Good morning and welcome to daybreak australia. We counting down to asias major market opens. David im david in hong kong. Stoxx are set to face headwinds, futures are pointing lower amid the u. S. Holiday. Rba decision today, the bank is expecting to hold its key rate. Its governor phil lowes final meeting. On the housing crisis threatening to engulf surviving developers with about two thirds of the 15 major private builders in default. Breaking, alan joyces is stepping down early as qantas ceo after a bad few weeks for the company. Public anger over a series of scandals. We will get to that story later in the show. In the meantime, breaking news out of south korea, all start with gdp numbers, its not important. Whats inflation are the whats important on the Inflation Numbers. Gdp,. 9 . Just this than it takes you to. 6 . That is the gdp story in line with estimates. What is coming in hot right now is the inflation print which looks absolutely nasty on face value. Up 1 on month on month. Headline cpi, year on year beating estimates. Excluding food and energy, strip those out any get to the core. 3. 3 . Im checking my bloomberg. I will correct myself im wrong but it seems that there is a 1 print on cpi that is actually is that a correct number . Anyway, at 1 that is the hottest inflation print going back not dosed a few years, all the way back to 2016 to get a 1 month on month increase. There you go, thats nasty. Lets see what Market Reaction is like. Im guessing the market will not like that. Haidi really outstripping forecast. Weve seen Higher Energy costs, but food for thought when it comes to the bok. Weve got data out of australia. Pmi numbers, the composite number, the final reading for august. In contraction territory. Better than the previous reading. Marginal improvement. The final reading for august, 47. 8, better than previously but firmly was in contraction territory. This goes into rba decision day. All but one economist weve spoken to expect no major surprises for the last meeting. Thats right and it points to the issue facing the rba because youve seen weakness coming through in the pmi numbers. Households are pessimistic even though you see strength coming through in the labor market, the expectation is we will stay on hold for a Third Straight meeting, the key rate at 4. 1 , near an 11 year high for borrowing costs in the country but the question when he got a hold is what sort of messaging will come through . Td securities has been mapping out different scenarios and saying there is a 60 chance that it comes in neutral but the remaining 40 is split between two different scenarios so we could see a hawkish bias and then we would see a firmer dollar coming through. Bond yields inching higher and then a dovish messaging, dollar retreating, yields going lower. One of the risks is chinas economy and the malaise we are monitoring. When you look at Market Sentiment equity futures looking mixed. Certainly keeping our eyes on chinas property sector because Country Garden is facing a key debt test. More than 22 Million Dollars in Interest Payments are due by wednesday at the latest. David, with u. S. Markets and futures online, that is where investors are concentrating attention today in asia. David its the first indication because of the long holiday. We started out soft and it looks to be momentum coming through was positive. Nine out of the last 10 days, we should be going for day 10 of gains. We are seeing something coming through, early goings s p futures. Bond futures are indicating we might get yields pushing higher at the japan open. What you want to watch, new york crewed is at 86. Closing at 90 at brent but that goes into the nasty inflation out of south korea where you have food in transport costs leading those gains there. Let me look at my screens, 3 in food and almost 4 on transportation month on month, that will be painful. We will see what the market reacts like we were thinking skinny jeans would go away. It was not inflation that did it, skinny jeans stay unfortunately. Inflation remains a problem suffice to say. Whats uglier on the margins . Lets get more reaction from our next guest who was saying markets have been too pessimistic. Lets see what he makes of this, shane oliver joins us, head of Investment Strategy at amp. Great to chat with the when you look at this shocking read on inflation from south korea is a reminder that there is upside risk when it comes to Central Bank Policy . It is not wrong. The figures were august. Weve seen a rebound in oil prices, gas prices we know of some food prices. That may have been effective. The estimate was for a higher number,. 6. It came in worse at 1 as weve heard. Its a reminder that inflation is a threat. By the same token, the broader picture is global slowing or cooling, labor market pressures starting to ease. We saw that on friday with the payroll numbers, u. S. Job openings. And of course in australia there is a risk here that the reserve bank has gone too far we have a high risk of recession. If the Economic Conditions remain one of slowdown, potential recessions, that will take pressure off inflation even though it is not going to go as high. Haidi i felt more calm reading your note saying there is cause to be optimistic or if you are going to be pessimistic you will get it wrong when it comes to timing low points into the market. Tell us about your strategy. I guess what im talking about in terms of optimism, the history of the market, ive got a book in my bookshelves on the history of share markets. They trend up over time, trying to get the timing right is difficult. In terms of the timing, bringing it back to the shortterm, were going through the august, september october. Slight negative, not as bad as it mightve been. Seasonal weakness is still with us. Theres a whole budget factors which could cause volatility with strong gains that we saw in the u. S. Going into july. Right now im feeling cautious as we know inflation risks are still there. Central banks have eased tightening but they still have a tightening bias. I dont think theyre going to raise rates in september. But they have a tightening bias. Recession risks are there and we got Government Shutdown risks for the u. S. Later this month. Going into october. I suspect volatility will remain high but i would see that is a buying opportunity because inflationary pressures are easing and that will take pressure off Central Banks. David im looking at that book, 100 one years of global investment, the triumph of the optimists. If inflation does it has returned, if it remains elevated what does that mean for returns in the next 24 months in the equity market, what is your view . If it remains elevated around these levels above target that is a constraint for equity markets. Youve got to face the fact that weve gone through many decades until the pandemic where inflation and bond yields traded down in that supportive equity markets. Inflation does not come back down again as markets are pricing in, that would be a negative surprise for investor markets. That is a risk, certainly a risk. David how are you viewing china . Well, not as negatively as everyone else. Cautious. David thats not hard to do. Scenario one is a lot of commentary worried about that. The other scenario is where they are more restrained, like japan through the 90s and 2000s. I would be more concerned about that one. I cannot see chinese authorities sitting by and letting their markets implode. Thats not the way china does things. It does not want to go back to the bubble economy just like japan in the 1990s. That says that they are on the side of not dashing enough. David mm. Yeah, yeah, i think we just lost the audio there. Haidi head of Investment Strategy at amp. Hoping we can get shane back because ive a feeling he was going to Say Something when it comes to china. We could use all the insight we can get at this point. You know, it really does feel like that the options for chinese leadership when it comes to what they can do to boost the economy, to fix the property sector are looking limited but lets bring shane back read we sort of lost her audio in the middle of telling us about china and i suppose my next question is the implication for australia, how do you invest around that rba decision day, but these economies that have big exposure to china. Are you feeling constructive . Unfortunately my sound device went off. Im feeling constructive. In china there are concerns. Longer term slowing down, cooling population, slowing productivity growth. I dont see them allowing things to collapse and we will see more stimulus. If we get more stimulus, that is resources stocks and positive for the australian dollar. Its not going to be a big scenario like 2008. The year 2008. By the same token i think it will be a positive scenario for Australian Resources stocks. David thank you as always in on that positive note, we will leave it there. We will see whether you are here to correct. At of Investment Strategy at amp. Just ahead, we ask why these new investments in largescale solar and wind projects are falling and we look at moves which could help turn the tide. Plenty more ahead, this is bloomberg. Reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh i was told my Small Business wouldnt qualify for an erc tax refund. You should get a Second Opinion from Innovation Refunds at no upfront cost. Sometimes you need a Second Opinion. [coughs] good to go. Yeah, i think ill get a Second Opinion. All these walls gotta go ah ah ah id love a Second Opinion. No. Im going to get a Second Opinion. With Innovation Refunds, theres no upfront cost to find out. So why not check like i did for my Small Business . Take the first step to see if your Small Business qualifies for the erc. David the clock is ticking for Country Garden to avoid what would be its first default. The builder has until wednesday to make Interest Payments on the dollar know weve been talking about for weeks since we are counting down to the end of the socalled 30 days. There is confusion whether it is today or tomorrow but the window is closing quickly. Charlie is with us, our bureau chief in shanghai, to get us up to speed. Is there indication they will make the payment . Charlie good question. The clock is ticking, the company has 22 million worth of coupon due today and tomorrow. If the Company Defaults, it will be the worst than the one by evergrande in 2021 given Country Garden has four times more projects then evergrande. Will the Company Defaults . We do not know, but what we know is the company has tried very hard to avert a public default. Two days ago the company extended the payment of 3. 9 billion local currency note. Yesterday they wired denominated bond coupon. The company is trying to avoid such an event, but bear in mind the company is one of the worlds most indebted. The company has a total of 187 billion totals liability including a couple billion dollar notes maturing this year. A couple of days ago the Company Released its interim report and posted 7 billion loss for the first half of this year. In the Earnings Statement the company warned that if financial performances continuing to deteriorate, it may not be able to meet financial obligations. The company is facing severe uncertainties that may make it, you know, hard to become an ongoing concern. That is exactly what he said. The dollar bond market and the securities traded at the stress levels despite a sharp rally in the shares thanks to good news about mortgage easing over the weekend. The Company Shares are trading below the peak and bonds are trading at . 10 on the dollar. Haidi that was bloombergs charlie with the latest on Country Garden. We are watching that but also checking corporate stories. Bloomberg learned while way and chinas top chipmaker have built an advanced seven nanometer processor to power their latest smartphone according to a tear down of the handset conducted by tech insights. Its the first to utilize the most advanced nanometers technology. Much remains unknown including whether it can be made in volume were a reasonable cost. Alibabas Cloud Division is weighing a profit round to chinese head of its ipo. Theyre working on a cloud Intelligence Unit fundraising that could raise 2. 8 billion dollars. Investors include telecommunication companies. You can get a roundup of the stories you need to know in todays edition of daybreak. Terminal subscribers can find that dayb or on the bloomberg anywhere app. Customize your settings so you get the news on industries that you care about. This is bloomberg. How can you sleep on such a firm setting . Gab, mine is almost the same as yours. Almost is just another word for not as good as mine. Save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. Fabulous surroundings. But everyones looking at their phones for Financial Insights from merrill. Is he hailing a ride to the concert hall . No. Hes making sure his portfolio and retirement plans work in harmony. They want to adopt a child and build a new home. So theyre talking numbers with their merrill adviser. Shes not researching her next role. Shes learning how to handle market ups and downs without the drama. Personalized advice so impressive your money never stops working for you with merrill. A bank of america company. Haidi qantas Ceo Alan Joyce is bringing forward his retirement with vanessa set to take over from wednesday. Lets get more from karen in sydney. A lot has been happening. Karen this is been a sudden morning. People were not expecting this for months. He stepped down early but the months this has come after has been tumultuous for joyce and qantas. He has had to defend qantas in front of a senate hearing, to defend his pay which it millions of dollars as australians are struggling. Qantas was sued by the consumer watchdog here which accused qantas of selling tickets on flights that had been canceled without consumers knowing about it. This comes in the context of a costofliving crisis that has seen record inflation, people struggling and people are upset that the brand they have been able to count on has been gouging them on prices. David so suffice to say these challenges do not go away just because alan joyce steps down early. What is next . What are the shortterm hurdles they need to get through to fix the optics . Karen the big thing is restoring customer confidence, wanting people to fly qantas, wanting people to trust in the brandt and all eyes from investors to consumers are going to be on Vanessa Hudson, cfo taking over from joyce. The pressure will be on and when joyce made a statement announcing his early departure he did say he was doing it so that qantas could focus on renewal. That is going to be a big watchword Going Forward. David thank you so much, karen lee, Global Business editor. One of stocks to watch will be the airline in over 30 minutes. Apart from that a brief look across markets. Its quiet coming off a long weekend. Lets get to your top stories. Starting with byd, dominating the ev market on the chinese mainland and european managing director told bloomberg they are planning to announce a factory location in the region by the end of the year. They also presented the first prototype of the future lineup at the munich motor show. Weve got good performance in china. Europe is our strategic market and we want to try, we want to connected with the customers here. Its a great opportunity. And then to have this conversation, we love to be here. And hope every customer in europe can meet us in munich. David renaults will resume talks with investors for the listing of its ev unit here. The ceo told bloomberg they have received positive feedback during some 35 meetings before the summer. He adds a separate listing will allow them to reduce costs as much as 40 in its next generation of ev. Right, just a look at markets as promised, lets start things off with what is not happening across currency markets as we point out, or coming up on a long week, thin trade, exacerbated moves. Rba decision coming out. We talked a lot about data coming through emis out of europe. Services print out of china in just over two hours from now, the private survey for the month of august right now. In terms of the yen a couple of things, 10 year bond option today will get the results, what demand looks like. In give or take four hours from now around 11 30 right after the markets come back online for the afternoon session. That is a look at the macro moves. Equity markets, the story Tuesday Morning is nine days of gains in the last 10 days, looks like thats it. Weakness in the market, more than 1 to the downside. Futures were flat. We will see what happens, volumes have been