>> good morning.

bloomberg daybreak: australia. >> the top stories this hour. u.s. stocks game on bets the fed can pull up a soft landing. the euro slips amid signs that ecb may stay on hold following thursday's hike. >> soren 25% on its trading debut, arm. u.s. futures coming online in the asian session. shery: investors were really digesting stronger-than-expected numbers, stronger-than-expected retail sales, producer prices.

our consumers in the u.s. doing better-than-expected is the key question. s&p 500 finishing above 4500 but the auto sector was under pressure today. detroit carmakers are facing a threat of potential walkouts. take a look at treasury yields because they were up across the board. we are watching the two year break even because investors are looking at the possibility of shorter term inflation so it -- expectations are growing. above $90 per barrel in new york for the first time since november. it has to do with the supply picture later in the year. arm's trading debut, a jump of

25%. closing at $63.59. this as we continue to watch whether this will be upheld throughout the rest of the week and perhaps the rest of the quarter. the ceo told us he remains bullish about the company's growth prospects. >> we have a unique business model that gives us the ability to have a good vision in the future. we have a very high confidence of the growth rate being sustained. haidi: let's get more from our reporter. is this a vindication for founder mashayoshi son? >> pricing it at the $51 mark

set the stage for a good reception from investors. when you rallied 25% it is a much-needed victory for softbank. given some of the recent headwinds. we can look at the screen and say softbank is having a good day. haidi: how important is it that we watch how arm trades in the months to come? >> the question is not how much of our you can have after day one, but can you continue to trade well? can you meet and beat expectations on some of the promises? this is accompanied talking about ai and their ability to fund not only customers like

nvidia but also capitalize on data centers. can they live up to those expectations? analysts are saying this is a lofty valuation for a company that has promising ai, but will have to live up to those promises. shery: and with the chip industry still facing a sales slump. >> this is a company that dominates smartphones. they make royalties off of chip designers in about 99% of smartphones, but as we have seen, smartphone sales are driving. can they continue to up the royalty fees? can they benefit from a company when you look at nvidia, can

they benefit off of the transition we have been seeing? that is what they have been pitching of softbank after since they took a private. haidi: some of these softbank and chip adjacent stocks will be in focus as we get into the friday session. there is a domestic data dump out of china. expected to see a little bit of a respite from the declines we have seen, but not really enough to change the downside narrative for the chinese economy. sydney futures up by a quarter of 1%. we could see strong games going into the start of cash trading in a couple of hours. when it comes to some of these

trading headwinds we have been watching, some think the yuan currency will rebound by 20%. a lot hinging on what we get from policymakers in china and how the domestic economic picture shapes up. the pboc has cut the reserve requirements for the second time this year to boost the lending capacity of banks. we could see the wider economic struggles perhaps finding a floor if not a meaningful improvement. let's get to annabelle who joined the side of singapore. -- joins us out to of singapore.

annabelle: significant because it is another policy tool the pboc is using to try to stimulate the economy. it is given banks greater capacity to lend into the real economy. that is the goal for policymakers. this means they can extend more loans into the market. this purple are cut is taken place -- based purple are cut -- this rrr cut is taking place friday. the reason for doing it now relates back to local debt issuance. local governments are rushing to

try to fill the quota of the so-called special bonds that are used to then fund infrastructure projects. the deadline for meeting the quotas is at the end of september. the chinese banks take up the bulk of the china bond space. it is liquidity that becomes the issue out of that for others in the market. this is what the pboc is trying to solve with this move. shery: some are saying we could see the pboc delaying interest rate cuts, especially since they want to see what the fed will do next. what are we expecting? annabelle: you do wait and see how the moves so far feet into the real economy. there is also speculation they could move despite this because when you take a look at what bloomberg economics is saying,

the moves so far from the pboc indicate that under the leadership under the new governor, the central bank is more serious about supporting growth. speculation of course, what happens with the one-year loan prime rate. that decision is due later. we could see perhaps a 10% reduction to its. it is at 2.5% now. it could happen as soon as friday. goldman sachs expects further easing. others in the market are more wait-and-see on the rates front. some saying perhaps we will have more proactive fiscal policies in the fourth quarter. haidi: the data get out later, could you tell us we are perhaps through the worst?

annabelle: that is what it could be because it -- it was a pretty good period over the summer in china. we had robust spending on travel and hotels. at the same time, manufacturers reported an expansion in new orders. special debt issuance was used to spend construction projects. there were some bright spots that develop during this period. industrial output and retail sales are expected to improve. watching the details over country garden over the course of the week. policymakers could want to wait and see what the numbers are. a lot to be watching in china later today. shery: republican lawmakers are

pressing the biden administration to cut off huawei and msi see after they launched a new phone using highly advanced technology that washington has been trying to keep out of china's hands. what is the latest? reporter: 10 republican lawmakers in the house of representatives said they want the commerce department to investigate what is happening with huawei and msi see msci and to completely cut them off from american suppliers, basically to say they cannot supply this in

the u.s. whatsoever. right now they are already facing a ban. they face u.s. export controls and also partial sanctions that make it difficult for american suppliers to sell these phones. it is more semantic difference. they are partially prohibited from doing this. the lawmakers are saying that they have been almost banning the sale of advanced semi conductors to the chinese so this kind of phone would not be developed. now that it has been developed, they do not want to see any business from these companies to american suppliers. haidi: there are already are

u.s. limits on dealing with these companies. reporter: this seems like more of a semantic difference. these are republicans who wrote the letter to the commerce department. they are saying that biden administration should do more, that they have not done enough. it plays into the issue of whether the administration has other ways they can try to limit this technology from developing in china. they tried to not give the equipment they would need to build these. they tried partial sanctions. clearly, they have not worked. republicans are saying do more, president biden. the commerce department has not commented since the new phone came out. they said they are investigating but they have not said whether they will do more.

we will have to watch and see what happens. haidi: jodi schneider with the latest. still ahead, arms ipo delivering a boost for equity markets and softbank. infrastructure capital advisors says the fed will not hike again because inflation is now declining rapidly. we get that next. this is bloomberg. ♪ ve with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. >> growth could be slower if the

policies are more forceful than expected or if the world economy weakens, for insists going to

further slowdown in china. conversely, growth can be higher than projected if there is a strong labor market and rising incomes mean that people and businesses become more confident and spend more. haidi: ecb president christine lagarde on the potential for global growth after the central bank delivered its 10th rate hike our next guest says the hawkish ecb will likely cause a global recession this year. join us now is jay hatfield from infrastructure capital management. great to have you with us. can they avoid this hawkishness when we have such solid data? >> we believe the data will continue to show cooling and also that the fed misinterprets

the data because of the lag shelter component of inflation. inflation is purposely lacked -- lagged. so if they properly interpreted the data, they would realize inflation is tame. now we've their preferred measure, the labor market is cooling. the ecb pause and it will be a pause is critical because we think europe is now heading into a deep recession, particularly germany. horrible data coming out of germany and italy. haidi: the consensus seems to be the fed will not move next week.

are you expecting the fed to realize this lag by november and december? will they keep the pause? >> yes. the next meeting is bullish because you get the dot plot and we think more participants will have an implied pause in november. we think the remaining governors will respond like they already have, very positively to cooling employment data. we think the process will play out and we will not have an increase. haidi: we are seeing more signs of a potential recession in the u.s.. particularly the 10-year gilts -- yields. the last few times we actually

were able to see recessions following inversions. can the u.s. avoid a recession and what does it mean for the markets? >> that is the critical question . as you pointed out, it is reasonable to expect there will be a recession after an conversion. you have to think about the process that leads to the recession, specifically the interest in rates tanks investment. the average decline in investment during the recession is -14% on investment. mostly housing, but also automobiles. the government to stimulating investment so it is one of the first times ever the government did appropriate countercyclical spending, not because of geniuses, they got lucky.

it is a very lucky situation where you have the shortage of housing and automobiles and government spending, but normally we would have a deep recession for that reason. haidi: as i understand that are going to raise how constructive you are on u.s. stocks going into the end of the year. >> we were usually way above consensus. we are not declaring victory get. our rationale was that earnings would not drop significantly. the economy has been pretty strong. we were using 18.5 as the multiple to get to 4500. if you look in the past when there are opportunities with technology, in this case ai,

what normally happens is companies first start to become fairly valued, but then they become overvalued, which seems like a terrible idea, but it draws capital into sectors. that is why we beat every other nation to the punch in terms of technology as the capital flows, we got there first. in technology, the first person to get the technology has a tremendous advantage and that is why we have all the technical leaders. it is widely efficient. haidi: tell us about some of your stock picks in this uncertain environment. >> if we are correct about a strong economic environment, and the fixed income side you want to be in high yields.

everybody knows about nvidia. we think the old economy, large-cap dividend stocks continued to be undervalued and there was that rotation. the dow was outperforming today. we think the trend will continue. the stocks are lower beta and it is a good way to balance out your portfolio if you are overweight technology. haidi: jay hatfield from infrastructure capital management, good to have you in the studio. terminal subscribers, go to dayb . you can customize your settings so you only get the news on the industry and assets you care about. this is bloomberg. ♪

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haidi: let's get to the latest stories. the biden administration has announced 100 sanctions on russian elites. while most of those targeted were rushing companies and people, the new round also hit say finland-based network -- hits a finland based network. hunter biden has been indicted on federal charges of lying about his drug use when he bought a gun five years ago. it follows the collapse of a deal under which he would plead guilty to misdemeanor tax crimes. the indictment means he could go

on trial during next year's presidential race. haidi: take a look at fx trading in the early part of the friday session. the brief responding -- respite come about 3/10 of 1% higher. this of course as we tracked the u.s. rally with the soft landing more insight with a number of strong economic reports suggesting the fed might be able to engineer that. some analysts said we nice footwork. man, you're lucky, watching live sports never used to be this easy. now you can stream all your games like it's nothing. yes! [ cheers ] yeah! woho!

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haidi: moody's has revised the outlook for china's property

market from week two stable. bloomberg originals has been exploring how the real estate market has become such a mess. reporter: deserted shopping malls, half-empty apartment complexes, abandoned construction sites. these are all signs of the crisis that has gripped china's property market. there was an enormous construction boom here. a fundamental belief that property crisis -- prices could only go up. >> they would get the money from the homebuyers and immediately invest the sum of money into new land parcels. reporter: china's property market is in trouble. because property is the biggest

single contributor to china's gdp, when the property sector is in trouble, the rest of the economy is in trouble as well. if china's economy stumbles, the global implications will be far-reaching. shery: you can see the full documentary right now online and on youtube. for subscribers, out the terminal and on bloomberg.com. china has criticized the european union's investigation into their electric car subsidies, colonnade -- an act of naked protectionism. they warn it will have an impact on its relationship with the european block. the eu says it is to protect jobs and claims china is unfairly flooding the market with cheap vehicles. republican lawmakers in the united states have called on the government to completely cut off

away from its american suppliers after quite launched its latest phone. the unveiling has stoped debate in washington over the effectiveness of its attempts to contain china's growing chip business. haidi: china says china will have to transition to a different economic model. president xi jinping has put ideology over the nation he has told us. >> i think xi jinping is a change from the leadership we saw prior to him coming in in 2013. previous leaders put economic growth first and foremost. with xi jinping, it is more

about party ideology and national defense, a more muscular china and we have seen in previous decades. this raises the global risk level of what happens if the economic model falters and we see other efforts, whether it is increased defense spending to distract the chinese populace from what is going on with the economy. >> want to talk about the cost to the economy. do you have a sense of how bad china's credit losses could get? not just in real estate, but across other sectors too? >> we saw this once before. when china entered the wto, they had to clean up their banking system. back then it was mostly the

state owned enterprises. about 40% of the loans were bad. that number would be horrific because china is so much more leveraged today than it was back then. the numbers you quoted are certainly in the ballpark. if anything, a little bit low. it is a bad problem. it is the real problem with the economic model that if you never write-off the bad investments, your gdp is inflated because you are borrowing money to put up another airport or another high speed rail link that is not economic. that resides ultimately in the banking system with the debt related to that. that is the inherent problem with the investment driven economic model. sooner or later the diminishing returns begins to make a difference. >> do you think other people

have woken up to that? >> i think people have figured out the risks. when we turned bearish on china, the new york times ran two up as ridiculing the call. it was just after the beijing olympics and china was unstoppable. i think now people realize it is more accepted that this investment driven model has real risks. haidi: jim chanos speaking exclusively to bloomberg. more on china's economy coming up. we take a close look at the consumer sector. the oil rally is picking up steam with crude above $90 a

barrel for the first time since november. it is the latest milestone in a rally driven by russian and saudi output cuts. su keenan joins us with the latest. the cuts have come during the time of record oil consumption. >> the united states and china are two of the biggest consumers of oil. oil prices moving higher for west texas intermediate. this raises fresh questions about whether rising oil prices will derail a lot of the central bank efforts around the globe to quash inflation. you are looking at the technicals that have been driving oil higher. it is called a golden cross. at the same time that the saudis and russian extensions of the oil curbs to the end of the year are putting a tight market into a far tighter situation. so that is another fundamental issue that oil prices are going higher. many analysts are looking at

other gauges such as the relative strength index which shows a fallback. let's take a look at the five-day charts. it looks nothing like a pullback. oil prices are up. some 30% since mid june. you have agencies morning continuing supply cuts by the two opec leaders are likely to create a significant supply shortfall. that report came a day after opec warned the market is facing a deficit of more than 3 million barrels a day by next quarter. if you look toward the end of this chart, you are seeing much

more procession for green for the week. that is different from earlier when we fell into a slump. oil prices again raising big concerns about inflation and i should point out a lot of the fuels also rising. u.s. gas prices at the highest seasonally in a decade. diesel prices at a three decade high. all of that as a result of the rise in oil. you have the secretary-general of opec+ hitting back at the iea which earlier had said a lot of consumers toward the end of the decade are likely to be more concerned about climate change and we could be seeing the beginning of the end of the fossil fuel era.

opec him back and saying some scary words, that a bend in the fossil fuels could lead to energy chaos i may potentially -- on a potentially unprecedented scale. it is not the first time the iea and opec+ have come into a clash. the iea has been critical of opec+ for cutting back on oil output and extended those cuts and creating the current supply squeeze. you are looking at pictures of an underground hydrocarbon storage facility in singapore. both iea and opec+ despite their differences are projected rather significant supply deficit at the end of the year. back to you. haidi: plenty more to come on

daybreak australia. this is bloomberg. ♪ ♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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trading debut for arm. it

in 2013, you were listed at that point, but it's not been since 2016 that you have been. how does the game change as a leader of that business now? yeah, i think there's some things that we were able to do as a private company that will just be different, right? quarterly earnings, making sure that we hit all our commitments. but arm is not a business. you measure from quarter to quarter. you measure us over years and decades. and the long term vision is something that i am very, very passionate about and will continue to drive the company the same way private or public. you have a lot of key vested interests, whether they be your clients, apple, tsmc, intel taking big stakes in the company today. how important are those voices vis a vis matters? as the head of softbank, who i'm sure you're on the phone to

daily? yeah. so one of the challenges of our industry in particular with arm is that the fact that we're everywhere. none of this works unless we play nice with others. so we have to have a lot of engagement with strategic partners and making sure that we're managing that balance, including our chief shareholder. do you think he lets more of arm become public? is that something you'd like to see? you know, martha and i talk quite frequently, but it's really not about the day to day. it's about the long term vision for the passion that he and i have about the future. and really about what this company can be long term. so i don't expect that to change. being a public company, do you think you'll go public in the uk? i'm sure it's been bittersweet for the london stock exchange today. yeah, so today, obviously we're in new york, but we're incredibly proud of our uk heritage and we are open to considering that down the road. okay. any sort of time frame for that? none that we can talk about today. i'm trying to get through today a little bit. those the ceo, rené haas, speaking to bloomberg's caroline hyde in new york after the chip designers trading debut. joining us now is paul golding,

who's a senior us lifestyle and payments analyst at macquarie. paul, just want to get your initial thoughts. were you sort of in press surprised by that pop that we saw? yeah, that's right. i was highly in the lead up to today's debut. sentiment was a bit weak. we'd seen the to implied expected valuation range for the company come down versus earlier reports and be down in the one implied valuation range versus the deal that was done with vision fund one between softbank group and vision fund one. so it it seemed leading into to today that sentiment may have been a bit more muted than it ended up being. it certainly ended up popping substantially at 25% on the day. so a bit impressed with today's performance. ongoing now. how important is it that we sustain this momentum in the weeks to come?

well, we've written in our research that this is the fundamental performance going forward is going to be ever more important, even more important going forward. now, given that and important to softbank group as well, i should say, given the 90.6% stake, that softbank group retains in arm. but as we were going into today, there was some concern over whether this growth momentum would be able to continue. and management was quoted in the press as having noted an 11% expected fy 24 revenue growth rate and a mid 20% fy 25 revenue growth rate. and so hitting those marks is going to be that much more important. we feel going forward given where pricing has gone to now consider going, where investors felt that that landed fundamentals relative to

valuation in going into the ipo pricing on wednesday at $51. yeah, because the skepticism right now is that arm got sort of caught up in the hype over ai, but at the same time, we are seeing this broader chip slump. so will they be able to achieve those targets? well, we've talked in our research about tangible growth levers here with respect to ai. so it hasn't just been hype in our view, with respect to arm as we do our valuation buildup for net asset value for softbank group and look at what arm could contribute. we always look at what arm's customers are seeing in terms of orders. we've heard about large chinese conglomerates, tech conglomerate ordering grace-hopper chips from nvidia and as we saw in the

hypotheses, but overall part of

the success this ipo has had is that the market saw seemed revenue growth. when you look at the semiconductor landscape, they tend to be relatively far out in terms of lead time. there may have been some incremental confidence that was communicated by management that led to today's performance and in light of that, mashayoshi son may want to hold a larger stake. haidi: paul golding from macquarie capital.

we have breaking news when it comes to the whereabouts of the chinese defense minister who has not been seen in public in two weeks. the chinese defense minister has been placed under investigation. that is what the u.s. government believes according to reporting. i should point out that people briefed did not say what led the biden administration to conclude he was under investigation. the white house has not commented. three u.s. officials and two people briefed on the intelligence said they concluded he has been stripped of his responsibilities as defense minister. this is two months after we saw two top generals being removed as well as the july removal of

the chinese foreign minister. we will bring you more details as we get to them. this is bloomberg. ♪

shery: disney is expected to fall millions of subscribers short of its target budget

streaming service. our senior editor for media and entertainment joins us from los angeles. is this a result of the price increases? >> it is a combination of factors. a big part is some countries have lost the rights to stream cricket there. it was their biggest source of subscriber disappointments. overall, they put in too ambitious targets under their previous ceo. they are shifting from a strategy to focus less on subscriber growth and more as profitability. they have been raising prices to try to boost revenue. haidi: we have been seeing losses of customers when it comes to price increases. is there a new target? >> there are about 140 5 million

for the court disney+. wall street is expecting some growth. they signed a deal with charter in the united states, the number two cable provider. part of the deal is that charter customers will get disney+ at no additional charge for them. that is going to be a several million bump to subscribers. but the big number they were shooting for is not obtainable. shery: are we expecting to see a broader restructuring at disney? we are hearing it is thinking of selling abc? >> bob iger set in july they are looking at all kinds of options for their traditional cable and broadcast networks. they confirmed today in a statement that they are still

looking at strategic options for the abc network. they have not committed to anything. nexstar is one of the companies interested, as is byron allen, the entrepreneur who owns a number of stations. there are also looking for investors in espn. haidi: that is just about it for daybreak australia. daybreak: asia is next as we count down to the start of trading. expectations of a soft landing in the u.s. building. this is bloomberg. ♪

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