Kathleen youre watching daybreak a show coming live from new york and hong kong. Haidi we are counting town to asias major market opens. The top stories, asian stocks to start the week under pressure following mixed signals in fridays jobs report. Inflation pressure from the u. S. And china. Will prices are nearing highs for the year after six straight weeks of that. Saudi arabia extending as his Prime Minister says he will not pursue the judicial overhaul. Annabelle asian stocks are starting the week under pressure and we see futures to a weaker start. We are one hour out from the open in sydney and tokyo. Looking at key events on the horizon the u. S. Rally evaporated at the end of last week. We will have more on that in a moment but in asia key events include Consumer Prices data from china on wednesday. We could see deflation taking hold officially in the country and other factors as well. Japan has got the boj releasing the summary of meeting minutes. Investors will be passing over those lines carefully. Any clues coming out around the prospects for exiting the program of yield curve control. Japanese yen is Holding Steady as investors await. In terms of what else we are watching, change on. Take a look at the Big Name Companies reporting over the coming days across asia. Earnings season is winding down in the u. S. And europe. In asia its starting to kick off. 2. 8 billion of market cap confirmed by reporting over the coming week. Key names, alibaba, sony, just some of the names. At softbank in the mix. Lets take a look at what is happening in the rest of their region in terms of u. S. Ones as well. Weve got futures kicking off. Mild gains at the start of trading. Its that story of a mixed jobs report that came through. Fed officials are mulling the outlook for rates. Brent crude, wti little bit higher. Details on why thats happening but in terms of what elsewhere watching, its in Inflation Report kathleen that is due out and traders are anticipating those numbers as well on thursday. Kathleen one big report after another, so lets get a preview of the week ahead. Tension turns to the u. S. Inflation inflation prints. Chief rates correspondent for asia Garfield Reynolds joins us. Garfield, we spoke to john, a longtime fed watcher. At city, imf deputy director, on and on. He thinks the labor market is easing enough. Hes not worried about rising wages. He thinks the fed is going to have to pause in september and wait to see what happens next. Markets just do not seem to know quite what to make of this. What is this going to mean, this Inflation Report in the next few weeks, waiting to see what the fed does it do. Part of the whole problem precisely is we are waiting for several weeks still. We do not know if there is going to be any definitive piece of data and certainly that jobs report last week was far from being it in either direction. Jobs growth slowed but the Unemployment Rate ticked down again and we had those strong wage gains. So its a tough one, the calls are tough because the market in the fed are at cross purposes. The fed is noticeably wanting to be able to hold rates. That would fit in with their name. Its been lets slow inflation down enough to kill it off, but without causing a recession. They are convinced that they can see the outcome as very possible. Its a difficult outcome to achieve but they could see it as being possible. And with that would go the idea that you are going to stop hiking rates, unless the data goes back to where it was last year, when you had continually high inflation, very robust jobs numbers. The signs were there that you needed to keep hiking, otherwise youre going to get into trouble. They want to be able to stop, that means the next battlefield and investors are already starting to get a taste of that in some of what went on last week, the next battlefield is how long do they keep rates elevated. Remember, we still have bets on some very rapid rate cuts next year. A few months ago we had bets on rapid rate cuts this year. So that remains the expectation and investors are always impatient to know, not ok how long are you going to hold rates, but when are you going to start cutting . One are you going to give us what we want both as far as Bond Investors and Equity Investors go . That is the tension with the cpi report and also those bigger treasury options that are going to help to create a bit of extra volatility. Haidi what do you make of oil rally . How much upside risk is there . Still plenty of upside risk because the backdrop for the surprises with the bond market, its been hit by the stock market. Its been the u. S. Economy and other economies out there remaining resilient after these rate cuts. At the seam time, you have heard opecplus is obviously a little bit like herding cats for those who are running it. So i different times they have struggled to be as disciplined on what sort of production they are putting out but they have more or less come find they need to avoid going to hard, too quickly on the production front. With that being the case, youve got potentially stronger demand than many expected. Youve got not as youve got limits on supply. So that creates a world where the expectation should be to keep rising until something says stop. Until it gets to a level where opec starts to think we can be happy with where it is now, we can boost output so we get more overall revenue coming in or on the others of things, until you get some sort of problem appearing on the demand front. If you do get those forecasts for u. S. Recession or elsewhere which have proceeded in the background, if they come back that would be downside risk. At the moment the sort of goldilocks assumption about the economies, it feeds into the assumption that the path for accrued oil is up. Haidi always good to have your thoughts. Chief rates correspondent for asia. Lets get you to key political stories following in ukraine. Drone attacks on a Russian Naval vessel in an oil tanker are signaling rapidly expanding war. Putting at Risk Commodity exports by the black sea. An Intelligence Firm sees rates blooming and says the cost of shipping russian oil may rise as much as 50 . Russia exports most of its grain and 20 of oil via the secor door. Chinas foreign minister has invited top diplomat joseph and his diplomatic for a visit. There will be a Leaders Summit later this year. There was a trip last month to meet chinas foreign minister and other senior officials. At least six people have been killed and armories looted as conflict erected in india. Police say they launched raids on the weekend to recover stolen arms and ammunition. Fighting since may has killed more than 150 people. Parliament will debate a noconfidence motion in the Prime Minister modis government over its failure to stop the violence. Support for west African Military operation to reverse a coup in niger has wavered as a move to reinstate the president arrived on sunday. Leaders in nigeria have urged regional leaders to prioritize diplomacy i should say over military operation. They seized power in july and have resisted all calls to turn to democracy. Kathleen israeli Prime MinisterBenjamin Netanyahu is backing away from a planned overhaul of the judicial system and is working to change the way judges are chosen. Proposals sparked the largest antigovernment protest movement in the nations history. He spoke to bloomberg about the change in strategy. I am absolutely sure that israel will come out stable and successful antidemocratic, at least as democratic. More democratic. I dont think were going to tear the country apart, have civil war. Right now what you are seeing is the natural conflict between opposing views that have not yet meshed but they will mesh. Do support your Central Bank Governor who is well respected internationally . Sure, i appointed him. Will you back in for another term . He has to decide by next month. I have not talked to him, i will. I have guarded i would say rigorously his independence in the event of the central bank and that will continue to be a policy. I will talk to him but you would not believe this, weve had no opportunity to discuss. Will you ask him to stay on . Possibly. I want to think about it. I think he has been an exceptional centralbank director and i think that is a possibility that i will have to talk to him about. One of your ministers called him a savage for raising Interest Rates. My am ministers in our Parliament Tree system can say anything but its a fact that we have never intervened with the independence of the central bank and we will not. In fact, i think i passed some laws or corrective additional laws that safeguarded the independence of the central bank. Its i do not want the government broaching in on what the central bank has to do. Do you support Interest Rate hikes . I leave that to susan, the central bank. Ive had several Central Bank Directors. Ive been in government along time. In a few months probably more time as Prime Minister than anybody in the western world for the last halfcentury. So i have a lot of Central Bank Directors to talk to. I always talk to them in a padded room, absolutely soundproof. That we can hurl at each other whatever we want but when i come out, i always give back into the central bank. It would be pretty powerful message to the markets given the divisions and turmoil if you were to ask him to stay on. That is a consideration. Do you agree . The powerful messages the independence of the central bank and the choices i have made in bringing in Central Bank Directors, whether it was Stanley Fisher and after him the current centralbank director, i think people see that we choose well. Haidi israel Prime MinisterBenjamin Netanyahu speaking to bloombergs francine in jerusalem. Kathleen still ahead the japanese 10 year yield could trigger further intervention if the bojs message remains unclear. We will discuss that later. Ubp thinks weakening an external demand will be a drag on chinas growth in the third quarter. Senior asia economist joins us next. This is bloomberg. Kathleen this is daybreak asia. Taking a look at the week ahead. On wednesday will be getting chinas july cpi numbers as the Economic Outlook worries investors despite beijings drip feed of support measures. On thursday bloomberg economists expect the u. S. Cpi to come in at 3. 3 for july. Will be watching a Rate Decision from the are b. I. Where economists are expecting policymakers to stand pat. On friday, easing in indias Industrial Production data on headwinds from weaker external demand and higher rates. In the philippines, economists are expecting secondquarter gdp to grow 6 . Lifted by investment and net exports. Other data to note, foreign reserves and trade numbers from china, u. S. Ppi, south koreas unemployment and Consumer Confidence reading. That is your week ahead. Haidi a busy week ahead. Our next guest says deflationary pressures in china will exert pressure on the pboc to deliver Additional Support measures in august. Casanova is senior economist in joins us in the hong kong studio. Great to see you in person after so many years. We talked about expectation into deflationary readings but i wanted to start off on the oil picture because as we know, weve seen it six straight going into a seventh week of gains both wti and brent are 2 away from the years highs i should say. There is more upside risk. It does that complicate both inflationary picture but also potentially the losers in asia terms of who benefits from ohio Higher Oil Prices and those who suffer . Higher Commodity Prices and oil prices are something that the market is not discussing enough in my opinion and we are going to start to see it translate into an impact on the data probably this week. With china, in the case of china, its beneficial. There is correlation between Producer Prices and economies so maybe it will alleviate deflationary this month. Pressures in the country. Throughout asia we are going to see some pressure building for net Energy Importers. India is a great example with the combination of adverse weather and Higher Energy prices could potentially trigger the rpi to hike later in the year. And on the other end of the spectrum, youre going to cnet energy exporters like indonesia that will benefit from higher Commodity Prices. And arguably have already started to benefit in the Second Quarter. We might likely see that again this week as well. Haidi the picture for china appears quite weak. And you are not alone in digging pboc could relate to another rrr cut this month. Does that help . Weve seen it so much weakness on the confidence side, corporate, demand for extra credit is not really there. So does making more liquidity available help . Thats a good point. They need all hands on deck and we also think the reaction function of the pboc might the lower lower than the market is open for because of recent changes. You are right, we are seeing more of a confidence crisis were households having negative expectations about future Economic Outlook being the drag on consumption more than liquidity per se with interim rates heading lower. Ample indirect liquidity. This is a move to signal pboc is on it and combined with other policies, they are looking to stimulate Economic Activities in the second half. The impact is stronger through sentiment then through the actual liquidity channel. Kathleen so let me jump in on japan. Because we have had a couple of interesting stories about how japan in terms of Equity Investors kind of leaving china in the dust this year. Is this warranted . How are you viewing the japanese economy now and where it is heading in light of the big policy tweak we just saw from the governor. Well, japanese equity market has performed this year. We are cautious but of course cyclically speaking you have factors that have underpinned the equity performance including both a wide policy differential with the u. S. That is fueling depreciation and there is a negative correlation between the Exchange Rate in equities. When the yen is down, equities go up. At the beginning of the year the Tokyo Exchange forced companies that did not meet certain criteria to do buybacks and that is a oneoff factor that triggered upside in the japanese market. The last thing that supported Japanese Equities is the ai theme. Especially certain tech names. So we think that these trends will continue in the second half but they will weaken relative to first half. Decision by the governor last week to increase flexibility in the way that the bank of japan it conducts yield curve control is a sign that they are at least considering some policy tweaks before the end of the year. Formal policy tweaks by the end of the year. Given uncertainties regarding what intervention means, we saw them twice last week intervene but we do not know if they will intervene more regularly if pressure increases. I would say we are going to see the market guessing and we will see japanese 10 year yields moving toward the 0. 6 level in a more sustainable manner. Kathleen reserve bank of india, another big central bank expected to hold except for the expectation that may be in laois will swing up again and tempt them to do another rate hike. What do you see there . They are most likely going to hold this week. Preferred option is to not have to do additional Interest Rate hikes. Our b. I. Is mindful of inflation and there are two things that can drive inflation swings in india drastically. The first one of course is energy prices, because the country is one of the largest net Energy Importers in the world. The second important driver for india is the price of key perishables. It remains lower Income Countries so the price of foodways significantly on their cpi basket. Luckily although this is an el nino year, we are seeing favorable monsoon rains as a result of local weather patterns. Most analysts do not expect the pickup to be significant. In case we have a worsening of weather conditions and Higher Energy prices, we think that quarter three our bia is in the books. Haidi you mentioned india because the limit policy is one of the early policy victims if you will of el nino. Do you expect more volatility for asian economies depending on how bad the weather is. Rod air broader risk. Climate change is a risk, so its one thing we explore in a secular manner because we think the Energy Transition is going to continue to be important for the world and regions in years ahead. This year we are open to volatility and there are markets that are more exposed than others, so within emerging markets, the impact on india could be quite significant and if we see another bout of drought in australia, that could be quite bad for assets in that country as well. So we are keepi