reported that chinese officials had recommended slowing or halting purchases of u.s. treasuries. global debt markets were already selling off. signs that central banks were stepping back from bond buying stimulus. such a move by china could make it harder for the u.s. to finance budget deficits brought on by president trump's tax-cut. >> president trump has promised not to attack north korea on negotiations underway with the south -- while negotiations are underway with the south. trump repeated the u.s. is open to talks with kim jong-un's regime under the right circumstances. north and south korea have agreed to hold military talks

but pyongyang says its nuclear program is off-limits. germany is maintaining a hard-line stance on brexit, demanding the u.k. pay for the privilege of its financial firms having access to eu markets after it leaves the brock -- bloc. german officials say the u.k. cannot hope for a trade agreement that includes financial services unless britain agrees to make substantial contributions to the eu budget and adheres to european law. and an advisor to money managers, including pimco, says emerging-market stocks will produce annual average returns of 6% over the next decade. .esearch affiliates says e.m will surpass every other asset class, even after an 82% jump in the past two years. the company predicted in 2016 that e.m. would be the trade of the decade. they see emerging-market local bonds outperforming. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries.

i'm courtney collins. much, courtney. next it back to the u.s. markets. all dampingoil, sentiments. plus take a look at how currencies reacted to the concern that canadian officials that president trump is likely to leave nafta. all of that meaning it was risk off today. that monstrous rally, take a look at the close. even though stocks try to get out of the pit, they ended up in the red several times today. let's go to the market snapshot. bonds were on focus, moved by china come up any concerns of the bear market. as you can see, as they roll into the thursday market, we can see gold lower. oil above 63, we haven't seen

that in more than three years, so that is something to keep an eye on. intel on the spotlight once again, with the concern of the flawed chips. online retailers are going heer, as amazon, the by myth, announced a small sizing in its businesses. and american airlines pacing gains from all major airlines despite higher oil prices. investors are saying a bullish cap i had, higher fares, strong demands, and that is really bullish for hairlines -- airlines. >> we mentioned concerns, tell us what it means and the u.s. making good on leaving nafta. what we have is unofficial that trump is going to

make good on his threat to leave nafta. if you look at how the currencies moved and the canadian loonie under pressure, the mexican peso also under pressure, and you also had a white house official come on the background and say there has been no change in trumps we have for you g #btv canada on the bottom, and we have mexico, and the balance of trade red. .o very big deals will continue to watch that. crypto mania goes mainstream, let's talk about the continuing trend of these industries and rebranding themselves to catch this coin rush wave. >> it appears to be working. buffett is warren

saying that he is joining the voice of critics saying he would like to buy a five-year bearish there is a lot of sorting out to come. let's go to the chart of companies, and the growing headedof companies towards cryptocurrencies. it has continued its gain for another 50%. company, jumped 60% after it was reported that they have a stake in ripple. notice overstocked and long island iced tea which changed its name to long island stoxx have the backed off a bit. it is not clear whether this pivot is a short-term or long-term gain. >> quite amazing there, susan. susan joining us from new york.

and that she mentioned, the chances are rising that president trump will pull the u.s. out of nafta. reaction in the markets, not just with currencies, but also with the u.s.. joining us now from the toronto bureau, lily, thank you for joining us. his is the art of deal at the moment? >> it may well be. u.s. government officials are not saying he is definitely going to do it, but the odds of trump polling out of nafta are rising. this is according to two canadian officials who spoke to bloomberg on the condition of anonymity. concern aboutmore -- of a withdrawal. canadian executives

talking real term, planning out their roadmap if this reality comes to pass. justin trudeau, our prime minister himself said that uncertainty over nafta keep some up at night. those were his words. what would it entail ? it is not some big i would happen overnight. trump would have to give a withdrawal,sue of and white house officials said on background that the president's position has not changed on nafta in a meaningful way. our bloggers are saying that even if trump gives a six-month withdrawal, it doesn't kill nafta, but the market was caught off guard by these headlines coming from canadian officials. what does this mean for the loony now? heard a minute ago, the

loony and the mexican peso, it is playing out in the currency market. strategists are saying that the market has been complacent on the potential nafta withdrawals. we also saw canadian government bonds yields on those bonds drop. that, we areo looking at the bank of canada, because mark expecting a big decision from our banks in canada area going into today, the odds of a hike next week are at about 90%. after this development, we saw them pullback at 55 to 60%. bank of canada once a little bit of wiggle room, he certainly got it in the form of this development today. also looking at auto parts suppliers in canada, big industry here. fall 2 to 3s all

percent. fell 3.5%.lso table,does this set the discussing january 23, talks that are just about to come up. >> it is a great question. this doesn't help. this is going to be round six, and around five it not and in a particularly up eight note -- upbeat note. there is a number of trade disputes between the u.s. and canada when you are talking about stocks with lumber, whether you are talking about newsprint. between a trade spat canadian aviation company and boeing.

we are learning that canada has filed a complaint that the wto against the u.s. with respect to how it applies duties. u.s. trade representative called that development and ill advised attack. you can imagine the three sites are sitting at a table in two weeks time is not going to be a particularly pleasant discussion. >> lily, thank you so much. much more ahead on daybreak asia. the theme at the consumer electronics show in venture capitalist firms. the miss our conversation with eric hippo. but up next, the warning on treasuries. this is bloomberg. ♪

is "bloomberg daybreak:

asia." china's threat to pull back the u.s. purchase of bonds with a note of a 10 mark -- 10 year high push the yields back down again. latest from kathy hayes. so is this the and of that bull run, or not? runhe and of the bull remains to be seen. even if it is not the end of the bull run, it would will take longer to determine. people all are pretty sure that some type of bear market has resumed. fare can take a look at the right side, you have this big , it has to be decisively row can. we got close to that in trading today, but also we have to look

at getting 2.6. you also start seeing that maybe where going to get into this territory in 2014. so what happened? china is really big in the news the last couple of days. bloomberg news has learned, this is a huge story broken by bloomberg, china has recommended slowing or halting its trading of u.s. treasury. china is the biggest holder of u.s. treasury outside of the over a trillion dollars. that is an awful lot. immediately, people started second-guessing if this is a .aper tiger let's look at some of the things that were bandied about today. trump is going to send some trade bullets to china towards they willnd steel, so

say, hey, you better look out, and we will make good on this right if you are not careful. pointing out that they are no longer a major buyer of u.s. treasuries. it will still buy them, but not as much as they used to. if you are an exporter, and you have a surplus, you will have to recycle those dollars back into bonds. if you downplay china though, a lot of people are seeing wait a minute, china may have come into the mix a time today. but, you have inflation expectations, which have jumped. ready toetting stimulate -- they're looking to pull away from stimulus. saye is a lot of reason to no, we are entering some type of bear market territory. >> what about for the fed stand? concerns gives them

with augusta stimulus? stimulus?gards to >> it is hard to see how this will play out. he says it will be manageable but must be vigilant. you can't wait for a dramatic inflation to move. against all of this, we have to look at one more thing. is ais the fact that there $20 billion sale of 10 year notes today, and demand was very healthy for these notes. they had a healthy jump. is thego to #251, that number of bids, the highest since june of 2016. a lot of indirect bidders. this includes big institutional

buyers. this is the most since august of 2016. we are in a bear market annuals are going to run higher, but who knows, maybe they will. to this is potentially going be the break that slows it down and prevents it from being severe. there is a reach for yield in the world. maybe likely to jump in and buy it. >> what is next for bonds then? you have to be eye on thursday, ppi on friday. it is interesting to look at , talking fuller said about inflation and a different regime for the fence. when it comes to the jump in inflation, oil prices have jumped. he was asked about this flattening yield curve, and he said he gives the fed's more room to move.

that the fed cannot be tied into an invert think curve. that is something we have to be aware of. is a change policy yet, but balance reduction continues, rate hikes continues. if it gets worse, maybe they will start to reconsider. >> thank you so much. for more for everything she mentioned plus the currency --look focusing on treasure rich for your notes and mentioning how boring these fed meeting seem to be getting. but what we are seeing right now, the bond markets will be getting interesting? towe are relying on china liven things up. the particular think about it is what the alter your motive is

here. a great bloomberg exclusive of course, but the difficulty is from a currency perspective, 48 hours, 24 hours ago, it was reporting the opposite way. the dollar perhaps going higher, and china was going to stop the decline. and now it is the opposite way around. i think the currency take life in all of this is that china is happy to have to way volatility in the exchange rate. >> why? . they don't want to be entrenched and feeding on themselves. to put in a circuit breaker there, and the beginning of the year it was fashionable to talk about -- to have a properly determined exchange rate, they want to be confident that the trend is

destabilizing for the economy. maybe they punctuated it today and as he said, below bit more excitement. is anyto see if there more follow-through on this report. there is reports, and there is action following it. it makes the dollar movement more interesting, and difficult. people liket for you, and the question with nafta for instance, where does it leave you in terms of the predictions, where is the dollar headed? >> the chinese did not shake up news, what the nafta we are getting is ambiguity creeping into policy decisions. it came this morning, and it felt like everything was now down for a hike in next week's meeting, and then we had a

headline that the market has to reassess now. -- we don't have that certainty. it is interesting with the policy directive because as you say, it makes it more difficult, more interesting, which is what we have relied upon. we have seen in 2017 where the dollar is not following treasury yields. those two things differently now, those correlations breaking down for 2018? >> it is tricky. not just on the likes of the euro-dollar elsewhere, but they haven't been perfectly guided as they used to, and those are traps you have to avoid. yet to identify the relationship that is holding neatly right now. while i extrapolate my forecast,

i think we have to try to at least anticipate where those andtionships may break down where they may intensify, and that made the -- that may give you a better lead. logically, in the context of interest rate differentials, and so far in 2018, it hasn't. to read how you view these currencies. it is tricky on that basis. thatwant to highlight correlation. one of our market specialists is saying that his take is that a u.s.s taking treasuries because we see that correlation breaking down in the 10 year yield and the yen. the doj is to reduce the purchases of the bond. to be honest, much of last or

as well, it is a trend working quite well over time are you i wouldn't hang too much on the story of the week. the doj reduced purchases by 10 billion and one part of the market, it wasn't the stuff of legend. the reality is that the doj has been buying fewer and fewer, the tapering has been happening in the background. it is part of the process of reassessment, and i would say that if yields aren't explaining anything -- everything, yet to hang your hat on. >> we will leave it there, thank you so much. the hsbc security had for strategy. much more ahead, will the electric car boom help or hinder the nickel business. we'll take a look at that next. this is bloomberg. ♪

7:30 a.m. thursday in hong kong. still pretty cold out there. don't be alarmed. here, 6:30 a.m. wednesday where markets closed in new york. we couldn't make any of those gains today. that is a pretty your city skyline. i am betty lou in new york. >> and i am in hong kong, and you are watching "bloomberg daybreak: asia." >> the canadian dollar and mexican peso drop after can in

officials said there is an increasing likelihood that president trump will give a six-month notice to drop out of nafta. white house officials say there has been no change in the packed. --pact. catalonia's two main want thence parties president to serve a second term. it remains in exile in belgium, that could be sworn in remotely to challenge spanish prime minister mariano rajoy. independent.atalan accessow citizens to visual id, selling allegations of a major privacy breach and

the largest biometric database. arsonal details of up to billion citizens enrolled in the program could be illegally accessed or just eight dollars. indian officials say that there is no breach. malaysian government says that they will pay up to $70 million f a firm can find the wreckage of the malaysian airlines flight 370 within three months. the transport minister said there is an 85% chance of finding debris in a new search area. the plane-- disappeared in march of 2014. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am courtney collins, this is bloomberg. >> courtney, thank you. that's a get how markets are trading to the countdown of the market open in hong kong and

soul. the jitters in the bond market continuing, and the first drop in u.s. equities. >> when it comes to the japanese equity session, we have central banks being delivered from investors when heading for the stimulus exit door. that fell to a six-week low, biggest drop. reaching averages all of which were i'd. -- bojity has returned activity will be closely watched , persisting ahead of that trend. take a look at the topics.

g #btv 5245, you could see that we could have the topics be tested given its flashing signals. .he 14 day rsi has been after that drop, we are seeing the benchmark that continues to see the pressure. they outperformed their bigger rivals in 2017, and that trend continues. one drag standing out, tell us about that. drugmaker.a bio it has picked up momentum over the last year, outpacing and driving this value. it is expected to do well in europe. with that backdrop, the stock hit a new record this week are outpacedu can see, has

hyundai, and it is beating out the numbers reactor, samsung. on thek you so much market preview. we haven't seen prices like this since december of 2014. , the $70 mark, what is behind the crude awakening? charts ono bloomberg oil. >> i like that, crude awakening, not rude awakening. about the u.s. supply of crude down, not one, not two, but eight weeks in a row. we see emerges there with crude supplies and the price of oil

rising above the $63 mark. notral reasons for this, just because of falling supply. through thisn year, and it is rising geopolitical risk that some banks are talking about. more on that in just a second. it is price rises, interesting to see that the demand is rising with it. this is global demand for oil. incan see in the red here 2008, there was a financial crisis and the demand for oil was at a low. 98.6 billion barrels of oil is what the world is consuming. the interesting thing here in the u.s. is that we are exporting more than one million barrels each and every day. this has been the case since

september, when factories and refineries started to come in wake of the hurricane season. visit are going to lift the global forecast, where is this going to go? of course, it is going to go higher. it is going to push the bullish bets higher. here, it is at a record for net longs for wti in white. it is nearly a one-year high. year,still a very young there is a of banks with and have a consensus. said that they are right now at 65 to $70 a barrel, they don't see it going to $80. is at 68, butti

city see some volatility, a lot of volatility, $80 for oil by the end of this year. war, you'reg about talking about kim jong-un, of course north korea, and i thought about our own u.s. president increasing that volatility on oil. we see wtior today, and crude hitting those highs. >> thank you. super sizing efforts to the australian nickel operations into a key supply hub for electric car batteries. they're looking to boost its value as they look for a buyer. bloomberg news reporter david stringer joining us live from melbourne this morning. try -- going to help the process? >> good morning yvonne.

has been on a real mission to strength the shy -- size of its portfolio . they don't include nickel, they are left with its own collection of assets in australia. mainly serve the stainless steel industry, and the last time they tried to sell in 2014, they could achieve the kind of value there were looking for an abandoned that sales process. the prospect of rising demand for all material from batteries needed in electric vehicles. this is changing their equation for the nickel market. it is a renaissance for the nickel, quickly responding to that dynamic. it is looking to build the biggest nickel sulfate producer

at the nickel west operation in australia. it is the kind of material needed in batteries. and are exploring other options to expand that, they are looking at cobalt materials and looking a step further down the chain to supply the combinations of mental needed and batteries. to build a global hub for batteries, but it is not an opportunity necessarily for them to retain the company. the ceo back in november said that this is a unit that still needs to be offloaded. there is definitely an opportunity there, but it is not one they want to keep. though, interesting because you mentioned that we are in the beginning of this, anid react so there is opportunity for the units to be a big role in the battery supply chain.

at in making second thoughts of finding a buyer? >> this issue is mainly about scale. like nickel sulfate and other special materials. it is not going to move the dial. what they see as the best strategy is to look at copper and aluminium. and to look to gain exposure. for bhp, that is chiefly around copper. fully electric vehicles need four times as much copper when compared to internal combustion vehicles. they are targeting that segment marketsage, not smaller that are boost earning. bhp has been trying to move away from complex processing and trying to simplify the process.

they really focus around copper, iron, and coal -- coal. >> how are they prepared to rise? >> it is still something of a work in progress. we have seen some of their thinking here. we have heard recently from glencore. they plan to double its production of cobalt, that key metal that is needed and batteries. the second biggest miner is studying the planned to develop its own lithium line in serbia. the are looking at that project at the moment. they are slightly cautious. market not yet fully understood, and there are concerns of technology risks. will lithium, will cobalt be

needed in 20 or 30 years time? -- they will need things like copper. >> david, thank you so much. to have much more on automotive innovation next. battle forhow the voice assistants is benefiting the stature of venture capitalist funds investor. this is bloomberg. ♪

>> i believe the next five to 10 years, video consumption is going to be through mobile. so these are our priorities, make it addressable, find out who our fans are, and reach more people over more and more devices. the mobile consumer very well, we know what they

want, and what they look at. content is one major piece. the people on mobile are on their four hours a day, and they we will seeed, and more content smart deals. to make sure we are not hampering the growth of innovation and creativity. number two, we are examining our own regulations to make sure our regulations are not slowing the rate of innovation. >> we just saw some very big names at ces in las vegas. we have seen lots of innovation coming out, car, the battle of voice assistants, 5g, all of those key themes at the electronics show in las vegas. what is wedding the appetite of investors?

us is eric, a leading venture capitalist. eric, great to see you here today. you look at all of the innovations, what gets you most excited? >> voice computing for sure, because it is coming of age platform. automation,d home and the automobile space as well , you will be's be speaking to your car, you'll be speaking to your refrigerator. it is exciting for the kinds of applications and the new services that can be deployed because of voice. of startu seeing a lot up, a lot of companies that are moving in that direction? starting to. playerscular, the big like google and amazon are trying to open their platforms so that you can start to share data and start to build.

there are applications and application tools that you can use area we are starting to see the beginning of it. we will come to full force by the and of this year and next year. >> you mentioned some of the big players like amazon. there see just arrived yesterday and talked about amazon disrupting every space, and noting how dare disrupting the search space as well as advertising. our you to listen to what he said. isi think the main thing what is going to happen with amazon. amazon threatens google on search and on their advertising platforms. billion, 2.5nd 2 billion -- in the foothills of

pimco and on the backside, amazon is coming fast and coming quickly. >> would you agree? >> i would agree. just tired a few thousand people to mostly deal with advertising area they deal with two and a to $3 billion in advertising and a half a dedicated audience that goes on amazon and searches for different products and content. it is becoming more -- however, to get to the scale of google, it is going to take a wild. it is not going to happen overnight. the rise of tech giants, the encents, howthe t are they differentiating themselves among the big tax like amazon and google? they are all trying to figure

out how they can they come big in the u.s. markets. they are at a stage right now where they are picking and choosing their space. it is not like alibaba is going to come head on to amazon overnight. but, i think they are in a phase where they are studying and we will start to see some of the first moves they will make, hopefully this year or next year. >> a lot of the investments we have seen has been from chinese giants like alibaba and tencent. do you see that kind of direction heading the opposite way where they become the targets? >> the ones you mentioned are so big, it will be difficult for them to become so big. they are also studying venture capitalist arms here in the

united states, so they are looking at companies all across the spectrum. be a new set of players coming in to buy foreign companies, ford companies, european companies. speaking of buying, softbank is one of the biggest buyers aght now, they are -- there is to buy all of the unicorns out there. am curious what you think about their mission and how that is actually going to -- or will it distort valuations that they have so much money? >> there a big believer in the transformation of technology -- the disruptions and the new products and the scale of technology driven products will be so massive that he wants to make the hit investments today.

he thinks very big, he has a long history of being very successful in thinking very big. think about yahoo!, yahoo japan, .libaba, very famously here's a disruptor in the sense that he is investing a lot of money into startups, and driving valuations to levels that we haven't really seen previously. the question is, is there going to be an output correction of all successful tech companies, or are we in some sort of bubble , perhaps? >> before you go, eric. he talked about these chinese tech companies, some of them are establishing offices here in silicon valley. not so much in new york. you keep hearing a lot about setting uppanies these investment arms and coming into the u.s. and looking for

more tech deals. raising any activity in new york , and is that a threat at all, or is that a good thing? companies in new york yet, but they are serious about the united states. yet to be in the second largest market for innovation, and that is new york. we would welcome that, who would welcome new ways of thinking, and would welcome access to chinese markets. would welcome different facets of thinking, so the more people who are investing and thing about technology, the better. >> eric, thank you so much. forget, our interactive tv function, tv , can watch us live. you can watch interviews and dive into any bloomberg functions that we talk about. this is for bloomberg subscribers only, so check it out on tv . this is bloomberg. ♪

>> this is "bloomberg daybreak: asia." and a quick check of the latest news headlines. acquire theal to u.s. section i business for $2.8 billion. an agreement can be signed as soon as sunday. plan to focus more on categories like coffee and pet food. as the industry grapples for the drop in demand of sugary products. >> coca-cola is launching its adding fourover, new flavors and you can's. the new flavors include ginger lime and blood orange. the thirdemains biggest carbonated soft drink in the u.s., sales volumes fell more than 4% last year.

the original coca-cola formula will not change though. >> chicken wings. the question remains, traditional, or boneless? restaurants promoting boneless friday, an effort of 64% of allg efforts, winks sold by restaurants. first, i should say that i prefer bone in, but i am lazy, so i actually prefer the boneless. the same way.ly we have been talking about this chicken wing dilemma. yes, you are lazy, but when you in, you thinkone gosh, i kind of regret. >> they want the real thing. nothing tops the real thing.

there you go, your chicken wings for today. [laughter] >> discussing the japanese retail landscape. this is bloomberg.

♪ yvonne: 8:00 a.m. here in hong kong. i am yvonne man. welcome to "daybreak asia." asian stocks set for decline. weig on japan.n hu.s. equitiess fell for the first time this year. signaling they may close down purchases of u.s. debt. betty: from bloomberg's global headquarters i am betty liu in new york where it is after 7:00 p.m. wednesday. we are watching japanese retailers, beating expectations. plus, cryptocurrencies, how bitcoin and others could be a growth driver for renewable

energy. ♪ yvonne: we talk about the perfect recipe for the bond selloff to ignite. china released during the pot once again, betty. according to a bloomberg report, slowing or halting their treasury holdings. posturing about this with the u.s., but a few implications for the market. history, backows in 2015 when we saw the treasury holdings from the u.s. and china ease off a bit. we saw vulnerability and volatility when it came to the .hort-term that is when they were defending the renminbi.

from the a tapering chinese when it comes to treasuries, as well. saying, whether this will be a deep or rapid givenould be different, the fact china is still the largest holder of u.s. debt from a foreign holder perspective. even if they do taper off or sell a less -- or more, i should say, they could shoot themselves in the foot a bit. it is self-defeating. betty: absolutely. every move they make is closely watched, has a ripple effect. we were talking to our currency guest of the last hour. the question is, why now? it makes sense as china is looking for liberalization of the chinese currency. so much they have locked in here with u.s. dollars. throughouthing us

this hour. but let's get to the first word news with courtney collins. >> president trump promised not to attack north korea, as negotiations are underway with the south. president trump gave assurances to south korea's president moon jae-in. he is open to talk with kim jong-un the right circumstances. north and south korea agree to hold military talks. but pyongyang said their military program is off-limits. pesoa's dollar and mexican -- and increasing likelihood president trump will give six months notice to withdraw from nafta. the white house official insists there has been no change in the president's position on the trade path. they filed the wto complaint over u.s. duties. and described robert lighthizer as ill-advised. germany retaining of hard-line stance on brexit, do many the

u.k. pay for the privilege of their firms having access to u.k. --e.u. markets after leaving the bloc. makewant britain to substantial contributions to the e.u. budget and adhere to european law. has named new people to the board that may position one as his successor. said he is in remarkably good health and the changes do not mean he is less passionate about his company. they also said the u.s. tax cuts make companies more valuable and stock ownership more attractive. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ thank you, let's take a look at the market open in tokyo and seoul.

we are looking at the fixed income and currencies with nafta talks turning pretty cold, potentially up to around six. let's get the latest with sophie kamaruddin. sophie: that send jitters through the market, the bond space and dollars. when it comes to the equity session, asian stocks expected to be tested today. that is the case for the nikkei 225. continuing for the benchmark, down 0.7%. the yen at a high. higher after a four day event. investors will have the latest news on exports to digest. chipmakers grew 17.6% on year in the first days of this month. ospi down. won snappingin --

a four day drop. we are keeping and i on treasuries. we do have a slight decline in the 10 year benchmark. gold picking up in the face of that weaker dollar, and oil slipping a touch. but holding at $53 a barrel. we have bonds mostly on the back foot. the japanese yields are sliding this morning. as the dollar loses ground, the kiwi up above the 72 handle. aussie stocks falling a second day, led lower by health care and i.t. sectors. tokyo, wes roundup in await a flurry of reports. fast retailing numbers are due this afternoon. thank you so much, sophie kamaruddin with an early look at

the markets. selloff inng for a units treasury that pushed the yield up from a 10 month high. and we have the benchmark within striking distance of the highest yield level since 2014. china making good on this threat. in fact, sell more? kathleen hays here with more. rhetoric and then there is action. kathleen: good way of putting it. so far it is all talk, no action. if you are a bond trader, you will not wait to see if this very important story broken by bloomberg news overnight, where chinese officials say they are recommending slowing or halting the purchases of u.s. treasuries. we did have quite a selloff. remember, china is the number one holder of u.s. treasuries,

.198he world, with $1 trillion. we have been looking at this one a few times today. you can see where you have got the total holdings of treasuries rising. china's have been fluctuating, stating out in 2014. a lot of reserves to defend the yuan. now kind of rebuilding those purchases again. may be chinale say is a paper tiger. after all, they are a big exporter with a big surplus. they have to sell back into u.s. treasuries. they do not have a lot of alternatives to invest. more than $3 trillion in foreign exchanges overall. likeing out this may be

what happened back in 2009 when wen-chinese premier said, are worried about purchases of bonds. rising, the very beginning of the financial crisis. weeks, chinese officials said they would continue to buy bonds. have may be there and done that a little bit. but when you look at the number of bonds china holds, even if they do not buy them like they used to, at a time when there is a lot of debt and bios, it is important to step back. yvonne: were -- where does this leave the bulls market? kathleen: are we there yet? we don't know. let's take a look at another bloomberg chart to make sense of what happened in the last couple days. 143 shows you the yield

has definitively broken through 2.5%. some said 2.6%. it will be a definitive break if it gets there. yields did trade closely -- close to 2.6%. a big story broken by bloomberg news, moving global markets. sold $20 billion worth of 10-year note's. you think, a bear market in bonds. if they selloff, what does it mean for the auction? there was a clear amount of demand with the sale of 10 year notes. let's look at g #btv 251. i want to show you treasury option results. it is important to look at the ratio. this pink line was the highest since late 2016. the measure of how many bids are put in relative to the amount being sold. and, indirect bidders, this white bar.

this is important because it includes pension funds, mutual funds, big buyers. the yield rising up to the highest level. in terms of where we are going next, they answered a question and said, they are looking at the cross current in china. he said the fed can continue with the rate hike. watching, not sure how it will play out. inflation data in the u.s., ppi coming out thursday, cpi on friday. get above those important yield levels and signal a stronger bear market move than we had today. yvonne: kathleen, thank you. kathleen in new york, talking more about the news we broke on china, possibly halting their u.s. treasury holdings. china's attempts to tackle

shadow lending are back in the spotlight. thatng issuing new rules could lead to weaker borrowers. tom mackenzie joins us from beijing with more. theher round, what is likely impact of these new regulations? tom: regulators laying down the gauntlet in the new year with these new regulations, trying to clear out the risks of shadow banks, trying to tackle concerns they have in the financial system. what the impact is likely to be targets three key areas. and trusted loans held by banks, insurance firms and some of their lending practices, and bond trading. morgan stanley says the key areas of impact be the property sectors and infrastructure investment, which rely on these mechanisms and loopholes for fundings. those are areas to watch more broadly and over a longer time frame. we should expect to see a slowdown in the broader credit

environment. they told us they expect credit still in 2018 to pick up by about 13%. moreis likely to be about targeted approach to credit. want to ensure it goes to small and medium-size enterprises. -- want to weeded out, weed it out. betty: give us details on the new roles that have been announced. clarify for us. entrusted loans are in important source of funding for smaller companies, less credit-worthy companies in china. banks act as the middleman. big companies get access to credit and liquidity and pass that on to smaller firms, and they get the interest rate as the benefit. they pocket that and banks act as a middleman. they have been told they have

been overly exposed. smaller firms could be pressured as a result of these changes. often offerrms loans disguised as equity investments as part of public-private partnerships. that is being clamped down on. that could affect infrastructure . traderse been told bond are meeting equity requirements. for most of the people we speak to in china, they say as long as the economy remains unsure footing, you will get more regulations ruled out throughout the year. betty: tom mackenzie, thank you, our china correspondent in beijing, on the new world. crypto crackdown. chinese authorities planning to limit the power of bitcoin -- the power bitcoin miners can use. yvonne: it is earnings season

for japanese retailers. hits and misses. a look at the numbers. this is bloomberg. ♪

♪ betty: this is "daybreak asia." i am betty liu in new york. yvonne: and i am yvonne man in hong kong. japanese retailers, the highest third-quarter profit in three years. the price drop brought in more customers. another company also beating estimates. missedence store lawson estimates. we're expecting results from fast retailing, as well as seven to nine. joining us right now is the bain & company expert joining us from tokyo. good to see you.

there is a divergence when you look at the earnings from a convenience store versus department stores. what do these results tell you about the trend you're seeing in japan, the retail sector, and japanese consumer? what we are seeing in japan is that the country as a whole is [indiscernible] impact on industry in interesting way. the first one is, you start in theasset disposal supply chain. format, ayou have a generic format. time, you can focus on one specific category.

what makes japan interesting is the fact that the so-called disruptors, the online players, find it difficult to enter this market. it'll be interesting to see how these trends play out over the year. especially with microtrends like the l.e.d. yvonne: it is interesting. you mention it is worrying when it comes to the generalist and specialist. i am intrigued by e-commerce in japan has not taken off, like we have seen in the u.s. or china. can an amazon, whole foods or alibaba model work in japan? paper, japane on would be exposed to the online trends, like any country. it is more about the speed at

which it would happen. first of all, there is one big difference between japan and the other countries. it is an interesting case study for the rest of the world. online has thrived around the world on the basic of two messages, convenience and better prices. japan, it is already occupied. 55,000 convenience stores in japan. you could add almost 2 million vending machines, by the way. very much a small side, proximity, convenience, that already carries this to the customers. if you are an online player, you need to be better than just convenience. then you have other specific .actors

the online payment system is not as good as we would like to see. needse aging population access to platforms like the smartphone, for example. over 65 years old, the patronage is small. [indiscernible] it is not happening as fast as some people would have expected. curious, taking a more macro view, we have not seen much wage growth, it in many countries, including in japan. this does not seem to be changing it all for the rest of 2018, or not by much. how will that affect retailers? retailers come in different forms and formats. it affects the industries in different ways.

it affects manufacturers, as well. linked to my previous point these channels, which are small size, proximity, not big-box. that gives the opportunity to manufacturers to address the needs of customers in many ways. geared toward service, prepared meals. for restaurant chains, as well. and also home deliveries. even though the macroeconomic described, is as they find different ways to services, orr smaller sized products, formats

-- [indiscernible] thank you so much, kenji govaers, bain & company partners. you can get that in more in today's edition of daybreak. bloomberg subscribers go to dayb on your terminal. customize settings so you only get news on the industries and assets you care about. this is bloomberg. ♪

♪ equities were down today but oil prices, still up. at their highest level in more than three years, since september 2014. what is causing oil to boil? let's head to the wall with a creamy inocencio. he has a bloomberg charts we need to know. i do not know if i like that image. ramy: it is proverbial, not

literal. it definitely is rising. see the414, we can price here come $63 and change for wti crude. it is because of what is happening in this blue area. this signifies the u.s. supply of wti crude. look at where we are. it has fallen by 5 million barrels. the exact number here in total for u.s. applied is 420 million barrels. hass not the first time it fallen. it is the age week in a row it has fallen. still, we can see that drop is pushing the price of wti and brent on the order of a couple percentage points. nearly one percentage point. let's go to g #btv 3826. as the price rises, we are still expecting global demand to continue pace through 2018. especially the world bank

raising its global force -- forecast. with that comes increased demand for oil. looking here, the financial crisis, over the past 10 years it has been rising. barrels a daylion is what global demand is looking .6 million now -- 98 barrels a day is what global demand is looking like right now. it seems like people are bullish in terms of brent crude. record bullishness. brent crude here in blue. record bullishness for the white line, that is wti crude. it is seeing its highest in nearly a year here. some financials are saying we or 58.it 55 citigroup sees $80 oil, because of tensions between donald trump and kim jong-un. yvonne: thank you, rainy

inocencio. counting down to the latest retail sales figures out of australia. we will bring you those numbers. this is bloomberg. ♪

♪ 11:30 in sydney. we are waiting on the latest retail sales from australia. looks like it was a big beat. 1.2% for the month of november. the estimate was for 0.4%. betty: that is right, retail sales for november, that is critical. one of the most important reports in australia for the past year. was that bubble we saw in october just a blip? does not look like it. 1.2% is the gain. more than double what we saw in the survey of economists. they estimated a gain of 0.4%. shows that despite the sluggish

household consumption we are seeing in australia, not reflecting in these retail sales numbers. shoppers really went out during the holiday season. amazon effect has not hit quite yet when it comes to retail sales in the country. let's take a look at the market moves. the aussie seeing a slide -- seeing a spock. -- spike. a retestould be eyeing of the october 2017 highs. seeing selling on the aussie against the yen, so we do have pressures coming through on the south side when it comes to the aussie. if you take a look at the aussie have that asxo 200 on course for the second day of losses, down 0.5%, signaling overheating for the index. it is being brought lower by health care and i.t..

look at this sliver, that is the retailing subsector. much show you the numbers in that space. morgan stanley feeling good about sales. upgrading the stock to overweight. retail sales has a three day drop. super retail group grew to the highest level since may. carales -- car sales.com under pressure. taking a look at the equities of space, the kospi falling for a third day. but the korean won snapping a four day drop. deutsche bank points to this expert growth and reinforcing bestorean won is still the place in asia. before i go, a quick check of g #btv 3964.

rallyng seng's record could be under threat after a 12 day rise. bear in mind mainland inflows have been moderating in hong kong and china, therefore soothing investor concerns. but we do have signs of overheating emerging for the hang seng index. they say we could see a more healthy run if we have more happen along the way. sophiethank you so much, kamaruddin. let's get the first word news with courtney collins. >> first up, bond markets have been further rattled after bloomberg reported chinese officials have recommended slowing or halting purchases of u.s. treasuries. global debt markets were already selling off on signs banks are stepping back from bond buying stimulus. it could make it harder for the u.s. to finance the deficit brought on by president trump's tax cut.

catalonia's two main pro-independent parties want carles puigdemont to serve a second term in office. he remains in exile in belgium but could be sworn in remotely as he tries to have a new challenge to mariano rivera he. -- rajoy. he illegally declared catalan independent. following allegations of a privacy breach in the world argest biometric database, virtual id to avoid sharing number.ique id personal details of up to one billion citizens enrolled in the program could be illegally accessed for just eight dollars. indian authorities say there has been no breach. the u.s. says it is deeply disappointed myanmar has formerly -- formally charged two

journalists with the secrecy act. they are accused of acquiring secret papers. rights groups have a criticized the myanmar government, led by a nobel peace laureate, using colonial-era laws to imprisoned journalists. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ yvonne: china's debt burden hna group may be set for major restructuring at its flagship unit. airline shares for bid and from trading in shanghai ahead of the possible announcement. let's get to the asian conglomerate editor live from tokyo. we have seen increased pressure on hna. does the company simply overspend on acquisitions and now needs to sell down and pay off some of the debt? or is there more to the story? certainly their spending has

been spectacular. the number $40 billion gets thrown around. diverse, geographically, and quite a few different industries. at the same time, there are a couple other factors playing in. one is the ownership questions. those have been dogging the company for quite some time and have interfered with their ability to complete deals and complete financing for deals. even moret garnered attention once the government in china began looking into companies that were doing a lot of overseas acquisitions and how they were financing them. one thing we know about hna is that they relied heavily on using shares of collateral for borrowing for these deals. when that comes under scrutiny, it does create a lot of liquidity pressure for them, because everyone is asking, which assets have been pledged,

which ones have not, what are the conditions? that in turn has raised borrowing cost a record levels. they are rolling over debt at record cost and that puts great pressure on liquidity. expectingen are we this announcement, in terms of restructuring? what does it need to do? dave: one thing they need to do thatusly is calm the fears they are in a liquidity spiral and to come out and show they can offload assets, that their assets are liquid enough. no one knows they have a tremendous amount of assets. they continuously repeated they won credit line they have not tapped yet, that is about $50 billion u.s. they have to pay it down in very trying circumstances with a very high rate for rolling over the

debt. what they are really going to try to do with this restructuring is restore confidence. beenis a company that has too big to fail. they have brought investments in a lot of different companies. they have brought exposure within china. there is a lot of talk about their connections to the government, as well. it is not accompany anyone it -- would expect a fold up. this would be a move to calm fears that they do have this liquidity problem. essentially, is hna too big to fail? seen --e signs we have the evidence we do have, is that they are too big to fail. we are not in a position to know for sure. these kinds of crises can spiral out of control.

signs.re the borrowing costs are gaining at the same time their scope, their ability to borrow abroad, is coming under scrutiny of the chinese government. they have a massive stake in deutsche bank, for example. the market value alone is worth a billion dollars right there. that should give them some access. but it comes at a time when they have pledged a lot of shares to borrow more. and the chinese government has put a lot of scrutiny on them, raising questions about whether they would be able to raise money there. it does look like the banks are willing to deal, and are in a position where they have to deal with agent name. this restructuring shows they have a lot of flexibility in that regard. they have reported -- people are saying they have missed interest payments already. they are in talks with banks already, and a tough situation. david thank you so much,

in tokyo. quite an intricate story on hna. much more ahead on daybreak asia. this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. in newi am betty liu york. cryptocurrencies facing scrutiny, now in china. chinese authorities said to be planning to limit electricity use by the use of bitcoin miners, who are starting to look elsewhere now. research, ishinese in beijing. we thought it would be electric cars is sucking up all the electricity. but it is bitcoin miners. how much power do they actually consume? >> we estimate the amount of

electricity they consume in china for bitcoin mining is quite minimal. china is the largest power market in the world, you have to keep that in mind. in terms of total consumption, it looks like it is only about 0.2% of the total power used last year. betty: it might be relatively small, but why is there so much mining -- bitcoin mining concentrated in china? the simple reason is because power prices are extremely cheap. there is a lot of cheap, large-scale hydro and pull power in china. but the main reason, since the beginning of 2015, china has been going through a significant period of deregulation. it is good for the power sector, going through streamlining and reforms. on the sidelines there are different industries like bitcoin mining taking advantage

of deregulated prices and lack of enforcement in areas, taking advantage of the reforms to obtain much cheaper electricity then they would normally be able to. betty: very cheap and profitable right now where bitcoin prices are. where does the price need to be for bitcoin for the miners to stay profitable? itaccording to our analysis, ranges depending on the electricity tariff and efficiency of the mining rigs you assume the facility may be using. we estimate between $4000 to $7,000 for bitcoin, the marginal cost at which bitcoin mining is still profitable in china. this does not account for all costs, but short-term running costs. betty: you were talking about regulation earlier. banning bitcoin mining be the end of bitcoin mining as a whole? >> it would be a significant

setback. china come other reason bitcoin mining has been so successful in this country, is because of a combination of the cheap electricity and huge scale. there is a very short supply chain, access to mining rigs and computer hardware and things that go into these mining facilities. in order for them to relocate to other countries, you lose the efficiencies of scale. even if you find other countries with lacks regulations and she prices. but the cost of relocation is not extremely high. much of the mining hardware we see nowadays has extremely short lifespans, less than two years. we estimate many of the mining byilities in china, mid-2018, are reaching the end of their lifetime. relocate,f having to

maybe this is about the time they need to be considering more stable markets, anyways. thank you,hie lu, joining us live from beijing. we will talk to the founder of the cryptocurrency neo, which has been dubbed china's ether eum. this is bloomberg. ♪

♪ betty: this is "daybreak asia."

i am betty liu in new york. yvonne: and i am yvonne man in hong kong. we have been talking about cryptocurrencies, bitcoin, ethereum, ripple. now there is a new cryptocurrency called neo, one of the world largest -- 12th largest cryptocurrency, with a value of $7.5 billion. thank you so much for joining us. we were just talking to our analyst in beijing about the regulations we have seen in the cryptocurrency world. it really has been stifled by chinese regulators, one day banning ipo's to discourage mining. -- did neo circumspect circumvent these? verye market has been

crazy, very hot, for the past few months. i think it is time for the regulations -- regulators to step in to regulate the industry. yvonne: we have already seen chinese miners leave of the country to circumvent these new roles. do you see more of this regulatory scrutiny? da hongfei: i think the regulation is already very strict. i do not see more strict regulations coming. the miners are leaving because they are subsidized by some local government. mining, by claiming they are doing computing or similar things. but now the local governments are cutting those subsidies. i expect more strict regulations coming. yvonne: the structure of neo, tell us more about that.

it is different from the structure of bitcoin and these libertarian ideals of transparency and an open network. council that controls everything. how does it all work and what do you oversee, exactly? da hongfei: the fundamental difference in my philosophy, when we designed neo--- neo, censorship resistance was not our goal. we are a financial system that conserve financial services. it is very different. use proof ofhereum work by mining. is we use a mechanism that perfect for financial transactions. confirmation and within a few seconds it is confirmed. that is the key difference between neo and other blockchains.

betty: how do you feel about all the speculation in cryptocurrencies? da hongfei: it is a very speculative market. somebody claimed it is the biggest bubble in human history. i think we need to separate asset bubbles from technology. it is possible there are bubbles with those tokens, those cryptocurrencies. but i do think there is a huge potential for blockchain technology in china or across the world. i think of the technology will change human beings fundamentally. betty: i hear that a lot, which is, the technology is solid and legitimate. but some of the cryptocurrency speculation is not. you think your own cryptocurrency is being powered by speculative money? and if so, are you concerned that there could be a crash in neo?

i think it is possible there would be a crash in the market, in the crypto market. i have been in this industry for more than six years. we have seen a lot of crashes. it is normal. every time after the crash, if a project or team is focused on technology, they will recover. i would also like to add to that, neo is not controlling everything. we are in a process of decentralization. the neo is like the parent to look over the product for the next few years. but eventually it will be fully decentralized. betty: like bitcoin, essentially? da hongfei: yes, like bitcoin. we need to seek a balance between centralization and efficiency and decentralization. betty: i think there is some

critique you could call it about the neo council and these neo coins. essentially -- i know you say it does not control the market, but how much does the neo council own? give us more explanation, because it does seem quite opaque. da hongfei: it is completely transparent. 50%, or half the total supply of neo tokens. we are using these tokens to foster the ecosystem. we are paying developers, organizing events with bit tokens to do good things to the product -- project. we are not controlling everything. we're just using the tokens. yvonne: you say you can build a better blockchain than ethereum

with a these so-called smart contracts. what is the ultimate goal here? da hongfei: the ultimate goal with our logo is a new, smart economy. it is an open network of a public blockchain for a smart economy. i imagine in the future the economy will be smart. cost is so, the high. we are paying lawyers, governments, different professionals to build trust between trading parties. blockchaineve with technologies and neo, in the future, the cost of transfer will be minimized. yvonne: just with the name itself, there was so much hype when you used to be called antshares, and change your name recently. why the change? da hongfei: there was some brand

andusion between antshares a giant financial service like ant financial. i was asked to numerous times what was the relationship. we decided to do a rebranding. it was quite successful. it caught the attention of the western crypto community. out like ait well-kept secret and found that the technology is solid. the design is quite different from other blockchain's -- blockchains. other things they are planning to do have been implemented by us. they are now treating tokens into neo tokens. yvonne: a few months ago -- we were talking about mainstream cryptocurrencies like bitcoin,

ethereum, ripple. that pack now. but below you, dozens of the new cryptocurrencies now. what do you make of the new coins? does it hurt or help the market? depends.i: it coin, the token, the team behind it is focused on fundamental technology, i would say it is beneficial to the market, to the industry. but if it is a hyped up a vehicle, it is bad. really quickly, we only have a few more seconds -- what do you say to those critics who cryptocurrencies are a complete fraud, and just a vehicle for money laundering? anything can be used for bad purposes.

but we need to use of the pot -- we need to look at the positive side. believe blockchain technology has huge potential to change the future of human society. please focus on the technology. founder,a hongfei, neo thank you for joining us from shanghai. betty: that is it for us. jampacked last few hours. our market coverage continues with haidi lun. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.

♪ >> is 12:00 p.m. here in sydney. this is bloomberg markets: asia. ♪ haidi: asia-pacific stocks snap their winning streak after wall street's first fall this year on a stronger yen weighing on japan. so much for armageddon. despite attacks from china, growth -- they a major restructure at the airlines after a top shareholder pledges its stake.