, that's right. bell for a second straight month, disappointing economic data from china and that spurred investment banks around the world to cut their 2023 growth outlooks. and that's despite a surprise interest rate cut from the pboc. let's discuss all this now with xiao jianzhi, chief china economist at credit agricole. shaja, thanks so much for joining us. i just want to start with that surprise rate cut that we had to the the seven day repo as well. but is that really answering the right question? is the demand even there for people that want to borrow money? but find it too expensive in china? yeah. thank you, paul. this is a very important question indeed. the the pboc rate can come as a surprise with earlier than expected timing and also a larger than usual scale for the

cut. i think this is an important signal to the market that the beijing is feeling the urgency to do more. that said, and certainly this 15 bips rate cut is not enough. if we look at all this, the latest policy easing announcement, they come timely and they come in, you know, with a slew of measures, but they are not sufficient to put an instant floor to the data. so definitely the market is looking out for more. and we certainly would see more of the monetary policy easing to come through in including like a 25 bips triple cut, likely in september. and also another ten bips of mfl rate cut in for the rest of the year. but beyond that, fiscal policy really have to step up again and the government have to address

the low, very low confidence, confidence level by introducing more of the supportive measure to break the, you know, the the downward spiral that is caused by the property sector in particular. so those measures would be certainly more of those more important compared to the rate cut itself. yeah, we've seen a number of downgrades pretty swiftly to china's growth outlook. look, i know that you have downgraded the growth target for china for 2023 to 5.1%. that's looking pretty generous. we've got jp morgan and barclays both with a four handle now for china growth. but given the piecemeal approach to stimulus so far, how would you rule out further downgrades this year? i think that is that is possible for now.

i think 5.1% that we take into account that the government is will take up more of the policy measures so that to, you know, boost confidence and stabilize growth. we we do think china has a willingness and commitment to achieving the 5% growth that said, the in the near term, the uncertainty still looms large with the property sector slump has continued and and that could have more of the negative contagion risks to other areas if china do not have does not introduce more of the measures to break such a negative feedback loop. we are still hopeful that the china could be, you know, taking more swift actions to counter that such risk. so the near-term uncertainty is large, but china still have no capability to to do more of the

the chinese yuan keeps weakening against the dollar and of course, on the dollar side, of course, you see the retail sales stay, that kind of thing. you see it there. but still, investors seem to be taking a rather they're taking this all to heart. the economy is slowing down. yes, there's stimulus, but it seems kind of late. still not enough is the chinese currency going to continue to weaken? i think in the very near term, i still think there could be more upward pressures in terms of the us dollar cny spot rate at this level of 7.3, we will still be quite cautious on calling for significant upside room to the us to the dollar spot itself. we do see that the pboc is taking more of an actions to manage the effects expectations and to slow down the depreciation pace of the the the cny of course on very weak data.

disappointing you know policy easing pace and magnitude and relatively low you know, risk appetite around china is putting more of the pressure for the cny. so at this level i would expect the pboc will continue to to introduce more of the measures to manage such volatilities. we have seen the pboc have been, you know, keep fixing the market rate with a stronger bias and there could be more of a tool coming out of the pboc toolbox if the the upward move cannot be slowed. that could include, for example, all, you know, hiking, triple for deposit, lower the deposit rate for onshore deposit as well. and also putting, you know, giving more know guidance to the corporate to the to the banks in terms of their, you know, us

dollar purchase and the cny selling among other measures. for example, you know, offshore market to raise the interest rate and to drain the liquidity. these are all possible considerations, as you know, on bloomberg news team following some things that are going on in fx market, the offshore yuan forwards implied yield jumped 1% overnight, the biggest jump since april 2022, potentially. they're saying this could be a sign of capital flight speculation against the yuan. are you seeing that? could that become a problem? i'm i think in the past few years, the pboc has indeed accumulated, you know, many measures. and to manage the capital outflow risks. and then there has been quite rather successful. so i think this this capital

capital outflow risk is definitely would a top the pboc consideration on when they you know when they introduce more of the monetary monetary policy easing measures and when they you know monitoring the situation in the market. i would not be too worried about capital flight with you know the macroprudential measures and also the pboc tools that are available. but most of all is very important for the policy makers to take various measures to stabilize the, you know, the expectation of growth and to boost confidence from the current very low level. well put. you going to take some fundamental long term steps to you know, put the yuan, their currency where they really want it to be. thank you, georgie. she's chief china economist at credit agricole. so china's faltering economy is

reverberating many ways. it's being cited as a factor. now in the sudden downturn in oil prices. us futures hitting a two week low in the latest session and we're seeing little change in asia trading. bloomberg sue keenan following this story. joining us now and the unexpected rate cut overnight because they just look like everyone thought they weren't going to cut the rates. they were going to do these little targeted fiscal steps, boom. and that, again, a lot of people heard this and reacted. and yeah, it's just one more layering on of surprise factors because the chinese demand they are the largest importers of oil in the world. that has been a key factor in the bull case for oil. and now it appears to be deteriorating. the concerns about china demand are offsetting the tight market supplies we're seeing and an asia trading were pretty much unchanged from the pullback we saw to a two week low as mentioned in the us session. also seeing a pullback in brant crude. now the oil markets are suffering from economic global

concerns and one ubs analyst points out that china's economic data continues to disappoint. while in the us we've got data like retail sales that came in stronger than expected and that is creating concern. the fed may have to hike yet again. so you've got all this sentiment despite the fact that the physical markets of oil continue to show signs of strength because of the tightening, we not only have the lower output by the opec plus nations led by saudi arabia, we're seeing crude supplies in cushing, oklahoma. that's the major hub at the lowest level since april. and asian refiners, according to statistics, continue to ramp up imports. in fact, we've got fresh data from a data intelligence firm that chinese are buying the most iranian oil in a decade because the surge in brant is making the sanctioned crude more attractive. so put it all together. how does it make sense? well, the rally in crude that

we've seen is really fizzling on concern that that chinese demand quotient really isn't there, and that demand has likely, analysts say, peaked for the year. so at the same time, we've got european natural gas prices continuing to spike. what's the latest there? well, that has a lot to do with what's going on in australia, paul. not shale gas spiking for the second time in less than a week and a lot of market tensions continue and arise over the possibility of strikes in australia. in fact, there's been no progress in the early discussions that took place between union officials and woodside energy group. that's one of two companies operating those affected lng facilities in australia and traders are closely monitoring these talks and they say an aussie walkout could put 10% of liquid natural naturalized gas. that's lng exports at risk. and so again, what we saw with

the benchmark dutch contract, which you just saw it settled 13% higher after spiking as much as 18%. and futures surged 28% earlier on august ninth. there's a concern, unless there's more clarity on where this potential strike is going, that there'll be a short term bull run in prices. yeah. and woodside and union officials are still failing to find agreement out there that strike action. bloomberg's sue keenan there. thanks very much. plenty more to come on daybreak. asia. this is bloomberg. the more my company grows, the harder it is to stay focused on our core product. and i need to master and i esg, m&a, even how to adapt to hybrid working. the more hats i wear, the more i need aon they bring their whole team to the table and give me access to great minds in each

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humanely raised pork, wild caught seafood and so much more. join and get free bacon for a year for. free. the end of china's regulatory crackdown is expected to lift earnings for tech giants, including tencent and jd.com. but continued economic headwinds might slow their revenue growth momentum. our chief north asia correspondent stephen engle joins us now from hong kong with a preview. steve, let's start with tencent. what are we expecting there? well, obviously, that big wet blanket that was the regulatory crackdown on the big tech platforms has been lifted and that is going to improve the revenue outlook for the likes of tencent, where bloomberg, you know, intelligence and other economists are looking or analysts are looking at the fast

pace of revenue growth in the june quarter that we're going to get later today. the fastest pace of revenue growth in more than a year. the consensus estimate is for 13.4% year over year growth in revenue. and that's after an 11% rise year over year in the calendar first quarter. but again, the rising macroeconomic uncertainty, which we've been talking about quite a bit in china, is going to kind of limit the pace and that momentum of revenue growth, according to most analysts. we've spoken to. so that's going to be the key focus right now as advertising spending will likely be muted and also, of course, rising costs in ai and also in gaming and uncertainty in the gaming sector, which is a bread and butter obviously, of tencent. honor of kings is their legacy title, which is getting a little bit long in the tooth and revenue projections are a bit uncertain for those key games. so there are some headwinds for tencent, but again, this can winter quarter, second quarter,

second quarter earnings results should be the top line pretty good. but going forward, that macroeconomic uncertainty is going to kind of weigh on the prospects. so that's interesting. i love that that big wet blanket that was hanging over big tech companies gone. but a new wet blanket, all this slowdown. so what does this mean for jd.com? well, jd.com is interesting as well, because alibaba did outperform. so we are seeing jd jd.com as the key rival, also seeing a revenue uptick and some spending on some big ticket items. so i mean, the revenue number that we're going to get later today is not going to be a blowout number. the consensus estimate for sales increasing about 4.3% in the second quarter. that's after just 1.4% in the first quarter. demand for physical goods has recovered last quarter and should support high single digit growth in gross merchandise sales. that according to bloomberg

intelligence. but again, the consumer right now is fairly weak and that macroeconomic outlook and the property sector paper wealth for households is going to be dampening effects on, again, one of the key bellwethers in the retail space in china. so bloomberg's chief north asia correspondent stephen engel getting us ready for jd.com and more. let's go on to japanese companies now. they've been posting blockbuster earnings, a sign that inflation is having a positive impact on corporate bottom lines. for more, let's bring in bloomberg's senior asia stock reporter hiroyuki sawano. so bring us up to speed on the earnings. and i hope that governor wade is listening to your story that inflation can have a very beneficial impact and maybe turn into something lasting for these companies as. hi there. yes, exactly. you know, when you look at the numbers, basically the japanese companies profits have done

pretty well during the last quarter and one overarching theme here is that inflation seems to be having a positive impact on their earnings. now, the japanese government announced a gdp data yesterday and we saw nominal growth of 12%. now that's an annual sized figure, but that's a pretty strong figure if you consider that japan has been mired in deflation for a long time and that is helping companies basically making more profits because in the past, companies have the assumption, almost religious belief that consumers here will not accept price hikes. but that is changing. so basically, that is a good sign for japanese stock market. so what's been the driver of

profit growth in japan. so i mean, if you look at some individual sectors, i mean, export was pretty good. and so that is helping car makers, for instance. and the another interesting example is utilities, which also did very well. and that's helped by falling commodity and other costs. but as i said before, basically the biggest theme here is inflation and and i would say the jury is still out on whether this is going to be a sustainable or not. i mean, no one really thinks that japan is going to japan's economy is going to grow 12% for coming quarters. but those strong figures seems to suggest that something might have changed fundamentally in

the japanese economy. and if we think about whether japan can achieve a virtuous cycle of higher inflation, higher wages and higher growth, then one key element is obviously corporate earnings and so far at least, corporate earnings seems to be doing well. and that bodes well for the japanese stock market. all right. bloomberg's senior asia stock reporter, hideyuki sano there. be sure to tune in to bloomberg radio to hear more from the day's big newsmakers. and you can get in-depth analysis from the daybreak team broadcasting live there in our studio from hong kong. you can listen via the app radio plus or bloomberg radio.com. plenty more ahead. stay with us. i need a cooler night. are you trying to ice me out of the bed? maybe only on game nights.

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filing sales tax returns, business license guidance. cross-border sales item classification? does it connect with. internet without trackers, without malware ridden files? zen be more cyber zen get nordvpn zen. three. ukraine's energy minister says his country is preparing for another hard winter as the war with russia grinds on. an exclusive interior german glushenko told us kyiv is expecting more inflows of gas now from its european partners. today we could say that already something around. 600 million of gas stored in ukraine, which is gas of

european companies. and that is also important for the security of supply in europe due to the level of storages in european in europe now, because it's very high. so i think that that is a good solution for for the business and that is a good solution for european security. do you expect more coming, minister, from europe? yeah, we expect more coming. so, so i can tell you that we expect average something around from 5500 to 600 per month. so and we could offer, we could offer. so our storage is. we need 15 bcm for ukraine for the next season. and so 15% is open for storing in ukraine. can we talk about what you expect to happen this this winter minister, both in terms of the situation in ukraine and what you think the energy situation is likely to look like in europe? i think that that's very important. i mean, when we are talking

about the gas, this is very, very important. instruments which already started in european union, that is the joint purchasing platform, which would allow not to speculate the prices and manipulate the prices. and i think that that is very important decision concerning the ukrainian energy system. of course, we we are preparing for the another hard winter. so and just recall you that the previous winter we were living under everyday massive attacks on the energy infrastructure from russia. so it started from the 10th of october and the last massive attacks was on the 9th of march. so and it was every every day by all kinds of weapons. so now we are preparing for the next winter and we are not expecting that they wouldn't shell our energy system. that was ukraine's energy minister, german galchenko, speaking exclusively to bloomberg's alix steel and guy johnson. all right. well, let's than five minutes away from market opens here in sydney, also in tokyo and seoul,

futures shaping up for a distinctly risk off day. we've got nikkei futures currently weaker by about 1%. similar story here in australia. it was a risk off session for us markets as well. we also have a very weak yen heading into today's session. one 4557 so those market opens in sydney, seoul and tokyo up next, this is bloomberg. yo, yo, yo dude. you know, don't worry about me. yo, there's no shame. no shame. you don't know my family, man. it's okay to ask for help. find a licensed therapist at

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we're counting down to asia's major market opens waiting to see how across the board more than 1% declines in the major market indexes in the us after us retail sales stronger than expected rate hikes not slowing them down, will the fed have to hike more key fed officials saying he's ready for more hikes? inflation is still too high. paul wonder how it's going to hit asia. trade doesn't look good. yeah. yeah. it's going to be interesting to watch. and we got south korea coming back online after a public holiday. so potential for a bit of catch down there and a rate decision out of new zealand. so a busy day. annabelle. yeah, that's right. no change expected from the rbnz in its decision later, but we're counting down, as you say, to the opens for sydney, seoul and tokyo and the start of trading for cash treasuries. we've been watching that ten year yield, the two year yield quite closely as we get trading underway. but given that move higher we had in yesterday, kathleen, it really was what we heard from neel kashkari, essentially. yes. touting some of the progress that the fed has made in controlling inflation, but still

saying it's too high and that he's not ready, just yet to call an end for rate hikes, further reinforced, of course, by the retail sales that came in stronger than expected. and really that narrative now shifting from how high rates may go to how long that they should be staying elevated. so that's the state of play for treasuries as we come online here. but that yield gap between japan and the us still in focus. and we're watching that japanese yen as a result very closely. we did have some verbal intervention yesterday from the japanese finance minister, suzuki, saying he is watching moves quite closely. they are prepared to act, but the market reaction to that, we're not seeing really much of a change in terms of implied volatility. and you've also got the likes of credit agricole, for instance, saying that suzuki's verbal intervention, their rating that a level four out of seven and seven indicating the intervention or the risk of intervention could be imminent. so still quite a ways from that. and we're watching that yen today. nikkei 225 just coming online and you're seeing that drop

there down 1% as we get trading underway. let's change on and take a look at the open for korea this morning because as you say, paul, we are coming back from a public holiday in the market here. yes. catching down the kosdaq. they're outpacing that broader loss. and we will be watching tech stocks quite closely in the session. actually, they had a better day yesterday given that upbeat commentary on nvidia. but not showing through as we come online. korean one. meanwhile, it is a little bit under pressure. it is that story as well of dollar strength we've seen over the past four weeks or so. and that is really weighing down apac broadly. if you change on that's also playing out in the antipodeans this morning because we're seeing the aussie dollar, the kiwi dollar as well, trading around their lowest levels this year against the greenback. we'll be watching the rbnz rate decision, of course, quite closely. as i said, no change expected, but still the kiwi dollar in focus on that. aussie stocks online to the downside and we're watching brant crude fractionally higher as we get trading underway but traders really caught kathleen

it's that story of shrinking inventories. but then on the other side, you've got that story of china demand. and we've been discussing across these hours just how much malaise is seeping into the chinese economy, not just from loan demand, shrinking exports, but other factors that that activity data yesterday. certainly a lot for investors to be weighing there as well. the push pulled away there. let's move on to our next guest saying he's underweight on emerging markets in japanese equities. and the other side of that is he's overweight us stocks. karen calder, head of equity research for asia at joining us now. so, karen, i just have to start with some big news in the last 24 hours, actually, all week, lots of big news every 24 hours. but us retail sales stronger than expected. neel kashkari fed official, still inflation still too high. market sells off. how does that kind of dynamic, the fact that the fed may not be done, there may be more rate hikes, how does that feed into your call that you're overweight, us versus japan and ems?

yeah. so good evening and good morning. so for us, you know, there's no accidental messages out of the fed. so when kashkari is saying, oh, they may not be done, i think it's a reflection of, you know, the obvious that that inflation still is too high. um, if you look at the guidance, you know, based on the dots, there's possibly 25 basis points left until the terminal rate. but of course, we're going to get an update to guidance with the september meeting as well. so there's some some scope there. um, but i think overall we need to focus on we're getting very close to the end of the hike cycle at and what follows a hike cycle normally and especially in an aggressive rate hikes like like this has been is 6 to 9 months at the terminal rate. so that's that's probably what we're looking forward to. so it may be six the clock may have started, you know, in july or it'll start in september. but that's what we're looking for. so we shouldn't expect a rate cut. um, until, you know, second half of next year, but probably at the earliest.

so how does that feed into our you know, sort of global equity strategy? um, within, within the us markets after the last rate hike, you've tended to see markets inch higher, but it's been value that's been the sector that you want to be in and specifically financials. so we think as we get to the end of the rate hike cycle, there's an opportunity to to become overweight or at least not underweight in financials based on that dynamic. so what about the other side of that? the underweight japan and emerging markets do you think that japan, the big rally is through? do we you know, we're just looking at inflation continuing to move higher. we're looking at that very strong gdp number in the emerging markets. you figure a lot of them have have peaked in rates and they're they're starting to cut. so why are you underweight there? so, i mean, think so where we are now and after the, you know, 20 plus percent rally this year, japan is basically at long term fair value in terms of

valuation. but obviously there's a lot of dynamics going on. and the backdrop is, you know, japan is a market where you typically get long periods of nothing really happening and then short, sharp periods of outperformance. so for that to continue, you need to argue or we need to see that this this time is different. you know, there's been a couple of catalysts. the tokyo stock exchange, you know, pushing companies to lift valuation, which has resulted in a lot of big one time buybacks. that's helped. we had warren buffett in japan in april, which got a lot of press and everyone wondering what else he's going to buy besides the five trading companies. in fact, alibaba was more in the other in those five trading companies. but what we really need from here probably is, you know, domestic households to start investing in the market. that's one thing. on the retail side. and then also, i think, you know, there is a case to be made that, you know, outflows from china, japan is probably japan market is probably been a beneficiary of some of that as well. so there's quite a lot going on

in japan against a market that's trading at long term average valuation. now. karen, i just want to get across something that we're noticing happening on the bloomberg terminal right now. the korean won depreciating a further 8/10 of 1%, now heading towards a year to date. low 1338, 76 against the greenback at the moment. can you just unpack for us what's going on here? is this a story of dollar strength or is it more a case of china casting a very long shadow over the region, or is it a bit of both? yeah, i think it's obviously a bit of both. so, you know, korea quite closely tied economic to china. so that's not helping. um, also, you know, people tend to look at the wan and the yen together. so yen strength against both of those is not helping either currency. so i think you know those are those are the dynamics at play in korea a little bit stuck in the middle between china and and japan. yeah and in terms of china i

mean the market waiting on something more than piecemeal policy approach to the problems there. but to what degree is this void of policy, a case of politics? i think it's all about about politics. so a lot of, you know, what's going on is self-inflict and and therefore, a little bit hard given the the structure of politics in china, a little bit hard to reverse course. so i think things have may have gotten a little bit out of control. um, the you know, policy is obviously incredibly inward focusing, inward focused. and and in china, the market, you know, obviously is waiting for its, you know, a stimulus bazooka. but you know, the government does not seem that that's going to be the way, as you said, piecemeal is more the approach at the moment. um, the investors are obviously becoming much less interested in in china, despite the fact that it's extremely cheap. and again, i think that japan has been a beneficiary of that in terms of flows, as you're

saying, we should focus on dividend consistency at this point in the cycle. i think, you know, dividends always seem like, oh, they're safe and they're solid. and what do you see there? what's what's good for investors to look at there? yeah. so i mean, we talked earlier about, you know, financials is a sector tends to perform well at the end of the rate hike cycle. well another i guess style which tends to perform well at this stage in the rate hike cycle. so between 12 and 18 months after after liftoff is is consistent dividend payers. so, you know, we're talking not about dividend yields specifically, but about companies that consistently pay or increase dividends. there's indices around these, you know, where the criteria is. you need to have stable or increasing dividend for more than more than 20 years. um, these are the kinds of names which tend to do well in this stage in the rate hike cycle. and the reason is, you know, it's incredibly uncertain where we're going from here. there's still possibility of recession and the market's been edging towards soft landing.

but i think you could say right now, as of as of last night, it's you know, that's not the raging a little bit more or the other way. so against that kind of uncertain anti it's the certainty of consistent dividend payers that tends tends to perform well at this stage. all right. karen calder, head of equity research for asia at ubp, thanks so much for joining us. let's get back to bell now for a look at what's happening on markets and bell. just at a glance, one color appearing to dominate at the moment. yeah, it's absolutely red, paul and we're actually building into a fourth straight day of losses for the broader benchmark today. one of the sectors in focus is financials. it's amongst the biggest laggards today and you can see that reflected in some of the biggest banks here in asia. now that follows the trend that came through in wall street overnight. and essentially we had a report out that a fitch ratings analyst said that the firm may need to reconsider its ratings on individual banks if it downgrades the industry score again. so we saw the banks index down

nearly 3% and hitting the lowest intraday level we've seen since july 17th. so that's some of the state of play here for the movers in the industry. health downgrade to a-plus from aa would probably translate into negative ratings actions. that's what that analyst told cnbc. let's change on because the other sector in focus today are the tool makers here in asia. today we are again seeing these mostly tilted to the downside, except for makita there in tokyo at the top. but we did actually have home depot, essentially that company reporting earnings that exceeded the average analyst estimate. and so that suggests to us that us home improvement spending is performing a little bit better than expected. but, kathleen, of course, something else that played out with that stronger retail earnings picture coming through so us consumers holding up for now for now, we shall see. still ahead on daybreak, asia, beijing blast, taiwan's vice president for comments in a bloomberg interview. you saying lychee is telling lies that bring the risk of war.

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shipping. all this join and get free bacon for a year. butcherbox is. a deluge of disappointing economic data from china have spurred investment banks around the world to cut their growth outlooks for 2023. barclays, jpmorgan, japan's mizuho and more slashing their forecasts in what may signal a french fresh round of downgrades. joining us now is bloomberg economist david koo. so, david, the these downgrades occurred and, you know, in the same 24 hours as the the economic activity industrial activity index numbers all came in. i mean, they're not negative yet or anything, but they're just steadily losing steam. how how badly is the chinese economy decelerating? how much further is this going

to go? yeah, i think the the downgrade was following the july data, which came yesterday. so that yeah, we have to say that the economy has have been has been losing steam over the past several months. and we can we can see it what we think is that in our mind, you know, above 5% annual growth rate is still our baseline scenario. but we have seen more downside risk since last month actually. so that what we think is that, yeah, the economy is is struggling because and a key reason is the weak confidence amid the economy. and we think now the government needed to do more to to help the economy to stabilize. but what's the so as kathleen mentioned there, we've had a few

downgrades in terms of growth. but also yesterday we heard that the government is no longer going to be reporting youth unemployment numbers. what does this mean for transparency and more accurate future growth forecasts? well, actually, the that was not a good practice in our view because the the national statistics bureau, they didn't give much explanation on that. and it triggered the concern about the transparency and it is the same for us. and and what we can say is that the the the young people jobless rate has been high and we didn't see any chance for that number to get lower in the near future, although they don't publish it. so what we can say is that because the young people's jobless rate is highly correlated with the servicing sector, especially for small business. so we can we can say that the

high number means that the private sector, the small business are facing a are struggling in difficult in difficult in difficult situation so that this tells us that the economy is not so good as its from the headline numbers in the past two quarters, which was largely based on the base base effect. so looking forward, we think that we will see more and more weakness in the economy because the the base effects are removed. but on the other hand, we have seen that the the government is taking more measures to support the economy for for example, the pboc cut the the policy rate by 15 percentage points. sorry, not it is 15 basis points. yesterday. so that you can see that they are doing something. all right. that was bloomberg economist david chiu there. turning now to look at the us, let's have a look at futures. us wasn't a great day for us

markets and we've got s&p e-mini futures very modestly in positive territory at the moment. nasdaq and dow jones futures similar story there. let's in fact call it pretty much flat, but at least a bit of a turnaround from some of the selling that we saw today. let's i beg your pardon. let's get some more analysis now with bloomberg intelligence chief equity strategist gina martin. adams. gina, things like inflation, the labor force in the us obviously a hot topic, but perhaps a burning away in the background. artificial intelligence. understand us corporates are increasingly discussing this, but specifically what do they say in terms of applications and implications of this technology? yeah, i think that's a really good question. we did a broad analysis of transcripts for s&p 500 companies and our big takeaway this week was the macro issues that dominated 2022 discussions such as recession and inflation, supply chain and labor to

continue to lose predominance in transcripts of earnings calls. that includes both management commentary as well as analyst questions. what's starting to gather a lot of momentum are conversations around ai and capex. it's still too early to really answer your question about how these things will be applied. what we do detect, though, in our transcript analysis is that companies are getting more optimistic. the commentary around ai as well as capex at large is starting to surpass the commentary around macro conditions, which does say a little bit about a shift in the outlook toward the toward the end of optimism as opposed to the pessimism that really dominated most of the last six quarters. let's take a look at the japan stock market. big rally. we just had a guest on karen calder from bp and he is now has japan as one of his underweights. he's overweight, us. but he he noted that it's been a big rally and japan tends to go

in long periods of not doing much and then doing a lot. where do you see them now. yeah. so we actually run a country allocation model, kathleen and that model has pointed toward japan for the last two quarters. that continues to pick up on the fact that japan has very strong price momentum, but also very strong revision momentum and strong earnings trends in the course of the second quarter earnings season. the japanese bellwethers are the biggest companies in japan by sector dramatic outperformed expectations, with 70% of those companies beating second quarter forecasts and japan is posting very strong earnings growth relative to the rest of the world. that momentum appears to be continuing into the third and fourth quarter, at least with analysts revisions also very positive for the nation. so these are tough to work against and pmis are also generally doing relatively well in comparison to other developed market nations. there's just not a lot of reason to fade beyond the idea that we have had a rip and maybe that

rip is a little bit overbought, but the broader conditions are still quite supportive of this group relative to the rest of the global economies. gina if we want to talk about a rip, let's talk about big tech, particularly in the us, real tear. but how sustainable are these valuations? what's the risk of a correction? yeah, tech valuations have been a problem all year. it's the one thing that really is holding tech stocks back. and our broader sector scorecard for the united states, we do see the tech stocks are toward the top of the sector scorecard relative to defensive sectors. they still are in a broadening earnings cycle. the momentum of earnings is helping tech. certainly price momentum has been very strong up until the last few weeks. what which i would consider more of a consolidation of gains than any sort of material sell off so far. but valuations are enormous. and in fact, the premium for tech stocks is back to its all time high relative to the s&p

500. even when you exclude the biggest tech stocks, apple and microsoft, you find that the s&p 500 technology sector is trading at an enormous premium to the rest of the index. so this could become a problem if the companies cannot satisfy expectations. us tech has a great history of growing into its multiple when investors get bid up tech stocks, usually it's in anticipation of an earnings recovery that is likely to surpass expectations. that does seem to be the case right now, with tech stocks still beating expectations in the first quarter and the third quarter. and lists continuously revising those estimates higher. but we do want to be on guard. valuations are so high that they do imply expectations are very high now in the market at large and we will need to continue to see these companies beating those earnings expectations to sustain those valuations. very interesting, aaron gibbs was on with us earlier. gibbs wealth management also very cautious and wary of these big, big tech stocks that was

bloomberg intelligence chief equity strategist gina martin. adams plenty more to come on daybreak. asia, this is bloomberg. to be a great active manager for you need a team. it's like turo prices. active etfs are a race car driving team. you have your drivers, which are the portfolio managers and you have your pit crew, which are the investment analysts, people are trusting you with their retirement money. and so every day you come in and give your best in order to come up with the best outcomes. hi, i'm mr. wonderful. and when it comes to small business, i don't bs why? because cash is king and it's hard to get. but i have good news. if you had w-2 employees during the 2020 and 2021 pandemic, you may qualify for a cash refund of

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there's noason. get up your way. china has slammed taiwan's vice president lightning to calling him a, quote, troublemaker who seeks the island's independence. the comments follow lai's exclusive interview with bloomberg. let's get more now from our deputy taipei bureau chief, cindy wong. so what exactly did say that upset beijing so much? because in some ways he was so nice. oh, yeah. let's open the doors. let's, you know, let's work together. et cetera. and i'm putting my tongue in cheek a little bit because i don't think they like to hear him talking about democracy and how they could join in that. hi, there. yes.

vice president lai is right now visiting paris. and before he returned to taiwan, he will make a stopover in san francisco in the us. despite lai has been very low profile about his trip. this time, china still showed its displeasure about lai's paragraph and us visit. so china has criticized us for violating the one-china principle by allowing lai to make transit through the us, even though the us has repeatedly saying that there has been routine practice for taiwanese president and vice president to transit through the us. so there is no point for china to make this as an excuse for any strong reaction in. and just late tuesday, china's taiwan affairs office issued a statement saying criticizing lai's comments when he talked to bloomberg exclusively in the interview that we will work to maintain the peaceful status quo. so china's criticizing the statements that lai's comments are totally lai, and people like him will only bring the risk of

war and so it's yet to be seen whether china will have any strong reactions or even military exercise following lai's us and powergrid trip. just last week. but one day before leaving for this trip, china already announced the exercise of military exercise in the east china sea, and it is widely speculated that china may have more reactions after lai's back to taiwan. so that's something we will keep a very close eye on. yes, lai is currently in paraguay, and that's just one of 13 countries that taiwan can count as a diplomatic partner. what's the latest on that visit? yeah, so lai arrived on paraguay on monday and on tuesday he attended the inauguration ceremony of paraguayan presidential elect. paraguay now is one of the only 13 diplomatic allies that taiwan have, and that's the only one left in the south america. so it's you see that the number of taiwan's diplomatic allies

have been dwindled in recent years after china flipped a few. so the main responsibility for lai during this trip is, of course, to deepen the bilateral ties between taiwan and paraguay. the ties have been lasted for over 66 years and the paraguay presidential elect also promised that his administration will continue to maintain the bilateral bilateral ties. and also that's a good opportunity for lai to meet with the leaders from around the world. all right. bloomberg's cindy wang there. and you can read more about taiwan's vice president and his views in the cover story of the latest bloomberg businessweek. more to come. this is bloombergpay over 100 br

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index of about nine macro indicators, a composite really of housing, consumer confidence rates and others. and it's just moved into negative territory, but only just by. 0.03 of a percent in the month of july. the june reading was also revised down a bit to 0.08. so pretty flat, which is a reasonable indicator of sentiment in the country at the moment. as we believe that the rba may possibly have reached the end of its tightening cycle. although phil low in his last statement to parliament suggesting as central bank often like to do, there could potentially be more tightening to come if necessary. in terms of central banks. the reserve bank of new zealand meeting today and it's expected to keep policy on hold for a second straight month when it does make that call in just a few hours time. so for more, let's bring in bloomberg economist for australia and new zealand. james mcintyre. so, james, the rbnz on hold. it's expected to be a hawkish hold, though, right? that's right. definitely no expectations that

they'll act this month around and we think that that they're done for this cycle in terms of hiking. but nonetheless they are still likely to remain quite hawkish. there's a couple of reasons for that. the inflation expectations is still a bit of a challenge out there in new zealand's economy. both around professional forecasters. we did see some decline in households, but they're not back at the level that they need to be. so the central bank wanting to maintain, i guess, the threat that they could hike further. but those hikes that they've already put in place are doing a lot of harm on the economy at the moment. it's already in recession. it's that recession is going to extend. so, you know, but for the moment, making sure that we keep they keep a lid on those expectations and also try and help support the currency, which has been softening and and could be a challenge. but james, if you know, if the economy is definitely the economy is weaker. but a lot of, you know, hard core paul volcker esque central bankers and economists would say, look, i'm sorry, you have

to you know, you have to get the economy to slow down in order to bring down inflation. it's still at 6%. do you think what message then is or going to give us seems to me he might be more likely to say, yes, we can see what's happening, but but we're going to keep rates high for longer. do you think this concern about a recession could tilt him a little less hawkish, a little towards the middle, even dovish? i think it will, but not today. i think that's the that's what will possibly come. i think what we're going to see is that there will still be holding the course and remaining of the view or expressing the view that, you know, we're aware that there is softening in place. there's a lot of tightening that's already in there that tightening is going to have a much bigger impact in the second half. so the half of the year that we're in now and in the early parts of 2024, particularly as those mortgages in new zealand, new zealanders have fixed rates of very short terms to three and five years, but a lot of them that entered into those fixed rates when they were very low during the pandemic, they're

starting to roll off and they're getting big interest rate hits. that's coming through the economy. and i think if we were to fast forward in three months or six months time, we will see that that softening from adrian orr. but as it stands today, there's a few still a few pieces out there with that inflation, that inflation still high at six inflation expectations are not where they want it to be. we think will still be talking or banging the drum that those rates need to stay where they are for the time being. i always hope for some kind of surprise. we shall see. bloomberg's james mcintyre joining us now. moving on to the federal reserve and officials saying he's not yet convinced enough has been done to curb inflation. we saw a robust us retail sales showing that rate hikes so far have not done much at all to slow down the us consumer. so let's bring in our chief rates correspondent for asia and m live contributor garfield reynolds. so garth, when you saw those numbers, when you heard neel kashkari, president of minneapolis, fed, yes, he's a hawk, but saying inflation is too high, probably more to do. what was your reaction?

what did you think? well, i thought this was deja vu all over again when it comes to us economic data. you know, the us economy is doing far, far better than anybody, including fed policymakers thought it would do after the rate hikes that we have had now, i'm no economist, so i'm not about to delve into some of the explanations as to why that might be the case. but as far as the market is concerned, the market continues to expect that these rate hikes will have the same sort of impact they've usually had, which is, yes, they slow inflation down and they do that by sapping aggregate demand and therefore, when you risk tipping the economy into recession, you know, every time inflation has gotten to these sort of levels that we had last year, you only get it down to the target range

via a recession. so, you know, that's been the strong expectation there will be a recession. there may well be one, but if it is one, then it's going to be, you know, come much later than was thought. and in fact, rates traders have been betting since about june last year that the fed would pivot after six months and be cutting rates. you know, going forward. and that those bets have of each time been pushed back and pushed back and pushed back. and this sort of data and this sort of understandable response from kashkari underscores the potential that this is going to go on happening. and linked to that is us dollar strength. they're going to go on happening. well the answer to that is likely to be a yes, especially because part of what is happening is, you know, as we

get rates staying higher, we get, you know, current inflation levels coming down while still higher than the fed would like. that means the real yield, i.e. the yield that investors get accounting for inflation keeps going higher in the us and is at the highest level it's been for quite some time. that's a key input for where currencies go. and also, you know, the fed's rate is among the highest across developed nations. if it's going to take that higher or simply hold it there for longer, that feeds into us dollar strength. that's been another strong expectation is that as the fed and the fed has said, it's getting close to the end of its hiking cycle, that once the fed reaches the end of its hiking cycle, that's the time when the us dollar will break noticeably lower. now it is considerably weaker than it was at the height of the fed's, you know, tightening

policy shift when it was taking rates up by 75 basis points at time. so it's down from there, but just like inflation, the us dollar has proved pretty sticky. all right. bloomberg's us chief race correspondent for asia and live contributor garfield reynolds there. all right, let's take a look at our markets are tracking at the moment. annabelle, what are you watching? thanks, paul. yeah, i think it's interesting what garfield was just saying, because it has been that shift in the narrative to higher for longer, but it's really that duration that we're focusing in on. given it does appear at least, that it's going to be quite some time before rates start to come down so high for longer, higher rates, stronger dollar. these are all negatives for asia stocks in the session today. and you can see that weakness coming through in the broader index down 8/10 of a per cent, but we are when you take a look at the technicals now at risk of breaking the 200 day moving average, if we move down that it opens it up for the lows that we hit back in june. so that is the state of play as we get trading underway.

we are looking risk off, but let's change on drill down into the sectors in particular. and when you take a look at the imap function, again, it is just that broad weakness. we're seeing every single sector in the red this morning. what's standing out, though, are the materials stocks, because these are leading the drop. and this is not just an expression of what came through in the us economy. those stronger retail sales, those lines from kashkari are certainly one factor that traders are focusing in on. but the other one, of course, is china's economy. and that malaise that we're seeing, deflation setting in, bank loans, dropping off exports, weakening weaker activity, data as well. and so when you change on now, that is really playing out in the materials sector in particular aussie miners, the big focus and you can see here, this is the drop we've got that subindex down, down 1.7%. so kathleen, something that's outpacing the broader losses for the benchmark today, but very much risk off as we get trading underway. risk off indeed. plenty more to come on daybreak. asia, this is bloomberg.

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we're joined by ivan suh, senior equity analyst at morningstar. so, ivan, a turnaround anticipated for tencent. we've got a chart here that illustrates the revenue expectations. but historically speaking, yes, this is encouraging, but it's a long way to go, really for tencent to get back to where it was. it is. but we are fundamental bottom up stock pickers and we tend to have a longer term investment horizon when we advise our investors. so in that sense, we think that tencent trading at current about 15 times earnings, multiple, i think they are you know, it is a very attractive stock to buy for long term investors. yeah. so in terms of that stock price, we have another chart to show you as well. tencent's only up about 5% year to date and it's really been lagging the hang seng index, which which isn't saying much, but it's a raise that big jump that it had at the start of the year. where do you see tencent.

ending 2023? well, we don't give price targets per se. we don't make short term stock price predictions, but we do have a 700 hong kong dollar, 500 plus hong kong dollar fair value estimate on this stock, which suggests well, one, we are pretty bullish on the company's long term potentials and two, we do find current. you know, share price to be extremely attractive for shareholders who are patient. i want to ask you about at the company's game pipeline in the second half. are there any blockbuster was coming given that its rival net ease is doing quite well now and its new game has overtaken honor of kings in download volume recently? yeah. so in terms of pipeline, looking into the rest of this year, we do think that netease has a slightly stronger pipeline, slightly higher potential to

deliver above industry revenue growth compared to tencent. i do think that tencent at this moment of time has a weaker pipeline, but going into 2024, for example, i do expect this company to come out with some of the more blockbuster potential games that will drive revenue growth. okay. and also everyone's wants to know about ai, and i'd like to know about their their ai model. update one the monetize creation process, a progress that gives me a video accounts and then the overseas market plans, each one of those. how's it going? what do you expect it. well yeah, everyone likes to talk about ai, but in terms of tencent, it is relatively speaking, a a laggard in terms of development. if you look at some of its peers like baidu and alibaba, i think those are some of the more are some of the forerunners in this space. and we also think that it is probably a bit too early at this

moment of time to judge what the long term financial impacts are and what the long term regulatory implications are and what are some of the, you know, public use cases can be for ai in china. so we haven't really baked in any the ai revenue into our forecast for tencent at this moment. i ivan, how important is fintech going to be for tencent as regulators sort of start to ease the pressure on that front as well? well, fintech is an extremely important business for tencent at this moment of time. the only the main, you know, the main way that tencent has been monetizing fintech is through payment, right? where they charge a very low take rate on every transaction that goes through its tenpay platform. but if you look at if you pay attention to what management has said over the past two quarters of of earnings calls, they started to, you know, mention or

label fintech as a growth driver for the first time since china's crackdown on the internet space. so what i expect will happen to this segment is that going forward, tencent will start to launch more products under its fintech offerings. so products such as insurance offerings such as consumer loans, such as all sorts of wealth management products. so i expect these products to be brought on to tencent's fintech platform and start selling to tencent's 1.3 billion users, which and i think the potential of that can translate to significant revenue growth opportunities for the company. thank you very much. some in-depth and even optimistic views on tencent from ivan xu. he's senior equity analyst at morningstar. of course, tencent is just one of the earnings stories we're watching today with jd.com and hkex. also due to post results. let's bring in our asia stocks managing editor ling tong to so what are we expecting from

later? yeah, i think we're expecting a relatively positive earnings report card from jd, which is china's second largest e-commerce platform after alibaba. and we know alibaba reported a 14% jump in sales growth and people are expecting about 4.3% for jd.com. so that's actually not a lot compared with alibaba or compare with its own past two, which we saw double digit growth before the pandemic. overall, i think analysts attributed a good sort of june 18th consumer festival hosted by jd as a good contributor to its earnings in the second quarter. but i think analysts are still expecting a lot of promotional spending by jd to lull consumers onto its platform to to spend an and there's also an ongoing price war going on among china's e-commerce platforms like meituan, alibaba and jd. so all of those have been

pressuring its profit margins and plus china's consumers are now more and more spending on experiences instead of physical goods. and if anything, they're trading down when it comes to spending on physical goods. so the longer term picture is not that bright for jd.com. in the meantime, china's considering cutting the stamp duty on stock trades for the first time since 2008. it's not a huge cut, though, is this actually going to boost stock trading? well, we did see a knee jerk reaction yesterday with brokers leading the csi 300 games. but historically, there is no evidence to show that stamp duty cuts had any long lasting effects in stock performance. us colleague yoshi did some data crunching in the past six times when china cut stamp duty. the shanghai composite, it only rallied for one day and after that, in the next three three months to six month period, the index has been languishing.

so, you know, it basically it is really comes down to the sheer price, right? that's the main contributing factor for people to trade and share prices are given this economic background, not doing, you know, going up any time soon, it looks like. and then we also spoke to the hong kong regulators this week. they've also said that based on their experience, the stamp duty cuts actually didn't really have a sustainable impact on on market turnover. all right. bloomberg's asia stocks managing editor there, lianting tu. and be sure to tune in to bloomberg radio to hear more from the day's big newsmaker and get an in-depth analysis from the daybreak team broadcasting live from our studio there in hong kong. you can listen via the app radio plus or bloomberg radio.com. plenty more to come. stay with us. hey, corporate types, would you stop calling each other rock

stars? you're a rock star. you are a rock star. no more calling your coworkers rock stars. look, it's great that you use workday to transform your business, but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm oswald. hello, oswald. pam, you are a rock star. i wasn't gonna say it. what if we lived to 100? don't want to outlive our money. keep eating all these chia seeds. i could live to be 100. we work with empower, even if we do live to 100, we don't have to worry. not worried. take control of your financial future to empower what's next? he snores like an angry rhino. you've never heard of angry rhino? baby. here, one every night. every night. okay, i'll work on that. say, 50% of the sleep number limited edition. smart bed plus free home delivery. when you add a base shop. now only at sleep number. this is marianne's first time visiting paris. well, you before poor marianne

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broader nikkei also off by more than 1% and this after we saw a pretty weak session for equities in the us as well. kathleen, let's move on to vietnamese ev maker vinfast soaring in his first day of trading in new york after going public in a spac deal, shares gained 255%, giving vinfast a bigger market cap than gm. ford or bmw. however, just 1.3 million shares are available for trading with most locked up by the company's founder and his family. vinfast ceo lee tuoi told us about some of the feedback they're getting on their products in the us market. it actually, if you look at the reviews of the publicity about us, most of them are positive or at least neutral. right? let's wait and see. there have been some like negative reviews. we we take them very close to our heart. we reflect on the feedback of

from from those reviews. and we make our vehicles better. we update the software when we make the vehicles better. we actually really appreciate the feedback from the public, from the consumers, because it's a way for us to to become better and it affects your own workforce. talk to us about the us workforce. you've consolidated it, saying goodbye to certain individuals. put together north america more broadly. are you going to expand? because i know you're going to put manufacturing here. well, i think vinfast and vingroup will always continue to optimize on our resources and restructuring of north america was just part of the optimization of of the resources. we always try to become better here in in the us with the north carolina plant. we we started expanding. we started hiring people.

i think we at the early stage of building the, the plant. but as the plant go into getting closer to opening, then we will start bringing in more people. your founder committed about $2 billion of his own personal capital to vinfast. what will the founder have to put more money in? i just want to go back to this idea of sovereign wealth funds as well. you know, in terms of a capital need, where are your priorities to raise? we we have the commitment from our our shareholder vingroup and our chairman up to to $45 billion. so that will help us continue on our path. we have been talking as part of the traditional ipo. we we were talking with a lot of the investors. and after becoming public today, we will continue the dialog with

with a lot of investors sovereign wealth funds but many other institutional investors as well. when the time is right for an for another transaction or for for the transaction to bring in significant funding for vinfast, we will do so. meanwhile, we we we have very regular conversations with our with potential investors. vinfast vinfast ceo, lee tuoi speaking with bloomberg's ed ludlow and carolyn hide. so paul, just to hours from now rbnz's reserve bank of new zealand, they're going to give us their policy decision. they're expected to hold. they said 5.5% would be the peak back in may. they paused in july and now with inflation still high. but, you know, some recessionary signals in the economy, they're expected to keep it on pause again. yeah, that's right. that decision in fact, just an hour and five minutes away. and and it's going to be interesting to see what happens down the track as well as one of our earlier guests said, not a

great deal of mortgage stress in new zealand at the moment, but consumers holding up okay considering. but a lot of those mortgages are going to roll off to higher rates pretty soon kathleen. and there is a concern that there could be a deeper recession on the horizon for new zealand. and throw another thing into the mix for you is going to be in october and an election in mid-october. wow. well, you know, quickly, i just have to say, you know, adrian orr, he is known for giving us little surprises. so i've still got my fingers crossed. maybe we'll get something we don't expect in just an hour from now. paul. all right. and that is it from daybreak. asia markets coverage continues as we look ahead to the start of trade in hong kong, shanghai and shenzhen. bloomberg markets, china open up next. this is bloomberg. my told me wouldn't qualify for the tax refund so called innovation refunds as their team of independent tax attorneys will work with your cpa to determine if your company is eligible. take the first step to see if

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