♪ >> it is 7:00 a.m. in hong kong. i am yvonne man. thetop story, fortescue , belowinor to report expectations. , all sides want an ambitious deal for the 21st century. >> i am betty liu in new york. for gold, futures trade at nine-month highs. investors seek haven. movers and shakers me that jackson hole. ♪

>> all right, a lot of news to kick off with. that the week that investors will focus on. not a lot of economic data in the u.s. this week to drive markets. everything from washington to , listening to what janet yellen has to say about interest rate hikes going forward. lot of focus on balance sheet reduction, but also a recognition among fed and the and presidents fed chief herself that inflation will remain low going forward. >> we continue to watch fed fund futures.

is what we are seeing when it comes to a possible rate hike for december. it has come down a bit from the fed minutes last week. the topic will be financial stability in wyoming. any thing from janet yellen that could send a hawkish signal. mario draghi more than janet yellen, reports that he is not planning any surprises, but he may talk down the euro. >> he has had a tough time with a lower dollar. that is complicating matters. a reminder for viewers on how markets closed friday, another day of jitters, but not as much. when robert lighthizer when gary cohn was reported to

leave, the markets went down, so setting up for a softer opening in asia. >> i thought it was interesting given the price action on friday that we saw for the first time the s&p fall 1% thursday. on friday, if followed with a decline. we haven't seen that movement since brexit last june. here is how we are trading for new zealand so far. slow going in the red, down point 20% the dollar weakening against most currencies, g10 currencies, with the exception of the swissie and the kiwi. australia, fortescue earnings coming out any minute. we also are seeing wti holding on to gains after 3% jump on

friday on u.s. shale explores reducing rigs. futures pretty flat for the open in sydney as well. nikkei futures, upside 55 points after that dramatic selloff of on the nikkei 225 friday, down more than 1%, dollar-yen seeing a little bit of a temporary weakness for yen. >> let's get the first word news. spanish police say they are no closer to finding the suspected terrorist leader behind last week's attack in barcelona. they have the names of the members of the group that planned a bigger outrage, but say three people remain unaccounted for. to pack three trucks with explosives and blow them up in barcelona.

more of will lay out its brexit position, hoping to persuade brussels to move away from divorce talks on to future relationship. range ofoverage a issues including data protection and judicial cooperation. the eu must be convinced that progress has been made on exit bill,rights, the and the border with ireland. the show support against conservative critics in india and increasingly confrontational united states, rouhani one another term on promises to press ahead to and isolation impose the economy and will achieve more by being united. the u.s. and south korea begin new wargames monday in an operation denounced by the north as reckless saber rattling that could lead to war and follows

weeks of heightened tensions to attack athreat qualm, drawing an aggressive response from president trump. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. a dramatic week for president trump, the firing of steve bannon on friday, so does his smooth sailingmos for the white house? can this administration get back on track right now? is this an inflection point for the trump administration? >> definitely. if you want to know who has not sent a single tweet today, that would be president trump.

adon't know if that means change in policy, but may be interesting to think about. he has an important speech scheduled for monday night about the afghanistan policy going ahead. with the departure of steve bannon, maybe things are starting to stabilize in what has in an extremely tumultuous white house. aret has been the we tracking developments out of north korea as well. you think steve tannins the parch or makes relations with pyongyang tougher now? he said there was little chance of a war. i am cautiously optimistic that there are other people among the generals and diplomats who don't want to go there in terms of a nuclear conflagration with north korea. most see a diplomatic solution is the best way, and it does seem like in the past few days that things have settled down a little bit, so i don't think

steve bannon was the only one at the white house who want that nuclear war was a bad idea. >> that's true. ok, but what about president trump's approval ratings which have slumped to under 40% in key midwestern states? talkingbelieve we are about this, but that could have implications for the midterm elections, right? the extent to on which he can get his legislative agenda across and how members of forown party start to plan 2018. than very unpopular, less 40% approval, and mr. again, pennsylvania, wisconsin, three key states. the democratsike to take the house in 2018. one thing they are down on is president trump's handling of international affairs, but they are more positive about his

handling of the economy, so it is not all terrible news for trump in those states, but it shows that it will be a tough few months ahead to establish stability in the white house and make sure that there is no revolving door of personnel. one thing we heard today was of ohio governor john kasich saying it is hard to have a winning team when personnel keep changing, so it seems like the administration is in a hole and trying to climb out of it. ofindeed, a merry-go-round people there. thank you on what has happened over the weekend and the week we just had. ford inut moving washington? ed conners is a visiting scholar at the american enterprise institute and former adviser to mitt romney and thinks that steve bannon's departure might 's price forry cohn

staying. ronald bowldent was last week. there are two factions. i would not be surprised that that was the price for staying. they were going to exert their influence and that would be a time to do it, but in the case the odds on, he is favorite to be the fed chairman after janet yellen. he has a strong incentive tuesday. lastly, if you look at liberals and conservatives, you're in for a chastising rebuke. the difference between the liberals and conservatives is they can chastise the president and leave him less effective, where as the conservatives are trying to push their agenda forward and they have to take in an effective president and make him as effective as can be, so walking out the door does not advance the conservative agenda.

they have to find a way to make it work. >> he sees so many people quit the white house, so when will he quit the white house? >> i don't think that is happening. the lesson donald trump teaches is you never quit, never give up, have to be in it to win it. the chatter in washington is rising as we see more and more people leave the white house. on line betting as been of the third that he does not get to the end of 2018. i would take that bet that he will be here at the end of 2018, but he is under pressure and has not assembled the legal team he needs to counter the investigation against him. he probably needs to put some attention on that as well. the problem is the conservative agenda is going nowhere while he is focused on this. trump equaling to arnold

schwarzenegger 2.0 with steve bannon's excellent? is this a way to reset the administration and get some execution on economic policy? >> i think steve bannon had a powerful insight that one the president the election. that trade and trade deficits and low skilled emigration put pressure on wages. aen you have to convince couple of hundred thousand voters to be elected president in the midwest most affected by that trends, so i suspect the philosophy of steve bannon, that portion of the philosophy, probably continues ford and is an integral part i suspect of the white house economic policies. we have seen the power and

the influence that john kelly has had since he has taken the role of chief of staff after the departure of other administration officials, are there more on the chopping block? >> some of those guys were rumored not to be team players, and we saw that in the public eye of them not inc. team players. it is clear that kelly is demanding they be team players. i know someone who says the white house is run differently than it has in the past. tightu have it run on a schedule and you get your one-on-one meeting with the president, a brief time that kelly is there monitoring the conversations, asking some questions and moving to the next meeting. it seems like the way the white house is being run seems as though it has changed from what i have heard. >> it certainly has. stay with us.

we will have more in the next block. ed conard joining us from the american enterprise institute. >> in this hour, we talk about the yen with bank of america. safe haven in as a storm of geopolitical risks? that is in just half an hour from now. this is bloomberg. ♪

♪ tokyo, cloudy in and counting down to the first major opens. , dollar-yenhe green seeing upside, so a potential pause in the strength of the yen

given geopolitical tensions. sell down the u.s., mexico, and canon that ending the first round of talks on nafta, committed to wrap up quickly with a comprehensive deal. .ith us is ed conard you have long argued that we are looking at this trade deficit in negotiations the wrong way, right? >> there are two issues. first, no serious economist things trade deficits are tied to the terms of trade. i think the traditional view is as investment heats up, it

poll savings from the rest of the world. that is what causes trade deficits. as long as you spend it, you don't lose employment. moneyst 20 years, the more has been pouring in and interest rates have been falling, an indication of saving rates pushing its way into the united states. if that money sits unused, workers don't get hired. there is no serious economist who believes this, but trade negotiators do themselves, so how do we get to a working agreement on nafta? ultimately if we did not have large trade deficits with mexico, running trade deficits with the rest of the world, i don't think people would be nearly as alarmed if every job that went to mexico came back to the united dates in terms of demand from mexico for u.s.

goods and u.s. employment, so one of the proposals i make is we should issue a dollar of import for every dollar of completely divorcing negotiations. it would be difficult, but we have trade with low-wage economies like mexico to be competitive in the long run. developing negotiating terms of trade that make sense, but if we use those terms to balance the trade deficit, it would lead to a bad situation. >> speaking about job killers come to the other view from the white house is immigration is a jobs killer in the u.s.. you wrote a recent op-ed that said we should rethink this. >> if you look at the u.s. economy, there is 120 million full-time employees, 6 million top 5% employed, innovation is

driving growth, so we doubled the number and double the growth rate. in the future, we are eaten alive by >> do you agree with the view that immigration is net-net a jobs killer? >> i believe the constraint to growth is talent in the united states. if you spread the talent over more low skilled workers come you get lower productivity growth and they will end up with lower wages as a result. the answer is to -- >> you agree with cutting the -- in a gets to the answer different way. i agree with the conclusion, but not the economics. my own view would be that by increasing the high skilled immigration, we can change the ratio of high skill to low skill and that will drive up the lay of the low skilled employed. if you have an unlimited supply of low skilled labor, it would

be hard for anybody to get a pay raise. you get big employment increases, which is what we see. >> do you know anybody listening to this? anybody have an opening in the white house administration? i think he is thoughtful and is interesting and listening to it and gave my book a careful read, but he comes from a if youional view, but look at that, what are we using the money for? up huge fiscal deficits, financing subprime mortgages, money sitting unused at 0% interest rate since the financial crisis, fueling greek consumption, so if you look at our business it is cash flow positive and it is hard to make the argument that they are constrained with savings here at -- with savings. >> you talked about china and

these trade investigations the u.s. has triggered on china when it comes to intellectual 301 iny, using section trade diplomacy. do you think that will be an effective way to get china on board here in terms of what the u.s. is demanding? >> know, china is stealing a lot of the intellectual property. the more effective answer would have been to use tpp to develop trade relationships with countries that are more likely to be aligned with us instead of rivals and more willing to respect our intellectual property and intellectual property laws and push the trade to those countries and away from countries like china who don't respect intellectual property laws because it is to their advantage not to and are growing very harmful rivals to the united states in the future so we try to use the terms of reduced trade deficits from asia.

it is a big mistake and we missed a big opportunity to develop an alliance of asian countries more aligned with united states than with china . >> is china likely to retaliate and trigger a trade war? more from them than they buy from us, so i'm not worried about retaliation, but we might end up buying less goods from china and by higher cost goods and consumers will pay the price. they will certainly pay the price in the short run in that it will not have any affect on protecting intellectual property because it is to the chinese advantage to steal that intellectual property and they will continue doing what they are doing because it is in their best interest to do it, so we need a different approach. i gave you an approach to make an improvement to the situation. >> what do you think of gary cohn as future fed chairman, good? a thoughtful guy because he got to the head of

goldman sachs, so you have to have a lot of confidence in that sense, but it is unclear what his monetary policy is. his public announcements have been all over the map and difficult to read. maybe you will like that in a fed chair. i don't think the economics knows what position he is taken. >> thank you for stopping by. visiting scholar at the american enterprise institute, add conard. you get a wrapup that story and more in today's edition of daybreak. bloomberg subscribers go to dayb on their terminal and the mobile anywhere app where you can customize your settings to get the news on industries and assets you care about. this is bloomberg. ♪

♪ a quick check of the business flash headlines.

nearing a deal to acquire texas power provider encore for $9.3 , out flanking elliott management and berkshire hathaway. encore is a division of bankrupt energy future holdings. terminating sale talks with kkr and infinity equity partners after they were unable to offer terms acceptable. the company says its optimistic outlook is an important factor in the decision. that delivering a return to sustainable organic growth following the year of transitions. jeffrey immelt could be the front runner to be the next ceo of uber. a vote of directors in support of an appointment is likely to happen in the next two weeks. two other executives are still being considered.

wall street watching jackson hole, but are we getting signals of policy changes? a look at the week ahead, next. ♪

♪ beautiful monday morning outside the victoria harbour this morning in hong kong. 7:30 a.m., a few moments from the first major market open in asia. betty: a gorgeous day in new york, 7:30 p.m. sunday evening in new york. friday, markets closed lower but a little bit of optimism you might say after the news came out steve bannon was out. i am betty liu in new york. yvonne: i am yvonne man in hong kong. you are watching daybreak asia. first word news with haslinda amin. haslinda: canada, mexico, and the u.s. want an ambitious nafta

outcome after the first round of talks in washington. there were few details, but all three are committed to the 21st standards -- 21st century standards. they want agreement before politics takeover. u.s. and mexico have elections coming up. president trump will address the nation monday on u.s. policy in afghanistan. he and his team met at camp david. he said decisions have been made but gave no details. troops could be sent back to train local forces and show u.s. commitment to the elected government. the president had previously demanded to know why the presence in afghanistan was so long. thousands marched through hong kong in support of three democracy activist jailed in the 2014 occupied protests. two of them were given community service, and the third a suspended sentence, but an

appeal sent them to prison for 6, 7, and eight months respectively. they say the judiciary is under threat from the beijing-backed government. indian ipo's are heading for a record year as they fight a rally in the local market and great demand for financial assets. aim to price stock sales by the end of 2017 with the total amount of funds raised reaching $7.8 billion. that will be 85% increase from last year and cut -- top the current record set in 2010. say it for -- singapore has used its national day speech to prepare for the challenge of the asian population and embrace new technology -- aging population and embrace new technology. he also took aim at singapore's diabetes problem, saying soda

makers have agreed to reduce the sugar in their products. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. amin. haslinda this is bloomberg. ♪ we are counting down to the first major market open in the asia-pacific. let's go to the bloomberg asia resources and gadfly columnist. late -- you are taking a look at safety havens in particular given this interesting week with the d.c. turmoil, jackson hole to look ahead to. the yen is showing a breather on its strength. what is the latest? david: there has been a bit of a move to some of the haven assets to the end of last week. the yen is narrowing towards the highest level it has been since the election of donald trump last year. it ran about 109 yen to the greenback, so it is a short move

over the last few weeks, 4.5%. that will weigh on the performance of exports in carmakers. that will be something to watch. we get the release of japan's industrial activity index today. they think it will be up 4.9% for june compared to the decline previous month. that is one of those natural rebalancing effects in the market. it is worth airing in mind with the yen strength one in 4 -- bearing in mind the yen strength going to the end of this year. betty: gold is trading lower after edging about 1300 on friday. could it be higher in the coming weeks? david: indeed. that 1300 and out's is very interesting for gold. -- an ounce is very interesting

are gold. the past four years, they have tried to break above that. it started with brexit, but ended with the election of donald trump. this is the first break but a brief one above 3000 and ounce. -- an ounce. it is trading lower today, 1290 an ounce. there is a bit of weight behind us. if you look at the cftc trader index, it shows which bets are being made by bearish market participants. various hedge funds have not the strongest net long since the u.s. election last year, 18 million assets equivalent. that is worth watching. august will be a good month to buy gold. january and february the past 10 years you see a good return. august is the other one. if you buy and hold for just a month, you get a 2% average increase.

a lot of months are bad for gold, but this is one worth watching. betty: thank you so much. our reporter looking at many markets unfold. not much economic data for wall street. investors are waiting for the friday beginning of jackson hole in wyoming. the coming week will test risk appetite with the departure of steve bannon. not so pretty there. joining us is su keenan. su: risk is a real question because the wall of worry is starting to be reconstructed. we know the dow did lead the way down on friday. the s&p 500 was slightly above, so there are a lot of participants in this market even though we are in the summer doldrums. if we look at the market snapshot, a lot of hedge funds starting to pile into gold. there are strategists warning that shorting the dollar is a crowded trade, now is the time

to pare back on wagers with near-term weakness. looking at 3285, we will show you a chart that also pretty much says those who frequently shouldld beware -- buy beware. while the market is moving higher, the breadth of stocks moving higher is not. more are making lows as the s&p 500 goes up. past gains, you saw companies making new loans outnumber the highs, and that is significant. that is something we should watch. in terms of the economic data that will be out in the coming week, it is rather short calendar in terms of -- if we go to the video, we can see the headlines coming out. is one.tion it will be one of the key reports of home sales rising,

existing homes and newly built homes in july. that will help solidify the housing rebound is there. we will be focused on data coming out on factory orders, manufacturing, and capital and durable goods. yvonne: jackson hole is going to be competing with donald trump for the headlines by the end of the week. what can we expect? su: what we typically get with jackson hole, and wall street turns his focus, is discussion of the economy. janet yellen is one of the speakers, and is mario draghi. it was going to focus on that. will beinflation issues touched upon. it is not clear if risk will be discussed, but what is interesting is the general view tout awill continue to party line, the fed policy is slow and gradual.

this is not expected to change. wall street will be listening closely to discern any differences. friday seems so far off when you look at the vast pace of headlines that have hit the street just last week alone. very interesting for the economists will have to say. days for we see anything from jackson hole. thank you. the yen's run as a haven coming to an end of door we discussed the outlook. this is bloomberg. ♪

♪ yvonne: this is daybreak asia. i am yvonne man. betty: i am betty liu. a quick check of headlines, according to metco raising its payoff forecast for the 2017 dividend of $.45 australian.

revenue came in at the ,quivalent of 8.45 u.s. dollars two hundred 30 million below expectations. but fortescue has cut its net debt in half from $42 billion to $2.6 billion. isnne: the bluecoat ceo stepping down after 10 years to be replaced by mark estella. this game as they reported their best -- this came as they reported their best since 2005. they doubled to 560 million -- the steelmaker will pay a dividend of five cents australian per share. betty: high court challenge against $269 million in taxes abandoned, saying it reached a regional -- reasonable resolution of the matter. that could struggle with -- settle a similar dispute in

australia. facebook, google, ibm facing a hearing on tuesday. yvonne: shell is said to have loaded the oil from libya for the first time in five years. the cargo was 600,000 barrels in the latest evidence of recovery in the country's oil industry. they were exempt from opec curbs after the civil war. it will not be restricted until levels reach 1.2 5 million. million. betty: the yen is weakening today, snapping three days of gains. seeing a little bit of a breather on the yen strength, 109 against the dollar. looking at 1864. we are seeing a bit of a pause in the yen strength, but the bottom panel, this is a net long position on japanese yen from leverage funds. that is in the red. still when it comes

to the currency. this is basically based on a lot of rate differentials we see what the u.s. as well as japan. we see the 10 year spread which has widened since late last year as the fed started hiking rates. our next guest seeing upside for dollar-yen. he says 117 by the end of the year. he is from the bank of america merrill lynch, joining us from tokyo. good to see you. what will be the key driver of dollar-yen? will it be interest rate differentials or continued turmoil from d.c.? reporter: i think that is a good question because there are crosscurrents running through the japanese yen. medium-term i do think the yen ,till has bearish factors namely low inflation in japan and very low interest rate by the boj monetary policy. so the question is whether other

currencies can manifest this trend. i think that is the case as the fed continues to normalize policy down the road. near-term as you see, the currency strength, there are concerns around north korea and u.s. politics. so we have to get through these risks, but economic risks tend to have trade impact revenue persisting. i would expect the yen to weaken into the final quarter of this year. yvonne: we continue to see the yen being one of the first lines of defense it comes to a safe haven play. looking at geopolitical tensions and north korea -- why do you think this is the case? japan is a military ally to the u.s.. there is a spat between the u.s. and pyongyang at the moment. shusuke: that is an interesting

point. the yen has some strong features net japan being the largest predator in the world, japan running a six figure surplus, but we have its own problems like demographics and geopolitics. i guess why the japanese yen strengthened at the time of basically every uncertain time is the market has to unwind options funded by the japanese yen and other funding currencies. had somepanese yen haven status, but it is not 100%. riskis case is japan's profiling increases, there could be some rush holt wind -- threshold in the market starts selling yen. performere clear out with the yen, but the euro again, we have seen this tear

from 115 130 in four months. what do you see out of jackson hole and mario draghi? is there any surprise from him he could talk down the currency? shusuke: i think as long as jackson hole is concerned, i don't know if he uses the opportunity to talk about currency or talk about policy the the september ecb meeting. [please stand by] ecb may be fine with the current level of the euro, but the minutes indicated they are a little bit concerned about opportunity of the currencies. as you plotted the chart, the

market is still long and short japanese yen. long: speaking about -- the euro and short the japanese yen. betty: i want to talk about the u.s. dollar, chart 992. it shows you the net short vision on the u.s. dollar -- the net short positions on the u.s. dollar are now exceeding the 1000 contract, one of the lowest level from 2013. complicating is that going to be for the japanese yen? year thei think this market has basically sold u.s. dollar and japanese yen at the same time. that is why the cross yen basically rallied. if the dollar strengthens on risk off sentiment, again say

currencies like aussie, it will be a little difficult for the dollar to right because the cross yen will suffer. that could takeaway from the yen's upside. so if the yen rallies from here, we should have both good economic data from the u.s. and higher conviction in the market that the fed can follow the path indicated by the dot plot. ok, thank you so much for joining us on the dollar and the yen itself. he is from bank of america merrill lynch, chief equity strategist. one feature we would like to bring to your attention is the interactive tv function. you will not only be able to watch us live but also see previous interviews like the one with ed conard here. dive into the bloomberg

functions we talk about, and become part of the conversation by sending us instant messages during our shows. it is for bloomberg subscribers only, so check it out. this is bloomberg. ♪

♪ this is daybreak asia. i'm that he lived in new york. yvonne: i am -- i am betty lou in new york. yvonne: i am yvonne man. the total solar eclipse on monday that is sweeping across the nation, casting millions into darkness for a few minutes, but is a business opportunity? emily chang puts on her safety glasses for a closer look area -- closer look. ♪ thousands of people will be lining up to watch the first total solar eclipse in nearly a century, visible only in america. tech companies from google to

airbnb are offering ways to watch it like never before. where i am, san francisco, it is the ideal place to see the total effect of the clips. 2 -- the clips. -- eclipse. you need to be a longest 3000 to seeff -- mile swath it. the best view is reserved for four nasa pilots. they are tracing this in a jet plane. it will have the clearest images of the corona, this son's outer atmosphere. for those of us not going supersonic, there are other ways. google is partnering with mystery science to hand out these glasses to make sure it is safer kids and teachers to watch. kids and teachers to

watch. it is dangerous to watch through homemade lenses. and for those not in the path, they can see what they are missing through google vr. there is a different dark side to this event. amazon is waging a war on sellers trying to pass off state -- fake glasses that could damage the eyes of unsuspecting shoppers. they have issued and even a warning and result -- refunded others. also airbnb. 24 thousand homes on the path of totality have registered on the home sharing site with 50,000 incoming guests. that is four times the same area from last year. in.also hertz is cashing this after the company faced online backlash after canceling overbooked reservations. even the company nest is helping people use learning thermostats to save energy by free cooling eligible homes -- pre-cooling

eligible homes. it could disrupt 83% in activity, totaling $700 million. it will also test the nation's power grid. eclipse couldd -- knocked down 900 thousand megawatts. energy -- as solar energy drops, more places will have to pick up the slack in the once-in-a-lifetime event. yvonne: i am so sorry i am missing that. we are not in this path in new york. a bloomberg chart to bring it. this is be 2 -- 3239. you can see where the eclipse is going to be. around 2:30, where it will be on the east coast, look how far away i am.

i have to leave you alone in order to raise down there to watch it -- race down there to watch it. yvonne: get those glasses to protect yourself. visible in the summer and -- southern hemisphere. -- there first time will be one in 2019 inch you like and argentina -- in chile and argentina. the next time you see this here will be 2024. betty: i better make reservations for the next one. look at what is happening with asia's first major market open now moments away. yvonne: sophie kamaruddin is watching the events in australia and south korea. >> a cautious start to the week given the tumultuous session from last week, given washington, d.c. in the continuing war of words with pyongyang area look at the futures in asia signaling mixed session. a lot is going on with jackson

hole later in the week, and we have the south korea and u.s. military drills beginning. we are keeping an eye on what is going on with south korea defense stocks like the check. we saw ratings down. we have plenty to watch for each energy and fortescue reporting earnings this morning, doubling profits and higher iron ore prices provide a boost. and this is a big week for aussie miners and bhp and south32. a focus on the end of topics with kkr and the potential takeover. and watch the aussie stocks after china has ramped up outbound investment curbs. they have companies on their restricted stocks, casino. that is the bad list. the chinese are bought up about 78% of australian properties last year according to this group. that is a look at what we are watching.

australia at 10:00, moments now. this is bloomberg. ♪

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♪ it is 8:00 a.m. in hong kong. morning,tories this china announcing new rules on overseas investment. sports clubs out, health and road in. fortescue to report, full-year profit doubled on higher prices and lower costs. >> i and betty liu in new york just after 8:00 p.m. the turmoil and washington is a lifeline for gold as investors seek safe haven here at the u.s. and south korea's latest

wargames, kim jong-un an interested observer. ♪ >> as you mentioned, escalated tensions between the u.s. and this, south korean drills week amid political tension, president trump and cam jong-un trading barbs -- kim jong-un trading barbs. the economic fundamentals in korea are still resilient, exports for august still rising 11.6%, off the 20% rise month after month, but still in double digits. >> it seems on the fundamental

side, given export numbers and how markets have behaved, some declines in south korea, but at elevated levels on the kospi. side, foreign investment this is 5340 on the bloomberg. out for an how free investors are -- freak out foreign investors are. they have accelerated the selling of korean stocks over the last several weeks. not reaching the levels of 2015, but on a trend and not a great trend in south korea. we will see whether the saber will cause more of a bailout of foreign investment. we talked about how in port in the asia supply chain is in south korea. article on the bloomberg

for companies like qualcomm, bhp least $1 billion in sales generated from south korea, so a lot at risk. thelief rally in terms of equity markets on this monday morning. asia, a markets in positive start coming gearing up for jackson hole this week. the dollar firmer, the yen sliding .1%. snaps a three-day drought, trading .1% higher. the yen softer with gold. ,heck out the kospi fundamentals still solid, a rise --experts at 11 port 6% exports at 11.6%. that is all green well for corporate profits.

well s all green the military drills between the u.s. and south korea start. overon has strengthened the course of these exercises for the past five years, now tenuous given the words between washington, d.c. and beyond yang. the cost be .2% higher today. , so watching up curbs for property stocks in australia, the asx 200 sliding .2% despite gains in steel and copper. on also extending gains friday. brent near a three month high. just below $50 a barrel, so the the benchmarks at the widest in two years. bluescope steel reported

results, falling 16% earlier, so lower for a second straight day. also, china unicom to resume trading along with ayala-ayala buying intoothers china unicom's reform plan. we have other property companies on the radar, so it could be a busy monday in asia. like it. thank you. now to first word news. double line total return fund has taken on the wall street journal about story on shrinking assets under management.

he tweeted, somewhat surprised wsj ran a story so pointless, so illogical, so poorly written, -- not done significantly -- not that it matters significantly inaccurate. we have the names of 12 members it the islamic extremist group that planned the bigger outrage, but three people remain unaccounted for. the gang plan three trucks with explosives and blowing them up in barcelona. more of will lay out its brexit position, hoping to persuade brussels to move away from divorce talks and on to future relationships. london will publish papers on data protection and judicial cooperation before talks can move to trade. the eu must be convinced that progress has been made on residency rights, the bill, and the border with ireland. oneiranian president

parliament's backing for all but one of his cabinet members, a show of support against conservative critics at home and an increasingly confrontational united states. rouhani one another four-year aheadn pledges to press on easing political isolation and boosting the economy and the country will achieve more by being united to the u.s. and south korea begin wargames monday, denounced by the north those reckless saber rattling that could lead to war and follows weeks of heightened tension, including kim jong-un's threat to attack the guam, president trump saying he would respond with fire and fury. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

>> china lays out new rules on makings investment, clear its campaign against irrational acquisitions. tom mackenzie joins us now from beijing. what do we know about these new rules here? this form alliances and puts a framework around the curbs on how down investment we have seen take place this year. we saw three categories of out down investment that the state council has put out on friday. one is the category banned outright, military technology, casinos, the second category involves areas where there will ,e further restrictions property, hotels, entertainment, sports, so think about the big

european soccer clubs that chinese alien errors have been snapping up, also cinema chains in the u.s.. then there is the third and final category, investments that will be encouraged, linked and focused on the health and road -- belt and road technology, agricultural, oil, and mining, all encouraged under new rules. we will see less of the headline grabbing flashy deals in the last few years. the acquisitions free could come to an end now. what does this tell us about the government's priorities now with an explicit set of new restrictions from the state council? and the explicit government saying they want control of private companies and where they are putting their

assets abroad and trying to ensure capital controls put in place are being stuck to it who we have seen fx reserves stabilize, but there are concerns going for that if they don't maintain restrictions, you can see renewed outflows of renminbi and assets. it is about tying in a local focus on financial risks, many big corporations seen to have use leverage to do some of these deals, companies like foci on, osun, dlaiannda -- f wanda, so it follows on from that. out downis year, investments of: off about 40 5% already, so the implications are significant domestically to the corporations operating here and

youthey refocus, but if look at countries like australia, 40% of residential property development was sold to chinese companies, there will be an impact their, and the will be an impact on corporations alike -- like dalian wanda. there are still deals that will give -- be given the green light. thank you. tom mackenzie live from beijing. more on earnings, fortescue 4% in sydney as the company's annual results released this morning. paul allen joins us from perth, a decent set of earnings, profit doubling, writing this rebound .n the price of iron ore

double, and that was a miss, analysts were expecting 2.36 billion dollars, but a strong set of numbers. the dividend was expected to rise, $.45, a beat. signal that this might be the time to look at returning money to shareholders, so they have certainly done that. the ceo is $260 million richer. is fortescue --iron ore is fortescue's only product, and the prices been volatile this year. >> that's right. the ceo has described the price as "uncharacteristically high."

ands subject to speculation he has suggested that pursue users and consumers have a look at contracts to bring certainty back, but a couple of charts, this is #6104 that shows iron ore exports increasing. milliono expecting 100 extra tons to hit the market this year. consider the in line with this chart, #6103, stockpiles in china continue to grow and are approaching record highs at the moment. itsescue has reaffirmed 2018 shipment target, 170 million tons, and the cost per time keeps coming down. oftescue expecting between $11 and $12 a wet metric ton. fortescue cutting its debt to $2.5 billion, so well-placed despite this anonymous supply on

the market. one does wonder what will happen to that price. >> indeed. thank you so much. don't miss our interview with the ceo of fortescue battles later at 11:00 a.m. hong kong time. that's right. still ahead, a 2 billion share buyback for infosys as it searches for a new ceo. next, our asian equities heading for a correction? we speak with the bank of singapore. this is bloomberg. ♪

♪ this is "bloomberg markets: asia."

asian stocks, a turnaround. we started higher monday has investors repair for jackson hole and recover from last week's turmoil in washington. let's bring in the bank of singapore cio from the lion city. ahead to wyoming, key thing for you this weekend terms of event risks? >> event risk his always difficult to guess. it is important we know what the fed will do. we need to see what is going on in the region. it is important to keep focus on some of the broader macro things globally, but you want to know what is happening locally. >> what is your read on price action locally so far? it seems this life that you mentality has cap this equity

bull run in tact. is it time to question the strategy? >> it is time to question the strategy. the early look and underlying growth, it has made sense to be positive. we are not excited about the next few months. a pause is what we are looking for. >> is it going to be mostly in equity? theave seen most of volatility and stocks right now, not so much on volatility. how do you see things playing out? >> the bond volatility has been , new corporate issuance has been strong so far this year. if anythinglook as will deter that rate. are thinking about a pause. the market has run hard.

it is probably time to reassess some of the underlying assumptions of what has made things as bright as it has been this year. >> i was reading your notes. you are maintaining your forecast for the u.s. to 10 year at 3%. what will be driving up yields to that level? we have not seen that call for some time now. >> that is 12 months out. still, that is off consensus. we think inflation will come back into the system at some point. the market has a benign view of things. maybe the risk is to the other end of the three, but towards the end of the year once the fed starts moving on rates again, i think we will move higher in rates. ,> we keep saying that though

but it never seems to -- it always seems to hit that ceiling. how will it be different this time? >> excellent question. >> it is like groundhog day. why is it different? >> the cycle has been different from previous cycles. we are saying don't suspend disbelief for this long. you will see the cycle reassert itself and labor costs starting to squeeze inflation and see the fed move. one thing that is important to keep in mind, if you go back fixednough and look at cycles come even what we think will happen towards the in the the year and next year is mild. we are not looking for anything drastic. we are looking for something towards normalization, not an aggressive tightening cycle. >> we were talking about two ed

how gary cohn, a given the way the markets behaved hearing about his to karcher come almost a given that he might become our fed chairman next year. that raises questions about janet yellen and her impact on the market. he raised a good point about how we are not sure what is monetary policies are right now. are you doing any advanced research into that given that he chair?ee our next head -- fed chair? >> someone like him has a good shot. how does it influence policy? no idea. there are too many things moving around. perhaps you should think also about the broader composition of the committee and not just the chair, how does that play into

markets. it is just too early to call them when. people will be taking out their pencils and doing the research on what gary cohn has said. getting back to asian equities, andart on korean stocks foreign investment in south korea, #53 40. it was a chart we brought up at the top of the hour that shows foreign net outflows of korean equities and how they seem to be quickening the pace, not as much as 2015, but if this trend continues, it could rival that. what do you make of this net selling that is going on right now? >> a little geopolitics and the rest profit taken. as investors start thinking about valuations what they think for the rest of the year, taking

risk off the table, a prudent move to trim a little bit if you have done well in the korean market us far. >> thank you for joining us. the bank of singapore cia oh. o. bloomberg subscribers can go to dayb and on the bloomberg anywhere app. this is bloomberg. ♪

♪ a quick check of the business flash headlines. nearing a deal to acquire encore , appearing toon outflank berkshire hathaway and elliott management. offered $9ad billion.

elliott had been working on a $9.3 billion deal. australian telco vocus group has terminated talks after bidders were unable to offer acceptable itss the company says optimistic outlook is an important factor in the decision and is confident of delivering a return to organic growth following the year of transition. has persuaded shareholders to back their takeover of a german drugmaker , $6.3x $3 billion billion. they will have to screen the offer to convince holdouts to sell. jeffrey immelt the next front runner for ceo of uber.

two other male executives are still being considered, but board members including arianna huffington are backing jeffrey immelt. the ceo of lufthansa said it would join the unit on cheaper contracts after it offers air berlin last a. -- less pay. will let it loan fly on for about three months. in the asia-pacific, sentiment turning to the negative for equities. down on thewo, but .sx 200, down .5% some saying a possible market correction is overdue in asia.

next, the top central bankers gather at jackson hole and we debate each one's mandate. this is bloomberg. ♪

♪ 8:30 in singapore, a beautiful look at the lion city. half an hour from the open of trading there. >> looks gorgeous. i am betty liu in new york. let's get to first word news. haslinda: canada, mexico, and the u.s. want an ambitious nafta outcome after the first round of talks. the statement offered few details, but said all three were committed to a deal. in july,lds election

and the u.s. midterms are 2018. president trump to address the nation on monday on u.s. policy in afghanistan. he and his defense team met friday, the president saying decisions had been made, but no details. it is thought that troops may be sent to afghanistan to train local forces. the president has previously demanded to know why the u.s. has been in afghanistan for so long. thousands of people marched through hong kong in support of democracy and activist jailed. to activist were originally given community sentences, but they were sent to prison for six months, seven months, and a months respectively. critics say the independent judiciary is under threat from the beijing backed government. ending ipo's heading for a

record year as companies ride a rally in the local market and cap demand for assets. the total amount of funds raised reaching $7.8 billion, an 85% , beatingfrom last year the record set in 2010. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. asian markets so far this morning, at woody's and on selling off. looking for some positive catalysts. sophie, we can't find it yet. can grab onto. data out of south korea pointed to better profit margins, but we withthe kospi falling

other benchmarks, bonds tracking u.s. treasuries lower, and japanese stocks are racing the earlier rise despite the softness in the yen. the correlation between the yen and the japanese stock market is eroding, but does not worried hedge fund managers. the korean won is up eight point 3%. gains, stronger for a fourth straight day as the dollar maintains its strength. the aussie building on the days drop. stocks in australia down .7%. here is what is dragging in sydney, utilities, health care, all in the red. the asx 200 gaining .6%. a part of that is the resources they come each energy up after results.

fortescue metals reporting thankss, doubling profit to higher prices, gaining 4.5%, but laggards in sydney, bluescope steel tumbling after its earnings, lower margins in the first half. to replaceew ceo paul o'malley from january 1. 68%scope steel has sunk since o'malley took the reins in november, so perhaps looking for a change of guard to help this company along. >> thank you so much. the world's top economists and central bankers gathering in jackson hole, inflation among the hot topics, but should they take a bigger picture view of their mandate? asian central banks in

this debate about prices? >> exactly. one of the thematics is likely a strong global economy, the best synchronize growth since 2011, but not much inflation. thatis leading to debate central banks should be looking at other parts of the economy. asian banks are officially mandated by authorities to look at more than inflation. they look at stability, exchange rate stability, so the view that even if there are some inflation don't thinkthere, i that is especially the case. the mandate is broader than developed market peers. >> we are talking about the diversity of mandates, what are they across asian central banks? >> in japan, headlines around

the 2% target, but also the stability of the banking system in a country where at had an economic collapse in the 1990's. australia is another great case. the central bank there has mandated to look out for the welfare of their citizens, a little known fact. has a multi-objective mandate, not just inflation or boosting employment or boosting liberalization of the market, liberalizing the overall economy and other tasks, so in asia it is not the case that asian banks are focused on inflation. >> you can see that from china,nt central banks, rba, indonesia look sick currencies in particular, but what does this mean for asia when the fed starts to unwind its balance sheet? there could be a lot of outflows. >> it is hugely important.

to be one ofing the most important thematics over the coming months, and we don't know how that will play out in asia. we know the rate hike did not have much impact, but as the fed begins to shrink it allen seed, currencies could be vulnerable and capital could leave asia, and that's where the broader mandate comes into the next. there could be a big car to play for central banks in the months ahead. .> thank you we have to talk about geopolitical tensions as well as tens of thousands of troops from the u.s., south korea and other countries conduct military drills. could inflame tensions with north korea, which sees them as a precursor to an invasion. let's bring in our government reporter.

tell us what will go on. >> these exercises are computerized. when you think about modern war. warfare is conducted based on computer command and control they bring in thousands of soldiers involved in these exercises and they simulate what war might look like, and this is where you have kim jong-un sitting not so far away in pyongyang. last week.s. colonel was explaining the importance of exercise is to he said it is like a football team. you need to go out and have practiced drills. you will be in a war situation, you want to make sure everyone knows how they can coordinate, so that is what these drills are about. thought is a school of

that says under no circumstances should military drills be used as leverage. >> that's right. north korea wants to see these military drills, the one taking place now and take her drills with people on the ground during , north korearcises would like to see these go. the chinese have been saying, let's do a double freeze. north korea freezes its nuclear program, then the americans should freeze these joint exercises with the south koreans. that is a false equivalency there. weaponsgal nuclear comparedf north korea with the legal exercises which are being done by the u.s. army, so there is a false equivalency, and the other argument is the

chinese are trying to put the onus on the u.s. to do something. policy experts say the drills should be used as a bargaining chip, so how exactly? is another school. a former state department official involved in informal talks with north korean government officials over the past few years, most recently geneva in november, and he has written an article saying the north koreans have indicated that if the u.s. is ready to ,ive up these two exercises then that might be enough for them to come to the table. tore is not much leverage bring kim jong-un on to the table at this stage. he wants to continue the development of his nuclear it is ansaying

existential problem for his own regime. there is not a lot the u.s. can do in order to force them to come to the table apart from perhaps indicating that if there were going to be talks at all, then perhaps these exercises may be at play. no one is recommending they should be unilaterally given up like that, but perhaps they could be brought into some mix to come to the table, because negotiation seems to be canof the only ways that bring this whole issue ford -- forward. is noty action considered realistic given the huge collateral damage that would take place so must immediately and south korea. >> absolutely. nothing to take life eight. our asia government reporter at large. hunting for aosys ceo, but wills group need to

turn the candidates? it has been a crazy drama at infosys, the outlook for the i.t. giant, next. this is bloomberg. ♪

♪ >> this is "bloomberg markets: asia." i am betty liu in new york. approved a two billion dollars share buyback announced the day after the ceo quit amidst the talks of personal attacks from the infosys founder. will the open hostilities make it tricky to attract outside talent for the job? >> it adds to the challenges being faced by infosys this is #1695, infosys against other peers. 2015, infosys gained 21%,

revenue increasing 25%, a challenging time for the outsourcing industry as a whole. it has moved to internet and database computing. it has been dealing with increased automation. then of course there is the led by ath the founder ,erson who said infosys accusing them of corporate governance issues. non-founder to helm the company. who will continue the growth and andsformation process

meeting the expectations of the founder as well? >> fascinating this war between the ceo, the board, and the founders, but what about the share buyback, a first for infosys, right? is.t as many as 130 million shares, a 25% premium to friday's close, more than some analysts had been expecting but this meeting had been scheduled before the ceo had announced he was going to leave, something already in the works. before see infosys rose news. than $6 billion, and shareholders had and wondering how they would get their hands on some of that, and that includes the founder, who had been concerned about the

acquisitions made under the what they might get in terms of return that could be whittled away by the buyback. indeed. let's continue this conversation and look into infosys, our next guest believing infosys could his a lesson on smooth executive transition. we have aipac avalon consulting in singapore. thank you for joining us. you are saying this is a fascinating story playing out in india and across asia and in the lesson in management, corporate governance, and so forth. what was the biggest problem here? a it so much that there was

, a floutingvernance of corporate governance, pay packages too high, or simply a culturallyt clearly can not accept western values coming into the company? you have to understand the background of the founder. the technology folks who set up a fine institution at the time they did with high levels of corporate governance. that is how infosys started and did well. they wanted to be known for high transparency and corporate governance. the industry all of them have high corporate governance standards generally in the indian context, so there was a background to this. you then recruit someone from the outside. culture trumps strategy many times. this is what has happened.

the culture of the palo alto, based management and the bangalore founder and board, one of the challenges of how this happened. i think it is important to know that. >> absolutely. forure needs strategy breakfast, something along those lines, a mantra for many ceos? does that mean infosys taking a to take am tata needs look inside for a loyal ceo? certainly that transition in that the tech consultancy services was excellent from the first to the second and third and fourth ceo, they were groomed. the responsibility of every outgoing ceo to groom the successor.

that is a major issue. that is where in infosys this issue did not happen. they move from founder to founder and then when they got a professional ceo from outside, there was a complete cultural gap. weak boardike a e because it does not match the founders well. you can see the crisis in the making. a do you see this as sending strong signal to other indian backed companies? >> it does. it clearly shows that as india transitions from family back structure to having outside professional managers, especially with a western bothround, then i think sides have to be aware of the challenges they face. this is a case study on what can happen. this will be

studied as a potential case study. it has been hanging in the public for everyone to see, a quite ugly spat for the past year. anyone in terminally at the company able to turn it around, not just brexit, immigration problems, but this constant scrutiny from the founders? >> it has a deep bench strength. the challenge with leadership for some time now. toy will find it difficult get an outside candidate unless they have resolve this issue between the founders and the board. get a little to more spine and you need to have someone selected from within the system, at least the next round. how destabilizing is the

infighting right now? do you think shareholders continue to lose out? time fora transition the indian i.t. industry, moving a delivery system to an innovation basis system. it is a very sensitive time. they obviously planned a different route, so the company will be headless for some time, although he has agreed to stay on as vice-chairman. need to quickly put in a candidate who can take the reins and run with it. you don't want demoralization to set in and you want the company to do well. it is an icon of the indian i.t. industry and the rounders have taken it to a certain level and it needs go further. perspectiveget your

on this, apex avalon consulting joining us from singapore. one feature we like to bring to .ttention is at tv you can become part of the conversation by sending us an instant message. this is for bloomberg subscribers only. check it out at . this is bloomberg. ♪

♪ >> this is "bloomberg markets: asia." >> plenty more coming up this week. we will be covering it all here. wednesday, austin, texas, why? votingoods shareholders on a proposed takeover by amazon, $13.7 billion. no shortage of support from the bond market to finance this. jeff bezos wants to reduce bring in more middle and lower income shoppers. intensify a price war with razor thin profit margins and deflation.

rarely has a supermarket transaction caused this much chapter in the market. up #3259 on the bloomberg, which is a sickly, look at this year at this is the amazon bet, where whole foods traded, the spike right when the deal was announced, and as you can see has held its gains in and to sit asian of the drupal of this transaction. -- held its gains in anticipation of approval of this transaction. to watch them cannibalize every sector we see. also, friday shaping up as a history,ay in samsung the verdict and the corruption trial of jay y. lee. three judges will decide his fate.

he has been in detention since february, accused of bribing a presidential confidant to win favors. prosecutors had asked for 12 years. the guilty verdict could have wide ramifications for the family-run conglomerate. it has not hurt the stock price. it continues to be in the green. >> indeed. incredible, right? that is it. market coverage continues next. standby for bloomberg markets. this is bloomberg. ♪

♪ >> this is "bloomberg markets: asia." haidi: china drives against risk, new rules on overseas investments. day,scue soaring on a down full-year profit doubled on high prices and lower costs. the u.s. and korea launch military drills.