Ed you are watching daybreak asia live from new york sydney and hong kong. Haidi counting down to asias major market opens. Paul u. S. Inflation signals complicate the fed outlook. Penciling in a first rate cut by mid 2024. Sx traders are back on the yen intervention watch. Country garden to suspend trading for monday in almost a dozen onshore bonds. Softbank reportedly in talks to buy the rest of chip designer arm from its own vision fund. Shery u. S. Futures early in the Asian Session seeing upside after the s p 500 struggled for direction in the friday session. It finished at a onemonth low. Really after fluctuations between gains and losses, big tech led the declines. We had the nasdaq 100 seeing the longest losing streak on a weekly basis this year. Big tech pressured the markets, not to mention investors were really trying to digest Inflation Numbers, whether it is Consumer Inflation Expectations unexpectedly falling. Producer prices surprising to the upside pressured the treasury space. The 10 year yield finishing around 415. We had a poorly received for 30 year bond auction. Oil prices at the moment under a little pressure in the asian section after we saw the wti seeing seven weeks of games, the longest winning streak this year already. We had the iea coming out saying demand in china looks robust. We are also seeing upside in oil prices overall. At the same time in the Asian Session, that is not really being sustained. Annabelle when you look at what will impact trading sentiment in asia today it is the focus primarily around what we see from chinas economy, chinas property sector the focus, very much still on chinas Country Garden, the Major Property developer under pressure. A lot of bonds suspended in the session today. The focus is on what beijing will be doing, whether we see more stimulus officials are so far quite reluctant to issue widescale stimulus giving the given the ongoing debt even though we saw some issuance for local governments in the friday session. Today most futures point to a weaker start, the aussie dollar fairly flat and the japanese yen very close to the 145 level we have not touched since the end of june. It is more an expression of the moves in treasury yields. It is also playing out now across the bonds space. The key we bonded, the tenured 10 year yield of the highest since 2011. We have an rbnz meeting going for a hold. Still the focus is on the fed. Shery especially with Inflation Numbers its tough for investors, economists, and policymakers. The top two u. S. Inflation metrics moving in opposite directions ahead of the next Federal Reserve meeting. Our Global Economics and policy editor Kathleen Hayes is here with the latest. Walk through the Inflation Numbers and what it means for the fed. Kathleen this was an unusual day for inflation. We have the cpi, Consumer Prices for july coming in lower than expected. Maybe everybody start saying the fed can pause in september. They hiked in july. Then on friday, Consumer Prices, an important number. They are wholesale prices, not the same picture, one step below retail prices, the broader view of inflation in the economy. Consumer prices, number one, came in up more than expected, 0. 8 yearoveryear. They were up 0. 2 percent in june. Some of the key numbers in the ppi, Producer Price index, carryover to the pce deflator, the feds main gauge we got later in the months to do with services prices, more technical factors, Health Insurance costs. Those tell you things are hotter than you expect. Then something that is important is at the university of Michigan ConsumerSentiment Survey including a closely watched measure of Inflation Expectations. They suddenly weekend. Gasoline prices were going up last month. About inflation . The year and number went down to 3. 3 from 3. 4 . A little weaker there, isnt it . The five10 year outlook went down to 2. 9 from 3. 1. There has just been a bit of a move, enough to make investors say that cpi looked weaker, but now Producer Prices are telling us one thing. Expectations, what is an investor to do . Thats why the data is interesting. It sets us up for the fed fomc minutes this week. Showing us how divided, how many people want to pause again, how many people were ready to hike. Furthermore, jackson hole, the symposium, the kansas city fed. That is a week from this friday. It is where jay powell that everybody will give a big speech. Everybody is waiting to see the direction he gives on these issues. Paul lets talk about china. Concerns are rising over deflation there. What is the government proposing there . Kathleen lending numbers. Lending is not just how much banks are willing to put out there, it is how much people and businesses want to borrow. When lending falls you think the recovery is not much recovery. We could be in need of more aggressive help then we have gotten so far. Overall, the loans came in about 346 million you want yuan in july and were expected at 780 billion. We see the new loan figure missed by more than 50 the expected figure. The total aggregate financial shrink is it reflecting a big ball of debt and interest to do that is not being refinanced. Thats another critical negative factor for the economy. Mortgage lending, given what has happened in the property sector, the governments less than aggressive steps to do something to shore up days. Thats another thing we are seeing there. Of course, yes, chinas government came out. Now, saying they want to attract more Foreign Investment. They are talking about changing taxation for Foreign Investors, focusing on key areas like, i believe, biotechnology and communications. This thing, of course, all of the standards they are suggesting so far are very targeted. It is not a big blast of government spending, a big last of Interest Rate from the pboc. Some might say it targeted and smart. Others might say it is too little too late. But, these and committed these measures seem kind of halfhearted. At any rate, thats the latest. The loans against the proposal, really standing in contrast to each other. Paul . Paul kathleen, does this point to further declines in chinas big Economic Activity reports we will get tomorrow . Kathleen it makes you wonder if they can do anything but look weaker. We talk about the Economic Data dump, three big reports and retail sales yearoveryear expected, at this hard to a little bit to Something Like 3. 8 from 3. 1 percent yearoveryear, or excuse me, year to date. No, yearoveryear. I have a bunch of numbers in front of me. It is the numbers from the year to date expected to slow from 8. 2 to 7. 6 in our survey. Industrial production is expected to decline a little bit. But, maybe, if you look at the year to date being not a big change, you get the investment figures that are expected to be negative for the second month in a row. Bottom line, paul, the people think of china is at the median lending rate and they are supposed to keep it at 2. 5 percent again. Bloomberg economic index expects them to save up a rate cut until next month. There is a lot of focus on these numbers especially after pretty bad lending figures. Paul Kathleen Hayes in new york there. Lets get a preview of the trading week ahead. Our chief rates correspondent for asia and live correspondent Garfield Reynolds is with us. Garfield, no action from the db is a on their one year rate. How long can they continue with these piecemeal measures to do something . Garfield as kathleen mentioned, the lending crashed out. So, i do not think that if they were to lower the mls from 2. 65 to 2. 3 or something, which would be outrageous, with that help . People are not interested in borrowing and banks are not interested in lending, partly because of the property sector. Partly because we have had this china going way back to the pandemic era expected to lead the world economically out of it because they had done such a good job with the exception of keeping death down, keeping control. That did not happen. Then they went to covid zero, that they decided was necessary for health reasons. But the economy took a hit and everybody was like, that is ok. They will end to covid zero and at some stage we will get a big bounce back the same as we have had everywhere else and that has not happened. So, peoples expectations about the chinese economy keep on being disappointed. The difficulty is, it is still probably in the back of everyones minds, after the Global Financial crisis china led the world out. Thats not happening now. There are a range of issues about that. To some extent, you know, the way that chinas authorities try and micromanage the economy back to health, that raises concerns, especially among investors that have been burned by the discouragement from things like education. But by the same token, there is an obvious easy fix. Where if they just slashed Interest Rates that would somehow bring the economy back around. That is why you now have chinese stocks 40 or so off 2020. The s p 500 is up about 20 , 30 , or something. Shery in the u. S. There seems to be more optimism about what the Federal Reserve will do. We could potentially see the end of tightening with Goldman Sachs been in a rate cut second order 2024. Quarter 2024. Does that mean we can expect more calm in the markets, particularly, the bond space . Garfield i am not sure but it would not surprise me is a year ago Goldman Sachs was forecasting a rate cut for Second Quarter 2023. Certainly the market was picking one that stage. If not Second Quarter 2023, second half was definitely the expectation. The story was for the bond market, not so much the equity market. It is doing very well this year. But the story of the bond market has been serial disappointment that the fed was expected to stop hiking and rapidly turn to cutting rates, that famous pivot that has just not happened. In fact, especially with Jerome Powell coming up at the end of the month with some of the very mixed data pictures we are getting not only from inflation figures themselves, but the jobs market, it is hard to see how the fed relaxes this hawkish posture. If it doesnt stop rate hikes, then, it will face this immediate battle. Then i think it will have to fight with the bond market to say, though, just because we have stopped does not mean we will turn around and cut rate in six months. We may have to say, i know that we have that is what we have done in previous instances, but in previous instances we did not have inflation that was this high and had been this high as of just last year outside of the early 1980s. And in that time is precisely why they are looking to fight the bond market because in that time period the perception was the fed cut rates too soon out of fear of inflation and revived inflation instead of taming it. They want to make sure that this time is much smoother that they hike, hike, hike, hold, hold, hold and only cut when they are sure they are absolutely needing to. Shery bloombergs chief rates correspondent for asia Garfield Reynolds with his take on what to expect this week and what is happening with the fed. Coming up, blackstone tells us why they are shifting back to buying mode for japanese real estate. Our exclusive interview with their japan real estate head later in the hour. And, why Oxford Economics is not expecting any fireworks from chinas upcoming activity data. More on their insights on the broader asian economy next. This is bloomberg. Paul a look at the week ahead. Chinas sliding into deflation. Another look at the state of its economy with a day lose of data, july industrial production, retail sales, fixed Asset Investment and jobless rates do tuesday. The pboc said its benchmark oneyear lending rate and most economists expect no change. On inflation, watching cpi numbers from india expected to show a sustained increase in food inflation. From the u. K. , price pressures as well. And we get inflation data from japan friday. Wednesday the fed minutes will give us more insight into the Central Banks recent rate hike decision. And, shed light on its datadependent future rate strategy. At the rbnz and philippine central bank, they are expected to keep rates on hold this week. We will get japans preliminary Second Quarter gdp numbers, a big week for data sharing. Shery lets start with where china is headed. Their banks extended the smallest amount of monthly loans since 2009 in the months of july. Our next guest says this year is proving to be a tenuous policy test for china. Luis lou is at Oxford Economics and joins us from singapore. This chart on bloomberg shows how loans and aggregate financing missed expectations. It seems that demand is weak despite targeted measures from policymakers that have been brought into. What are you expecting in terms of the demand picture in the country . Louise it is great to be on. The problem with china, really, is it is pretty much a demand side story. The recent policies we have seen from the government, a lot of analysts talk about how there is not enough detail in them to mentation. Really, i think a lot of them i think a lot of the problem is these problems are on the demand side. We have seen this in the credit space. We will not see very much meaningfully Going Forward. The credit data was disappointing. Look at the household loan stated. It is a good measure of the kind of consumption. The demand of the economy. It has been quite low. Part of that represents the fact that in july, part of that is that the property sector is very much in correction. It means the risk aversion is high. Shery we have the pboc setting the one year rate today, not expected to do much besides keep it steady. What can i do with Monetary Policy when demand is that week weston mark louise when demand is that week . Louise even if you increase credit supply, if there is no demand to meet that, its somewhat muted. I think that at the pboc now the goal is to ensure that liquidity conditions remain to facilitate fiscal measures that perhaps the government is looking to put in place. I do not necessarily think there is much of an impact in the mlf. And that is why much of the street this week is not expecting a drop in the mlf or benchmark rate this month. I think it does signal a very strong easing policy for the pboc. That is why we do expect there will be some kind of decrease in the mlf perhaps next month or next quarter. Paul you mentioned the lack of demand for lending in china. Theres not a huge amount of demand coming from offshore either. Foreign direct investment is declining. How long do you see that trend enduring for . Can Foreign Investors continue to ignore a market of chinas size for too long . Louise i would not say aversion, but much of the slowdown we have seen investors going into china comes to two things. One, the Regulatory Environment on shore. Even though authority has been focused on attracting investment it has not worked. There is a u. S. New outbound investment. These factors, i do not think this is a temporary phenomenon. I think this could happen a while. That is why i think over time you would see chinas balance of payments get smaller overtime. I think that it does not necessarily mean there is nothing the government can do. I think that they continued push for investors coming into china, especially, when using about the new Technology Sectors, the manufacturing, you have sectors china does have a very strong presence in, then i think that these other sectors, that authorities should turn their focus to attracting that. Paul i want to talk about japan. There is a lot of data coming out of that country this week including towards the end of the week. Cpi numbers have been outside, above the target range for Something Like 14 months now. Do you think the doj has it right when they talk about bojs right when they talk about inflation in japan not injuring . Because we have been burned by the word transitory before. Louise exactly. I think in the case of japan you are right. We have seen pretty animated inflation by japanese spenders for a while. We see it as sectors that drive more of the upside to inflation and it really is transitory. Think about what is driving even though recent trends. Higherthanexpected core cost cpi, reaching an absolute threshold of energy in japan. This reflects the fact that some travel subsidy programs put in place during covid have started to fall away. So you are really transitory. I think that would fold down inflation Going Forward. To the extent that we believe this will create a meaningful drag on inflation for a sustainable time, i think that is still a huge uncertainty. Thats why is think the b will continue to be quite patientoj in assessing whether it needs to move in a monetary sense to combat this inflation. Paul louise, we have to leave it there. Thank you for joining us, louise loo, lead economist at Oxford Economics. We have much more to come on daybreak asia. This is bloomberg. The first time you connected your godaddy we