♪ a.m. in hong kong. i am yvonne man. welcome to "daybreak asia." welcome to the party, china's must send -- much-anticipated congress. the latest brexit talks and in deadlocks. the u.k. refusing to assess financial obligation. from bloomberg's global headquarters, i am kathleen hays. tropical storm harvey drenched texas but could have a much wider impact. the u.s. economy is expected to take a hit. strictly neutral, they prepare

to stream new stories online -- news stories online. ♪ kathleen: let's get to breaking eco-data. south korean gdp, the second quarter figures just out. we can see a quarterly gain of 0.6%, forecasted in line with previous quarter. the yearly number at 2.7%. in line with the first quarter in forecast. insee a different income cpi. ino points the -- 0.6% august. -- bank of korea just held policy steady.

a lot of people think rising inflation will get them to push that rate higher. with so much uncertainty in north korea and new regulations in the mortgage market, they are just holding things steady despite this. cpi,e: take a look at that quite a beat at 2.6%. core cpi remains below the target for the be ok at 1.8%. domestically it seems like we are on solid footing. it is those concerns outside it left and right when it comes to china tensions in north korea that could be leading to more uncertainty for the economy, overall. export and import numbers coming out in the next hour as well. kathleen: it is a big night for numbers. taking a look at what happened in the u.s. stock market, we see green across the screen, any -- anywhere from .25% to 1%.

0.6%.p 500 getting the nasdaq up nearly 1%, 60 points. yvonne: giving us a good momentum here for the asian session. we had a pretty tricky month given the d.c. drama. marginal gains for the month of august. to end the oomph month on a positive note. new zealand flat for them nzx 50 . the kiwi at .7177. the dollar rally short-lived. equity futures in australia just marginally higher. looks like we can start things off pretty flat. look at the private gauge out of china later this morning for manufacturing numbers. the aussie could be heading to $.80.

a sizable beat on china pmi. yesterday there was a bid up for commodities. checking futures in japan, we are seeing dollar yen holding above 110. we saw a whipsaw for the euro after there was a report the ecb may be worried about the strength of the currency. euro yen. the kathleen: may be the euro bulls are safe until they hear mario draghi say he is concerned. let's get to the first word news with courtney collins. >> china says the party congress will open october 18 for the nation's biggest political reshuffle since 2012. the gathering of more than 2000 delegates gives president xi jinping to move allies into position and guide documents. many as a five of seven

bureaus on the committee could be replaced. thanal estimate see more -- say more than 10,000 homes have been inundated by tropical storm harvey. it has shut down much of america's oil and gas industry. it is now threatening neighboring louisiana. president trump is donating $1 million of his own money to help their relief effort. other prominent actors are doing that, like leonardo dicaprio. president trump's stick to be the top regulator had a tough hearing. he admitted he should have been tougher on the banks when he worked at the treasury before the 2008 financial crisis. the latest brexit talks broke up in a stalemate, over the u.k.'s divorce bill. they are saying they want an impossible bill. the pound was at the lowest in a week.

michel barnier said the u.k. is refusing to a knowledge the financial obligations until the contract has been made. as i said before, time is pressing, if we want to get what we want, which is a global agreement. at the current state of we are quite far from being able to say that sufficient progress has taken place. india grew at its slowest since 2014 in the second quarter as companies and retailers paired inventories ahead of the nationwide sales tax. through june..7% slower than in the previous period. putsifth straight quarter

pressure on the rba to keep rates lower longer. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. strong economic data from china as well as the u.s. pushing stocks and commodities higher. the dollar slid after secretary mnuchin said a weaker currency is somewhat better for trade. joining us now is su keenan. what do you think? day ford have a strong commodities and metals as well as energy complex. we did see stocks and gains across the board. not from the lower volume we typically see in this final week before the fall, which most of wall street tends to take off. many will be looking at their friday jobs data from their vacation homes. let's get more of that in a minute.

if we go looking for big movers, apple is in the headlines. it is the third straight day in a row it has hit a record. it is the eighth record for the month of august alone. september 12 is when they will the launch of-- the new iphone series. campbell soup gave a dire outlook. many investors concerned. warren buffett, who had recently bought a big food company has thrown water on the idea of buying anymore in dim hopes campbell will be acquired. biogen riding the combination push in that sector. let's go into the bloomberg at g #btv 3951. the implied volatility which is now below the historical volatility. that signals, if you take it from these charts alone, that we could be off to a calm start in the weeks ahead. we will see. kathleen: very specific aspects.

but for commodities, the best day for the bloomberg commodities index in more than a year. so much has to do with the big economic reports. su: you have to go back to november 2015 to see the index doing so well. when you talk about the china economic data, china the biggest consumer of metals like copper and iron ore. gold has rebounded after dipping after -- it is now above $1300. if we going to the energy complex it has not been all about harvey, which is crippled production in the u.s. and sending gasoline higher at the retailing futures level. in the after-hours we are coming off a bid but it was a strong day of gains in the regular session. let's go into the video of the texas area and the best headlines. we are finding is, at the wholesale level, gasoline prices are high. in new york at the retail level,

may have jumped significantly. rigs anduster of refiners in the texas area could be hit with yet another hurricane. we have hurricane irma forming in the atlantic. it is the -- this year. it may delay fracking. oil moved higher on the view there is going to be a long-term effect from harvey alone. yvonne: we have breaking news from the white house. saiddent trump saying he we debt limit increase -- been talking about how complicated the disaster has been, not just for texas the for congress. when it comes to negotiating the debt level talks as we get into a crucial month of september. we look more closely on this headline. once again, trump said to wegh

tying debt limit increase to harvey eight. -- aid. for july came in at 1.4%, well below the 1.2's -- 1.2% target. how should traders process this ahead of job numbers coming out today? let's ask our guest. jim, good to see you. the inflation picture has not changed much for months now. how can the fed continue to make the case for hiking rates? can,i do not think they and that is the problem. if you look at markets, they are not pricing in a hike until june of next year. even though the fed told us their preferred one more rate hike this year, three rate hikes next year, the market is looking at the inflation data and

saying, we're nine months away from the next rate hike. kathleen: but may be just a month away from unwinding the balance sheet. which camp are you in? this is like watching paint dry. do not worry about it, move ahead, or are you in the camp, this could cause more market waves than the fed is anticipating? jim: can i split the difference and say i am in both? the fed will start off really slow in reducing the balance sheet. it is not going to be a big deal , september 15, 16, nothing will happen in that regard. every three months they will ratchet up the size of the reduction. when you get into the second is when the that story plays itself out. the cumulative effect of the reduction in the pace picks up, we could talk about a second quarter 2019 story.

i am of the camp that balance sheet reductions are like more rate hikes. they are around to it if $50 billion, $300 billion of reduction. it will take 18 months to get the first one. the second and third one could come rather fast. it is something to worry about, but not right away. kathleen: -- explain what is going on in the bond market. i am thinking of the yield and 10 year. ago, a lot of guests said we should be higher than we are now. what is going on? this should not be happening with growth of 3%. jim: a couple of things. first of all, you have low inflation, that has been helping hold down the bond market. second of all, i would venture a that your guests said interest rates have to go up,

which means they already sold, which means they can't sell again, which means the bond market has nowhere to go but up in price and downing yield. as far as 3% growth, that is just for the second quarter. khat is an offset of the wea first-quarter data. there are estimates the third quarter could be hike, but we have to see what hurricane harvey does to the third quarter. there is a whole month of pulling back on oil production out of the greater houston area that could suppress that. you added up with low inflation and a contrarian signal on the bond market. everyone has sold out waiting for yields to go up. it is easy to understand why rates are at this level and might stay at this level a while longer. yvonne: stay with us, we will talk more about harvey. we will discuss this tropical storm and the damage it has caused the u.s. economy. october 18 for china's biggest political reshuffle in

five years. see what it means for the world. this is bloomberg. ♪

kathleen: this is "daybreak asia ," i am kathleen hays in new york. in hongi am yvonne man kong. several months of unsettled economic data. major weather events have typically led to significant swings in succeeding monthly reports. let's head to our bloomberg economy reporter, steve matthews. we just got this line from our d.c. team saying president trump is said to be tying the debt limit increase to harvey aid. $6s could be close to billion for hurricane harvey. how far could that go when you think about the overall effect

harvey has already had? steve: it is a fascinating story. if you look at what the wall street firms have been saying, since harvey has happened, the political appetite for a debt debacle like not raising the debt limit or having a government shutdown -- the appetite for that has diminished. you have firms like goldman sachs saying they will be double to negotiate this, make things happen, because it would really be politically difficult for their to be a government shutdown at the time you expect the government to be working in helping people in a city like houston right now. a fact thatn't it texas except for austin is a very red state? steve: absolutely. kathleen: when you look at the damage done to texas does this make republicans in the house

and senate stop and think, we have to make those voters happy and whole again? steve: absolutely. there was some resentment over the aid in new york over hurricane sandy and there were some votes against that. this would be a really difficult vote to vote against aid tied to a debt limit for anyone in a red state, i would think for any american. kathleen: thank you for joining us, setting the stage for not only what will happen with harvey as we look at the economy, but also the debate in washington. he is our economy reporter in atlanta and fed watcher extraordinary. jim is still with us. let's get to a bread-and-butter question. we know hurricanes happen, they cause a hit to the economy. there is rebuilding in the economy bounces back.

can we check this question off the list when it comes to harvey and the fed? jim: yes, i think so. that is exactly what is going to happen. willata the fed will see come with all of these caveats and asterisks. one of the bigger gdp sectors is energy. of refining capacity in the u.s. is down. it will only be down for another week or two. but it is down right now. it will have a drag on the data. in this world when we all worry about the data and what the fed will do a couple times here or there to make or break what we think about monetary policy. you mentioned the fact inflation is so low. we have the jobs report tomorrow, it will be healthy. not move the needle on inflation. if i am buying and selling the dollar, which is been sold a lot been soldthe euro has

a lot lately. what difference does it make to currency traders? is the ball in the court of the euro now? jim: that is exactly right. the euro has been soaring. the dollar has been falling. it has all been a story about recovery in europe right now. it has been the european story driving it. ofwe are going to a period dollar strength we do not need to look at the u.s. economy with u.s. inflation. it is whether or not there is a rollover in europe and if their data starts to roll over. -- see thed of scene signs it could be. it is not there yet but i suspect it would. if it does come i would expect a bout of dollar strength. yvonne: talking more about the harvey impact, we continue to see recovery impacts -- efforts which could be weeks. some say it could take years to keep things -- to get things back to normal.

in terms of the refinery, how long do you think they could be shut -- stuck in shutdown mode? and how long can gasoline prices continue at these levels? jim: they are saying two weeks. the september contract was well over two dollars. if you look at the november contract it is $.50 to $.60 lower, pre-harvey. i do not think this will last more than a couple weeks. the shutdown we are seeing in a couple of these refineries could alleviate as early as this weekend if it stops raining and the waters continue to reseed. ede.ec half a million cars have been flooded. half a million cars will have to be replaced. that will greatly impacted the used car market, maybe even the new car market. one of the biggest industrial products the united states makes is automobiles and we have now

created an artificial demand for automobiles because of hurricane harvey. yvonne: jim, always appreciate your insight, joining us live from chicago. 20 more to come. this is bloomberg. ♪

♪ yvonne: apple has told u.s. regulators it opposes higher fees for after internet access, joining amazon and facebook, they are protesting the rollback of net neutrality rules. this comes weeks after apple said it would spend $1 billion making movies and tv shows to stream online. let's bring in alex webb joining us live from san francisco. have been tightlipped, apple, when it comes to net neutrality. seems like they are joining in now. we must clarify, apple has

not said they will spend $1 billion for content, this is something they are investing in. when you tie the two ideas together does suggest there might be a motivation behind this. apple is a company that gets more than 2/3 of its revenue from hardware, most from the iphone alone. and there are the services like the app store, apple music, icloud. this streaming service is likely to use a lot of band worth -- bandwidth. they do not want to pay more for this, should net neutrality rules be abandoned. eight $1 trillion valuation -- how much is it, this movement of services? the long-awaited launch of a superduper new iphone will cost about $1000. -- it is a two ideas

virtuous cycle. apple devices.on the more you invest in apple services, apps, music, the more keenly tied you are to an apple device. there is a third element recently since we are getting closer to the iphone 8 launch, and that is offshore cash reserves. there was the hope under the trump administration that money would be repatriated and returned to shareholders. kathleen: tell us about the launch for september 12, special for apple. invitationt the today. i will be down there in cupertino at the steve jobs auditorium. they suggested the campus itself would be named after him. they decided to name this underground auditorium after him. it will be a lot of interest in this as well as the phone itself. we will see a new phone, apple tv, and watch. kathleen: thank you for joining us from san francisco.

beginsup, the countdown as china announces the start date for its party reshuffle. this is bloomberg. ♪

♪ 7:30 a.m. friday in hong kong. minutes away from the first market open. kathleen: 7:30 p.m. in new york. markets closed higher, in the green across the board's. a beautiful evening in new york. to a fullrom 1/4 percentage point higher on market indexes. s&p 500 up 6/10 of 1%. nasdaq up nearly four

percentage points. i am kathleen hays in new york. yvonne: a pretty good labor day holiday it seems. you are watching "daybreak asia ." nasdaq uplet's get the first ws with courtney collins. --president trump has sha slashed spending on obamacare, saying he will allow it to with her. the health and human services department will cut the budget to $10 million for 2018 coverage, from $100 million earlier this year. democrats criticized the move, as did health market experts. with in mexico city, president trump's rhetoric expected to feature prominently. he threatened to pull america out of nafta, four times. any of the three nafta partners can quit with three months notice. the u.s. military has deployed

fighters to north korea and displayed an aerial show of force in a clear warning to the north. the u.s. pacific command says the drill was launched in direct response to the north firing a ballistic missile over japan earlier this week. at least 12 people are known to have been killed when a building collapsed in mumbai. there were as torrential rain and several people still unaccounted for. the residential building was about 100 years old and many similar blocks are feared to be at risk of collapse. 17 people were killed when another mumbai building came down. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. yvonne: let's get more on what we should be watching is treating gets underway in asia.

sophie kamaruddin joining me now. we had a rough august. september is probably going to be a little bit more rocky. >> it is a busy first day to start with. lots of documents and asia, reacting to what happened on wall street. the big picture pulling up g the asian you can see stocks lost some steam, making it the worst month for 2017 this year. it did hedge out global stocks. when you break it down and take a look at japan, stocks flipping in august. at the end of the summer, investors may have silver lining. gain shares tended to through september and the end of the year. yvonne: we keep hearing it will be japan. >> take a look at what is going on with futures, looking like a tepid start when it comes to the open in tokyo. korean stocks could temper on a

positive note after the first monthly decline since november. we have lots of data on the docket. sydney shares hovering around the 5700 mark. the asx 200 has lost ground for several months. we will watch commodity stocks closely. continuing to outpace gold. the best month for copper since 2009. yvonne: you have the weaker dollar and china pmi helping things. let's check out hong kong. we are untended in the month of august. we see another monthly rise, the longest stretch in a decade. can we hold at the 28,000 level for hang seng? >> showing you this chart g #btv 4034. the best streak since 2007 for this index. while it is closing in on the top for 2015, this rally could be different.

80% of companies have reported earnings growth so far compared to 56% this time two years ago. that, after hitting a record in august on its result. tencent was the biggest boost to the hang seng after strong revenue. the market is trying to catch up. pulling up g #btv 4225. earnings have a but hang seng prices have not moved too far. the hang seng valuations are still looking cheap. companies on the benchmark trading at 12.3 times estimated earnings. that is a discount of more than peaks we saw in 2007. kathleen: we are wrapping up a heavy week for earnings in hong kong. cannot rally continue? -- cannot rally continue? >> the property bears are

nursing their will and. despite signs we see slowdowns for the china property market. real estate is the best segment on the msci china index. is the top dog in the rally, soaring 200%. both stocks hit new record highs this week as it has boosted earnings in the first half. you can check that out on g #btv 4233. grande --ou ever evergrande's revenue more than doubling. core profit 204%, on the back of an aggressive expansion. the chairman is staying cautious about expectations there will be more cooling measures ahead. we are waiting to see what xi jinping may have to say when it comes to addressing market the upcomingell as congress. kathleen: thanks, sophie

kamaruddin. put it on your calendar. china has named this date for twice a decade communist party congress. they are slated for replacement, with president xi determined to entrench his power now. our correspondent joins us. for people -- is there any other country in the world that has something like this? twice a decade, were so many aspects happen at once, leadership, reforms, consolidation of power. it is not surprising so much of this is important for the chinese economy. the tone, the narrative for the next five years. what happens for china's economy is important to the world economy. plenty to look out for an upcoming congress. in particular, the work report, which is very important in terms of setting the direction for

coming years. five years ago the initial indications were that the market would have a role. there was a feeling president xi would become a liberal arrived -- liberalized and a performer. but there has been steps toward control of the state as well. to see whateresting personalities are lined up at this congress to set the tone for the years ahead. kathleen: to what extent and in shift did nots happen -- perhaps more openness are getting a grip on power, already seems to be entrained. do you think the election of donald trump and the change of tone and direction, when it comes to trade and other aspects that are very important to china, do think that perhaps has had in impact on -- influence on xi? enda: absolutely. it is a curious affect. in many ways, the election of donald trump has launched china

into a qualified leadership role. would not want to overstate it, but a defender of globalization, the status quo for world trading relationships. not least, they stepped up on climate change after mr. trump's promised a full out of the paris accord. on the global stage, china has been forced to step up. domestically perhaps trump has done them a favor. his rhetoric has weakens the dollar and that helps china with which takes pressure off [indiscernible] it helped force recognition in china that they could open up some parts of the market. allowing greater market access in some areas. not just america, but they would expect more going forward. the election of donald trump has had an impact on president xi to some extent. yvonne: it is earlier than we were expecting. we were calling for november.

xiryone is talking about jinping, do not worry about what will happen to financial markets in the economy until after the party congress. are we expecting more volatility after october? what does it mean for the markets and the currency? enda: we have been on hold with the china story and told nothing will happen until after congress. there will be volatility. with a new narrative we will shakeup. will there be no language in deleveraging? on the currency as well that would be important because one thing we know it has been shake. steady to strengthening this year. the suspicion is, will the policymakers in china use the post congress window as an opportunity to let the currency we can take pressure off the economy to help exporters a little?

one to watch and were most volatility might come is from the currency exchange rate. yvonne: we just broke below 660 for the offshore, 12 straight days of gains. when it comes to capital control we will hear about that. enda: it is unlikely we will see immediate liberalization of control. that is in a big part of stabilizing china's financial market. when the currency was expected to weaken, there was a push to get money out. that changed when the exchange rate controls were enforced at the border. there has been a clampdown on outbound m&a. i do not think there will be ion of theliberalizat outflow story. we cannot let it go too far, because then everyone wants to get their money out again.

that is the balance to strike when it comes to the yuan. kathleen: what about the geopolitics in the asian region? the whole question over the south china sea and who owns what -- is that something the chinese push to one side because they do not want to over emphasize it, or is it something that might be addressed squarely in this 19th party congress? enda: geopolitics is never far from the debate in china. there is more assertion on the part of xi jinping when it comes to overseas claims. the south china sea dispute is far from resolved. it could flare up at any point. the focus in the near term remains north korea and china's role in that. -- a vital a violet role in economic sanctions, seen as important putting the brakes on the nuclear program of north korea. some nations thing china could do more on sanctions, in

particular the north korean energy supply. north korea is probably going to be the one dominating in the near term. kathleen: thank you so much, enda curran in hong kong. this will be keeping him and many of our bloomberg correspondence busy. the u.s. congress going back to work next year. what businesses will ceos be watching? we discussed this with a pwc partner. he says the debt ceiling may be the number one focus. this is bloomberg. ♪

♪ we are counting you down to asia's first major markets open. japan futures up 40 points. looks to be a positive open in tokyo. .12lar-yen, weaker at 110

against the dollar. this is "daybreak asia." kathleen: u.s. congress returns from its summer recess next week with plenty of work to do. the debt ceiling as the number one focus but a new challenge may arise in the debate of hurricane harvey relief. isning us now to discuss it a pwc partner. it thank you for joining us. thes get started with latest news our bloomberg team thatshington reporting donald trump may be explicitly tying the debt ceiling limit in an agreement -- and an agreement on that with hurricane relief. a very complicated thing because some republicans are saying, if there will be relief it has to be paid for with cuts. it?did they do how do they balance the politics and make sure they are not hurting the people of texas? reform, withve tax

corporations and individuals in it. it is very difficult. you would think that something as simple as finding relief for the folks in texas and maybe louisiana would be totally apolitical. but i do not think anything anymore is totally apolitical. they will have to find the funding from someplace. the debt ceiling, absent texas, was on the number one mine -- was the number one thing on everyone's mind. it is all very complicated. the thing really concerning ceos, you mentioned things concerning ceos, all this uncertainty is hard to plan for if you are a business. you do not know what your tax rate will be or the outcome of the country from a financial perspective. kathleen: the question of a debt

ceiling and -- it is political theater. gingrich shut the government down four times in a year and the republicans lost the house. they know how difficult it can be. but these negotiations could lead to tax reform that republicans are pushing for to bring down the corporate tax rate from 35% to 15%. this is what ceos and business owners are focused on. mitch: if we do not have hurricane relief going into the debt ceiling debate, many republicans do not want to report -- support raising the debt ceiling at all. that will force the treasury secretary and the administration to go to democrats and get by and for the policy. when they go in that direction will water down promises made by republicans. within their policy there may be pushback that will spill back into tax reform. it is all interconnected.

yvonne: how can they get support from the democrats when the president is tweeting and accusing people in his own party, like mitch mcconnell, like paul ryan? there is only something that is important to somebody. the question is, what are those trade-offs going to be and what is the cost of that to the budget? but also a lot of maneuvering can take place in tax reform tax some of the temporary loopholes that are in there. if you extend those and make those permanent you may be able to play around a little with budget neutrality. all of that will be on the negotiating table. the president fancies himself a dealmaker, this may be the biggest deal he has ever done. what weyou mentioned can see in tax reform could be permanent. you mentioned the tweaks in terms of offsetting these cuts. what would that look like? especially now that this border tax adjustment is dead.

mitch: border adjustment tax looks like it is off the table. that would've paid for virtually everything. $1 trillion could have come from border adjustment tax. and make this permanent, you begin to make the opportunity potentially -- this is one reading of the way the world's work -- to traded off against something. it is hard to say both sides because there may be multiple sides -- they may all be looking for something they want to trade. that the good people in texas get caught up in all of that i do not get the appropriation they need to rebuild texas. kathleen: i will bring up the border wall. our team in washington also reporting one of the reasons trump would like to decouple the debt limit for fighting congress over funding a border wall, because it risks of shut down, he would rather move it back somehow. kenny step away from it?

like it,yone republicans and democrats, if the president would step back from that and hammer out a budget agreement? mitch: you have 12 working days in congress and the month of september before the debt ceiling limit potentially gets hit. i think the priority of everyone is to work at the debt ceiling and try not to pull too many red herrings into the negotiation. kathleen: how would you characterize the positions? to be moree seems unity when you talk to democrats than when you talk to republicans. their position has been to devote -- to vote no to everything. but they all have to get reelected as well, in 2018. everyone will start focusing in this next round of budget debate, focused on midterm elections in the impact of what they say, do, support, don't

support. mitch roschelle, think you for joining us, a partner at pwc. you can get a roundup of stories you need to know to get your day going in today's edition of daybreak. subscribers go to dayb on their terminals. it is available on mobile. you can customize settings to only get news on industries and assets you care about. all of this you can find on bloomberg. this is bloomberg. ♪

♪ yvonne: this is "daybreak asia." i am yvonne man in hong kong. kathleen: i am kathleen hays in new york. the prime minister said they need to raise their game on brexit. there was a lack of clarity unless the government is open --

they say the negotiators must do better. >> there is some uncertainty around brexit. one thing i have been lobbying the government about is more certainty. one thing realistic is to conclude [indiscernible] i am pleased the government is listening. there will not be a cliff edge fall in march 2019. they should be reassured the government is listening. i think the government should say sooner rather than later. at least it during the transitional arrangement. in my view, even after we leave the e.u., we should be members of the single market. in the government recognizes what the single market is so important. they will have the certainty there is no need to make plan b.

>> the negotiations seem to be stumbling. it is not a concern to you? >> i think the prime minister and cabinet have to raise their game. i have been saying for a while now they need to make sure they are negotiating good terms with a sense of positivity with the e.u., but recognize the negotiations. i am pleased to see that davis -- david davis and his team have done well. if you are in the shoes of the e.u., it is not possible for someone that leaves the e.u. to have better terms than the others. there is a good deal ahead to be done. i think we should give a guarantee to london and the u.k., irrespective, we will give you the guarantee you want.

that would lead to goodwill. interest --ody's [indiscernible] that was london mayor sadiq khan. coming up, plenty on south korea. the wrath of the eco-data out today. and we have the most bearish economists when it comes to growth in 2018 for south korea. we have export and import numbers. plus, is gogovan hong kong's first unicorn? our guest think so. he will join us to explain. yvonne: we are counting down to asia's first major market open. futures looking positive as we

start a new trading month of september. we are seeing nikkei futures up 60 points. the dollar weakness we do see, that rebound is short-lived. the yen is back at 110. the yen is back at 110. ♪

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a.m. here in hong kong. welcome to "daybreak: asia." 18, we will see president xi schick things up. and the latest brexit talks and in deadlock. the u.k. refuses to assess its financial obligations. kathleen: and i'm kathleen hays in new york where it is just a -- just past 8:00 p.m. the fed is equally concerned about inflation. storm shut down a

quarter of u.s. refining capacity, and that is offering a rare windfall for asia. ♪ yvonne: we have more breaking numbers coming out for the month of august. exports beating estimates of 17.4%, kathleen. so bigger than what they were expecting, but slightly off from what we saw in the month of july. imports year on year, 14.2%, that was a slight miss there. that thisto show foreign demand coming out from the trade picture's hill quite rampant. it goes to show --

kathleen: it is interesting because we did get the gdp figures as well. 2.7%, coming in with forecasts. jobs are looking pretty good, consumption is looking pretty good. but if we can, i want to pull up a chart that is a good one. what it shows you come up broadly the correlation, the white line is korean exports. the bars are korean gdp. the fact that gdp is moving so nicely higher suggest that the korean economy should easily hit that 2.8% this year. i wonder if the outcome will be that exports continue to rise. if that number will come in on the higher side. core inflation was not too bad, if that will support the case of those who say that by the middle of next

year, be ok, bank of korea, will have to raise rates a little bit. yvonne: and the government just announced and proposed this budget, the biggest spending increase. how does that factor into the policy as well? kathleen: we shall see. first, let's get the first word news with haslinda amin. the partychina says congress will open on october 18 for the biggest political re-shoppers since 2012 -- reshuffle since 2012. it will give the president the -- theo meet allies and chance to move allies and to top positions. as many as five of seven officials could be replaced. initial estimates say more than 100,000 homes have been inundated by tropical storm harvey. the floods also shut down much of america's oil industry.

the system is moving north, threatening neighboring louisiana. 25,000es put the loss at billion dollars to's 27 -- $227 27,000.-- to -- we are told the white house request could come as soon as friday, including by $.5 billion for fema, and the remainder --the latest brexit tolls broke a stalemate over the latest arose -- divorce bill accusations that the u.k. is pursuing an impossible bill. the impasse increases the chances of the u.k. leaving the eu without a deal in 2019. the u.k. is refusing to announce -- acknowledge financial obligations. as i said before, trying --

time is pressing. if we get what we want, which is a global agreement. ,he current state of progress we are quite far from being able to say that sufficient progress has taken place. -- the second quarter with companies and retailers carried inventories ahead of a nationwide sales tax. below the 6.5% median estimate, and slower than in the previous period. this raises pressure on the r.b.i. to keep rates lower for longer. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.

i'm haslinda amin. this is bloomberg. tradingend of the the, we get the latest on markets open from tokyo as well as sydney. it seems they are ending on a good note. firie -- sophie: official numbers beat estimates yesterday. take a look at what is going on. longest streakts since 2010. games for the3 offshore rate. we have the aussie dollar giving up some of its earlier gains, but still holding towards that high we saw in the new york session ahead of that data, and aussie shares up by 0.1%. second-quarter gdp data is due.

out of korea, we had a slew of data from there. -- the one isdp at 1122.. the strong cpi could be a catalyst for the dollar that could test the lower range of the dollar one for this year. kiwi stocks in the currency, little change after new zealand's terms of trade missed, but that could be more potter -- fodder. rising after posting its fourth monthly drop this year. despite a recent rise -- decent came inprofits, japan less than forecasts. that adds to the drag we are seeing for the yen, after it slipped easily below the level

after murmurs at of d.c. dragged on the greenback. highlights in the commodities space, we have iron ore rising as well as your -- steel. little changeda at now, but we have gold 1300. that is a solid support. and -- edginges closer to that $40 a barrel. -- u.s. crude service has been dented. and malaysiapore and markets off-line. kathleen: yvonne and i want to take a look at the job numbers coming out at a: 30 eastern time eastern time.

it reflects the u.s. economy, every part of the industry, and it is like a barometer. monthin line with a 12 average. -- bloomberg intelligence thinks it could fall. hourly wagesbit of because around 2.6%, up 0.1% it is, a plateau even with such a tight labor market in the u.s.. yvonne: we were talking about the inflation numbers we got on thursday, and it was once again the same inflation story. prices movesaying higher. how long will the fed make the case that cell phone prices are all transitory? kathleen: because you brought that up, i will show you one of my favorite charts. let me just put it so our viewers can see it nice and

clean here. is theu are looking at core and the headline down to 1.4%, but the green line is the target, to present -- 2%. as you think, two or three more rate hikes, and then you get that. yvonne: we have more data that came out yesterday. what an upset. at second quarter coming in high .7%. %.at brings us back -- at 5.7 that was a lot of concern on the demonetization campaign, a lot of uncertainty around the gsp as well. a lot of people saying this would win -- this would be the quarter we would see the v-shaped recovery. kathleen: it is interesting find thatthink people

the demonetization impact was pretty much over, and the concern looking ahead is the gsp because people are pulling back on inventories. that is one of the things we saw on the gdp reports from india that was maybe not so anticipated. it is hard to say, because i think many people support what to do.s trying he wants better tax collection, he wants people to have all their money on the table and not but taking a toll on the economy so far. yvonne: we will see if the r.b.i. can squeeze in another rate cut after we get a surprise in the last meeting. come, growth remains stable at among tensions with the north. we will have more with young-sun kwon. kathleen: and later, we will speak to the ceo of gogovan,

fresh from their tie up. this is bloomberg. ♪ ♪

yvonne: this is "daybreak: asia ." i'm yvonne man in hong kong. i'm kathleen hays in new york. south korea's economy expanded in the second quarter, matching forecasts. a tick down from the previous three months. our next guest has a bearish view on the gdp growth for 2018, so let's find out why as we bring in young-sun kwon, a senior economist. thisally, your take on 2.7% number, we know they were looking at 2.8% gdp growth in 2017.

it looks like they are on target with exports rising. are you more bearish on the economy next year, or is it now? you don't believe these numbers? these numbers are posted by private consumption, but don't forget that over the last --r and a half, south korean contributed to more than half of gdp. over the next 1.5 years, i expect the government to announce tough measures on the housing market. we believe the housing market will go into a housing slump. the other one is the north korea risk. because of the concern about north korea, actually the financial conditions are getting tighter. the construction sector to is tied to financial conditions.

chinese choice to believeth korea, but we that north korea will have an impact on our construction sector in south korea. kathleen: we have already seen some of these geopolitical tensions. export services have slowed toward them as well, given the tensions with china over the travel ban. at what point does it start to hurt animal spirits in korea? guest: there is some kind of a dent in korean -- in consumer confidence. policey,ges in fiscal and a tax policy in south korea. south korea raised minimum wage 16%. that is the highest growth in more than a decade. the other one is the government tries to raise the corporate tax for large corporations.

there was a decision by the korean court about the compensation for the automobile. feel aeve the managers bit uncertainty about the government policy. yvonne: that could delay investment plans moving forward? guest: exactly. don't forget, investments this year was strong, but mainly driven by the financial sectors. but other sectors, we believe they are struggling with the demand -- with weak demand. yvonne: it puts you in a top position where you have domestically received growth at they are dealing with so much externally as well when it comes to foreign demand for exports.

also with geopolitical tensions as well. his term ends march 2018. can he actually squeeze in a rate hike by then? guest: that is why we believe the rate hike will be delayed. we believe they will have interest rates in the second half of next year. we believe the rate will be around 2%, and inflation surprise on the upside. this is because of food and energy. we believe the pressure still remains. the be ok highlights that. they are looking at the demand side of inflation. highs. it is also the concernt is the biggest for the korean government in the bank of korea, but don't forget the government announced comprehensive measures for household debt in september, and have also announced very tough measures in the housing market. because it is one of the big drivers per household debt over believe three years, we

that be ok may see that combination of regulations and householdo bring down debt. kathleen: i am so glad you are connecting the dots in that way, because i think everyone assumes you have high household debt, but if you raise rates you would spike it too much. by the same token, people think you can't afford to cut them because the economy is strong enough. i want to bring up another chart to bring some things into perspective when we talk about inflation, because we got inflation numbers. the core was pretty tame. #btv 9497, it shows the rate at 1.25%. i think your argument is very compelling. you have the inflation rate at 2.6%.

if you are the u.k. and you have pushingnd a weak pound inflation rates higher, you can understand it, but korea seems to have no explanation for it. is inflation, 2.6 percent is mainly due to the food prices because of very bad weather in south korea that pushed up consumer prices. and the other one is energy prices. the last couple months gave temporary reprieve on energy. are excluding the agricultural and energy prices, i am sure the core cpi inflation is only 1.8%, and we believe they will remain the 2% target over the next one year. that is why we believe that be ok will not focus on the supply side of temporary inflation.

rather, they are focusing on the demand side, the inflation pressure that we believe is still week. compelling make points about the risk and regulations. thank you for bringing that to us on "daybreak: asia" tonight. young-sun kwon, we certainly thank you. you can get a roundup of the stories you need to get your day going on today's edition of daybreak. bloomberg surprises go to dayb . it is also available on mobile in the bloomberg anywhere app. you can also customize your settings so you get news on industries you care about. check it out. this is bloomberg. ♪ ♪

this is "daybreak: asia." expedia's new ceo says

his predecessor will be fantastic at uber. with him for years and says he will be a great fit in his new job. he says expedia has been working on succession plans for some time. his departure was not a shock. >> you talk about these things for years. you prepare the team for the big one, and you get a call sunday night, and suddenly the game is in -- isn't in two weeks, it is now. it unfolded like that we were all ready for this eventuality. i don't think it unfolded the way we planned, but i think we were excited. we are excited for dara. i think he will do a fantastic job. reporter: when it comes to you and your job, you say no one else was considered. i know you have worked together for many years. what is your vision? what are some things you might do differently? as i have said, i have been

strategically involved in the direction of this company or a long time. in the been lock step strategic decisions, along with our chairman. i do not have a long list of things i am dying to change. prioritiesumber of across the company, certainly becoming more international is one of our key priorities. we will focus on expanding globally. think you are going to see a lot more of the same for us, and if i do my job well, maybe we can go a little faster. emily: you now have deep ties to uber's ceo. what are some ways you can work together, like free uber rides for expedia customers? >> have talked a long time about possible ways to work with uber, integrating their service into the expedia or the hotels.com app. i am hopeful that these talks

will be a little easier. ra is walking into a credibly -- an incredibly difficult situation. several lawsuits, difficult dynamics. why us a little more about you think he has what it takes to take on some of these personnel challenges. mark: i think above all, he has one of the highest levels of emotional intelligence i have ever seen. he knows people, he is humble, he listens, and i think above all, he makes the people around him at her. people want to be around him, think the way he does. he is a man of high integrity. values diversity, he values gender balance. he stands for the great things -- from what we read, maybe lacking at uber. i have 100% confidence that it

will be a better company under dara's leadership. lyft isuber rival moving into rural areas of the u.s. in a bid to grab market share. they will offer service in every corner of the states it operates. 79% of the u.s. population had yft, ando l that has risen to over 90%. anair says it will bid for bankrupt paula thalia -- alitalia. they say staff will be retained, although they want -- they arers to 3 not interested in air berlin. looking ahead, save the day.

investors should be watching for it. this is bloomberg. ♪

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yvonne: happy friday. we are an hour away from the open of trading. upterms of equities, leading to the crucial u.s. jobs report later in the u.s. hays in: i'm kathleen new york. it does not get much more important than the monthly jobs report. get to the first word news with haslinda amin in singapore. a second round of nasa talks resumed in mexico city, with president trump's rhetoric expected to figure prominently. since the first round, he has threatened to pull america out , in a deal four times

twitter post, and at a news conference with the president of finland. any of the nafta partners can notice.h six months korea's exports jumped in august, beating estimates, while imports fell short, leading a trade surplus. growth of 2.7%, is the same is previous -- as pretty it -- as previous estimates. the bank of korea held its key interest rates steady. the u.s. military has deployed self fighters to south korea and demonstrated a show of force as a clear warning to the north. the exercises included a b-1 bomber and for f-35's. the u.s. pacific command says the drill was in direct response to the north firing a ballistic

missile over japan earlier this week. operatorst junket plans to be more than just a middleman lender for high rollers. they plan to transform themselves into a fully fledged overseas operator. they have already experienced it and have some plans for japan, when casinos are legalized. >> we are actively planning to enter the japanese markets and have an monitoring official announcements and local rules. we are working on the feasibility of casino projects. we have been in touch with local corporations for potential tieups in integrated resorts. and the "star wars" empire continues to grow. sales increased by 5% last year to 20 $.4 billion star wars is

-- the machine will soon be in top gear, showing toys ahead of the new movie in december. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm haslinda amin. this is bloomberg. time to see how the asian markets are faring on this friday morning. we have the latest with sophie kamaruddin. sophie: starting september on a positive note. we did have company profits coming in better than expected for the second quarter, perhaps hoping equity bulls. kospi still-- edging higher. the offshore yuan continuing to rise ahead of the key data.

are mostly climbing, but treasuries are falling as the dollar holds its gains. they are rising ahead of the next meeting with australia and u.s. 10 year yields. keep an eye on that spread. we have oil under pressure. crude has slipped below the $47 a barrel numbers. they have their forecast with the best profit since 2009. long-term revised its pricing. the earnings forecast has been upgraded. corps,ks include glen but it is a mixed bag in sydney. the miners are gaining.

gold producers, they are also rising down under. bloomberg intelligence says they could be on the verge of a bullish reg out about 1300 -- break out about 1300. taking a look at what is moving in tokyo. i want to highlight a and a holdings. they're buyback program stopped rising the most in a year. today, we have the nikkei bumping off its average. good news for tokyo. yvonne: sophie, thank you. to china, we have the date for to twice decade -- twice per hash predicted communist party meeting. marketsg's global

editor m o'brien joins us now. -- emma, is it, risk?headline are there in analyses getting us ready and trying to tell us the trigger in the markets? emma: i am sure we will definitely get a lot of that, but in terms of what could happen in the markets, i think it will be more of the same. that is a steady, almost be thatl -- almost eerie calm has been engineered by beijing. they do not want any surprises, mood any speculation that could lead to a collapse. 2014.ng like we saw with things will be steady as she goes, and we are likely to see a continuation in the gains in the

yuan we have seen. it is in a 14 month high. well on the mainland showing a bit of a recovery over the last couple of months. trying to catch up with what we have seen with stocks trading in hong kong. yvonne: as china aims at being a global economic, financial powerhouse, certainly stepping up their markets into the modern world is part of that. i am waiting to see if they make their central-bank more transparent. deleveraging? will this be a focus of the 19th party congress? what should we be focused on now? be two thingsll people are focused on specifically at the congress. these are the personnel and work reports. the work reports is where we will be looking for messages on market liberalization. one man has been a big proponent

of this, the premier. it may not be a good sign for markets. that opening up of chinese markets. it has been strengthening, but there have been more interventions, more controls around it. there has been a cognizance that they don't want it to be on this depreciating trend. to afterwardseads more opening of the currency, making it more tradable outside of china is anyone's guess. we spoke to a former official come a very top official at the currency regulator a couple months ago. he said there will be nothing up to the congress. everything will be steady as she goes, but afterwards we could expect a comprehensive reform package for financial markets, and that could include you on liberalization moves. yvonne: what can we expect after

the congress? you mentioned we could see a pickup in voluntarily th --e volatility. this is seen as the president's moment. emma: there is a lot of speculation about that. we have goldman sachs saying that usually there is a pickup in stock volatility. we could see more movement in the you want, but you are right. they will not want to end this by starting the new five-year term that the bout of craziness in the markets. i think while we will see some slow steps toward more opening, more flexibility, that'll be still a long time to come before we see a fully open and freely traded market here. is there anything that

can go wrong in this meeting that you foresee? emma: well, that's a good question. i guess if you get a speculative attack, or if there are some issues to do with margin trading, that has been a problem in the past. that was a problem in the boom bust cycle. this is a retail investor market. it is dominated by small, individual investors. that makes it a little less predictable. institutionsve the that work on a longer time frames so much as you would in other markets. they will have to keep an eye on things as there are things that could go wrong. o'brien, thank you. switching to the oil markets, almost a quarter of u.s. crude

texasut down due to the storm, and that presents a rail or opportunity for asia. ben: given the importance of the u.s. refining industry, we see the effects of harvey rebel. you mentioned the opportunities in asia. there are opportunities everywhere. fromrs are booking cargoes as far away as singapore. the quarter of that refining is off-line in the u.s. is all having this large ffect across the markets. refineries are all down at the moment, and it is having a large effect. yvonne: how long-lasting for this rare opportunity be? co said it could be

back online in two to three weeks. ben: you are seeing some refineries in corpus christi that were hit on friday starting to resume their. it is all about the floodwaters, was their destruction import channels? all that needs to be assessed before these refineries can come back online. there are estimates at two to three months this could carry on for. it is wait and see. you see it internally having an effect. airlines are shoring up their jet fuel supplies. you see motorists in far -- as far away in florida where gas prices will rise because they cannot get their gasoline. of then: i guess one good pieces of news is this occurred in a time when oil and

gasoline prices in the united states had fallen so much. even if they come up, we now have hurricane irma starting to brew. refineries can come back on track. do we have a sense yet of how long prices for gasoline and national -- natural gas could remain elevated? ben: it is soon you start seeing the refineries come back online. definitely prices will go down. at thede oil market start of harvey still in that fundamental situation where we are working through large stockpiles in the u.s. and globally, but demand is picking up there. there are positives. you mentioned the period also, harvey hit towards the end of the seasonably strong period in the u.s. had it been a month earlier,

there could've been a more significant increase. once we pass through harvey, expect prices to decline and prices easetock -- back into those ranges trending before $45 and $50 a barrel. if demand picks up, they should climb toward that higher and at $50 a barrel. yvonne: thank you so much. coming up, we hear from logistics booking in hong kong about its tie up with a unit from china. ceo joining us. this is bloomberg. ♪ ♪

is "daybreak: asia." yvonne: hong kong logistics app gogovan merged with a chinese competitor this week.

we will discuss the merger with the million-dollar valuation with gogovan founder steven lam. stephen, great to see you -- steven, great to see you. this $1more about how billion by the way should arrive for the company. was it based on combined valuations of the two? steven: we cannot just add the two together. we have a lot of business in china, and a lot of energy by merging. one reached more than million drivers in china, and they share their consumer base with us so that we can share one gigantic delivery network within china. that is where we have a lot of synergy. yvonne: did the

company raise any more funds? steven: we are very excited about that. we are the dominant payor in china. have you gotten any funding from dc? how much is the company raised so far? from --they sped up supported by alibaba. from alibabading fund.w horizon, a major amount, of the total they raised over $300 million. yvonne: just fill us in in a few basics in the two companies. you are similar in what you do. how did you get involved in this startup and give us a sense of

how much of china, how much of the business do you actualyl have? -- actually have? involved, ii got couldn't get a job after i graduated from berkeley. i moved act of hong kong, and i becoming successful in hong kong and we expanded into southeast asia. in china, we grew gradually over time. by last year, we were working with 58 suyun on business collaboration. we worked much closer to build the base. and then, we talked to our own customers and we shared it would we got to is how where we are today. kathleen: necessity was the

mother of a brand-new, very big company that is soon to be a unicorn. a lot of companies raise money before they make money. are you turning a profit? what can you tell us about that part of your business model? e -- we are ar profitable. expect we can control it by the end of 2018. weis a matter of time of how expand our business in china that will be key. yvonne: you have your competitors. they are all expanding very aggressively. do you think some of these rivals will be a big threat for you? steven: i don't see them as a threat, but it is motivational logisticse economy in

is way behind the other markets. it is time to use technology to disrupt it. especially in the logistic have no ideaowners how to apply technology to their business. yvonne: is tencent going to help in that? steven: our shareholders are very supportive. everyone knows that logistics is one strategy that is very key for both tencent and alibaba. we play an important role in the future. yvonne: i know you are still aiming for a listing in hong kong next year, was it? "daybreak: asia steven: -- steven: in the next two years. yvonne: i have a chart to show how they are doing. the white line is the ipo index in hong kong, which includes the large ipos within a first year of going public.

largely underperforming. does that weigh on your decision on when to go public? steven: that is a good point. we will see it in a year or two how the markets perform, and those will be the key elements. we will look at that right before we make a decision in a year or two. yvonne: thank you so much for stopping by. new feature on the bloomberg is our interactive tv function. at tv . it not only will you be able to watch us live, but see some of and ourt interviews, bloomberg functions that we talk about on the right-hand side. you can also become part of the conversation. send an instant message during the show. this is bloomberg. ♪ ♪

yvonne: this isyvonne: "daybreak: asia." a quick: it is time for check of the latest business headlines area wells fargo has raised its estimate of how many big accounts staff may have created as they struggle with recordcandal as far as fines and congressional investigations. a review found an additional 1.4 million unauthorized accounts, bringing the total to about

three point bad million. it may throw wells fargo back in the political crosshairs as congress returns from its summer recess. yvonne: bloomberg intelligence says -- is seeking advisors. paring down their medical operations to focus on factory equipment. list the $36 billion health division in the first half of next year. sony has launched a range of new devices, including a new smart phone. it features a slow mo camera that shoots 960 frames per second. opponents can also capture high definition images in 3-d which can be shared on social media or sent to a greedy parental. printer.to a 3-d yvonne: time for a quick look on

what is coming up on bloomberg markets. rishaad: i think you have already had more than i do. inflation looking edgy, more than anticipated. perhaps it goes with what the bank of korea's governor was saying when they held rates. growth pretty much in line. not such a great news story for india, that demonetization story. much weaker than anticipated by the economists we talked to. we will be talking about that in the course of the program. will india's reform program -- is india's reform program stalled at the moment? we will be in singapore as well to look at that. what about gaming? yvonne: what about gaming?

that typhoon was going to push him back when it comes to those two days they were shut down. we could be having another one that will be three in 10 days. it is something. -- also, sun city is trying to get out of the junket business and get into gaming itself in japan. we are looking at that and more. kathleen: i can hardly wait. that is it for "daybreak: asia." our market coverage will continue with rish and heidi. this is bloomberg. ♪

♪ nine d: km in hong kong, 9:00 thursday night in new york city. kong, 9:00. in hong thursday night in new york city. president xi jinping tightens his grip on power. profits soaring 1600% in the first half. haidi: i am haidi lun in sydney. deadlock in brussels, brexit talks wrap up with the u.k. being accused of failing to accept financial obligations. this is "bloomberg markets: asia." ♪