>> a very good morning. markets are just an hour away from the open. >> good evening from bloomberg's european -- from bloomberg's headquarters in new york. >> welcome to "daybreak asia." >> asia-pacific stocks looks at first small gains after wall street edged higher. the dollar pushes the end to its weakest this year. theresa may sends up her critics with calls for pragmatic brexit.

and the generals on cruise control. a long look at weimar. let's get you started with a check of how markets closed in the u.s.. stocks were mixed. the dow ending at a record high. the s&p 500 gave up all its earlier gains. we saw yields spike. we saw a rate sensitive shares weigh on the benchmark as well as financials leading the gains. we have the 10 year yield at the highest level since july 2011. yields following this, so let's see how it is translating in asia. >> we have headwinds in the making. asia stocks could see modest gains. nintendo lower set for a fourth day of losses. higher oil prices to contend with. a stronger dollar.

could be struggle city for asian currencies today. the end back above 114. that could provide stocks support in tokyo. the korean yuan could be the whipping boy. the kospi could be looking at gains at the open. we could see the asx 200 up the head of the trade. the 10 year yield jumping nine basis points this morning, which has taken treasuries to its 30 year low. watch a potential moving real estate, utilities, and banking shares. >> paying catch up there -- playing catch up there. let's get your first word news. >> jpmorgan is downgrading chinese stocks, forecasting a full-blown trade war yes -- next year as its base case. conflict between the world's two largest economies will only

escalate as the u.s. raises tariffs on chinese imports, the dollar strengthens, and the yuan weakens. tumbling to aes two-week low. wonu.k. prime minister muted support as she closed the conservative conference with an appeal for unity and commitment on brexit. she made the case for pragmatism , warning against pursuing an ideological divorce that could damage corporate britain. her speech was welcomed by business. critics were not impressed. may says a good deal as possible. --what we are proposing is but if we stick together and hold our nerve, i know we can get a deal that delivers for britain. >> reports from washington say the fbi has not interviewed brett kavanaugh or the woman accusing him of sexual assault. sources tell us the white house

has not given the bureau clear authority to speak to them, saying their testimony is sufficient. it is not clear if the fbi wants to seek approval from the white house to interview kavanaugh and christine blasey ford. mike pompeo is backing away from north korea ending its nuclear weapons program during president trump's first term. he is preparing for a visit to pyongyang saying 2021 is not his target. comments he does not want to get into a time game with the issue. global news 24 hours a day on air and on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you for that. bond bears are on the attack pushing the 10 year treasury yield to a seven-year high. two big economic reports coming

in stronger-than-expected. italy backs away from a budget battle with the eu. kathleen hays is here with more. the economic surprises, were they big enough to create this move we saw in the yield? >> i think we have to start with the fact that these reports came one day after fed chair jay powell gave a big speech where he said he is looking at an extraordinary economy. unemployment is low. inflation is moving towards target. gradual rate hikes are in order. people, especially since he has endorsed this idea of pushing the key rate above the level -- neitherstricts restricts nor boost the economy, they are waiting to see if there is data to push him in either direction. let's start with the job survey done by a large private job services firm, the adp. let's start with this white line over here.

that is the adp number coming in at 230. excuse me, the forecast was 184. , the u.s.e blue line government data, right around 201 in august. we are looking at september this friday. people are always so focused on the report because in a rough way they track -- if you got a large and unexpected jump, does that mean the friday number is going to be stronger as well? the u.s. maine services gate, the isn nonmanufacturing index came in at 50 16. growthg above 50 singles -- signals growth. it was interesting to see because the selloff started with the adp report. it got worth with -- worse with the services report. here we have the benchmark for the u.s. government and you can around 3.8 1%, the

highest since july of 2011. third-year bonds closed at 3.34%. this was a selloff. in addition, friday is expected to show unemployment falling to 3.8%. that will be the lowest since 1959. wages we have watched as well. >> we have had a lot of fed speak it -- speakers this week. what was the message today? >> day two of a speech from jay powell, he said we are long way from neutral. charlie evans used to be a dove. now he is on board with rate hikes. he sees policy moving above the neutral rate because the economic outlook is good and there are upward forces on inflation. bloomberg television spoke to patrick harker this morning. he so far is not on this for rate hike camp. listen to what he said and why.

>> my forecast is three this year, to next year, to the year and two two next year the year after. we are starting -- we are still seeing good job numbers, so i do not think there is a rush. we do not have to rush the neutralization process. i think if inflation starts to excel a rate, i could support a december increase. >> this is minority view. at the september 26 meeting with all the federal reserve, 12 of 16 looking for that december hike. for italy of course, they just conceded they are going to have a lower budget deficit forecast. 2020 and 2021. that fear that was in the market there might be more problems has really eased. ,eople put a lot of that impact another reason we saw such a selloff in bonds, they reversed.

>> thank you so much. kathleen hays. as kathleen was telling us, a selloff in treasuries, yields rising, and then we saw stocks give up gains. the s&p 500 closed marginally higher but fell short of an all-time high. joining us with more of course, not surprising given those rate sensitive stocks. >> we saw yields rising on economic data. what stock investors thought was, hey, let's focus back on the fundamentals. the u.s. economy is fairly robust. the concerns about trade and global issues falling to the wayside. let's go to the market snapshot. as the yield started to rise with the steepening of the selloff, there was a concern and you saw the gains giving back. you saw the s&p 500 financials posting a significant gain. crude oil above $76. it was on a tear earlier.

let's go into the stocks on the move. the theme was interest rates sensitive stocks. utilities, real estate fell. regional banks benefiting from higher rates soared. let's go to some of the other stocks that were in focus. a lot of it having to do with news of the day. twitter rising as it announces it is finding a way for users to monetize their video globally. removing some restrictions. notice nio, china's version of coveredt is going to be by analysts monday, a lot of optimism there. jcpenney, similar big-box retailers moving higher. and rpm getting slammed on adjusted earnings. let's also take a look at the -- faange -- fan

trade. bank of america shows these tech giants are holding the key for performance. a couple of key funds that do not have exposure to the fangs did poorly in august but did great in september because they were hurting in terms of -- you can see the performance there. >> quite a lot of action when it comes to commodities. we had wti climbing despite bearish supply numbers that said we had the biggest buildout when it comes to u.s. fuel stockpile since 2017. >> a big buildup and supply wednesday. usually that supply data drive straight. if you look at the one year so much ofan see that has to do with the fact the u.s. is putting sanctions on iran. there is concern opec will not be able to fill that gap. criticism of

president trump has responsible for the rise in price. he is also setting the iran sanctions. there is an uptick in production from some countries, including russia. traders are all focused on iran right now. that is driving prices higher. inventories to not seem to play into the matter. that,nk you so much for looking at all the action on wall street overnight. still ahead, britain tells trump told take a good look in the mirror when talking about oil prices. up next, what the fed says is still a long way from neutral. the powell balancing act. this is bloomberg. ♪

>> this is "daybreak asia.

>> we have a headline right now crossing the bloomberg. the fbi is set to be making the report on supreme court nominee judge brett kavanaugh available at 8:00 a.m. we are assuming this is new york time. the fbi has been looking into sexual misconduct allegations against brett kavanaugh. we are now hearing that the fbi is set to be making their report available at 8:00 a.m. we will get you more details when we get them. stronger reports of private payrolls helped drive up the yields on u.s. 10 year treasuries to the highest level since 2011. let's discuss the applications with hsbc chief u.s. economist kevin logan. thank you for coming into the studio. let me bring up this chart showing global pmi. outperformance of u.s.

manufacturing, that would be your line in white. in china, europe, things don't look as good. how uncomfortable could this divergence get for the economies in emerging markets? >> it is ironic. a strong u.s. economy should be good for the world. strength in demand will pull more imports and lift economies elsewhere. the problems arise in financial markets. the concern is the strength of the u.s. economy eases strengthen the u.s. dollar. higherr dollar means expenses for borrowing in emerging-market economies. economies have to take more in their currencies to service their debt. it tends to take capital away from emerging markets. financing becomes more expensive . on the real side there should be more demand coming into the u.s. in the form of imports. there is concern about financial stability. that is what markets are focused on.

what's going to happen to bond markets in stock markets in emerging economies? will there be downward pressure because of the drop capital back to the united states? >> when it comes to the dollar we are seeing resistance to further uptrends for the greenback. could we see another false don we saw in august? >> that is possible. the dollar will keep appreciating. the fed is on a steady path. it has become clear they will be raising rates. if difficulties emerge and other economies, the dollar will continue to be used as a safe haven. kevin, speaking of the trade world, looking at that direct correlation with bouts of dollar strength over the past year or so, how much of a detriment -- the commonality seems to be the trade hurts beijing more than the u.s..

at what point to you look at this and say, in a world of globalization and interconnected trade, that these are going to hurt the u.s. as well? >> it potentially can hurt the u.s. in the form of higher prices and inefficient. free trade should lead to efficiency in the construction of supply chains. producers will arrange their processes around the world to create value in the best way. when that is interfered with, it drives up costs. driving up costs could slow growth in the u.s. economy. what is important is that trade is not completely disrupted. tariffs are inefficient. quotas or barriers to trade, that would be worse. we are not there. it is likely companies will be able to adapt. they should be able to find substitutes for goods imported from china. there are other companies that produce similar goods,

particularly in the electronics space. it should not be too disruptive. it just creates inefficiencies. >> do you anticipate a scenario if the trade war is prolonged that tariffs are double down on, you do eventually get the stagnation, and policymakers are equipped to maneuver around that? , the idea that growth slows at the same time inflation grows up, that is a good question. tariffs are not inflationary. they change the price of imports relative to goods produced domestically. say compared to services or housing. imported goods become expensive. unless you are raising tariffs every year, it is a one-time change that needn't the inflationary unless it affects expectations. if people change their minds about how much inflation will occur every year.

in a fully employed economy like the united states, that is a risk the fed is guarding against. when we heard from jolo -- jerome powell this week, he emphasized inflation expectation and the idea that the fed wants to keep expectations controlled. that is what they will be leaning towards. they will continue to communicate their intention to keep inflation down by raising rates just as successfully controlling inflation expectations, we will not have stagflation. we are now seeing money markets pricing in more than two rate hikes for 2019. a sharp difference from just two months ago when it was barely one increase. what is your call for the fed? >> we expect a rate hike in december. i think that is built into market pricing now. we expect to more rate hikes next year. that 75 basis point in total will bring the range for the fed

up 2.75% to 3%. we think that is restrictive. it is above the neutral rate. it will slow down the growth of economic activity. when that becomes apparent, we think the fed will pause for a long time. that is what we expect. it is true, the market has made a sudden shift. a lot of it has to do with the communication from the fed about their intention in the recent economic data digesting the economy has more momentum now than many people anticipate. >> thank you for that, hsbc chief economist kevin logan. coming up, the fbi is said to lack white house approval to interview brett kavanaugh and his accuser christine blasey ford. we will have the latest next. ♪

>> this is daybreak asia.

is set to release the report on the supreme court nominee brett kavanaugh to senators thursday morning in washington. bloomberg has been told the fbi did not interview kavanaugh or his accuser christine blasey ford because it does not have clear authority from the white house to do so. joining us now from washington, d.c., joe, this report from the fbi will not go to the public. this will be only going to senators. tell us about the process and what they are expected to announce. >> this is going to be going sometime tonight over to the senate. it is going to be kept locked up in the senate judiciary committee room. it will be brought at 8:00 a.m. tomorrow. the plan is for one copy to be available. first the chairman of the judiciary committee, chuck

grassley and whatever staff he wants, will be able to read it, ask questions of the staff who have reviewed it, and separately dianne feinstein the senior democrat on the panel will be taking a look at it. allowhere is some plan to wider dissemination. very restricted access to this andrt, only to senators, only one copy locked up in a room, which does not suggest at least immediately the any part of it is going to be released to the public. >> any idea how this could affect the confirmation vote? >> it depends what is in their. as you mentioned, there were not follow-up interviews with either dr. ford or judge kavanaugh. there have been other people who were named or associated with them at that time who have been questioned. they have confirmed through their lawyers. at least one of the other accusers has also been talked

with. fbi will depend on what the has found and what people tell him. -- the them. it would have to have something new, some new revelation to change any votes. the votes are still very much up in the air. of what thea sense white house strategy is behind this? >> right now they are trying to keep it contained and push it forward. this has been a very motivating issue for republicans, trump supporters particularly. he has used it in his rallies. he came under criticism for a rally last night in which he seemed to be mocking dr. ford. this fight is very much part of the white house strategy to get republicans motivated to vote in the midterm elections coming up. democrats -- democratic voters

have already been quite energized based on polls. there was some concern that republicans would be sitting at home because the president has -- don'trepeatedly believe the polls. the white house now is trying to really went up republicans -- whip up republicans to get them to the polls. >> thank you for that. getting closer to the confirmation hearing, of course we are getting reports that 8:00 a.m. is when that investigation will be available to senators in a secured area. it does not seem that will be available to the public. coming up, russia's energy minister says oil prices are too high. our exclusive interview with alexander novak is next. this is bloomberg. ♪

>> is 9:30 a.m. in sydney. three days of declines for asia-pacific stocks. here in australia it is a drizzly day looking to build on yesterday's modest gains. >> 7:30 a.m. in new york where markets closed mixed. the s&p giving up gains after yields spike. we also had a very strong dollar. the bloomberg dollar index at the highest level in more than a month, which could be tough on asian currencies. you are watching "daybreak

asia." let's get your first word news now. >> crude climbs to near a full year high as iran's dwindling presence in markets overshadowed again in u.s. oil stockpile. inventory from the world's largest economy increased in five times the pace predicted. arending u.s. sanctions scaring buyers away from iranian cargo and tightening concerns of the global supply squeeze. >> levels might be a little bit high. we think the markets will be stableg -- which will be for consumers these levels are lower than what we have seen. the president has spoken about the range of $65 to $75, which seems to be an acceptable level for consumers. >> the alumina market faces fresh turmoil after the world's

largest refinery shutdown. it is temporarily closing because the only area used for waste processing is close to capacity. the ceo could not give a timeline for restarting. aluminum prices jumped as much as 4% while shares of other aluminum producers and -- also gained. charge the will former prime minister of malaysia of money laundering. he was detained after questioning by the anticorruption investigators. her husband has pleaded not guilty to 25 charges linked to the fund. facebook ceo mark zuckerberg is hunting for a chief investment officer to oversee $10 billion for a philanthropic fund. we are told the search is being conducted with yale university

cio, who will chair the investment community -- committee. the initiative holds much of the couples fortune. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> we are counting down to the major market opens in the asia-pacific. china still away on golden week holiday. let's bring sophie kamaruddin to find out how things are shaping up. bond bulls had a tough day in the u.s.. asian currencies could also have a tough day. the dollar just spiked. >> the name of this chart really encapsulates that sentiment. asian currencies could get yields, andtreasury mark yields trading at 2011 highs. not a pretty picture for the ruby and the rupiah and the

korean yuan. this backdrop could potentially push the bloomberg and jpmorgan dollar index lower. as you can see by the white line , it could crash through the years low. that may clear the way for a post gse low we saw in 2016. >> investors turning glum on emerging market bonds in light of soaring oil prices. a stronger greenback as well. >> asian bonds are set for the first annual drop since 2015 as illustrated by the line in blue. investors are turning defensive at the start of this quarter. strategists are not seeing a turnaround for the time being. when it comes to the laggards, indian and asian easing -- --onesian sets seem to be despite policymakers events to contain weakness.

as you can see with the yellow line, ruby notes lose their shine after being favored for their high yields. indonesian bonds are susceptible to even more outflows. this in light of cyst substantial foreign holdings -- in light of substantial foreign holdings. >> more vulnerability when it comes to the em space. thank you for that. gainsntinues to hold despite saudi arabia and russia pumping an additional one million barrels a day. the market seems to be ignoring that supply. president putin says it may be donald trump's own doing. >> it seems our american partners are making a strategic mistake. they are undermining the trust in the one universal reserve current.

-- currency. they are cutting their own throat. it is strange, unbelievable. i think this is a typical mistake of any empire. when people think nothing will happen, that everything is stable, there cannot be negative consequences, but consequences will come sooner or later. >> earlier the russian energy told us alexander novak uncertainty over global supplies and the iran sanctions will continue to drive oil prices higher. >> the market is reacting to fundamental things. but there are various factors which outweigh fundamentals of supply and demand. and uncertainties are pushing price depreciation. these are connected to sanctions and lack of visibility in reaction to this topic and global gdp growth, which is also affected by sanctions.

i think there is little chance that such market sentiment will , atge during the next month least until we have clarity at the beginning of november. no matter what happens to supply and demand, there will always be the risk of new sanctions. i think fundamentals of this point in time can outweigh that. >> to do not think the market is pricing in the fact that you are at record highs? >> i think we should not only be looking at russia's capacity, but at the more complex picture. the market is looking overall at shale oil production growth rates. they are looking at venezuela and north african production. they are looking at overall spare capacity. i think that only by looking at the complex picture can we

understand that is what the market is doing. >> we always talk about prices. there is always a range of 60 to 70. some say it could be $100 in the new year. are you worried prices are too high? >> such risks exist, and such concerns do have some grounds. once again i would like to say that the price is somewhat high due to a level of uncertainty in factors being embedded into the price. current levels maybe a little bit high. what we think the market will be striving to reach is a balance which would be stable and acceptable to both producers and consumers. these levels are probably lower than what you see today. if you listen to the main event of today, the president has spoken about the range of $65 to $75, which seems to be acceptable to both producers and consumers and at the same time ensures enough cash flow to the sector to reinvest and allow us

to develop. novak into annmarie hordern in moscow. audio space isg revving up. honda is committing to general motors self driving unit. ramy, what happened? i thought honda was speaking to waymo. >> that was 22 months ago. how things change of course. we did not get details over the course of those months. the initial press release said we are going to look into research, see what happens. clearly nothing is happening. then today $2.75 billion going the gm, going into president here. interestingly, a little

bit hush-hush. the ceo did not give comment. he did say this is an exclusive deal. they are not going anywhere else. as for the president of gm, he -- theing this keeps investment keeps everything on track for 2019 autonomous vehicle launch. he also spoke to bloomberg television and told us that in terms of the $2.75 billion, it is good for his bottom line. in a0 million of that is direct equity investment. they are getting a 5% stake. they are bringing another $2 billion to the table in conjunction with that in terms of supporting developments and other financial streams that will accrue to the benefit of the overall mission. --think this is a partnership is what you heard him say just now

and investors a great. look at where gm shares opened. up by over 5%. the biggest intraday pop since may 31. that is when waymo got $2 billion from softbank. shares closed up by 2%. they did pare some of those gains. every single time, gm gets more money, more infusions into its self driving unit, the stock does jump. investors clearly hopeful there is something in the future for this. 2019 is the president was saying there, you have got to be ready for driverless cars. investors areke assuming gm is in pole position when it comes to that space. >> investors may be hoping for that. really it keeps them on par with what google is doing with waymo. he was saying it is a good vote of confidence in general motors and their technology. he also said waymo may be ahead

of companies overall. the big thing investors may want to be looking ahead to is this could be an indicator there is market consolidation starting and that these companies, gm as well as google, are the most dominant companies. looking at other possible competitors, uber comes to mind as one of the biggest ones. they have suspended their self driving vehicle efforts because of that the tally -- fatality that happened in march. it looks like it is going to be google as well as gm looking ahead. >> think you so much. heating up in the self driving car wars. coming up, theresa may has put on a display at the conservative conference. the party remains deeply on harmonious on brexit. analysis next. this is bloomberg.

>> breaking news crossing the bloomberg. japanese 10 year yields hitting 0.145%, the level that has spurred boj buying in the past. that level back at the start of august. somewhat mixed messaging when it comes to that yield curve control policy and allowing greater flexibility in the movement. boj bonde watching buying operations as the trading day goes on. this comes on the back of the aussie yield moving nine basis points in the early part of the session. all reflecting playing catch-up as we had u.s. 10 year yields hitting the highest in -- since 2011, putting it's more context where it goes from here. that tug-of-war between the bond market and the equity market will continue. >> the 30 year yield also the

highest since 2014. the two-year rates also at a level not seen since the precrisis 2008 levels. let's turn to europe. theresa may dancing to her own brexit to. the prime minister strutted onstage at her conservative party conference hoping -- to solidify her divided party's stance. minister is prime to do what i believe to be in the national interest. that means two things. first, honoring the result of the referendum. secondly, to seek a good trading and security relationship with our neighbors after we have left. they are our close friends and allies and we should ensure it stays that way. no one wants a good deal more than me. but that has never meant getting a deal at any cost.

some people asked me to rule out no deal. would i did that, i weaken our negotiating position in have to degree to whatever the -- agree to whatever the eu offers. if we stick together and hold our nerve, i know we can get a deal that delivers for britain. >> other than the prime minister's dance moves, very little has changed. nowb kierkegaard joins us from washington. great to have you as always. how does this set of the u.k. and the eu for brexit? the dancing is over. it is back to meeting with people dancing to their own tunes. you are seeing a clash in the coming weeks. >> i think the big delivery from theresa may's speech was cheap she effectively

ruled out the canada free trade option because it would entail having regulatory and a customs border between northern ireland and the rest of the u.k.. she ruled out the norway option because it would mean a loss of u.k. sovereignty. she double down on her checkers proposal from earlier this summer. mattroblem is that eu salzberg effectively rejected checkers and therefore since the eu also set a deadline for the eu council on october 18 as when they want progress, and they announced today that they were going to discuss brexit at the of27 dinner on the 17th october, meeting before the

actual council signaling this is not going to be a 5:00 a.m. in ,he morning compromise process you know, we have two weeks to find a deal. as far as i can see, that is not a deal era craft can find -- eurocrats can find. the deal is for a temporary breakdown in negotiations in two weeks time. >> her speech seems to indicate a breakdown would lead to another election. >> i think if you listen carefully to theresa may's speech to the conservative party, there was an awful lot in that speech about the unity of the party and attacking jeremy corbyn in the labour party. which, to me, is essentially theresa may's stump speech for another election.

if she were to call such an election, it would be high-stakes. at the same time, it kind of makes morbid sense to me. if she wins such an election, i think she will be safe as a prime minister and leader of the conservative party no matter what kind of rex it happens. brexit happens. if she loses she will have to resign, but that would have happened anyway. for her it is doubling down and double or nothing. >> should the u.k. am -- abandon the notion it will be able to establish frictionless trade with the eu? >> yes. the idea that there is such a notion as frictionless trade outside the customs union and the internal market, meaning the so-called norway option, yes, that is a fiction.

explicitly that very matt salzberg -- at salzburg a few weeks ago. it is not clear to me the u.k. government listen to them. >> let me turn to china. we are seeing this tension rising between china and the u.s. in the south china sea. we are seeing reports the u.s. could actually take action there in order to show force against the chinese. thesengerous is mixing trade tensions with geopolitical tensions in the region? >> i think that is a major risk of escalation or accident happening, so to speak. if you look at the recent trade deals of the united states with japan and canada and the nafta, you basically have american trade tension increasingly focused on china. there are either a new deal or a

cease-fire with the rest of the world. i think it is also clear donald trump's aggressive trade stunts broadnce enjoys bipartisan support in the united states. therefore like his trade tensions with the rest of the world, and therefore this is something that is going to continue. this raises the risk that in this environment and political climate, something happens in the south china sea that maybe nobody wanted or anticipated, and things get out of control. >> does his recent trade successes with korea, the renegotiated nafta, embolden donald trump to take a harder line stance? how much risk is that? >> in short, yes. and inndabout and costly my opinion stupid way he has

managed to put the united states, or try to cajole other countries to fall in line behind the united states in confronting china on some of his economic and trade practices, i do not think there is any doubt heading into the midterms, but also a potential reelection campaign over the next coming years, donald trump will be emboldened to pursue this line against china. i also think an increasingly entrenched president xi who clearly has signaled he is willing to crack down on domestic dissent and other events in china, will be forced to push back. this is unfortunately a relationship that i think will have to get worse before it gets better. >> always appreciate your time and your insight. jason kierkegaard, senior fellow for the peterson institute joining us in washington.

let's take a look at the stories trending across the bloomberg universe. subscribers are reading all about the reaction to president trump's mocking of brett kavanaugh's accuser christine blasey ford. on bloomberg.com, taking a look at gm keeping up with californian officials to push electric vehicles. on twitter there is news about hyperloop's first passenger capsule. all those stories trending online and on the terminal. ♪

>> this is daybreak asia. a check of the latest business flash headlines. 24 hours after raising the minimum wage, amazon has cut bonuses and stock awards for warehouse staff. employees have been eligible for monthly payments that could total hundreds of dollars. sources say this is to pay for

the wage rises. amazon says operations and customer services still see their total compensation improve. hp is offering an upbeat profit forecast indicating the leading personal computer maker seeing robust demand. the stock jumped in extended trade after the company said net income would be -- above estimates. hp has climbed to the top of the pc market by overhauling its lineup. pc shipments rose more than 1% in the second quarter after years of decline. >> there may be array of sunlight through the clouds form macau. healthy tourism this golden week, easing worries the holiday could disappoint. arrivals were 20% higher than a year ago. the best today start to golden week in years.

casino stocks closed higher on wednesday. >> futures looking slightly positive. more daybreak asia next. ♪

haidi: i'm haidi stroud-watts in sydney. asia's major markets have just bird shery:rade good evening from bloomberg's world headquarters in new york, sophie: and shery ahn. i'm sophie kamaruddin in hong kong, welcome to "daybreak: asia." . --i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong, welcome to "daybreak: asia." . haidi: our top stories this thursday, asia-pacific stocks set for small gains after wall street edged higher. the dollar pushing the yen to its weakest this year. the boj's latest estimates as gdp outpaced potential in the second quarter.

the banks may prepare to further reduce qad. shery: critics with calls for a pragmatic brexit. theresa may told conservatives she can deliver a good deal. treasury yields weighed on stock markets in the u.s. let's see how things are shaping up in asia. we have yields on japanese bonds and aussie bonds gaining. sophie: bonds very much in focus with benchmark treasury yield at 2011 highs. jgb's have climbed to 14.5 basis points. the 10 year yield, which on august 2, we saw the doj come into the market to buy bonds to contain that rise in yields. we are looking upon buying operations in about one hour. the 10 year yield is being jumped by almost nine basis points this morning. it has taken a discount to treasury to a 37 year low. utility and baking shares to move near sydney.

japanese stocks are gaining ground, up about .04%. the yen is holding steady after the 11th month low overnight. we are keeping an eye on the korean won. the kospi seeing change -- little change as south korean markets reopened this thursday. with the dollar climbing to a one-month high, we see the kiwi taking a hit. the aussie dollar could be looking to push below the 71 u.s. level against the greenback. an eye on commodities. brent and wti softening a bit. it would admit to headaches for currencies like the ruby. haidi: let's get you the first word news with jenna dagenhart. jenna: reports from washington say the fbi has not interviewed supreme court nominee brett kavanaugh or the woman accusing him of sexual assault.

sources tell us the white house has not given the bureau clear authority to speak to them, saying their testimonies are sufficient. it is not clear if they're the iowans to seek rulebook -- approval to interview kavanaugh and christine blasey ford. backing away from the goal of north korea ending its nuclear weapons program during president trump's first term. he is preparing for a visit to be on you next week, by saying 2021 is not his target. that echoes the president, that he doesn't want to get into a time game with the issue. mike pompeo mentioned 2021 in a statement released two weeks ago. near four-yearo high after the dwindling presence in global markets overshadowed a steep gain in u.s. oil stockpiles. inventories in the world's largest economies increase have five times the pace predicted in a bloomberg survey. republic arethe

scaring buyers away from the iranian cargo and heightening concerns of a global supply. >> current levels may be a little bit high. once we think the markets will strive to reach a balance, which would be stable and acceptable thensers and consumers, they probably ended a bit lower than what we have seen today. if you listen to the main panel today, the president spoke about the range of $65 or $75, which will be acceptable for users and consumers. jenna: facebook ceo mark zuckerberg is hunting for a cheap investment officer to oversee -- chief investment officer to oversee its fund. we are told it is being conducted with yale university cio david quinn, who will chair the investment committee. of the $63 billion fortune. onbal news 24 hours a day

air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jenna dagenhart, this is bloomberg. as sophie mentioned, that japanese 10 year yield climbing, eating the same level that last prompted the bank of japan to buy bonds last month. goodman joins us from singapore. we are also seeing jgb 10 year at 0.15% at the moment. this is after the deepening selloff in treasuries we had overnight, and the weakening in the yen. do we see the bank of japan coming in again today? yes, when treasury yields rise, you can see that being felt globally, even in japan with its easy monetary policy. i think the bank of japan is willing to see long-term yields this is year yields,

sometimes called the steepening of the yield curve, something they probably want because it helps banks. we can look for those to rise. as far as 10 year yields, if yields rise much further, they will come in and buy. they will have to signal to the market that even though there is pressure on yields to go up, they still want the 10 year yield to be near zero. they want to remind everyone that they will stick to their easy policy. haidi: when it comes to u.s. treasury's, highest for the 10 year yield since 2011. we see that hover around 3.2%. is it likely to continue capitulating? do we see a repeat of what we saw in february? wes: the reason -- the latest reason for the rise in yields, nonmanufacturing components, just the latest sign of economic

strength in the economy. strength aref building. two weeks ago, we had fed chairman powell talking about more gradual increases. yesterday, he was talking about policy is still accommodated and it may eventually be pushed into a more restrictive area. this is all the background for more fed rate hikes and bond yields to keep rising. i think there is concern that this rise in bond yields could undo the start market rally. the s&p 500 near a record high. -- whichconcern happened earlier in the year, there was a spike in ball deals -- bond yields. it hasn't happened yet, but more people are talking about it. shery: just quickly, we saw chair powell downplaying the potential of the spurring prices. what is the real risk of inflation? from my point of view,

inflation expectations are rising. the latest development is from amazon. it is increasing wages for its workers. that will increase pressure on other retailers to do the same. the one that mainly comes to mind is walmart. we have oil prices rising. that will help push of inflation expectations globally. this is the backdrop for more fed rate increases and higher treasury yields. shery: thank you so much, wes goodman in singapore. our next guest says the u.s. economy is clearly blooming, but the top of three fed hikes next year is the third. chief economist bob bauer joining us from tokyo. great to have you with us. we see data become more positive on the u.s. economy. you see yields rising. let me start with the boj and

what jgb's are doing were you are. we see the 10 year yield spiking to levels that would usually spur the boj to come into the market. is that also your expectation for this time around? think you havei to look at the big picture of what is happening. economic growth in the u.s. is excellent. the economy is booming. around the world, growth is pretty good. this very strong growth is causing central banks, as well as china lending authorities, to try to withdraw the huge gusher of liquidity that came during and after the global financial crisis to try to get the economy going again. gradually, that liquidity is being withdrawn. thatw the first impact of on the most volatile countries a few months ago -- vulnerable

countries, venezuela, turkey, south africa, brazil. that gradual withdrawal of liquidity is causing yields to rise. willnly in the u.s., it eventually in europe, and what has happened in japan. haidi: we see 10 of 22 major central banks --shery: we see 10 of 22 major central banks raising interest rates since the start of july. is this -- this is a mass go for our bloomberg subscribers showing the central banks that have tightened since july. seven more are predicted to do so again before the end of the year, according to bloomberg economics. should wen would be be focusing on the tightening global policy? or the fact that we are mentioning, the boj keeps pumping money into the market, as well as the ecb? bob: it does, that is true. the european central bank will

cut its bond purchases in half. that started on monday. january 1, they are not going to have any more bond purchases. they will keep their balance sheet the same for a while. they are just behind what the fed is doing. other central banks, particularly in europe, and around the world, are doing the same thing, raising interest rates. this gradual tightening of liquidity will create problems. not only in the stock market, but probably more credit stress, and emerging markets as the year goes on if the rise in interest rates continues, which we expect. about thet deleveraging campaign in china and the structural slowdown you see? tariffs and the overlay of the trade and -- and the overlay of the trade and tariff worries. how is that a risk? bob: it is certainly a regional risk. china is in the midst of what

will probably be a long, gradual, slow deceleration of growth. they have fantastic growth for 15 years outside of the global financial crisis. a lot of that was pushed by a huge rise in local debt. now, china is trying to slow the growth of debt. there is some evidence that it is working. that is also a piece of trying to withdraw this gusher of liquidity that happened during and after the global financial crisis. it's just adding to the tightening of monetary policy around the world. if you are anse investor and looking at these frosty markets, the u.s. markets pretty close to record highs, would you suggest that it is very much not pricing in the level of risk that exists? bob: i think it is a time to be cautious. we saw what happened in

february. there was the headlines of what happened, and the volatility we have had since then has all been based on trade tensions, at least that's what the headlines say. believe this withdrawal of liquidity and the gradual tightening of monetary policy, because they don't need the same kind of accommodative policy of five years ago today with growth where it is. i think that is going to cause more credit stress, it will cause struggles in the stock market eventually, maybe probably not this year, but early next year. we look for 10 year treasury yields to hit 3.5 at some point later this year, early next year. i think that will be a real problem for stock markets. shery: we were just talking about china and the pboc. this chart also shows the pboc refrain -- has refrain from hiking rates alongside the fed

for the last two quarters. , theusually hike rates pboc the line in blue, the fed funds target rate is the line in white. pboc seems to have shifted to more commentary -- monetary financial sense. without continue as we see the trade tensions and every thing else? bob: yes, i think we are. you have seen the central bank in china not raise interest rates. they have done some other stimulus things. they cut income taxes substantially for middle-class households. they have eased lending standards. they reduced the required reserves for banks. they are trying to add some liquidity. it is really a problem. at the same time, they are trying to deleverage, or at least slow the growth of debt, so they can't open the lending spigots like they did in 2008 to

2010. that will defeat the purpose. i think they are worried down the road of having a local financial crisis, so they don't want debt to get out of control. they are trying to find other ways to stimulate the economy. keeping interest rates somewhat low is one of them. haidi: it's a tough balance for beijing at the moment. usy with us, he will rejoin in a moment. coming up next, we discuss when it comes to europe as concerns grow over italy's budget deficit. is the threat really over? restart --it cook, the brexit clock start and it is ticking. how rent will be affected in the most expensive office market. this is bloomberg. ♪

shery: this is "daybreak, asia -- this is "daybreak: asia," i'm shery start watching new york. i'm haidi haidi: in new york. in another european battlefront, the u.k. prime minister theresa may closer conference by making her case for brexit pragmatism in a week of diplomatic wrangling as the brexit negotiations get back underway. bob is still with us in tokyo. his views on a europe, brexit, the contagion of italy, and beyond. in this chart, there was a sigh of relief overnight, in terms of those worried about in tallying debt contagion, and where the deputy premier confirmed the deficit to gdp is that 2.4%. the problem i see is it is reliant on expectations of future growth. is that something you think can

come through? do you think the worry about the ability to spend any problems with italy is still very much a risk? bob: i think it is certainly a risk. we were a little too optimistic about european growth this year, thinking it could see 2.5%. 2% isk this year, 1.5% to reasonable for eurozone wide growth. unemployment rate is coming down, the wage growth is picking up, household consumption is one of the drivers of the economy. what is going on in italy is a risk, but it seems the alliance governing italy now has some sort of agreement with the european commission. i think that downplays at least the immediate risk of problems in italy for europe as a whole. weeks,over the next few the focus will be back on brexit. what are your base case

assumptions, in terms of what can be done? case, you would have to think these sort of deals come through, prime minister may has certainly made some -- what seems like reasonable offers, and has been met with total rejection. my hope would be euro officials -- the european union would look with some favor and make some concessions to europe. woulds our base case still be there is some kind of deal that will be positive for both areas. there certainly is a risk of coming up to the end of negotiations and not being able to come up with anything. shery: there will be huge costs of leaving the eu without any deal. will that be faced by other countries? the u.s., india, china, australia, new zealand? can they make up for the loss of

that economic relationship with a single market? bob: i think there can be some makeup for that. the u.s. would like to have a separate deal with the u.k. i'm sure other developed countries can. andtrade between the u.k. european union is so strong that they are integrated there. they are having a shutdown of trade, or really the uncertainty about what could happen with no deal. i think it would be very hard for the u.k. economy, at least for the next year or so. there is a tremendous cost. some companies will leave, some residents of london and other place would probably go back home. it is certainly a cost. my hope is european officials will find some way to compromise with what prime minister may has suggested. shery: there is uncertainty over brexit, but also when it comes to italy.

it is really not a done deal. the european commission is still requesting, asking for more. when you have these fronts brewing in europe, what is your forecast for the region? growth this year in total, at least for a couple of quarters next year, will be 1.5% to 2% range. that is probably above trend. there are positive things going on in the eurozone with what the european central bank has done. banks in general are in better shape than they had been before. i think there is still positive things going on in the eurozone. they can keep the trend growth a little more, at least well into next year. haidi: the bank of international settlements, as well as the other institutions, have been warning about the possibility of a global downturn. bas is interesting area in case of the next financial crisis,

central banks don't have as much of a buffer space to really meaningfully react. is that a risk at this point? bob: i think if you look around the world, the u.s. economy, as we mentioned in your last segment, is doing extremely well. i think it has a chance to continue the current pace of growth, or 3% to 3.5% well into next year and beyond. capital spending in the u.s. has been very strong the last several quarters. with the incentives in the tax bill and the age of the current capital stock, that will continue. consumers are practically the most confident they have been in history. consumer spending will be fine, the labor market is on fire in the u.s. i think the u.s. and india, which is also an outlier in global growth, they are certainly going to be able to keep global growth at a decent

pace, at least well into next year. haidi: on that positive note, we will leave it there. bob hour, chief economist of principle global investors joining us. you can get roundup of thea stories you need to know to get your date going in today's edition of daybreak. bloomberg subscribers can go to dtv go on your terminal. higher and higher was the top story of what u.s. treasury yields did overnight. the deepening selloff in the treasury market. this is also available on the mobile in the bloomberg anywhere app. you can adjust the settings to get the news on industries and assets that you care about. this is bloomberg. ♪

haidi: this is "daybreak: asia," i'm haidi stroud-watts in sydney. shery: i'm shery on in new york. let's get a check of the latest business flash headlines. is that abased maker

foreign month high after they announced to invest $300 billion. two of the key moving averages have climbed as much as 60%. -- 16%. billy billy jumped more than 17%, despite the added headwind of tariff tension, they are still up 25%. haidi: hp is offering a profit forecast for 2019, indicating the leading personal commuter maker sees robust demand. the stoxx jumped after the net income would be two dollars, 12-22 a share, and projected $2.15. they climb to the top of the market by overhauling their lineup. shipments rose more than 1% in the second quarter after years of decline. shery: there may be a ray of sunlight through the clouds over macau. early numbers show healthy tourism this golden week, easing

worries the holiday could disappoint. were 27%als from china higher than one year ago, the best today start to golden week in at least six years. this is bloomberg. ♪

haidi: it is 8:30 a.m. in hong kong. we are one hour away from the open of trading. chinese markets continue to be closed for the national day golden week holiday. hong kong may be a little bit brasher across the asia-pacific. hong kong with most asian markets falling yesterday to the tune of about a 10th of 1%. wall street providing a more positive lead. we had the deepening selloff in the treasury markets. i'm haidi stroud-watts in sydney. shery: i'm shery on a new york. you're watching "daybreak: asia." . let's get the first news with jenna dagenhart. jenna: jpmorgan is downgrading chinese stocks investing a full

born trade war after its best case scenario. the new report suggests a conflict between the world's two largest economies will escalate as the u.s. raises tariffs on chinese imports. the dollar strength in the yuan weakens. chinese equities tumbling to a two-week low. u.k. prime minister theresa may won support as she closed the supportive party congress. unity and commitment on brexit. she made the case for pragmatism over the slip from europe, warning against an ideological divorce that could damage great britain. it was welcomed, but critics were not impressed. she says a good deal is possible. >> what we are proposing is very challenging for the eu. if we stick together and hold our nerve, i know we can get a deal. jenna: the alumina market faces

fresh turmoil after the world's largest aluminum refinery shutdown. north guy drove is temporarily closing a refinery in brazil because the only area can be used for waste processing is closed. they couldn't give a timeline for restarting. aluminum prices jumped as much as 4% while shares of other aluminum producers also gained. on thursday, prosecutors will charge the wife of the former permit -- malaysian prime minister with money laundering. she was detained after questioning by the anticorruption commission. she has been under investigation, over $266 million worth of cash and luxury goods seized from her home. her husband pleaded not guilty to 25 charges linked to the troubled state fund one mdb. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'

m jenna dagenhart, this is bloomberg. -- i'm jenna dagenhart, this is bloomberg. haidi: let's get a look at how asian markets are shaping up. we get a look to sophie, who has been surfing hong kong. we think green shoots this morning. sophie: some when it comes to happening with japanese stocks. nikkei 225 resuming gains. it's led higher by electronic makers and banks. we see an uptick in yields, as well as the weakness in the yen. we see gains for the sf 200, set for a second day higher as energy, financials, and materials leading sectors. we see losses for the cosby. we keep an eye on what is going on with the korean won as a potential center pain this thursday. . the australian 10 year yield jumped nine basis points. we saw the jgb 10 year yield pickup to 15 basis point earlier in the session.

we also see the long sector climb for the jgb it taking a look at what's going on in the currency market, this is the dollar climb. we see the kiwi dollar taking on the chin back below it. aussie dollar also underwater, while the korean won is looking to decline on -- when it comes to india contracts. also watching the commodities space. oil is losing ground. that will likely keep the pressure on emerging currencies. shery: sophie kamaruddin, thank you so much. we will talk about the rupee on now. willesian central bank talk about its preemptive monetary policy to ensure the rupiah covers by next year. kathleen hays is here with more. bank of indonesia chief is quite clear on this, more rate hikes. kathleen: he certainly is leaving the door open and making it clear that if it continues to

be pressured lower, he will have to walk through the door with more rate hikes. he says global winds have been hitting the rupiah, including the trade were, and rate hikes -- trade war and rate hikes. it tilts tightening from some central banks around the world. this is the chart that says heavy lifting by the bank of indonesia may have held five interest rate increases since may. you can see this trajectory. five rate hikes. even so, the rupiah is down 10%. it past 15,000 on tuesday. it hasn't been that week since the asian financial crisis. not the one that started in 1997, just toin put this in important perspective. he did pledge more market intervention, and he does see a rupiah recovery ahead.

to's look at what he said underline he is ready to do more. he said we already know interest rates are broad will increase, we just can't wait for it to respond to it. it will be too late. we have to take preemptive measures so capital flows will not be so drastic. he didn't want to have to raise rates more, but to curb the capital outflows, it is important to do that. rupee the rupiah, the already under pressure before the market selloff in the u.s. there will be other pressure to come. kathleen: absolutely. when you look at what he listed for some of the things he thinks is causing this -- he basically thinks it is undervalued, because the underlying fundamentals are stronger. there are special factors, these global wins pushing a lower. he called for synchronized global, fiscal, trade, and

monetary policy to ensure growth in the global economy. in terms of what hitting the rupiah, he puts the fed at the top of the list. he said one of the reasons it will strengthen next year is the fed will not hike rates as much. the second reason is he says global investors will not keep their funds in cash for too long, they are already putting money back into emerging markets. he thinks we will see more inflows as this episode passes. he says the rupiah will do better, because they are taking steps to lower their current account deficit. therefore, we will see less pressure on the exchange rate. a fairly optimistic view. he's backing this optimistic view of with the promise of more action. what's interesting about this bond market selloff in the u.s. is you can see it isn't just what's happening with central banks, if they see yields rising -- it spills over to other large bond markets. nobody can really escape this.

it's interesting to see what the impact will be. with the glow but economy recovering come -- global economy recovering, rates and deals will go higher -- and yields will go higher. haidi: thank you so much, kathleen hays for us in new york. america's largest explorers got squarely in the presidents spat with china. up to a quarter of boeing backed up -- they are fighting airbus in the world's fastest-growing aviation market. us he is not overly concerned when it comes to the fallout from the trade war. >> aerospace is a thriving, growing business, the strongest industrial business in the world. the world needs about 33,000 new airplanes over the next 20 years. 20% ofout 15%, less than the world's population, have ever taken a single flight. the amount of growth still ahead of us in the airplane business

is extraordinary. it depends on free global trade and movement of people to be successful. we are engaged in the dialogue. the good thing is there is a lot of neutral tendency. take the u.s. and china, both economies thrive on a healthy aerospace industry. it is a great generator of manufacturing jobs in the u.s.. as china grows, they need about 7000 new airplanes over the next 20 years to create or increase in capacity. we have a mutual interest to find trade solutions. >> how long do you expect this to be prolonged before that solution is reached? dennis: it is not clear whether duration will be. we are very much engaged at the dialogue -- in the dialogue. we are at the table, having conversations with leadership in both the u.s. and china. we are focused on trying to find solutions that benefit both countries. there are real challenge is being addressed, some discussions around trade, and we

all want a world based on free and equitable trade rules. time, we want to make sure those solutions are win-win. we see a way to do that in our aerospace sector. >> spacex making it to mars in 2020. nasa is looking at 2030. i know you think you can get there sooner than 2030. do you think you can beat spacex? dennis: we will put the first person on mars. we are the only ones building a rocket today that is capable of going to the moon and mars. not something on paper, building it today. we are working on it with nasa. 38 story tall rocket being built today. we will do initial test flights next year with nasa. we will return to the moon. we will set up a primitive presence on the moon, then step to mars. >> can you get us there in 2020? dennis: it is possible. it will require continual and

reliable funding, continued success in our test programs. role -- isogy is the not a problem. it is the will and funding to get it done. i believe the first person that steps on mars will get there with a combined nasa-boeing rocket. shery: dennis muilenburg speaking to emily chang. coming up next, it has been rough for cryptocurrencies. it is not proving much of a hindrance. we find out why. this is bloomberg. ♪

haidi: this is "daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. cryptocurrency companies are leasing space is in some of hong kong's most prestigious buildings to carry rents even banks are avoiding. sophie is looking at this. sophie: as we well know, hong

kong's property prices have been heading in pretty much only one direction. let's put this chart on the terminal to illustrate the move. it makes for some of the highest occupancy costs in the world. that's the blue line on this chart. it sees hong kong topping the london's west end. prices haven't seem to deter cryptocurrencies from splurging in the city, even after the wipeout in digital assets. it has brought crypto coin closer to $6,000. we are joined by office services director at joe colliers intersection -- international to discuss what it may mean for hong kong's real estate market. have least about 72,001st he of grade a office 50 -- 50%t's about what we saw on mainland chinese firms. do you see this as an anomaly or sustainable trend? >> i believe it is sustainable. we see office rents continue to

rise steadily in 2018 due to strong demand and low levels of supply. we forecast for your rental 6.5% ins of 8.5%, and colin. another interesting trend is co-working operators. some of these companies are intially launched cooperative space. these places continue to expand in operation in hong kong. ofrators are more than 40% first year lease and transactions in hong kong. these are deals which we transacted on, including 19,000 least feet, and campfire, 60,000 per feet -- square feet. sophie: we do see a lot of these new entrants, these sharing office spaces, as well as crypto firms.

we have the likes of investment banks looking for lower-cost buildings. do you see a change in composition? where do you see more of an appetite in the city? philip: in terms of investment banks, we see them be centralized in back mid office operations. examples include goldman sachs, who recently relocated their back-office to a new development in causeway bay, which is around 93,000 square feet. toorgan recently committed 250,000 square feet. finally, bmp power bar, who are consolidating operations for central. sophie: in this building, bit next paid a world record-setting price for a full floor. do you see more of those? philip: i believe so.

the appetite will be coming from the crypto exchanges. it is no surprise bit macs can afford the -- bitmex can afford the rent. given the trade volume is around 800 billion u.s. dollars. for more than we transacted with did you mix, least 8000 square feet in ifc, which is one of the most expensive buildings in the world. finally, there is genesis bank, hong kong's premier otc trading exchange. they opened a trading floor and even space. we are actually helping them expand their crypto atm machines across hong kong, singapore, and taiwan. sophie: this is coming despite regulatory risk facing the crypto space. it looks like they are optimistic about the industry. what about the landlords? how are they cushioning against potential risk? philip: i think landlords certainly see a slight risk,

which is why these companies are paying higher deposits compared to traditional occupant. sophie: now looking at the macro outlook, we have the fed policy tightening pact likely to continue. we have conditions changing in hong kong. how is that impacting the outlook for hong kong? another outlook would be the u.s.-china trade tensions. we are yet to see any impacts on the office sector. we see a softening in demand from chinese stocks companies. .9%, the low vacancies of we don't see a sharp correction over in 2019, in terms of the lenders. sophie: that is interesting. philip.u so much also discussing just how

optimistic the digital currencies base is looking when it comes to expansion for some of these companies. haidi: thank you so much. don't forget about our interactive tv function. you can watch our interviews and conversations live. catch up on anything you may have missed. we are diving into any of the securities we talk about. you can join in on the conversation. send us instant messages during our show. this is for bloomberg subscribers only. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery on in new york. haidi: i'm haidi stroud-watts in sydney. howard marks has a message for investors. the cochair of investment capital suggest taking a cautious approach to markets. eric spoke with him about this. >> i'm calling for caution. alarm sounds alarming. i don't think it is appropriate to be an alarmist. upward for has gone almost 10 years. the markets have gone up for almost 10 years. the too much money phenomenon is certainly underway. it will be a mistake to have as much risk in your portfolio today as you did two years ago, five years ago, or 10 years ago. i use the term calibrate.

today is not the time for max risk, full risk, or, in my opinion, evenly balancing offense and defense. your portfolio should be skewed toward less risk. not extremely. eric: you wrote a similar memo in february of 2007. you cited many of the conditions you described back then as the same as what we see today. what i am getting at, and you make this point in the memo, is that even before february of 27, oaktree was selling. you were selling assets, getting liquid in, you are raising money, $11 billion for a distressed debt fund that you put to work in the financial crisis. what are you doing today? are you selling? howard: we are selling assets, we are also buying. we are buying more than we are selling. we are selling highly appreciated assets. bargains when we can find them, but it is not easy.

we raised another distressed debt standby fund at $8.5 billion. we did it three years ago. we thought something was coming, and it hasn't yet. shelf.itting on the we are not putting it to work very much. we are not charging many fees. we are waiting, and i think our clients are happy to wait with us. they want to have that hedge. money committed to a fund that can invest when times get tough. haidi: oaktree capital --shery: oaktree capital chairman speaking with erik schatzker. let's get a check of the business flash headlines. 24 hours after raising minimum wage, amazon has cut bonuses and stock awards for warehouse staff. employees have been eligible with a monthly payment that could total hundreds of dollars. sources say the scheme is being dropped to help pay for the wage rises. andon says operations

customer service staff will still see their total compensation improve. haidi: under is investing 2.3 quarter billion dollars in june's self driving car program, having spent two years collaborating. shares jumped more than 5%, the biggest intraday advanced since the softbank backing was announced. >> the main dating item to deployment will be if we are operating to the right level of safety. as soon as we are, it will be ready to deploy. this partnership with honda accelerates the effort that will come after that. we are going to work together on a jointly developed, purpose built autonomous vehicle that we would be looking to roll out in the next stage of scaling after our deployment. tradingston martin debut hit the brakes as investors bounced, putting the carmaker on par with more --fitable robert for art

rival for are the. shares closed down almost 5% in london after an ipo that gave after martin the market cap of $5.3 billion. scaledpany had already back its ipo admissions after analysts questioned comparisons with ferrari. china's highest earning movie star has apologized after being heavily fined fo tax evasionr. it comes after she disappeared from public view for. months. shestate run agency says has personally been fined about $700 billion. companies affiliated with her must be -- $700 million. companies affiliated with her may pay more. she disappeared a few months ago from public view. her social media accounts have been silent. there has been a #this all-time. it is overall these so-called pyongyang employment contracts

-- yin and yang employment contracts. how much she is being paid for film and television, and how much is being compared to the tax authorities with a lower figure. they are common in the industry. you have to wonder who else is next, in terms of their heads on the chopping board. shery: chinese authorities trying to make an example of her. at least we are hearing from media reports that she will not face criminal charges. although, her agent was not as fortunate. her agent now being held on suspicion of criminal activity. tos also raises questions the future of the chinese film industry, which is expected to start passing the u.s. anytime now. we have global box offices just reaching record highs. a big part of that was because of the huge gain in the chinese market. as you are seeing more of the government controls being applied in the industry, it

makes you think where the industry could go from here. issuing anis apology. she said there would be no more without the parties. before we head over to bloomberg markets: asia, we will look at how the markets are trading in asia at the moment. the nikkei 225 is seeing an upside. jgb yield popping after we saw the selloff in treasuries overnight. watching for with the boj does. the cost be is seeing declines and underperforming the rest of the markets. here in sydney, we see about 7/10 of 1% as the aussie 10-year also reacts. shery: the china open is next. ♪

♪ you produce some of the most famous movies in american history. barry: first we failed. in order to figure stuff out, you are going to make a mess. i have certainly been successful. but, none of this is mine. david: how did you gravitate towards the internet? barry: it was interactive, and it intrigued me. david: is that how it happened? barry: that is what happened. then they said i was crazy. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪ david: i don't consider myself a