yvonne: 7:00 a.m. here in hong kong come alive from bloomberg's asian headquarters. i am yvonne man. this is "daybreak asia." the fed minutes show some policymakers one more inflation evidence before they have another rate hike. the markets determine that is dovish. and new highs, the asian pacific expected to rise, as well. betty: i am betty liu in new york, it is after 7:00 p.m. wednesday. president trump an hour ago talking tax, saying the current code is holding america back. the speech was long on promises,

short on details. amid more detail permitted g.m. the latest company hit i the scandal. ♪ betty: we heard president trump talk about tax reform and how it would be a boon for the average american. also a boon for the u.s. stock markets. he talked about how he has seen an unprecedented rally in stocks, based on his presidency. i want to pull up this chart, which i think is fantastic. it shows you how much the s&p stocks have risen since trump took office. in thee has gained more timeframe he has been in office obama, and clinton in 1992, he is behind kennedy, bush in

1998, clinton when he was reelected in 1996, and roosevelt in 1932. terms oft was huge, in how much market cap he has added, $4.4 trillion. but that has to do with how much bigger markets are these days. yvonne: that speech in pennsylvania, president trump the salesman came through. it was like he was on the campaign trail, once again. emphasizing the middle class family. some economists are still disagreeing on that front. betty: some are saying the math just does not add up. we did see the u.s. markets continue to close. the rally heads -- the markets had higher. the s&p up about 0.2%.

the dow, up 42 points. this should be pleasing to president trump, the nasdaq up 0.25%. earnings season is underway. that is always uncertain right now. not a great earnings quarter, at all. yvonne: certainly lackluster. those numbers on wall street helping us, more pleasing for asia-pacific. nzx 50 pretty much flat. a turbulent kiwi is what we are expecting, we are expecting winston peters will make his coalition announcement sometime today. from theteady at .7095 kiwi. in australia, aussie home loan data coming through in the next hour. .7796en pretty much flat, for the aussie right now.

treasuries holding onto gains after the fed minutes came through. the nikkei 225 closing at the highest level since 1996. producer prices coming out, as well. futures at a higher level, extending the gains. 112.48 for the dollar-yen. tupac'sthis is when "california love" was released. betty: nostalgic, there. [laughter] betty: president trump kicked off a roadshow to promote his tax reform program. they were adjusting criticism his plan would only benefit the rich. and. trump: we will fight get those republicans and maybe a few of those democrats to raise their hand. you will have so much money to spend in this wonderful country. and this great economy.

that is why we have proposed tax cuts that are progrowth, pro-jobs, pro-worker, profamily and pro-america. betty: joe sobczyk joining us now from washington. as you are watching this speech, anything strike out at you? joe:+++

way. even in the aftermath of the fed minutes. gold causing a bit of a bid. i am still in the

instagram and facebook bracket. let's take a look at wirp. we are still holding at 77%. benefit.eing banks across the board upgrades, it has to do with bonds. let's go to g #btv 8124. this is titled, upgrades and bounds. higher bond yields around the world helping expectations. the optimism helped push the msci index to nearly the highest level since the financial crisis. let's take a look at the companies that will be in the spotlight starting thursday. j.p. morgan chase and citigroup reporting on friday. the focus will be on cost-cutting and fixed income trading, first and foremost. also, the impact of brexit and other issues.

outlook is always one of the issues. yvonne: coming up, the fed on the fence. the latest minutes show a december hike is not as certain as markets believe. we get the view from a former fed economist. betty: just ahead, a look at key third-quarter results to watch earnings season kicking off on wall street. this is bloomberg. ♪

betty: this is "daybreak asia," i am betty liu in new york. innne: and i am in on may in hong kong. this is the earnings season. let's get to ramy inocencio with a preview and the some charts that you need to know. ramy: a bunch of things came together that are proving to be

headwinds for the financial industry. for example, hurricanes, low volume for the third quarter, and political uncertainty. let's go to g #btv 7991. entitled bank hiring on the rebound, at least for now. head to the right side of your screen. 035 million people are employed, that is awful low. hurricanes and ai and the impact, how was that going to impact things? in september, the jobs are poured hit a low not seen in 17 years. -33,000 in contraction. will this go up or down? we will have to see. the second chart, g #btv 4136. we are looking at bank lending slowing down, loan growth slowing down. it is already happened over the past three quarters with these companies that are reporting this week.

we are seeing one of the big culprits could be commercial bank lending. rbc and bloomberg calculations both say we could see growth of about 1.8%. twoallish rise in the past years. j.p. morgan is in the white. we are expecting this to take up by 4.5%. we will also see weakness in mortgage lending. citibank in yellow, we are expect to fall. right now it is 2.2% in the second quarter, down to 1.9%. wells fargo has had its shares of downs and downs because of the scandals. 0.1% is where it was in the second quarter, 0.2% possibly in the third quarter. let's head over to the third bloomberg terminal chart.

we are looking at what is happening with trading revenue. the orange bars are the third quarter for 2016. the blue bars are what we are expecting for the third quarter of 2017. across the board we are expecting this to fall on $3 billion for most companies. jpmorgan a little higher there. they are blaming a lack of volatility. third quarter, second quarter last year, there was brexit. around the 13 mark. this quarter, around the 10 mark. without ups and downs, traders cannot pay attention to it. as you said, it is just kicking off. betty: thank you, remy innocence you with the charts you need to know this earnings season, particularly on wall street. is joining me with more on the earnings season. i want to pull up another chart that shows you the status quo we

are seeing with banks, g #btv 7763. you can see the green bar showing the return on equities, pretty much flattened out over the last several quarters, years, in fact. far below what we saw for the financial crisis. if you look at this white line, bank stocks have steadily climbed higher. they say it is propelled more by macro factors, regulation being world back, -- rolled back. how much of these bad numbers are baked in to stock prices? peter: potentially a fair amount. trading, 15% to 20% expected year on year because of the volatility of last year. that has been out there for a fair while. it is already put into the estimates. you are seeing and outflow in

cni lending. it is a low single digit pace of growth. a lot of that is attributed to the fact tax reform keeps going in congress. companies do not know what corporate taxes they will pay, as a result, they do not know what their plans will be. they have been hesitant to test the market. the improved outlook on corporate lending could be proven wrong. they: outside of banks, entire earnings season looks to be, what? peter: potentially a little long. predictable, to be fair. it is a pretty tough environment. last year, just as we were coming out of that recession. that was the first quarter we are coming out of the positive numbers again. as a result, expectations are for the slowest pace of earning growth. s&p 500 expected to grow in the

low single digits. consensus puts it at about 4%. there are declines in discretionary and financials. technology expected to grow into double digits this year. betty: amazon going to show up everywhere? peter: stocks continue to drive. . yvonne: certainly going to be dominating the earnings calls. they have been going down the third quarter. what about the topline growth? we know what happened in the second quarter. punish stocksts on companies that miss on revenue growth, and this quarter you have the weaker dollar, the hurricane effects, will markets be more or less forgiving this time around? peter: potentially less forgiving. revenue is another area you see a slowing case of growth. the extent you have seen the trends build throughout the course of the year, we are

rewarded a little bit by markets. top of mind, we are completely punished by them. the second quarter reporting season, we saw average excess declines of 2% over the two days that followed the reporting. we are facing another quarter of scarce single-digit growth. companies that miss again on the topline potentially face more punishment by the markets. yvonne: that jobs report on friday we started to see some indication of wages picking up. at what point will that start hurting margins for some of these companies? in september there were a couple upside stood inflation reports. we saw cpi in the middle of the month. thate seeing some of appear in q3 reporting.

over the past couple quarters, market expansion has in a big driver of what we see helping the growth of the s&p 500. but it is starting to crest off of it. broadly speaking, see the wage pressure coming on. potential he crimps that margin and slow the pace of growth. peter, thank you for shedding light on this coming earnings season. we have big names coming up on bloomberg television. we are going to be live at the world bank and imf meeting in d.c. where we speak to christine lagarde. that will be on bloomberg radio. hear from the world bank president at 10:20 in the evening in hong kong. yvonne: don't miss our exclusive interview with amazon's ceo of web services.

that is in the next hour of daybreak asia. this is bloomberg. ♪

yvonne: a quick check of the latest business flash headlines. qualcomm has been fined $773 million in taiwan over how it prices mobile chips and patents. they say they have been violating antitrust rules from getting $13 billion in fees and not time. they have attracted scrutiny with investigations in south korea, china, japan, the european union, and elsewhere. second-largest insurer talking to banks about an ipo. aboutre seeking to sell 20% of their american businesses in the second quarter of next year. 54% in a lieude a

us -- in alias. plans could change. kobe steel in the headlines, amid warnings more faith data could come to light. this is bloomberg. ♪

yvonne: 7:30 a.m. thursday in hong kong. beautiful outside this morning. started to get less humid. it is like the hong kong fall for us. is 7:30 p.m. wednesday here in new york. higher, that again records. no stopping the s&p, it seems. i am betty liu in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." 's taxsident trump

proposals, saying the outdated code is preventing american recovery. he told reporters in pennsylvania his reforms would kickstart the economy. he claimed to have increased the by $20f u.s. assets trillion in the first few months of his administration. a new opinion poll in japan says prime minister shinzo abe is on track to win the snap election and may add to his current majority. he is expected to win at least 290 seats, while the new governor, yuriko koike, about 70 seats. his party was losing support ahead of the vote. boss tells bloomberg he supports regulations that are smart, but is not impressed with proposals that make no economic sense. he says rules put in place after the financial crisis play an important role. he says he did not support

time, and putting limits on the market does not help. >> i think the volcker rule was ill advised, and at best. i did not support that. there is nothing wrong with that, as long as they are regulating like everybody else. their liquidity is important to the marketplace for the security of the marketplace. questa builds scale is reaping rewards. its business pulled and $52 billion in the third quarter, helping beat estimates for the quarters. in four they saw total assets under management surged almost $6 trillion. the stock is up almost 20%, compared to the s&p 500. taiwan's exports surged to a record last month on strong demand on electronics and a rise in domestic optimism. billion, the8.9

most since july 2010. japans to china and leveled. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am just the summers -- jessica summers. this is bloomberg. ♪ yvonne: let's get the latest from sophie kamaruddin. these minutes came out dovish, weaker dollar. is highsis set for the we see in both markets. sophie: it trickles through into the asian session. raging at the fed, if these forces are persistent or temporary. we saw the dollar retain losses

throughout trump's tax address. the question remains, how is he going to pay for those tax cuts? the dollar looking to snap a four day decline. let's show you how asia is set after fresh highs we saw on wall street. contracts pushing higher for japan and south korea. the kospi reaching a fresh high. watchdog rolled out the red carpet for funds. the nikkei 225 reached a high. 22,000 may not be far behind. they're expecting upgrades at the earnings season ahead, this october 22 election. we are waiting on september ppi data, due today. betty: shinzo abe may want to keep the stock markets rising ahead of that election. all of these have been trading

for a little over half an hour. what is happening there? sophie: no fresh highs for the aussie share market. they fell for a second day. they are dragged lower by materials. showing you the break down by sectors. materials falling 0.9%. iron ore miners under pressure. the metal is falling. prices dropping to the mid 50's. aussie data, we are waiting on august home loans. the last check on an early mover is sydney. this one is jumping after they upgraded the revenue target above analyst estimates. that stock now up just over 4% this morning. yvonne: the latest scandal to rock the bank could go deeper than initially thought. kobe steel has more cases of

falsified data likely to be revealed in the coming days. the company lost $1.6 billion in market value since the news broke. let's get the latest from japan's managing editor, brian fowler, joining us from seoul. reports,about multiple there could be more products affected now. or other international automakers looking into this. this followed is really just beginning. brian: that is right. last night we got one more product we had not been talking about yesterday. in addition to the iron ore powder, aluminum, target materials had falsified data. blese are used for writea dvds. many customers were affected by that. there is a possibility more will be discovered in coming days. this is continuing to

expand and now analysts are coming out, including one in a few moments about the breakup of kobe steel. what are the prospects of that? brian: i saw that report by the jefferies analyst. interesting, looking at the pieces of kobe steel, putting in estimation. his main point was, this is a buying opportunity. it is all hypothetical. he also lays out a possible scenario, what companies might be interested. we are also starting to see what customers are doing. a company that operates the bullet train between osaka in tokyo saw components supplied by

kobe steel with a low industry standards. we will see more of those reports and coming days. wety: an interesting tidbit learned, prime minister shinzo abe once worked for kobe steel, decades before, back before you were born, in the 1970's. i am curious, given that affiliation, might any of that impact shinzo abe in these elections? an interesting point, it was between 1979 in 1982. he spent some of that time in new york. a very junior position, would have been very young. this predates the problem by decades. i do not think it will affect them. i have not seen mention of it in the local press yet. i think he can probably reflect that one. -- deflect that one. on one of our

favorite topics, bitcoin. regulators and policymakers finding out how hard it is to control the explosive growth of cryptocurrencies such as bitcoin. president vladimir putin is the latest a call for tighter rules, are serious risks cryptocurrencies can be used for money laundering or tax evasion. that is a long-held view by the critics. our live blogger help to write a story about this. regulatorse moves by -- after china banned these ico's. latest and toughest moves by regulators in the sector have been by china and south korea and the past month. they both moved to ban ico's. that is the mechanism by which startups can raise money by having digital tokens.

the sector needs to be regulated. generally, we have seen regulators from the central bank saying it is a sector then needs to be watched. in july the sec said some digital tokens will be considered securities, so they should follow those regulations. betty: it is like chasing jumping beans, is just so hard to catch. once you try to regulate one part of it, more pop up or more problems pop up. how successful have regulators been so far? camila: not very successful. the reason it is so hard to regulate the second or is because it is decentralized. that is the way the technology was built, to be a network spread across computers globally. even if you crack down on one jurisdiction, miners and traders and investors can move on

somewhere else where regulators are more flexible. another reason it is hard to regulate -- it was dealt to cut out the middlemen and regulators. can keep working, even without a central bank or financial institution, or any authority. we see these cautionary tales even today where we learn about this one trade, somebody losing $70,000 in just one of those sales. those are the concerns and why we do need regulators in the space. we see digital assets, we see things rally back again. bitcoin hitting 4500 on monday. where could we go from here? camila: that is a good point. we usually do see that kind of reaction. cryptocurrencies generally have a knee-jerk reaction and a slip a little bit after regulatory action is taken.

then they bounce back up. it is because of two factors. one is what we mentioned before, it is hard to really limit these cryptocurrencies and trading. the second factor which is investors end up thinking, regulation can be a good thing. have current where they stand in this new industry or asset class. yvonne: certainly, thank you for your insight. coming up, the latest fed minutes show mixed report, worries over stubbornly low inflation. this is bloomberg. ♪

yvonne: this is "daybreak asia,"

i am yvonne man in hong kong. betty: and i am betty liu in new york. said recents, 15 weakness is temporary, another said unemployment will push this higher. kathleen hays is here with a closer look at what was discussed. wasleen: it looks like it an intense debate over where inflation is going and whether or not it will get close enough for the fed to continue on a gradual rate of rate hikes. written, carefully nuanced. many expressed concerns the low inflation readings might reflect not only transitory factors. remember, it is temporary, this drop in inflation, it will rise. of --so the development the influence of developments that could prove more persistent. decision will

depend on inflation rising toward 2%. charlie evans spoke to bloomberg television in zurich. he has been more in the dovish camp. he was asked about a december rate hike, here is what he said. >> it is too early to say. i do think the inflation data had been disappointing. i understand, i read the arguments. o transitory factors, there have been a number of those in the u.s., low inflation is a global the -- environment. the whole world is dealing with transitory sects. many say one more rate hike is warranted this year. let's going to the terminal, do

ts . out, 11r consensus came of the 16 or 17 saying, one more rate hike. some of these dots are waiting. they said yes in september, but maybe they are waiting to see the inflation move. let's look at world interest rate rejections. -- projections. the odds of a rate hike after these meetings did not budge. people are still figuring the fed is on track for that summer hike. yvonne: let's bring in our guest, from bank of tokyo mitsubishi. also worked as an economist for the fed. seems like the fed is taking this inflation debate seriously now, it is not about temporary effects, but persistent was the

keyword we got from the fed minutes. is it a turn from what we heard from janet yellen in cleveland? doubt in the december rate hike? >> i do not think so. inyellen is leaving february, a committee will give her one last rate hike, so the interest rates look more normal as she leaves. three years ago i gave a speech in tokyo in which i asserted that global central banks cannot create inflation in this world. we do not know why. all of us, including me. that is beginning to surface now. the minutes are very interesting. they look a bit more divided than they would. i think the divisions should not be over policy. i think the key is to understand, why isn't inflation

appearing? yvonne: does the debate seems to be more structural now? you talk about the amazon affect coming through. these are things that will be hard to really shaken change when it comes to inflation. cliff: the fed i know is really pragmatic. they are interested in figuring out what is going on. years ago i asked chairman don cohen, how good you think your inflation models are? he is a humble guy. he said, maybe not that good. the fed predicted it both ways. in the early part of the last decade they were looking for deflation, it did not happen. now they look for inflation, it is not happening. there is plumbing that needs to be examined. normalizesome want to and many will say rates are very low. a near-term promise or issue is

the hurricane. the hurricanes are going to potentially skewed data so strongly. when it comes to december, the fed will maybe be making this notsion, divided again, based on a change in the inflation rate they can count on. the numbers still did not tell them if the numbers are moving enough, if the majority is saying it does not matter what inflation does. they say they are data dependent but will hike rates anyway. cliff: they have always been pretty dovish, it is not a surprise. ought to be divided on -- i want to emphasize this, it is not, do we hike or don't we hike, but do we understand why inflation is not coming back? how can you make policy if you do not understand what is going on? yvonne: we saw the market reaction, the stronger dollar story.

yield is at 2.4% for the 10 year. are those calls further to come? are we going to see a pullback for we see meaningful shift upwards through these levels? led -- less a fed story than what is going on with trump and tax reforms. we think people who are hanging the strong dollar hopes on a read of trump tax reforms -- yvonne: wondering who the chair will be? cliff: depends on the person. they is someone like don, will expect the interest rates to persist. skeptical on the dollar. bottom line. there is a great chart we have here. hope you can see it in hong kong, g #btv 2607. it shows you what is going on with the yield curve, and invert

between the three-month and the 10 year. it is fascinating if you take a look at it and the pattern. it seems toinverts, pretend a recession in the u.s.. it looks like judging where we are seeing the trend headed, we may be headed toward that direction again. do you see something like that on the horizon, cliff? cliff: it is too far away from zero right now to pretend that. this is something of economist like to look at. certainly if we got closer to zero, yes. i think what is going on right now, if you look at the spread, once -- what traders do when the fed starts the hike, is a look for flat nurse. lattener.rn

it looks similar to everything we have seen since the late 1970's. betty: we just got breaking news. cliff tan from think of america -- bank of japan mitsubishi. and kathleen hays. see japan pbi producer prices coming out for the month of september. online withang estimates. slightly above that we saw in the prior month. also coming in, a slight peak, up 0.2%. pretty much unchanged producer prices. it continues to drive home the point we are looking for inflation in japan to take anything we can get with these numbers. these are prices and cpi, as well. you can see the dollar yen

trading slightly lower. we have seen dollar weakness throughout this session. to monitor thee market reaction in the japanese market. you can get around above that story and more you need to know to get your day going in today's edition of daybreak. subscribers go to dayb on your terminals. you can customize settings to only get news on industries and assets you care about. this is bloomberg. ♪

betty: this is "daybreak asia." i am betty liu in new york. yvonne: i am yvonne man in hong kong. we have been talking about the response from all of this. we are hearing from morgan 000nley, ready to charge $25

an hour when those new financial rules hit next year. betty: on top of the annual rate, what they intend to give to some clients from basic equity research once the regulations come into force. it is almost twice the rate of top corporate lawyers. it may be debatable as to how much value it is to pay $2500 an hour. morgan stanley is passing basic business 101. throw a higher price out there and see what the market takes. don't underprice yourself. yvonne: they will be more analytical of what type of research they will buy. it is why you see hedge funds teaming up together on some of these platforms to cut and share these costs. betty: compare that to a typical salary, you can imagine

all the bean counters will be figuring out how much of this is worth. prices are coming out. in the next hour, a look at the kobe steel scandal. ♪

yvonne: 8:00 a.m. in hong kong. welcome to daybreak asia. policymakers want more inflation before they back another rate hike. wall street saw more new highs. asia-pacific is expected to rise as well. betty: i'm betty liu in new york. president trump talking taxes saying the current code is holding america back. in kobe steel, more data might

have come to light. general motors is the latest name to be hit by that scandal. ♪ yvonne: we have to talk about his speech in pennsylvania on tax reform. the focus has been kobe steel. it seems like it is the story that keeps on giving. we are hearing the likes of bullets -- bullet trains that used those parts. we are seeing the stock trade down about 1%. a day of losses, but not as dramatic as the past two days. betty: it is interesting that as the stock falls, there is regulation about what will happen with this company. might there be other competitors coming in to buy up parts of

kobe steel if conditions deteriorate #that is the -- deteriorate? that is the thesis of one of the analyst coming up. this is not the end of the story by any means. jeffrey will be joining us in the next few minutes, saying it is not the end of the world for kobe. let's get to the market open with sophie cameron. sophie: not the end of the world for japanese stocks. 225.i 222 -- we have the latest price data from japan rising 3%, led by higher energy and metal prices. take a look at what is going on in the currency stakes. stillwi dollar rising but

below that handle. volume of sales came in the lowest this month. the aussie dollar is strong for a third session. -- the rise in utility stocks is upsetting the drag, helping the benchmark tread water. keeping at a high. the korean won is higher for a fourth straight session. the yen is looking study. -- steady. more yen weakness will be critical. 38.2% on the lines. at 22,000w envisioned

points. a big win from abe could be a ticker. earnings may be cautious from here. the same time it took for the nikkei 225 to reach the levels called the s&p 500 soared 242%. the nikkei 225 still outperforming the market. betty: we will be watching how it performs again today. let's get to the first word news. reporter: spanish prime minister has given his catalan opponents time to the -- say they have declared independence. they have until 10:00 a.m. monday local time to make his position clear. if they are found to have violated the law, it may trigger legal procedures to force him from office.

the latest minutes reveal that they held a detailed debate on whether the forces holding back inflation were temporary. they said they wanted strongest -- stronger evidence of rising inflation before another rate hike. showing 2% inflation is achievable in the next year. that they havee been low. they have been low for quite some time. we have been regularly calling of the market measures inflation expectations moving down. they continue to be low even though they back him back -- bounceback a little after the election. toorter: they are set continue their commitment with interest rates even as policymakers argue about how long to maintain the program.

the governing council meets whetheris month among this is the time to plan an end to two and a half years of qe or to continue until inflation accelerates. president trump promised justin trudeau and adjusted positive attitude of the u.s. proposals for nafta. more contentious and -- issues are coming. the president said it is possible we will make a deal. we will see. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. yvonne: president trump relaunching his campaign to sell tax reform speaking to truckers in pennsylvania. that hissed criticism

benefitl lead -- only the rich. president trump: you will have so much money to spend. this great economy. that is why we have proposed tax cuts that are progrowth, profamily,ro-worker, and pro-american. jodie snyder joining us now for more analysis. did he sell well tonight? he is selling the tax plan. the white house really want to win on tax reform. one of the criticisms of the plan is that it benefits corporations and the wealthy and does not do a lot for middle income americans. was doing in he

harrisburg. he was calling on congress, trying to get them to do something. that has been part of his mantra. it is no course it is that he was in pennsylvania. one of the reasons he was there ofbecause rob casey is one 10 senate democrats running in .tate that trump won last year he has been making campaign appearances pretty strategic to put democrats on the ropes. republicans?e what is the significance of this deduction? >> it basically benefits higher on the easttates coast and in california that have high homeownership prices and high property taxes. this is something that the

administration has thought we could get rid of. there are republican house members from those states who are very concerned about what that would mean to there can the two and and could possibly hurt them when they have to run in 2018. they are meeting with the house majority leader to see if there is some compromise they can work out, perhaps capping out people a year or more00 would not get it. there are republicans who are concerned. they do not want to lose those republican votes when it comes to a tax reform vote. yvonne: we're seeing the administration looking increasingly isolated to try to renegotiate this. i will looking closer to the u.s. pulling out of this deal? >> he basically called for these negotiations of nafta. he says he does not like it and it is a terrible deal. it looks like what he is trying

to do is raise the stakes on what would be required for renegotiation, making it harder. he could say well, i tried. said it was possible the u.s. would drop out of nafta. it is looking more and more like they will not be able to renegotiate. comments ford nice each other, they did not have a press conference afterwards. the proof is in the pudding. they are looking tougher and tougher. they want a will that would require more content from the continent in things like cars. that is something that automakers say would be very difficult for them. i think it is increasingly --

they are trying to make it harder and harder to renegotiate , which makes you think it will be harder to get a deal and easier for president trump to say i tried, but i am not sure. there is a lot of industry. the chamber of commerce president was on the road in mexico saying this would be very bad if nafta was to end. it is really a do or die time. yvonne: it is getting tougher with this tough talk. they are saying the terms on nonnegotiable for the most part. still ahead, ahead in the cloud. our exclusive interview with the amazon ceo of web services on getting ahead of the market and how to stay there. betty: we will hear from one of the few analysts keeping a reading on kobe steel. he joins us next. this is bloomberg. ♪

yvonne: this is "daybreak: asia." betty: back on the latest scandal to rock corporate japan. they could go much deeper than initially thought. kobe steel says more cases of falsified data will likely be revealed in the coming days. they have lost value since the news wrote. brian, this is not just about -- we have heard about the aluminum, ironon or powder, now reports about more product that could have been affected. >> we learned about target materials, which are used for writable lcds. many customers were affected by that.

we're trying to look at how these problems might filter through the economy. one thing we want to look at his bullet train exports. japan is trying to export old train technology to some other places. -- bullet train technology. they have inspected parts supplied by kobe and the aluminum part that connects the betweeno the train osaka and tokyo were found to be substandard. they say there is no safety threat at this point, but it does seem a little worrying that a bullet train that moves that 300 kilometers per hour might have a substandard part connecting the wheels. betty: we asked you again yesterday, but what is the likelihood of the damages? what are we talking about as their ownnies assess

products and what to do about that? as of yesterday, we did not think the damages were going to be huge. it was not going to be a takata types in area. -- type scenario. it is a little bit early to try to assess that. it does not seem like kobe steel is facing any kind of crisis in terms of its existence at this point. yvonne: stay with us because we are bringing in our next guest. it could follow the footsteps of other companies that have to recover after being rocket -- rocked my scandals. joining us now from tokyo is

bloomberg's top-ranked analyst on kobe steel and has a rating. lasts been interesting the 48 hours area given the fact he made this reaffirmation on monday about the development we have seen that more products could be involved, it has been close to two days with a 40% drop. does this change anything about your reading? >> thank you for having me. this is not going to be the end of kobe steel. it could be the end for management, which has been promoting. it could actually result in a breakup of the company. with a 40% fall of the share price, we could expect ,hareholders to be very unhappy and we could see some lawsuits. serious governance

issue at kobe steel. japanese ratesr, basically in is seven large unrelated is this segments. when you look at management, a lot of people have pointed out there are issues with the size of the board. there are 16 people. it is a very entrenched board. it is questionable. there will be a lot of finger-pointing, a lot of bowing and apologizing to customers, but with the share prices down 40%, i think the market is in probably what is the maximum losses that could end up as the result of this scandal.

i think the market cap, they lost $1.6 billion. aluminumte that the and copper businesses, which they announced on sunday, that is one year of falsification. the market is certainly pricing that in. interesting that perhaps the markets are pricing at a worst-case scenario. this proposal you have of the company being worth more broken together, howly likely do you think that could happen? i look at steel companies. to be honest with you, kobe steel was a production cap a city. withare not playing ball

the guys. there are two big players in japan. that would be a very good scenario to have a further restructuring in the steel industry in japan. i spoke with management. i think they are very happy to buy the steel business and restructure the business itself. this is a win-win scenario for both. each person against the current keephe wants to basically the current structure. with the current scandal, this could escalate for him to lose his job. the biggest barrier of breaking up the company, the likelihood increases substantially. i have a question about one

of the potential buyers. what kind of synergies with a likely get out of that acquisition? onld there be any concern the behalf of the executives about the business culture if we are seeing this scandal rippled through different divisions? >> sure. ,f you look at past precedents this synergies were a couple hundred billion yen, which is a lot. .hey could close down excess they could get a lot of overhead. procurement together. there are multiple layers of synergies. .t is just a rough estimate right now, selling kobe steel business would fetch at least

¥200 billion or about y600 a share. tonacing that 7 million city would cost ¥700 billion. can sell at a relatively low price. it is good for everybody. as for the corporate culture itself, it is very toxic. nobody is actually taking responsibility for anything. the president is coming from the steel business areas i do not think he knows about the element of business. betty: i am curious because you have been observing this company. were there indications that this was going to happen? before they rating say they falsified to a that was keeping their eye on the company externally?

this has been going on. it was on the recurring basis. apparently, it was dozens of factories,have these including the senior management knew about it. and from theide headquarter management, i do not think they knew about it. my understanding is that this 2016ed with the july affiliate scandal. kobe steel started their own investigative policy. they were looking at different business segments. this.eported it forced them to come clean. from the outside, these kind of scandals are impossible to

anticipate or forecast. bad things happen. would change her mind? what would you need to change her mind about your bullish call? -- if thereoducts were accidents, there are two types of outcomes going forward. handled thegement situation very poorly. the disaster or the potential damage was huge. on the other hand, if you look at the other side, mitsubishi motorss -- motor is, -- came back. it is a time for investors to look at the intrinsic value of the company and what are the

likely outcomes. these are the only times where you can generate an offer. yvonne: we are looking at a chart of what you just mentioned. toata was still failing recover. we will see if kobe steel can avoid that outcome. thank you. this is bloomberg. ♪

yvonne: this is "daybreak: asia." betty: you are looking at live where theyom seoul will begin their appeal hearing today. and othersitnesses in this historic case, alleging

him and convicting him of bribery. this has been one case that we've been following all year long that has enraptured the south korean public. this is bloomberg. ♪

yvonne: seeing some dark clouds. half hour away from open. betty: you are watching "daybreak: asia." let's get to the first word news. president trump has promoted his tax proposal saying the outdated, complicated code is what it back the american recovery. he told people in pennsylvania that reforms would kickstart the economy, creating more jobs and higher wages. a new opinion poll in japan says

prime minister abe is on track to win the election later this month. the nikkei survey says they are expected to win at least 290 seats while the party of hope may claim about 70 seats. her party was losing support ahead of the october 22 vote. focusing on exchange rate funds is reaping reports -- rewards. it is helping revenue beat estimates for the first time in four quarters. the stock is up more than 20% this year compared with 14% for the s&p 500. taiwan's export surged to a record last month.

a general rise in global optimism. shipments rose 28%. july 2010.nce that was more than twice the estimate of every economists surveyed by bloomberg. imports eat forecast as well. the former brazilian president has had her assets frozen in connection with the loss. the court said it found signs of intentional mismanagement to cover up irregularities and froze access of a chief. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. have to see how the

asian markets are shaping up so far this morning. let's get an update with sophie cameron. athie: we could be looking november 1996 levels for the nikkei 225 this thursday. there is little in the way of this equity bull market. it is stalling the dollar's rise. you have the kiwi and the aussie dollar rising. wean bonds are tracking what are seeing in treasury. treasury bonds moving higher. 46% off of theme record that we hit back in the 1980's. keep that in mind. we have seen some pretty nice gains for the nikkei 225 since abenomics kicked off a few years ago. pharma is leading gains. falling over 3%

after cutting its operating profit outlook. profit int a record the first half for a fifth year. planning one and a quarter percent. weakness will be critical for any further gains we see the hitting25, as well as this milestone this week. we are seeing some yen buying. we could see its first weekly gain. kospi is soldiering on at record highs. even with regional benchmarks at these levels, there does not seem to be much in the way of alternatives. that is probably helping investors.

all the shares are trading ssie shares -- au are trading fairly flat. halting a three-day advance on u.s. rock piles growing. -- stockpiles growing. betty: the political turmoil in spain. spanish prime minister has given five daysn opponent to say if he has officially declared independence. he has until 10:00 a.m. monday local time to make his position clear. bloomberg editor joining us now with the latest on this. walls seem to be closing in on the leaders in catalonia. he is not trying to get clarification for clarifications

six, he wants to trigger this in -- sake.itution he wants to trigger this in the constitution. >> the leaders in the region do not have many options right now. a situationphase where the army will take -- face a situation where the army will take control. several people have already been brought up on sedition charges. they risk losing allies and his own regional government that were backing this movement. yvonne: what is the game of the catalan players? is it who blinks first? is it a game of chicken? backis conflict dates centuries. there is a feeling that they are pushing this weak government.

they had some competition. they look to be pressing. they are running out of cards to play now. the prime minister knows it very well. them to buckleor essentially. if they do declare independence, that will put into motion the process by which they could suspend the catalonian government. what is the likelihood of something like that happening? we know he has been extending the hand to have some dialogue here. they were betting on some international backing. they are getting nowhere on that front. they are not getting any real international support for their movement. they are seeing big companies

defect from the region. barcelona, it's football team might not be there. this whole movement does not have the backing that he would need to really be able to for ange spain sustainable separatist solution. yvonne: we have seen the banks turn their backs on the catalan government taking their headquarters out of the region. will be here more voices against this community? thing that is holding back this movement and empowering the government in spain push ahead to set the

deadline to really put him on the edge. betty: shifting gears to china. freeing up funds for certain sectors of the economy. the economy is not swimming in stimulus. jeff has been tracking this. tried these targeted lending schemes before. it has not been particularly effective area what makes the pboc any different? on the credit supply and money supply in the next couple of days. it is a complex picture. credit is rising, but the money supply is slowing. credit to small businesses is

actually falling. ist the pboc is doing targeted impulse. the demand is really there. we can see that from the capacity cuts that are happening. that is where it is different from europe. yvonne: it makes the wonder how we can sustain the 6.9% growth that we see in china so far. what are the other gold that they have when it comes to this program? pboc,this works for the what it does is bring credit out of the shadow banking system and into the official banking system that it supervises and is in control of. that is what they want is to be back in control of credit supply . this is pretty easy money

here. what will the uptake the on the you -- on these loans? >> that is hard to say at the moment. the supply of new loans going to small businesses has fallen. of the a result anti-leverage campaign. banks are less willing than normal to lend to smaller businesses because of the pressure put on them to clean up their balance sheets. going forward, it is logical that if you are a small business in china, it is not necessarily a mom and pop shop on the street corner. there will be demand for that. betty: we will certainly watch the impact of these new roles. many more stories you need to know about getting your day going.

bloomberg subscribers can go to tv on their terminal. it is also available on mobile. you can customize your settings so you only get news on industries and assets you care about. this is bloomberg. ♪

yvonne: this is "daybreak: asia." betty: a quick check of the latest headlines at this hour. talking about an ipo minority stake in its u.s. operation. 20% ofg to them about its american businesses. the holdings include a 64% stake in money manager. no final decision has been made and plans could change. about: they may spend

manager million dollars in asia to bolster this global presence. the ceo says he would consider andng majority stakes lenders in india and indonesia as well as the united states. they have singled interest in those countries. a senior executive has educated how much they might spend. shown aacebook has cheaper vr headset that does not need to be tethered. pushing that technology to a wider audience. oculus go and will be available next year. they have cut the cost of the oculus rift headset. their rivals come in at $599. i do not know if i am ready for vr in my home. there are sharp corners of my house.

private analysis when new financials kick in next year. hand thisnk plans to the change is almost twice the rate of corporate lawyers. air launching an appeal today against his five-year prison sentence for corruption and perjury. he was convicted in august of rising then-president, who won instead of him. peter has been tracking all of this. catch us up on what has been happening since that conviction in august. catch reviewers -- viewers up with what is happening. change.de a major

he swapped out his lead attorney -- or retained a long-term judge on the court. it will help their cause in appealing the five-year sentence. in about 20 minutes, the appeals hearing will begin. it is expected to last until january or so. mainly because the court once to to hear from the former president who was impeached, who was a key figure in the corruption scandal. people want her to testify. she did not testify in the original court case. testify until a separate trial is over. that is not expected until november. yvonne: what could she bring in

her testimony in this case? this bickering has been going on for about a week now. prosecutors said they did everything they could to bring her out of her detention center, but she refused every time. >> she is facing her own trial and had a right not to testify during the regular court trial. particular,ce in they need her because she has denied bribing him. this is what he was convicted of and found guilty of. you have a key figure who says she did not. against theargument court finding him guilty. her testimony would be quite interesting as well. where are we now in terms of how the judge would view this case? theyg this conviction,

were trying to make a lesson out of all this when it comes to corporate scandals in korea. do you think they will be a little more lenient here? say and how the public sentiment will play in the court ruling. they obviously will say that it does not. they cannot disavow it. how they willr turn. remember that this appeals hearing has to happen because both sides appealed. prosecutors said the defense was too lenient and it should be 12 years. the difference side said he was innocent. there is a lot of speculation. a lot of lawyers believe the sentence is likely to be reduced , but not overthrown. betty: let's show really quickly

what happened moments ago, which lee coming off of the bus on his way to the appeal hearing, which is a -- going to start in about 10 minutes time. samsung is going to be releasing their earnings tomorrow. how has the company fared in this interim after his conviction? >> they have actually fared very well. ands almost as if trial imprisonment of the heir apparent has not really mattered to the actual business of samsung. as we noted before, they have hit record profits. they seem to be rolling along very well. part of that was highlighted in ehe court hearing when jay y le said he did not pay attention to

the day to day operations of samsung. more capable people are running the business. i think that is reflected in the stock rally of the company and the weight investors see the operations of the company -- the way investors see the operations of the company. yvonne: peter, thank you. up next, amazon's web division has seen robust growth thanks to surging demand for cloud products. this trend is only beginning. our exclusive interview next. this is bloomberg. ♪

yvonne: this is "daybreak: asia." amazon's profitable web services division says the ship to the cloud is just beginning. they searched 42% last quarter. 42% last quarter. it has certainly grown very fast. i do not think any of us would have had the audacity to predict it would grow as fast as it has. he always believed it had a chance to be a significant business. very strong technology company. we had a lot of internal development teams who want help

moving faster in building their applications on a technology platform. the fact that amazon really wanted this made me think that third parties would really want it. i do not think we would have predicted it would be this kind of business, growing year after year. i do not think we would have predicted we would have several times the size business in the next 14 providers combined. we have millions of active customers. all those things were big surprises to us. >> your competitors want this as well. how do you make sure that amazon stays in the leading position? not a surprise that every large technology company is interested in building a replica. it is such a great proposition for customers, which is why it is being adopted so fast. others want to participate. the first thing is that it has a

lot more fresh analogy by a larger amount than anybody else. -- innovating a faster input. there are different ecosystems around this input. providers make their software to work on one platform. some will do to you below. very few have the time -- do t wo. very few have the time to do three. expression we use internally that there is no compression algorithm first.. algorithm forn -- experience. they have not learned those lessons yet. as a customer.

you lost google to microsoft. tell us about the lengths you are going to to -- to keep the customers. >> the way to think about an is ae customer is it non-amazon entity that have used our platform in the last 30 days. they span victim it. gamut. -- the these are companies like pinterest, airbnb, robin hood. over the last three years, the enterprise and public sector has really dramatically increased in the cloud. you see every meaningful businessover the segment using . one, intuit, manufacturing, ge has been

working with it for a long time. technology, netflix runs everything on top of it. even though we compete with them in our video business. in the public sector, we have nearly 3000 government agencies using aws. that was amazon web speakingandrew jassy with emily chang. yvonne: we have an exclusive interview coming up about echo devices with tony reid. for "daybreak:it asia." this is bloomberg. ♪

david: when you told people you would raise a $100 billion fund, did they tell you you were crazy? did you suffer discrimination in japan? masayoshi: that made me stronger. david: how did you feel losing $70 billion of net worth? masayoshi: i was so close to fall down from the cliff, we almost went bankrupt. somehow, we survived. notd: people would recognize me if my tie was fixed. ♪