News of another recall, 2. 7 million airbags. Jamie dimon has a warning for investors and all amazing policymakers. Rishaad china may offer new implications. Are on the cusp of the u. S. Earnings the season. Having a look at one thing. Taking a look at perhaps could be happening here. 2459, this chart is looking at corporate profits, suggesting we could see a slowdown down worldwide in the second half of the year. All of this according to j. P. Morgan chase, going on to say that the global Producer Price index has a correlation to delivery. Asts what we have coming up the earnings season beckons on the heels of recent market turbulence. That turned him coming to the Producer Price index globally speaking, so heading into earnings season to see if that analysis in any way shape or form is correct. We are watching earnings. We are back to watching the fed, centralbank all, and where they go from here. Janet yellen preparing for her testimony to congress, plenty of clinical distractions to be had from capitol hill, all of this over Donald Trumps meetings with the russian lawyer. We are 30 minutes away from the open in hong kong and china, a meandering session so far. Its get it over to sophie. Edgee fed watchers are on as we await Janet Yellens testimony to congress. That brief jolt was not enough to dent the s p 500, but equities in asia under pressure, the asx 200 and nikkei 225 leading letter laggards today. Its unclear what kind of pressure this will have. Dovishainard ahead of commentary which did send treasuries higher, the dollar falling for a third day, so asian bonds and currencies catching a bit. In the commodities space, base , copper over 1 , steel rowling 2 this morning, and 1219also trading at announced. Oil continuing the days momentum, new york crude up 1. 5 from back above 45 a barrel. The socalled russia gate pushing the yen higher, the topix pulling back. Thanks and autos weighing the most on this index. Afterors will be going individual stocks with Solid Earnings potential, so pulling up the board, will show you some of those stocks it could move given the results. S p operator jumping the most after its profit increased and share buyback, but falling mart aftermily income below estimates. And mazda falling after bank of america downgraded the carmakers to outperform. They say the market is likely to price and lower earnings from here on. I want to in on takata, shares climbing, rising 40 this morning, i had scratcher given the company is set to recall another 2. 7 million airbags in the u. S. Earlier this week, honda confirmed a defect linked to a car in the u. S. , so takata maintaining the momentum over the past few days, but again, not clear as to why the shares are on the up so far. Rishaad it is politics front and center in the u. S. , and we are looking at emails. Lets get the first word News Headlines with paul allen. Paul those emails released by president trumps eldest son so he was told about potentially damaging material on Hillary Clinton before he met the russian lawyer last year. Told trump publicist junior that the information came from the russian government. He never toldays his father, saying it was a waste of 20 minutes and there was nothing to tell. China said to be considering handing the pboc a key role in coordinating financial oversight to focus efforts on bringing in risks. Sources are telling as the idea will be debated as part of the fifth National Financial work Conference Due to start on friday. It would create for a new office for aligning chinas three main regulatory bodies at the bank. Two secret accords have helped do in the impasse between qatar and his neighbors three years ago are fueling the latest dispute. The documents are marked highly confidential. They agreed not to interfere in other countries and not to host socalled hostile media. One of the current demands given to qatar is that it shuts down the al jazeera news network. Himi arabia sent to have more than 10 Million Barrels of oil a day in june, exceeding its production limits for the First Time Since brokering the deal to curb global supplies. The kingdom usually raises production. The demand was hard this year because of ramadan. Crude entered a bear market last month after declining 17 this year. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thanks for that. Janet yellen preparing for two days of testimony to congress as inflation remains a concern. She wonterged that be offered a second term. Lets get over to Kathleen Hays watching this from new york. Have pretty fastmoving and garyordinary report that cohn is the next pick for fed chairman. I would be surprised if someone did not ask the fed chair what she thinks of gary cohn as the replacement for her when her term ins in february 2018. We shall see. She has set in the past she is doing her job and will fulfill her term. Even donald trump said he likes janet yellen, but its not surprising and new president once a new person at the fed filling out his vision of what the Federal Reserve should look and how it should be run. Gary cohn was Goldman Sachs president and ceo, now director of the National Economic council. He is not an economist. He has been an investment banker and successful manager. When janet yellen testifies starting at 10 00 am wednesday, despite anything she may be asked about gary cohn, i think the markets have three Big Questions. Is it time for the fed to sit back and let the job market run hot . Should she be emphasizing that could lead to higher inflation and more aggressive Interest Rates for the economy . Will it shrink the Balance Sheet . The fed has made that clear, but when . What about the role of financial conditions. The fed has been raising rates, but the financial conditions have gotten easier. Where she say about that . One analyst says he think she was stick to her guns. Offhe is determined to hand to the next fed chairman a federal funds rate that is essentially even with inflation, which means one more increased this year, possibly two, but more likely one, and at least getting a start on reducing the Balance Sheet. Told me that when it comes to managerial skills, its clear he has plenty of those and skills they could translate to the Federal Reserve. Again, we shall see. It is several months off, but catching a lot of attention. From fedwe also heard governor Lyle Brainard. She is willing to reduce the Balance Sheet, but not necessary ready to move when it comes to Interest Rates. How do those two square together . That is not too surprising since inflation has been slowing and Lael Brainard was expressing caution and that it might mean she has to change her assessment of the Interest Rate outlook. She was a big dove in 2016. Gotten on board withrd rate hikes, but heres what she had to say as inflation falls short. I will want to monitor inflation developments carefully after increases in the federal funds rate to help guide inflation back up around target. The fed has a big conundrum. Btv 77. s take a look at it says it all. Defense key gauge, that is the white line. Even the turquoise line which touched above 2 as well below. That is why she is saying she wants to think twice about rate hikes. That seems to make sense to chew was joined in that view by the president of the philly fed, making the same kind of comments. You were there at the new york fed conference where Lyle Brainard was speaking. Did you get a sense of consensus when it came to the regiments about the Balance Sheet . A fascinating array of discussions from why do you want , howduce the Balance Sheet quickly are how much you can reduce mortgagebacked securities. She is onard said board with the fed starting to run off the Balance Sheet soon. Jamie dimon made it clear that he sees rig rests. We have never had qe like this before. We have never had unwinding like this before. Obviously that should Say Something to to you about the risk it might mean. Will the Federal Reserve say of jamie dimon . The Balance Sheet rolloff will be gradual here they have been talking about this a lot, well telegraphed, not a big impact on the bond market because of this, and they can moderate and modulate this. Again, jamie dimon is whirring, but the fed is on course for that Balance Sheet reduction. Rishaad thank you a lot for that. Just quickly looking at the boj, increasing the amount of fiveyear notes it will be fine. Billion now buying 330 as yields go up more out of their comfort zone. The 10 year at 0 is their comfort zone. Buying ¥500 is billion worth of 10 year out right future delivery jgbs, so boj treasuries there, or should i say japanese government bonds. Lets discuss more. Lots more to discuss on Janet Yellens upcoming testimony. Our next guest is watching for any Additional Details on Balance Sheet reduction. We have more with state street Global Markets in a moment. Plus, cautious on stocks, but planning to him by more unlisted assets. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Inhaad i am Rishaad Salamat hong kong. Investors looking for some clarification over the balance andt reduction rate increases when janet yellen testifies. Joining us now is the global macro strategist at state street Global Markets. Are we going to get anything new . I dont think so. We have the june fomc minutes. There was only one interesting data, the labor market data. Yes, labor market numbers are. Ood we have seen payroll numbers around 180,000. The bad part is inflationary growth Transition Area . Even wage growth has been a weak story. What we will see is how the fed and janet yellen will manage this dual mandate. A lot of people will focus on that first. The second thing is the Balance Sheet. Rishaad you will probably not get much on that. We have fake cracking story about the job market being hot and wages not. They have moved the focus to asset prices now. Are they giving them an excuse to raise rates without looking at the fundamentals . Yes. If you look at the june rate hike, that was not data dependent. If you look at the macro data, you would think the fed was on hold, but given the market has priced in that rate hike, it made sense for the fed to do it. I think everything is expensive now. The point is whether there are things relatively more attractive. That is how we see valuations. We focus on the relative basis, and thats where we have this program for pro risk tilt to our strategy. Haidi more political distractions coming out of the u. S. , and more voices saying this is going to be a hindrance to progrowth policies. Makes janet that yellen thinks she needs to walk back that hawkishness because there is more uncertainty . Over all, the u. S. Story remains treaty good. There remains a decent amount of growth, and that is what the fed is looking at right now. When they have the opportunity titan, and asset prices are steady, volatility low, asset prices in the equity and bond market are still at a relatively low level. We are seeing the 10 year treasury at 2. 3 when we have had to rate hikes. Mini tantrum. A , btva look at this chart 2090 two, showing markets are bracing for a flatter treasury curve. , theave that white line twoyear net treasury position less the 10 year. Down, flatter curve, goes up comes deeper curve, and turquoise showing the actual curve. That is picking up, but positioning is the largest in 10 years, so does that suggest people in the bond market are doubting janet yellen and the fed . I agreed to a certain point that if you look into the overall bond market, it is important to highlight that the bond markets through quantitative easing, one of the objective was to push down real yields. Nominal yields have to hover around 0 , meaning if you push down for you yields, you are boosting Inflation Expectations and growth, and that is what cute he was therefore. Now you are doing the reverse. It makes sense for the bond market to have this reverse selloff where you are starting to see yields go up. Is the beginning and the market is behind in expecting the fed to do more because 2018 rate hikes for the market are at one when the fed is three. Dimon what jamie september clearly he is right, but you think markets are mispricing this . Overall, financial conditions are relatively moderate. What you are seeing is that the fed is doing this normalization, but the markets are not buying into that yet, and that is what we are seeing right now where basically we are not actually expecting this tightening to come through from the markets, so we have to focus on whether they continue to push for this normalization. Haidi thank you so much for that. Macro strategist there at state street Global Markets in hong kong for us. Image up, how this altering selfie app is getting a boost in the market. This is bloomberg. Rishaad you are back with Bloomberg Markets. I am Rishaad Salamat in hong kong. Haidi we are counting down to the open of markets. We are minutes away when it comes to the hong kong open. Take a look how the premarket is shaping up. Aoking to extend gains into third day. A pretty good week given fluctuations across broader markets and futures pointing to a flat open. We did have overnight quite a investors sidelining themselves ahead of key congressional testimony by janet yellen. Is meitu of looking at. This is a selfie app. Inhad this lackluster ipo december. Since then, the stock has had a rough time, down just over 16 since that ipo. We had a large block sale that dented sentiment. But a Financial Investment in Property Development outfit in Mainland China upping their stake to 14. 23 , buying just over one million shares, so we will see if that gives a boost to Investor Sentiment today. Rishaad right. Hsbc. It is among the most traded 2808s in hong kong, btv shows you what has been going on here. 1 in therd of premarket auction period. We are looking at the daily traded volumes. This is the most traded stock in hong kong. There we go. We had that spike up, reflective of selling pressure. The day britain voted to get out of the european union. To today, andut again eating traded heavily. Here we have it. This is the move of in hsbc since the start of the year, up 55 , showing you what is going on volume wise and regard to that. Ok, there we have it. Let me tell you about what we have coming up, the central bank in china, what is in the works for the pboc . How its control is spreading. That is next. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Rishaad there we go. Statue square, 9 29 a. M. In hong kong. Well, looking at what at the moment . Premarket auction period up by. 4 , adding to the massive dance we saw on the hang seng yesterday. Initial jobless claims in the u. S. , japanese Producer Prices in line with estimates. And ppi as well. Yellen is front and center, two days of testimony to congress. She will get some tough questioning, particularly on the second day. I am Rishaad Salamat coming to you from bloombergs asia headquarters. Haidi i am haidi lun in sydney. Lot of extra spanners in the works ahead of that testimony. No doubt she will be asked about her potential placement. President aying trumps top choice is gary cohn, a controversial choice, if true. Lets get over to sophie with the hong kong open. Waiting to see what janet yellen has to say, but the open on the mainland in china and hong kong, chinese stocks up. 1 after slight gains at the immediate open, so set for a second day of gains. The hang seng climbing for a. 8 as trading volumes pick up 30 above the 30 day moving average. On the data front, we could the getting chinas june money supply and credit data today. Giving the movements and treasuries, now a pickup in asian bonds. In the currency space, the climbing. 2 , strengthening after the pboc said a stronger fix set a stronger fix. There is a piece in the pboc newspape