♪ kong comem. in hong alive from bloomberg's asia headquarters. welcome to "daybreak asia." wall street gains set to extend oilhe asia-pacific spirit also on the rise. clashes with the army and kurdish forces -- from bloomberg's global headquarters, it is just past 7:00 p.m. on monday. there may be a new favorite to have the fed. , netflix storming ahead in

its drive to create a global television network. shares and costs are rising as subscribers switch on. ♪ have amedia influence, i cool chart that shows a much immediate talk is affecting the market. #btv 5195. the blue bar you see on the bottom, they represent how many times you hear in the media, buy the dip. since 2002. the more you hear this, particularly in the last several years, the higher the markets go. maybe we have solved the puzzle. why do these markets keep going

up despite all these terrible headlines? us, really.on saw interesting moves overnight. not just stocks but also with dollar treasuries. he really is becoming more of a serious contender. thet yellen speaking with president this week as well. >> i would love to be a fly on the wall at that meeting. john taylor now emerging as a front runner. the markets as you mentioned, they continue to move higher. we were reaching records again for the s&p. the dow gaining 85 points. nasdaq also higher by 3/10 of 1%. not really getting that netflix effect yet as the numbers came out after the market closed. we will see how markets -- >> the subscriber numbers were quite good. asia looking pretty rosy for

tuesday morning on the back of what you saw on wall street. new zealand pretty flat. the kiwi we are seeing it rise. stronger kiwi on inflation numbers. really the focus is on this coalition government announcement that should be happening anytime soon. australia looking ahead to a few hours. aussie miners out with prediction results. has been theoser aussie at 7849 against the dollar. that dollar momentum continuing as we see this morning. take a look at japan's futures. up about 130 points expected as the tokyo opens. sitting pretty for the dollar-yen. let's get to the first word news. >> president trump and

republican leader mitch mcconnell may have given themselves some breathing room. both emphasized their desire to move on after talks at the white house. but the clock is ticking on the legislative calendar. this weekis on recess and when it returns it will have just 28 days to tackle issues including taxes and funding the government. fed candidate john taylor is said to have made a favorable impression with president trump after now are long interview last week. the stetson university economist is on the rise while former fed governor kevin walsh is seeing his star fade. the president wants rates low but taylor generally wants higher rates. separatist leaders in catalonia have until thursday morning local time to state whether they have claimed independence. the monday deadline passed with spain saying it remains unclear. the referendum has given

catalonia and mandate for independence. madrid repeatedly said it will not negotiate. reports from brussels say the you cable not improve its $24 billion wrecks it -- brexit offer. the eu may met commission president and chief claimsnegotiator amid that talks are deadlocked. hear theay they negotiations heading for a catastrophic breakdown must the eu agrees to talk trade. new poll suggests prime minister shinzo abe and his party are heading for the best election results in three decades. as many as 202g seats. -- 303 seats. they would retain their super majority. the governorces of

staying at the bank. >> the governor needs to understand the macro economy. he has to face regular questioning and to communicate with markets while introducing bold policies. i cannot easily think of anyone more able to juggle such challenging tasks. >> global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you so much. asian stocks look set to gain off i higher u.s. close. netflix grabbing the spotlight. oil futures also standing out during the regular session rising to a two-week high. andave more on the markets the records we continue to hit. >> records across the board. not big gains but enough to keep us in the green.

oil is the big story at a two-week high as the iraqis clash with the kurds. that impacts output. the currency, you do not see a big move now. earlier in the session we saw the pound lower against the dollar. treasuries under pressure. spotlight -- the apple was in the spotlight even know there was a report the iphone 8 in one of the samsung ability.have a break under a california investigation for possible role in the wildfires. uports -- wynn resorts strong. if we go into what is going on after hours, netflix is the big story. your debate seen netflix as a very strong performer. the focus is after-hours where it is up about 2%. beat,eported a big

probably their best three cue on record.- 3q on they will spend more on u.s. marketing this year. they can raise prices slowly but steadily. they do not see a direct correlation between content increases and -- we will have more on that later. let's go into the bloomberg. what you see is netflix's scriber's versus the stock price. it has got higher and higher as the blue boxes, subscribers, has gone up as well. a very big story likely to translate into the tuesday session. >> seems like subscribers just shrugging off the price hikes. talk about commodities. you mentioned oil rising higher on escalating tensions in iraq. copper seeing some big moves around the china data. >> the china data definitely a big push for copper.

china is the biggest consumer. let's go into the bloomberg one more time. je can see the strong rise tting past year end forecasts are rising. what is also in the spotlight, metals across the board outpacing oil in terms of the push higher. bitcoin again grabbing the spotlight as it nears yet another record. ceo of j.p. morgan chase has been an outspoken critic of the bitcoin craze. some comments he made over the weekend was who cares about bitcoin. he believes it is only the other guy. the only value it as is the value the other guy is willing to pay. it cannot in any way match currencies tied to -- it has no value. a ceo begs to differ.

she believes we will see in etf tiedto bitcoin -- an etf to bitcoin. >> it tops out. it is mathematically metered to top out. not even gold is topped out. it goes up 1% a year in terms of supply on average. i actuallyut value, think this has a lot over fiat currencies which are unlimited. >> unlimited. bitcoin nearing 6000 again, yet another record. back to you. >> my favorite part is she says i'm done talking about bitcoin. the price just going up. coming up, the former chairman of morgan stanley asia joins us to discuss all things china at of the 19th communist party congress. >> later this hour in just ahead, president trump

reaffirming his december deadline for a tax bill. but can he really deliver that? we hear some hedging now. this is bloomberg. ♪

♪ this is "daybreak asia." trump anthony majority leader mitch mcconnell held an impromptu press conference trying to project unity following reports of a strained relationship. trump insisted he and mcconnell will continue to work together on tax reform. let's bring in our tax reporter joining us. make of this kind of show of unity from trump and mcconnell today? >> this is interesting. his chief of staff and rex tillerson do this and say look come everything is great, we are getting along.

that is good. if trump feels that is good, that's great. but can it last? there seems to be a reoccurring trend of a public approximation -- proclamation than a fight later. unlikely they'll get a tax bill by the end of the year. >> it's interesting hearing comments from the president, managing expectations. he was mentioning president reagan during these massive tax reforms in 1986. it took until his second term to get anything through. he said i have been here for only nine months. it seems like he is tapering down expectations for all this. >> the rhetoric has been we are going to get it done by the end of 2017. but the big open secret here in washington is a half until early spring to get this done. the whole timeline of what they are running up against is midterm elections.

when to get into april that's when you get too far but they have several months into 2018 that they can maneuver. a letter steps and things they have to get done and agreements they have to come to. there is still in finding within the republican party. forget getting democrats on board. >> thank you so much. laura on the prospects for tax reform this year. let's dig deeper into president trump's tax reform push with senior political analyst who specializes in government action. there is certainly going to be a push to try to get it through this year, if not maybe two 2018. but how important is it now to take action now? we heard gary say we have to get it done now. if we wait until next year the momentum will be don. -- gone. >> it's important to get it mostly done now.

they run out of time to sketching in negotiations roughly at the end of the year. i think we will see a detailed mostly final plan by the end of the year. but the reality is there will still be a lot of haggling in conference committee working on. the senate may not be have bill -- be able to pass the bill. ofre will be a lot visibility by new year's but it won't be finalized until sometime between the eyes of march and april fools' day. mark april 1 on your calendar for completion of tax reform. >> we will definitely be doing that. sounds like a first draft is good enough, at least for the remainder of 2017. what do you think needs to be in that first draft? >> i think they need to outline the basic structure. so far they want to do in terms of brand objectives. but the reality is clear they are going back to the tax reform act of 2014. that is a very specific will

detailed bill with a lot of corporate revenue raisers in it. over $1 trillion in corporate tax increases is simply we will likely see when they put out details. i do not think there is much discussion internally about the engineering of how you manage things. perhaps they have not figured out entirely how they do the pass rate. of the bill is locked and loaded. it will be the 2014 bill. that has big implications for a lot of industries. from the budget committee reform saying this plan could add to the deficit. what does the president need to to pitchich this -- this as a ill that can pay for itself? >> he needs to pitch the public first. how they can raise incomes and basically increased take-home pay. they are fortunate enough they do have a lot of academic research that shows the benefit intorporate tax cuts goes

wages by a substantial amount. the problem is president trump should have been talking about this in january. a huge communications deficit because he has been failing to make the case for tax reform as part of this program to renew america. now it is catch-up time. all the time they wasted on the details of what the rate is going to be or what do we do about state and local, that is time wasted when the president could have in making the case for a broad-based tax reform that listing comes across the board and does help to revive american industry. >> in the midst of this catch-up we are seeing talk from steve bannon, he has attacked senate majority leader mitch mcconnell, challenge incumbent gop members. alabama was a prime example of

that. and of course he has an interesting view when it comes to tax reform. how big of a distraction is this for the gop? party tot forced the shift back into a conservative agenda? >> i think it is forcing function in terms of time. the reason time runs out for tax reform in early april is that is when the primary season starts and that maybe when we start seeing all of these challengers. in particular are likely to see competitive primaries ahead of them. that's quite disruptive and really a deadline for getting things done. in terms of where conservatives are, the good news is the freedom caucus seems to be on board with this. i don't think we will have the same problem getting tax reform through as we did with health care reform. on the senate side you have a combination of senators worried about budgetary implications,

about a bipartisan bill. between three and six republican senators who just do not like donald trump. the senate is always the point of failure. >> absolutely. i just want to focus for a moment on the corporate tax side of the equation. we hear a lot about corporate tax cuts. you have done a deep dive into what companies or businesses are going to get affected, whose taxes are going to go up and who's are going to go down. what did you find? >> the single biggest change is going to be the way that we tax the overseas earnings of software and pharma and consumer branded companies. companies with a lot of intangible income. we will have something similar to a global minimum tax on these companies so we tax their income worldwide and it will no longer be possible to pile up millions and millions, billions and billions of dollars in overseas bank accounts that are no longer sent back to america. they are going to get

repatriation for what they have stored up overseas already but going forward, they are going to pay taxes on that income. the good news is the taxes will be at a lower rate, 20% rather than 35%. it will be a more rational system. but these i.t. and pharma companies that paid low tax rates will see that affect their tax rate higher. another big group of companies that might be vulnerable would be banking and finance -- and insurance, especially insurance. these companies have a bigger benefit from the cut in the corporate rate. so even though insurance in particular will see lots of tax increases, i believe they will probably be next winners overall -- net winners overall. >> interesting perspective. it could make for a scary halloween. i don't know how much markets are pricing this in. >> halloween is the single biggest festival in washington. all the cool stuff happens

around halloween. >> james, thank you. coming up, john taylor maybe the new favor to head the fed. this is bloomberg. ♪

♪ ." this is "daybreak asia >> a quick check of the latest is this flash headlines. airbus taking a majority stake boosting a slow selling airplane in opening a new front in the battle with boeing. the c-series left them drained of ash -- of cash. subsidy dispute with

boeing in washington slapped it with 300% tariffs. sources in india city government is considering selling their flag carrier. sell air india to local barriers -- the carrier is $8 billion in debt but they are debating whether to put more than half of that in a separate vehicle to make air india more attractive. they expect to resubmit a joint venture request with american. the request -- he feels there is a strong likelihood submission will be approved. they rejected the airline's request for a joint venture in the u.s., australia and new zealand. >> the race to be the next fed toir and dark horse appears be running in last place and is said to be running up on the inside rail after his meeting with donald trump is said to

have left the president rushing -- gushing. every week there is a different person leading the pack. now we are seeing john taylor. ,> for anyone in hong kong racetracks really resonate. >> we love them. >> absolutely. it so exciting when you think a horse doesn't have a chance, suddenly they are up on the inside coming around challenging the leaders. another important thing, remember when donald trump said john taylor, obvious choice. and has a willan that suggests higher rates. than donald trump criticize janet yellen. been trump got in the white house and realize you might like to keep rates low. that's a big reason a john taylor was not one of the most likely winners.

are some reasons, trump might be saying this john taylor guy looks good to me? >> less experience. jim -- lots of experience. he served under three presidents. two prominent republicans. former treasury secretary for international affairs. he knows global issues and the global economy. he's maybe a kindred spirit with trump when it comes to the economy. a few weeks ago he wrote a book. he showed he believed in limited government. a reliance on markets. a big fan of those. a lot of people said because the rule would point for higher rates, that's where he and donald trump may part company. but john recently reminded everybody, this is not to tie central banker's hands. he emphasized flexibility. kathleen, we will be watching

of course. it could change. issues forok at key xi jinping as the party congress begins this is bloomberg. ♪

yvonne: storms and cloudy skies. 7:30 a.m. tuesday morning in the city right now. 30 minutes away from asia's first major market open. bity: looks a little cloudy. 7:30 p.m. monday, here in new york. markets closed higher, just like the skies. but clear. theclear in increases in gains we thought. i am betty liu in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." first word news. >> bloomberg is being told steel has been faking quality data for 10 years.

to oldest data going back thousand seven, but the executive tells us there are indications of wrongdoing dating back more than a decade. shares have slumped since kobe steel admitted to falsifying reports. higher in late trade after gaining another 5.2 million subscribers in the third quarter, beating estimates both .n the u.s. and internationally it is expecting another 6.3 tv viewers to sign up in the fourth quarter. earnings per share was $.29, missing analyst estimates of $.32. , beatingame in forecasts. the australian government has reportedly rejected a clean energy target recommended by the country's chief find it. the abc says malcolm turnbull will propose a plan to bring down the electricity prices while meeting australia's paris climate change agreement. the plan will appeal to a group of lawmakers who advocate for

power. a new poll suggests prime minister shinzo abe is heading for his best election results in three decades. as three tos many three seats, just shy of the record, 304. would maintain the super majority needed to pass legislation. boostingctory is seen the chances of horror who go kuroda -- haruhiko kuroda staying at the bank. >> the governor needs to lead the bank of japan. plus, he has to face regular questioning and to communicate with the markets while introducing bold policies. i cannot think of anyone more able to double such challenging -- juggle such challenging tasks. >> powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg.

anchor: thank you so much. we are counting down to the market opens in tokyo and seoul. sophie kamaruddin. a lot of central bank top. -- talk./ looking pretty good so far. quite a few good tailwinds for the asian session, as central banks are reconciling. i want to show you what is going on with futures in tokyo. the stage is nicely set for gains following the new highs we saw for u.s. stocks. because the is pointing -- the kospi is pointing to a softer start. we are not seeing a flight to safety than. the dollar -- safe havens. the dollar-yen holding above 112. that u.s. andorts north korean diplomats might meet in moscow this week. unclear prospects for who becomes the next fed chair.

hays talkingen about john taylor becoming that dark horse, and that send bonds fighting. i want to share this -- bonds sliding. this chart.are u.s. bonds have been moving in line with china's pmi. you have u.s. 10 year yields on the bottom panel. chinese pmi, the white line. you see the slight correlation given that we are in this era when global inflation has been stuck in a rut. this is more of a key driver. yvonne: it is not just the pmi data that has been impressive out of china, but the ppi data as well that send copper flying to the three-year high. where to now for the price? sophie: copper has had a decent run. three-yearper to a high, surging back $7,000 for the first time since 2014. you can check that out on g #btv 81 on the terminal.

it has surpassed the median estimate for the fourth quarter, for $6,100, the line in blue. this is the third we saw on copper on the london metal exchange. resistance next level. chinesegoing into the party congress. anchor: oil now is at a two-week high. how is that playing out in the sydney market? price, well, betty, most when you take a look at the breakdown of what is driving the market this morning, you have materials and energy stocks, both gaining over .5% of our. that is helping the asx 200 arise for a fifth session. you have galaxy resources on top after pushing a rise in third-quarter mining volumes. rio tinto reported improving numbers. let us check in on that stop

this morning after iron ore shipments beat estimates in the third quarter after a week start this year -- a weak start this year. trading at the highest level since february, 2013. keep in mind, rio tinto cut its copper guidance for the second time in 2017, and we have news lines from the financial times is sellinghat rio its aluminum assets. although going on for the commodity space. we have commodities getting to a six-month -- to a high, i believe. much,: thank you so sophie kamaruddin, looking at the commodities and how they are trading right now. the chinese communist party is gathering in beijing for it five yearly national congress. this brings together the ruling elite to chart a course for china's future and more importantly, replace seniors. now.e seeing moving

tom mackenzie explain the path to china. tom: there are four steps to china's leadership. to read first, you have the party congress made up of about 270 delegates. these -- 2270 delegates. the leadership will it's surprisingly -- the leadership pool is surprisingly small. the central committee has roughly 200 members. only 5% are women. the central committee officially has the power to elect the general secretary and members of other top committees. to advance beyond the central committee, you must meet certain criteria. age is a factor. a precedent was set in 2002, requiring committee members 68 or older to retire. aspiring state leaders need to reach each level at a young enough age to ensure their climb to the top. residency -- president xi

joined before his 45th birthday and can stay on until 2022. john h, leaders hoping to advance the on the central committee must have experience cities orofile provinces. an appointment to a top post in shanghai has been the most reliable springboard to state power over the last century. after the central committee, the next level is the politburo. this committee is generally comprised of party chiefs of top regions and the top two military officers on a military commission. this is the decision-making body. they ensure the execution of party policies. at the very top of this power pyramid is the standing committee. this delete body is always -- elite body is always composed of

the chairman of the standing committee. the remaining seats are occupied by commissions. narrow pathchina's to political power. the leadership shakeup. let us bring in stephen roach. he joins us from connecticut this morning. fore, thank you so much joining us. what are the next five years going to look like for china? china istty, i think at a critical juncture right now. they made progress in rebalancing the economy away from the old model of manufacturing, heavily dependent on exports, external demand towards more of a services-based, consumer-led model, but it is incomplete. they have got to do a lot more

to provide stimulus for chinese savers to begin to commit their funds to discretionary function. this involves taking care of the social safety net, a lot of financial reforms, and a lot of unfinished business with respect to reforming state-owned enterprises. this is a really critical juncture that analysts tend to worry about. china is sort of in this middle income area. most developing economies stall out here, and my bet is china will not stall, but you cannot take that for granted. anchor: you mentioned the unfinished business. the last five years, what we have seen under xi is there has been some hiccups as well. i have a chart for viewers to see. g #btv 9610. it shows where we are in the shanghai composite and the renminbi. you have the august evaluation.

the equity market boom. the markets have not recovered back to those levels since then, not to mention the central bank has spent $1 trillion to limit capital outflows, so does xi really have the appetite to implement boulder change -- bolder change? stephen: i learned you have got to be pretty careful in drying major connections between what happens in volatile financial markets in your core strategy in dealing with the economy, and that discontent works both ways, we have seen, in the west. but i think, you know, to me, china is at a similar quasi-tipping point like it was back in the late 1970's, when the other leader was faced with similar types of choices. you either go for the reforms or

you let the economy flounder. it took a courageous commitment to those reforms in 1978. it'll take some courage on the part of xi jinping and his leadership team to face the needs to embrace the new round of reforms this time around. anchor: we are going to hear xi jinping get his report on what is cap -- what has happened in the last five years, and we will hear the policy direction for the next five, and you know, i want to bring up a chart here that a lot of us have been familiar with. g #btv 624, which shows you the enormous growth of debt to gdp, which has been skyrocketing over the last several years. how serious do you think we're ,oing to hear from xi jinping their policies on tackling this debt? does some of --

that hinge on how serious they are on tackling this? stephen: i think the debt issues are really overblown, not to say that they are not important. they do reflect these legacy -intensiven debt state owned enterprises. china has the highest savings rate in the world. it owes its debt to itself. there is not likely to be a classic international flight in capital, like we have seen in debt crises in the region 20 years ago. china has got the time and the enormousal and the cushion of domestic savings. there's going to be more on his plate than just dealing with this issue. anchor: he certainly has a lot on his plate. ping a fewnced moments ago. i am curious if you think this time around, president xi

proven to behas one of the most effective chinese president in the last several years, decades, do you think he will at this party congress elevate himself to the deng xiaoping? stephen: there is a lot of speculation in the party congress that there will be some reference made in the sonstitution to xi jinping' thought, which would put him on the same level as mao. which isone's guess pretty good on that. at this point, it is all speculation. there is no question that he has enormous power. there has been a lot of consolidation on the political front, on the policy front, on the military front, and he has

already been designated "the core leader." this is a time to look ahead and figure out what he is going to do with his power, as opposed to continue to speculate on whether or not he has got it. this is a done deal. the question is the way in which that power is utilized to push ahead this next wave of important reforms that needs to be done in china. yvonne: what type of reforms can we see when it comes to the currency? we have seen kind of a volatile couple of weeks here on how they are managing it. i can be a positive signs leading up to the party congress. is there tolerance for further appreciation? stephen: you know, i think they made it pretty clear now for a number of years, and the governor, in a very lengthy interview, underscored the need to push ahead on moving toward

more opening in the capital account, which there has been some reversal there recently. very much committed to ation ofionaliz r renminbi. i think china is more than prepared and have the resources to deal with that, especially since the capital outflows seem to have been arrested. renminbinterns of the becoming a free-floating currency, do you see more likelihood of that now, or is it a dream? stephen: it is not imminent, but i think china is on the trajectory for full convertibility by 2020. betty: we have got a lot more ahead. we will talk about what is going on in the u.s., including the race for the next fed chair.

stephen roach, just ahead on "daybreak asia." this is bloomberg. ♪

anchor: all right. we are back with stephen roach, the senior fellow at yale university and former chairman. i want to get your expertise back here in the u.s. with lots of things going on here. tax reform, but most notably, the race for the next fed chair. now, john taylor at stanford, possibly the frontrunner to take over. what do you make of that? stephen: i don't know if john is a front-runner. his name has been mentioned for a long time, and, you know, kevinlike heave warsh as well. kevin, his experience during the

financial crisis, that is invaluable for any central but what i find attractive about both of these gentlemen is they both have serious misgivings about overly accommodative on a terry policy, keeping in place liquidity injections that were designed for a crisis, keeping that stance in place long after the crisis has faded. that is risky. you warned about that many times, stephan. in your view, if john taylor were to be appointed the next fed chair, do you think we will see interest rates rise faster and be higher than they are now? stephen: i think the fed's policy rate will probably rise quickly. the balance sheet will shrink more quickly, but if the economy is in such great shape, the market rates, you know, across the yield curve, will not find

this disturbing over the long haul. there may be some near-term disruption as we take away the bowl from the marketplace. anchor: we heard from janet yellen over the weekend in d.c. she seems convinced that inflation will start coming back in 2018, and the fed still seems on course for those three rate hikes next year as well. i mean, what justifies this type of policy? are you on her site here that we are going to face that inflation might start overshooting in 2018-2019? or have asset prices really gone long the two? -- the tooth? stephen: janet have had this view of inflation moving up for quite some time, and it has failed to materialize. she recently gave a very thoughtful assessment of some of the forces, mainly global, at work and continuing to produce

this surprise. you know, we are at the point where economies around the world are firming, wages seem to be picking up a little bit in the united states, and you know, on a risk assessment basis, it seems reasonable for a forward-looking central bank to think that there might be some modest increase in inflation back above the 2% zone that the fed has been targeting for quite some time. anchor: just really quickly, because janet yellen seemed to indicate -- she said we might see this inflation tick up in 2018. do you think we might finally see that? stephen: if we do, it will be modest, and it is not something that is going to, i think, cause major disruptions in markets or fed policy, provided the fed stays focused on the normalization campaign.

anchor: stephen, s thank you so much for staying with us. stephen roach, senior fellow. up next, glued to the screen. netflix with new subscribers. it spent billions on programming. a look at how long that program can run, next. this is bloomberg. ♪

anchor: netflix has reported a blockbuster quarter, blowing past domestic and global subscriber targets and beating on revenue. however, costs are also on the rise. from shaw joins us live los angeles. if you look at the subscriber growth, this was quite a good quarter for netflix. lucas: the best third quarter they have had at the company. normally, in the past couple years, the added reply 5 million. this time, they topped 5 million.

they are on pace for the best earnings. david wells said they would add about 22 million this year, up from 19 million last year, and so, about 1.5 years or 21 months since expanding to 190 countries, they continue to chug along overseas. anchor: it seems like the customers were not too bothered by what we saw, the announcement we heard earlier this year. at what point does that start to hurt? they have, in the past, been surprising their customers with these price hikes. they have been monitoring that better now? lucas: the important thing to keep in mind is it is only in it u.s. and the u.k., and takes affect mostly in the upcoming quarter. the numbers we just saw do not reflect how people respond to the increase in the price. where we see it is in the

forecast for the fourth quarter, which netflix issued today. the forecast for international growth with very strong because most of those customers will be unaffected. in the u.s., their forecast was a little south of what analysts expected, but because their projections for international growth is so strong, it evened out. biggest incident they had with the price hike was in 2011, when they separated their streaming service from their dvd service. that was a huge problem for them. it hurt for a little bit, but in the grand scheme of things, they had their best year yet and are on pace to break that record this year. anchor: all right. the big question is in terms of -- they are spending big and programming to offset some of these suppliers like disney restricting content to netflix. lucas shaw, thank you, our reporter joining us from l.a. coming up on the next hour of "daybreak asia," we will speak

about xi jinping's reform agenda and ask him how it could affect his investment. we will take a look at the jump in oil prices. the market open, coming up. this is bloomberg. ♪

♪ >> :00 a.m. in hong kong. welcome to "daybreak asia." commodities take the news with pacific markets expected to rise. oil it a two week high with production cuts. classes between the army and kurdish forces disrupt output in two major fields. betty: is just after 8:00 p.m. on this monday evening. john stanford could be the next favorite to head the fed. china's elite gather for their

five yearly party congress. to become the most powerful leader since mao. ♪ ♪ yvonne: keeping our eyes on the potential that fed chair, john taylor rising in the ranks of the focus has been on china as well. the data suggest this reflation rating will continue on. betty: absolutely. here in the u.s., despite there being any inflation, the market still continue to rise on the that we will see that rate hike in september. betty: let's get the market numbers.

japanese stocks rising for an 11th today on the nikkei 225, gaining a half percent on the open. sophie: they warn the lacking correlation between the dollar-yen and japanese stocks could mount. we could see investors are not entirely risk-averse. elsewhere in equity markets, we have the kospi gaining ground forthe asx 200 going another trading session. in current, check out the kiwi dollar jumping. it briefly peaked above that 72 handle in wake of the data. the cpi reading does not threaten the central bank reading -- output. kiwi traders waiting to see what

you come from information from the new government one month since the voting place in new zealand. the aussie dollar is drifting lower. from september to be released. backfoot. on the commodities, a bloomberg gauge of raw materials, trading at a six-month high. copper trading at the strongest level since july 2014, fueled by the chinese producer prices which sparked a rally in most metals. we have oil slightly lower here but it is still holding on to a two-week high as outfit is disrupted by clashes between iraqi and kurdish forces. shares,t kobe steel that stock extending backslide.

the company held an investor meeting and told analysts that short-term liquidity is not an issue. the time vely low by the company reports earnings. datais said to have saved for decades. betty: we will be watching that. let's get to the first word news with paul allen. iraq's incursion into kurdish territory has already heard oil production. kurdish kar groups stopped pumping at two fields after technicians failed to report the work. the disruption could affect day,000 --275,000 barrels a

in outfit. plane hasngle isle suffered delays. bump barnier is in a dispute -- bombardier is in a dispute. they say korean airlines will start flying the plane in the next few weeks. us the stanford university economist is on the rise. the president is known to want rates to stay low but taylor devices a monetary policy rule that generally advocate higher rates. saysesia's president consumer prices provide interest rate easing. he told bloomberg television

you've got tried to interfere with the central bank independence but despite the easing cycle, greg is stuck at around 5%, well below the 7% jokowi set when taking office. a formerf course as businessman, i would be happy if banking rates of interest go down. it means cost will continue to be lower and available have better product and competitiveness against other countries. happy, there is business expansion. it means an expansion of the labor market. why not? you can hear more of her exclusive interview with kowi.dent jo bloomberg.is ♪

yvonne: china's most significant political of it in over a decade beijing on wednesday. the party congress and president xi jinping is set to emerge as china's most powerful leaders said mao. what are the likely invocation of -- implications for investors and companies operating in china? correspondent: i will start with divining politics in china is a bit like looking into to a black box. some of the strategists we have been talking to say they expect the continuation of what we have seen in the last five years in terms of policy and what we're

likely to hear at this party congress. highlighted make it , things like health care, the telecoms industry, we have spoken to captial markets and they think policy will stand in a more conservative stance. and lefts on stability on liberalization. they have been expecting big policy issues. things like foe reform and the financial markets. those will be tackled next year around november 2018. we have a terminal that has shows what- that happened over the past five years since president xi takeover in 2012.

it shows this timeframe. yet the shanghai composite from the end of 2011 up until now. you have the blue lines and the white lines. becomesn bar is when he secretary of the party. yellow bar, that is when he becomes president of china. the reservoir, that is only happy shanghai-hong kong connect and the blue bar, the evaluation of the renminbi and the selloff we got in the stock. it is those missteps and the geopolitical context that would make most observers think that would be a close approach to policy from president xi. yvonne: what are his priorities, what are xi's priority that this congress? >> he is probably going to come up president xi highlights his

key policy initiatives, the made in china 2025, which is his big focus on innovative manufacturing. his anticorruption campaign which is leading to the jailing of many government officials. there is no potential successor for president xi. the question is what happens to president xi was his next five-year term is done. there is not a likely successor yet. we will be watching that. will he take another role or continue over the next five years? heree: tom, stay with us when we move across to seoul and the world knowledge forum. manager ofis the the total return bond fund. thank you for joining us.

what is your take on what to expect in this party congress? isot of people thinking xi going to take a more conservative approach or will be sacrificed growth for reform -- or will he sacrifice growth for reform? >> the reforms that need to be taken are inevitable if they need to get that model. sure, despite the lack of volatility and not much clarity going into the party congress, we will begin to see some of those structural changes made that brought some volatility into the economy and into financial markets. betty: what about in terms of the more meaty reform policies, does xi have the confidence to

foe?le the >> it seems inevitable from our perspective. continue with to a robust growth outlook. they know they have to raise productivity, especially in the soe sector. that is something that is going to be taken on after the party congress. another thing is a movement --if you look at the chinese economy, the fact that the exchange rate and capital controls are so tightly controlled presents a risk. the markets are sensitive to changes in currency policy coming from china and sensitive to this capital flows. given the size of the economy, they should be. we think there will be

-- will be some movement in that direction. they have to move off a semi pegged rate. >> is this a push to make the party more involved in the private sector as well, whether that is setting up party committees in private companies or pressuring them on outbound deal, is that a risk? it definitely seems like it would be a risk. look at the small tweaks, changes in chinese policy that have occurred. and time there is a tweak policy and he can say none of them have been that significant in isolation. and time there is a tweak policy, it raises uncertainty

tremendously, not just about the growth in china but about winners and losers in china. it is one of the reasons why we think financial markets are being a little bit myopic at the moment. we have record high prices in every asset class around the world that we have very low volatility. that reads a certain amount of laziness in thinking about the risks. returnnot calling for a to high volatility but we certainly think volatility will go back to at least average levels. one of the reasons is because of the likely direction chinese policymakers made in the new year. betty: it seems we have been lulled into complacency with the low volatility. you are in asia and seoul in particular, what are you finding attractive right now? we are hearing how asia is

becoming more and more attractive. attractiveu finding in asia? scott: it is still one of those challenges, especially if a fixed income investor. when we look at the world, we see the results of very aggressive, easy monetary policy. it makes it more difficult for an investor to our a decent rate of return -- an investor to earn a decent rate of return. there is explosive growth in asia. we think that growth will continue and that is where we will put more resources to work in the coming years. beckyt following on from 's question, if you have much appetite for chinese bonds or equities and you have there is further reform in the capital

market and you might play a bigger role? part, sure, in large there is a local chinese market that is closed to foreigners. that is gradually changing. given the tremendous size of that market as well as the projected growth in new issuance, it is going to be a very interesting place for investors such as ourselves in the years to come. we really need the opening up of this market for foreign investors. yvonne: stay with us, we want to talk with you more. not just about investments in asia but all around the world. we'll be back with scott. we are going to be turning now our attention with scott right after the break to janet yellen and her push to raise rates as president trump gets set to make his choice for the fed chair. later in the show, more

on how fighting between iraqi urdish forces is moving the energy market.

♪ this is a daybreak asia. betty: i'm betty liu in new york. let's get back to the world knowledge for them in seoul. our friend is joining us. i want to show our viewers a tick by tic chart of what happened today when there was talk of john taylor being the propensity front runner here as the next fed chair. that when there was that talk coming in in the late afternoon and these headlines coming across that john taylor, that president trump is now gushing over john taylor. you saw the dollar's fight on this news. i'm curious if you think the

markets have gotten right. that if you have someone like john taylor in the position of chair that-- of fed you will see a more hawkish fed. what do you make of that? scott: it will be perceived as a more hawkish mays. we know the reaction function of the fed would change substantially. -- you will be perceived as a more hawkish move. the market, you expected to react on the announcement. the fed is an institution, it is more than just one person. sea, i is played in the doubt it will be a change -- seat, iis placed in the doubt if it will change soon. betty: maybe investors have become complacent in the low volatility environment. do you think the markets are

amount of volatility we might get if there is a change at the fed? >> yes, it is one of the things we identified in our reason outlook for the year ahead, which is that there is a big inflection point in monetary policy. what is going away from the fed is as much important as what is going inside the fed. the majority of the world central-bank made from a decade of easing to a decade of normalization. conclusion that is likely to lead to volatility returning in the marketplace, at least to average levels. yvonne: on top of that, you have ,eard that it is not broken according to janet yellen and kirk years. d.c. over peers in

the weekend. ips,strongest demand for t what can we see as appetite for the break even know the bonds are getting more expensive? >> inflation linked bonds are relatively cheap compared to nominal bonds for long-term investors. an attractive place for people to invest. if the fed is successful in doing what they appear to be aiming to do, which is to generate and overshoot of inflation, that is when tips investors will be very well rewarded. we believe in that phillips curve framework. you see signs of wages picking up in different geographies and industries. it has not spilled over to inflation more generally but that is the most important influence. inflation will generally be going up in the year ahead.

yvonne: did you get your perspective on all this. reming up, rio's iron o shipment rose but is that enough for the company to meet its two-year target. keep it here. this is bloomberg. ♪

♪ weste: rio tinto said australian iron ore shipments rose in the third quarter. this to improve rail capacity. issues with rail maintenance and its plan to install fully autonomous trains. are we now back on track? >> i will absolutely and completely say they are back on

track. there were realm works carried out -- railworks carried out in the first half. aheadmpany is forging with autonomous trains that will carry iron ore to the port. they are on track for 330 million tons of iron ore shipments. that the them in a good position. with the improvements coming through from rail capacity and they opened a brand-new mine in august and are winning benefits there. yvonne: we are seeing the shares rise about half of 1 percent. rising, is that going to be a concern? >> we thought those is down for both coal and copper.

important a commodity than it was in the past. the reason the production forecast are lower is they did not sell a package of mines this year. they are going to be pretty output. over the coal copper, a bit more of a concern. there will be doubts after a quarter of four performance -- o f poor performance. copper down to chile's mine. track, we hadn data from chile's government say things are starting to ramp up.

copper is really going to deliver for rio. yvonne: we see those reports later this week. thank you so much. we'll be back with much more on oil. this is bloomberg. ♪

yvonne: 8:30 in singapore. singapore,ws from oil domestic endpoints falling from 11% for the month of september. we will get a market reaction in about half an hour.i need on man in hong kong. betty: i'm betty liu in new york. you are watching "bloomberg daybreak: asia." let's get to first word news with paul allen. thank you. hong kong is heading for its worst year for initial public offerings since 2012 with $20 billion of deals being pushed to next year. -- the statenge was initiallyp.

planning to list at the end of this year, but is now targeting the first quarter of 2018. prime ministerst shinzo abe and his ruling ldp are heading for the best election results in three decades. they may win as many as 303 seats, just shy of the record 304 from 1996. the ldp would maintain the super majority needed to pass legislation. also seen asis boosting the chances of the boj governor staying at the bank. >> the governor needs to understanding macro economy and leave the bank of japan. plus, he has to face regular questioning in the diet and to communicate with markets while introducing bold policies. i can't think of anyone more able to juggle such challenging roda. than mr. corona -- ku paul: separatist leaders in

catalonia have a deadline. the referendum has given catalonia a mandate for independence. has repeatedly said it will not negotiate while secession remains a possibility. yesterday lean government has reportedly rejected a clean energy target recommended by the country's chief scientist. the national broadcaster says prime minister malcolm turnbull will propose a plan to bring down electricity prices, while still meeting australia's paris climate change commitments. the plan was appealed. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. yvonne: thank you. time to see how the asian markets are shaping up. let's get the latest with sophie kamaruddin. domestic imports in singapore

are quite a mess. sophie: quite a miss for the numbers. the singapore dollar sliding 2/10 of a percent, trading at 1.3542. bag. a mixed the korean won sliding. the kiwi dollar jumping after the third quarter cpi data beat estimates this morning. it is the only g10 currencies on the advanced this morning. the aussie dollar is leading declines in that space. we did have the rba coming out with october minutes. also this morning, reaffirming gradual growth supported by low rates. the rba also saying that local and global economic conditions are more positive since 2016. taking a look elsewhere, we have stocks on the rise in tokyo and seoul as well as in sydney.

the sydney benchmark rising for a fifth straight session. banks, miners, and energy producers leading gains for the market. even gold players are climbing despite softer prices this morning. show you rio tinto, trading at the strongest level since february 2015. the minor is on track for record iron ore, as chinese demand surges. producers climbing in tokyo. let's check out what is moving on the nikkei 225. sumitomo metro mining trading higher. stronger copper and nickel prices are a boon for the company. and kobe steel expanding -- extending monday's advance, rising 4.5%, even as the company is seeing financing problems in the long run. the big picture, the nikkei 225 is headed for an 11th straight day of gains, the best winning

streak since the summer of 2015. for in funds are flocking. foreign funds are flocking. you can see the green line at the end of the chart signals the first week of october, marking the biggest overseas buying in 2.5 years for japanese stocks. there is more room for fund flow steady, because foreigners are still underweight on japanese stocks. betty: we will be watching how that trade continues. thank you so much. sophie kamaruddin there. of course, how oil is trading, brent crude hitting a high not seen since january. this andake a look at the implications for the oil markets with our energy editor in a moment. first, remy innocence you is at the wall with three charts we need to know. reporter: thank you. let's look at what happening

with brent and wti. take a look at the yellow circle to the right-hand side. we can see the rise in prices as the tension builds on the kurds were looking to the independence vote in iraq. we landed just under $58 for brent. example, brentr actually rose to nearly $59 a barrel. that is a january high. wti rose to a high not hit since april. this is the reaction from what's been happening in iraq. let's head over to see what kind of production is coming out of iraq. generally speaking, the higher the red, the more production iraq is pushing out. it is actually really near historical highs at 4.4 7 million barrels.

this is per day. talking about oil field closures, about 2, 3, or four, depending if they have been seized. just about 6% of iraq's total oil production is actually affected here. not very much, but you get a sense of the magnitude. let's flip the screen here. i want to bring up this great full-screen map we have to show the only pipeline that goes from northern iraq from the kurdish area, crossing the border into turkey, through the port this redline is a pipeline. carry about 700,000 barrels a day. what does that mean against the 4.4 7 million?

it's interesting to see this pop and then a pullback in oil prices over the past 24 hours or so. that's one more thing to look at. a third and final bloomberg terminal chart. let's flip the screen here. talking about the oil going into turkey from iraq, actually not so much. take a look at the past six months or so, we can see as the tensions have risen, the output going from iraq into turkey has fallen. right now it's about 68,000 barrels per day. this time last year, it was coming in around 600,000 barrels a day. we are definitely seeing just about 10% of the production pulled back over the course of a year after the independence vote came to a head, and as the conflict is now happening.those are the three bloomberg terminal charts . i want to remind you that we can always go to opec go to see what's happening with iraq. the green in the pie chart oil,g up 13.6% of total

and in blue is iran. those are the three bloomberg terminal charts you need to know. betty: great charts to explain the situation. thank you so much, ramy inocencio at the wall. let's continue on oil. consults for ihs market. quite interesting seeing the argument that can be made by looking at the charts, that perhaps what's going on right now in iraq is something that can be contained and may not have a long-term impact on oil prices. what would tell you that this is going to spread further, and that we may see a spike in oil prices last longer than expected? >> what's happening in the market is that global oil stocks have come down in recent months.

producers among opec to the agreed production cuts has so far been very good this year. the global oil market is tightening. geopolitics have really reemerged in the minds of traders, even though the crude exports out of the kurdish controlled pipeline are relatively small compared to the total production in iraq. ton you compare that number the spare opec production capacity, which is about 2.5 million barrels per day at best, then we are talking about a rather important contribution to potential disruption of this kurdish pipeline exports in impacting global supply. right now, oil continues to flow.

besides iraq, in some corners of the markets we are concerned about what's going to happen -- now that the u.s. president donald trump has decertified iran's compliance with the nuclear deal. potentially in a matter of months, we could see the return of sanctions by the u.n. betty: and the return of what price in oil? where do you see oil prices going? >> i think in the near-term, prices are going to be supported by these concerns over geopolitics. the problem that opec faces is that u.s. supply has proven to be very responsive to price signals. if we see brand getting closer to $60 and wti above $50, quite a few of the u.s. ones are going

to be profitable. we are likely to see increased production from u.s. shale. aredes the u.s., in 2018 we likely to see increased production from other non-opec sources like canada, brazil, and kazakhstan. if we look into 2018, we anticipate a global oil surplus and prices will likely be lower in 2018 than in 2017. that is our call. if there is unplanned supply off.e, then all bets are we are likely to see higher prices. there is not that much spare opec production. right, you mentioned u.s. shale being a potential game changer for 2018 as well.

this should all help opec in terms of the rebalancing in iran and iraq as well. what our markets pricing in right now for 2018? are we going to see an extension of these curbs after march, or is the demand still looking so rosy that you don't need help from russia or saudi arabia? >> that's right. you mentioned demand being strong, and that is true. our view is that opec and a number of the non-opec countries, including russia, when they meet in november of this year, they will likely --eed to expand construction production cuts through the end of this year. with continuing global demand growth, we are likely to continue to see the market stay relatively tight, even though we are going to have non-opec supply growth. in 2018, we see brent prices below 50. be slightly

other analysts call for higher because there are mixed messages in the markets. likely around $50 on average for brent in 2018. yvonne: and we have been looking ahead to the party congress. there's a lot of anticipation on some kind of withy forms, help us rebounding commodities. is the market pricing in more capacity cuts? cuts is being priced in by opec. we talked about china. china has continued to increase crude imports. china continues to build up stocks for both commercial stocks and strategic stocks. some ofs helped soak up the surplus oil supply in the world. victor, thank you so

much, the vice president of energy at ihs market. let's get a quick check of the latest business flash headlines. netflix rising in late trade after gaining another 5.2 million subscribers in the third quarter, beating estimates in the u.s. and internationally. it is expecting another 6.3 million tv viewers to sign up in quarter.h earnings per share was $.29 below analyst estimates of $.32, while revenue of just under $3 billion beat forecasts. bloomberg is being sought -- told that kobe steel is probably faking polity data for at least 10 years. the false data goes back to 2007. an executive tells us there are indications of wrongdoing more than a decade. shares have slumped since they first admitted falsifying reports. shares rebounded 5% this year -- morning. betty: client is expected to

resubmit a joint venture with american. the ceo sees the request being filed by the end of next year. he added he feels there is a strong likelihood submission approved. the dot rejected the airline's request for a joint venture on routes in the u.s., australia, and new zealand. >> we do believe we have a strong case and we were a bit surprised that this was rejected, because the department of transport typically has approved these. they typically say in the past that there are clear consumer benefits with these arrangements, and all the competitors on the transpacific routes united with air new zealand, and with virgin australia. they have similar partnerships that were previously approved. yvonne: we stay in the skies for the next segment. the rivalry between airbus and boeing reaching new heights. to european playmaker agrees

a deal. that is next. this is bloomberg. ♪

betty: -- yvonne: this is "bloomberg daybreak: asia." i am yvonne man. betty: i am betty liu. posting -- boosting a slow selling plane and opening a new front in the battle with boeing. our aerospace reporter has been tracking all of this. bombard ea has been looking for partners for this business, and they finally happened with airbus. how significant is the tie up between the two companies? reporter: this is definitely going to benefit bombardier,

given that there has been over budget on this program and there have been delays as well. airbus is a very established playmaker -- plane maker. this is definitely good for bombardier. this is also good for airbus because they are filling in a gap where they don't have an it is going to be more product for airbus to offer to customers. it is a win-win for both of them. betty: right, it fills the gap in their own portfolio. eries a, why is the c-s slow seller? reporter: it has been known for quite a long time that it is over budget. bombardier has been having difficulty raising funds.

some of the requirements and performance, they have not been able to follow up with the customers. they have had problems with delays. those delays meant more costs, means -- meaning they were running out of cash. the quebec government had to step in and help them together program off the ground. there has been a lot of delays in not just the development of that, but also on the supply chain component as well. it has been a big struggle for bombardier to get the program off the ground. yvonne: what would this mean for bombardier's customers? what are they saying about this? reporter: obviously, it would be good news for delta and other u.s. carriers, given that the u.s. has imposed a big tariff on

the c-series planes. a c-series last year, and the u.s. government said they would be imposing a itself.iff on the plane there was a debacle about who would pay for it. delta did not want it. with the deal and some of the c-series planes being produced at the airbus plant in alabama, that eases some of the concerns. learned, quite quickly, the response from boeing in all of this. they actually say this pact looks a little questionable, that they could skirt the recent findings from the u.s. government under concerns that everyone should have -- i think this runs in the middle

of the trade dispute that we see boeing and airbus. reporter: obviously, this will pose a very big challenge and competition to boeing. the c-series itself is in a category that boeing is not in, or does not have a product to offer in that segment at itself. this will be a major competition if the deal does go through. it will definitely pose a big threat to boeing in the offerings that they give to the customers. from the order we saw with delta, there are airlines that want plaintiffs in that segment itself as well. we will see how it goes. yvonne: thank you, joining us singapore, our aerospace reporter. coming up, indonesia looking for investment to invest in infrastructure.

where that money may come from. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." i am yvonne man in hong kong. betty: i'm betty liu in new york. president has brushed off claims he is increasingly becoming an economic nationalist. in an exclusive interview, he told haslinda amin that he is taking private investment to fire up southeast asia's largest economy.

of course, indonesia's national interest must remain the number one priority. but to say indonesia's protectionist, it is not. i say indonesia is open. indonesia welcomes investors. i say we want openness and competitiveness. we have opened many to foreign investments. wo, ork it is not one, t three, but many. it shows indonesia is open. haslinda: what reforms can we expect? what is your priority? we will keep opening more sectors for foreigners to invest their capital, their investment in indonesia. it is true our concentration is still on those related to manufacturing industry, film, cinema. why not? later, in the creative industry. yvonne: you can catch more of

our exclusive interview with indonesia's president on our special program, coming up this friday on bloomberg television. betty: that's a pretty place to hold an interview. [laughter] that is it from "bloomberg daybreak: asia." markets coverage continues with rishaad and haidi next. standby for "bloomberg markets." much more ahead. this is bloomberg. ♪

>> a.m. in hong kong and singapore. i am rishaad salamat. japanese stocks are on an 11 day winning streak. oil getting a high over tensions in iraq. jenna's elite gathered for their five-year -- china's elite gathered for their five-year party congress. xi could become the most powerful leader since chairman mao. this is "bloomberg markets." ♪