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00:00♪ PAUL GOOD MORNING : AND WELCOME TO "DAYBREAK: AUSTRALIA." I AM PAUL ALLEN IN SYDNEY. ANNABELLE: I AM ANNABELLE DROULERS IN HONG KONG. SHERY: FROM BLOOMBERG'S WORLD HEADQUARTERS IN NEW YORK, I AM SHERY AHN. ANOTHER CENTRAL BANK OFFICIAL BACK SAY 75-BASIS POINT HIKE IN JULY. PAUL: U.S. TREASURIES RARELY AFTER WEEK ECONOMIC DATA FEELS RECESSION FEARS, PUSHING TRADERS TO RETURN TO EQUITIES. SHERY: WALL STREET'S BIGGEST BANKS ACED FED STRESS TESTS. AND U.S. FUTURES ARE UNDER PRESSURE IN THE EARLY SESSION OF ASIAN TRADING. WE HAD THE S & P 500 AND TREASURIES RALLYING IN TODAY'S SESSION. THE WEAKER THAN EXPECTED DATA PAUL MENTIONED, JOBLESS CLAIMS HOVERING NEAR THE FIVE WEEK-HIGH, MANUFACTURING AND SERVICES ALSO COOLING FOR THE MONTH OF JUNE. WE HAVE THE 10-YEAR YIELD FALLING TO THE 3% LEVEL AS WE CONTINUE TO SEE THE CONCERN ABOUT WHERE WE'RE HEADED WITH THE ECONOMY. ARE WE GETTING A RECESSION IS THE BIG QUESTION. WE HAVE PRESSURE ON OIL PRICES, AROUND $103 LEVEL. WE HAVE NOT SEEN AT THIS TEST TO THE DOWNSIDE FOR CRUDE IN A WHILE. TAKE A LOOK AT THIS CHART ON BLOOMBERG SHOWING YOU IT IS PAST THE 50-DAY MOVING AVERAGE, THE 100-DAY MOVING AVERAGE AND HEADED TOWARDS THE 200-DAY MOVING AVERAGE, FOR THE FIRST TIME SEEING IT ATTACHED TO THE DOWNSIDE SINCE THE PANDEMIC BEGAN. ANALYSTS FELT MIXED ON WHERE CRUDE PRICES WERE HEADED FROM HERE. ANNABELLE: THAT'S RIGHT, WE ARE SEEING SIGNS THAT ENERGY DEMAND COULD HAVE TAKEN A TURN, A MAJOR FOCUS IN THIS REGION TODAY. WHEN YOU LOOK AT THE LOSSES ACROSS THE ENERGY COMPLEX IN AUSTRALIA IN THE PREVIOUS SESSION, WE DID HAVE BERNSTEIN AS WELL SAYING THAT WE ARE GOING TO SEE IRON ORE SHIPMENTS DECLINING FROM AUSTRALIA IN THE SECOND QUARTER. FOR THE REST OF THE REGION'S EQUITIES, LOOKING PRETTY MIXED. WE HAD THE DROP IN TREASURY YIELDS, THAT COULD BE A SUPPORT FACTOR FOR EQUITY PRICES THROUGH THE SESSION. NEW ZEALAND IS CLOSED TODAY BUT WE ARE SEEING THE YEN, A PARTICULAR FOCUS, CONTINUING TO STRENGTHEN. A BIT UNCHANGED NOW, BUT STILL STRENGTHENED OVER THE PAST SESSION. WE ARE SEEING TECHNICAL INDICATORS THAT WE COULD SEE THE RETRACEMENT DEEPEN. PAUL: AND WE AREN'T EVEN DONE WITH THE TIGHTENING CYCLE YET. YET TRADERS ARE PRICING IN POTENTIAL FED CUTS IN 2023. THEY ARE PILING INTO HEDGES ON THE POTENTIAL FOR A DOVISH FED PIVOT. 50 BASIS POINTS OF CUTS SUGGESTED FOR NEXT YEAR. THAT COULD MEAN MARKETS ARE PRICING IN AN END TO THE TIGHTENING CYCLE NEXT MONTH. RATES WOULD BE 3.4% BY THEN, SUBSTANTIALLY LOWER THAN THE 4% OF THAT WAS BEING PRICED IN JUST A FEW WEEKS AGO, SHERY. SHERY: GIVEN THE FEARS ABOUT THE POTENTIAL RECESSION, NO WONDER THESE FED STRESS TESTS WERE SO IMPORTANT THIS TIME AROUND. AND SURPRISINGLY, AND PERHAPS NOT SURPRISINGLY, GIVEN THE BANKS HAD PREPARED FOR THIS MOMENT, WE SAW THE BIGGEST BANKS PASSING THE FED'S ANNUAL STRESS TESTS. MORE THAN 30 LENDERS WERE EXAMINED OR THEIR ABILITY TO WITHSTAND TURMOIL. THIS COCKTAIL OF FOUR BLIMPS -- SURGING UNEMPLOYMENT, COLLAPSING REAL ESTATE PRICES A PLUNGE IN STOCKS. . THIS MEANS THE BANKS HAVE A GREEN LIGHT TO RETURN CAPITAL TO INVESTORS. ACCORDING TO BLOOMBERG CALCULATIONS, 80 BILLION DOLLARS TO RETURN TO SHAREHOLDERS THIS YEAR. TAKE A LISTEN TO WHAT CHAIR POWELL TALKED ABOUT, HIS COMMITMENT TO CURBING INFLATION BEING UNCONDITIONAL. CHAIRMAN POWELL: IT IS UNCONDITIONAL. OUR COMMITMENT. THE REASON IS THAT WE NEED TO, IN A PARTICULAR SITUATION, WE HAVE A LABOR MARKET THAT IS UNSUSTAINABLY HIGH AND WE ARE VERY FAR FROM OUR INFLATION TARGET. WE NEED TO RESTORE PRICE STABILITY AND GET INFLATION BACK UP TO 2%, BECAUSE WITHOUT THAT WE'LL BE UNABLE TO HAVE A SUSTAINED PERIOD OF MAXIMUM EMPLOYMENT. SHERY: WE HAD THE FED GOVERNOR MICHELLE BOWMAN ALSO TALK ABOUT THE 75-BASIS-POINT RATE HIKE IN JULY. LET'S TURN TO OUR ECONOMY REPORTER, STEVE MATTHEWS WHAT CAN WE EXPECT FROM THE FED? WE EXPECT TO GET THIS VERY HAWKISH RHETORIC FROM FED OFFICIALS? STEVE: IT WAS VERY HAWKISH RHETORIC FROM POWELL AND BOWMAN. YOU ARE CORRECT, RIGHT NOW MARKETS ARE PRICING IN 75 BASIS POINTS, THERE IS A SENSE THAT THERE WILL BE FRONT END LOADING OF THE RATE HIKE CYCLE IF YOU GET TO 3.5% BY THE END OF THE YEAR. POWELL BASICALLY ENDORSED THE RATE CYCLE THAT WAS LAID OUT BY THE FOMC LAST WEEK IN THEIR FORECAST, IN THE DOT PLOT. THERE WAS A LOT OF HAWKISH RHETORIC. AT THE SAME TIME, POWELL SAID THAT A RECESSION IS NOT INEVITABLE, THAT THEY ARE FOCUSED ON THE EMPLOYMENT SIDE OF THE MANDATE AS WELL. SO IN SOME WAYS, IT WAS A BALANCED PRESENTATION. THIS WAS IN THE VIEW OF SOME OF THE WALL STREET ANALYSTS WHO FOLLOW IT VERY CLOSELY, NOT AS HAWKISH AS IT COULD HAVE BEEN, GIVEN THAT OBVIOUSLY THE FED RIGHT NOW IS IN THE HAWKISH POSITION AND AGGRESSIVELY RAISING RATES. THAT IS OF IS TO WHAT IS GOING TO HAPPEN IN JULY. PAUL: CONGRESS ITSELF HAS QUITE A LOT OF SKIN IN THE GAME HERE, WITH THE MIDTERMS APPROACHING. HOW DO THEY REGARDED THIS TESTIMONY FROM POWELL? STEVE: IT WAS INTERESTING BECAUSE THERE WAS A LOT OF POLITICS AT PLAY. DEMOCRATS WERE TRYING TO GET POWELL TO ENDORSE THEIR POINT OF VIEW, WHICH IS -- ONE OF THE DEMOCRATS WHO WAS MENTIONING THE INFLATION RATE FOR GERMANY, FOR POLAND AND A DOZEN OTHER COUNTRIES WHICH IS VERY HIGH, INCLUDING SOME THAT ARE HIGHER THAN THE U.S., MAKING THE POINT THAT THIS IS A WORLDWIDE PHENOMENON. AT THE SAME TIME, REPUBLICANS WERE TRYING TO MAKE THE CASE THAT, NO, THIS IS ABOUT JOE BIDEN AND ABOUT THE STIMULUS PACKAGE THAT WAS PASSED IN 2021. AND THEY GOT POWELL TO SAY THAT HE DID NOT ENDORSE THE STIMULUS PACKAGE OF 2021. HE DID AT THE BEGINNING OF THE COVID CRISIS, BUT NOT THE LAST PACKAGE. PAUL: ALRIGHT, U.S. ECONOMY REPORTER STEVE MATTHEWS THERE . WALL STREET'S BIGGEST BANKS ACED THE FED'S ANNUAL STRESS TEST, PAVING THE WAY FOR BILLIONS OF DOLLARS OF SHAREHOLDER PAYOUTS. LET'S BRING IN BLOOMBERG'S SU KEENAN FOR MORE ON THIS. ONE TO THE STRESS TESTS SHOW? SU: THEY SHOWED THAT ALL THE BIG BANKS THAT WERE EXAMINED CAN WITHSTAND SEVERE STRESS, AND THAT IS IMPORTANT GIVEN THE MACRO ENVIRONMENT WE ARE IN NOW. IT ALSO PAVES THE WAY FOR THESE BANKS TO PAY OUT BILLIONS IN STOCK BUYBACKS AND DIVIDEND PAYOUTS. IN THE TEST, THE FED PRESENTS A MARK CRISIS, HYPOTHETICAL SITUATION. A MASSIVE SURGING UNEMPLOYMENT, CRASHING COMMERCIAL REAL ESTATE, AND A COLLAPSE IN ASSET PRICES, AND MUCH HIGHER MARKET VOLATILITY JUST FOR GOOD MEASURE. ALL FIRMS STATED ABOVE THE FED'S MINIMUM, SHOWING THAT THEY HAD MORE THAN ENOUGH CAPITAL ON HAND TO WITHSTAND WHATEVER CRISIS MAY COME THEIR WAY. TYPICALLY WE SEE THE STOCKS RISE AFTER THEY PASS, AND WE MIGHT SEE SOME ACTION IN THE FRIDAY MARKET. BUT MAJOR FIRMS SUCH AS MORGAN STANLEY AND GOLDMAN SACHS WERE ALSO GIVEN ADDITIONAL STRESSORS, HYPOTHETICALLY TO FACE. THAT'S THAT TESTED THE RESILIENCY OF THEIR TRADING OPERATIONS, AND THEY DID VERY WELL. BANKS CAN NOW ANNOUNCE THE PAYOFF PLANTS STARTING MONDAY AND THEY ARE POISED TO RETURN, AS MENTIONED, $80 BILLION TO INVESTORS. SHERY: COULD IF POTENTIAL CRISIS PERHAPS BE BILLIONS OF DOLLARS IN LOSSES GIVEN THE BUYOUT DEBT THEY ARE HOLDING? SU: REMEMBER THE M & A FRENZY THAT TOOK PLACE? WELL, A LOT OF THE CORPORATE DEBT USED TO FINANCE THAT IS NOW SINKING IN VALUE. LET'S LOOK AT BLOOMBERG TO GET A VISUAL OF THE REALITY CHECK. YOU HAVE BANKERS IN THE U.S. AND EUROPE BRACING FOR HUGE LOSSES ON THOSE BUYOUTS AS THEY TRY TO OFFLOAD THE RISKY CORPORATE DEBT. SOURCES CLOSE TO THE MATTER TOLD BLOOMBERG THAT THE BIGGEST HIT COULD AMOUNT TO $200 BILLION, AND THAT COULD BE THE DEAL THAT TOOK CITRIX PRIVATE. THAT INCLUDED A GROUP OF LENDERS LED BY OF AMERICA, CREDIT SUISSE AND GOLDMAN SACHS. EACH OF THE BANKS COULD FACE LOSSES IN EXCESS OF $100 MILLION, ACCORDING TO PEOPLE CLOSE TO THE MATTER. YOU ARE LOOKING AT HOW THE BOND MARKET, THE CORPORATE BONDS RISK. THAT IS ONE OF THE DEALS THAT YOU SEE HAS HAD A LOT OF FOCUS ON HOW THAT WILL END UP ON THE BANK'S PROFIT SHEET. BACK TO YOU. SHERY: BLOOMBERG'S SU KEENAN WITH THE LATEST ON THE BIG WALL STREET BANKS. LET'S GET OVER TO VONNIE QUINN WITH THE FIRST WORD HEADLINES. VONNIE: EUROPEAN UNION LEADERS HAVE GRANTED UKRAINE CANDIDACY STATUS, AND HISTORIC STEP ON THE PATH TO MEMBERSHIP, WHICH CAN LAST MORE THAN A DECADE. KYIV APPLIED SHORTLY AFTER THE RUSSIAN INVASION IN FEBRUARY. IT WILL HAVE TO MEET CONDITIONS ON THE RULE OF LAW, JUST AS ANTICORRUPTION. CANDIDATE STATUS IS ALSO GRANTED TO MOLDOVA. > > OF COURSE, THE COUNTRIES ALL HAVE TO DO HOMEWORK BEFORE MOVING TO THE NEXT STAGE OF THE ASCENSION PROCESS, BUT I BELIEVE THEY WILL ALL MOVE AS SWIFTLY AS POSSIBLE AND WORK AS HARD AS POSSIBLE TO IMPLEMENT THE NECESSARY REFORMS. VONNIE: LEADERS OF THE BRICS NATIONS SAY THEY OPPOSE GREEN BARRIERS THAT COULD RESTRICT GLOBAL TRADE. BRAZIL, RUSSIA, CHINA, INDIA, AND SOUTH AFRICA SLAMMED TRADE PRESSURES. IN THEIR JOINT DECLARATION AFTER THE VIRTUAL SUMMIT HOSTED BY BEIJING, THE GROUP ALSO CALLED FOR REFORMS TO INTERNATIONAL BODIES SUCH AS THE WTO AND IMF . NEW YORK'S TRANSPORTATION AUTHORITY SAYS IT IS DRAFTING RULES TO KEEP WEAPONS OF MASS TRANSIT, THIS AFTER THE SUPREME COURT STRUCK DOWN A STATE LAW LIMITING WHO CAN CARRY A HANDGUN IN PUBLIC. THE LANDMARK RULING IS POSSIBLY MEANING MORE GUNS ON THE STREETS OF ALL AMERICAN CITIES. IT COMES AS A U.S. SENATORS ARE MOVING TOWARDS APPROVING NEW GUN SAFETY MEASURES AFTER RECENT MASS SHOOTINGS IN NEW YORK AND TEXAS. A MAJOR INQUIRY INTO AUSTRALIA'S MINING SECTOR HAS UNCOVERED DOZENS OF CASES OF SEXUAL ABUSE AND HARASSMENT OF WOMEN IN THE INDUSTRY. A REPORT BY THE WEST AUSTRALIAN GOVERNMENT DESCRIBED THOSE INCIDENTS AS HORRIFIC. BHP AND RIO TINTO ARE AMONG THOSE NAMED IN THE INVESTIGATION, WHICH RECOMMENDS COMPENSATION FOR SOME WORKERS. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM VONNIE QUINN. THIS IS BLOOMBERG. PAUL? STEVE:. PAUL: STILL TO COME, WE DISCUSSED THE OUTLOOK FOR EMERGING-MARKET CURRENCIES IN ASIA WITH OUR NEXT GUEST, AFTER MAJOR DECISIONS FROM INDONESIA AND PHILIPPINES. AND OUR NEXT GUEST, CHIEF STRATEGIST VICTORIA FERNANDEZ BREAKS DOWN THE IMPACT OF ANOTHER POTENTIAL 75 BASIS POINT FED HIKE, AND WHY SHE IS STILL SKEPTICAL ABOUT THE THREAT OF A U.S. RECESSION. THIS IS BLOOMBERG. ♪ > > INFLATION IS HAPPENING EVERYWHERE NOW. INFLATION IS FROM DEMAND, AND WE HAVE TOOLS TO DEAL WITH THE DEMAND. OUR TOOLS ARE BLUNT BUT THEY ARE THE RIGHT TOOLS TO DEAL WITH BROAD, AGGREGATE DEMAND. WE ARE VERY FAR FROM OUR INFLATION TARGET. OUR INTENT IS TO BRING INFLATION DOWN TO 2%. IT IS UNCONDITIONAL, OVERCOMMITMENT IS. THAT PAT HAS GOTTEN MORE AND MORE CHALLENGING THANKS TO THE EFFECTS ON OIL PRICES AND FOOD PRICES. PEOPLE DO EXPECT INFLATION TO COME DOWN TO LEVELS THAT ARE CONSISTENT WITH OUR PRICE STABILITY MANDATE. WITHOUT THAT, WE WILL NOT HAVE A SUSTAINED PERIOD OF MAXIMUM EMPLOYMENT. SHERY: FED CHAIR JEROME POWELL TESTIFYING IN CONGRESS. HE HAS ALSO TALKED ABOUT THE POTENTIAL OF RECESSION. OUR NEXT GUEST IS A LITTLE MORE CONFIDENT ABOUT THE HEALTH OF THE U.S. ECONOMY, AND JUST AS CONFIDENT THAT THERE IS TREMENDOUS VOLATILITY AHEAD THIS YEAR. ACROSS MARK GLOBAL INVESTMENTS -- LET'S BRING IN VICTORIA FERNANDEZ. WHEN CAN WE EXPECT TO SEE SOME SIGNS OF A BOTTOM IN THE STOCK MARKET, AND WHAT WOULD THAT LOOK LIKE? VICTORIA: LOOKING FOR A BOTTOM IS A VERY DIFFICULT TASK, AND TIMING IS EVEN HARDER TO DO. BUT THERE ARE SIGNS WE WOULD BE LOOKING FOR. YOU WANT TO LOOK AT MORE TECHNICAL SIGNS, YOU WANT TO SEE THE VIX GET ABOUT 40, HE WENT TO SEE THE TREND READINGS GO BETTER. THE PUT-CALL RATIO AT ONE. AND PMI'S NEED TO BOTTOM. EUROPEAN PMI'S ARE COMING DOWN, BUT THEY ARE NOT IN CONTRACTION TERRITORY SO I DON'T THINK THEY ARE BOTTOMING. THE OTHER ITEM WE WANT TO LOOK FOR IS THE FED OR OTHER CENTRAL BANKS MAKING A MORE DOVISH EVENT. YOU CAN SEE FROM THE COLLECTION OF CLIPS YOU JUST PLAYED, WE ARE NOWHERE NEAR THAT LEVEL. FOR US, I DON'T THINK WE HAVE HIT THE BOTTOM YET, WE HAVE QUITE A BIT OF VOLATILITY. WE WILL HAVE THESE BEAR MARKET RALLIES THROUGH THE REST OF THE YEAR, BUT WE SEE THE POTENTIAL FOR MORE DOWNSIDE. SHERY: IN THIS ENVIRONMENT WHERE WE ARE NOT SURE WHERE WE ARE HEADED, WHERE CONSUMPTION COULD GO GIVEN RISING PRICES, WHAT ARE YOU BUYING RIGHT NOW? VICTORIA: I THINK YOU HAVE TO BE VERY TACTICAL IN YOUR PORTFOLIOS RIGHT NOW. IN THE LAST COUPLE OF YEARS, YOU ARE KIND OF ABLE TO THROW A DART AND PICK A GENERAL AREA AND YOU WOULD DO WELL, BECAUSE THE MARKET WOULD RESPOND TO THAT. NOW YOU HAVE TO BE VERY CAREFUL AND TACTICAL. WE HAD OVERWEIGHT TOO VALUE FOR A WHILE. WE HAVE SEEN THE PREFERENCE FOR VALUE OVERGROWTH START TO DIMINISH, IT HAS DIMINISHED 50% IN THE FIRST HALF OF THE YEAR. SO WE ARE LOOKING AT SOME NAMES THAT KEEP US MORE BALANCED, NAMES LIKE LOCKHEED MARTIN SO WE HAVE EXPOSURE IN THE DEFENSE SPACE. WE WILL CONTINUE TO SEE DEFENSE SPENDING GO HIGHER NOT JUST IN THE U.S., BUT GLOBALLY. YOU NEED TO HAVE SOME FINANCIALS AND INSURANCE NAMES, SOMETHING LIKE DISCOVER FINANCIAL OR METLIFE, THESE ARE NAMES THAT WE LIKE. AND WE LIKE RETAIL NAMES, EVEN THOUGH WE KNOW THAT THE CONSUMER IS GOING TO GET HIT BY THE HIGHER INFLATION NUMBERS, THEIR HOUSEHOLD BALANCE SHEETS ARE STILL STRONG. SO WE HAVE PURCHASED SOME NAMES. PAUL: BUSINESSES HAVE BEEN DEALING WITH SOARING INPUT COSTS. HOW DOES THIS IMPACT YOUR VIEW OF WHAT THE NEXT QUARTER OR EARNINGS IS GOING TO BE LIKE? VICTORIA: THIS IS CRITICAL. I THINK THIS IS WHERE WE ARE ACTUALLY GOING TO SEE HAPS SOME OF THOSE ELEMENTS WE ARE LOOKING FOR AT THE BOTTOM, MAY BE SOME OF THAT COMES WHEN WE START TO DIVE INTO EARNINGS. WE ARE STARTING TO GET A FEW NUMBERS COME OUT EARLY. WE HAD FEDEX COME OUT TODAY. WE HAVE BEEN WAITING FOR MARGINS TO COMPRESS. WE HAVEN'T SEEN THAT HAPPEN TREMENDOUSLY, JUST A LITTLE BIT. BUT THESE EARNINGS EXPECTATIONS HAVE STILL NOT COME IN DRAMATICALLY. DISCRETIONARY HAS COME IN SOME, BUT WE HAVEN'T SEEN IT IN THE VALUE NAMES, AND ENERGY IS STILL KEEPING EARNING EXPECTATIONS HIGHER THAN WHAT WE WOULD EXPECT. SO THAT IS GOING TO BE KEY OVER THE NEXT MONTH, TO SEE WHERE THE EARNINGS EXPECTATIONS GO AND WHAT MARGINS LOOK LIKE. FEDEX HAD INCREASING MARGINS ON SOME OF THEIR FREIGHT, WHICH IS INTERESTING. THEY ARE INCREASING THEIR FUEL SURCHARGES. HE WILL HAVE TO LOOK AT EACH COMPANY AND SEE HOW THEY ARE HANDLING THE LABOR AND WAGE COSTS AND THE FUEL COSTS THAT THEY ARE FACING NOW. PAUL: DO YOU SEE SOME OF THOSE COST PRESSURES PERHAPS EASING DOWN THE TRACK? WHEN DO YOU THINK THE OIL PRICE WILL COME DOWN, FOR EXAMPLE FED HAS A WILL MANDATE, PRICE STABILITY AND FOR EMPLOYEE -- AND FOR EMPLOYMENT. HOW MUCH UNEMPLOYMENT WILL BE TOLERATED AS IT TRIES TO GET INFLATION UNDER CONTROL? VICTORIA: THE LABOR MARKET HAS BEEN INCREDIBLY STRONG AND THAT IS WHERE THE REASONS WE DON'T SEE A BOTTOM RIGHT NOW AND WE DON'T SEE A RECESSION IN 2022. WE ARE LOOKING FURTHER OUT TO 2023 FOR THAT TO HAPPEN BECAUSE THE LABOR MARKET IS STRONG. BUT THE FEDERAL RESERVE HAS SAID THAT INFLATION IS THEIR PRIMARY CONCERN. THEY ARE WILLING TO TAKE ON RECESSIONARY RISK AND LET THE LABOR MARKET WE CAN IN ORDER TO HAVE THE INFLATION PRESSURE COME DOWN -- AND WILLING TO LET THE LABOR MARKET WEAKEN TO HAVE INFLATION PRESSURES COME DOWN. WE HEARD POWELL SAY, THEY CAN FIX THE DEMAND-SIDE OR AT LEAST ATTEMPT TO HELP THE DEMAND-SIDE, BUT THEY CAN'T DO ANYTHING ON THE SUPPLY-SIDE. . SO WE HAVE A LONG ROAD AHEAD OF US TO SEE THE PRICES COME BACK DOWN. SHERY: CROSSMARK GLOBAL INVESTMENTS CHIEF MARKET STRATEGIST VICTORIA FERNANDEZ, ALWAYS GOOD TO HAVE YOU WITH US. THANK YOU. THE U.S. SUPREME COURT STRIKES DOWN A LAW LIMITING WHO CAN CARRY A HANDGUN IN PUBLIC. WE WILL GET MORE ON WHAT THAT MEANS FOR THE SAFETY OF AMERICAN CITIES. THAT IS COMING UP. THIS IS BLOOMBERG. ♪ > > WHILE WE ARE STILL ANALYZING THE DECISION, WE CAN SAY WITH CERTAINTY THAT THIS DECISION HAS MADE EVERY SINGLE ONE OF US LESS SAFE FROM GUN VIOLENCE. THE DECISION IGNORES THE SHOCKING CRISIS OF GUN VIOLENCE EVERY DAY, ENGULFING NOT ONLY NEW YORK, BUT ENGULFING OUR ENTIRE COUNTRY. SHERY: IN NEW YORK CITY MAYOR ERIC ADAMS, ON THE SUPREME COURT DECISION STRIKING DOWN STATE RESTRICTIONS AND CARRYING A HANDGUN IN PUBLIC. IT FOLLOWS CASE DUTIES OF MASS SHOOTINGS AROUND THE COUNTRY THAT LEFT MORE THAN 30 PEOPLE DEAD AT A NEW YORK STATE GROCERY STORE AND A TEXAS ELEMENTARY SCHOOL. JOINING US FOR MORE IS BLOOMBERG'S GREG STOHR. HOW FAR DOES THIS RULING GO IN EFFECTIVELY ALLOWING GUNS TO BE CARRIED IN PUBLIC AND HOW MUCH CAN BE DONE WHEN IT COMES TO PERHAPS SOME MEANING TO THE SENSITIVE LOCATIONS THAT WAS A KEY POINT HERE? GREG: WHAT THE COURT SAYS IN THE OPINION BY JUSTICE THOMAS IS THAT MOST AVERAGE LAW-ABIDING AMERICANS HAVE A CONSTITUTIONAL RIGHT TO CARRY A HANDGUN IN PUBLIC. AND THERE ARE SIX STATES THAT HAVE LAWS THAT MAKE IT DIFFICULT FOR PEOPLE TO GET A LICENSE BECAUSE THEY WOULD HAVE TO SHOW SOME SPECIAL REASON WHY THEY NEED A GUN TO PROTECT THEMSELVES. THE COURT DID NOT SAY TOO MUCH ABOUT THE SECOND QUESTION. THE SENSITIVE AREAS ISSUE. THE COURT HAD SAID IN PAST OPINIONS THAT STATES AND LOCAL GOVERNMENTS CAN CARVE OUT AREAS LIKE GOVERNMENT BUILDINGS AND SCHOOLS WHERE YOU CANNOT BRING A GUN. THE ONE THING THE COURT DID SAY IS THAT IT CANNOT BE AS BIG AS ALL OF MANHATTAN. SO THAT IS AN AREA WHERE WE SEE ADDITIONAL LITIGATION TO FIGURE OUT EXACTLY WHERE STATES AND LOCAL GOVERNMENTS CAN SAY, YOU CAN'T BRING YOUR GUN HERE. PAUL: GREG, THIS DECISION COMES NOT LONG AFTER THE HORRIFIC EVENTS OF THE SCHOOL SHOOTING IN TEXAS. DOZENS OF MASS SHOOTINGS SINCE. DID ANY OF THIS FACTOR INTO THE COURT'S THINKING? GREG: IT CAME UP IN THE DISSENTING OPINION. DISSENTING JUSTICE STEPHEN BREYER LISTED A LOT OF THE MASS SHOOTINGS IN RECENT YEARS AND HE MENTIONED THE SHOOTING IN TEXAS AND IN BUFFALO. IT PROMPTED A RETORT FROM JUSTICE ALITO, WHO IS A MEMBER OF THE MAJORITY, WHERE HE SAID, NEW YORK'S GUN LAW DID NOT KEEP THE SHOOTING IN BUFFALO FROM HAPPENING, DID IT? THE COURT DISAGREEMENT WAS WHETHER THOSE FACTORS SHOULD BE TAKEN INTO ACCOUNT. THE MAJORITY SAID, IT IS NOT OUR JOB TO TRY TO WEIGH WHETHER IT IS WORTH IT TO HAVE THE RESTRICTIONS. WE LOOK AT THE HISTORY OF THE COUNTRY AND WOULD DECIDE WHETHER THESE LAWS ARE IN ACCORDANCE WITH THAT TRADITION, AND THE COURT SAID NO. SHERY: GREG STOHR IN WASHINGTON. A QUICK CHECK OF THE LATEST BUSINESS FLASH HEADLINES. BLOOMBERG HAS LEARNED THAT TESLA IS TAKING STEPS TO RAMP UP OUTPUT AT ITS FACTORY IN SHANGHAI. THE ELECTRIC VEHICLE MAKER WILL SUSPEND MANUFACTURING AT VARIOUS POINTS THROUGH EARLY AUGUST SO IT CAN UPGRADE FINANCIAL LINES. THE UPGRADES WILL PUSH TESLAS OUTPUT INTESA LETTER UP TO ONE MILLION CARS A YEAR. BILLIONAIRE KEN GRIFFIN IS MOVING CITADEL'S HEADQUARTERS FROM CHICAGO TO MIAMI. THE RELOCATION WILL AFFECT BOTH THE HEDGE FUND AND CITADEL SECURITIES. IT EXPECTS A FEW HUNDRED PEOPLE TO BE BASED IN MIAMI NEXT YEAR. THE MOVE COMES AFTER BRIEFING BECAME EXTREME CRITICAL OF CHICAGO'S CRIME RATE, AND LEADERSHIP IN ILLINOIS. PAUL: JUST GETTING THE ALERT FROM QANTAS MARKET UPDATE FROM AUSTRALIA'S AIRLINE. WE SEE NOT A GREAT DEAL OF CHANGE TO THE GUIDANCE HERE, QANTAS SAYING IT EXPECTS TO RETURN TO UNDERLYING PROFIT IN FINANCIAL YEAR 2023, AND CUTTING DOMESTIC CAPACITY HAS BEEN HELPING TO COVER HIGHER FUEL CRISIS. > > I DON'T THINK THERE WAS ANYTHING NEW IN CHAIR POWELL'S TESTIMONY. > > IT WAS QUITE HAWKISH. > > 1% MOVE WAS NOT OUT OF THE QUESTION. > > IT'S GOING TO BE DIFFICULT FOR THE FED TO HIKE RATES. > > MORE PAIN TO COME IN THE BROADER MARKETS. > > FINANCIAL CONDITIONS TIGHTENING. > > IF THE FED REMAINS AGGRESSIVE THE RISK OF RECESSION IS RISING. > > THE RISK IS BECOMING AMPLIFIED. > > YOU WILL HAVE FAST RATE HIKES. > > THERE IS A FEAR OF RECESSION THAT REMAINS THERE. > > THEY ARE ACUTELY AWARE THAT THERE IS LIKELY TO BE SOME PAIN TO THE ECONOMY. PAUL: SOME OF OUR GUESTS THERE ON BLOOMBERG TV. RECESSION FEARS ARE BOOSTING GLOBAL BONDS, THOUGH TRADERS ARE LOOKING FOR CLUES ON WHERE RATES MAY GO. ALREADY THEY ARE PAVING INTO HEDGES THAT PROTECT NOT ONLY AGAINST PEAK POLICY STATES, BUT A POTENTIAL CUT AS WELL. LET'S BRING IN MLIV STRATEGIST MARK CRANFIELD. HAVE WE SEEN A PEAK YIELDS YET? MARK: IT IS QUITE POSSIBLE AT THE LONGER END OF THE TREASURY CURVE. OUR COLLEAGUE, WROTE A DETAILED PIECE YESTERDAY SUGGESTING SEEING A BOTTOM FOR BOND MARKETS IN THIS CYCLE, COMPARING IT TO 1994. IT IS PARTLY BECAUSE OF WHAT YOU ARE HEARING COMING OUT OF THE FEDERAL RESERVE, ESPECIALLY JEROME POWELL, WHEN HE SAYS THAT ACHIEVING A SOFT LANDING IS GOING TO BE VERY DIFFICULT. IMMEDIATELY ALARM BELLS ARE GOING FOR TRADERS, SAYING, IF WE DON'T GET A SOFT LANDING THAT MEANS THE RISK FOR HEART LANDING ARE HIGHER. IF YOU LOOK AT THE DERIVATIVES CURVE GOING ON BEYOND THIS YEAR, PEOPLE ARE LOOKING FOR THE POINT AT WHICH THE FEDERAL RESERVE MAY BE FORCED INTO CUTTING INTEREST RATES BECAUSE THE ECONOMY IS SLOWING TOO QUICKLY. YOU LOOK AT SOME OF THE DATA COMING OUT FOR THE U.S., IT IS ALREADY GETTING MIXED. ACROSS THE COUNTRY THERE ARE POCKETS OF WEAKNESS. THAT MAY START TO ACCELERATE IN THE NEXT FEW MONTHS. IT IS RIPE FOR TRADERS TO BE GETTING MORE DEFENSIVE AND THEY ARE SUGGESTING THAT THE TIME SPAN BETWEEN THE END OF THE FED HIKING CYCLE AND THE BEGINNING OF A RATE CUTTING MOVE, ACTUALLY COULD BE RELATIVELY SHORT, NO MORE THAN SIX MONTHS. SHERY: THE FACT THAT WE ARE TALKING OF FRONTLOADING RATE HIKES AND THESE JUMBO-SIZED HIKES, DOESN'T MEAN WE COULD POTENTIALLY SEE A POLICY MISTAKE, OR DOES THE FED GAIN CREDIBILITY ON THE FACT THAT THEY ARE SHOWING THAT THEY WANT TO TAME INFLATION AND THEY DON'T HAVE TO MOVE AS MUCH? MARK: FOR NOW, I THINK TRADERS ARE LEANING TOWARDS A POLICY MISTAKE. I THINK THEY SENSE THAT THE FED WAS A LITTLE BIT SLOW BUT THEY MIGHT OVERCOMPENSATE WITH EXTRA BIG RATE HIKES AND THE RISK OF NOT DOING DAMAGE TO THE HOUSING MARKET IN AMERICA ENTER THE LABOR MARKET IS VERY HIGH. THEY ARE DOING IT IN ALMOST AN UNPRECEDENTED TIME. INFLATION IS MUCH HIGHER THAN PEOPLE ARE USED TO, ESPECIALLY PEOPLE WHO ARE WORKING IN THE FINANCIAL MARKETS. THESE DAYS, MOST OF THEM HAVE NEVER SEEN INFLATION IN YEAR 8% BEFORE, THEY HAVEN'T SEEN SITUATIONS WHERE WE HAVE A MAJOR WAR GOING ON, MASSIVE SUPPLY DISRUPTIONS CAUSING THE INFLATION TO STAY HIGHER FOR LONGER. ALL OF THESE ARE VERY DIFFICULT FOR PEOPLE TO ASSESS, AND WHEN YOU HAVE A CENTRAL BANK THINGS DOWN, THE CHANCES OF IT -- CENTRAL BANK SLOWING THINGS DOWN, THE CHANCES OF IT GETTING BETTER ARE NOT HIGH. TRADERS ARE TRYING TO EMBRACE THAT POSSIBILITY. SO THE CHANCE OF A POLICY MISTAKE IS BEGINNING TO BE PRICED INTO THE MARKETS. PAUL: OF COURSE, THE CPI NUMBERS FOR JAPAN FOR THE MONTH OF MAY ARE COMING ON LATER. TO WHAT DEGREE ARE LOWER YIELDS PROVIDING RELIEF FOR THE BOJ AHEAD OF THAT READ? GREG: THEY WILL BE PLEASED TO SEE GLOBAL YIELDS FROM DOWN A TAD. BUT IF YOU LOOK AT WHAT IS GOING ON WITH THE JAPANESE BOND MARKET, THERE ARE CLEARLY CONCERNS, PARTICULARLY IN THE VERY LONG END OF THE MARKET. IT APPEARS THAT ALTHOUGH THE BANK OF JAPAN IS CONTROLLING THE 10 YEAR SECTOR VERY WELL, YOU CAN SEE THAT THERE HAVE BEEN DIFFICULTY CONTROLLING THE 20-YEAR YEAR AND 30 YEAR SECTOR OF THE MARKET. WE HAVE SEEN ANALYSTS SAYING THAT THAT IS WHERE FOREIGN MONEY IS PLACING BIG PRESSURE ON JAPAN. THEY KEPT EVERYTHING AND CHANGED WEEK AT THEIR POLICY MEETING, BUT MORE PRESSURE IS HEAPING ON THE BANK OF JAPAN -- THEY KEPT EVERYTHING AND CHANGED NOTHING LAST WEEK AT THEIR POLICY MEETING, BUT MORE PRESSURE IS HEAPING ON THE BANK OF JAPAN. PARTICULARLY WITH INFLATION NUMBERS ALREADY GETTING TO 2%, THE BANK OF JAPAN HAS TO CONSIDER WHETHER THIS POLICY IS OUT OF DATE ALREADY. SHERY: MLIV STRATEGIST, MARK CRANFIELD. ALWAYS GOOD TALKING TO YOU. STAY WITH ANNABELLE. WE ARE HEARING THAT BOND TRADERS ARE FOCUSING ON DEBT BEYOND THE BANK'S FEAR OF INFLUENCE. ANNABELLE: YES, JUST PICKING UP ON WHAT MARK WAS SAYING, THE SHOWDOWN BETWEEN THE BOJ AND TRADERS, IT IS AFFECTING THE DECISIONS THAT THE BANK HAS TO MAKE. THE BOJ WOULD BE THE FIRST CENTRAL BANK TO OWN MORE THAN 50% OF BONDS OUTSTANDING. WE HAVE SEEN, MARK'S POINT, INTENSE SELLING PRESSURE THIS MONTH, THE BOJ VALUE 25% MORE DEBT THAN IN ANY OTHER MONTH PREVIOUSLY, IN JUNE, AND THERE IS STILL ONE MORE WEEK LEFT TO GO. AS MARK WAS JUST REFERRING TO THERE, GOLDMAN SACHS IS SAYING THAT THE FOCUS ON BOND TRADERS IS ON MATURITIES THAT ARE RELATIVELY FREE OF THE CENTRAL BANK'S SPHERE OF INFLUENCE. THAT AUCTION FOR 20 DATE, A TEPID RECEPTION. WE SAW THE BID TO COVER RATIO WIDENING, ITS WIDEST SINCE 26 DATES. THAT MEANS GOLDMAN SACHS IS GOING TO SEE GROWING PRESSURE ON PARTS OF THE YIELD CURVE THAT ARE LESS DIRECTLY AFFECTED BY CENTRAL BANK INTERVENTION. THEY ARE SEEKING SWAPS AND MATURITIES BEYOND THE 10-YEAR POINT. PAUL: SEEMS LIKE EVERYDAY WE GET ANOTHER BIG-NAME INVESTOR PILING ONTO THE RECESSION IS INEVITABLE NARRATIVE BUT NOT EVERYBODY THINKS THIS WAY, DO THEY? ANNABELLE: THIS IS QUITE INTERESTING, FROM MORGAN STANLEY'S CHIEF EQUITY STRATEGIST, MARK WILSON. HE IS THE BEAR THAT CALLED THE SHARP SELLOFF THIS YEAR. HE SAYS RECESSION IS THE BASE CASE, BUT NOT THE BEAR CASE. YOU LOOK AT THE PERCENTAGES HE IS LOOKING AT -- 50% CHANCE OF RECESSION FOR THE BASE CASE, 35% FOR THE BEAR CASE, AND 15% FOR THE BULL CASE. THE REASON WHY? TAKE A LISTEN. > > THE BANKING SYSTEM IS VERY SECURE. . THERE IS A LOT OF CAPITAL STILL OUT THERE. THE CONSUMER BALANCE SHEET IS IN DECENT SHAPE. ANNABELLE: WHAT THAT MEANS FOR EQUITY PRICES? MARK WILSON SAYS THEY LOOKING ATTRACTIVELY PRICED BUT HE WILL STILL NEED TO SEE A DROP IN THE S & P 500 TO FURTHER REFLECT THE RISKS OF ECONOMIC CONTRACTION IF IT HAPPENS. HE SEES THE S & P 500 DROPPING TO 3000 IN THE RECESSION. PAUL: ALL RIGHT, THANKS, AND ABOUT. LET'S CHECK IN ON THE FIRST WORD NEWS NOW WITH VONNIE QUINN. VONNIE: THE WORLD'S MOST WATCHED U.S. OIL REPORT WILL NOT BE OUT THIS WEEK BECAUSE OF TECHNICAL ISSUES. THE ENERGY INFORMATION ADMINISTRATION'S WEEKLY PETROLEUM STATUS REPORT, READ BY TRADERS AROUND THE WORLD, IS ONE OF SEVERAL AFFECTED BY POWER ISSUES. THE ORGANIZATION SAYS IT IS WORKING TO RESOLVE THE ISSUES. IT IS THE ONLY PUBLICATION NOT AFFECTED BY POWER OUTAGES. HONG KONG'S INCOMING HEALTH CHIEF SAYS HE AIMS TO CUT QUARANTINE FOR INCOMING TRAVELERS TO FIVE DAYS FROM THE INCOMING SEVEN DAYS. BUT HE TOLD LOCAL MEDIA THAT THE CITY WILL STICK TO ITS DYNAMIC ZERO APPROACH TO THE PANDEMIC. . THE REPORT DID NOT MENTION WITH THE TRAVELERS WILL BE ALLOWED TO QUARANTINE AT HOME, RATHER THAN IN HOTELS, AS CURRENTLY REQUIRED. THE JANUARY 6 COMMITTEE INVESTIGATING THE ATTACK ON THE U.S. CAPITOL HAS HEARD ACCOUNTS ON HOW PRESIDENT TRUMP ATTEMPTED TO PRESSURE DOJ OFFICIALS INTO SUPPORTING HIS CLAIM OF ELECTION FRAUD. THE SHOWDOWNS CAME IN THE DAYS BEFORE THE STORMING OF THE CAPITOL. INDIAN BILLIONAIRE GAUTAMA DANNY HAS PLEDGED CLOSE TO $8 MILLION TO SOCIAL CAUSES TO MARK HIS 68TH BIRTHDAY. HE SAYS DONATIONS WILL BE USED FOR BUSTLING HEALTH CARE AND EDUCATION AND SKILL DEVELOPMENT. INDIA'S RICHEST PERSON ADDED $15 BILLION TO HIS NET WORTH THIS YEAR, MAKING HIM THE BIGGEST WEALTH GAIN OR GLOBALLY -- WEALTH GAINER GLOBALLY. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM VONNIE QUINN. SHERY: SOUTH KOREA'S VICE FINANCE MINISTER SAYS ELEVATED GLOBAL COMMODITY PRICES WILL WEIGH ON THE ECONOMY IN THE NEAR FUTURE. HE SAYS FIGHTING INFLATION WILL BE THE GOVERNMENT'S TOP PRIORITY, ALTHOUGH CURRENT PRICE PRESSURES ARE IMPORTANT. > > WITH GLOBAL ENERGY AND RAW MATERIAL PRICES SOARING, INFLATION IS AT EIGHT OR 9%. IN SOUTH KOREA, THE INFLATION IS LOWER, 5.4% IN MAY. BUT AS WE ARE RELIANT ON OUTSIDE SOURCES FOR ENERGY AND CROPS, IT IS TRUE THAT IT HAS BEEN HAVING A NEGATIVE IMPACT ON EXPORTS, I EXPECT THE OUTPUT PRESSURE IN PRICES WILL CONTINUE FOR SOME TIME, SO WE ARE MAKING TACKLING INFLATION OUR PRIORITY. WE HAVE RECENTLY LOWERED FUEL TAXES TO 70% AND ALSO LOOKING FOR WAYS TO LOWER CUSTOM TARIFFS ON MAJOR ITEMS. SHERY: WE CONTINUE TO SEE WEAKNESS IN THE KOREAN WON. WHERE DO YOU SEE THE BOTTOM, AND WHAT IS THE GOVERNMENT DOING ABOUT THIS? > > THE/ RECENT DOLLAR-ONE, RISE IS DUE TO POLICY TIGHTENING GLOBALLYW BECAUSE OF INFLATIONAY BANG DUE TO POLICY TIGHTENING GLOBALLY. THERE IS NOT A PROBLEM WITH SOUTH KOREA'S ECONOMIC FUNDAMENTALS, BUT RATHER, DUE TO GLOBAL FACTORS. WE ARE WORKING ON POLICIES TO PREVENT HERD BEHAVIOR, AND ALSO TO ALLEVIATE SUPPLY AND DEMAND IMBALANCES IN MARKETS. SHERY: WE CONTINUE TO SEE INCREDIBLE WEAKNESS IN THE JAPANESE YEN, JAPAN IS A COMPARATIVE SOUTH KOREA WHEN IT COMES TO EXPERTS. HOW DO YOU SEE THIS? > > WHEN IT COMES TO THE CURRENT IMPORT-EXPORT SITUATION, THERE IS INDEED A CURRENT ACCOUNT DEFICIT, IMPACTED BY CURRENCY FLOW ISSUES, BUT LARGELY ALSO BY FUEL AND CROP PRICES. WE SEE THIS TREND CONTINUING FOR THE TIME BEING, BUT FUNDAMENTALLY, WE SEE SOUTH KOREA'S EXPERTS AS BEING COMPETITIVE. SHERY: WE CONTINUE TO SEE VERY AGGRESSIVE TIGHTENING COMING FROM THE FEDERAL RESERVE IN THE U.S.. HOW DOES SOUTH KOREA LOOK AT THIS, AND WHAT IS SOUTH KOREA DOING WHEN IT COMES TO CAPITAL FLOWS, OR PERHAPS THE NEGATIVE IMPACT IT COULD SEE? > > DUE TO THE FASTER PACE OF GLOBAL MONETARY POLICY TIGHTENING, SOUTH KOREA'S POLICY RATE HAS RISEN, AND VOLATILITY IN FINANCIAL MARKETS HAS ALSO GROWN. THE CURRENT ADMINISTRATION IS AWARE OF POTENTIAL RISKS FROM HIGHER RATES. WE ARE MONITORING IT CLOSELY SO THAT FINANCIAL AND CURRENCY MARKET LETTER THAT HE IS NOT AMPLIFIED. IN THE BOND MARKETS, IF THERE ARE BIGGER RESPONSES, THE GOVERNMENT WILL IMPLEMENT EMERGENCY BUYBACK, IN THE BACK OF KOREA SHOULD PURCHASE GOVERNMENT BONDS AT THE RIGHT TIME. SHERY: YOU HAVE RECENTLY DOWNGRADED YOUR GROWTH FORECAST. TELL US A LITTLE BIT ABOUT WHAT SORT OF CHALLENGES YOU FORESEE? > > IF YOU LOOK AT SOUTH KOREA, OUR EXPORTS IS BIGGER THAN OTHER COUNTRIES, AT 70%, SO EXTERNAL FACTORS ARE INDEED HAVING A NEGATIVE IMPACT ON THE ECONOMY. WITH SUPPLY CHAIN DISRUPTIONS, IT DID HAVE A NEGATIVE IMPACT ON EXPORTS AND INVESTMENTS. HOWEVER, WITH THE COVID SITUATION STABILIZING HERE, WE EXPECT SPENDING TO REBOUND. SHERY: LET'S TALK MORE ABOUT SUPPLY CHAIN DISRUPTIONS AND HOW THAT IS AFFECTING EXPORTS ESPECIALLY IN THE TECH SECTOR, WHICH IS SO IMPORTANT FOR SOUTH KOREA. > > THE SUPPLY CHAIN DISRUPTIONS. > > TRIGGERED BY THE PANDEMIC HAVE LED TO COMPETITION AMONG NATIONS AND IMPACTED OUR ECONOMY. WE ARE LOOKING TO DIVERSIFY IMPORTS FOR CERTAIN PRODUCTS, AND WE CAN SAY THAT WE HAVE OVERCOME THIS CHALLENGE IN A SHORT PERIOD OF TIME. PAUL: SOUTH KOREA'S VICE FINANCE MINISTER SPEAKING EXQUISITELY WITH SHERY THERE. STILL TO COME, THE KOREAN WON IS AMONG ASIAN CURRENCIES THAT HAVE BEEN HIT BY DOLLAR STRENGTH. WE WILL GET THE EMFX OUTLOOK, WITH BRANDON MCKENNA OF WELLS FARGO, JOINING US NEXT. THIS IS BLOOMBERG. ♪ > > COORDINATED INTERVENTION GENERALLY IS VERY DIFFICULT, UNLESS THERE IS EXCESSIVE MOVEMENT OF THE MARKET TO CRISIS MODE. BUT UNILATERAL INTERVENTION SHOULD NOT BE ELIMINATED AS A POSSIBILITY. > > IF YOU GO WELL ABOVE 140, THE DOJ WILL HAVE TO -- THE BOJ WILL HAVE TO CHANGE POLICY, AND THAT WILL BE TO CHANGE THE YIELD CONTROL CURVE. > > IF THIS IS THE WILL BRING INFLATION DOWN, SO BE IT. PAUL: SOME OF OUR EARLIER GUESTS THERE SPEAKING ABOUT JAPAN'S POLICY PATH, AHEAD OF THE CPI NUMBERS THAT ARE DUE IN ABOUT HALF AN HOUR'S TIME. LET'S LOOK AT SOME OF THE MAJOR CURRENCIES OUTPERFORMING RIGHT NOW. THE YEAR IS SHOWING SOME STRENGTH, BACKING AWAY FROM THE RECORD LOWS WE HAVE SEEN, 134.8 FOR A THE GREENBACK. THE YUAN IS 6.7 AGAINST THE GREENBACK. THE PHILIPPINES PESO RETRACTED A LITTLE BIT IN THE INDONESIAN RUPEE IS HOLDING STEADY AFTER THE CENTRAL BANK DID THE SAME. TO TALK MORE ABOUT ALL OF THIS, WE HAVE OUR NEXT GUEST, BRANDON MCKENNA FROM WELLS FARGO SECURITIES FX. HE SAID WIDESPREAD DEPRECIATION MEASURES CONTINUED FOR EMERGING-MARKET CURRENCIES. TO THAT POINT, I JUST WANT TO SHOW THAT CHART ON THE BLOOMBERG TERMINAL THAT SHOWS SOME OF THE CURRENCY WEAKNESS WE ARE SEEING. WHICH OF THE EMERGING-MARKET CURRENCIES ARE LOOKING MOST VULNERABLE TO YOU AT THE MOMENT? BRENDAN: THAT IS A GOOD QUESTION. E.M. ASIAN CURRENCIES LOOK QUITE VULNERABLE. BUT THE ONES THAT LOOK ESPECIALLY VULNERABLE AT THE MOMENT ARE THE CURRENCIES ASSOCIATED WITH CENTRAL BANKS THAT ARE ON THE DOVISH AND END THE STRIP SPECTRUM -- THE INDONESIAN RUPIAH, THE THAI BAT, THESE CURRENCIES HAVE TRENDED WEAKER IN THE LAST COUPLE OF MONTHS AND WE EXPECT THE TREND TO GRADUALLY CONTINUE, AS THE CENTRAL BANKS PUSHBACK ON INTEREST RATE HIKES AND DON'T KEEP PACE WITH THE INTEREST RATE HIKES HAPPENING HERE IN THE U.S. PAUL: IN TERMS OF THAILAND, THE BANK OF THAILAND HAS STOOD PAT FOR 16 MONTHS IN A ROW WITH INFLATION AT A 14 MONTH HIGH, AND THE NEXT MEETING IS NOT UNTIL AUGUST. R.O.E. WITNESSING A SLOW POLICY HERE? BRENDAN: I THINK SO. WE HAVE SEEN CPI IN THAILAND TREND HIGHER FOR MONTHS. IT IS AT A POINT WHERE IT IS WELL ABOVE THE CENTRAL BANK'S TARGET RANGE. IF YOU LOOK INTO WHAT -- IF YOU LISTEN TO WHAT POLICYMAKERS ARE SAYING, THEY DON'T SEEM WORRIED ABOUT IT, THEY MAINTAIN THE PHRASE THAT INFLATION IS TRANSITORY IN THAILAND. SO IT IS GETTING DOWN TO A POINT WHERE WE HAVE NOT MADE A POLICY MISTAKE RIGHT YET. TO YOUR POINT, WITH THE NEXT MEETING IN AUGUST, IT IS CERTAINLY TURNING THAT WAY, WHERE THE BANK OF THAILAND IS BEHIND THE CURVE AND THE CURRENCY COULD UNDERPERFORM AS A RESULT. SHERY: THE PBOC IS NOT BEHIND THE CURVE BUT GOING IN A COMPLETELY DIFFERENT DIRECTION, YET WE HAVE SEEN A PRETTY GOOD RESILIENCE COMING FROM THE CHINESE YUAN WHEN WE HAVE SEEN INCREDIBLY -- INCREDIBLE STRENGTH TO THE U.S. DOLLAR. SO WHAT IS GOING ON HERE? BRENDAN: I THINK IT COMES DOWN TO THE FACT THAT THE PBOC IS LOOKING TO INTERVENE IN FX MARKETS AND STABILIZE THE CURRENCY. EVEN THOUGH THEY ARE LOWERING INTEREST RATES AND DOING MONETARY EASING, THAT PBOC AND POLICYMAKERS IN CHINA ARE UTILIZING THEIR FX RESERVE CAPACITY AND INTERVENING TO STABILIZE THE CURRENCY. THE OTHER THING IS, WE ARE STARTING TO SEE SIGNS THAT CHINA'S ECONOMIC RECOVERY FROM THE RECENT LOCKDOWNS IS STARTING TO GATHER MOMENTUM. . THERE IS STILL A CURRENT ACCOUNT SURPLUS IN CHINA. SO THE ECONOMIC FUNDAMENTALS ARE RECOVERING, AND THERE IS SOME FX INTERVENTION FROM THE PBOC THERE , SO NOT ENTIRELY SURPRISING THAT THE CURRENCY IS STILL SOMEWHAT STABLE EVEN THOUGH LAWMAKERS OUR EASY MONETARY POLICY. SHERY:. SHERY: WHAT OTHER COUNTRIES IN THE E.M. FX SPACE CAN WE EXPECT TO SEE THIS FROM? BRENDAN: I THINK SOME OF THE CURRENCIES ASSOCIATED WITH STRONG UNDERLYING FUNDAMENTALS AND WHO ALSO SOME CURRENCIES THAT HAVE HAWKISH CENTRAL BANKS, OR CENTRAL BANKS TURNING IN A MORE HAWKISH DIRECTION, COULD BE MORE RESILIENT. WE LIKE THE HONG KONG DOLLAR. WE STILL THINK THE CURRENCY PEG IS GOING TO BE INTACT, HONG KONG WILL MAINTAIN THE PEG. THERE IS LITTLE RISK OF THE PEG BREAKING IN HONG KONG. WE ALSO LIKE THE TAIWAN DOLLAR, WE JUST SAW THE CENTRAL BANK IN TAIWAN LIVED INTEREST RATES -- LIFT INTEREST RATES. IT CAN EXHIBIT SOME RESIDENCY GOING FORWARD. SHERY: BRANDON MCKENNA, WELLS FARGO SECURITIES FX STRATEGIST, GOOD TO HAVE YOU WITH US. TUNE INTO BLOOMBERG RADIO TO HEAR MORE FROM THE DAYBREAK TEAM, NOW BROADCASTING LIVE FROM OUR STUDIO IN HONG KONG. YOU CAN LISTEN VIA THE APP, BLOOMBERG PLUS, OR BLOOMBERG RADIO. PLENTY MORE AHEAD. STAY WITH US. PAUL: A LANDMARK INQUIRY INTO AUSTRALIA'S MINING SECTOR HAS UNCOVERED DOZENS OF CASES OF SEXUAL HARASSMENT AND ABUSE OF WOMEN IN COMPANIES INCLUDING BHP AND RIO TINTO. OUR GUEST JOINS US NOW FOR MORE. SOME PRETTY CONFRONTING FINDINGS IN THIS REPORT, JASON. CAN YOU SEND THAT UP FOR US? JASON: IT CENTERS ON THE RESOURCES INDUSTRY IN AUSTRALIA AND IT HAS AVERAGED ABOUT 950 $9 MILLION A YEAR, THE MAJORITY FROM IRON ORE MINDS. SOME OF THESE MINDS ARE IN REMOTE AREAS AND ARE INACCESSIBLE BY AIR. WORKERS FLY IN OR STAY IN CAMP-STYLE ACCOMMODATIONS FOR WEEKS AT A TIME. THIS AUSTRALIAN GOVERNMENT INQUIRY FOUND DOZENS OF EXAMPLES OF FEMALE WORKERS AT THESE AREAS BEEN ABUSED, THREATENED, COERCED AND SUBJECT TO SEXUAL VIOLENCE. THE REPORT LABELED THESE INCIDENTS BOTH AFFILIATE OF THE INDUSTRY AND OVERSIGHT BY THE GOVERNMENT. AMONG THE RECOMMENDATIONS IT MADE WERE THE PAYMENT OF COMPENSATION TO WORKERS WHO BECAME VICTIMS OF BOSSES AND COLLEAGUES IN THESE REMOTE PROJECTS. IT ALSO SAID THAT THOSE RESPONSIBLE SHOULD BE BANNED FROM THE INDUSTRY, AND TOLD THESE COMPANIES TO BASICALLY LIFT THEIR SAFETY STANDARDS, INCLUDING PROVIDING ADEQUATE LOCKS ON ACCOMMODATION AND LIGHTING AT THESE CAMPS. SHERY: THIS IS A PRETTY MALE-DOMINATED INDUSTRY, RIGHT? HOW HAVE THE LIKES OF BHP AND RIO TINTO RESPONDED SO FAR, AND WHAT DO THEY PLAN TO DO? BOTH OF THOSE COMPANIES INITIATED THEIR OWN RESPONSE TO INCREASING ALLEGATIONS MADE OVER THE YEARS. ONE OF THE INTERESTING THINGS ABOUT THIS REPORT IS JUST REVEALED THAT THESE INCIDENTS ARE HAPPENING BASICALLY NOW IN THE METOO ERA, THEY ARE NOT HISTORICAL. BHP RECORDED 79 SUBSTANTIATED REPORTS OF SEXUAL HARASSMENT OR ASSAULT IN WESTERN AUSTRALIA ALONE BETWEEN JANUARY 2020 AND AUGUST 2021. SO THESE ARE ALL HAPPENING NOW. BHP SAYS IT IS COMMITTED TO CREATING A SAFE AND INCLUSIVE WORKPLACE AND IS TAKING ACTION, INCLUDING REGULAR TRAINING, INVESTING IN MILLIONS TO BOLSTER FACILITIES, AND RIO TINTO ALSO WELCOMED THE REPORT. . PAUL: ASIA COMMODITIES AND ENERGY EDITOR, JASON SCOTT, THANK YOU FOR JOINING US. ALSO ON THE AGENDA IN AUSTRIA AND NEW ZEALAND TODAY, NEW ZEALAND MARKETS ARE CLOSED FOR THE MAORI NEW YEAR. AND AUSTRALIA'S CENTRAL BANK GOVERNOR WILL PARTICIPATE IN A DISCUSSION ON GLOBAL POLICY CHALLENGES. HE HAS SAID THAT THE CENTRAL BANK WILL DO WHAT IS NECESSARY TO REIN IN INFLATION. MELBOURNE IS THE ONLY AUSTRALIAN CITY TO CRACK THE TOP 10 MOST LIVABLE CITIES. WELLINGTON IN NEW ZEALAND AND AUCKLAND, BOTH TUMBLING ON THE LIST, SHERY. SHERY: "DAYBREAK: ASIA" IS NEXT. WE CONTINUE TO SEE A MIXED PICTURE WHEN IT COMES TO ASIAN FUTURES. THIS IS BLOOMBERG.

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'Bloomberg Daybreak: Australia' Full Show (06/24/2022)

Haidi Stroud-Watts in Sydney and Shery Ahn in New York drive to the Asia, Australia and New Zealand market opens while wrapping the biggest stories of the previous day on Wall Street. (Source: Bloomberg)

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