tv Bloomberg Daybreak Asia Bloomberg August 30, 2022 7:00pm-9:00pm EDT
annabelle: counting down to the market opens. kathleen: stocks are set for a weaker opening asia. fresh data supports the fed tightening stance while commodity sinks. china -- goldman sachs orders a return to the office five days a week. haidi: we have korean industrial production numbers. the contraction is worse than expected. 1.3%. the gain of 1.9% was revised down. on a year-over-year basis, the
numbers missing expectations, the june number is revised and the cyclical index change for july, contraction of 3/10 of a percent versus no change. we have been expecting more of an improvement when it comes to industrial production numbers, better vehicle indicators, exports, perhaps asking some gains what we continue to see kind of korea. watching for more signs of the recovery, the pmi for south korea. kathleen: let's take a look at the futures market. we see is a little bit of a bounceback on the nasdaq, 1.1%. fractional gains here. at least the rest of sentiment
has been generated by hawkish comments from three fed bank presidents today echoing from jackson hole. we can see that path even though we see strong because data, the fed has plenty of room to remain aggressive. upon futures are higher, the 2-year note is higher during the u.s. trading day. still, oil having a little bounce. oil is down to $92 about. now at $92 and change. this is after conflict in the streets of baghdad has not hit the oil industry, commodity prices had pressure, asia and beyond. annabelle: the u.s. data you
mention. fed hawkish in us. probably in asia, we looking to follow the wall street session, new zealand is online to the downside, some building approval data out, 5% on the month, signaling perhaps the economy is withstanding this pressure, rising rates, rising costs. some other key data on the docket, you had the korea data, japan two out this hour. china pmi data. lots of headwinds facing the chinese economy, take a look at where global stocks have fared over the past month. we're down 2.5% on the month. everything is lower your today. energy is the only sector left standing.
unsurprising given the shortages. haidi: let's get some more analysis on that. garfield reynolds is with us. the u.s. confidence in jobs report. we had fed speak supporting what we heard from jay powell at jackson hole. what are we seeing in terms of markets reacting trying to trudge into a new month? reporter: as far as the u.s. is concerned, good economic news is bad news for assets because that confirms the fed is going to continue to be extremely hawkish. we have pricing like a two and three chance of a 75 point races -- basis point hike. if you look at the data, it is understandable. we need to get a significantly
week set of data both from payroll and cpi next week before you would think 75 basis points would be the least likely outcome. that is making things tough. as mentioned when it comes to asia, we have the potential for bad economic news which will be bad news for assets, if you look at china, that has a great deal of difficulty coming up with prescriptions to turn output around. japan already has massive tv still in place. any problems will change either local or global policy settings. >> where are we headed in terms of the last trading day? it's been so tumultuous and
uncertain. reporter: the difficulty is, investors are hoping for some capacity to stop and think and look at where we can see some long-term value without running into a situation where we have to wonder whether we can afford to hold on. we might get a bit of a turnaround at some of those data points come in more kindly, because it is the end of the month. you could see some grounds denoting equity futures were up slightly. going forward, it comes down to central bankers and strategists talking about a narrow window to avoid a hard landing on the policy front. that window seems to have --
that is what indicators are signaling. that would be what investors are looking for. if the window is shut, has not been locked. kathleen: in asia, we seem to be getting the tone set for u.s. equities, bonds, we carried over. doesn't asian need some steam of its own? reporter: asia might be doing better than the rest of the world were it not for the drag on activity, the region's biggest economy, it's also the central bank that had space to try and turn it around, but it is facing so many other burdens that it has been reluctant to do that. the china pmi coming out will be key, and going forward, we have
the name for when congress happens in october, you can think the chinese will want to show some signs the economy is improving as they get ready to anoint xi jinping. kathleen: what do you make of the commodities market right now? is the war in ukraine bubbling over to every commodity, how does the play into what is driving markets broadly? reporter: it's very much about energy. it's not just ukraine. in china, the rivers are dry. they can't get enough hydropower. problems of transport. same sort of thing is happening in europe. climate change is having a real impact on global economy. in the u.s., there have been
times where extreme heat has put strains on texas and its energy producing industry. it's very much focused on the energy side. if you look at metal, they went up a lot. those gains have not been -- you have high inflation reducing demand. energy remains the major problem, the look at the surprise bounceback, that is partly because oil prices came back down a bit. but, they're going to stay elevated going forward. that's going to go on causing problems. kathleen: bloomberg's garfield reynolds.
the china leadership conference will begin on october 16, bringing president xi jinping to an unprecedented third term. stephen engle is following this story for us as always. drumroll. this is a big moment. stephen: it's the worst kept secret. the top of the agenda is an anointment for a third consecutive term. in 2018, he was able to change the constitution and abolish the term limits so he will be able to be potentially a leader in perpetuity. again, this is a highly choreographed national congress that is held every five years. the jockeying is behind the scene. that will last about a week behind closed doors. about 2300 communist party officials will gather and
essentially be horsetrading and jockeying for positions will probably already be dealt with in the previous week, and at the end of the long week, xi jinping will walk out on the right carpet followed by six other standing committee members and ranking order. that is where it will be very interesting. at least two members have surpassed the unwritten retirement age of 68. also, the number two in the pecking order is 67, he has already announced he is going to resign. three potential members of the standing committee could be picked. will xi jinping have enough of a mandate built as supreme leader to put his own people in those
positions? kathleen: let me juxtapose those. underpinnings, how much power he has, because the banks are carrying loans, trying to get the company through it. all of the things that are going on can't be the most popular part of the program. stephen: is going to get a third term. he is facing extreme challenges with the issues in your brain, issues with taiwan. domestically, he has taken on a lot of fights. the property prices, covid zero. there is so much to break down. the bank with the biggest
exposure has been reflected in these results we got yesterday from the biggest bank, the china construction bank, and the bank of china. the net income was ok. they gained between 4.9% and six 3%. the property loans have soared. record 2.95 trillion yuan as of june, 39 trillion in outstanding mortgages. the bank of china can be seen as the most vulnerable, the most exposed with 38% tied to the real estate sector. nonperforming loans rose to 5.47% with the industry below 2%. you can see, this is a big challenge.
the government is pushing these big state banks to len off, it's ordered them to cut the loan prime rates. that is pressure on the net interest margins as they are strong-armed to lend and boost this economy. there is going to be headwinds for the banks as they try to support growth leading into the party congress. haidi: you have so much to bring together. a momentous year. stephen engle with the latest. let's get you to vonnie quinn. >> the european union is net gas storage goals. they had aim to fill reserves to help absorb supply shocks. high energy prices are worsened
by gas flows. the eu commission president says more needs to be done. >> we have agreed all member states could save 16% of energy between august and march. the second pillar is we need to diversify away from russian fossil fuels to fill storage. here is good news. we have reached an average of 80%. >> taiwanese soldiers have fired fouts toward off civilian drones. a taiwanese military statement did not identify the drones and says they retreated in the direction of a chinese city. chinese stocks in the u.s.
tumbled after reports of the altercations. sri lanka has announced new reforms and raised taxes in bailout talks with the imf. the president said value-added prices will be raised to 15%. he announced a write off. the administration is looking to reach an agreement with the imf team. the last leader of the european union has died at the age of 91. a news agency says he died at a russian hospital. he pushed for radical changes to the soviet economy after becoming a communist leader at age 55. the overhaul unleashed a political avalanche that brought down the berlin wall. 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'm vonnie quinn. this is bloomberg.
haidi: the darkening global outlook has credits we shifting to underweight stocks. let's get more from jp morgan. we have a few more spots of resilience in asian markets. how are you positioning going into the rest of the year? guest: good morning. without the rally, we have a cautious attitude toward equity markets. this will continue as long as we see an outlook for weakening growth.
thinking about the uncertainty that comes with the global economic environment. haidi: in terms of opportunities you see in asia, what are you lacking at the moment? guest: there are some bright spots when it comes to investing. the resilience offset some of the weakness, we are thinking about the different stage asia is in the recovery story compared to other parts of the world. obviously, think about the impact of china. we are thinking about that a
little bit separately and seeing valuations that are still relatively attractive, growth that can come through, earnings estimates stay a bit low given the growth that could come through, we could see the market behave a little bit differently this time in the face of external pressures. kathleen: i want to ask you the poll question. where do you see the most value in china? guest: our attitude is long-term. the greatest value will come through. we think about the environmental side of things, big commitment to achieving goals around omissions and the support that comes to that side. anything in line with environmental goals and targets to bring down omissions, technology gains that can come with that will be one of the best things for china in the
longer term. kathleen: how are currencies at play here? we have different metrics, different dynamics. guest: that is right. the headwind from the u.s. dollar, expectations have changed. a case of how central banks are positioned in asia relative to the u.s.. they were ahead of the curve with the inflation outlook, going through the rate hiking cycle. we think about those benefits in terms of your not going to see as much pressure as you have seen in the past. again, we are investing from a u.s. dollar base perspective, hedging they will come through
china's state airlines reported $18.5 billion in losses as the covid zero policy to travel. air china says net loss was 186% year on year because of reduced capacity. southern airlines posted a deficit. higher oil prices also hit airline earnings. up next. the european union is stepping up intervention in the energy sector. but that means for commodit this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going? yes!! and once in a lifetime moments. two tickets to nascar! yes! find rewards like these and so many more in the xfinity app.
curbing the hottest prices in decades. [indiscernible] u.s. job openings underscoring the tightness of the labor market as employers compete for the limited supply of workers. the labor imbalance is driving wage groups complicates fed efforts to drive down inflation. president xi jinping is a step closer to a third term in power. a congress will be held. he is expected to extend his decade in power at the event. pakistan and united nations have
appealed for emergency funding after flooding caused by monsoons. more than 1000 have been killed. nearly half a million are forced into camps. shelter, tents, and mosquito nets are needed. 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. this is bloomberg. >> looking at the data docket in asia, half an hour from the open in japan, korea, australia. china pmi readings, the estimate coming through is further into contraction territory but there are a pile of problems. property woes, covid flareups, power outages. japanese industrial data and
retail sales are due and korea posted numbers and we saw it coming in at 1.5% of growth on the year, below the estimate for the gain of 2.6% and a signal the fourth largest economy in asia could be losing steam and there are uncertainties. on the chart you can see the diverging fortunes of the countries in asia and how they are suffering under the china slowdown. southeast asia is holding up well. they have more essential goods and services going into china. north asia is not the same story. south korea saw declining shipments and electronics in august. we are looking at commodities.
copper and aluminum tumbled in the previous session. concerns around china's covid crisis on how it will affect demand. supply seems to be easing. kathleen: european energy prices plunging as effort step up to curb the crisis. an increased risk of recession. let's bring in jonathan barrett. they talk about bringing down consumption and taking steps and how can you describe the dynamics right now in the market
facet by -- be set by the ukraine war and droughts around the world? >> the major thing we look at is when you look at energy prices, natural gas, we are trying to work out how 104% increase in the commodities, when you look at british natural gas, it's over 400% up. what does it mean for inflation on supply? we understand supply as they are, but for how long given the ukraine situation? so it's all about how we will manage, particularly in the northern hemisphere. kathleen: tell us about the expected harsh winter. i have heard the phrase over and over. >> comes down to climate change.
we have had extreme heat waves and extreme cold. it is how the market behaves. if we do not have enough supply you will see homes and industries have problems. then we would have problems of economic slowdowns that affect everything. climate change is creating these volatile things and it will create blackouts in energy. haidi: stimulus policies out of china are beginning to step up. will it be enough to create renewed demand? >> i think that will be the interesting thing. it's a lot of money they will spend. i understand there are problems
over there in terms of the property sector and covid but when you look at certain commodities that say regardless of stimulus they will be needed and i feel certain sectors in the commodities area will be where we invest. we have to try to look through the woods for the trees and come up with some suggestions. haidi: a lot of problems the world is grappling with comes down to structural issues taking a long time. when it comes to those changes to benefit the clean energy transition, what opportunities do you see? >> icd energy crisis as a great opportunity -- i see the energy crisis as a great opportunity to get to the targets we are aiming for.
i think the situation has proven there were issues so this is a good divergence into the green energy space. what is happening is negative but it's a great opportunity for the world to factor in that green energy and get on it and spend more energy and money on it. it's an opportunity to focus on it. haidi: how much further downside move do you expect to see from these metals like copper and aluminum? >> it's interesting. aluminum is on another year low. when you combine the energy crisis with high energy intensive productions like aluminum and you are already in a dire situation, you think, how
far can it go? i look at the aluminum market is a prime example where you have energy problems, demand trying to reach [indiscernible] there is a mismatch. we find it low-end and start to trade to the topside. when i see it for the next 12 months i see a supply issue but also demand. >> where do you see the price of crude going, and natural gas? >> the crude market is volatile. let's see what happens with sanctions. as we come into the hurricane season i see further upsides back over 100 regardless of the
recession. 105. my guess is it will be super volatile. we have to see if climate change comes. and then we will see consolidation. haidi: we have some breaking news. apple chief primary officer is set to leave the company for a new role at a law firm. he was a chief officer who had the job and there has been a strategy increasingly to broader business particularly to be a seller for the product. he took the title last year as the company provided security safeguards.
apple has been touting features like strict air app policies that have been controversial. we have not heard of a replacement yet an apple has not responded to request for comment. this is one of the top rules in the group -- roles in the group. bank of israel says they will likely raise interest rates further. the governor said he suspects it won't happen until the middle of next year. >> israel's economy is in a relatively good situation compared to other developed economies. we have grown in the second quarter by 6.8%. in 2021 by 8.2%. low unemployment.
government surpluses. inflation has been going up but it is among the lowest in many developed economies, perhaps the bottom 10%. yet it is 2.2 percent above the upper 3% limit and we are determined to bring it back to target. we are likely to continue to raise the interest rates. it will have to be somewhere around zero or slightly above and we expect inflation to come back down into the target somewhere next summer but as the rest of the world faces, there is so much uncertainty from oil prices to pressure on supply chain and many other factors. >> you are starting from a lower
level than jay powell. to expect to reach neutrality before other countries? >> it is hard to tell. i think several principles regarding your previous questions, we at the bank of israel are seeing inflation is essentially a tax, a drag on the economy, at a certain level it hurts the lower income segments of society and therefore it is imperative that we bring it back to target. we feel frontloading and that is why we did the rate hike and given the numbers in israel, the economy can absorb that. and i think all these principles, you also saw some of them be referred to in the recent jackson hole meeting. >> the frontloading, governor, does that mean if you are taking
care of business up front could be among the first central banks to start cutting next year? >> i think it takes a while for the interest rate process to cool down the inflation. we see it everywhere. as i mentioned, israel is in a good situation so we expect that process of cooling down in the economy to be able to absorb that but it will take some time and i think at this point, as was also mentioned in other countries, interest rates are likely to be at the higher level for a while until we actually see inflation really stabilizing inside our target range. governor -- >> governor you were in jackson hole with other central bankers listening to jay powell. what extent does the federal
reserve policy guide your own and do you stay in touch with jay powell and other central bankers around the world? >> of course. all central bankers meet and we discussed. these are particularly challenging times for all central banks. supply shocks that ultimately show up on the demand side. it is very important that inflation does not get entrenched, the process of raising interest rates, it is clear it creates pain for many but it is pain today to avoid a much greater pain in the future if inflation was to keep going. kathleen: the bank of israel governor speaking with bloomberg. up next, covid rigid policies.
at fidelity, your dedicated advisor will work with you on a comprehensive wealth plan across your full financial picture. a plan with tax-smart investing strategies designed to help you keep more of what you earn. this is the planning effect. kathleen: we are counting down to the start of trade in tokyo. in japan, retail sale data for july is due in a few minutes and are expected to fall 1.4%.
we will also get industrial output. toyota says global output shrunk because of supply chain issues. korea, deciding on a lawsuit filed against the south korean government by the united states. haidi: china's rigid covid policy and high oil prices hurt the bottom line when it comes to the state owned airlines. what have we learned from the numbers from chinese airlines? >> it's not surprising, given
their international borders are still shut but interesting that china eastern sees the impact on the domestic side because there covid policies are disrupting travel and appetite for consumption internally, which has been the saving grace for some of the airlines in the past two years. kathleen: what is the key takeaway? >> we saw a lot of chinese company earnings last night and showed how the impact on the economy is being felt from covid curbs and property situation. baidu came in above estimates because of revenue from their search function a news app.
i think people seeking information in china, given the ongoing covid a situation and also being forced to stay home, not going out. haidi: it will be quite some time before we get recovery for chinese companies, particularly beleaguered airlines. we are awaiting numbers out of japan. we are waiting. production will likely continue to increase. we saw the jump over 9% at the end of covid lockdowns. numbers coming through the moment are the 1% month on month, better than expectations. a preliminary reading for july.
a contraction of 1.8%. better than expected. calling back losses from the previous reading. again of 1% month on month is much less than the prior reading but production is expected to increase slowly if supply chain constraints offer some support but japan has inflationary pressures and the continued spread of covid. kathleen: it looks like a pretty good run today for japan. look at retail sales. month on month up 0.8%, more than the decline in june and eating the forecast.
when the governor was in jackson hole he commented at the end of the day and said while other countries are raising rates, we have to remain easy and see wages rising and that consumer spending will help so he hopes to eventually get to the 2% target. plenty more to come on daybreak asia. this is bloomberg. ♪ how will your business adapt to change? you could hire an office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha! or you could use workday. omaha. the finance, hr and planning system
china's aging airbus. masks, testing, and ordering all staff back to the office five days a week for goldman sachs. a company memo says wearing the masks significantly helps the risk of severe illness. haidi: australia, japan, and korea trade opens in about five minutes. china's steel industry crisis is worsening. we will watch if volatility is putting wheat, corn, and soy on shaky ground. output has sunk for the fourth straight month in china.
they are waiting post jackson hole hawkish comments from the fed. >> it is our message, the question remains as the magnitude of how far the fed is willing to go. for that, we need more data. let's get you to belle in hong kong. >> a very volatile month. where staying for the open in japan, south korea and japan -- and australia. we did see significant moves in the shortage securities in the previous session. we could see another outside from the fed with that opinion overnight. the setting is up for the open in japan today, we are keeping an eye on what's happening in the end this morning because that rate differential. saying that 148 may not happen given the pressure we are seeing
from equities on yen, that could stop it from reaching that key level. in terms of stocks, something we are keeping our eye on is something happening in the data drop, we do have retail sales coming out in the past few minutes, .8% on the month. industrial production rising 1% on the month. a contraction of .5%. japan taking the lead, what happened on the wall street session overnight, speaking of data, we also have industrial data this morning that were miss on what economists had been expecting, the economy there is losing a bit of steam. the cause ducked down .6%. -- the kosdaq down .6%.
let's change the open and australia's of the fx 200, earnings finally joined to the close. we do have some -- we are watching what's happening in energy, we did see a big retreat in copper overnight, aluminum as well. brent crude just fractionally hired as a trading volumes, trade is accessing what came out from iran overnight, saying exports have not been -- a rack overnight, saying exports have not been affected. haidi: very volatile. going into the rest of the year, do you expect to read based around the lows we saw in june,
or do you see there are opportunities for gains, given earnings were terrible? >> i think it depends. you're looking the second half of the year, i think were still going to see some pretty volatile equities in the short term. the fed is focused on high inflation, despite a lot of indicators that inflation expectations are coming in lower. we are seeing those come lower. the fed could argue it is winning. it is not arguing that with inflation where it is today. focus on a strong evidence of any signs of life in the economy is going to keep its focus on hiking interest rates and trying to control that inflation. we do think an elevated risk of a recession coming forward, the
markets of partially price at risk, we could see some further downside before we see a bomb. haidi: you have a preference for gold, tell us about the risk profile at the moment, and also the u.s. dollar. steve: gold has been peeking around february this year. the strength of the dollar rising, with the fed massively revising, there's been significant headwinds for gold in the past six months. we do see those continuing, as the dollar has picture, or interest rates -- where we look forward, we do think that what
happens of the dollar is in the final throes of its rally. together with steel it's quite a volatile environment. haidi: asian markets, asian central banks, the relatively new head of the bank of korea, says he is watching the currency closely. he made other comments about watching inflation, having to keep up with the fed. how is this going to wash across all asian markets? steve: i hate to think currency is going to be increasingly important. you mention korea of obviously european central bank is aware. and chinese authorities are trying to level everyone against
the weight -- recent weakness. the central banks are taking into account currency moves and maybe trying to lean against it. korea's of that means the outlook is for higher interest rates. china, it's going to be really interesting, the economy is weak at the moment of giving covid lockdowns and the property sector, we are seeing them try to fight that and also fiscal policy stimulus, but also that wide interest rate, spiking at the moment. it will be interesting to see how the authorities counteract that. haidi: if we go down that road, what does that mean for investors? steve: the bottom line for us is that china is a different stage
of the economics ipo. the u.s. is heading -- authorities in the u.s. are genuinely trying to fight a strength in the economy to bring inflation down, we do see the reverse coming through in china. if were looking equity regions, we are overweight japan, they had a good second quarter, we've seen some weakness coming through the past couple months. we do see a bottoming out phase. kathleen: thank you so very much. the cio of standard chartered wealth management. let's get to the first word headlines. bonnie: there remained vacant rate hikes. the fed president in separate remarks says fighting inflation is their top priority.
new york, above 3.5%. they will focus on data before making a decision. >> we would like to see over the last four meetings we've raised rates 225 basis points. we strengthen our balance sheet. we are committed to returning inflation to our 2% target and will do what it takes to get there. vonnie: u.s. job openings rose unexpectedly in july. as employers -- the number of available positions, while the quit rate fell to a more than one year low. wage growth complicates efforts to tempt on inflation. taiwanese soldiers warned off civilians -- to come -- the taiwanese military states they
identified as having come from china, they were cheated in the direction of the chinese city. chinese stocks in u.s. tumbled after reports of the altercation. mikhail gorbachev has died at the age of 91. they say he died in a moscow hospital after a long illness. he pushed to open the economy after becoming the communist party leader in 1985. the political avalanche the product on the berlin wall -- the product on the berlin wall and ended soviet rule two years later. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: let's get you tobelle in hong kong for some of the early moves you're watching. >> i was picking up a story she was talking about, particularly
taiwanese soldiers fired some shots toward civilian drones aversive their offshore islands controlled by taipei. the reaction to that, we are seeing some needed moves in defense stock in early trading. it has been seen as one of the biggest outperformer in asia. another sector we are watching this morning is the copper and aluminum producers. we have in bed -- but declines in metals, copper slumping for the most since july 5, aluminum seeing the biggest drop since may. over concerns on the economic woes in china, pmi data will be watched, due out in the next hour. this is south korea's tech stocks, a mixed reaction we have seen a bit of a runoff on local media reporting in the last couple days, the headline here is that korea is making big changes to how it has trouble
rules in place. now all three covid test rules will be scrapped. you're free to travel and, you just have to do one test one day prior to arrival. haidi: exciting times ahead. still ahead, european union meets the goal two months ahead of target. plus of the chinese communist party leadership congress is set in october. details, next. this is bloomberg. ♪
haidi: the chinese communist party twice a decade leadership conference will begin october 6, bringing present xi jinping closer to an unprecedented third term. stephen joins us with more. we are going to be previewing it, the next six to seven weeks. >> is going to be a closed-door affair expiring october 15 and beijing. it is pretty much a foregone conclusion that xi jinping will
get a third consecutive term. he change the constitution following the last party congress in 2018. essentially making him later in perpetuity. -- leader in perpetuity. the question is who is going to fill out the roster below him in the standing committee, three members, two of them have surpassed the mandatory retirement age of 68. xi jinping is 69, it does not apply to him. he has announced he will not stand again for premier. three of the seven, which includes xi will be replaced most likely. the jockeying for position and all that is going to be taking place behind the scenes. we really want to know if some of the pressures on the chinese economy, now that xi will likely
secure the third term, will some of the pressures he initiated on the chinese economy, whether it is the crackdown, on energy, the property sector, the tech platforms or the overarching covid zero policies, will start easing now that he has secured that position that he so desperately wanted most likely will get. keep in mind, what we look at the crackdown on technology, you look at these numbers of youth unemployment, up to 20% of chinese age 16 to 24 are out of work. another 11 million new graduates are hitting the market this summer. that is a big societal pressures of all the mortgage boycotts, that is representative of his own policy. he has not societal pressure and covid zero, that applies to everybody in china. lots of issues, not to mention
issues with the u.s. and taiwan. haidi: some of those issues percolating through turning seasons of the bank, we talked about the pressure points on the property sector, did they see that play out in the numbers? >> we did. three of the big four missed expectations, but the biggest issue is their exposure to the property sector. they are in an awkward position, but they also have the margin of what -- march to the chin the government is asking. they are asking to lend more to the economy and businesses and households that don't want to borrow. you have already the long primary lower, that is going to squeeze them. you already have capital constraints, just as the government is asking them to lend more. there are lots of restrictions
on these banks, who are in and but an enviable positions as the economy is slowing. bank of china up 5.4%, it is outperforming months, bank of china, the most exposed to property sector with 38% of its total loans to the real estate sector. you look at the property sector, nonperforming loans, there are about 2% or under 2%, the nonperforming loans to the property sector, 5.4%. haidi: in just over an hour, china releases data. let's look -- what are you going to be looking at? >> we are looking at a few things, if we have been
inundated you get with numbers, data, you are getting manufacturing and nonmanufacturing out. june and july, four out of the five were already in contraction territory below 50. this is barely above it. the other one is an indication, new orders fell. and employment of that is in contraction, let's look at nonmanufacturing, you also have a specific employment gauge there. as you can see, the services sector, that is also contraction. talk about disinflation, the lack of demand, prices 47.4, second lowest level since the pandemic. we will see what august looks like, if the trajectory is a
and tensions between china and taiwan and the ongoing energy crisis. msci europe down by .6%, dax futures sitting pretty flat at the moment. russian gas giant gazprom saying it will stop supplies to a french company over disagreement over payments. we will continue to watch that in europe. kathleen: european power prices now plunging on plans the region is stepping up efforts to store electricity. the said they met their target, they are getting it done. >> the message is outs of the eu commission president, the executive bar of the european union really taking a victory lap, saying we are way ahead of our goal.
that brought prices down in europe for a second straight day. they were down 20% on monday, that is after being up some 40% from prior weeks. that is why you get an odd looking chart. what is it about? it is about these gas storage tanks filling up ahead of schedule. there are now on track to be better than 80% by november. they are filling up other european countries like the u.k. do not have a great storage facility. they are not in as good a shape. in any event, this is a lot of progress, it was just over the weekend the european commission president sounded alarm bells and said they had to step in and do something. check out the bloomberg chart on energy prices in europe. electricity prices have soared tenfold.
gases soaring out of control, it has everything to do with the nord stream 1 pipeline, which russia says it is repairing again, that is raising concerns that the russians are using the pipeline and not gas as a weapon , causing europe to panic and speculate they are going to be cut off completely. that would be catastrophic for the region. haidi: oil futures as well, we are seeing a rebound in asia trading at the moment, still on track for the worst losing since 2020. let's look at how crude is trading as asia opens. they were founded a little bit and have been in the green. that does not reflect the huge pen down they had in new york and london, that is on the latest news out of iraq and libya having to do with violent
clashes. there was concern over the past 48 to 72 hours there that this would further tighten oil supply, now we've got iraq saying we don't think we've got a disruption, traders have reined their concerns. we also have lower liquidity, lower volumes of the adds to what were saying. let's look at the bigger picture for oil prices, both for nymex and brent. it's been a dramatic august, you know only have these supply concerns, you've gotten opec meeting the first week of september, they are likely to reduce oil output for the first time. haidi: now quick check of the latest business flash headlines. kathleen: u.s. shares tumbled, net income around 500
$12,000,000 settlement asia june -- stocks dropped from that made to june. . the company says is a challenging macroenvironment. the lowest since their 2007 listing and hong kong. bloomberg intelligence says it's too the company's fundraising efforts, china vanke becomes the first property management company to post earnings -- compared to a 46% drop last year. they've managed to defy the liquidity crisis. china's big three state own airlines report $18 million as
moves we had the u.s. session overnights of wall street reacting to that economic data came through on consumer sentiment and job openings, setting the stage for another supersized hike from the fed. what has become clear is determining the outlook or direction of the market is getting harder than ever. economic signals are mixed. that makes it difficult to tell what central banks are going to do. industrial production numbers weakening in korea, japan a bit stronger, solid retail sales there, as well as china and the next hour we do get that pmi data. extremely low trading volumes in this month. let's -- the lowest for australia and japan, hong kong and korea in 17 years. china is not showing it because of its size, we had the lowest
in the last month for the past year. kathleen: that's something. let's get to vonnie quinn with first word headlines. alicia: the chinese communist party leadership congress will begin october 16, bringing present xi jinping to a third term in power. state media says it will be held october 9 to prepare for the congress. he is expected to extend his decade in power after listing the term limits in 2018. high energy prices are being worsened by russia limiting flows to the crucial gas pipelines. the presence is more needs to be done. -- eu president says more needs to be done. >> we need to save 2% of
energies of the second as we need to diversify away from russian fossil fuels to reliable , right minded sources. good news, we have reached now and average in the european union of 80% storage. >> sri lanka has announced newer forms -- new reforms. and an interim budget space it -- interim budget speech, they sent will be raised to 15%. he also -- the administration is looking to reach an agreement with an imf team that visited wednesday. pakistan anyone have launched $150 million in emergency funding. the government says more than 1000 people have been killed and nearly half a million forced into relief camps.
the prime minister says it is needed urgently. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. on vonnie quinn, this is bloomberg. haidi: let's get the latest on the markets. mark, we are wrapping up what has been the most tumultuous month. what are we expecting going forward given the fed speakers carrying on from jackson hole, delivering that same message, commitment, the magnitude is unknown. mark: more of the same. how far will the s&p 500 fall in september. if you look over the past two decades, september has traditionally been the second-worst month for the s&p among all months of the year.
i don't know whether it is going to be too much different this where -- this time around. wait jay powell set up the meeting, and he's been endorsed by the fed speakers you been talking about, it suggests we have to be prepared for a large u.s. hike, probably 75 basis points. and more to come. plus traders will be looking for changes in the dot plots, there's a decent chance the median will go above 4%, which may not be fully priced into the market yet. the headwinds with equities for september will last right on through to the fred meeting -- fed meeting. kathleen: the st. louis fred president -- fed president was one of the first subsite get the accuray up to 4%. because markets, the sooner you get this done, have the pains of get inflation coming down means you can start building up again.
it is definitely going to potentially drag out for a long time. mark: not only that, i think what paul did last week was to reset people's thoughts about any chance of a lowering of rates. the fed wants people to get away from the idea that they can solve this inflation problem quickly. even if they do interest rate hikes, it does not to say inflation will suddenly get back to target range. it is going to take a long time. what they are trying to do now is prepare investors for the fact yes, we are going to continue to hike quickly and aggressively. we probably need to go to at least 4%, maybe more. but we get there, we probably need to stay at high levels for some time. we can think about lowering interest rates until we are very confident we are in the back of the inflation problem. kathleen: as i said, that may
take a while. that was at bloomberg's mliv strategist, mark cranfield. the economy faces pressure on multiple fronts this year, including power shortages, drought, on top of the property crisis and the covid outbreak. let's bring in alicia garcia herrero, it's great to see you again. just before we get into the pmi preview, i want to follow on cranfield. we are watching china, what do they mean? you play out and note today talk about the fed that the hawkish stance is bad news for china. i want to hit that as we head into the numbers that are so important. alicia: it is important. china needs to attract customers in the light of weakening, over
8% this year. the sentiment in china is very negative. the fear is not so much -- but that's not enough. it is all about unreported flows. in flows from nonresidents are essential. half of those are equity, the market is underwhelming. you have the bond market, you need a differential. furthermore, given the expectations for weaker. they can keep rates so low, let alone cut, which is what the economy needs. kathleen: talk about how badly
they need rate cuts. alicia: they need rate cuts badly because it was estimated the impact of covid, the contraction was about 2% of gdp this year, suggesting how much you need to do on the monetary side. however, this is very important, rate cuts may not be packed on the rest of the economy. there is an accredited track in china, the smaller banks are in trouble and bigger banks will not pass on liquidity. i think china needs to do some thing to keep cash, those that are lending mortgages, basically banking the economy work. kathleen: i'm so glad you raise the risk of a liquidity trap. that is the point where china is
up. when you look at the lack of demand, credit slowing so dramatically, it begs the question if loosening these lending huts is going to make a difference. alicia: there is where there shouldn't be, there's demand for those are desperate. there's not demand for those that can pay back their debt. it is a -- the problem is that the larger banks, their clients -- the banks that don't have liquidity have the worst clients of the real estate developers, it is a tricky thing. if china is just on some form of -- china is doing, it is allowing china corporations to
keep guarantees for developers to issue debt or get loans. it is not the central bank, it is all about -- that is the link between the liquidity trap in china. we don't have bad creditors out there which need liquidity, they don't think the growth expectations needed. when it comes to the chinese economy, if we are assuming the new normal is going to be lower and productive jet for china, how easy is a transition going to be to the various sectors of the economy? it is not going to be easy. the chinese lockdowns, it is the
only country that has gone through the real estate bubble, and climate change, plus zero covid policy. let alone geopolitical risks. it is all about in my view, lifting some these constraints. that is where china needs to do something and let the economy recover from the shock. the bursting of the bubble will last years. we know that from other countries's experience including japan. you have a decade there. sobering thoughts as always, the chief asia-pacific economist at natixis. more to come on daybreak: asia.
>> really not surprising. all three airlines in total combined losses, we are on track for the third year of net losses. it is because of the on-again off-again covid restrictions, those airlines are hit especially hard by the lockdowns in hotspots including hainan and tibet. it is a different situation, in china, there are not enough passengers, globally there is not enough capacity to carry all the passengers. >> even within the property sector, there are always those a little more resilient. vanke is one of the biggest players. what do we have for them versus country gardens? >> this is the kind of winner take all situation when it comes
to the china property crisis. it is the nation's second largest developer. it is cash-rich, it was able to borrow very cheaply onshore. there is ample liquidity going on in onshore market and not enough borrowers out there. they've taken advantage of that cheap borrowing. then country garden, was suffering from the whole rising interest rate and they saw a 96% drop in profits what was reported yesterday. >> why do were big beat, why are shares not -- baidu earnings were a big beat, why are shares not reacting? >> baidu is the last of the
companies to report results, but i think it is still concern for investors because the covid lockdown is still firmly in place. overall from this earnings season, china's tech companies reported better than feared earnings. i think a key concern is the outlook is still very cloudy for the whole sector right now because of the covid zero policy. kathleen: that is part asia stocks managing editor. now a preview of the china open to date, let's bring in china's -- bloomberg's china correspondent. what is the big force as we get ready for this trading day to begin? >> a lot to watch out for. we do have those pmi's duet 9:30. -- do at 9:30.
we also have that trading for five straight days, yields up yesterday at 4:30, that is the official close of trading onshore. that was a stronger move in the currency, that tends to happen when the state makes it easier for the pboc to get a stronger fix the following day. let's see if it is using it to protect the currency from weakening too quickly. overseas, the stronger dollar is make that difficult. a lot more in terms of earnings, let's see if it reacts to the news that berkshire hathaway is selling that state after all. haidi: and the slightly more medium-term, we finally have a date for the party congress, do we know how chinese equities
trade around these big political events? >> this year is a big one, october 16, that is an easy one for me to remember, it is my birthday. i watched a day for traders, it is not the event itself, it is what will happen after. everyone you talk to around china and chinese markets says we are waiting to see what happens, will xi jinping on covid zero after the big congress? your previous test was saying china need something to rescue the economy. the expectation is that will happen after this congress. the second half of october and november is when people are expecting something to change, some kind of pivot. let's see if that happens. kathleen: it's been a pretty shocking performance and global stocks. there has been some back --
bounce around asia, has been terrible, especially market reactions to the big tech names. >> if you look at the final trading day of the month, we did see -- i don't know if you have the chart on hand there -- yesterday was the highest proportion of short in hong kong . almost 30%. that makes for more difficult september, its rating a compelling chart. a lot of that has to do with the tech space, the been really short the sectors of morgan stanley warning of short there. when it comes to earnings, we know the tech sector is slowing down, baidu slowing -- scaring investors with a slowdown in revenue growth. what will the future look like
for these companies? can they still generate earnings growth? the answer is yes, the danger is you will get caught on the wrong side if you pile up on the short bets. that is the theme for september and the tech space in china. haidi: sophie, always great to have you with us. china markets correspondent, a very busy last trading day of august. be sure to tune into bloomberg radio to get newsmakers in the in-depth analysis from our great team there. you can listen through the app, bloombergradio.com.
haidi: a quick check of the latest business flash headlines, china airlines has ordered six boeing dreamliner's. the airline also has options for eight more of the planes, delivery is set to begin in 2025. they will replace the aging airbus eight fleet. the u.s. is lifted all covid pup protocols including masks and testing. employees in new york city will have to continue following the
local mandate of being vaccinated or receiving a health or religious exemption. a company mimosas the decision was based on significantly lower risk of severe illness. there -- elon musk asking a judge to amend his counterclaim against twitter, that's it for october 17, employees are asking for to be moved to november. kathleen: some stocks were watching a of markets opening in hong kong and china, oil producers may move, metals can -- tumble on concerns lockdowns and china will her demand. we've seen loan pressures and shares are trading at only 40% of value. many property companies reporting their financials today, logan, ryan schein and
ocean. haidi: let's look at markets around the region, a really busy start to the market open for china and hong kong for pmi data as well as market growth, finally that date being set for the october party congress. look at the markets opened at the moment, we are seeing a bearish outlook, kospi down by .5%. retail sales there -- in australia, down .4% on top of the day of gains driven by energy and the mining stocks. these are session fears coming back into play -- recession fears coming back into play. u.s. officials continue to double down on their commitment whatever it takes to get back to 2% inflation target.
we are seeing futures look a little bit downs of equity high about .3%, nasdaq also giving back given the recent selloff, about .4%. coming up, global investment cio tells us about covid zero -- all the pmi data from china, and covid flareups of the property sector in the analysis. this is bloomberg. ♪
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