>> good morning and welcome to

bloomberg daybreak australia. >> we are counting down to the market opens. >> treasuries tumble with corporate debt sales flooding the market ahead of the fed decision. >> oil surges as saudi arabia and russia extended cuts. >> softbank is seeking under $5 billion in a downsized arm ipo that is still to be the world's biggest this year. let's get a quick check on wall street. we have only had two u.s. trading sessions in september. the hope is this september might

be different from previous ones because we have had a rally. some strategists are saying we are going to see a drop from here. we can see now s&p futures have opened up and headed for another down session. the two year yield for 95, that might be a little bit surprising . 40 companies tapped the debt markets just today alone. a huge amount of issuance and that definitely weighed on bonds. my take this number with a grain of salt. the dollar index continues to rise and is impacting currencies including the yen which topped 147. another strong day for the u.s.

dollar. what will that mean for inflation? opec and saudi arabia will extend cuts. brent oil topped $90 per barrel. >> you mentioned that again with the dollar strength. breaking above the 147 level. we are back near levels where japanese government officials intervened last year. when you have the dollar strength there is the question of whether we will start to see a reversal, but it seems the trend of yen weakness will continue. economic data shows us the recovery read are post-covid is still stalling. yesterday was for households and we saw household spending falling off, with interest and payment pressures.

they do not see the boj change in their easy policy settings until 2025. there is also the other part, which is the story around china's economy and the weakness we are seeing there. a bit of support now for the property sector but the pmi data yesterday coming in weaker than expected. the yuan now trading around its weakest level since 2007. we are looking at the bullish one-month dollar yuan. we have only seen this a handful of times going back for years or so. traders are betting on short-term yuan strength. that is a very fragile sentiment in the markets when you consider

the inverse of the dollar yuan is the move toward the greenback and the move into treasuries. >> we will have to see if we see continuing strength if treasury yields do not continue to rise. treasuries sinking today as more than three dozen companies flooded the market with billions of dollars in debt sales. let's get more from our cross asset reporter. it is after labor day. companies are getting back to work. was there a big rush into the market? >> there was. i thought ian from bmo markets had a good analysis today. he said everybody return from vacation and tapped into the corporate debt market and that is why we saw a big rise in treasury yields today. but he said nothing really to worry about, the market will

still remain volatile. there was nothing too surprising about the fact that yields move higher when we saw these bond selling off. we saw the dollar moving up higher, which we typically see when rates move up higher as well. the yen move and bloomberg contributed to the dollar strength. also, the services data weakening votes for the dollar to move up higher from here. >> we has some interesting calls from high-profile investors. >> nothing we have not heard from some of wall street's biggest bears. they are sticking to their bearish calls. mike wilson came out today talking about how things remain weak and the rally is only being led by a few names and the games

have not spread out to some of the other names in the index. he has a s&p 500 price target for the end of the year. we have nothing that materialized. he has been calling for a big remix collapse but we have not seen it quite yet. we still have a few months to go. another investor saying we should fade. he does cross asset strategy at jp morgan. he says he could turn more optimistic on equities if rates fall globally in the near term. his target is 4200. >> that is indicative of the spectrum and we have it in the economic spirit as well. -- sphere as well. we really are seeing a broad diversity of views. when it comes to rates, is there

any coalescing around one particular area? >> i think a lot of people are coming to terms with the fact that the fed is likely done. may be will get one more hike in november, likely a pause in september. the question is not what exactly is the terminal rate going to be, but when will we feel the effects of the 500 basis points of tightening? i did an interview with fidelity and they say within the next two quarters when companies have to refinance debt at higher rates it is going to be a big shock. i think people are now starting to realize -- talk about when are we going to see the fed monetary policy transition mechanism start to catch up and is it going to be the catalyst for a recession or are we going to have a soft landing?

that is another theory. >> we keep bouncing between these scenarios. our cross asset reporter with all the market action. so much of it will be the inflation outlook and we are watching oil prices after two key members of opec plus announced that they are extending cons until the end of the gear. su keenan joins us now. were traders caught by surprise? >> pretty much, this was a much more aggressive move than expected. they expected an extinction by may be a month, but not the end of the gear. one veteran traders said that is why you do not short oil. saudi arabia continuing its unilateral action comebacks of

one million barrels per day until december. it will be holding output at the lowest level in several years for a total of six months. russia announcing their export production will be extended for the same time period. all analysts and traders said this tightens what will be a tight market by garin. -- year end. the saudis voluntary cut this and that is what kicked off the whole thing. they said this decision will be moved -- considered month to month. that is according to market conditions. saudi arabia is aiming to support stability in the oil markets and you definitely see that in the brent oil chart. you see where brent really shot up. west texas intermediate shot up.

we are seeing brent rise to above 91 in asia trading. so the rally continuing although technical analyst said this big jump is putting brent crude in an overbought condition. >> the biden administration will not be pleased about this. >> they absolutely will not. this will clearly add to inflation and it has been their aim to keep the united states from suffering gas prices above four dollars per gallon. and we are already as we come out of the summer driving season seeing seasonal prices for gas at the highest they have been in a decade. so this is bad news for the biden administration although a white house spokesperson says

the u.s. has regular engagement with the saudi's at multiple levels and these conversations will continue. iranian crude is coming back on the market because of backdoor diplomatic discussions, but those exports have already peaked. you are looking at a chart on the bets of $100 oil already rising. many believe the market tightening just last month, the forecast indicated the global market was set for a supply deficit of just over a one million barrels per day in the fourth quarter. that was before this announcement which upends of the short term direction higher. >> still ahead, a new ceo takes the helm at qantas airways. we will get analysis on the leadership change.

vanessa hudson will be taken the home. this is bloomberg. ♪

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>> i think we are descending from the 2021 bubble and this should be normal the deflationary period. which is a function of will be earnings decline, will profit

margins declined, will the economy go into recession? we will have a recession deep into next year perhaps. and a decline in stock prices. >> you can see the full interview on bloomberg wealth with david rubenstein at 9:00 p.m. tuesday in new york. 7:00 p.m. wednesday in hong kong. goldman sachs says he sees a 15% chance the united states will slide into recession, down from 20%, as cooling inflation and a resilient labor market success the fed may not need to raise rates further. the investment bank is more optimistic than it appears on u.s. economic growth. joining us now is sarah ponczek

from ubs. a move from 20% to 50% may not sound like much, but it could be enough to go to a soft landing. where does ubs fold in this? >> you laid out to opposite sides of the spectrum. jeremy grantham is brilliant and we respect his views deeply. more so on the bears side. and you cited goldman sachs on the opposite side who has brought down their expectations and calls for a recession. i would say ubs as of now more so lies with goldman sachs. our economists are calling it a soft-ish. there could be some bumps in the road. when we look at the economic

data, a has been surprisingly resilient. you look at labor data, inflation data and so far the economic data does support the soft landing scenario. so we do believe the risks of a recession have receded and we are calling right now for this type of lending. >> if that is the case, what will happen with inflation? will consumers continue to hold up? we know excess savings has been dipping maybe to a concern in extent. cracks in the housing market as well. >> our view is bad disinflation will likely continue. that is why our economists expect we likely have seen the end of the fed's tightening cycle. by the time november rolls around, it is likely we will

continue to see inflation softening. economic data points to an end to the tightening cycle. when we look at bonds, i know you'll to have been very volatile, but when we look at guilds, we believe it makes sense to lock those in right now because we do see them come down in the gears to, and that will only be a tailwind for bonds. one statistics i find very interesting is that if you look at five-year. since 1977, 97% of those that started with an inverted yield curve, very much like we see right now, 97%, we saw bonds outperform cash, so we see an argument, yes you are earning money on cash, but start to diversify and lock in. >> does that mean you think we

have peaked when it comes to yields? are the equity markets escape in the worst or are they priced in and able to be resilient when it comes to high heels going forward? >> by the end of the gear it is likely we will see yields lower than where they are right now. they are back to near the highs of 2023. everybody expected that as we saw yields move higher, that we would see the equity markets come under more pressure. but we are looking at an s&p 500 up in 2023. the market is looking ahead at the economic data and saying maybe we will see this soft dish landing -- sift-ish landing.

we would say look at the balanced positioning between laggards, value and defenses. keep in mind that only 26% of s&p 500 constituents have outperformed the index this year. it has been a difficult year for stock pickers. we believe more so in passive index investing when it comes to large-cap because it is difficult to outperform the market sometimes. haidi: how are you feeling about energy in terms of the leadership we have seen in energy stocks? and the upwards momentum gauge showing there could be strength and resilience in this rally. >> absolutely.

our chief investment office has been positive on energy. that was a call that worked out well because we have not only seen oil prices rise, we have also seen energy rights as well. energy stocks have really let the pack when we look at industries within the s&p 500. we believe this is something that can continue. energy absolutely falls within the bucket. it comes down to the supply and demand story for oil. a lot of people are saying are we seeing oil prices rise due to demand or supply? it is both. we have seen a record travel season. at the same time, we are also seeing production cuts when it comes to opec and other oil producing entities.

vonnie: where in the top five questions does artificial intelligence come? it feels like we have seen a huge rally in some of these ai stocks. >> you never know when something is a bubble until after the bubble has popped unfortunately. some people have been calling for a bubble in mega-cap tech stocks for years now. we saw a crack last year with the mess that down. but they just come back. when you look at ai in general, it is likely that some of these individual stocks that are up triple digits in 20, some may have run a little bit too far ahead, but ai is not just a theme. it is actually a technology that companies are investing billions of dollars in.

it is likely we will see this continue in the years ahead. we believe ai is not just a hype story. it is somewhere where you probably have exposure to in your portfolio, but you want to be selective. haidi: we are seeing strength returning when it comes to the u.s. dollar. if we see another week of gains, will be the longest stretch in data going back to 2005. >> we have to keep in mind the effect the dollar has on multinational companies, the effect it has on companies that are generated profits overseas, but at the same time, i know

many people have been calling for international stocks to perform well. we saw i hate at the beginning of the year -- a hint at the beginning of the year. at some point when we look at valuations of united states versus the rest of the world, it is likely that at some point, we will see the valuation story take over. but right now, it is still difficult when we look at the fundamentals overseas when comparing. haidi: always a pleasure talking with you. sarah ponczek from ubs. more to come here on daybreak australia. this is bloomberg. ♪

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on fx. we start with the aussie dollar after the rba left rates unchanged. it has been weakening because the u.s. dollar has been strengthening. the new zealand dollar the same, weakening by about 1% in the last few sessions. the bank of japan will be concerned about a i may be known for my legendary football career, but truth is, i love a bunch of sports. the only trouble is knowing where to find them. that's why i got xfinity. so, i can easily find and watch whatever sport i'm into all in one place without missing a thing. even if it's football, australian football, or football football. in a word—it's fitz-credible.

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zealand. anthony albanese said to address a meeting of algae and leaders in jakarta to boost trade ties in the region. they want to transform australia for a hub to transform minerals for ev batteries. australia has won its dairy dispute with canada. we will speaking to the new zealand prime minister as the countries election campaign kicks off over the weekend. that conversation at one -- 1:40 pm sydney time. second quarter gdp numbers due in australia. paul allen joins us with a preview. i suppose with the rba saying on hold is fully expected. the race at an you loving your

highest starting to transmit. >> very much so. households carry big mortgages and weak consumption was noted by the rba in its decision yesterday when the cap rates on hold. consumer prices are up as well, they are moderating a little bit. same factors weigh on residential construction. business investments and trade have been reasonably strong. we expect quarter on quarter growth of 4/10 of 1%. yes, it is slower but we are in positive territory. population growth will make the per capita figure look weaker as well. vonnie: what is the path ahead now for the rba under new leadership? >> no change even though there was a change at the top. he has a lot of the job down in

terms of tightening but we have had three pauses in a row from the rba. maybe that is it, could be done for tightening. the move in the aussie dollar declined by more than 1% on use of the decision, inflation down as well. if we look at statements, the rba said some further tightening may be required depending on the data. that is not a particularly new sentiment. phil lowe has one more speech he will give tomorrow. he has no plans other than to work on his golf handicap. i knew meeting scheduled for the rba for next year, just eight meetings instead of 11 next year. haidi: speaking of leadership

changes, coming qantas airways ceo takes over the position after alan joyce's early departure for retirement. there has been anger about fake ticket scandals and skyhigh fears. we are being joined by jeffrey thomas from airline ratings. who has a tougher job, michelle bullet taken over at the rba or vanessa hudson taken over at qantas airways? is this a reset? yes, alan joyce was expected to leave anyway. is that enough? >> it has given vanessa and qantas some clear air. we have seen an enormous amount

of rhetoric in the public arena, politicians becoming involved, a come fleet destruction -- a complete distraction for the frontline staff at qantas. the ongoing issues are causing friction. with alan joyce going now, we have clear air. everybody will leave vanessa alone probably for six months as she works through the issues and does some resetting. although what they have been doing over the last 12 months will simply continue. it may have a bit more sugarcoating on it. there is not a lot vanessa can do, but this gives some clear error. haidi: to be fair, what has been

done has made alan joyce adored by ceos and investors. he has been the master of the corporate turnaround and the cost savings he has managed to achieve. but if you take a look at the performance of the stock in recent days, does it suggest that even investors are starting to have their doubts? >> you are absolutely right. this is one of the messages that has been forgotten in the media. he has done an amazing job with the qantas stock. he has done amazing things with restructuring the airline which needed to happen. likely the stock has not performed as well, but i believe

that now with him gone and with vanessa in the chair, investors will understand vanessa was the cfo for the last few years, she navigated through covid and she is the architect of how qantas got through covid. they will understand that and the stock i believe will recover. the issue with qatar airways and getting access to the australian market is an issue. qantas future is assured because of the things alan and vanessa have done over the last few years and they have exciting things happening in the next 12 months. it is a ghost that to be on board with. vonnie: if she has been there for 30 years and she was telling choices right-hand woman, why

does she get away with all of the problems that investors are now unhappy with? the fleet renewal was her baby. that is unnerving investors. >> the fleet renewal has a lot of publicity, you are absolutely right. but a lot of it is not justified. over the next three years, qantas is taking delivery one new aircraft every three weeks. in hindsight, possibly they should have brought forward some of the ordering decisions 12 months, but during covid, qantas was selling its boeings and leasing them back to fund its survival through covid. they also sold property as well. but now that they have those

decisions made, they are getting preference from airbus and boeing on deliveries and they have amazing flexibility on deliveries from airbus where the bulk of the orders are. it is an aggressive renewal program. so i think the concerns are possibly a little bit overstated. i am bullish on the fleet renewal program. let's not forget, qantas engineering is one of the best in the world. vonnie: there would be a lot of litigation to deal with as well. the allegation that qantas sold tickets on flights that were never going to happen. not just that, but credits were used in ways they should not

have been. how did she solve those problems? >> let's deal with the first one. the last one first. the credit situation, they have acknowledge they made a mistake. -- acknowledged they made a mistake. people did not use the credits hoping the first would come down. qantas qantas should have said they would honor the price and they should have had a far longer term on the usage of the credits. they have done that now and they have made it unlimited. they have fixed that problem.

the seats allegation is interesting. i believe the issue is that the engineering and the apparition sections of qantas were not communicating properly with the marketing section of the airline. and they were canceling flights and not telling marketing. i think we will find it was incompetence rather than deceit on the part of qantas. this is going to play out in court. some insiders say it was the left-hand not telling the right hand what was happening. with airlines last year, front end and backend was chaotic. systems were not working the way

they were supposed to. haidi: neither deceit nor incompetence is great when you are talking about your flight carrier, but i suppose the last one might be preferred. when it comes to this, is that a red herring or does it create the perception of protectionism that might end up the government opening the door to more competition and that would hurt the prospects when it comes to domestic share? >> qatar is an international carrier and it is the international share that is at stake here. several governments have said they are protecting qantas international market. it is a strange decision. i think the government is

passing the buck between one person and another. my understanding is that the transport minister approved it. the higher up said no. there seems to be some moving around on whether -- on where the responsibility lies. qantas should be given access. a lot of airlines are not coming back to australia. some that are coming back post-covid are only with limited capacity. a number of airlines in asia went into bankruptcy or restructuring during covid and they are a shadow of their former selves. we have a capacity shortfall in australia. qatar can fix that problem straightaway. with qatar, it is per airplane. qantas rightly says if qatar once more capacity, they can

operate more larger capacity aircrafts. but qatar does not want to. because they are fuel guzzlers. the final dynamic is we cannot get back peppers back to the country because they airfares are too high. we need extra capacity to bring the first down to where they should be. vonnie: united airlines has resumed flights after a temporary grounding of all of its aircraft. the carrier requested the grounding after a software update because no widespread slowdown in its -- technology system. the company said it identified a

fix for the issue which delayed 350 flights. coming up, softbank's arm is looking for less than $5 billion in a downsized ipo that is still going to be the biggest in the world. detail shortly. this is bloomberg. ♪ baby, only on game nights. you know you are retired right? am i? ya! the queen sleep number c2 smart bed is now only $999. plus free home delivery when you add an adjustable base. shop now only at sleep number. that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

haidi: asian markets are set for muted trading. investors are weighing the outlook for china's economy. let's bring in annabelle. i would have thought there would have been a sigh of relief when it comes to country garden. annabelle: the chart shows the flows in and out of china, the bar in green was inflows we started to see on monday. but it is the trend up outflows that has continued. investors are bearish on the outlook and not convinced by the piecemeal government stimulus measures coming through. underweight in china is the consensus from global fund managers. when you take a look at the issues in the debt market and the property sector, some are

excited to see opportunities. one of the fund managers we have been speaking to his in singapore and they are confident about adding exposure to china. they say the measures that came through from beijing in terms of lowering down payments were more than they expected for the market. they say beijing will do what is necessary to stimulate the economy. so they are starting to add exposure, looking at consumer discretionary and the tech stocks. vonnie: what about the moves in nvidia? has the rally gone too far? >> it one of the most tracked stocks. more than 230% rally in 2023.

it has defied a lot of skeptics who told us the rally here is looking overstretched, so it is too much optimism around ai. another down cycle coming through. it is from rob, who warns about the dangers of bloated mega-caps. he is saying the bullish sentiment in nvidia is looking overdone because it reflects too much optimism that nvidia products cannot be replaced by competitors. on the assumption that it that is not too big to fail. in fact, it is too big to succeed. this is someone who has a track record in this area. he pointed out the issues in test lot before we saw its stock in dissent. haidi: continue with tech, softbank's arm planning to raise

$4.87 billion in its long anticipated ipo. this ipo was once expected to generate roughly twice that amount. amy, how surprising is it that they are trying to raise this much money as opposed to more than that? >> it is a sentiment of expectation management. in might go further, but at the moment they are trying to give a bit more incentive for people. a lot of discount on the addictive price range at the moment. depending on the roadshow, they may be able to raise the price later on. we are still not sure exactly one the last valuation will be. haidi: given how highly anticipated this is, does it have broader implications? >> yes and no.

arm is really big in the grand scheme of things. the valuation right now is up to $54 billion. it is too big to be indicative of the smaller group of companies that are going to test the new listing market. we definitely know from the reporting that 50% of the deal is already taken. there is good support to the ipo. it is deafly going to go ahead, it is just a matter of where it will be priced and how the aftermarket is going to be. the smaller group of companies have a much broader range of technology operations. arm is actually [indiscernible] but the others are more in service and software. the whole sector has been hampered so much during the correction in the market. the valuation gap was down seven

times. it is good that it has a feel-good sector, but the test is the smaller group of companies to come. haidi: our equity markets reporter there. we have more to come on daybreak. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh vonnie: the ftc looks set to

file an antitrust suit against amazon after the company fails to offer concessions to settle claims. they plan to target their popular marketplace for -- where third-party merchants pay a commission on each sale. ubs executives are weighing options to renegotiate parts of the deal credit suisse struck. sources tell us the bank is not happy with the terms credit suisse agreed to one that sold parts of the business to apollo global management. executives are concerned about management fees that must be paid to apollo. ubs will double the coverage of single stocks that credit suisse wealth clients can access.

this will enable clients to receive research covering 3000 stocks while bond coverage will increase sixfold to 18,000. haidi: let's take a look at asian markets at the moment. we have seen the climbing obstruction into the week. sydney futures down a quarter of 1% as they are stay on hold. we also saw weakness in the aussie dollar, the lowest since mid august. we have the dollar strength factor as well. the economic divergence expected to play out with gdp numbers out of australia and on today. kiwi stocks pretty flat at the moment.

we also have some weakness in commodity prices impacting that. chicago nikkei futures a little bit lower. one of the field across the region that outperformed. watching dollar yen. we are watching it very closely, sitting at the highest since november. this is bloomberg. ♪ to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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asia live from new york and sydney. >> we are counting down to