♪ horse racinga two- to a packed field, at least six candidates considered for the next fed chair. a drag on inflation brings investors pushing higher. betty: insurance, energy, resources rattled as hurricane irma leaves devastation in the caribbean. >> i'll be breaking japan's second-quarter gdp growth. they are expecting growth.

hello, and welcome to "daybreak asia." i am haidi lun in sydney. betty: i am betty lou at global headquarters in new york. we are talking about the aftermath of the ecb meeting. but really, we are looking ahead to this weekend. i want to bring this function. it shows you the path of hurricane irma, which is expected to make landfall sunday afternoon. you can see it will hit miami at 2:09 p.m. as a category four hurricane. this has been -- a fascinating story, six months in and making, owing to the el niño affect. after hurricane irma we have hurricane jose. looks like there will be no relief for the storm. that reflected market sentiment.

let's pull up how the market closed, jitters among investors. even see the dow off by 20 three points. the s&p and nasdaq unchanged right now. when it comes to asia, a mixed picture. we're looking at positivity in early trading. new zealand, look at how we are shaping up, the nzx 50 up by 2/10 of 1%. the kiwi dollar at .7231. it was the worst performer out of that g10 space. we will look at asian currencies. also, australia, japan and korea, positive opens for sydney, asx futures up 16 points. we closed flat in sydney. aussie dollar holding above $.80. that key macro data points will be china trade.

the aussie dollar. take a look at how chicago nikkei futures are flat. the nikkei 225, we saw gains of the 2/10 of 1%. the yen hitting the highest levels so far this year. when it comes to the yen, still very much under way. let's get to the first word news. says, while trump it is not inevitable the u.s. will go to war with north korea, military action remains an option. earlier, vladimir putin said the trump administration was willing to solve the crisis through diplomacy, but repeated his view that further sanctions would not prompt kim jong-un to give up new skirt -- north korea's nuclear options. president trump: is it inevitable? nothing is inevitable. it would be great if something else could be worked out.

we will have to look at all of the details and facts. we have had presidents for 25 years that have been talking, talking, talking. after an agreement is reached, new work begins in north korea. exchanges foreign reserve posted its gain in august as it strengthens, reporting the best monthly performance for at least a decade. the pboc said it climbed. the yuan surged late thursday beyond the 6.5 to the dollar level for the first time in 16 months. mario draghi voiced concerns but euro volatility, declined to talk about action to stem the rise. when it comes to the central banks bonded buying plan beyond this year, officials say the scenario is within current parameters and expectations. but draghi says there is plenty

of flexibility. >> we are pretty confident that when the policy decision time comes, we will be able to exploit all the advantages of the program. >> bloomberg has been told blackrock is an talk about outsourcing the fund's private equity business. california public employees retirement system is in discussion about blackrock managing its equity investment. they are seeking to control sees -- control anemic returns. 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. betty: another day of major uncertainty. the s&p ending unchanged. hurricane damage is about to get worse, no doubt. there is also risk from north korea, that is on investors' r

adar. i want to bring in su keenan, who has the latest on what the markets are watching. sometimes the best thing to do is nothing. it looks like in the s&p 500 it did not move much. real concern about korea issuing more threat. and the hurricane that is now barreling through the caribbean. what's going to the big movers. insurers with heavy coverage areas in florida got hit hard. movers, we are looking at heritage and some other names. down as much as 15%. if we look at the market movers, tumbled of the dollar, treasuries rally, gold headed bid. that was the market snapshot of the day. finally, before we talk more there willurricane,

be a big story friday. it has announced some 143 million consumers will be affected by a cyber hacking incident in which names, addresses and credit cards from 209 million credit card accounts were affected. it is down 12%, adding to the concern for the company and the stock. it appears and is reported that three senior executives sold 1.2 8 million in shares before the report on cyber hacking was released. it is down from 12.5% after hours. haidi: we will talk more about irma and the damage she is causing. the worst is still to come. su: we have incredible pictures as it barreled through the caribbean, hitting hard to several islands. onere looking at barbuda,

of the hardest hit. st. maarten, devastated. sir richard branson saw devastation on his island, very strong structures knocked down. he is warning those staying in florida should leave, because of the ferocity of this storm. barclays has warned it could cause $130 billion in damage. they believe that is a possibility. we are seeing miami bracing for a direct hit. the models so far show it barreling toward miami. the 24 hours before it hits or makes landfall, it could move in another direction. orange juice, up in a very big way. a lot of forecasters are saying, it could become unaffordable after the damage we may see from the storm. we are also seeing oil with a bit of a bid. 9474, disaster indicator

is what we are calling this chart. initial jobless claims in the session showed a spike after the hurricane. after recent hurricanes in the past, we have seen a spike in unemployment. 65,000 jobs, we could see far more than that after hurricane irma makes its way up the east coast. impact,racing for seeing caution play out when it comes to the markets ahead of landfall. turning to central banks, it is a big day for monetary policy. we have heard from ecb president mario draghi, saying there is little to stop the euro rallied. he has talked about inflation, that pushed the euro higher. butbloomberg scoop, nottwo, six candidates are in the running to be the next fed chair. lots to talk about with kathleen hays. let's talk -- start off with

deadly. is saying he is on board with higher rates. it is very interesting. he also says low inflation may be structural. let's put bill dudley in context. he is a president of the new york fed. more equal because he always votes. he is also a supporter of janet yellen. with the coming departure of stan fischer, it is a triumvirate. as a matter of fact, he said he was surprised by the inflation shortfall in does see inflation rising back to 2%. over the medium-term, that is the boilerplate for saying, maybe not right away, but over time it will get there. he thinks the path should be gradual. valuations, overvalued

stocks some are not particularly troublesome. he is ready to raise rates if that is what is called for. the president of the cleveland fed, more of a hawk on monetary policy, said earlier she double down on rate hikes. it could return over the next year or so toward 2% on a sustainable basis. she said she is comfortable with another hike this year. in her mind, the fed waits until march of next year to make a move, that is not gradual. she is saying that is moving too slowly. esther george, said she is watching the data. but she would like to raise rates. speaking about an hour from now. we are getting a lot of indications from fed speakers. they are looks like, saying, maybe we are ready to raise rates.

betty: what about draghi? let's talk about what he said. perhaps it was not enough, because the euro cap surging. kathleen: it was wild. it was a rare mention of the euro in an ecb statement. at the last meeting they voiced their collective concern over the euro. he did say, they are monitoring it causing uncertainty. here is what he said at the press conference. >> the recent volatility in the exchange rate represents a source of uncertainty, which requires monitoring, with regard to its possible implications for the medium-term outlook for price stability. kathleen: let's look at a chart of the euro. 438.s look at g #btv the euro is up 14% against the

dollar this year. and yet, mario draghi did not mention -- that120 level, the yellow line across your screen. he voiced serious concern on the euro as it neared 140. look what happened when they -- down, down, down went the euro. the euro is rising because the ecb boosted its forecast for gdp in 2017 to 2.2%, the fastest in a decade. on qe he said he is discussing their scenarios. they may announce something in september -- october. betty: bloomberg news reporting now rates for the fed chair, could be six people at a minimum? kathleen: it is very interesting. janet yellen's term is up in

february of 2018. trump said he is looking at janet yellen and gary cohn, former president and ceo of goldman sachs. after the charlottesville incidents, when gary cohn spoke out over his displeasure with the president, at least 3/4 telling us this displeased trump. in their story today, definitely three names we know well -- kevin warsh, former fed chair governor, and professor. cean hubbard, head of the and helped designgeorge bush's tax cuts. and larryaylor, lindsey also at the board of governors in the 1990's. also advisor to bush on the economy. then we have richard davis and john allison, former head's a

big banks. not surprising trump wants to broaden that the business people. bankers would know more about the fed and monetary policy. saying trump is not yet deeply focused on the fed chair search. think we take this as a direct message. but obviously, looking at a lot of different people now. we still have time to add names to the list. betty: that seems like so far off, given the stuff that needs to get done from now until then. kathleen: he has a lot on his plate. he can put that on his new year's to do list. betty: thank you so much, kathleen. we are counting down to second quarterfinal gdp numbers out of japan. bank of america, merrill lynch joining us to unpack the figures as they drop. haidi: markets have a lot on their minds, with hurricane

irma, white house policy in north korea. we will measure sentiment. this is bloomberg. ♪

♪ ,"idi: this is "daybreak asia lun in sydney. betty: i am betty liu in new york. a fast week for investors. north korea, a string of severe storms, and policy turmoil in washington. how have bond markets reacted? we saw quite a bit of buying in treasuries. bmoring in the head of capital markets.

let's tackle, who is going to be the next fed chair? it seems to be get the ring steam in terms of the story. steam in terms of the story. >> it introduces uncertainty into the process. we had an understanding gary cohn would be at least as dovish as yellen was, if not more. the market was prepped for that. theuld add to come on yellenthe probability gets the nod, because it would be harder to replace her, if he does wait until the last minute. betty: yellen gets the who would you put your bets on? ian: that is a difficult call. i would say, given how challenging it has been for this administration to move forward with anything, i would say yellen might get the vote. she would take it for central bank independence is that is a

key notion in her time as chair. the former philadelphia fed president was on our network earlier expressing concern about the number of vacancies we have right now on the said board. saying that not only doesn't make him worry this whole situation might be making things more politicized, but also we might be operating on a subpar basis. this ends up causing more strain in terms of work burden. do you think we are operating on a subpar basis? ian: it is challenging for the members of boards that are currently there. when you think of the confirmation that needs to go through relatively quickly to alleviate some of that burden and to move forward with trump's deregulation agenda -- if that is going to happen, they need to get in that seat. betty: i want to pull up g #btv 1572.

this maps the 10 year treasury yield. despite the calls earlier this year, the end of the 30 year bull market on bonds, that trend has still not broken. why? ian: a couple things. the market brought in more optimism in terms of inflation, in terms of economic growth, thatse of trumponomics have not come to fruition. we have seen a slowing in core inflation. if you take a step back and look at the trend over the last 30 years, that corresponded with them period in which treasuries have become more globalized with a broader investment bank. and bank transparency has increased, which takes a volatility of the rate cycle, which should compress the yield curve. not that surprised we are still in this range.

i would not expect to break it anytime soon. things youof the mention is we are getting to a point where natural disasters are overshadowing politically may disasters in washington. what implications does this have for crating distortion as we get past the hurricane or another two hurricanes? does that push back any expectations, low as they were, for the fed to tighten into the end of this year? this morningsaw with jobless claims data, it will be difficult for the fed to get a true sense of what damage has been done to the economy. whether that means taking a quarter or half a percent off gdp toward the end of the year, or a one-times or two tents 1/10 or 2/10r --

higher, that will make a hike more challenging. do you see circumstances in which they can tighten when there is no inflation? do we get to a point where other risk factors of having loose monetary policies for too long it is a -- whether structural or transitory, it is just not hitting the mark? ian: that is a fascinating question because the fed is going to tighten in two weeks when may deliver the tapering of the rollover. deal, something the fed things might have an impact on risk asset. if that tightens financial conditions, that might provide a greater headwind for further rate hikes or tightening in 2018. usdi: thank you for joining in new york.

you can get a roundup of stories to get your day going in today's edition of daybreak. bloomberg subscribers go to dayb on your terminal. it is also available in your mobile anywhere app. you can just get news on industries and assets you care about. this is bloomberg. ♪ industries and assets you care about. this is bloomberg. ♪

haidi: a quick check of the latest business flash headlines. in a show of confidence, a chinese carmaker is joining its , with a publicity avalanche around the 10th anniversary of the iphone. that make 10 will go head-to-head with the iphone. will be increasing along with the prices of its

smartphone. >> for many years, huawei's mobile phones have seen fast growth. mobileppy to see the shipments to china and internationally increased along with the average price. the taiwanese tech giant says support from apple, softbank and sharp, it is ready to proceed straight away. they do not know exactly how much foxconn is willing to pay. toshiba has been struggling to complete the sale. one year after itsthey do not kw much foxconn is willing to histe off with amd, dell says it sees demand for networking equipment and computers. thursday, ge made dell its primary ip infrastructure

supplier. michael dell says the future is looking bright. up next, the rebuilding effort in houston after hurricane harvey. we speak to the president of a company about cost of operation. ♪

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here in sydney, almost the open of asia's first major markets. a beautiful morning here in sydney. that is the hit me -- that is the sydney opera house. betty: a pretty gorgeous evening here in new york. kind of rainy in the morning. the lackluster session throughout, in stocks. 7:30 p.m. thursday here in new york. markets closed flat. i am betty lou, here in new york. haidi: i am haidi lun in sydney. you are watching "daybreak asia ." let's get first word news. >> bloomberg sources say the

white house is considering at least half a dozen candidates as the next venture, including andomist and executives other business people. it had been widely seen as a two horse race between janet yellen and gary cohn. possible contenders include economist glenn hubbard, and john taylor. hurricane irma continues on a collision course with miami after battering puerto rico and devastating a chain of caribbean islands. the national hurricane center is forecasting a direct hit on florida on sunday, sending insurance stocks lower. the category five storm destroyed almost all the homes in barbuda, killing at least eight people. has suffered a new setback on his embattled travel ban. an appeals panel has left in

place a lower court ruling that forces the u.s. to accept people with grandparents, cousins, and other relatives already living there. the san francisco ruling comes ahead of the supreme court showdown over the broader legality of attempts to ban travelers from six mostly muslim countries. donald trump jr. has discussed the of his meeting with several russians during the presidential campaign in a five-hour, closed meeting with staff of the senate judiciary committee. they said the president's son again with the statement denying collusion with any foreign government. he may face a public hearing later this month. 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. what weet's get more on should be watching us trading gets underway in asia. this friday,h us

another down day for the dollar, the worst performer in g10. willollar down, the yuan rise. what will traders do? pushed after them yuan , the bankat 650 level of east asia saying traders may be gunning for 645 with them pboc seeming to allow more appreciation. i will pull up this chart to show you what is going on with the yuan. level, it at that 650 below that mark. 645 could be on the radar. caution could be warranted, as a pboc may want to slow them yuan 's rise. i will get some sense of that once we get the latest news on exports for august. when it comes to the daily six this friday, we are anticipating a slightly weaker reference rate than what is being forecasted.

keep in mind that on tuesday the pboc said a weaker forecast that expected the yuan to bend. the yuan has been trading at the top of the range. but trade-weighted basket. you can see that on g #btv 1995. since been in this range june 2016. they reckon this strength appears to be a short-term bout against the basket, probably to achieve a policy goal ahead of the party congress. not a fundamental economic need. this could be another impetus for the pboc to fix the yuan on the weaker side. betty: turning to the korean won, traders are the most bearish since 2013? sophie: yes. for all the won's resistance,

sentiment is turning sour. the last time this was the case, was during the taper tantrum in 2013. you can see that on g #btv 560. in the short-term, geopolitics in north korea and ties between the u.s. and china, that could in september.on i want to pull up the south korean five-year bond. we see it take a plunge, 21 basis points wiped off of the south korean bond yield, the lowest level since december of last year. betty: thank you so much, sophie kamaruddin, the reaction in the korean won. natural gas storage glut that has persisted two years has expanded after hurricane harvey for fuel innd texas. jason kelly spoke exclusively with bhp petroleum president on

the market impact. >> it is still early days, jason. big,ly, harvey has had a devastating impact on houston and its people. the responsiveness so far has been quite positive. i chalk it up a lot to the very strong civic leaders, including mayor turner, governor abbott, and the rest of the business community. jason: as you talk to your fellow business leaders here, what happens next in terms of how businesses continue to grow, balancing the recovery and the high-growth houston is so well known for? certainly in the short run, the majority of businesses are back to work. we reopened our office on tuesday. but i can tell you it is far from business as usual. it will take time to address the recovery and rebuilding. it will take time to provide

volunteers into the community. they are still very much in need. lots of schools are still closed. we encouraging our people to take the time they need, not only to address their own needs, but the needs of their neighbors and really work through this and not try to speed it up and get back to business as usual. jason: how much has this storm and everything else going on wiseher wise -- weather- impacted the broader energy markets? steve: we appreciate that production was shut down to some extent in shale, which was directly hit when it came into corpus christi. has been shy of one million barrels a day at peak. the biggest impact was refining capacity. 45% of total u.s. refining

capacity was here. roughly half of that was curtailed or down at its peak, from 4 million barrels per day. that has created bond the, storage build up on the front and, drawn down gasoline inventories on the backend. think some 15 of the 20 or so that have been impacted by the storm are already starting back and ramping up production. bigger ones are expected to come back online in the next two days. refineries like port arthur and exxon mobil and beaumont, that will help relieve things over the next few weeks. one of the most significant impacts we have seen on crude rises, when -- with wti prices in particular, we saw a reduction around 5%. the biggest impact is the spread between wti and brent price. 5.5 between them, still

significant, around five dollars a barrel. jason: how long do you think it will take for all of that to normalize? --rom a market perspective all of that to normalize, from a market perspective? steve: a few weeks, but it takes longer for inventory impacts. refinerieshat when are back at full capacity, they probably run harder than perhaps usual. there may be turnaround to address the gasoline inventory. that will help resolve crude stocks. jason: a lot of the attention has shifted east to what is going on in the caribbean at the moment, with hurricane irma bearing down on florida. about that you worry from a broader market perspective and bhp perspective? steve: we worry about it primarily for the people in

florida, the people in the island, bahamas, and so forth. four,category five, catastrophic damage expected. the warning the governor is going to put out and request for people to evacuate is right on the money. that is the biggest concern. in terms of impact on broader energy markets, probably muted if it continues to follow the path anticipated up the east coast of florida, into south carolina. it doesn't end goes into the gulf of mexico, that would have a bigger impact on production here. presidentt was bhp speaking exclusively to bloomberg's executive editor, jason kelly. there are so many different ways you can see implications coming from weather events like hurricane irma. less than two weeks, still reeling from hurricane harvey. we are expecting irma to make landfall on sunday.

take a look at this chart, 9474. it really does distort the data. we had initial jobless claims early this morning. u.s. jobless claims surging the most since november 2012. tens of thousands of texans displaced, that is distorting the data. you can see that play out historically. -- the yellowat is what happened after sandy in 2012. in the pink is harvey. insurers, adities, goes without saying, that impact on everyday people. 2 million people expected to not have power as a result of this. something for washington to be grappling with this weekend. betty: it seems claims immediately come down after

that. you do see that spike after the storm. new york fed president bill dudley making a speech, taking questions in new york. he does not think harvey will fundamentally change the economic trajectory here in the u.s. another thing he is saying in response to a question is, cybersecurity is the biggest thing that keeps him up at night. so much these storms, but a storm in cyberspace is what keeps him most worried about the outlook for perhaps the economy and this country. that comes on the back of the news of equifax saying they were the victim of a cyber attack that could have had up to 143 million customers. one of the biggest cyber attacks in history. we will keep following the headlines from the fallout. that stock getting hugely hit in the after hours. haidi: pick your event risk.

we will speak to bank of america, maryland, talking about these gdp numbers coming up from japan. this is bloomberg. ♪

betty: we are counting down to asia's first major market open this morning. japanese futures are looking pretty flat. we will be getting final gdp numbers from japan. are we going to see continued growth in these numbers in japan? this is "daybreak asia." i am betty liu in new york. haidi: i am haidi lun in sydney. they say it is not sustainable. we are expecting second-quarter gdp numbers from japan any moment now. economists we spoke to are expecting 2.9% annualized

growth. our next guest is not too optimistic. great to see you again on gdp day. why do think the number is too optimistic? we had growth pickup that cannot be sustained? first of all, we think in terms of a revised gdp numbers itself. will be revised downward, that was clear from figures that came out earlier. in general, japan's growth so far has been sustained by a pickup in exports. and a little bit of a one-off boost to consumption. we think growth will remain around trend, 1%. we do think the export boost will fade going into 2018. that will reflect a slowdown in china. idea that the boj is losing the fight against have been asking

this of other central banks, as well. does it matter when other group -- growth's are picking up in an encouraging way? one thing, it certainly reduces the necessity to ease policy further. no one expects the bank of japan to deliver additional easing. that does not mean they can just give up and federal -- settle around this figure. they are still very much committed to raising inflation and waiting for the labor market ze into wage sei growth. you could undo a lot of that work. haidi: want to throw up a quick chart, 961. we have been talking performance with japanese equities, it has started to break down with that correlation with strength in the yen. clearly, with everything going

on in north korea and uncertainties of her policy in washington, it is not helped by the weakness in the greenback, either. we saw the yen the strongest we have seen it all year. how much is this going to be playing into what the boj does and whether it will be a headache for governor kuroda? izumi: it is an absolute headache. the worst-case scenario for the boj is a risk off strengthening of the yen. feasible for the bank of japan to maintain the ceiling on its 10 year yield target. it is much more difficult when yields are under pressure to fall below zero into negative territory. in that case, they have to keep reducing purchases. that might invite the impression they are aggressively tapering. if we see a softer print in these numbers, which are out

and about 90 seconds, what do you think the market reaction will be like? izumi: i do not think the reaction will be very big. it is very much expected the gdp number will be downwardly revised. talkingit is, we are probably above trend growth, close to 60%. i do not think there will be a big reaction. even if there was a reaction, likely short-lived in any case. your fundamental view of the japanese economy is what? izumi: we think japan is doing pretty good. down inorts slowing 2018, public investment is fading next year, that could be -- that could up private demand. the fundamentals look very good. macro labor incomes are rising, firms are more constructive about capex.

this is encouraged by the tightness of the labor market. we think japan can sustain growth of 1% on the back of a self-sustaining cycle in private demand. betty: you mentioned foreign workers might present a safety valve for the japanese economy? izumi: absolutely. it is one of the most commonly asked questions we receive. they notice there are a lot of foreign workers in the country now. in fact, 30% of net employment gains for 2016 were supported by growth in foreign workers. they are filling part-time jobs. this will help sustain the business cycle and prevent overheating. haidi: we got the numbers, japan's second quarter gdp rising to 0.5% on an annualized basis. we were expecting 2.9%. the current account surplus coming through. ¥20 billion.g at

0.5%,ss spending rising quarter on quarter. private consumption rising 8/10 we wereust shy of 9/10 expecting. the headline number, second-quarter gdp, rising 6/10 of 1% on quarter, just shy of 0.7%. the2% annualized well under 2.9% we were expecting. reaction,ng a quick you are not expecting that 2.9% to come to fruition. izumi: exactly. this is in line with expectations. much of the downward revision is coming from the capex side.

the fact we are calling it a muchpointment shows how this notion of japan's recovery has been cemented in investors' minds. that is an interesting point. we have been looking at these theories, the inflationary mindset. why isn't that coming through as more of a stronger force? first of all, things do not happen overnight in japan. it will be an attitude change, especially following decades in this deflationary environment. cautioust will be very about making aggressive capex decisions are committing to wage growth. on the ground, attitude change is happening. the japanese economy is headed in the right direction. haidi: it is always going to be

a slow process. thank you so much for that. as it she pointed out, that number, annualized 2.5%. missing expectations, but not a bad number at all. follow trading on our live blog, get reaction to the macro data. we have china trade numbers coming up as well. you can get a market run down in just one click. there is commentary and analysis from bloomberg's expert editors. this is bloomberg. ♪

haidi: this is "daybreak asia." i am haidi lun in sydney. betty: i am betty lou in new york. they have asked airbus and

boeing to create less expensive, more efficient versions of their airliners. they want to add discounts to long-distance flights. the boeing carriers said it would be interested in buying a more efficient version of the 747 dreamliner. haidi: german regulators are keeping a close eye on china's hna group. they could come under more scrutiny if buying a stake in deutsche bank. investors must meet eligibility criteria for such investment. hna holds a stake in deutsche similar has had a purchase of shares in alliance. betty: a temporary reprieve from lenders and extension of a facility until the middle of january. there -- noble is struggling to

avoid a default. they look to sell their oil business. the chairman expects to have a buyer at the end of the month. amazon is in the hunt for a second home, a massive second headquarters dubbed hq2. chicago and the memphis have raised their hands to play host. the plant will cost more than $5 billion, take 20 years to develop, and employee 50,000 people. no doubt an economic boon for whatever city wins that bid. amazon's native seattle. betty: we will look at the latest trade data out of china, with anz's chief economist. we are counting down to the start of trade in australia, japan and south korea, just moments from now.

this is bloomberg. ♪

haidi: seeking haven from the storm. the economic damage from hurricane irma. betty: bloomberg learns the white house is considering six potential candidates for fred chair. -- fed chair. haidi: second-quarter gdp expands more than expected. betty: china's foreign reserves rise as the insurgents past key milestones. yen surges past key

milestones. risk: we have seen the concerns over north korea. heading into the weekend, plenty of risk for investors to be worried about in the u.s. and in asia. expectations of another missile tests. that is very much in place. .ake a look what you want to do is track the path of the hurricane. it is expected to make landfall in florida on sunday, not far behind that is hurricane jose. watchinghe one we are with potential for leaving people without power and hitting florida, one of the largest areas in the u.s. top u.s. growth of u.s.

exports. sugar, orange juice and such. a little bit of risk sentiment going into the weekend. it can see that in the yen. betty: absolutely. when you look at the economic indicators, you can see that while the impact could likely be very devastating for those regions, overall, it does not seem as if it will have a huge impact on trajectory. we heard from bill dudley a few moments ago, the tragic the -- trajectory remains on track to -- on track. let's get to the first word news. >> while it is not inevitable that the work -- u.s. will go to .ar with north korea

vladimir putin said the trump administration was willing to solve the crisis through diplomacy. or the sanctions were not prompt kim jong-un to give up north korea's nuclear weapons. military action -- it would be something if something can be worked out. had presidents for 25 years now talking and talking. a day after an agreement is reached, new work begins in north korea. china's foreign exchange reserves posted a seventh straight game. that climbed to $3.09 trillion.

hurricane irma continues on a collision course with miami after board -- veteran puerto rico. the national hurricane standard is forecasting a direct hit on florida on sunday. the category five storm destroyed almost all the homes on the island of barbuda. it killed at least eight people. would andon of opec if it the country and all investors involved. the minister told bloomberg he is budgeting for a $40 barrel of oil for the next three years. when elaborating our focus, we are real or emptying -- reorienting towards oil prices.

this price, we have some reserves in the project. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. with so much for investors to be frustrated about , we have extreme weather events and political jitters. how markets are setting up in the session in asia. let's get over to sophie. sophie: as we brace for those events, we have a mixed bag. asian bonds are rallying. reboundeeing a slight in that debt market. we are seeing foreign and social banks raising their treasuries

to a record. check out korean bonds. that is on fire. earlier, the yield fell as much half basis points. now it is trading at the slowest level since march of this year. is rising for a second straight day. traders have turned the most since 2013.he won forecast that weaker for gdp. dollar weakness is going to be big -- the catalyst once more -- once more. what -- err on the

weaker side. that is trading on the highest levels since november. the kiwi is leading gains. aussie the is holding -- is holding. energy prices are very much in focus. sticking near a four-week high. on the opec side of the equation, capital markets say the momentum is building for a cut extension beyond april. , we have chinese retail sales due at noon on friday. betty: a jampacked day. the u.s. may be facing that inflation shortfall. u.s. chief says he is on board with more rate hikes. --t surging euro

he was very gentle and his comments. kathleen hays is here with more. bill dudley'sth speech. at the top he makes it very clear. as you read through those speech, he is backing higher rates. heading in that direction come he says this low inflation maybe structural. he sees a gradual tightening of the labor market. unemployment is pretty right -- pretty low, but wages are not rising. he says the weaker dollar is going to boost import prices, help boost inflation, and inflation will hit 2%. let's listen to what he had to say in a nutshell.

trajectory of the policy should continue to be shallow. kathleen: this might make the reluctantalevolent -- to make a move. disasters tend to improve economic growth. ish fedely a hawk president. in answers to reporters questions, he is comfortable with another hike this year. is too slow.at pretty hawkish. at the meeting earlier in new

york, bill dudley said that he thinks fed chair yellen has done a great job. it is interesting that he is she getsg the chair as ready to step down. bill dudley, i think is getting in line with janet yellen's view is important. haidi: very interesting show of support. they did not say very much. what he did say would only make the euro go higher. meeting, at the last they expressed collective concern about the recent rise in the euro. he said that the ecb is monitoring the rise, but he did

not come down hard. >> the recent volatility in the exchange rate represents a source of uncertainty, which requires monitoring. with regard to possible implications for the medium-term outlook for price stability. kathleen: putting this euro surge in perspective create the euro is up some 14% over the past year. he did not mention anything remotely sounding like a need to .tep into the currency market in 2014 come he voiced serious concern about the euro and ecb policy. that is something that helped push the euro down, along with relaunching the quantitative easing. its gdp ecb has raised

forecast to 2.2%. if that is reached, and economists pointing out that is another reason for the euro to be rising. the european economy is done better. qe, but onlybout in the context of talking about it now to maybe an ounce -- announced in october. not some big change to move the euro. we shall see. haidi: maybe talking about it next month. they do so much for that. maybe looking to steal a deal with the largest pension fund in the united states. california republic employees talking about outsourcing is private equity business. to john who joins us from l.a. how serious are these challenges the group is facing with the deal with blackrock? >> there are so many unknowns at

this point. what is driving it is expected returns. calpers has relied on private equity. it has been their best source of returns. -- they are getting a lot of pushback from their ratepayers. how come you are paying all this money to wall street guys when we are having to pay more for our pensions? figure outtrying to a way where they can get private equity return without paying a lot of money to a lawsuit firm. in steps blackrock, where most of their money is coming from very low. they wanted to diversified little. they wanted to play some sort of

intermediary. maybe they will manage private equity, some or all of the money in private equity funds that calpers has. try to get a good return at a lower fee, something like that. betty: the deal and what it means for blackrock, they are such a big player. those returns are small. it is making ms. push -- this push. i do not have the exact numbers of what share of blackrock's revenue comes from alternatives. generally, alternative investments are higher. is five to $.10 per $100 that they get. some of the other investments are much higher fees that they can charge. they are longer lockups as well.

you can go up and you can go down. betty: i we likely to see this replicated elsewhere? >> i think this will be an interesting experiment. calpers is the biggest pension fund. they have money to experiment with. they have been the leader in a lot of ways. if they do not increase their margins by going to blackrock, i do not see many people following them. thank you so much for this breaking story this evening. still ahead, chinese tech giant unveiling a new smart chip as it prepares for battle against apple's newest iphone. an exclusive interview with the ceo. that is coming up. haidi: chinese exports continue to benefit.

this is bloomberg. ♪

betty: this is "daybreak: asia." reserves posted a seventh straight being. -- gain. showing another month of solid export growth. is it too good to be true? raymond, policymakers are maintaining stability above everything else going into the congress. do these numbers really match? should we be looking beyond october for a real picture? >> i think the august export

will continue to grow. the second half of the year, last year already got a high rate in comparison. if you look at the sequential growth, it seems that trade number will continue to be pretty decent. china has benefits from global supply chain. domestically, stability is the top priority. the party congress will be coming in october. a little bit earlier than expected. i believe over the next few months, then map -- the number will be pretty stable in terms of foreign reserves. i do not expect any relaxation. willapital flow policy stick to the status quo. trade,global intraregional trade has been a thein a cross hairs since

last election. do you think this latest bout of geopolitical tensions is likely to put china in a bad situation in terms of trade, possibly be one of the things that are vulnerable? >> i think the geopolitical event are happening around the world and will have minimal impact on chinese exports. fact that china is part of the supply chain and the position of --na to deliver efficiently they can produce it and ship. it is very difficult to replace in a short while. i think that not only the geopolitical tensions will have fairly little impact on global have even been talking about the exchange rate being very strong in the past two months. it will also have very little impact on china export as well. betty: why is that?

i want to put this chart to give you an idea of the trade balance. it does seem to be moderating a little bit. you have export trade, this yellow line falling off. you do not know any of that to the following in the chinese in they -- falling chinese currency? expect the electronic supply chain stores taking shape in the export over two years time. productshese low value , the same time for high-value products, i believe people managing the logistic network will still believe in the efficiency and the role china plays in organizing all different components. i think this is eventually the

quality of the chinese export more than quantity and cost of production of the chinese. betty: let's just take the exchange rate itself. do you think it will do anything about it? is to havethe policy this as a reference. at the same time, they let the explode.urrency it has been an adjustment factor . if we talk about the exchange rate, this is merely a reflection of the u.s. dollar weakness in the past one or two months. the outlook on that would be much more dependent on the u.s.

dollar than the chinese standards. i do not know where interest rates will head at this point. so manyearing conflicting signals. if the dollar continues to fall, is there any kind of red line that you see that pboc has? >> they have an adjustment factor as a moving mechanism. if volatility is too strong and too high, this mechanism will kick in. that will help smooth the rate. i think it all depends on what the u.s. dollar will do. if it continues to be very weak, the yuan will be strong. get that story and many more that you need to do -- get your day going.

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haidi: this is "daybreak: asia." betty: a quick check of the latest headlines. giving details about plans to buy toshiba's memory chip unit. the tech giant says their brad support of the offer from apple hasn't sharpened and it is ready to proceed right away. toshiba has been struggling to complete the sale, which it needs in order to be delisted from the tokyo stock exchange. delta surging demand for its servers network and

computers. dell is the main supplier from one of its biggest government contracts. the future is looking bright. shifting to the bt, business technology come over he cannot do anything without technology. you cannot sell anything, by anything, make anything. this is true across organizations of all sizes and government, society. i actually see the overall theet, when you consider role technology is playing, getting much larger. much more ahead. china's foreign reserves rising again. the details next. fax cyberhis equi

attack. this is bloomberg. ♪

haidi: it is a: 30 in singapore. -- 8:30 in singapore. going into a weekend where hurricane irma is asked acted to make landfall -- expected to make landfall in florida. looking ahead to that potential missile test from north korea on the weekend as well. fory: a lot of ahead investors, despite it being a friday in asia. you are watching "daybreak: asia." let's get to the first word news with paul allen. paul: the new york fed president says the rate hike should remains shallow.

william dudley says evaluations are not particularly troublesome with a softer dollar and global growth in the trade sector. he also sees little economic damage from storms in the gulf. maybe the damage from hurricane irma are going to make it more difficult to accept the economic data in the month ahead. i do not expect it to fundamentally falter the underlying trajectory of the underlying economy. concerned about volatility after the meeting. declined to talk about -- a kept rising against the dollar. when it comes to the central bank buying plans beyond this year, officials say the scenarios are within parameters of expectations. firstis plenty of next -- -- flexibility. >> when the time comes, we will

certainly be able to exploit all the flexibility that the program has in its construction. central banks governor says she sees no significant deviation from her inflation target of around 4%. economists think using is all but given. inflation is now a 3.2%. she told bloomberg she is comfortable with the current range. it will go up and down. we are prepared. ,t will be going up and down and we are saying 3.3 is within the acceptable quarter were. -- corridor. what is important is to understand the nature of the fluctuation and come up with correct measures to respond to them. bank malaysia's central

interest rate is under -- unchanged. strongerth will be than earlier expected and headline inflation is forecast to moderate. the statement said a is -- global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you for that. as we have been saying, this weekend could hold quite a bit of event risk for investors. it is the friday session in asia. let's take a look at how the rest of the markets are shaping up. sophie. sophie: that trade is driving bonds higher. it is also weighing on stocks in tokyo. 225.ave the nikkei

they are dragging the most in tokyo. we had the second-quarter gop -- gdp this morning. check out the kospi down about 2/10 of 1%. concerns about what that might mean with the weekend ahead. check out the south korean bond that dropped. it was falling as much as 21 and a half basis points. take a look at what is driving moves on the kospi. consumer stocks leading the drive. i.t. is the bright spot with samsung shares. over prices have eased somewhat. waiting forors are

the risks to be resolved because they want to buy more. even adding holdings of some small caps on the nasdaq. pulling up the board to show you what is going on with that stock along with consumer stock. keeping an eye on asian auto stocks today. carmakers with exposure to the u.s. it and areas hit by extreme weather could be vulnerable. they are sold in florida. weather in houston, we might be looking at the same when it comes to hurricane irma's impact. yet onno fallout in asia

this incredible story. under scrutiny after three senior executives sold and the discovered a security breach. one of the biggest hacks in history, affecting possibly half of the united states. andrew, there are so many angles to this story. tell me about these executives. it is a chief financial officer and president of two of the units that sold shares. they discovered this big breach. betty: what is the company saying about this? >> they told us about 10 minutes ago that neither of these executives knew about the breach at the time of the sales. there is no funny business going on. unfortunates rather

and raises questions. betty: is that the end of it? the executives do not know and this is it? >> i doubt this is it. this is material information, one of the biggest hacks, perhaps ever. i am sure it will be looked at on the company level and perhaps escalated up to regulators. back-checks, what was the security breach, and how significant were the implications of the hacking itself? >> we will see the fallout of the in the coming days. it is one of the biggest ones that has ever occurred. we are talking as many as four to 20 million customers, -- 420

million customers. thank you so much for that. chinese tech giant has unveiled to release a chip new smartphone design. the company is ramping up its cloud business. he started by asking how the new chip would give it an advantage. today smart phones are not smart enough. we need ai technology to improve their smart capabilities. ai technology can greatly improve our efficiency. >> you are going to have these new chips in the new smart phone that you are launching. you are watching it in october. smartphone sales for the first

half slowed. domestic competition is placed on with the likes of evo. apple and samsung are still dominating. how do you have to reassess your ambitions as being the world's number one smartphone maker? >> for many years, mobile phones have been very fast growth. i am very happy to see the first half of this year, mobile phone shipments to china and internationally increased with the average price. huawei is at the number two spot this year. assess will be the impact from apple's newest launch? apple is a brilliant company. we admire them.

while it also has many innovations, including the dual camera function, apply to phone producers. >> i know you are making a big push on cloud, making the cloud a bigger part of the business. how you plan to compete with the likes of amazon and other companies that have already made moves in cloud computing and drawn revenues from the cloud? we are monetized -- the past, our customers would by our equipment he had now they buy our services. we just support them. business, margins have been squeezed. do you expect to see the margins pickup again? >> last year's after-tax profit

margin was nearly unchanged from the previous year. to persistently improve our operations, including our cost structure. 4g hasspending on happened. now we are looking at 5g. it is still a ways off. where you sit between the 4g and 5g? how do you find revenue streams as part of the business and how 5gh of that investment in and waiting for that, mine is pressuring revenues? only aboutt communication among people, it is also about communication between all devices between people, technology, and equipment for the first time in human history. we have invested more than 6 million euros dollars -- u.s. dollars. that was his ceo speaking

exclusively to tom mackenzie in shanghai. up next, the u.s. pushing the security council to vote on tough new sanctions. why washington is willing to risk a veto. what that conflict means for global trade, next. this is bloomberg. ♪

haidi: this is "daybreak: asia." president trump says while it is not a net of the not inevitable- that the u.s. will go to war with north korea, they are trying diplomacy. they're trying to boost stations on the regime. -- sanctions on the regime. the director of economic research at bloomberg intelligence is joining us. action.closer to the

>> i had to come to hong kong to talk to you, betty. in any case, i have to find you in hong kong to talk to you. north korea, these sanctions, there is a high chance. perhaps it will not get through. if it does, what would be the impact? >> if china were to stop exporting oil to north korea, that would be significant. the existing sanctions already put them in a bind. it is a country living paycheck to paycheck. of sanctionsmonth cut that paycheck by a third, if not half. if you were to suddenly takeaway their oil, it becomes a problematic situation. china is in a bad position. if they are too hard on north korea, they suddenly have a

nuclear armed neighbors who is connected to them, who could be as angry with china as they are with the u.s. if they are not hard enough, they will anger the u.s. and you could see the u.s. taking some kind of unilateral literary action against north korea. both outcomes are pretty bad for china. betty: we've heard president trump say that military action notn option, though inevitable. is anyone pricing in the scenario and what that might mean economically? >> i do not think so. yet to think about the idea that the regime has been in power for many years. they have a sense of self-preservation. core heads will prevail. he will not do anything suicidal. -- cooler heads will prevail. he will not do anything suicidal. there is no outcome for the regime that is positive in any

way. betty: let's take it back to what is going on in the u.s. these headlines coming out on the side. this -- the fed. guestsasking one of our from the last hour if this will have any impact on monetary policy. likely not was his answer. what do you think? >> i assume it will not. donald trump has once said he likes low interest rate people. he considers janet yellen a low interest rate person. it would probably be someone like janet yellen. i think there is a chance that want to start naming people in place, you will have a slightly -- i do not think it would look that much different. this gives president trump

immense control of the future of the fed. you only have two governors that will carry over that are there right now. it might be unprecedented. i do not know is any president has had an opportunity to put this many people in there. he was saying would be hard-pressed to be a hawk and that -- in that situation. is that such a bad thing? we talk about the lack of inflation. lower inflation and looser policy is not a terrible conundrum for the fed to be in. >> the biggest risk, if you look at what the fed has put on the table right now is moving too fast. they had the idea that this online program was going to be like watching paint dry. it is actually quite substantial.

on top of that, they are saying they will hike rates. it does seem a they might have to pull back on some of those expectations. nextmber 20, we have the meeting. it is a near certainty that you will see them announced the official start of the unwind plan. janet yellen does want to get that underway before she potentially exits the position. haidi: make it a non-politicized move. let's move over. it was highly anticipated. they were very cautious. looking at next month, we might talk about talking about it when it comes to the balance sheet. what was the key takeaway for you? >> the euro is put in a bit of a bind rate. inflation has not really been coming back as strongly as we would like to see it. if the euro was kind of weak, a

little worried. that is not great for inflation. i could him being a little hesitant. i do think you made the groundwork for some announcement in october, as it relates to tapering. it will probably be very gradual, they will be very concerned about how the impact -- it could impact the euro. haidi: i want to get back to bark isa of trump's worse than his bite when it comes to protectionism. what we are worried about now is geopolitics. if you have a president threatening not to do business with countries who do not section as hard as he wants them to come do see that as being a major risk and talking about these heavily export vulnerable economies like south korea come in singapore, taiwan, and china? read myguessing you daily note. that was the title of it.

where he a situation has said he will do a lot of things, especially when it comes to trade. yet not really seen any follow-through. a great example is nafta. when the plans came out on how it would be renegotiated, it looks like they will make very minor reforms. when it comes to protectionist policies, if you're going to implement strong tariffs on another country, it will also hurt you. they will probably reciprocate. there is an important supply chain implications on that. mexico is a great example. theou are to strip out transportation sector, the u.s. would actually be running a trade surplus of mexico. that is not only cars, that is car parts. let's say it is 50-50. whole cars, maybe that is not great. companies like ford making cars there.

most auto parts are going into cars that are being made in the u.s. complicated. the biggest concern you have, i do not there will be any major protectionist policies in the u.s. china is the most vulnerable to what the u.s. does. as long as growth remains good in u.s. coming you will not see him flipping the switch is on on thisswitches protectionist policy. if you saw the u.s. economy began to slow, if there was a risk of a recession, trade policies is one area where the president has a lot of control to directly impact things. he could put some action behind some of his threats. the good news is that we do not see that happening. the u.s. economy is on a relatively good footing. maybe not a good enough footing for the fed to follow through with their plans for the next year and a half, but certainly on sound enough voting that we

should not be worried about recession. betty: some are worried about andimpact on hurricane irma hurricane rg -- harvey on the economy. do you agree with dudley that it will not change the current trajectory of the u.s. economy? >> no. it will all this we have a devastating impact. the impact it has on people will be far more severe than on the economy. the only thing that could have changed the trajectory was a potential debt ceiling debate, budget debate. that has been kicked to december. i do not see anything that will get in the way we now and the september meeting. maybe in december we might have some risk of the year end rate hike. mike, thank you so much for joining us.

one feature on the bloomberg we would like to bring to your attention is the interactive tv function. you can find it at tv . you cannot only watch us live, but the previous interviews and dive into any functions that we talk about. you can become part of the conversation by sending us instant messages during the shows. this is for bloomberg subscribers only. this is bloomberg. ♪

betty: this is "daybreak: asia." ondi: that is just about it "daybreak: asia." david, happy friday. also a bit of a nervous friday going into the weekend. i heard of something can happen in northeast asia, that starts with the letter s and ends with the letter a. and weget started area are waiting for trade out of china which could come out, usually comes out around 10:00 a.m. local time. been a littleas bit late. we will see what happens there. we will be joined by the senior em. investments will have him in the china as well, as well as our bloomberg intelligence

economist. we will be fleshing out where we are in the growth cycle in china. i mentioned korea would be joined by the associate of sovereign risk. if we do are saying is see a prolonged military conflict in north korea, they will need to take the ratings down a few notches. watch out for that chat a little later on the show. betty: a lot ahead. that is it for "daybreak: asia." coverage continues with david. this is bloomberg. ♪

♪ david: all right. it is friday, 9:00 a.m. in hong david ingles.id englis this is "bloomberg markets: asia." ♪ david: seeking havens from the storm, the yen, treasuries, and gold rally as investors brace for the economic damage hurricane irma. japan looking for growth. inecline