paul: good morning. under an hour away from the market open in australia, japan, and south korea. >> good evening, i am shery ahn. >> and i'm selina wang in beijing. asia." to "daybreak our top stories this thursday, moving markets. steven mnuchin tells bloomberg ultralong bonds are a possibility but there are no plans to intervene on the dollar. the brexit drama turns a new

page. boris johnson will suspend parliament next month to limit debate on a no deal divorce. joining china's internet leaders to discuss the future of artificial intelligence. this trip threatens to annoy president trump. marketset a check of and how they closed at the end of the u.s. session. the dow adding 258.12 s&p 500 was down .7%. everyone was in the green except for utilities. energy shares beating utilities. the u.s. for more than expected. the volatility was low. not volatility, but volume. trading was around 15% below average. and let's look at how we are setting up in asia. nexta: we are set for a

open in asia. we are waiting for the latest on the trade headlines as investors are held captive. but we did get positive news that chinese negotiators are talks.d to come for it looks like nikkei futures will open a bit lower, down about .1% right now. that is going to be reversing the gains of two straight days. futures like half the have little change and we saw it open up around 1%. health care leading those games. switching boards here, we want to take a quick look at the yuan that has weakened by almost 4% in august. of course on the continuing trade the celebrations. -- decelerations. while theing trade

pboc is setting the fixing stronger than expected. it is still above that psychological level that leads to concerns that it could be used as a tool in the trade war. is notasury department going to be intervening in the dollar, but there is still pressure on the yuan given the weak economic data we have seen out of china. let's switch boards one last time for some of the important economic data we are expecting today. we have australia's private capital expenditure. have risen .4% in the second quarter. the strong report will allow the rba to hold the benchmark at 1% for the rest of the year. that is the expectation. we have trade retail data and economists expecting inflation is slowing slightly. and we had the japan super confidence index -- consumer confidence index. paul: let's check in with first

word news. >> argentina is banking on the imf to save -- stave off default. than $5package of more billion, adding to a record bailout last year. than $10ve had more billion in the last month as policymakers try to shore up the peso after stunning political defeat. brexit drama has turned another page with prime minister boris johnson securing the queen's admission to limit parliament ahead of debate. forill shut down comments months, severely restricting .pponents of the no deal brexit he said a hard brexit would be manageable but there would be a hit to the economy. is undemocratic at a time of national crisis. a parliament must be able to account to represent

constituents. it is undemocratic to shut parliament down and stop it from doing its job. the italian prime minister has been given a mandate to form a new government. talks. after start stop the coalition collapsed when the anti-immigrant league withdrew its support. markets welcomed the news but democrats are maned unhappy -- remained unhappy. 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. paul: thanks very much. the top story. treasury secretary steven mnuchin has told bloomberg that the possibility of ultralong bonds is under very serious

consideration. in an exclusive interview, he anticipates taking advantage of favorable conditions to borrow long-term. between the five-year and ten-year treasury is widening. josh joins us. news from mr. mnuchin, but it's not a new idea, is it? >> it is not a new idea. it dates back as far as 2009 that the u.s. has consider doing this. this administration has rekindled the idea. secretary mnuchin first raised it in 2017. it has been on and off with the treasuries since then. with the yield curve inverting as everybody is talking about and showing signs of recession, the u.s. has started looking at this again. but again, it's hard to know how

serious the administration is about this. they said they are very seriously considering it, but at the same time, they have talked about this in the past. a very tepid response from investors. we want to see if they actually follow through. >> the intervention in the currency markets, what did the secretary have to say about this? josh: the secretary said a pretty high bar for what it would take for the u.s. to intervene and weaken the dollar. he said that basically they would need global allies to go along with the u.s. and doing it and the federal reserve as well. neither of those two things seem very likely. things thatill

president trump could do, to act on his own. steven mnuchin says that they want others to join them, the likelihood seems relatively low even though the dollar has been quite strong recently. thank you so much for that. our white house editor joining us from ec -- from d.c. to thet the comments me international community, let's turn to the president of the peterson institute. a former member of the bank of england monetary policy committee. always great having you with us. let's get started on the secretary's comment on the dollar. he is saying that they don't intend to intervene right now, but even if the u.s. were to directly get into the currency markets, how effective what it to thee if it comes president's concerns about a stronger dollar and everybody

else undervaluing the currency gekko >> that is the right question to ask. that kind of intervention is unlikely to succeed. even if the fed were to go in on this, which they shouldn't -- but even if they did, you're talking about a total reserve pool of well under $200 million -- $200 billion, excuse me. and a daily turnover in the exchange markets. it is not going to work. the president keeps attacking asian countries including china and paris. and they will keep driving of the dollar anyway. shery: secretary mnuchin not putting an exact date when it comes to the negotiations with china. not even confirming that the meetings in september will take place. tariffsthe additional

are coming up on sunday. we have talked about the direct impact to what these would mean for the u.s. economy. i know you have extensive research, making the u.s. a less attractive place for foreign investors. tothank you for referring that. it is something that leaders are looking at. you see people doing flights to other currencies, not just the u.s. dollar when there is trouble. you see direct investment in the u.s. declining and that is even before they started blocking chinese investment directly. you will see technology flows and access to markets go down. proportionately, people will have less reason in the u.s. exact but you want access to markets, which is why you invest in a place. it used to be that it was a

great place from which to export . that is less true now because of the trump administration. back at the start, the president said that the trade wars were easy to win. who is winning? somewhere care from bloomberg economics analyzing 700,000 data points to figure that out. buyers or placing made in china products as not easier. what is your estimation? for a while now is that the trade war is trump's afghanistan. it is open-ended, costly, fruitless, and there is no clear victory. he doesn't know what winning would mean. he can't tell anybody because he has no coherent strategy to do it. afghanistan, it could take a long while to get out and it will cost the u.s. blood and

treasure. i respect your colleagues for doing that kind of work but i would not frame it as who is winning. both the u.s. and china are losing. other small countries are picking up some trade from u.s. and china. , but thewin environment is going to get ,orse if it becomes political whether you align with china or the u.s. most people are losing, including the u.s. and china. that is pretty much the conclusion that the economics report comes to as well, that everybody loses. i just want to talk about deficits as well. the president is very concerned with trade deficits, but is he worried about budget deficits? pointing out $100 billion in terrorists, but a trillion dollar deficit that the u.s. is

steering down. staring down. adam: he and the congress are a bunch of hypocrites that were talking about austerity or conservatism during the need for stimulus in the financial crisis , and now that we have an economy doing extremely well, they still go out and cut taxes and blow spending. this is complete hypocrisy. it is probably wasting money that could be used for better purposes at a better time. is stickingosen around because ahead, we are discussing brexit and elon musk. he risks president trump sire -- by talkingrump's ire about artificial intelligence in china. shery: and boris johnson suspending parliament days before a crucial eu summit on brexit. critics say it is a constitutional outrage. this is bloomberg.

♪

shery: this is daybreak asia. i'm shery ahn in new york. and on paul allen in sydney. u.k. prime minister boris johnson has taken a controversial step suspending parliament ahead of brexit. still with us is head of the peterson institute, adam posen. he spent three years on the bank of england monetary policy committee as well. take a look at the political side of this. and in someoutrage way, a subversion of democracy. but if you look at it from the --er side, there has been does boris johnson have no choice. but think he has a choice

you have put your finger on something. remains no effective majority in parliament. there may be a majority of people that don't want a hard brexit but they are unable to come together on a coherent proposal on how to end it. to agree whether it is jeremy corbyn from labor or whoever has to be the face of it. johnson is taking a page from saying, i'm and just going to be as disruptive as possible and see if the arees aligned against me going to fall apart. a lot of people are spinning about strategy but i think it is that simple. paul: one thing parliament managed to agree on is that nobody particularly wanted a no deal brexit. we hear a lot of doomsaying. but we don't hear examples. can you give me a few?

adam: there is a lot of work out there thinking this through, but there will be short-term shortages in medicine and foodstuff. there will be huge queues at the border whether it is the northern irish border or euro star. there will be breakups of scientific networks, including in the u.k. you will lose some of your best people, shortages of personnel of medicine. bank of england is probably going to have to cut rates and the pound will crash. they will have to reverse cutting rates for too long. let me expand on one of those points. cable crashing. rising,seen volatility the two-month cable volatility the highest since brexit.

we see the pound crashing more than 1% against the u.s. dollar today before paring back some of those declines. what does it mean for the notder economy when you see just the crashing and collapsing framing the pound? the pound is overvalued if you look at the macroeconomics of it. they have very large, though shrinking, public deficits. growthve productivity which has slowed more than the rest of the g7 and g20. tables, asad ranking it were. they will be throwing up a bunch of trade barriers for their services and the financial sector. in an would expect irrational world, the pound would have go downward to compensate for some of that. aere will be a bit of

counterforce because people will want to buy london real estate cheap and pick up companies cheap. bloomberg has reported on a little bit of that. it will not be straight down. cable to move and the pound to move more against the euro than against the dollar. shery: we expect the new governor of the boe soon. what are the challenges he will have to face? she, not to be politically correct, but some of the key candidates are female. predecessors of the 80's.d it in the early they will be unable to kind of pursue the domestically oriented policy and focus on domestic inflation and growth. are going to have to keep one eye on the exchange rate and market conditions in terms of basic stability.

whether it's prime minister johnson or whoever his successor picks, it should be someone with effort into combing markets. -- into calming markets. shery: always great to talk to you. it you can get more on brexit and around the story that you need to know around daybreak. terminals,o> on your also available on the bloomberg app. customize your settings so you only get the news on the industries and the asset that you care about. this is bloomberg. ♪

paul: this is daybreak asia. i'm paul allen in sydney. shery: i'm shery ahn in new york. leadersk joins china's at a major summit in shanghai this week. the event will showcase the country's achievements in

artificial intelligence, even as they draw u.s. scrutiny. tom mackenzie joins us now. this is quite a moment for elon musk to be heading to a tech event in china. tom: for one of the most high profile u.s. corporate leaders, one of the most colorful corporate leaders to be in shanghai. china's financial hub. this is days after president trump says he wants american companies to pull out of china. and elon musk will be headlining an event at the ai world conference. they will be talking artificial intelligence, and area drawing greater scrutiny from the u.s.. this is an area where the u.s. and china are pushing ahead to see who can lead. china else comes close to -- to what china and the u.s. have. this is an event, a key event to unveil some of the advancements. you have officials along with business leaders and academics,

getting an indication of how much state support there will be as well as private enterprises stepping up in this space. we will be listening to elon musk when he takes the stage with jack ma from alibaba. also listening for advancements on technology, getting a better sense of how much money the chinese government is going to be putting behind some of these advancements. if you lead in ai, you can lead theilitary, technology, and industrial space. paul: the are other reasons for elon musk to be in china, some more boring ones. forgive the pun. tom: lovely pun, paul. elon musk will be also unveiling tunnel transport company as well. we expect to get more details on that. he is likely to visit the giga shanghai thate of will be producing model threes

by the end of 2019. tesla is pumping billions of dollars into the facility. it is the first car company to have a fully owned majority car company in china. he is expected to meet with local officials. he is really doubling down on the chinese market where tesla gets current revenues at about 11%, but recently hit by a retaliatory tariff. on all cars40% manufactured in the u.s. and shipped to the chinese market. but there is a lot of demand for tesla in china so he is doubling down. tom mackenzie in beijing, thanks for joining us. let's get a quick check of the latest business flash headlines. billion investment in crown by the australian regulator. a planned purchase for 20% stake in crown is on hold and will now wait 60 business days after the

completion of the regulatory process. crown'sy is a blow to biggest shareholder that has been trying to exit the company after a series of setbacks. shery: apple is under increasing cabin pressure. qantas is the latest to ban macbooks from check-in luggage over concern the batteries could catch fire. says the computers must be carried in the cabin and switched off. others have banned all apple laptops from the hold. is said to be in talks to invest in an indonesian ride-hailing company to boost its presence in southeast asia. enjoyed thees latest funding round and sources say one scenario would see amazon make a meaningful payment for a stake in the start up. ptt is looking for partners in the middle east

to tackle growing competition in asia. we are in bangkok next. this is bloomberg. ♪

♪ >> this is daybreak asia. i have first word headlines. cathay pacific was the target of the latest protests in hong kong,, demonstrators supporting the hiring of workers were fired for supporting democracy. demonstrators are pushing back at cathay pacific's largest shareholder. cathay pacific has fired at least seven people since the protests began. they asked me to leave. i was hurt that i couldn't help my colleagues.

confident that i can still continue. i will tell the truth. anchor: argentina is again banking on the imf to stave off default. they are in buenos aires to decide on a new package of more than $5 billion, adding to the record bailout of last year. economy has plummeted more than $10 billion as policymakers try to shore up the peso after a stunning lytic cold defeat for the market-friendly government. ed lee's second-most famous tocano has come back to life the north of sicily, the home of mount etna. it has been sending huge plumes of ash and smoke into the sky. elaine's were deployed to drop water on wildfires spark by burning lava. it is one of the most active

volcanoes in the world. the blast comes almost two months after interruption killed a hiker. global news 24 hours a day, and on tictoc and 20, powered by journalists in more than 120 countries. this is bloomberg. sheri: thank you. we are a half-hour away from the open in tokyo, sydney and seoul. what are you watching? i am watching toyota and suzuki. yesterday both close lower. there is a report they are going to take stakes in one another to extend their collaboration and development of self driving cars, electric vehicles. according to the report, toyota will acquire a 5% stake of suzuki shares worth about 96 billion yen. suzuki will get a smaller holding, ¥48 billion, in toyota. also watching yamaha motor, last closing down about 2%. they had to recall golf carts due to a fire hazard, and told

consumers they should immediately stop using the usb charging device and the recalled vehicles. ofaha received five reports associated fire incidents and 100 ports of molted usb modules. not great news. searching boards to look at commodities, oil is rallying for another day. above theing it climb $60 per barrel level on science opec is doing supply cuts and is draining some u.s. inventories, which is good for upholding prices, but gains are being capped by concerns about the u.s.-china trade war. searching boards again, taking a look at another commodity, copper, a bellwether for global activity. we are seeing futures trading up slightly, but there are concerns it could continue to fall on u.s.-china trade tensions. we have read a bank saying it has already fallen below significant support levels, and that is bad news for

emerging-market currencies. thanks, selena. joining us is first franklin financial services chief. ,hanks for joining us today brett ewing. things are whipsaw in. i want to bring up this chart on the bloomberg terminal. it shows a number of 1% swings during the month of august. how are you dealing with all of this volatility? is it wise to think about trying to buy the dips? a great opportunity to take advantage of some of these dips. and it has proven itself over the last 20 months. we have been actively buying these dips and plan to continue that. the vix has been wild, but i think not taking advantage of some tweets, sending the markets down a couple of percentage

points is bad strategy. the noiseou tune out over the trade war, the tweets over what the fed is doing, and just focus on earnings, the earnings season last quarter was not tremendous. and when you bring all that noise back into the picture, you can't be optimistic about the next quarter? earnings will probably come in a little better than expected. of course, analysts brought earnings expectations down quite a bit. i am very optimistic on the u.s. economy, in light of the recent inversion on this yield curve. we don't know if a recession is going to come, we couldn't tell you that, but right now we feel there is opportunity and buying these dips. we have seen the s&p 500 stuck in a range. what will be the catalyst that breaks us out of this, as the gtd chart on the bloomberg shows?

i think the catalyst that can break this market out is clearly a move of forward-looking, and a clear agreement with china to move forward and stop this escalation with the trade war. and also, i think the market is looking for a fed that can get ahead of these rate cuts, instead of just meeting market expectations. the fed needs to try to get ahead of this market a little bit on the rate cut cycle. sheri: and yet, we heard already from the former new york fed president that perhaps the fed is not in the best position to act, because it could actually cause president trump to worsen the trade war with china. is that something you are thinking about, or are investors worried? should beryone worried about dudley's comments about potentially weaponizing the federal reserve. that is a nobody's best

interest. the independence of our federal reserve system is vital to the world. we are the world's reserve currency. so i don't believe the fed should take a political stance and try to dictate any policy toward the white house, no matter who the candidate is or who the president of the united states is. i believe it is their policy, and a dual mandate, to support other policies coming from other parts of the government, like out of the white house. it is full employment and rice stability, that is their mandate. -- and price stability, that is their mandate. -- you make an excellent point about the fed being independent, but his president trump allowing them to be independent? he has broken the rules on that front and every time the fed eases, he takes further encouragement to ramp up the trade war. it seems there is a need for respect and cooperation on both

sides. americando need the people do not want to see a recession. at we don't know if there's going to be a recession anytime soon, and i don't know if a deal with china would actually stop a recession, or if the fed could stop a recession. but i think most people out there think it would probably be a good idea if both were working in concert together, and realize that this trade war is creating something that nobody has ever seen. these headwinds from the supply chain disruption, so i think it is very important for both of them to work together to get through this and help the president with these negotiations. in this environment, where you are seeing macroeconomic headwinds, not to mention trade uncertainty, and at the same time you have a pretty strong u.s. consumer, what strategy works for you? specificooking at sectors or large caps versus smaller caps? brett: we are.

i really like the small-cap index. if you look at the small-cap index, the russell 2000 versus the s&p 500, the spread between those two is very large at this point. the russell 2000 is still over 15% off its all-time high, whereas the s&p 500 is around 5% or 6% off its all-time high. with all the passive investing going into etf's over the past 10 years, it is pushing a lot of money into these large caps, but the opportunity is out there in the small caps. we are able to pick up small companies with twice the growth rate of some of these larger caps, and they are trading at much better valuations. that is where we are focused right now. sheri: brett ewing, great having you with us, first franklin financial services chief market strategist. we have another big guest coming up. san francisco fred -- san francisco fed president mary

daly joins us if you are marching back if you are watching from new york, 11:00 p.m. wednesday. chinese energy giant ptt group is scouring the middle east for race toners as rivals finalize with the region's oil producers. we spoke exclusively to the tpp president and ceo in hong kong. what did he have to say? just to put it in context, it is not just the largest state andoil -- state owned oil gas company, it is ours -- it is also the largest company in thailand, power generation, even coffee retailing. it is now looking overseas for a partner producer to ensure supplies going forth from thailand we know there is -- can we know there is a widening demand for oil in this country. the likes of reliance and

petronas, they have secured producers, including the likes of saudi aramco. i found out what our source thinks about it. ,> we look at the middle east some countries, but it is still cop -- it is still talk. i cannot tell you. could it be saudi aramco? >> no, we need crude, and we need exploration, because we need to have some supply to thailand and the indian and asian markets. : how soon do you expect to announce the partnership? >> one or two years. haslinda: in terms of tpp oil and retail, a lot of talk and a lot of numbers out there. can you shed some light that is more definitive?

to expand tong mainland china and asia. in thailand we have [indiscernible] we tried to expand this one to asian countries, like we have in malaysia and singapore, we have expanded in china, japan, oman, --an countries, that is why [indiscernible] step.have passed one big we have separated the company already. we have a financial statement

already and we will move in the in theep to the filing stock market, because we need time to do it because of regulations. and i can't tell you now. [laughter] the next how soon, three months, the next six months? year.hink by the next new haslinda: in the next 12 months? >> i think in the next year, 12 months. haslinda: the ipo will be delayed by rules and regulations. our expectations the ipo will happen in the first quarter, so some disappointment. paul. haslinda amin in bangkok, thank you. another bigst, decision for the central bank. this is bloomberg. ♪

♪ paul: we are counting down to market opensmajor this morning, south korea, japan opening at the top of the hour, nikkei futures traded out of chicago weaker currently. this is daybreak asia. i'm paul allen in sydney. in newi'm shery ahn york. south korea has urged japan to agree to talks so they can repair restrained ties after south korea revoked japanese status as a preferred trading partner. economy guest says the is facing multiple headwinds. tan joins usstal

from singapore. japan would be the get asked that would be the biggest risk for the south korean economy. what sectors could get hurt? the korea japan spat is the biggest risk to the south korean economy. the impact would be dependent on how japan carries out export controls, whether we say more complicated, slower export process, or is it going to be a matter of export preference be given. i would say that looks like japan is not looking for export and bargo's, so they -- export koreaos, so the hit to would not be severe. but if that escalates, that is going to be a very severe blow

to south korea's semi conductor sectors, because all the high-tech manufacturers in korea are dependent on highly specialized input from the japanese, and it could be a 10% fall in korean semi conductor production, taking off about 0.5% off the korean gdp. sheri: given all these headwinds, we are seeing consumer confidence plunge in south korea. the bloomberg chart on the top panel shows it as follows -- falling to the lowest since january 2017. but on the second panel, you see household total debt is now at a record high. so when we have a key rate decision coming up, how does this impact what they can do next? because the korean rate is already at a pretty low level, there is a limit to how

much more they can actually cut. high household debt is already so high and there is concern about cutting rates and furthering fuel or acceleration and household -- and if further fueling acceleration in household debt. paul: there is even a more difficult problem on the horizon for korea. if we look at this chart on the blu -- on the bloomberg terminal, they have one of the biggest credit crunches in asia on its way. how do you fix this problem long-term? is there anything realistically that the bank of korea can do? this is becoming a political problem, isn't it? krystal: yes, this is something that is more on the government andcy side than the bank, there isn't much the bank of korea can do in terms of a demographic problem.

you need structural reforms in the economy that will increase productivity, so that can help a cap for the labor force. [indiscernible] paul: no it isn't, and i'm quite relieved about it. but more importantly, there is the issue of the korean yuan, one of the most beaten-up currencies in the region. where is the floor? krystal: there is going to be more weakness and the year-end forecast is 12.35. there is a lot of pressure right now,yuan external backdrops for growth, u.s.-china trade tensions, south korea is one of the most exposed economies in the region and that is because of the high uanrelation of the korean y

and the chinese yen. sheri: we are seeing the south korean government getting involved in the economy and trying to support job creation. how much more can fiscal policy support the economy at this point? krystal: fiscal policy needs to take a bigger role in supporting in korea economy, because the monetary policy, there isn't a whole lot more space for bank of korea to cut rates. it is encouraging that the supplementary budget was finally passed earlier this month, and there are government plans to promote a shopping increase in spending for the 2020 budget. but fiscal policy alone isn't going to help push growth much higher, but it will at least help push it. tan, thanks for joining us. and don't forget interactive tv

toction, .active tv function, tv this is bloomberg. ♪

♪ paul: this is daybreak asia. i'm paul in sydney. sheri: i'm shery in new york. let's check the business headlines. caesars is pursuing a casino is droppingapan -- its pursuit of a casino plan in japan. global operators see japan as having the potential to be asia's largest gaming market after macau. also keen on the tokyo

bay area and potentially yokohama. paul: tiffany's jumped quarterly passed as they expectations. profit up one dollar 12 cents per chair did beat forecasts of one dollar five cents, but sales around the world felt 3%, twice as bad as analysts projected. tiffany's said sales in hong kong have fallen since street protests began in june. ♪ sheri: more signs of a slowdown in the hong kong property sector, the most in a decade, falling 45% on the last year to just over $4 billion. there will be no interim dividends but ever grand says it is confident meeting its annual target for sales contracts. the company plans to develop more in tourism, health and electric car units in the second half. ♪ paul: forever 21 is in feeling so young. we are told it is preparing for

eventual bankruptcy has turnaround options fade. the company has been in talks for additional financing and is working with a team of advisors to restructure debt. negotiations would lenders have stalled. the clothing chain was founded in 1984 and operates more than 800 stores around the world. ♪ sheri: markets open in tokyo, sydney and so let the topic of the hour. let's turn to selena. a futures are pointing to mixed and muted open. investors are cautious and on the edge of their seat, waiting for the latest trade headlines paid look at the nikkei futures come a little change, soul and sydney futures, little bit a green and red on the board, not going along -- not going on, however. we did get positive sentiment from stephen mnuchin, who says he expecting chinese negotiators to visit and speak about trade, but he did not specify about the previously-planned september meeting and whether it is going to happen. we still have the september 1 deadline for the new wave of

those taggart tariffs. there are still concerns of a global -- those staggered tariffs. there is still concern of a global slowdown and not much that central banks can do. boards want to look at -- switching boards, we want to look at treasury futures. we heard comments from the san francisco fed president, mary daly, that the u.s. economy is growing but there are concerns about headwinds and she is in a watch and see position looking for uncertainties. these echoesaring from fed officials. treasury futures are edging a bit higher. we also got headlines from stephen mnuchin, who said he is considered -- is considering longer-term bonds. after his comments, we saw the 30 year, we saw the long bond jump those yields to 1.79 percent, reversing the record low of 1.9% earlier in the day. paul: thanks. coming up in the next hour of david gaudia,

gives us his take on the volatility. this is bloomberg. ♪

♪ paul: good morning. asia's major markets are about to open for trade. sheri: in new york, i'm shery ahn. >> i'm in beijing. welcome to daybreak asia. ♪ paul: our top stories this thursday, moving markets, stephen mnuchin saying alter long bonds are a possibility but there are no plans to intervene on the dollar. boris johnson will suspend parliament next month, to limit the debate on a no deal divorce.

protests inut from hong kong. we assess the chances of investors pulling their money and walking away. let's get to the market opens in south korea, japan and australia. what are we seeing? at the if you look board, we start with australia, it looks like muted, little change. new zealand is on its third day of straight gains. there has been quite a bit of positivity in new zealand shares. i want to switchboards and look at japan right now. the nikkei did have two straight days of gains. actually, we will take a look at up 1/10 of a percent. a lot of investors are on the edge of their seats, waiting for what is next in the trade war. 1312 40e yuan at the level, and we are worried about continued risks in japan and south korea, we know that south

korea has a very low consumer confidence. we are waiting on that news as well. switching boards, let's look at what is going on in japan. we are waiting for japan's consumer confidence index. at looks like we are not getting japan on this board right now, but we are watching for a lot of news there as well. yesterday we saw that real estate and communications sectors lead gains. upri: the japan nikkei is 2/10 of 1%. let's talk about south korea, because we are getting breaking news. the finance minister said in a statement that they will raise spending 17.3% for rnd, 224.1 trillion yuan. spend 2.1hey will and want 30,000 automated smart factories, this -- justpan just mood

remove south korea from a list of preferred trading partners. so we are getting allotted of south korea on global uncertainty and downside risks. paul: let's check in on first word news. >> thanks, paul. argentina's banking on the imf to stave off default. the fund is in buenos aires to decide on a new package of more than $5 billion, adding to a record bailout last year. 's plummeted more than $10 billion in the past month as policymakers try to shore up the peso after the stunning political defeat of the market-friendly government. the italian prime minister contact has been given a mandate afterm a new government,, talks between the democratic party and five-star movement. the prime minister's earlier coalition collapsed after the anti-immigrant league withdrew its support. democrats remain unhappy and

plan to install a deputy prime year. cathay pacific was the target of the latest protest in hong kong, demonstrators demanding the rehiring of workers who were fired for supporting the cause of democracy. crowds gathered at the headquarters of cathay pacific's largest shareholder to push back with political pressure that china is putting on hong kong. fired at leastis seven staffers since protests began. they asked me to leave. i was very hurt i couldn't help my colleagues. it i'm confident that now, will just change, i can still continue to help them, i will change my role. i will tell the truth. day onal news 24 hours a air and on tictoc and twitter, powered by more than 2700 journalists and analysts in more than one have been 20 countries per this is bloomberg.

♪ sheri: treasury secretary steven mnuchin in is dusting off the possibility of issuing very, very long bonds, an idea whose time may finally have come. bond yields keep falling at home and around the world. kathleen hays is here with highlights. kathleen, this idea comes up often, here and there. but this time it seems perhaps the environment is supportive. >> i think so. end of course, this is one of the most exciting parts of this bloomberg news interview with treasury secretary stephen mnuchin. he is eyeing ultra long bonds. he said is under very issiderate -- he said i under very serious condition. if the conditions are right, i would anticipate we will take advantage of long-term borrowing and execute on that. now people are saying, he could be setting up a 15 trillion dollar u.s. treasury market for

a historic revamp. but to go out to 50 or 100 years, that would really be something. but as yields tumble, this concept is gaining traction. the 30 year treasury bond, let's look when the news came out, crazy, the bond yields a jump to one point 97% from a record low of 1.90 percent. that didn't come up. let's move on. ultraole point is that long bonds would make it cheap giant budgete u.s. deficit, getting bigger every day, and that would make a cheaper. i think that is one reason people are taking this seriously. on the other hand, when this came up in the past come a lot of bond investors said, you have got to match that longer term duration with some kind of need, insurance companies, pension funds, for them this may not feel the bell -- may not fill the bill. but when bond yields are falling, maybe it would get some interest. we will see. paul: kathleen, let's talk about

the greenback. -- stephen mnuchin share any shed any light on that? kathleen: he said no intervention to currency markets to support the markets now eerie daily that dangling, don't they? a source told bloomberg news that he thinks u.s. officials may have talked donald trump out of intervention, because if you don't have massive intervention, if you don't have other countries joining in, if you don't have interest rates ranging in the u.s., you are not going to do anything that will last. on trade, stephen mnuchin told bloomberg news the china talks will happen, but won't say when. maybe there is no date set, maybe that is the reason. the u.s. just branded china a currency manipulator, and on that point, stephen mnuchin said he has been talking to imf counterparts in china, on the manipulation question, on the trade talks, and he said manipulation will be part of the trade talks, but a separate

part. peter navarro, one of donald trump's top trade advisors come also saying it is unlikely anything will happen quickly, again trying to calm down hopes that seem to go up and down every day, if not every hour. so this is an enlightening interview from stephen mnuchin and you can find that on bloomberg.com and the bloomberg terminal. paul: global economics and policy editor kathleen hakes -- kathleen hays thanks. u.k. by minister boris johnson is suspending parliament for five weeks, prompting widespread protests. let's bring in senior international editor jody schneider. suspend parliament as a dramatic one, what does it mean in terms of the brexit deadline? jody: dramatic as the word many are using. giveally, it will parliament only two weeks before that deadline to come up with a plan or to leave without it. parliament will be back on

september 3, and then, according to this plan mr. johnson has come up with, they will leave on the 12th of september and won't be back for another month, two weeks before the deadline. now, itgoing to happen will be mr. johnson's plan or a no deal brexit, that is what it is looking like. the opposition to mr. johnson , theo the no deal brexit problem with that is that everybody wants something different. there is enough of a coalition to try to stop a no deal brexit, but because they want different things, coming up with a plan in a short time would be difficult. for instance, the opposition labor party would like a second referendum. others want different parts of the plan, they don't want to second referendum. so maybe mr. johnson's plan or the highway, no deal brexit, which the business community

opposes because of the potential fallout for the british economy. paul: another key player in all of this is the speaker of the house of commons, john burkle. he doesn't think much of the johnson plan. what could he do to stop it? : he is the parliamentarian and when they come back september 3, he could try by parliamentary maneuvers to outmaneuver mr. johnson and try to do something to stop his plan to suspend parliament. but it would be difficult. he does not think much of the plant, you are right, paul. he said it is a constitutional outrage and said that basically, mr. johnson is playing fast and parliamentarytish rules for his own ends. but we will see how this plays out, but mr. burke out will certainly be a key figure in whatever happens the next few weeks. italy, after onto days of negotiations there might be an agreement now to form a new government. and really interesting, prime minister giuseppe conte might

get a second chance. conte's coalition fell apart, but he is trying to put it back together. he is supported by italy's president. investors would like to see a coalition rather than a snap election, what the problem is that putting together that coalition is not so easy. the two parties he is trying to put together have very different views. the only thing they really are really aligned on is that they don't want snap elections, and their hate meant -- and their hatred for the league, the anti-immigrant party that led to the coalition falling apart before. so the question is, can he satisfy their needs to get that together? and also, will it stay together if it is able to be reformed? fellll apart before -- it apart before, and because they have so many differing issues -- differing opinions on issues

regarding italy, it may not last. we will see what happens in the next day. it is critical to mr. conte's hopes of rebuilding the coalition. sheri: thank you. still ahead, we break down big numbers for the china construction bank and preview the rest of the big four as they expect reports by the end of the week. says up next, david gaud the dollar remains strong and remains overweight on asia. more of his top picks in a moment. this is bloomberg. ♪

♪ paul: this is daybreak asia. i'm paul lowden in sydney. -- paul allen in sydney. sheri: i'm shery ahn. stephen mnuchin told bloomberg the trump administration does not intend to intervene in the u.s. dollar market for now.

the dollar index has strengthened only 2% this year. from pictet ceo wealth management. david, we are seeing as this chart on the bloomberg shows, the index is on track for the tightest trading range of the year. how positive is a stable dollar for asian central banks, and you expect this trend to continue? david: it is hoped that the dollar will find some kind of stability. first of all, that would definitely help asian central banks to further cut rates in the region. real interest rates in a number of asian countries are still dreamily high in the current context of global deceleration, so provided the local currencies are not falling too fast against the u.s. dollar, those central banks would have more room for monetary easing. that would be supportive to

growth momentum. so this is a very important point. what could actually lead to further u.s. appreciation would be easing the growth differential between the u.s. economy and the rest of the world, if it were to widen further. right now it doesn't seem to be the case. in terms of interest-rate differential, how fast the fed is going to cut and how fast other central banks are going to have to cut themselves, to protect growth. this is still to be seen, but this is a very crucial point, the direction of the u.s. dollar and how it is dictating a lot of the asset class performers right now. sheri: one of those central banks and a shed that really has a lot of ammunition left is the people's bank of china, and also has tons ofnt fiscal measures that they could take. when you take into account that if china-u.s. trade tensions would continue for a while, where would you position

yourself in china when it comes to the markets? said ishat you interesting, because probably the idea in politicians' minds in china is that those trade tensions are going to last for several months, if not several quarters. so you don't want to make use of all your ammunition from day one. and probably when you look at the chinese economy, the economic bane is not high enough at this stage. pmi, but whenwn, you look at services and consumption, they are still holding pretty well. that is why we are in a time when there is probably no need for much urgent action from the government and the pboc. and that is why we see gradual adjustments, interest rate changes recently, announced yesterday 20 points, some of those targeting the auto sector.

so this is a gradual move. this is fine tuning. we haven't seen yet the big fiscal program, which may have to come at some point should the situation worsened, but as long as services and consumption are still holding, there is no need for very sharp and very large action right now from the chinese government. you are looking for investment opportunities in china at the moment, where would you put your money? david: clearly, the interesting part is that below the macro picture, which seems to be deteriorating, for services and consumption you find actually a lot of opportunities, and some are sectors like health care, education, consumption, discretionary us still holding extremely well. and you have very much unloved some sectors, which at some point could see a revival. for instance, the china auto

space, which has been very much in the past two years, reaching actually a deep value level, and if you stop to see some supportive measures, your tariff alsos. car imports is actually benefiting local brands. there could be an investment opportunity, even in that space which looks so weak and fragile at this moment. paul: david, i want to turn to the kong, because all protests and upheaval notwithstanding, do you see opportunities there? you are not alone. we can see hot money still coming across the board in this chart, mainland investors still interested in stocks very much. what are you looking at there? david: first of all, we believe hong kong remains important for china, but capital control rules

in china make it that there is a need for hong kong as a financial place, it is very important. the second thing is that the economy in hong kong traditionally is quite sticky, even in crisis times. that new property sales over the past weekend, as soon as you see a bit of price elasticity and price slightly down, you see natural demand coming in, and over the weekend the sale for new property was quite strong for new projects. so it tells you that yes, we have to be mindful of the political situation, we shouldn't disregard the trends of the hong kong economy and its attractiveness. so at some point it will make sense probably to come back, buying into the hong kong ritz, still very good quality and coming down, and retail oriented stocks in hong kong, which have

been hurt badly. there could be an opportunity. what we need is a bit more political consultation, we need to see a better consensus and the capacity to restore communication between the government and the population. we did see it in france. i always mentioned the yellowjacket case, which was a very violent case, true negotiation and true communication, and the situation east. that is what we need to see on our kind of platform, where people can can -- people can discuss point and hopefully come to a can. that may be by year-end that it could be an opportunity to add to in hong kong. any have high yields so from income point of view and evaluation, they are attractive and that is an interesting opportunity to consider, yes. david, thanks for joining us. we have another big guest coming up on bloomberg later on, san

francisco fed president mary daly joins the markets asia team at 11:00 a.m. hong kong, 1:00 p.m. in sydney. don't miss that interview. this is bloomberg. ♪

♪ paul: thispaul: is daybreak asia. i'm paul allen in sydney. sheri: i'm shery on the new york. argentina is seeking to extend maturity on over $100 billion in debt and delay payments to the international monetary fund officials say they are analyzing the plan. chief joins us from buenos aires. what a dramatic week for argentina, bonds at the pace of plummeting. what is the latest there? huge has been a announcement and highly unexpected, but the argentine government, after a terrible

week and a market collapse, has presidentfter the came in second by huge margin in primary elections. the market royal has pushed argentina to a brink and is now looking to extend debt payments. we are looking at 101 billion dollars, including $44 billion already disbursed by the imf, $50 billion that the government will seek to do voluntary repro filing, and $7 billion that will be a mandatory reprofiling on short-term debt. what led to the situation, and it is -- carolina, what led to the situation, and will it be enough to avoid default? carolina: the opposition leader one by such a large margin in the primary, suggesting he may be the likely next president. , cristinag mate

fernandez, is well known by investors -- well known to investors by such measures as capital controls and a lengthy court battle with bondholders. so the uncertainty over what will happen to the country and what kind of policies would come into place played a huge factor. -- both macri and hernandez are in conflict, and the president hasn't been elected. the next leader will have tough challenges ahead. paul: let's check business flash headlines. the resort company is delaying a $1.2 billion u.s. investment, due to an inquiry by the australian regulator. the planned purchase of a 20% stake in crown is on hold. it will now wait 60 business days after completion of the process. crown'syed blow to

biggest shareholder, who has been trying to quit after a series of setbacks. sheri: caesars is dropping its pursuit of a license for a casino in japan, saying it will focus on the current business plan, including a merger with el dorado resorts. global operators see japan is having the potential to be age's largest gaming market after macau. the las vegas sands perverts tokyo and -- las vegas sands prefers tokyo and win is key -- andw -- paul: the profit of one dollar a's a share beat 4 -- $1.12 share beat forecast of one dollar and five cents, however same-store -- however tiffany sales fallon that was twice as bad as analyst projected. tiffany sales in hong kong have fallen since protests began in june.

interviewome, and with elizabeth gains. this is bloomberg. ♪

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♪ >> this is "bloomberg daybreak: asia." has turnedcontrol another page, securing permission to suspend parliament on september 12 for a month, severely restricting opponents from being able to debate. critics say it would mean a severe hit to the economy. undemocraticoundly at a time of crisis. policy must hold the government to account, represent our constituents.

it is profoundly undemocratic to stillarliament down, doing its job, the time of national crisis. >> a mandate to form a new government to the prime minister after days of talks between the democratic party and the five-star movement in italy. an earlier coalition collapsed when the anti-immigrant leak withdrew its support. markets welcome the news, the overrats remain unhappy plans to reinstate the premier. mount etna has been sending plumes of ash and smoke into the sky. it is one of the most active volcanoes in the world. the irruption comes two months after a blast killed a hiker.

global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. paul: thanks. let's check the markets in beijing. openedn markets have mixed and muted as investors wait for the next trade headline. we seeing the nikkei reversing two straight days of gains. 0.2%.now it is down we are waiting on the japan consumer sentiment index. new zealand leading gains, up 0.2% kospi. muted and--kospi little changed. her one to look at a few stocks i am watching.

-- hi want to look at a few stocks i am watching. toyota and suzuki taking stakes in one another to further development of electric vehicles and self driving cars. toyota will take a 5% stake in suzuki. watching a fall for one company with trading falling doubling. sellers include three of the biggest banks. health onea, ramsey of the bigger gainers, fiscal year 2020 earnings per share growth of 2% to 4%. shery: thank you. for china's big banks and first have numbers for china construction bank where in

this. the second biggest lender posted net income of $21.5 billion from the $300 million below forecast. we have the numbers as china's big banks report. see, it was a miss burnett income. estimates were for $21.8 billion. 4.9% in the first half, not all bad, but not as much as expected. net interest margins narrowed by seven basis points to 2.2 7%, provisions for about instead increase. you will see the second quarter breaking out. there is more than a 5% rise in net incomes in the second quarter. a parched rise in a return on equities has well. i went to look ahead to icbc, the world's biggest lender by assets. these are the estimates

according to bloomberg data we are looking for for net income and revenue for this half. we see icbc could be under the same pressures in terms of margins, and also having to increase provisions for badlands , something that is probably coming -- bad loans, something coming for icbc. it did drop in july and has not been able to recover since then, after it took a 10% stake in a struggling smaller bank. now concerns from investors this in maystart of a trend continue have to help smaller banks. s&p global ratings said risks are surfacing at china's small banks. we keep talking about icbc as the world's biggest by assets, i want to show your chart against j.p. morgan chase,

the biggest in the u.s.. this is net income, the white bar being icbc, but assets started breaking away, the yellow line, icbc started breaking away in 2011 and has continued to pull away from j.p. morgan since then. back to you. paul: thanks very much. is the fourthls largest exporter of this is for bloomberg subscribers only. and has earnings --exporter of iron ore, and earnings have tripled. we were joined earlier by the ceo and ask her if the metal is oversold. >> we are seeing strong demand , and steele production in china is up 9% in the first seven months from the so strong demand for iron ore, steel driven by investment in infrastructure, so it could be oversold. there is strong demand. there is seasonality in the current price with weather-related events in china.

paul: they are a low cost producer as well. you have some mines in western will bea, and vale coming back soon. do you see a risk of oversupply? >> hi down. the activity is largely replacement investment. that are mines depleting and there is an investment program underway to replace him. toh vale, it may take two three years to bring back that 90 million tons that we lost earlier this year. >> to those investments include efforts in other markets like ecuador and argentina? >> that's right. we have been investing in ecuador. at the moment. .e started the drilling program

it is very early stages. it is a great way to grow and unlock potential through exploration. copper, perspective for and we have tenements in argentina and san juan also perspective for copper. we will drill for those later this year. shery: how much is driven by the fact we could see more volatility because of the u.s.-china trade tensions and you need to diversify away from your sales base in china? about diversifying away from our sales base in china. we are a mining company in exploration is a great way to unlock potential growth. we believe copper will be in demand globally. there are depleting assets around the world and we see the opportunity to participate, but iron ore is fundamental to us. we are investing over $3 billion in iron ore in western australia with two projects. we have a significant investment

program underway in australia in iron ore and we are very confident in the outlook for iron ore. paul: the copper story is interesting because fortescue metals was criticized for just away iron ore, so how far do you think you are before we see copper added to that portfolio, 2020's? >> 20 20's at some point. it's probably more in the medium-term. we are doing this in a measured manner, so we have to undertake the drilling programs and determine if there is something that we want to develop, then from there to get the relevant approvals, so it is some ways away. the next three to four years will be building out two projects and commissioning those projects. we have a lot on our plate, but exploration is a great opportunity for us as well. shery: coming up next, feeling the downdraft.

will there china's profit boost be the start of industry wide gloom. we will investigate with expert analysis when we come back. this is bloomberg. ♪

♪ shery: this is "daybreak: asia." chinese airlines in the spotlight amid signs earnings are under pressure. air china reported first quarter profit down 10% year on year while china southern's profit for 20%. china eastern will report on friday. joining us now from shanghai is out guest. thank you for joining us. i want to get your reaction to the results of the two airlines that have reported so far. yes.

they just released the report. the first half of 2019 is not too good. revenue growth only increased by profit more than 20%. 2%, andgrowth less than nearrofit fell by about 10%. the main reason is the downturn china,economic that

priceled to a weak ticket , low revenue growth. the other reason is the change .o accounting standards it is bringing more sensitivity to the exchange gains. how much of the weakness we saw in these airline results were because of the weakness of the chinese yuan? because china and u.s. fell becausend china and the u.s. trade

so a lot of, enterprise canceled their business trips to the u.s. students cancel their flights. this impact a lot. shery: thank you for joining us today. a thai energy giant is scouring the middle east per new partners as others race to sign up with the region's oil producers. in an exclusive interview, the president and ceo told us what he is looking for in a potential deal. east,look at the middle some countries, but i cannot

tell you. >> saudi arabia? no, ok, some portion it exploratione need in some countries because we need to have some supply to thailand or the indian or asian market. >> how soon do you expect announce this possible partnership? years.next one or two ipo, ain terms of the lot of talk and numbers out there. can use shed some light that is more definitive? expand ourto business between china and asia. thanve in thailand more 1800 stations, and outside we , andmore than 280 stations

2000.e more than we try to expand this one to malaysia,tries like oman,ore, china, japan, in asian countries. that is why we listed in the stock market. we passed through one big step. we have separated the company already and have the financial statement already and we move with the filing in the stock market, but we need time to do -- and i cannot tell you now.

>> the next three months, six months? >> i think in the next year. >> the next 12 months? >> the next year, the next 12 months. paul: that is our exclusive interview with the president and ceo of ptt. don't forget our interactive tv function, tv , there you can watch us live and catch up on interviews and dive into the securities or bloomberg functions we talk about. you can also become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

♪ this is "daybreak: asia." shery: let's check the latest business flash headlines. inzon and talks to invest indonesian ride-hailer go check -- gojek. sources say one scenario it would see amazon making a meaningful payment for a stake in the startup. signs of slow down in china's property sector, ever grand slumping the most in a decade,

falling 45%. there will be no interim dividend, but ever grand it is confident it will meet its target for sales contracts. it plans to invest in tourism, health, and electric car units in the second half. forever 21 isn't feeling so young anymore. it is preparing for a potential bankruptcy filing and turnaround options. the company has been in talks for additional financing and is working with a team of advisors to restructure its debt. the clothing chain was founded in 1984 and operates more than 800 stores around the world. paul: whitening restrictions on the macbook pro on flights, and now under pressure. some laptops have been banned from check in luggage over concerned the batteries could

catch fire. the 15 inch versions of the computer must be carried in the cabin and be switched off. virginal estrella has banned all apple laptops. was it the biggest questions hanging over hong kong has antigovernment protests drag on is will investors pull their money out. our chief asia economics correspondent has been reporting on where to look for possible capital outflows. this chart here has a story that shows bank funds held with the hong kong monetary authority. can you talk us through what we are seeing here? has opensly hong kong capital accounts, money comes and goes all the time, as we have seen with previous bouts of capital flight. money has been leaving the last couple of years, reflecting what the fed was doing was typing interest rates. that is the aggregate balance,

the measure of bank funds. there is no perfect gauge or one single metric to measure outflows, but people look at this as an indicator of what is happening. you see the chart has been coming down sharply over the last year or so. storyore reflects the fed rather than the slowing economy or political protest. see if thatch to does accelerate. it would reflect the broader issues, the trade war from the slowing economy, but also whether it would be accelerated because of the political unrest. we have seen the hang seng index crash more than 10% this its july high, but gtbc are showing chinese investors have been adding their

holdings of hong kong stocks for 15 straight weeks, so how positive is this? >> that's right. we had some conflicting messaging here. the hang seng is a good indicator as to the broad mood and sentiment in hong kong. we have seen significant corrections during past. set of stress. thistime around, we have new feature called stock connect, so when you drill into flows and hong kong, we have this connect between hong kong and shanghai. indications are that money still through, to flow reflecting china's own slowing economy and the weakness of the yuan. they want to channel their money into the hong kong stock market instead. it is another one of these gauges that people would look too.

if we see a sudden reversal of flows, that would be used as a metric of dates to point to in the hong kong financial system. we are seeing these names betting against the hong kong dollar. we haven't seen that peg rake, even though we have seen managers bet against the hong kong dollar, so what are we seeing from the hong kong monetary authority so far? >> it is one of the favorite talking points when it comes to hong kong's economy. during the moment stress, it becomes a key issue as to whether there will be downward pressure on the peg. all indications are in terms of official commentary and market moves is hong kong resolutely stands by its peg. that is the official narrative. we have seen some downward

pressure on that. reflect the fed cycle, but right here, right now, there are no major indications of stress on the peg. the economic mantra among the official sector has always been the peg is part and parcel of hong kong's economy and they have not given the signal that they will be changing that any time soon. shery: thank you. we have the hong kong markets and mainland markets opening in the next half-hour. let's get a preview of what to watch. looking ahead to earnings. they may be facing margin pressures other banks are facing , as well as provisions for bad loans. it last close up. cathay pacific, closed it almost 2%. that stock has been under

pressure since the protests started. the latest headline is thousands have gathered the firing of employees at cathay pacific who participated in those protests, saying they need to be rehired. looking at more earnings on tap, petro china, last close little changed. , another large national oil company will be reporting earnings and giving us a window into how the chinese economy has been faring amid the pressures externally and internally. ♪

♪ david: so you started your own company at what age? john: i was 24. david: and where did you get the money to capitalize it? john: my mom gave me everything she had that was liquid. my dad gave me what he thought he could afford to lose. david: one of the boards you are on is mcdonald's, and it is said you eat mcdonald's every day. is that true? john: it is just about every day. david: so in chicago, did you ever play basketball with barack obama? john: yes, several times. david: and is he that good a player? john: he's a very good player. >> would you fix your tie, please? david: wop