>> welcome to daybreak australia. shery: i'm shery ahn in new york. sophie: i'm in hong kong. we are counting down to asia's major market opens. ♪ haidi: here are the top stories. banking syste -- banking tops listing that. amazon is planning thousands of cashierless stores. the escalating trade wars claim

another victim. jack ma's says he can't lead his pledge from last year. kim jong-un rounded up in a summit. president trump says it is tremendous progress. shery: let's get you started and take you how markets closed on this wednesday session. we have seen u.s. stocks higher. the dow, rising six cents -- 6/10 of 1%. shares of caterpillar boosted the dow, helping it outpace its peers. not only headlines from china and the u.s. but the ongoing nafta talks. we heard from canada's foreign that the talks will continue on thursday. we also have the s&p 500 gaining 1/10 of 1%. banking shares lifting the s&p 500. we have the 10 year yield rising past 3%. that helping banks can the nasdaq finishing flat. let's see how this will be felt in asia. we are gearing up for a fairly busy day and asia whether it is politics or eco-data in japan. counting down to the ruling

party election. the question is, by how much will he win and what would that mean for his policy priorities moving forward? holdingnikkei futures higher. it has been an interesting week for korea investors. this is us moon jae-in wraps up his visit to the north which kim jong-un -- kim jong-un legend -- pledged to do that. we do have aussie contracts looking flat ahead of the start of the session. have stocksnd, we and wellington opening lower by 1/10 of a percent after a five-day advance. this ahead of the latest gdp at 6:45will be getting a.m. hong kong time for the second quarter. heads up haidi, numeral -- markets are closed this thursday. in hong kong, we will be welcoming the latest trading debut. that is the chinese food delivery giant. beer is can catch our interview with the cofounder and ceo at

12:00 p.m. sydney time and 10:00 a.m. here in hong kong. haidi: highly anticipated listing there. thank you so much for that. let's get you to first word news with jenna. says the commission u.k. is still far from a brexit deal as leaders meet in salzburg. the irish prime minister added to the -10. he says he sees no progress and the negotiation since march. the irish border remains a major hurdle but donald to says the block also remains opposed to theresa may's plan for future ties. >> i believe it is the right proposal because it means -- it maintains friction with trade. it is the only negotiable plan on the table that delivers no hard border in northern ireland. jack ma's says his promise to create one million jobs in the united states cannot be met. relations between

america and china have destroyed the basis on which he made his pledge with donald trump. he says he would keep trying to improve ties between washington and beijing, but warned trade should not be used as a weapon. just months after facing calls to resign in a scandal, shinzo abe is expected to be overwhelmingly reelected on thursday as the leader of japan's ruling liberal democratic party. colleagues say the turnaround comes from a solid economy, wide-ranging political savvy, and a hefty dose of good fortune. victory against his rival would help make abe japan's longest-serving prime minister. the evidence of. have wrapped up their talks in pyongyang after what is being seen as a better than expected a summit. the talks may help revive negotiations. president trump ailing president moon's trip as exciting and a sign of tremendous progress.

however, it is not clear if kim jong-un's promised to hold -- to close a testing site aligns with washington's call to denuclearize. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am jenna degen heart. this is bloomberg. thank you. let's dive into those u.s. markets. bank stocks giving list to the dow and s&p higher for a second above $71.ti crude the dollar and treasuries, the 10 year yield pushing a year to date high. su, talking about the yield at the 10 year, we are looking at levels at the highs this year. big reason we saw bank stocks rally in a way that pushed the dow and s&p higher. let's go to the market snapshot. the risingness and

yields, the story of the day. i have the s&p 500 banking index there. you can see better than 2%. the tech heavy nasdaq 100 was lower. the nasdaq, the only one of the three major indexes that closed off the levels of the day. let's go into the bloomberg. i have the dollar. this is called dollars bold appeared position. gtv is where you can find our stocks. what you are seeing is one of the most widely followed fund managers coming out with a note that the -- that the dollar bulls are gearing off the gas. that is at the -- as the next move on the dollar will be lower after this big strong run we have seen. let's go into some of the stocks that have moved. i will give you a bunch of the bank stocks p you can see they are higher on the day. banks and financial firms getting a boost from the rise in yields. let's go to the other big movers as well. amazon, not moving down in a big way.

it was what happened to all the grocers as a result in their announcement that they are looking at all of these 3000 cashierless stores that could offer serious competition to the groceries. tesla motors getting a rebound. caterpillar interestingly along with the boeing doing well since they are most exposed to the trade issues with the tariffs about to be imposed. shows you there is an increasing view that what we are seeing is not so much a dispute leading up to a trade war, but a painful negotiation. at least analysts say some of the analysis that investors are now having. this rally. get to a wild ride if you are an investor. this is a marijuana stock. it rose to $300. then reversed those gains. we had the trade five times throughout the day. what was going on? su: this was an extraordinary

occurrence. both because of the heft of the investors in the stock, and of the wild move spirit must go to the intraday chart which may be squeezed because it is now a two day chart. what you might be able to see at the peak of the right hand side, the value of till ray, again, an ipo two months ago, virtually almost doubled to 300. then it dropped 94%. day, iting in one reached a value greater than -- a double by greater than u.s. steel pyramid companies. the size of the move is notable. bennett declined. been it declined. one trader said bodies were all over the place. long position, short positions, a lot of people got killed. let's go to the big picture chart. in the last two months since the ipo, you can see the dramatic. me,ease as one trader told when starbucks came as an ipo, he said he was selling it to investors as the only legal drug left.

caffeine. now, we have another legal drug coming back. canada, possibly nationally in the u.s. we are seeing a wild ride. the unusual gyrations in the stock really never seen in a stock of this kind. shery: also, wild ride for oil recently. what is driving the markets right now? su: what we got today was a supply report that kim jong-un is in surprise and that there was a dramatic drop to a three-year low of supplies. 2 million barrel drop. also, refineries at this time of year at a low. there are concerns short-term, the very bullish pressure on oil. if you look at our intraday chart, we are back above the $70 level. we have been below that for a while. short-term, we have a bullish ride for oil. haidi: thank you so -- shery: think is so much. let's discuss the trade war president trump is waging with china. it is shifting to a new phase. each new series of tariffs

pushes the world's two biggest economies toward the coupling. joining us with the insight is libby cantrill, head of public policy. great to have you with us. we have heard from commerce secretary ross saying the tariffs will be spread over thousands of products. it will not impact some sooners -- impact consumers. will that be the case? libby: what we know is this direct lists 20% consumer goods. about 40% are intermediate goods. it depends. washingwe saw with machines, for instance, happen with these goods? in that the tariff was passed on 100% to the washington machine to it -- to the washing machine prices. even though there are only 20% of the list is consumer-oriented, we also think this could affect the consumer by businesses increasing prices because they are getting

increased prices and terms of intermediate goods. bottom line, i think he is sanguine about the consumer impact. it remains to be seen. shery: not only him but president trump seems to think that this could only break the supply chain systems in the world and bring more job creation into the u.s. what is the likelihood of that? libby: again, difficult to assess. what we have seen here is that we have 10% on until the end of the year. then there is a threatened to 25%. course, if china retaliates, which they said they will, and president trump moves forward with his threat, you will see tariffs on all chinese imports to the united states. about 507 billion last year. that is unprecedented. i -- the reason i bring that up is because we never had the -- of this type of tariffs imposed on so many goods. economic impacts are difficult

to assess at this point. haidi: it feels like the resolution or potential for resolution to this trade tariff depends on what kind of war is being raged. there was one account that says this is not just about economics and trading relationship. this is about the rise of china. how do you view that? how does not inform the likelihood that we will get a result if president trump gets a political result he wants out of this? libby: it's a great question. i think you have to go back to what president trump's philosophy is on trade. i think the markets have underestimated it. thely, if you go back to tape, back to the 1980's when president trump was talking about japan before the plaza accord, when he was talking 1990's,fta in the early he has been incredibly consistent that he believes the united states is getting short shrift on trade.

this is something that animates him. it is something he has been consistent on. yes, could the net impact of this be to try to thwart china's growth and their superiority because of the global landscape? absolutely. i would not underestimate how fundamental this issue is to president trump. he believes the united states is getting shortchanged. even though a lot of people would disagree. haidi: the narrative so far is that it is hurting china more than the u.s. i want to get your views on how china potentially response giving the tit-for-tat only go so far if you take a look at the trading relationship and the nature of it. listen too take a what the former australian prime minister had to say about the possibilities available to beijing. >> my attitude to china's holding the u.s. treasuries, china will never do anything contrary to its essential interests p china has an interest therefore in making sure that they are for medical

investment in u.s. treasuries. haidi: in that conversation, he they would not evaluate the yuan but how long do you reckon that will last? int do you think is likely the arsenal of potential weapons that beijing still has to use? libby: they have tariffs. even though -- they are talking about much smaller supply of goods, 130 billion versus 507 billion. they can still use tariffs. the things we export to china. they have done that. but they can increase the tariff levels to that is 112 they can use. there are a host of non-tariff levels they can pull. some of which you have alluded to. our view is that selling treasuries is such a jerk tony and step -- such a draconian step. we do not necessarily see that happening. could there be some sort of depreciation of their currency? possibly. we have seen them use that as a

tool before. however, they are sensitive to the fact that president trump is sensitive to that. he and the treasury department are looking at what is happening with the treasury. iss is something that important to remember, there is a semiannual report that the u.s. puts out, the next report will come out in mid-october. if china starts doing something with their currency, the united states is likely to label china a currency manipulator which could exasperate time -- tensions that i think they will be careful. it was really interesting, despite the fact that president trump keeps pointing to the yuan, they haven't labeled china a currency manipulator. there seems to be some bipartisan consensus in congress that there needs to be a fix for the unfair trading practices with china. does china have any allies left in washington? libby: it is something -- it is the reason why i think we believe that this trade war or

trade escalation, whatever you want to collect, probably has more longevity than people expect. because there is a lot of political will around rectifying what people view -- has been bad practices by china. they -- people believe rightly or wrongly that they have -- that they have used some of those special treatments to their advantage and disadvantage to other countries. i believe in washington, there is a longer political runway on this china issue to go hard against china. certainly than there is on nafta or auto tariffs which are very unpopular. nafta withdraw is unpopular. shery: we want to discuss nafta in the left -- and next block. libby is staying with us. breaking news on the bloomberg. tobacco ceo isn a to retire april 2019. we are hearing from the company

that he will be retiring on april of next year. put forth his intentions to retire. this is according to the company. there have been reports that he was planning to retire. he led the charge of last year's $55 billion acquisition of american, which bought brands like camel and natural american spirit under tobacco. now we are hearing the ceo is planning to retire next year in april. still ahead -- sounds like a according to reports, he could be replaced by an internal candidate according to other reports. the chief operating officer regarded as the front runner there. coming up next on daybreak australia, a study by the of v.a. sees the aussie dollar surging in a global trade war. we will take a look at that later in the hour. shery: how tariffs could

undermine u.s. growth. the view from pimco next. this is bloomberg. ♪ o next. this is bloomberg. ♪

haidi: i am haidi in sydney. shery: you are watching "daybreak: australia." the canadian press news agency says the u.s. has backed away from some of its by american demand as nafta talks continue. sources told bloomberg that a new deal with canada was unlikely this week or for more, we're joined by libby cantrill, pimco head of public policy. when itlks, especially comes to a trilateral deal, they don't seem to be project -- progressing. what is the likely hood -- likelihood that democrats take over the house and we are stuck with the status quo? libby: my personal view that there is a high likelihood. the reason is because september 30, it it effect a deadline in order to get something signed by

december 1. september 30 is right around the corner. some of the issues that remain outstanding, especially with canada are really fundamental issues. resolution,bsidies, they are the same issues that have slowed down progress in the tpp talks. this idea that we can get some sort of resolution in the next few days, it's possible, i would the waters -- the washington cynic in me would say that that seems like a heavy lift. theother point that i think press is not focused on is even if there is a resolution in the next few days, and even if something is signed by december, it is not clear the votes are there in the u.s. congress right the current composition of congress. even if they can get a vote on the floor between -- before the end of 2018, it is not clear that there are votes there. that seems unreported. everyone is so focused on getting a deal resolved, one to

get the deal resolved, you still need the vote. 20 those other unresolved issues, and even a few weeks ago, most people would have been saying the confirmation of brett kavanaugh were surefire. so much uncertainty lingering over that. if we do have the democrats take the house, potentially afterwards it would be a tough fight to take control of the senate, what are we set up for in terms of the new reality? is it policy paralysis and uncertainty over what the supreme court would look like? libby: it might be the republicans would do everything they can to get kavanaugh confirmed. this session of congress. the house is especially vulnerable. the senate looks less honorable. i don't think they are taking anything for granted at this point given the political environment. it depends on what scenario you think is most likely could if , thenink a split congress you probably do see more

gridlock, more paralysis. democrats in the house will try to deliver on infrastructure. but i think that is going to be hard to get the votes in the senate, and then of course, even if impeachment is not considered in the house, what you will see are lots of investigations into the dim -- into this administration. democrats will have the gavel. they will be able to determine the committee agendas, they will be able to subpoena folks. they congressional hearings with lots of attention. from a that is not great comb it he perspective. it is not fundamental to bipartisanship. on the other hand, if you see democrats take both chambers of congress, you could see traction on infrastructure and the markets perspective. it depends on what scenario you are playing at. shery: any scenario you play come in seems at we are headed toward more gridlock. seen here ise have from a republican perspective,

the panacea. they control both chambers of congress. they have the white house. this is as good as it is going to get. it will probably get worse. us.y: thank you for joining libby cantrill, pimco head of public policy. plenty more coming up on "daybreak: australia." this is bloomberg. ♪ this is bloomberg. ♪

welcome back. i am shery ahn in new york. haidi: i'm had he stride what in sydney. you are watching "daybreak: australia." let's get you a check of the latest business flash headlines. a large part of the $234 billion that flew through its units may have to be treated as suspicious. itslargest lendl revealed dirty money scandals. the report says the ceo booklet and the chairman may grow too. much of the stocks have come from russia. confusions-- shery:

around star wars has taken $500 million stake in mgm resorts. shares jumped after the new york the plans include offloading mgm reports on the strip and merging its real estate arm with caesar's. sources tell bloomberg that star board has no stake in mgm and no exposure to its operations. haidi: delta has followed rivals in charging $30 for the first checked bag. the five dollar increase means all travelers in the u.s. will pay $30 for the first bag and $40 for a second. united and jetblue raised their charges last month. american has not followed suit. the airline industry is trying to find revenue sources other than selling tickets to offset the impact of higher jet fuel prices. shery: coming up next, amazon rings the changes at the tail. the site that sells everything aims to shake up the everyday shopping experience even further. about 15 minutes time, we

will get gdp data out of new zealand. we are expecting growth of 2.5%. it would be a slowdown from the previous quarter. we will get you that next. this is bloomberg. ♪ xfinity mobile is a new wireless network

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a.m. here.s a 30 a grizzlies sydney. 13 degrees outside. it has been raining all morning. markets looking pretty bright. trading in 90 minutes time. futures looking slight at the moment. broadly across asia, could be setting for another day of gains had a recovery in the emerging markets. on the back of the rally and the elon we had. i am haidi stroud-watts in sydney. shery: i'm shery ahn in new york and you're watching "daybreak: australia." let's get to first word news. jenna: the frosty relationship

between president trump and jeff sessions dramatically with the president telling that he "does not have an attorney general." trump says his dissatisfied -- his dissatisfaction goes beyond the russian inquiry and includes his handling of immigration issues and what the president said was a poor performance at his confirmation hearing. argentina's economy shrank the most in four years in the second quarter as the central bank repeatedly raised interest rates to support the plunging peso. gdp fell 4.2% from a year earlier. reversal -- the sharp from the first quarter when the economy grew a fraction under 4%. , damaging. rates drug, and concern as the budget deficit saw the peso collapse this year. former malaysian prime minister has been arrested over the missing money scandal. is inency says he detention and will face further charges later on thursday.

he is already facing multiple counts of criminal breach of trust, corruption, and money laundering, all of which he denies. prosecutors say more than $4 billion was siphoned out of 1mdb. the uk's most expensive property market is also the worst performing. london house prices posted their biggest drop in almost a decade fromly, falling 7/10 of 1% one year earlier. the steepest decline since september of 2009. properties outside london rose 3%. the average price of a home in the capital is now 485,000 pounds which comes out to 640,000 u.s. dollars. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am jenna deking heart. this is bloomberg. haidi: thank you so much for that. breaking lines coming out.

the company and filing details of its share buyback program. in early august along with its latest first half results where it's all a profit gain of 12% on year. and housing an additional share buyback of $1 billion. in all, they will be returning through a $3.2 billion share beingk scheme with those returned there. we are getting details on that. it todayg to watch which were by far the biggest gainers in yesterday's session. the rally we have seen in high-grade prices as well. rio, want to watch as sydney gets underway with trading. let's get to sophie kamaruddin with a look across the rest of the markets and how asia is setting up for the day. lookingasian stocks are at a mixed sessions while u.s. futures are trading flat. in japan, stocks may extend in midweek gain after rising to a three-month high on wednesday. this ahead of the party election which investors will be watching to see how tight the race may

become a given location has been for stimulus policies. in wellington, it is slipping after a five-day advance ahead of second quarter data due out at 6:45 a.m. we have kiwi 10 year yields nudging closer to 2.7% ahead of the continuing to rise with global reit -- global yields. i want to check on the kiwi dollar. how it has fared against its g10 peers. using the function on the terminal, the kiwi this morning, back above 66. it is still under pressure. it has been a punishing quarter for the currency. as you can see, the worst-performing g10 performer in this quarter, down 2.4%. of late, the kiwi has taken its cues from better global sentiment which has allowed traders to look through a poor series of data. the likes of consumer confidence and the widening current account

deficit. should the kiwi sustain a move above 66, that could much toward the 100 a moving average of 68. the blue line on the chart. a decent -- a decent gdp number, that could be the catalyst for an up in the kiwi dollar. economists are forecasting a strongest growth at .8%. that is better than what the rbn forecasting at .5% expansion. the jury is out as to what may be the central banks move on the back of this gdp data. last month, they dictated the chance of a rate cut increase the weaker growth. the likes of morgan stanley think that is too pessimistic if you. they are expecting no change until the fourth quarter of 2019 followed by a rate hike. is a much for that. let's get more on what we should adam haigh a we have seen bond yields. you look at the 10 year pushing toward a year to date high. the dollar has not really been following suit in emerging

markets. markets have been enjoying a rally both in the fx also in equities. you are seeing relative performance of bonds. i think haidi, really, it is remarkable in a sense that we are not having the shakeout in the end, given this huge rally in u.s. bond yields. the fact that where we have come from in this emerging market turmoil and where it has left yields in the em space relative world, i thinkd colts the key. this chart is in your gtv larger area. it speaks to it. you have that spread between two years p.m. debt yields and u.s. treasuries back down to a two-year low. that is what we're hearing from the firm managers we spoke to over the last day or two bank. the likes of goldman sachs management getting back in, looking at buying argentinian bonds. folks over at double the have been saying there are pockets of

opportunity, given these type -- these kinds of disparities in plenty out there who still feel this is a tricky environment. we heard from state street yesterday, they say it is very early in this big shakeout that we are experiencing at the moment. they are not wanting to get back in. at the moment, the trend is the caution is easing end of some of these rallies are rallying. shery: let's talk about the aussie dollar. bloomberg -- bloomberg gleaned insights that modeled a worse case scenario under a global trade war to why does the central bank think it might cause the aussie to surge even though gdp would drop? this is a study done by the reserve bank of australia early in the year. back in the early part. they were looking at what might happen in a worst-case scenario for a trade war, where the u.s. would slap tariffs of 20% on imported goods for every country. and why australia would do relatively well is more down to

the relative gain of australia, relative to other worlds. that is why they would see a pickup in the aussie dollar and in relative terms. have a look at this chart. gtv library. it is a good one that shows you what the real issue is at the moment for the aussie which speaks to this idea of why it has been hit so much. been the closes correlation it has had with chinese assets, and what is going on in china. the overriding situation for the trade war and how that plays out remains a key for the aussie and where it goes from here. shery: thank you so much. bloombergs global market editor adam haigh, and the church he showed you, you can find them on gtv go. that would be your function on the bloomberg. amazon is said to be considering a plan to open up as many as

3000 cashierless stores in the next few years. it is an aggressive and costly move that would threaten convenience chains including shops.n and sandwich spencer soper broke the story. joining us now from seattle. another measure from amazon to reinvent the brick-and-mortar shopping experience. spencer: yes. that is where they see the opportunity. they have not done much in terms of physical stores. they have experimented a little. they started with bookstores a few years ago. they have 20. they purchased whole foods. if you go to whole foods market scummy you basically see a lot of amazon signs and a few of their devices that would make you recognize it as an amazon opposed to a regular supermarket. amazon go is the most since think of all of their efforts. what they are targeting is the downtown lunchtime line. narrow windowf a of time when thousands of people

want to get something to eat, this notion of being able to check into a store with your smart phone, get whatever you would like, without having go to a cash register has value to busy people. is this strategy likely to attract the ire of the president? spencer: i really have no idea about that. the trend has been -- the pattern has been generally that president trump will attack after he is unhappy with coverage by the washington post which is also owned by amazon ceo jeff basis. -- jeff bezos. i don't see where amazon opening more storms -- the stores opens to this criticism. he has floated this antitrust idea. if it is any example of further market concentration that he could complain about. thank you so much for

that. spencer soper there for us in seattle. it's get the latest when comes to geopolitical developments in this part of the world. the united states is calling for a new round of nuclear talks with north korea after this week's summit between the divided peninsula's leaders. mike pompeo welcomed kim jong-un's promised to dismantle a missile test site and signaled reciprocation is coming. trackingrg reporter is these developments from seoul. we are getting into the third and final day of this historic summit a what are we expecting in terms of actual deliverables coming out of this? reporter: pretty much nothing in terms of concrete development when we are looking for the toxic regarding -- talks regarding denuclearization. or north korea to prove even more that they are willing to commit to do new their grazing. what we did see yesterday from the joint statement is that north korea had agreed to

dismantle some of their nuclear facilities under the inspection of international experts. we are assuming that is pretty led to secretary of state mike pompeo's welcoming of the joint statement and potentially leading to the next summit with kim jong-un and donald trump. shery: would that be again the experts like they did during the six party talks? with that measure be enough to persuade president trump to actually give them a piece declaration? let's keep in mind, the six party talks didn't go anywhere. jihye: exactly. the very people that kim jong-un would be inviting to north korea to witness the dismantling of these facilities would be the key pointers to determine how indeed he really is committed to dinner colorizing. could it be some random international "experts." or will they invite experts?

it is not specifically stated in the statement that could work as a loophole for north korea to rather use the joint statements to work for their benefits. or would moon jae-in insist that the specifics be stated, ingrained in the statements? we will have to wait and see. the key to proving how north korea is committed to denuclearize and. shery: president moon is expected to brief president general assembly comes in new york. how well is the president playing his role as mediator between north korea and the united states? mediator is the keyword that president moon's office used. they said specifically chief negotiator. that theyally stated have received a direct message from donald trump to deliver the message, to deliver the outcome

from the inter-korean summit back to the united states presidential office. what the office also -- also says is that is what we determine their success of the summit. i guess, moon jae-in is living theo this role, denuclearization bit is the key point take away. from the summit talks. exactly who he will invite come how he would prove he is committed will be the key port to determine moon's success as a chief negotiator. shery: thank you so much for that are bloomberg reporter jihye lee in seoul. treasury yields rise as bond traders get on board with the fed's rate hike path. we discussed the implications next. this is bloomberg. ♪ this is bloomberg. ♪

haidi: getting to breaking news

coming out of new zealand. gdp growth numbers are solid. they beat the quarter on quarter for second-quarter growth coming in at 1% pace. that is than 0.8% expected from a .5% pay seen in the first quarter. if you take a look at the year on year comparison for the second quarter, gdp growth of 2.8%. of 2.5%he bloomberg consensus. just a bit of a big -- of a pickup from the 2.7%. certainly a surprise given we have had a dovish tilt coming through from the rbn on the back whenetty depressed numbers it comes to things i can investment confidence and consumer confidence. consumer confidence falling. creating some pressures when it comes to the state of the housing market as well. still, lots of analysts saying despite the upside beat, even if we did get an upside beat which we did, we would not see much more of a hawkish tail coming from the rbn. they are more worried about the overall outlook. we are seeing that when it comes to the kiwi dollar on the back of that beat in gdp.

there waseady come up already rising given commodity currencies getting a boost. as haidi mentioned, the kiwi dollar at 66.41. let's turn the focus to the u.s. forget worries about the flattening u.s. yield curve. it is a potential for the massive treasury short squeeze concerning one big fixed income investor. kathleen hays is here. kathleen, making these warnings. but we could see finally a lift off her yields? kathleen: actually, let's start with this part of the story. we have and so focused on trade wars. north fence off. so much going on in the world. it has been off of everybody's radar. that the bond market has been marching steadily higher. on the investors seem to be warming up more. believing what the federal reserve says about how many rate hikes it is doing this year and

how many ma do next year. let's look at something we haven't looked at for a while. for --t rate projections. what you will see is as we look at the september meeting, next week, it will be a big one. the chance of a hike, nearly 100%. if we go out of the december meeting, you can see the odds of a move, another hike up to 76%. he can go out further, by march, people warming up to this idea. it has been may be too, traders will moving that forecast higher as well. you have this, then you have the two-year note yield. this is something that is very important. when they are rising, that is a strong signal that people are seeing -- no matter the long end, fed raising, 2-year note is going higher. i want to turn that off. so that i can turn this on. and go to my next bloomberg chart. which is not coming up. i guess he will have to take my word for it.

since juneest level of 2008. that is 10 years when the financial crisis was just hurting. thank you, control room. i love this. you can see, you have this study high higher. if you took it back to 2008, that is how long it has been. is this a problem? probably not for the fed. they want rates to normalized or you're getting back to 10 years ago. doubtfulket is still about a more aggressive fed next year. not warming up to the fed's three rate hikes, thinking inflation will not go that high. haidi: getting back to a cherry mentioned, just good luck has been -- has been calling this for some time. the end of the decades long bull market for the bond market. we are seeing the 10 year yield pushing the year to date higher. what is he saying at the moment? kathleen: what he is saying is he seems to be saying, yields are rising, this could really

finally spell trusting's for the u.s. government bond market. thebond rally went on from early 1980's and is turned around. nevertheless, he also notes people are not paying attention. here is what he tweeted 24 hours ago which continues to resonate. yields, on the march. up 3%. this time without financial media concerns. he is saying, watch this. watch that on 30 year bonds. two closes above the level could mean a game changer. look atnted to take a another chart, you will see something that haidi was talking about. a move in the 10 year yield will definitely mean the end of the bull market. we got up as high as 3.09%. the white line is liquidity. the fed changing the balance sheet. a lot of things going on at once. but he warned last month which i think is coming back to people's

ears is that we could see a massive -- we have seen a massive increase in short treasuries,nd u.s. 10 years and 30 years, and that could spur a very severe short squeeze. that is what he is trying to warn is about. shery: quickly, what are the applications for the rest of the world? kathleen: great chart on the bloomberg. couldn't give you too many charts. the global bond may -- bond yields are rising. thatwe saw in china is their 10 year, their benchmark it got up to a three-month high care not bad. this is the same time when the government is putting in more liquidity. 21 billion dollars yesterday. the yield keeps rising. rising yields for a country like china that has a slowing economy which they are trying to offset, not a good message. if the fed keeps raising rates, they could be an issue for many countries around the world. shery: kathleen, thank you so much. policy editor kathleen hays. a you want to round --

roundup of the stories we are telling you, bloomberg television, go to dayb on the bloomberg. you can find all of our top stories. you can also customize your settings so you look at the stories you want. you see commodities they are jumping in new york. dayb . this is bloomberg. ♪ is is bloomberg. ♪

haidi stroud-watts in sydney. shery: you are watching "daybreak: australia." a check of the latest business flash headlines. the drawnout battle for control of british broadcaster sky may be settled in an abbreviated bid it -- bidding war on saturday. an auction lasting one day has emerged as the favorite way of ending the $34 billion battle between 21st century fox and comcast for europe's biggest satellite broadcaster. sources say details are yet to be finalized including whether to accept open bids or not.

haidi: the unit of china's hna group has scrapped a $1 billion plan to buy an e-commerce company on the mainland as it tries to lower cost and sell assets. it withdrew its offer and will hold a meeting on friday to explain why a global bryant -- buying spree left them with the highest debt in china. it is attempting to unload assets worth about $70 billion to meet its obligations. shery: sony's rolling on a mini version of the playstation tap into theing to craze for retro and nostalgic gamers who grew up with the original device. the new playstation classic will retail for $99 while original consuls are offered on ebay for $40 to $60. the revamp comes loaded with 20 games including classic titles such as final fantasy seven, and tech and three. haidi: that is it for "daybreak: australia." trading in new zealand is

getting underway to we will get that reaction to a much better than expected second-quarter to be just gdp. we are a few minutes away in australia can we have seen resilience in these markets and in these markets despite trading headwinds. we are seeing a downside when it comes to the early session in new zealand. the kiwi dollar sustaining that balance as the riskier version from the trade war tensions start to fade. and even on the back of that rally that we saw in the line china not devaluing its currency. taking a look at the rest of asia, we are expecting a potentially positively coming through. shery: we will be talking to pg i am chief economist and former secretary for international affairs. he thinks if china raises tariffs to 25% on the u.s., then that could equate to a 60 basis point impact on u.s. growth in a year from now. haidi: that is it for "daybreak: australia." shery and i will be sticking

around for the asian market opening coming up next on daybreak: asia. this is bloomberg. ♪ ♪

haidi: good morning. the markets are just an hour away from the open. welcome to daybreak asia. our top story this thursday. separate a muted start. while also rising on the back of lower u.s. stockpiles. the escalating trade war claim