our globals bring economics and policy editor, kathleen hays, with more. thleen, we were just talking about peter coy in the last hour. they could not have picked a worse day to raise rates. gods or: the fed the economic data gods were playing a joke on the fed today. he saw how weak the cpi was, how weak retail sales were. the fed said, the risks are balanced. they see the weakness, too. but it is temporary. drop in prices, they will stick with the headline gauge and core line gauge. janet yellen said a tight labor market would boost inflation. jump into the bloomberg with me now. see is how that turquoise line is back, steadily lower. the white line, that is wages. they have come off their low but plateaued and started to go down. that is a connection janet yellen is making. unemployment will rise and boost inflation. over the medium term we will get back to target. cpi, down four months in a row. weak. sales are week. -- they say the second quarter will look better. the president of the minneapolis fed says inflation is moving back toward 2%, year-over-y

thank you, kathleen hays, joining us from new york. your bloomberg for more on the boj decision coming up. top live logs on the boj decision will start around 10:30 hong kong time. this is bloomberg. ♪ shery: i'm shery ahn in hong kong. betty: i'm betty liu in new york. you're watching "daybreak asia." we are getting those singapore numbers out on exports, nonoil , 8.1% for thets month of may. electronic imports, more than double the expectation of a 4.2% rise. looking at year on year, you can see it fell by 1.2%. a smaller fall than what economists estimated at 5.6%. this was helped by electronic exports, rising 23.3%, a substantial gain from the prior month and also for exceeding the economists'expectations of an 11.9% rise. certainly good news for the city there on the export and trade front. let's get to first word news. paul? putin used his annual tv show to poke fun of washington over alleged meddling in the presidential election. he said james comey's leaking of discussions with president trump was strange, but he was prepared t

kathleen: and i'm kathleen hays in washington dc. to our top story, exit polls suggesting an inconclusive election results, the conservatives falling short of a majority in parliament. and we are going to sydney. great to see you. no seats have changed so far, but what are your initial takes on the exit poll at the moment? >> it is obviously a pretty disastrous results for theresa may. we will see if the exit poll reflects the final vote tally, but it should. it is bad news all around. even if the exit poll is off by a few seats and theresa may scrapes by with a majority, i would argue her leadership would be imperiled within the tory party and she would lack credibility going forward in the negotiations with brussels. yvonne: one second. we want to bring john fraher back. we were just talking about this, the superlatives we were describing for theresa may leading up to the election, iron lady, difficult woman, those things substantially taking right now. anyway she can come out of the election stronger? john: no. these exit polls wo

kathleen hays has more now. what has theresa may proposed here?t has been the mixed response so far? >> so far what she has done is take an important step, because there are nearly 3 million citizens of the eu living in the u.k., and there is another 1.5 million or 2 million brits they are the eu, so wondering how this will be resolved. whatts to the heart of people call divorce issues, divide the kids, who gets what, so this is something that has to be tackled before they move on to bigger issues. it is not clear on a cut off date. it is all about how long you have lived in the u.k. the cutoff date for determining whether you are eligible to stay without too much difficulty is somewhere after article 50 was triggered on march 29, and before the u.k. actually exits from the eu. u.k. fivelived in the years, you get settled status. if you live to their less than five years, you have to live years,ntil you get five then apply later for the settled status. what if you moved to the u.k. after the cutoff date is determined or starts? you get a grace. pe

summit kicks off in brussels kathleen hays here with more on the e.u. summit. portant, and what was the response so far, kathleen? kathleen: this is going to affect the lives of at least 4 million people if you look at the numbers. citizens from the u.k., who are living somewhere in the e.u., it is a very specific issue that has to be ironed out at the beginning of brexit negotiations, that is important for both sides. both sides are kind of drawing some lines in the sand and importantly, theresa may put out a specific proposal. so far, it has got a pretty decent response, and it has got some ideas for how citizens rights will be maintained as they get ready to negotiate the rest of the very important issues. here is how it works. if you have been in the u.k. at least five years, you have no problem. you have settled status. you will be treated like a u.k. citizen. less than five years residence before a cutoff date -- it cut off date between when the brexit negotiation period started in march, and when the u.k. actually brexits -- that is contentious. if it is

also joining us is kathleen hays, who covers global central-bank policy for us.ob, you may be an outlier. you do not see this as a done deal just quite yet, right? bob: it is easier to justify a rate increase when you come on after -- come after a strong economy. we had a dismal first quarter. wasmost recent jobs number not supportive. i do not see an imperative for them right now. especially since the age book showed a similar modest expansion. there is no urgency to act. by september, they will have a reading on second-quarter gdp, more job numbers. it is truly had a number that is way down. it is still something of concern. the inflation is on target. on balance, it is a 50-50 situation right now. -- kathleen: i hear everything you're saying. i have the good fortune to ask a couple months ago. labor is not rising. there is some softness. inflation has just started to soften. other feden and officials said the inflation softness will be transitory. labor markets are getting tighter and wages eventually will rise. why would janet yellen and her colleagues back a

economics and policy editor kathleen hays is looking at this for us.t is really looking at the underlying details. why is that question becoming ever more important? >> it is a big deal to the bond market and the fed is no longer reinvesting all the proceeds from the balance sheet, then it will not be taking up supply in the bond market, pushing yields higher. then there is the complicated mix of if you are trying to reduce the balance sheet, that is less stimulative, so would that affect the number of rate hikes you do? the more people want answers to these questions. now, wirphours from is showing us that this is all but a done deal, the odds of the june rate hike. now, so this is what people are expecting. if you ask me why, well, listen to the fed. unemployment is low, 4.4%, a 10 inflation has slumped, well, that is probably just transitory. who is onent foster board with rate hikes and removing stimulus put in place following the financial crisis things fed communications is problematic right now. the market doesn't believe the fed when it sa

kathleen hays has more.e were just discussing the stability of the yuan, the strengthening does give impetus to buy treasuries again it would seem. interesting process, this link between china's holdings of u.s. treasuries and managing the currency is once .gain on full display here it goes wanting to buy some bonds back, and here is why. ,n that list of reasons why that yields on treasuries are attractive. they sovereign bonds, if want to put their money back into bonds, you're going to get the best yield in the u.s. compared to other developed countries. versus the up 2% 6.5% drop in 2016, so discussion as you look at this story that bloomberg news broke after speaking to chinese officials, analysts and traders are saying this can promote confidence in china's exchange rate system and the pboc's ability to manage it, promote a more globalized exchange rate market. #3032 two underscore the point of yields around the world. the yellow line is the yield on 10 year treasuries, just over 2.1%, next in line the

policy editor kathleen hays here with more of the stunning failure for theresa may. carney might not do anything. kathleen: they would not hold anyway, but this creates so much uncertainty over the economy, financial markets. they will sit back and watch and see what happens because it is not just the economy. it is what theresa may -- betty: setback. kathleen: tumble from power. she has been called the walking dead, many say she will be done by the end of the year. 19.it talks on june she said we will go ahead, i will have a minority government. that is what people want me to do. she said she will move ahead, but the u.k. economy is already pretty tepid. let's look at a bar chart that defects this very well. you can see how growth tumbled in the first quarter. the estimate before theresa may's election failure was looking also pretty tepid, but after this they could get more so. we don't know. hard brexit, theresa may pushing hard for it. she does not have the power to push that through. said inn at citibank substance, the worst risks cap diminished now, because you

shall kathleen hays with the watch on central banks.us on the follow-up from the u.k. of election. how asian relations may change under a weekend theresa may government. the pound faces headwinds as some traitors are betting on a softer brexit. we get numerous outlook for sterling next. outlook for sterling next. this is bloomberg. ♪ is "daybreak asia." >> theresa may was left with a hung parliament. our next guest sees sterling strengthening by year's end due to a softer brexit. he joins us live from singapore. the u.k. needs is more political uncertainty, but let's assess the fallout we have. #9243, we have seen moves in the pound, 2% drop in sterling, that is more during the brexit vote. some thought a hung parliament with knockoff 7% on cable. i think the general view is that this uncertainty we are thesethrough will lead to softer brexit narrative gaining some traction. the election results clearly show that people are in favor of the hard brexit that prime minister may was pushing for, and from here, we think a lot of the more neg

let's get it over to kathleen hays in new york. these boj minutes from april, did we learn anything new? >> i don't think we learned anything new. we have these minutes underscoring the key challenges the boj still faces. in april, boj at left every aspect of policy unchanged. they anchored the 10 jgb at the long end of 20, and continuing to buy bonds to achieve all of that. one thing that emerges from the mentum from the 2% target was not strong enough yet. let's look at the details out of these minutes. not surprisingly, the vast majority saying the risk that are the economy remains skewed to the downside and it was appropriate to pursue this path for monetary easing which they have been doing since governor kuroda took office, and most ateeing that stable rates the long end show that yield curve control is working. story comes from our bloomberg team in tokyo, where they talk to a former boj isicial who said the risk when the hawks leave in july and there won't be enough debate to keep policy on track. we see a lot of agreement

bloomberg's global editor kathleen hays is here.he rate hike is considered so much of a done deal. investors are looking for more. we are looking at future plans and how the balance sheet unwinding could work. reporter: absolutely. the fed will wrap up a two day read -- meeting wednesday afternoon about 2:00. janet yellen will start her press conference around 2:30 and talked for about an hour, plenty of time for reporters to cover her with questions about a hike today, what are you looking for next, when are you going to reduce the balance sheet? presumably we will get a lot of good information. hike bakedsis point in the cake after we have seen fed officials saying we see an appropriate high three times this year. interesting the fed is doing this inside it -- in spite of a soft patch. the new york fed has a survey of inflation expectations. that number tumbled one as people where inflation will be three years out. in april, the average was 2.91%. now in may, it is down to 2.47%. expectations, are they following weakening inflatio

bloomberg's global economics and policy editor kathleen hays here. ing to see how mario draghi finds his way through this hot mess. kathleen: exactly. those are technical terms. here is what is going on for him. the economy has gotten stronger in europe. at the same time, inflation is weakening. how can mario draghi come up and not acknowledge stronger growth? if he doesn't, it could hurt his credibility. but mario draghi is saying, if we start thinking about stronger growth, people think we are getting ready to reduce stimulus. here is how mario draghi gets out of this. come back to inflation. in euro cpi down to 1.4% may. let's make this clear by looking at a bloomberg chart. 21.have got #btb32 you see core inflation taking it on the chin, down 2.9%. headline targeted by the ecb down to 1.4 percent, target just under 2%. they had a temporary rise because of high energy prices, but now it has pulled back again. is sort of the lifeboat for mario draghi as he policymakers, to make a decision at their closely watched press conference. what people are fi

kathleen hays is here with more. sothis really going to be bad for the u.k.nomy to the extent that the boe needs to take it into account because people have been living under this brexit cloud? go again perhaps. this is shaking the current the power structure, how quickly brexit can be negotiated and what kind of brexit will occur. it is a clichÉ, but true. investors say there is a pullback at times like this. the institute of directors in the u.k. did a survey over the weekend to find out what businesses are looking at and ,ight of this election result this unexpected result for theresa may, and stephen martin arector saying that firms worried about a possible postelection disaster. plunging aftersm the election. let me run through the key findings. percent are now pessimistic about that u.k. economic future after this vote. that is a lot more than the 43% who turned pessimistic after the eu referendum in june. isn't that interesting? concerned about the new governments impact on the economy, and bottom-line what they are most worried about is businesses are

also, thank you to kathleen hays for joining us.sday with much more ahead and a policy,hat confounds the search for inflation. this is bloomberg. you are watching daybreak. let's get to the news with rosalind chin. calling for the u.s. to spend more on infrastructure. they were impressed by the condition of the airport and cell phone service. warning that spending it is damaging american growth. the proceeds spent on infrastructure. apple has cash reserves outside there is a proposal of a one-time 10% levy on the corporate tax rate. be a our view, it should repatriation and it should be required and you are not asking people who have had the earning from the subsidiaries if they want to bring it back and you thisaying that you must do over a certain span of time. security continues to andnate ahead of the vote on called the election brexit and recent attacks as a switch of the focus. the outlook was cut to negative. led to thelaim costs underwriting losses, the reduction came because of a delivering of strategic goals. and, land val

economics and policy editor kathleen hays with more. talk about the london terror attack's and when that might have an impact on the economy, around the world but also rate hikes. if we got an outcome, if the london terror attack's unsettled the u.k. electric -- electorate to an extent that theresa may said it was in jeopardy, many say no because she has got a background fighting security. vote was -- the federal reserve said before that, we will hold back. anybody is talking about that yet. we will see what happens. has alreadyorbyn been trading barbs. looking at the jobs report, you could say it is basically strong footing, but let's look at the numbers. 138, --oll fell short, 138,000. looking at this chart, april and may were all revised lower. so the white line which goes up until we got to this may report. now it is not looking quite as strong as it was. you are seeing the pink line, the three-month moving average, it is over. they are losing momentum in the market. but what about the unemployment rate? it fell 4.3%. wages will ris

yvonne: kathleen hays, thank you. still ahead, waiting for their health check.ok at how u.s. banks will do in the annual stress test. betty: trumps criticism of china's role in handling north korea hurt ties between washington and beijing. a are going to talk to professor at a university next. that is donald trump speaking at a rally in iowa. this is bloomberg. ♪ yvonne: "daybreak: asia this is live from hong kong. i'm yvonne man. betty: i'm betty liu. china has hit back hard at president trump, saying his efforts in north rea have been indispensable and played an important role in seeking peace. yvonne: in response to president trump's tweets, which said while he appreciates the efforts of presidency in china to help -- president xi jinping in china to help, at least he knows china tried. joining us is the associate professor of chinese studies at young state university joining us live from seoul. we're still trying to get clarity on what the u.s. is asking from china. you saw that tweet from the president saying thanks but they are going to wait on their optio

kathleen hays is here with the latest right now. the fed rate hike is considered a done deal.nvestors are waiting to hear from fed chair yellen? >> she is getting a lot of questions in the press conference after the fed decision on wednesday. definitely the rate hike, 25 basis points, to the middle of a range, that is what is in the cards. as the fed focuses on a stronger labor market, the unemployment level at the lowest in 10 years and dismisses softening in inflation. survey of inflation expectations tumbled in may. road, 2020,down the the expected inflation rate is 2.47%. let's put this into perspective and see what inflation is doing, this is the fed's main gauge, the pce deflator briefly topping 2%, and has now fallen to 1.7%. 1.5%ore pce is now down to , so this is quite a move. found thef economists majority still see the fed doing two more rate hikes this year. fed's third hike is seen in september, and the balance unwind is supposed to start in the fourth quarter of -- first -- fourth quarter this year, so some time after september. what are the odds looking like now

global economics and policy at other kathleen hays is here. >> let's just go home.eresting is the fact that you have several banks meeting this week and not doing anything. turning tois already where the central banks are heading. maybe some different directions people have been anticipating. that is the case with the rba. they are going to keep it at 1.5%. jobs growth has picked up. retail sales looking stronger than expected. tost-quarter gdp is supposed pull back 0.3% to 1.1% the quarter before. wages are stagnating despite faster job growth. you're seeing a turn to more part-time jobs than full-time job and there is a question beingquality of jobs created. household debt is rising. it has risen quickly. on the other hand, the rba in many businesses would like to see currency. let's jump into the bloomberg and look at #6486. what you can see is the house price index. as you wish you bought a house 10 years ago in australia? then you have the household debt to income ratio, the yellow one. then you can see the rba rate target is down quite a bit lower. that is whe

let's get it over to kathleen hays for more.errible events in london over the weekend, does it change market positioning ahead of the general election on thursday? >> we can say this for sure. fed meeting, the jobs report, all important, but the general election that would have been a global market focus at any rate now has perhaps on heightened -- or have's heightened uncertainty after the london attack. don't forget james comey is also testifying this week, so again economic risks, fed risks, more politics and geopolitics. we have to look at the bond market and the report itself to get some of the details. let's do that. the june payrolls did fall short. revisedd may were lower. let's jump into the bloomberg and look at #1977, the white line, you can see the swings in the growth of jobs and see how the last month's tilting lower. the pink line is that three-month moving average. if you go from a third of the way from the right of your screen, you can see momentum is definitely slowing. beyond that, let's take a look at unemplo