This is bloomberg daybreak europe. I am lizzy burden in london. Wrestling bears, china delivers its strongest ever push back against a weaker currency, seeking to repair confidence as Developers Warn of mounting losses. Bank of america says investors should strap in the return of the 5 world as bond yields surge on bets at rates will stay higher. Plus, shot in the arm. Things get a boost as no fewer than 28 of them have said to be lined up for the arm ipo likely to be this years biggest. The morning. Happy friday. You have made its. What a week it has been for august. We have treasury yields broadly study but the 10 year was near the highest since 2007. The 10 year touching the highest 2011 and tech stocks especially feeling the weight of rising real yield. U. S. Futures flat after the close that stocks are headed for the worst read a streak since march just as yields ease off the highs. In beijing shares heading for a six daily decline. Bear fatigue setting in on the china story now. The pboc defending the yuan with the strongest ever push back which is something of a head scratcher. Given that it just cut policy rates but as a mark of just what an unusual august has been, no longer are using the usual relationship where the chinese currency weakens and there is a bid for treasuries. In fact, they have been weakening together. Markets are asking themselves is it the time to stop talking about the chinese recovery and Start Talking about china maybe even entering a recession . Lets get a broader look at what is happening in asian markets. Bloombergs Charlotte Yang joins us this morning. What is happening where you are . Charlotte the session here at this morning is as gloomy as hong kongs weather. We are looking at equities falling across the key markets. With china, korea, japan also, the main concerns on investors minds are worries about china as well as concerns about high global interest rates. We are looking at msci asia index heading for its worst week since mid june. Those concerns wont fade away soon. The onshore markets in china open higher today after authorities vowed support for the currency but that is not able to stay. That faded in the later hours and now we are seeing stocks on shore and in hong kong in the red. Australia seems to be the bright spot today. Earlier it was in the negative territory but we had to support from the local real estate as well as utilities stocks that gave support. Some other data that you should state pay special attention to is inflation japan which we are seeing the core inflation for the country actually slowed in july. We are looking at Consumer Prices including fresh food which rose. 1 from a year 3. 1 from a year ago. This could taper market speculation that the boj may shift from its ultra easing monetary stance towards later this year. There are nuances should Pay Attention to. We are still seeing some sticky pockets of price growth which we are looking at prices excluding energy and food accelerating from june. It shows the monetary authorities are likely to be on high alert for any upside pressures. Lizzy thanks to bloombergs Charlotte Yang for that update on asian markets. Time now for our morning roundtable. With us is Valerie Tytel and we have David Finnerty and singapore and jill disis in hong kong. I went to get more into the china story because china has delivered the strongest ever push back against weaker yuan as it tries to repair confidence that was broken by disappointing data and heightened credit risks. At the same time stay owned Property Developers are warning that widespread losses are feeling concerns about deepening housing crisis. David, lets start with you. Do you think thats a line has been drawn in the sand as regards this yuan fixing level . David there certainly seems to be potential that it is. If you look at the yuan fix has been weakening for five days and turnaround today but the pboc said it basically yesterday they will guide guard against excessive moves in the currency markets. That is changing the rhetoric and indicates may be 7. 21. The fixture was 7. 26. The fed the pboc story sorry to say that 7. 21 would allow them to trade to percent side of that. You want to go to 7. 35 and change. They are saying that is enough as far as they were concerned. In the near term i will be looking to see if they keep the fix in a 7. 20 handle or Even Stronger at the 7. 19. 7. 21 is a bit too much at the moment. Lizzy it is hard to believe we are only halfway through august. What other events should investors be watching that could have a big impact on the dollar yuan this month . David there are a couple. Next week, fed chair Jerome Powell will speak at jackson hole and everyone we look at that to see how hawkish he sounds. Obviously, if he does stay hawkish and says rates have to go higher for longer that will put pressure on yields which will take the dollar yuan higher. The other thing is at the end of the month you have the china pmi data and it turns the attention back on the health of the china economy. If it remains week and it will add to risk off sentiment particularly if u. S. Yields are higher. That will be another negative for the yuan and keeping pressure on it we can further. Two we can further. Lizzy thank you to David Finnerty there. Jill, let me bring you and. How significant is it that this property crisis in china seems to be spreading from the private sector to the Public Sector . Jill the important thing to keep in mind here as we are reviewing corporate filings for 18 of 38 stateowned builders were reporting preliminary losses through the First Six Months of 2023, up from 11 of these Companies Listed in hong kong and mainland that were reporting full year losses at the end of 2022. This is telling us that the state builders are not immune from the ongoing property crisis that is coming at the same time we are on default watch for country garden, one of the nations largest Property Developers. Evergrande defaulted a couple of years ago and it is also declaring chapter 15 bankruptcy in new york trying to protect itself from creditors as it is trying to work through potential restructuring plans. All of this comes together to show you that a property crisis that not only has been going on for the past couple of years but also is not showing an signs of going away. We await support measures that the government has rolled out in the into potential further support measures that they could roll out to protect the property sector. It shows the widespread Collateral Damage from this ongoing crisis that is happening. Lizzy getting back to the treasurys picture, it is the third day of the global bond market selloff. U. S. Stocks fell for a third day yesterday as the 10 year yield rose towards the highest 2007. Valerie, traders are asking themselves what normal looks like for the treasury market now and interesting in your notes yesterday, you say that it is actually more about supply and demand dynamics in the markets, more actually about the china and japan story. Valerie thats right. A lot of questions raised on why we are seeing this steepening now and the main narrative behind that is the supply and demand dynamic. We have seen intervention on cmi see ny in china and we are speculating about intervention on the yen and japan. Both of those countries would sell treasuries when they come to intervene to strengthen their currency. At a more supply of treasuries to the market when they do so. Yesterday was an interesting session with a 10 year and 30 year yields reaching a cycle hike and now we have the likes of bank of america saying that 5 could be the new normal when it comes to longterm interest rates. We heard from blackrock saying that they are seeing a remarkable repricing and longterm yields to come, but this week is all that about the yields rising and equity markets falling following along beside them. We have had biggest threeday retracement and s p since march, since a banking crisis and march. We have now retraced over 5 since those high in july when it comes to the s p 500. If we look at what happened yesterday, the put option volume the total u. S. Exchange reached levels not seen since march. There is a bearish tilt out there into the markets, those clamoring for some put hedges to protect them from further Downside Risk is something to note. Lizzy we have the latest jobless claims data for the week more signs of resilience there. Jill exactly. Hes on appointment applications fell by the most in five weeks. We are seeing the labor market continues to hold up. It seems that employers are reluctant maybe starting to scale back hiring but they are ultimately reluctant to let go of a lot of workers. A lot of companies are still wary given how difficult it was to attract and retain talent during the pandemic. This spells what we have been seeing in these data points over the last several weeks of the labor market continues to be pretty strong. I think we have an upcoming Bloomberg Survey of u. S. Economists that is due out in a few hours that may show us some dated forecasts for what recession looks like. This adds to that idea that we are pushing back the possibility of a recession into some time of 2024 and it adds to questions about whether the fed is going to have to keep rates higher for longer periods of time as we continue to see resilience in the labor markets. Lizzy thanks to bloombergs jill disis, and valerie will stay with me. I want to take a look at a bloomberg scoop. Bloomberg has learned that british chip giant arm has lined up 28 banks to handle its ipo. Sources say the transaction is going to be led by barclays, Goldman Sachs, j. P. Morgan, and mizuho. Bank of america and Deutsche Bank will be among a second tier of 10 institutions. The third tier includes hsbc and socgen looking to raise up to 10 million for its listing next month aiming for a valuation of 6070,000,000,000 dollars. Lets have a look at what else we are looking at today. At 7 00 a. M. London time we have the latest you kate retail sales data which is expected to drop from 0. 7 growth in june 2 0. 6 contraction in july thanks to the unseasonably typically british weather. Rate hikes weighing on the economy. At 10 00 a. M. We get the final euro area cpi data reading for july, expected to fall from 11. 3 to 10. 2 year on year. Before the bell in the u. S. , we get Estee Lauders secondquarter results revenue forecast which has fallen to percent in the quarter, not great but not as bad as doubledigit declines we have seen previously. Valerie, let me ask about the u. K. Data. When traders are pricing in peak rate 6 for the bank of england, how do you think that hot retail sales do you think hot retail sales can push it further . Valerie the u. K. Is a Service Economy so retail sales figures matter a bit gdp. It goes without saying that hot gdp we got last friday was driven by consumption. Lets see if that is confirmed with the Monthly Retail sales print today. Upside risk to the consumer staying stronger for longer will add upside risk to gdp and couple kate the bank of england and complicate the bank of england inflation fights. Lizzy you can find those stories and more on the daybreak newsletter. Terminal subscribers can find it by going to dayb. They china targeting bears with forceful fixing and more on Chinese Developers flagging losses and bank of america warning of the 5 world as bond yields surge. Coming up, damage control. China is stepping in with a range of measures as it tries to repair confidence in a market hit by disappointing data and heightened credit risks. We get insight are markets live team next. This is bloomberg. Lizzy welcome back to bloomberg daybreak europe. Shares in asia are lower for a sixday as worries about the chinese economy continue. Beijing is targeting the yuan bears is most forceful fixing ever as authorities tried to repair broken confidence in a market spooked by disappointing data and heightened credit risks. I am joined by paul dobson, bloombergs executive editor for asian markets. Good morning. Do you get the sense that chinese authorities are starting to get to grips with the situation . Paul good morning. While we are picking up some more encouraging signs that there is an invisible hand of the state playing a more active role or paying attention to what is going on in the financial markets. This week, we have been reporting on some guidance that was provided to mutual funds to avoid sales of shares on a net basis. We also saw this very strong pushback in the fixing to sort of stem the losses in the currency. In addition to that, we are reporting that yesterday the authorities had also instructed state banks to step up their purchases of the yuan against the dollar. All the little bits and bobs going on behind the scenes to try to prop up the currency and try to help assuage the losses in the stock market as well. I think the bad news for the state is while the bad news is this keeps on coming in. Look at the top of our website and we got shadow banking crisis, state Developers Morning of losses in the property market, evergrande filing for bankruptcy. It is a relentless bad news they are battling against. We are starting to see proactive measures and hear about future moves that they might take as well that would give the market confidence. It is going to take time for all that feedthrough and the bad news to be brought under control. Lizzy lets say the bad news keeps coming. What else could they do to arrest the market declines . Paul i think the currency, in particular, theres a number of levers they could still pull. They could make it more expensive for people to borrow in the shortterm market to short the yuan. That is one way of squeezing them. They could make it less appealing for people to hold money on deposit in u. S. Dollars which again would increase the relative appeal of the yuan. They could go harder or more direct with other intervention measures there. We could get a pronouncement, Something Like a Silver Bullet that would really give people more faith and confidence as well. That does not seem to be what we are getting right now and hence, the market is believing that we are going to see a steady drip lower than the currency and maybe also in equities markets until we find some sort of resting points. Lizzy valerie was talking to me about how the moves treasuries may actually be less to do with the fed minutes and more actually about supply and demand dynamics going on with china and japan. Could you see china selling u. S. Treasuries to prop up the yuan . Paul it is an interesting theory. I think citigroup was talking about it overnight as well. China has huge holdings of u. S. Treasuries and if it wants to weaken the dollar relatively to the yuan it could offload some of those and use it to support the currency. There has been sort of this conversation about has china already been easing back on its holding of u. S. Treasuries . It is true but not to bring money home but more to keep it in agencies or other parts of the u. S. Fixed income market that has a higher yield better return. I think the idea that we would see anything pronounced would have to be visible in the market and that is still pretty unlikely at this point. The other thing to bear in mind is china is sitting on probably some paper losses that would be extreme just as everybody elses and the treasuries market because of the selloff in the last two years. And this month as well. Lizzy thanks to paul dobson, bloombergs executive editor for asian markets. Coming up, walmart raised its outlook again but strikes a cautious tone on American Consumers and the economy. We had a wrap up of this weeks u. S. Retail earnings next. This is bloomberg. Another Strong Quarter for Walmart Raising the outlook for the fiscal year for the second time in a row, seeing Comparable Store sales up 6. 3 versus the 4 the analysts were anticipating. It is feeding on the bottom line in the top line. Interesting here continued strength in grocery but especially strong in ecommerce were ecommerce sales rising 24 in the quarter. Weekly traffic up also suggesting investments that walmart has made in its online services, delivery, omnichannel where you buy online pickup and store, all of these things bearing fruit. Another thing that is interesting to me from the Earnings Call were comments by cfo John David Rainey about private label. He said it is increasingly see consumers move to private label products of which walmart has a particularly large stable compared to other retailers. He also sees them buying more hand blenders, standing mixers, things you need in order to cook at home. The question for the rest of the retail slate is is walmarts success, can they replicate it . Walmart has been dragging business away from Grocery Stores and others. We will see over the coming days and weeks as the remainder of those results for the quarter role in. In you are, im simone foxman, bloomberg news. Lizzy sticking with the retail theme at the top of the hour, we will get the latest u. K. Retail sales data. More interesting than usual perhaps given the mixed ecodate that we have already had this week. On the one hand, you have wage growth finally outstripping inflation, the rising on appointment suggesting the labor market is loosening and inflation falling though not by as much as economists expected. The bad news is more wage growth likely means more inflation, core inflation stay the same and Services Inflation rose. That suggests domestically generated inflation may remain an issue which is what the bank of england is worried about. Therefore, traders expect the bank of england to keep hiking. They are pricing a one in four chance of a half point hike in september and had al