Testimonyhis week, from the fed. This is daybreak australia. We are hours away from asias first major market. Liu, over the next hour we are going to be looking at how the action in wall street and england are going to be playing. I know we are talking about the results. In the meantime we are going to andocused on the markets whether the bond rout is going to continue into this week. It doesnt look like that is happening in the stock market. They got a pretty good jobs report. Near the high have a session of 94 points. Place up aboutin 1 . The testimony from janet yellen will be wednesday, she giving her midyear outlook on the economy and we are going to see what she has to say about Interest Rate hikes or Balance Sheets. Investors are going to be looking at what had last week, this shift of Monetary Policy expectations, whether that was a blip or proper readjustment. A u. S. Starter culminating in invalidate the feds Inflation Expectations as we go forward. We are going to pick up on wall street. Stocks trading flat at the moment. Strength against the greenback. Opene seeing a positive when it comes to futures and the. Ikkei in terms of what you are looking for, we have an emphasis. It is nation prices coming through today. A bit of a downside when it comes to the aussie dollar. The g20 wound up in hamburg with the u. S. International peers. Resident trump flew home little more on north korea. The stark difference was on climate. Accord the 2050 paris irreversible. The president returned to washington, saying it is time to work with russia and he discussed a joint Security Unit with putin. Even this president putin says he thinks trump accepted his denial of any russian meddling and last years election. Secretary of state tillerson u. S. Ed ukraine to reaffirm support two days after the first meeting between President Trump and putin. Overising influence Ukrainian Forces in the east you trump tweeted with putin at the g20. President trump stress trumps press secretary seems to have mislabeled xi jingping as the leader of taiwan. Referring to him as the republic of china, which is the official name of the island. Actually president of the peoples republic of china. Global news 20 hours per day powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. We are going to stick with the g20. A bit more particularly when it comes to the exception on the Prime Minister and trump had a conversation in the back of the president ial limo. Assurances that australia will be exempt from the tough tariffs putting on steel imports. That is going to be a relief for australian companies, not the least which produces half a million tons of painted steel in the united states. There are persons familiar with it seems the u. S. Is more concerned about chinese overproduction and steel dumping relatively small imports. The Prime Minister meeting with to finallys a trade agreement with the eu. Looking to stitch up a freetrade deal there. Indonesia, meeting up with the Prime Minister at the g20. Looks like we are going to conclude a freetrade deal there. Plenty action on the trade front. Toting with french president push forward the two countries defense deal. What if the latest on that . This is a 38 billion deal. Building 12 submarines for the australian navy. Australia will open an office near paris for the future submarines design. This is the largest and most ambitious military project in australias history. France. Y working with Emmanuel Macron to build these enormous ships, employing 2800 people when construction gets underway. Is little bit further down the line. Streetay is open on wall and tomorrow is going to take on greater significance. Rout and people wondering whether or not the bull market is over or whether this is a prepricing. Su keenan with a look at the week ahead. Bill gross is saying dont call it a rout. We had the job creation coming in much stronger in terms of the headline number. The fed likely to remain on a hawkish note. Lets look at the bloomberg. Going into the friday jobs number we saw stocks and bonds selloff thursday. Losses and that with the s p 500 etf trust. The last time we saw this simultaneous selloff was all the asset classes. This time they trigger more widespread than Central Banks. Are going to hear from bill gross in the next hour. He says in his view it is not a rout. We go to the bloomberg one more time. Btv 1771. Can see what you have with that blue line sneaking up, the number of people who have not been in the labor force, they have been jumping back in. That is underscoring a lot of strength in the economy and a view that the fed will keep on track for tightening this year. That is overshadowing every other element of the report. Yellen sent a new report to routinely watching this. What are we expecting . The today has money to begin on wednesday. I believe she starts in the house and goes on to the senate. A big surprise but it will tell us if she is on track. Lets look at the Economic Data out of u. S. Retail sales. We also have the cpi costofliving index. Big bang set to report. Citigroup, wells fargo all in the spotlight. A very u. S. Centric take a look at one of australias top Pension Funds, building up its portfolio of infrastructure assets. We are going to get back in the g20. This is bloomberg. You are watching daybreak australia. Lets talk a g20. President trump returning from his first g20 trip. He wrote the g20 summit was a Great Success of the u. S. I want to bring in john edwards, a fellow at the institute for international policy. Hell so just closed that his Board Membership at the bank of australia. President trump said it was a very successful g20 for the u. S. It . I think it was notable that the u. S. Not only didnt lead the discussion but didnt wish to. An economicsual for meeting of that significance. We knew that there were a lot of differences. The second part was more surprising, that the u. S. Didnt role, bigger leadership knowing that they cleaved away from their counterparts on issues like trade. What were you most surprised by at this meeting . It was surprising he found his only real ally on Climate Change with turkeys president. He found his only good beating with President Trump of russia and he chose to give his major speech in poland. I guess i come away with this sort of curious, doesnt make the u. S. Significant . I think europe has taken leadership of g20. And isy stood up supporting Global Economic coordination. That is disappointing not to have u. S. Leadership in this area. Disappointing would be an understatement. It is a seismic shift. Is it china . That china putle itself forward publicly in a big way. Its europe. Europe has taken the lead. I think that is interesting and important and useful. When we spoke to the Prime Minister about a month ago, we are talking about where that leaves small and midsized like australia. Deal with that shifting fanned of a global line . It seems that australia in particular is not facing a big contradiction between chinese intentions and american intentions. That is the one danger they would have identified early in the administration. I think with most countries australia just have to see how this plays out. You would imagine there would be a conflict. The kind of shift its alliance more toward china . I dont think it is an issue. In terms of our relationship we have to think beyond the Trump Administration. Over the past week or so it looks like there has been a global reach shifting of expectations. That there wasng such a lack of a hawkish tone . What is that say about australias economy . I dont think it was markedly different from previous statements. Until the First Quarter of next year at the earliest, given that we dont have any inflation. Trend. Is below stay with us. Going to get more on what global Central Banks are doing. We are waiting for Janet Yellens congressional testimony. A hint at how this is going to play out. This is bloomberg. Good morning i am betty liu in new york. You are watching daybreak australia. The bank of australia didnt change its target, leaving it at the record low, but it also left a statement largely untucked largely untouched. I want to bring back john edwards, a board member who thinks it could be, it could be a hack rate over eight times. I want to start with this chart. This is the conundrum i think about every time we have a meeting. You have record low rage growth. Do they go from here in terms where that cash rate goes . Its a patchy economy. Where i talked about the possibility was based on the the forecast for the australian economy are actually achieved. At the end of 2019 we would have inflation within target and growth of 3 or more, which is the best they can do. Where would the cash rate be was the question i was asking. The question is how much higher. It would be 3. 5. And to get to 3. 5 you need eight with a percentage point increase. Forecast was the premise of my speculation. I dont think it needs to do anything and wont. It shouldnt. It shouldnt until it sees higher inflation and stronger wage growth. Even on this forecast it wont need to make this kind of decision until the first half next year. This failure to translate into wage pressures, it feels like a global structural issue. Extent it is, it is apparent in a lot of countries. Particularly in the u. S. And australia it has been associated with growth. Its not good in the longer term. I would expect wages growth to pick up and australia. The course may see some pickup in wages growth. That is a big struggle we are in the u. S. I want to pull up a chart that illustrates it really well. The number of people who have not been in the labor force have been jumping back into the labor force. We have seen that Participation Rate go up and the Unemployment Rate go down. Dont and fall short of expectation. Distance and at a what a conundrum was facing. They will continue to hike or will this lack of wage growth can wait with make them cause . It is very low. At one point, the u. S. Unemployment is low for a quartercentury. I think hestances which growth will pick up. I think we will see wage growth picking up a little bit. Those are circumstances in which the fed will continue. And even pace of returning to more levels. For its policy rate. That is the key question here for the markets. Edwards, former board member at the rmb a. A quick check of his news flash headlines at this hour. 6. 3 billion for container klesko is offering a 31 premium to overseas however it still requires regulatory and investor approval of the family that founded orient in 1969. Chinese playmaker has won approval to start mass production of the ai j regional jet. The plane has a maximum range of 3700 kilometers. Has 413 orders to date. Approval tods operate in the u. S. And european markets. Air france says the turnaround launched earlier this years gathering strength. Rising bookings and the return of tourists from asia and the united states, the group is still recovering from the collapse in travel that followed terrorist attacks. It seems it has seen prices surge. It has affected the mood among businesses in france. Theres optimism and we do feel it. More people coming from overseas. To look at why u. S. Lawmakers are going to continue to be divided on health care. That is a big question, this is bloomberg. Sydney markets open and ive futures and australia. See them pointing upwards. A Beautiful Day shaping up in sydney. Gorgeous. Pretty gorgeous here in new york area and daybreak australia. Shinzo abe has seen approval for his cabinets like to the lowest ever. Ratinging following falling to 31. 9 . That if the lowest since he took office in december 2012. The biggest reason was a lack of trust in him as a person. President trumps eldest son has confirmed a meeting with a russian lawyer. And a statement donald trump junior said Jared Kushner and Campaign ManagerPaul Manafort liberating the Northern City of moses from the socalled Islamic State. Three years after it fell to the groups strength. Of was the Islamic State leader. And the Republican Party hopes the repealing and replacing the Affordable Care act has hit the rocks with passage of any plan before the car that before the august congressional recess in doubt. The Louisiana Senate declared the plan a nonstarter while ted cruz allowed for cheaper plans that provide less coverage. News 24 hours per day powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Lets get an update on the markets. We are a pretty flat at the moment. We did see some moves when it comes to strengthening the aussie dollar. Looking tosydney open up on the back of a pretty strong session in the u. S. Ahead. K that route continues. Equities continue to play out. The japanese yen, given the lack the yenical setting up the week pretty flat. Seen how the u. S. Tenyear holding at by 6 10 of 1 . Continuing to be week in the u. S. Lets take a look at the payrolls numbers. What we looking at . It is a big week, now looking at the 10 year. Having risen 24 basis points. How does this spill out toward equities and continue . They have that in the middle of the week. The reason they potentially move the dial, and of course equity markets are start off very lackluster. Still the overall context is odd. To be priced with a are now. Thanks so much. That to washington. Senate republicans clashing for their stalled Health Care Bill with passage of any planned before the august congressional recess in doubt. Rival factions trend and pull it in opposite directions. Joining us is the executive Vice President of the Communications Firm corbis. And working for several years on budget committees. Post in a recent thus we had the situation here. They had barack obama. Then they had hillary clinton. Thathey have republicans it is a difficult problem for them. Given a narrowss republican majority in the senate. Are some saying lets delay the august recess. But not clear delaying the august recess will change the calculus on health care. Is not clear anything on health care can pass the senate. You are going to be delaying tax reform. I would argue the tax reform and they need health care for tax reform. They believe they can leave it he hind but that half the pass another budget. If they keep working on tax reform to august and health care through august, theyre going to make tax reform impossible this year. Am going to get the end of the year. Busy dreaming . I think he is fantasizing. This is the same secretary of the treasury. Now it is the end of the year. Impact on thetle legislative process and the white house has so little impact it is hard to understand where he is getting his information from. It withhey have to do budget reconciliation and things like that, there is no way this is going to happen by the end of the year. What do they need to prioritize . Show the health care for now . Im pretty sure the Senate Leadership is going to take a rollcall vote behind closed doors. Ify are going to see anything at all is being compromised and if not they are going to move on. Move on with the budget and with the appropriations and debt ceiling. Bet it is willing to dead for at least this year. How much of the inability to get things out at the moment is a lot of critics are saying is because the Trump Administration isnt even fully staffed at this stage. How much of that is playing it playing into his ability a jew that is clearly beating factor. This is work going on in the hill. What is contributing more is his popularity is getting lower on a daily basis. News stories about russian connections and those type of things. That is getting the republicans on the hill and the senate worried about their own futures, saying lets go slow. What is the fallout here . Probably not the senate. Seats if ite some continues under the current path. The house is definitely in play. That would lead to total gridlock over washington. Up next Janet Yellens fed on polling that labor force is paying off. This is bloomberg. You are watching daybreak australia. Wages remain stuck in low gear. She testifies to congress this week. Kathleen hays is here with more. Wages are rising. If you are the run the paycheck is getting bigger which the fed wants to see, because they are about keeping inflation too low. That is the mixed bag here. For most economists, the strength of the rebounds out wages it may have been a week month. With the latter part going into june. Payrolls were only coming up turning into 230,000. Looking at btv and you could just see how they got this nice rebound over here. Up to 222,000. It looks like the up of jobs is in place. This happened as new workers entered the labor force. That means we are getting more confidence. It includes part time. Going down steadily. It bounced back up. It only rose by 2. 6 . Issue for then fed as jim gillen testified. We did get the feds Monetary Policy on friday. They do expect to start their Balance Sheet reduction. She doth testify on wednesday and thursday, first the house of representatives and the senate. No doubt John Williams from the San Francisco dead speaking today. Charlie evans from the chicago fed. To get a lot of fit speak on the back of jobs report. In Monetary Policy report. And then always great to have you ahead from head speak. This global repricing of policy expectations being built up that week. She can continue this Monetary Policy course, markets strengthened. Placerategy has been in for a number of years. She would at this idea that the Monetary Policy had to be organized. Some employment report. Picking up some weakness in the labor market. The constituents about how strong is the economy really. She maintained this tone of gradual rate hikes. Most importantly she gave any kind of hint of whether it would start as soon as july or september. There is a lot of setting about inflation growth. When marketplace was basically saying what is everybody so worried about . I want to play for you what he said on friday. Is not what i would have expected three or four years ago, that we would have this much jobs and this much inflation. I thought it was the goldilocks. It was not too warm and not too cool. That is what the markets are responding to. I would agree with that. This idea is that you have interesting slack in the labor market. The labor force Participation Rate, it was a sign of slack but a lot of people are outside of the labor force slowly coming in. There are signs of slight tightness in certain sectors. You have this goldilocks scenario that doesnt produce accelerated reaches accelerated wages. Although rates have been going in thestill remain middle of the range rather than having the acceleration of Interest Rates. Its pretty clear the consensus of inside the head, maybe the fed will announce its Balance Sheet reduction at a september meeting. Will look to do its final rate hike of the year. If we just dont return on the path toward 2 , if they stay where they are and even follower, then what happens . I want to show you a chart. What it shows is unemployment, the turquoise line falling. You can see it is at 4. 4. Stillou see they are stuck around 2. 5 . There is in that move up. What do you make of the economic standpoint from the fed thatpoint . With suggests is those coming back in the labor force are not really competitive in terms of getting wages for that matter and moreover they are coming in still on a parttime basis. And from a fed standpoint, in the sense that it is so uncomfortable to be in the position of not being behind the wages, thecelerated others should point out if this weight pressure continues to stall out and maybe further decline, then it becomes complicated for the fed to pursue rate hike policy all the way up to 3 . This is where we are at where the markets are judging and saying we are in a range of Interest Rates. Were note time dealing with an accelerated wage picture. Putting aside these questions of whether it is a structural for wages are not fit not getting through, doesnt validate with janet yellen has been saying all along . Just that weakness has been one reason why people have come the rate hikes may have been to preemptive. You may be making a mistake so to speak. The report is relevant for that matter. Picture,a very benign still not seeing acceleration in wages. It doesnt change the current course of multipolicy. Its all very gradual. The testimony will be focusing on how the core about convincing the economy going from here. Thats what really matters. Trying to pull up this chart here that shows the treasury yield curve. It shows the yield curve flattening. Shortterm rates are going up. Investors believe we will see inflation. The longer this continues the tighter you see the spread ago. The implication is if you get a flat curve or even included curve it has to be significant slowdown in the year following that inversion. We are all on the path to a flat yield curve. If you didme concern not see enough traction in the economy that would lead to a steepening of the yield curve and then you may have time to march. On pmi say for example data coming out of you, we are getting that countertrend steepening. Curveion of the yield would be potentially an issue. Ahead of credit Portfolio Management thank you for joining us. Automobiles, and wide and aussie pension fund wants to raise it that on infrastructure. This is bloomberg. 1 here in new york500 im betty liu here in new york. The pension fund is betting on infrastructure. Seeking board approval to improve investments in everything from total roads to airports. All the details. Everybodybig thing, is hopping on the infrastructure train. Infrastructure gives funds, especially reliable funds over a long period of time. We are talking workers in the Hospitality Industry so coffeemakers are coming into the office. When they get to retirement they are going to need some money of course. You dont have 20 to 30 years every time. Having a Good Platform for that, given the money when they get into retirement. Expensive . Getting asset prices are getting up there. On average around 120 million. That is up from 350 last year. The quality of the asset is also something that Pension Funds and other funds are looking at as well. The quality of the acid is coming off a little bit. Sale andcoming up for theyre looking overseas. These crossborder infrastructure deals. It for thisst morning. Of course getting monday started over the next couple of hours. And a key on inflation story today. Perhaps wedence could see a deflation trend losing a bit of steam. Firm 5. 5 for june. If the question on what this means for industrial pop industrial profits as we see these prices edge off. It pick up high of 1. 6 . We received the decline continues that you will see if the decline continues. And also joining us he specializes issues around nuclear nonproliferation. Hes going to talk about how north korea did not get discussed at the g 20, what did not or did not get as discussed as much as we thought it would be. We will look at china will usher china russian relations as well. It, all of the action in daybreak. This is bloomberg. Asiapacific markets signal gains has strong u. S. Jobs data reinforces optimism. Payroll numbers bolster confidence, but wages still flat. More for the fed to ponder. Trump hails of the g20 as a major success, but he is increasingly isolated on trade. The white house appears to have forgotten which country xi jinping isad