under one hour away from market open in australia, japan and south korea. haidi: good evening -- shery: good evening from new york. sophie: welcome to daybreak asia. paul: our top stories, the fed cuts as expected and says more could be done if needed. jay powell warns he may resume bond buying sooner than expected. saudi arabia says there is evidence iran was behind the aramco strike. president trump orders new

sanctions. partslan to sell vehicle to help its turnaround and get back on track. it is also still looking for a new ceo. shery: let's check the markets. u.s. futures unchanged at the moment. u.s. stocks struggled throughout the session. s&p 500 slumping after the fed rate decision. markets taking it is a hawkish cut. in fact it did recover towards the end but it finished basically unchanged. we also had energy stocks dragging on the index. crude falling for the last two sessions after that 15% gain we saw monday. at the moment unchanged, below $60 a barrel. financials gaining ground today. we had yields plunging after the fed intervened and the repo markets injecting cash to soothe the money markets. that was paired back a little bit after the fed rate decision.

10-year-old -- 10 year yield finishing around 1.80. paul: some breaking news on the bloomberg terminal. the hong kong monetary authority is cutting its base rate to 2.25%. pretty much as expected after the fed move today. so we have the hong kong monetary authority moving as well. let's check on how things are shaping up for the asian markets and get over to sophie in hong kong. sophie: we are looking at a muted start potentially with a mixed picture for features after u.s. stocks ended the session flat. we have a sharper u.s. dollar to contend with. central banks in focus following the fed. the boj expected to -- looking for clues as to how it will manage the yield curve given the 10 year slipped towards -20 basis points. also getting a decision from taiwan and indonesia which

occurred -- which could deliver a third straight rica. dollar, we are seeing its brief bounce fade as gdp beat estimates. growth rates still fell to a five-year low. that provides more scope for the easing to continue. shery: let's now go get the first word news. >> president trump says new sanctions against iran are coming in response to the drone attack on a major aramco plan. secretary of state mike pompeo sue to flutie -- to saudi arabia in reaction to distract. the claimant was an iranian missile saying the attack came quote,, from the north. they did not elaborate but they said it was unquestionably from tehran. they are playing down the effect on the oil facility. he said it would not change any

of the government's spending plan including on defense. it would also not affect the planning timeline for the much awaited aramco ipo. we are committed to the ipo and the government will choose the right time. most likely it will happen -- the listing will happen. as we have always said. >> the legal hearing into boris johnson's suspension of u.k. parliament finishes thursday with judges again demanding he explained what to do if they were to rule against his move. the prime minister's lawyer said the suspension is a political decision beyond the responsibility of britain's even most senior judges. critics say it was an excuse -- an abuse of power. a no deal brexit is almost inevitable.

the fallout from ongoing protests in hong kong is widening. visitors continue to decline and hotel workers are paying the price. a survey says more than three quarters of people working in hotels been asked to take unpaid leave. almost half expect their pay to be cut and hotel to cut staff if the situation worsens. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ripped the group to. this is bloomberg. shery: the federal reserve lowering its key rates as expected and warns of growing risks from the slowing global economy and ongoing trade war. so why are traders calling a hawkish cut? kathleen hays is here with more details. how does jay powell's decision compare with signals from the dovecot? kathleen: very important that

jay powell said things he says. diversions, he cut all over the map. cut by 25 basis points as expected. the economy is going moderately. just cutting this rate as insurance against deepening risk from the slowdown globally and trade policy weighing on the economy. jump into the bloomberg library, this is what got people going. it might open the door to more rate cuts. we were actually five people in the middle without one cut was warranted. seven thought one more is warranted this year. nobody is looking for the other rate cuts so many people in the markets are looking for. but when jay powell was answering questions at the press conference, the things he said about the economy and what would happen if the economy slows down seems to a lot of people to see more dovish. >> if the economy does turn

down, then a more extensive sequence of rate cuts could be appropriate. we do not see that and it is not what we expect, but we would certainly follow that path if it became appropriate. kathleen: in terms of the whole dysfunction and the money markets, the repo market in particular, he said this will not affect the economy or fed policy. they cut the interest on another key rate, interest on excess reserves which will free up reserves and put liquidity fed maynd said yes, the need to resume organic growth of the balance sheet. buy bonds earlier than we thought which will also put out more reserves. of course the fed has announced another move to put liquidity into the system with a $75 million repurchase agreement tomorrow. shery: kathleen, stick around. let's bring in a guest who knows all the innerworkings, the former atlanta fed president.

great to have you with us and thank you for your time. with kathleen throughout the normal -- the morning we have been trying to dissect what this means out of the fed. markets are thinking was at a hawkish cut, was it dovish. how would you frame what happened? guest: i would say it is not dovish, if you mean but -- if you mean by dovish it reflected pessimism about outlook for the economy. the outlook for the economy andented by chairman powell certainly in the projection is that all the members of the a solid, made remains optimistic view of how the economy is going to evolve. so it is hard to say that this is a dovish situation in which they cut. i actually preferred the way it has been characterized as a risk management, as an insurance cut. i think this was the second payment on an insurance policy.

shery: i am going to show a chart and i know in your mind you will know what it will be the nonfarm payroll numbers. we will see on the right of the screen are some blue bars which show you how there is a study downtrend in payrolls. yet the fed and jay powell continue to call this a strong labor market. this is one of the big things people .2 like, come on, the trend is shifting. -- people point to. the trend is shifting. dennis: i don't think job gains ,000 or something like that per month on an indefinite basis. i believe economists on the fed staff and members of the committee have always believed they would be a slowdown in employment markets as we get closer and closer to true, full employment. maybe that is what you are seeing. the key thing is job gains continue to be higher than the replacement rate, or the right

that covers newcomers to the job market. and i think this slowdown is to be expected. have 3.7% official unemployment. all indications are we are very close to about as full employment economy as we can have. shery: of course we saw manufacturing pmi slit before -- below 50. another important thing jay powell gave in the press conference was saying are you worried about running out of ammo, that you don't have much room to cut, you have to go slow. he said actually he came back definitively saying no. the research shows if you need to cut and you have less ammo, all the more reason to be preemptive. seems to me that is another reason why some people are coming away thinking he is someone who is looking for another rate cut this year and he is in the camp who is ready to go if needed. dennis: he may very well be, it

is really hard to tell. i think the key point that he made and he will always make is that they made this decision, one decision at today's meeting, and they will wait and see how the data evolves, how the picture regarding risk evolves, out,s the situation plays they will make a decision in the future about another cut or not. very hard at this point to know what the picture is going to look like, even in november or december. so i think they just have to wait and see what the data tells him. -- them. certainly nos shortage of diversity of views on the fed board at the moment. i'm wondering if you can remember a time there was more division about what to do next, and how you feel about jay powell managing that. dennis: certainly in my time,

which was 2007 to 2017, the consensus on the committee was much tighter than it is today. i understand the situation. the domestic u.s. economy actually performing pretty well. he used the word solid, or solidly. the risks are external to the united states, global risks for the most part. the trade-related uncertainty is in thely present u.s. psyche. but a lot of the risks are global risks. there can be a difference of opinion and how much spill over the u.s. economy would actually feel if those risks were to develop, to manifest. honestink there's differences of opinion about how vulnerable the u.s. economy is at this moment to the global picture. shery: and of course also making headlines this work -- this

week, turmoil in the repo rate market. the fed did lower interest on excess reserves but they also mentioned they could start growing their balance sheet again. how will they be able to justify this without calling it too we ak? dennis: the term used was organic growth, which means to some extent the natural growth that will come from currency and circulation. so adding more currency in the circulation, which grows ready much steadily. the refunding of theunat the fe. purchases through open market operations, but not deemed to be qe. so i think there is a pace of growth that will happen naturally to the balance sheet without really calling it a new qe program. kathleen: let me put a finer point on that.

let's say all the worst things happen. the economy is weakening and heading towards recession, the effect -- the fed says now we have to do qe. how will we know that? will there be a big announcement? will they make it clear this is now an extra amount of growth to really make the balance sheet a lot bigger? and that is true of quantitative easing. dennis: if they undertake a new qe program, it would have to be in much worse situation than you see today, it would be announced. the markets need to know what the plan is. in the previous three rounds of quantitative easing, all the key information was presented to the markets. so we will know if they feel the circumstances require qe. i think they will resort first they willts, then resort probably to forward guidance. so we are a long way from requiring a new qe program.

i think it is all very theoretical at the moment. paul: all right. dennis lockhart, you are sticking with us, and we will go on to discuss the state of the global economy a little later in the show. shery: up next we will have michael milken. all of this as he joins us from his eponymous summit in singapore. this is bloomberg. ♪ this is bloomberg. ♪

shery: this is daybreak asia. i'm shery ahn in new york. paul: and i'm paul allen in sydney. --hin than 1500 leaders and our gathering for the annual milken institute asia summit. let's get straight to singapore and haslinda amin. what is the scene this year? haslinda: the theme is asia at a

you can imagine all the uncertainty happening. we have demographic changes, we have geopolitical uncertainty as well. a lot to consider when it comes to investment community and where we go. let's get insight from michael milken himself. thank you for being here. always a pleasure to speak with you. michael: wonderful to be here. i want you on television in the u.s. to be here in person is fantastic. haslinda: that is great. asia at the crossroads. what are the biggest issues today? michael: i think people are looking at headlines. we try to look not at the headlines but what are the issues behind it. so, a big issue is what is the quality and length of life. so, the movement of fast food to asia from the united states has brought diabetes, obesity, et cetera. so the potential here to solve these problems by changing the food.

change the ability to deal with environmental change and how do we deal with that issue. by moving to plant-based food and not having to grow animal protein. all these into use -- issues are intertwined. one thing we try to show is where does finance begin and where does business begin and where does society begin, environment, health, et cetera. and the goal here that we bring is we bring all of our centers and all these people from different walks of life together's research -- together to search for solutions. haslinda: so where are the investment opportunities? what scenes are there for investors? michael: yesterday we spent our time on food technology. the basic concept is healthy human, healthy planet. they are intertwined. so we can improve dramatically the health of the human being by moving to a plant-based diet. today, as you know, you can find sue -- find food substitutes in

almost every area. and the same thing for that. we don't need to cut down rain forest and we can substantially reduce methane going into the air from that standpoint. technology, access to technology that also improves the environment. the leadership here in asia starts with the cochairmen of our global capital markets group from japan. japan. as this has expanded, today would technology, hydropower, solar power, wind power, it is now cheaper than coal. it is not even an environmental discussion. coal is not economically viable. in two thirds of the world today, you can see a dramatic drop and closing of coal plants because you cannot operate them economically viable. haslinda: are you personally efg, and two, when

do you see a tipping point in asia? michael: i think we have seen the tipping point in asia. if you go to china today and realize there were no cases of diabetes and now they have the most people with diabetes in the world. cancer inflammation is associated with 62% of cancer. well, half the cigarettes in the world were sold in china. n, 300ear 2.5 trillio million smokers. so changing your micro -- changing in your micro biomes are dramatically changing the n, 300health of people in china. this is not a one country issue, this is a worldwide issue. so we are looking at these industries and the potential. so, you can take a look at it in just two companies if you are an investors. kraft heinz stock has gone down 70%. nestle stock has gone up 45%.

you could say they are the same industry, both consumer products, two of the largest companies in the world. but nestle focused on becoming a health company, sold a chunk of business in the u.s., and has moved in that area much more aggressively than kraft heinz is. haslinda: you are well respected in the financial market. we have to get your views on this rate environment. what do you make of it and how do you best invest in such an environment? ishael: the first challenge negative interest rates for 15 or 20 trillion in japan, germany, and denmark. if you take a mortgage, they will pay you to take out a mortgage. what does this mean? there are many factors going on in the world. one is the entering into the financial system of tens of trillions of assets that were never a part of that system. if you grew up in south asia, for generations the wealth was saved in gold, silver, precious

stones, other jewels and so on. you are now coming into the system, entering more than one billion indians and registering by the retina. they are now in the financial system. there are assets that you can never borrow again, never leverage, come into the system these tens of trillions. asia, the creation of wealth was so significant, the world really did not focus on that wealth. that wealth becomes deposited into financial institutions. third, private equity, the growth of private equity. today there are more companies controlled by private equities in the u.s. than are public. what that does is it changes the balance sheet and puts trillions of dollars back into be reinvested. so there is a challenge. as a fund, how can you meet those needs?

you could not meet those needs obviously by buying that today. bslinda: when you run out of onds, what do you do? tohael: you are forced invest in industries of the future. dealing withtech, the change in the demographics that you spoke about, the fastest growing group in the world is over 100, then 90, 80. the substantial reduction in children in the world today. the u.s. have the lowest birth rate ever recorded last year in the history of the united states. so, you have to look forward and not invest in the past. one of the keys in investing was always regression analysis, which assumed that the future it be like the past. it is not. but you are being driven away from investing in fixed income securities, and looking for yield. and sometimes today the greatest risk is buying these low yield securities that appear to be of

good quality. bonds,, u.s. government some of them traded for $.50 on the dollar. not because of quality, but because of the movement of interest rates. haslinda: mike milken, great insights. thank you for being with us. michael: always. haslinda: there you have it. invest in the future. technology and food, for instance. shery: thank you so much. we will be looking forward to those conversations. we will be speaking to plenty of other big names at the milken asia summit in singapore, including tom finke and formula one ceo chase carey. this is bloomberg. ♪ this is bloomberg. ♪

just getting you a quick check of margaret's. new zealand, the only market

trading, higher by a shade more than 4/10 of 1%. futures around the region are looking quiet. the nikkei higher than .5%. stay with us. plenty more to come. this is bloomberg. ♪ ♪

>> this is "daybreak: asia." i'm here with the first word headlines. new zealand's economic beat expectations but marked a five-year low giving the central bank scope to cut interest rates again. second-quarter gdp rose 2.1% from a year earlier, slowing from 2.5 in the first quarter. the rbn slashed interest rates to a record low 1% last month. most economists to one more rate cut before the end of the year. betrayed a spats between japan and south korea is hitting tourism between the countries. a new survey says arrivals in japan fledged almost 50%, dragging down incoming numbers for only the second time in six

years. korean tourist sonoma -- normally account for one quarter of visitors. the slump to 48% in august is as the nations have tit-for-tat export controls. jerome powell it reiterated his view of a strong u.s. economy as he cut rates and said moderate policy moves should be sufficient to sustain the expansion. the fed lowered its benchmark whiley 25 basis points admitting greek -- weakness and u.s. trade policy are waiting on the economy. powell says he may have to resume bond buying sooner rather than later. >> it is certainly possible we will need to resume the organic growth of the balance sheet earlier than we thought. that is out -- has always been a possibility and it is now. we will look at this carefully in coming days and taking it up at the next meeting. >> the new report says asian economies will increasingly lead to boosting their collective share of a business while becoming less reliant on the rest of the world.

the institute says the region will have a growing impact on trade and capital, as well as on people, transported, and the environment. by 2040, it says asia may be home to more than half the world's middle-class and account for more than one third of global consumption. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. paul: let's get a check on how west texas is trading with rising tension in the gulf. 50 812 a barrel. trend and since those attacks on the aramco plant has been down. saudi makes assurances on supply. the fallout from that attack .ontinues to unfold president trump saying the u.s.

will be adding some a very significant sanctions on tehran in the next 48 hours. greg sullivan joins us now. wide array ofas a sanctions on iran. what's left? greg: that's a great question. as you said, ever since pulling out of the iran nuclear agreement, the trump administration has targeted iran with sanctions, focusing on their oil sector, in that country's economy is dependent on the oil sector. the sanctions have been crippling. despite the wide array of sanctions in place, there may be some targets left for the u.s. to pursue with sanctions. those include potentially constructive come -- constructed companies, or the revolutionary guard, potentially additional companies. whatever the sanction targets end up being, the effect is likely to meet -- to be marginal because the country is reliant upon oil and the trump

administration has been aggressive in pursuing sanctions. shery: where does this leave us on the president's recent comments on being locked and loaded? it's interesting because while president trump promising significant sanctions and today he said there is time left to do dastardly things to iran, the administration seems to be poised to go the sanctions route rather than the military intervention route. president trump said -- he likened his restraint to a symbol of strength. he pointed to the outcome of the iraq war as a warning against intervention. he even engaged it back and forth withit looks like the admn is attacking toward a sanctions rather than any military intervention. paul: ok, in the wake of the departure of the john bolton, president trump has a new national security advisor. how's that likely to change the

administration's foreign policy approach? greg: in some ways, robert o'brien appears to be different than john bolton who trump fired last week after disagreements over afghanistan and iran. he is elevating this envoy for hostages out of relative obscurity. but o'brien does have a background in foreign policy. he did work for bolton when bolton was the u.n. ambassador rice are george w. bush. in many ways, o'brien does seem to align with trump on his foreign policy. in the past, he said president obama enabled tyrants and terrorists. president trump seems to work with -- enjoy working with him. he even sent o'brien to sweden when american rapper a$sap rocky was arrested. potentially he will be more aligned with trump where bolton had many disagreements. some things remained to be seen. shery: rick sullivan -- greg sullivan, thank you so much for joining us. we are half an hour away from

that. let's turn to sophie for what to watch of the markets. sophie: checking in on nikkei futures in singapore, they are nudging higher. the end is trading toward a seven-week low ahead of the boj decision. three quarters of economists expect that without the yield curve control policy may be tweaked. they are keeping a positive town after that solid 20 year auction we saw on wednesday. checking on an gold -- checking in on gold, let's switch the board for a check on yuan. firming up after weakening through 1193 overnight. the b hook a governor's fielding questions from reporters. on thec decision eased rate meeting. he is also saying the swine fever is not an issue to that the oil and situation in the middle east, that needs to be monitored by the be ok. paul: thanks, sophie.

still with us is fed president ennis lockhart and the global economics and policy editor, kathleen hays. we were talking about how the fed has felt a compulsion to react to some of the global pressures we see at the moment. in your mind, what is the biggest risk facing the global economy? is it trade tension or is it something else? first, youl, i think have slowdown occurring in china. china is a big part of the global economy. you have what i guess i would call domestic weakness in europe, with some of the european sovereigns in fiscal slowdownso the general of the broad global economy, i think, is first. and then it is is that --

exacerbated by the trade tensions each raises uncertainty as to what kind of a world we will be in in six months or a year, two years. be a two things tend to somewhat toxic brew at the moment. kathleen: if you were on the fomc, and you are having to weigh in, the economy looks good, labor markets not going fast but it is growing. but there are these other things, these global risks. and it is not just china slowing down, it is what the trade war has done too many asian exporters. and the eu. the ecb just had to open up all the monetary floodgates. how do you see the u.s. economy holding up if other key regions are slowing down and continue to slow? economyfirst, the u.s. is not as dependent on the exports,onomy or on particularly as many other countries. starters, the first order of

magnitude channels of influence, of global weakness on the domestic economy in the u.s. might not be so strong as other countries experience. a big,, for example has big expert sector and is highly dependent on both asia and the rest of europe for a lot of it's overall demand and its economy. i always tryere, to understand how will this weakness abroad, whether it be european banks, you remember that, or sovereign crises in italy or in some other european country, greece, how will that actually translate to weakness in the united states? it is not so clear. that's one of the reasons, as i said earlier in the program, i

think there is a divergence of tows on the committee as whether it is time to cut rates or not. u.s. economy is simply a little more insulated than most from these influences. shery: and yet we are expecting more tariffs to get implemented, especially against chinese goods. when should we start factoring in potential negative inflation affecting consumers here in the u.s., not to mention that we just had the oil prices spike because of geopolitical tensions as well. are certainly a lot of risks and a lot of developments out there that are at work at the moment. one cannot be blase or sanguine about the overall situation in the world. i'm simply making the point that the u.s. economy is a bit more closed, a bit more oriented to

domestic demand. the key question for the u.s. economy is when does the u.s. say,mer really get, let's concerned enough or worried enough to change behavior? as long as u.s. consumption and retail sales continue to be relatively robust, i think the u.s. economy will enjoy some insulation from the rest of the world. if we have a big shock, an enormous thing happens, all bets are off, clearly. it was interesting to see that so far, it is interesting to see that so far, the oil shock has not really materialized. oil price shock, from the attacks on the saudi facilities. 10 or 20 years ago, that could have driven oil prices to double. it is just a different world in terms of vulnerabilities.

paul: that oil question is an interesting one, isn't it, because iran cohead room -- have removed 40% of that lost from the weekend strike. somethingms, that is we have theorized about for a while, in terms of risk. and now it has happened. it seems safe to assume that is not the end of it, that will not be the last one we ever see. is not a risk that you are closely -- is that a risk you are closely watching and that could be a spike in oil prices you are talking about? dennis: you have to watch it very closely. look back in history, you see a correlation between spikes in oil prices and the onset of recession in the united states. policymakers can't ignore it entirely. there is a lot of history there. the saudi authorities seem to have handled it well by

giving assurances. the markets haven't, as was mentioned earlier, haven't really seen a big increase in prices, if anything, a little bit of softening in the last few days. this seems to be being managed at the moment. but it's -- we don't know what the retaliation will be. we don't know if it is going to be sanctions or military. we don't know whether there will be retaliation. in some material form. but i would expect there to be. there is so much unknown at the moment. and i think you have to watch it very closely. kathleen: one thing donald trump does is he watches the fed, jay powell very closely. it was interesting to me, maybe because there were so much going on, important things, the fed singling -- signing a mixed vision. when donald trump said the fed failed again, no gats, no sense, no vision, a terrible

communicator, it didn't get into the news that much. do you think maybe finally, this -- people are getting numb to this, markets are getting numb to it? is it a detriment to the fed? dennis: certainly it has been going on for a while. prefer to put myself in the shoes of chairman powell or current committee member. if i were there, i and others would be certainly advising to do exactly what they are doing. and that is ignore the noise coming from the white house, keep your eye on the ball, stay focused on the health of the u.s. economy and the achievement of their objections -- objectives. i thought today's press conference was another case of very elegant handling of this unusual pressure that is coming from president trump. so far, there's been no blink.

i'm very respectful and admiring of the way the fed is handling this. shery: and yet we have her the opposite view from the former new york -- the opposite view from the former new york fed shouldent who says he not encourage trip president trump's trade war. dennis: i would not have made that statement. i have a great deal of respect for bill dudley, he is a civilian now so to speak, so he can speak his mind. i understand the emotions behind it. fed islistically, the not going to take any political calculus into consideration. it is really an apolitical process. politics talent enter into the decision-making. and they will keep their eye focused on how the economy is evolving, and how they are doing against their mandated objectives. shery: dennis lockhart, thank

you so much for sticking around throughout our show. and also our thanks to kathleen hays. coming up next, nissan is looking to slim down as it tries to get back on track, seeking to sell an affiliate in a billion-dollar deal. we will run through the plan. this is bloomberg. ♪ ♪

we continue our covering climate series. today we are looking at green bonds as a race to keep up with demands at curbing carving -- at curbing carbon emissions. there is a lot of opportunities for investing in futures -- future tech. b of a have helped surging sales in green bonds which are for everything from windfarms to batteries. they have already beaten 2018's record of $135 billion with

issuance having more than quadrupled in the past five years. this as investors concede. u.n. at 640 four funds focus on environmentally friendly investments. that stands at more than $220 billion, compared with around $80 billion we saw at the end of 2014. they observe even from investors who don't identify as green climate related bonds, they are appealing in this late stage of the economic cycle. for those who have invested, that has worked out well with some sales pricing better than nongreen debt. barclays data tracking bonds, they have outperformed in recent years. a masonmind, it remains space. making a .5% of the $110 trillion global bond market. concerns remain over financing standards and potential greenwashing, which has seen the eu attended to address that with its own green bond standard. shery: thank you so much for

that. bloomberg news is part of cove than 220 news outlets to highlight climate change. let's talk about nissan. vehiclet to distribute parts and materials in a deal that may be valued at $1 billion. let's cross to tokyo and our reporter. what exactly is nissan putting up for sale? sources have told us nissan is seeking to sell off one of its subsidiaries, called nissan trading co. in a deal that could be valued up to $1 billion. the company distributes and imports and exports auto parts and other materials with annual sales of about $6 billion. the sale process itself is very early stages. it is set to be drawing interest from private equity firms and other trading companies. paul: we say, why is nissan doing this? what's the motivation?

lisa: nissan has been going through a rough patch recently with public city. -- publicity. businesswise, it has been pressured by slumping u.s. sales as well as aging vehicle models. in july, a reported quarterly profit that was at a decade low. in earlier this week, the chief executive officer stepped down. they are seeking a replacement. basically, an asset sale would free up cash that it can reinvest in other parts of its business or broaden the option out for nissan itself. paul: our consumer reporter lisa du in tokyo, thank you for joining us. you can get a round up of the stories you need to get your day going. bloomberg subscribers, go to dayb on your terminals. it is available on mobile in the bloomberg anywhere app. you can customize your settings

so you only get news on the industries and assets you care about. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. paul: i'm paul allen in sydney. let's get a check of the latest business flash headlines. fedex delivered its worse trading day for more than a decade as wall street rejected its claim the trade war and the weakening global economy are to blame for poor results. at least four analysts downgraded the shares, taking the ceo to task for what deutsche bank called a series of missteps. critics say fedex has not moved fast enough to lower capital expenditure. shery: a strike by autoworkers i general motors could hit the company hard. s&p global rating says gm may burn through $1 billion in cash if the uaw action lasts a week. it could also see loss products in of about 45,000 vehicles.

the strike over a pay and conditions again sunday. s&p rates triple be the second lowest investment grade level. british airway pilots have been called for a one-day walkout calling for new talks overpay. the pilots were due to strike at the end of next week but said it is canceling the action to "prevent serious damage to the brand." however they also demand the ba takes negotiation seriously. the two-day strike last week scrapped four ba flights and costs the carrier $50 million a day. aery: delta airlines has study to see a forest debris including branches and bark can be used to create jet fuel. it is investing $2 million to work with northwest advanced biofuels on the feasibility of using wood to power planes. it is part of delta's plan to reduce its carbon emissions. the carrier says it is 20% of the way to cutting emissions in

half by 2050. paul: issues are piling up for office sharing startup wework. in addition to its ipo being delayed, deals for two major properties in london are in doubt. the center capital has pulled out of a deal with more than $110 million for one building, while talks have stalled for a sale on a property, which the company calls the largest co-working facility in the world. shery: cisco is set -- said to have made an offer for data dog in recent weeks. sources tell us a data dog rejected it in a belief it would be worth more as a public company. almost 650 million dollars after pricing shares above and already raised target range. the ipo values data dog at $7.8 billion, less than a cisco is thought to have a bid. markets open in tokyo at the top of the hour. let's turn to sophie for what to watch. sophie: futures are pointing slightly higher as asian stock

investors may be pinning their hopes on the prospects for more easing from the region central bank. the hong kong monetary authority has followed the fed's cut. in indonesia, expected to deliver a third rate cut in a war -- in a row. the end trading at a seven-week low ahead of that as the nikkei is set to resume gains after halting a ten-day rally on wednesday. flipping the board, we are watching travel and retail related companies in japan. this shows a 2.2 percent yearly drop in foreign visitors for august with visitors from south korea sticking 48%. visitor numbers from china, they rose 15% year on year. paul: all right, still to come on the next hour of "daybreak: asia." jay wong, joins us from a summit in singapore. we will discuss strategy in the region and the outlook for 5g. the market open is next. this is bloomberg. ♪

paul: good morning. i'm paul allen in sydney. asia's major markets are about to open for trade. shery: good evening in new york, i'm shery ahn. sophie: i'm sophie kamaruddin and hong kong. welcome to "daybreak: asia." paul: our top story is this thursday, the fed cuts as expected and says more can be done if needed. jay powell warns he may resume bond buying sooner than expected. investors now wait two more decisions, banks of japan and england are expected to avoid a recent wave of easing. shery: an update on the 5g

rollout across asia. we will speak to nokia live from the milken summit in singapore. let's get straight to the market action with sophie and hong kong. how are markets reacting to the fed rate cut we saw in the u.s.? sophie: we are seeing risk sentiment on the table. when it comes to stocks, tokyo equities gaining ground. the nikkei 225 adding 6/10 of 1%. after snapping a ten-day gain. the yen is trading near a seven-week low as we wait on the boj's decision. any clues like governor kuroda may offer on the yield curve control policy. the is they receive the jgb kneeled -- yield. we have rate decisions from indonesia and taiwan add if the doe later on thursday. central banks are very much in focus. let's switch the board to check on seoul. the korean won is under pressure this morning. sticking below 1.5%. fomce ok governor said the

decision eases pressure on korea and its upcoming policy meeting. switching the bar to check in on the antipodes, on the asx 200 this morning, higher by 1/10 of 1%. the aussie dollar is under pressure somewhat, off 1/10 of 1%, ahead of a jobless data from australia. little progress is seen when it comes to tightening the labor market despite rate cuts we have seen from the rba. as for the rba, there's more scope for easing after the pace of gdp growth fell to a fresh five year low. kiwi dollar, steady here after raising most of the overnight losses on that second quarter data, beating estimates earlier this morning. paul: all right, thanks very much. let's check in on first word news with ritika gupta. ritika: thanks, paul. new zealand's economic growth expectations, but still is at a five-year low giving the scope to cut interest rates again. second courter gdp rose 2.1% from a year earlier falling from

2.5 in the first quarter. the data slashed interest rates to a record low, 1% last month. most economists expect one more rate cut before the end of the year. president trump says new sanctions against iran are coming in response to the drone attack on a major aramco plant. secretary of state mike pompeo flew to saudi arabia to coordinated the reaction to the strike. we added displayed what it explains as an iranian missiles saying the attack came from the north. the officials didn't elaborate but added that it was sponsored by tehran. the saudi finance minister is playing down the effect of the attack on aramco's oil facilities. he told bloomberg it would not change any of the government plans, including on defense and it would not affect the planning timeline for the much awaited aramco ipo. plans, including on defense>> we have always said we committed to the ideal, and the government would choose the right time they would leave the

markets and decide. most likely, it will happen in the next month. the next thing that will happen, the markets -- we have market options. the primary markets. ritika: the legal hearing into boris johnson sub spansion is the u.k. permanent initials thursday with judges demanding he explained what he would do if they were to rule against his move. the prime minister's lawyer says the suspension was a political decision beyond the responsibility of even britain's most senior judges. critics say it was in abuse of power. sterling fell as jean-claude juncker said a no deal brexit is almost inevitable. the fallout from the ongoing approach -- ongoing protest in hong kong is widening. visitor numbers continue to decline in hotel workers are paying the price. a survey by an industry association says more than three quarters of people working in the hotel industry have asked to

take unpaid leave while half expect their pay to be cut. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. shery: thank you. the federal reserve cut its key rates as expected by 25 basis points, emphasizing the u.s. labor market is still strong while noting the damage being done by the trade war. our global economics and policy editor kathleen hays is here with what many saw as a hawkish cut. chairman powell did try to offset that in his presser. kathleen: at the very least, a think he may have kept dovish hopes alive. there's no doubt when people got the 25 basis point cut as expected, not surprising to see in the policy statement the fed talking about the economy growing moderately, the labor market being strong. nonetheless, talking about weak

investment, talking about global risk weighing on the u.s. economy, the slowdown, the trade war, etc.. let's jump into the bloomberg library and look at this at the far right hand side of your screen. because the fed, these five in the middle, those are the five officials who said yes, we needed to cut, that's enough. these are the cats -- the fed officials who said no, we did not need to cut. that is hawkish. what other people found hawkish, there were seven out of 17 that say we need one more rate cut. more's nobody who says two rate cuts should be happening this year like so many people in the markets are saying. when jay powell was asked about where the fed may be going, he is the one who said of course, if these risk materializes, we could do more. let's listen to what he said. >> if the economy does turn down, then a more extensive sequence of rate cuts could be appropriate. we don't see that, it's not what

we expect. but we would certainly follow that path if he became appropriate. kathleen: another thing that was distressing to traders, investors, economists, is with this great dispersion, there were two dissents against this the boston fed, just like there were in july. jim bolson said he wants a 50 basis point cut. such a wide divergence of yous. -- of views. all right, kathleen, the fed did take it one expected step to reduce money market pressures that cause the u.s. repo rate to spike suggesting a bigger step is on the way. does that mean the fed will get back into bond buying? kathleen: it looks like they very well may. jay powell did say in answers to questions, don't be too concerned. this will not affect the u.s. economy, the path of monetary policy. the fed did cut another key

rate. interest on excess reserves by 30 basis points. now it is below the fed funds rate. that puts more reserves in the banking system. importantly though, he was asked about buying more bonds. as you do when you are doing qe that would put more reserves in the system, he said yes, they will have to start organic growth of the balance sheet soothe her than we expected. this is more technical. this is for demand and currency and expectation. all kinds of things that necessitate a certain amount of growth in the balance sheet. but it is not qe the way you think of it when you look at a fed that is so worried about the economy, they start buying bonds rapidly to boost the balance sheet and really boost the economy, push down long-term rates, et cetera -- seppi -- etc. the fed needs to keep the money markets,, keep the repo rate from spiking, and the fed

announced late another 75 billion dollar repo operation is coming on thursday. they are using those tools to smooth things out about admitting also longer-term, he said the fed will talk about this organic growth and by more bonds at the next meeting. paul: global economics and policy editor, kathleen hays, thanks so much for joining us. let's get more on the market reaction to the fed decision. mike cranfield is with us in singapore. do you think the rally we have seen in the s&p could be short-lived? mike: yeah, indeed. as kathleen was saying, there's a disconnect between what the market is pricing in terms of lower interest rates then what the fed is implying with its dot plots. that gives plenty of room for traders to see volatility in the short term. what it does is putting the onus back onto fed speakers. we have a lot a fed speakers who will be coming up. jay powell doesn't speak again until early october. in the meantime, there's plenty

of room for traders to make their own decision about whether they think this is hawkish or not and listen to the next few speakers. that could have the market jumping all over the place. we could have the treasury market: big around -- clipping around. there was a difference between the highs on the lows. that will filter into the equity market as well. it will be tough for the s&p 500 to make serious up the moves while the treasury market is jumping around so much trying to interpret where the lower bound is for the interest rate side. we have the fed funds futures looking for as much as 50 basis points over the next year. the fed is saying through the dot plot, they should be unchanged. some but -- something has got to give. the feedback will come through to volatility and equities. see soll not want to much choppiness in the short-term. it will make it tougher the s&p 500 to make a lot of progress on the upside unless we get something surprisingly good come

out between the u.s. and china on the trade talks. it is always possible. but it looks onus back on two other factors, in terms of where the interest rate direction is going, not that great for equities in the short-term. shery: what are we expecting in rate decisions in asia this week? we saw the hong kong monetary authority already move. they are bound to do that because the hong kong dollar is pegged. we still have the boj decision coming up. mike: boj should be a very interesting meeting. obviously, they have seen the major central bank's around the world do something, especially the ecb. the boj will be looking at that one because the ecb had negative rates and have done even more. the boj are expected not to change their official -10 basis points. but they certainly could do something on the yield curve or say something about where they see long-term yields. they melt -- they may well tweak the wording to suggest there is

more room for flex ability and allowing yields to go lower. they have recently touched 0.3% which is perceived to be the lower boundary of yields. they may change the language to allow even more volatility without changing official rates. it will be interesting, especially the press conference later in the day. we could get a lot of market reaction. even if officially the boj does not change policy, it will be a choppy day for the yen, all japanese assets looking for a busy day today. shery: mark cranfield, think is so much, our strategist there. you can find mark's commentary on the markets live blog. you can get a market rundown in one click and there is commentary and analysis from bloombergs expert editors so you can find out what is affecting your investments right now. still ahead, nokia's asia head jae won joins us from the summit in singapore.

we will ask him how he is preparing for the upcoming 5g wave. paul:, attention turns to the jet -- up next, attention turns to the bank of japan. the chief economist tells us what to expect. this is bloomberg. ♪ . ♪

paul: this is "daybreak: asia." i'm paul allen and sidney. shery: i'm shery ahn in new york. the bank of japan is expected to stand back on policy in a few hours after the expected cuts by the federal reserve. joining us from tokyo is invesco asset management global market strategist tomo kinoshita. great to have you with us. the expectation right now is that the boj will stand pat. they will hold. what about their yield curve control policy? we continue to see this downside pressure on the 10 year yield. tomo: that's right.

allowedon why the boj is that they want to mitigate the pressure on currency appreciation. the rateow, differential between the u.s. and japan is a critical factor for determining the japanese yen. we have seen appreciation. because they don't want to see a lot of appreciation which is bad for the economy. they are in a comfortable the yen -- with the expert company should feel pretty ok. i don't think the boj should do .nything at this time benefits of additional policy is

outweighed by the side effects in terms of financial stability. shery: you mentioned the weaker japanese yen, but how long could that last given there are so many different uncertainties out there including the trade war? that's a good question. i do think we are likely to see a further turbulence. what we see now is the slowdown in china's manufacturing output. and also a slowdown in manufacturing investment, which has been affecting the sector output. what i more eight about at the moment is that with accumulation in many economies in asia outside china, including korea, taiwan, and japan, this means they need to destocked the inventory for a while. it takes aim few months -- a few months.

activity should be quite slow. inventoryews is that de-stocking will be a temporary phenomenon. after that process which is probably around the end of this year, the countries should be able to increase the pace of production. once there is the inventory question, you see political reform as well. can you explain what you are watching their? -- there? tomo: the upper house election is over for japan. saw is the what we discussion over the reforming pension system is coming up. is going means is that to increase the burden of consumers by asking them to bear more burden in terms of payment and others.

i have a fear that that discussion may cause lower consumer sentiment. i think that is a one risk factor going ahead for the japanese economy other than the consumption tax hike, which is coming within two weeks time. you mentioned potential risks for the bank of japan and policy of the negative rates that may lead to financial instability. i want to get your thoughts on this chart in the bloomberg terminal that illustrates the extent to which the bank of japan dominates the jjb market overwhelmingly holds the most government bills. do you see any potential risk arising from this? it surely can't be healthy. tomo: well, that's a good question. i think we have to accept the fact that nowadays, central holds al over the world substantial amount of assets. how is important now is

they control the size and control the 10 year bond yield, in terms of japan. what was mention today, he is worried about the flattening yield curve, because that is affecting negatively the management of other financial institutions. the side effects are there. i think we have to see very carefully the side effects going forward, because that may become a political situation as well. shery: we will be watching japan closely this morning. thank you so much for joining us. tomo kinoshita, invesco asset management global market strategist. plenty more to come on "daybreak: asia." this is bloomberg. ♪ bloomberg. ♪

last week, nokia's chief

technology officer said we are at the peak of the 5g hype curve. aey added the market is in state of flux and would remain until the end of 2020 or the beginning of 2021. let's bring in one of the key 5g players in asia from the milken summit, we are joined by nokia's head of asia-pacific and japan, jae won. thanks very much for joining us. i'm just wondering if you see a major difference in the times of 5g in the various regions? the aipac, europe, and the u.s.? jae: thank you very much. on asia-pacific and japan, on tensionsrn front, across japan as well as korea, australia, new zealand. that is as developed as you can get. the deployment speed of 5g is very diverse and different. on the eastern front, especially with korea and japan, things are moving along very fast at a

breakneck speed. has been ahere massive scale of deployment already. nokia is participating in the three buildout happening in korean markets. there is already 2 million subscribers for 5g. it is fully expected that at the end of the year, there will be more than 4 million subscribers switches 10% of the population. that breakneck growth is unprecedented, even compared to the 4g era. as fastve 5g will be and even much faster than 4g. paul: how's nokia positioned in the market now? do you see the company getting the same slice of the 5g market by the end of the year that was forecasted to start the year? jae: absolutely. we are doing very well so far. haveready mentioned, we three operators that have launched the commercial networks for 5g in korea.

we have commercial deals with all three japanese operators that are operating in the market as well. we have very great markets shares, which is increasing in the case of japan market. we have presence in australia, new zealand. we are doing very well so far. we expect that the trend will continue throughout the year and towards the end of the year. shery: in doing business and asia, has nokia seen any impact or benefits from huawei's recent challenges? i guess the challenges ventures are half it -- are having is unique. as far as nokia is concerned, we have been focused on our own technology development. 5g technology is extremely technology -- extremely challenging technology to develop. we are in the most advanced markets in the world. we are at the -- we are focusing on our own technology

development and are on customers. and doing the best we can to support their growth strategies. shery: as a european company, do you get any of the benefits of being seen as a neutral company? west versus east, tussle that is going on at the moment? from a technology company perspective, these geopolitical issues are something that always come up. these are issues we have to manage somehow. we are just focused on developing the market and developing the technology. because we think that 5g technology is the foundation of the industrial -- of the technology revolution. to be massive. we are trying to develop our technology to support that growth, and by doing so, we can contribute to the operators, as well as the enterprise is going forward. as they take advantage. shery: quickly, as a technology company, when you see the

bifurcation between the u.s. and china in a tech divorce, did that affect you? things that are outside our control. as you can imagine, the only thing we can do is continue to focus on the technology. that we have been doing well. in u.s. markets, we have good market share, in korea and japan. we have more than 48 -- we have 48 commercial agreements that operate around the world. and we are holding our own and doing well in terms of technology development. that's what we are focused on doing so and serving our customers. shery: thank you so much for your time today. nokia head of asia-pacific in japan -- and japan. stay tuned for other interviews on the bloomberg tv at the milken asia summit in singapore. plenty more to come. this is bloomberg. ♪ ♪ devices are like doorways

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xfi advanced security. if it's connected, it's protected. call, click, or visit a store today. ♪ i am disappointed by the fed. >> why? >> the market is priced for more action. the fact the fed is disappointing based on market expectations. >> we were expecting more in terms of the dots. >> i think the fed is not accommodative. i would like it to be because my forecast is below 2% over the next three years, so there is more room for accommodation. toohe fed is way preoccupied with inflation expectations. the fed has changed the way it operates at a fundamental level,

and move towards this expectations-based way of looking at the economy, rather than sticking to the same macro variables they used to. i think it is very confusing. some big names talking disappointment in the fed not as accommodative, but asian markets taking it positively. let's check with sophie. prospects forng, more easing. slidinger yields towards -19 basis points. the yen at a seven-week low, boosting exporters in tokyo. the nikkei 225 resumed against. split,icymakers looking 0.1%,llar gaining currencies in the region weakening. weakening, and the

aussie dollar falling ahead of data later this morning. the kiwi has resumed its tumble. it is a raising the drop we saw earlier, by beating sub trend growth. i want to check stocks in tokyo. this one jumping 20% after the turnaround plan was approved by the tokyo stock exchange. the other falling under shares in14%, after its lng project plunged on reports mcdermott hired a restructuring firm. >> let's check first word news now. >> thanks. reiterated his view of a strong u.s. economy as he cut rates and said moderate policy moves should be

sufficient to sustain expansion. the fed lowered its benchmark rate by 25 basis points, while admitting growth and trade policy are weighing on the economy. he said he may have to resume bond buying sooner than expected. need is possible we will to resume the organic growth of the balance sheet earlier than thought. that has always been a possibility. we will be looking at this carefully in coming days and taking it up at the next meeting. >> asian economies will increasingly lead the pack, boosting their collective share of business after becoming less reliant on the rest of the world. the mckinsey global institute to the region will have an impact on trading capital, as well as people, transport, and the environment. it says asia may be home more than half the world's middle-class by 2050, accounting for a third of global consumption. one french billionaire art collector is taking on more debt

to finance a $2.7 billion acquisition of southern these, selling eight year bonds which should be priced friday and can't be bought back for three years. a loan of the same size is so thing set up. he wants to take over sotheby's after three decades as a private company. the trade spat between south korea and japan hitting tourism. 50%,ivals in japan plunge dragging down numbers for the second time in six years. korean tours normally account for 25% of visits, but some 48% in august as the two nations imposed export controls.

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. >> thanks. president trump says he wants tupper sanctions on iran. his top diplomat is in saudi arabia to build a case against tehran. saysaudi finance ministers the disruption is only temporary. interruption in terms of economy and revenue is zero. our senioring in international editor jody snyder and oil reporter. saudi arabia is trying to restore those reserves as quickly as possible. what is the progress in the outlook? >> outlook is better than the market expected after the attacks happen. they said they will get the output from the field to where it was by the end of the month, and saudi arabia output will

reach 12 million barrels a day, which is where they were before the attack in october, so things are going better than the market expected, and that is why price of oil have dropped. it was expected it would take months into 2020 to bring the output back, but saudi aramco said they could do this quicker than thought. you are seeing the prices drop because of that. >> we have heard everything from president trump on strategy against iran, including a potential sit down with president rouhani to being locked and loaded after these attacks. what is the latest from him? >> what he has done pretty much all along, to impose more sanctions, or threaten more sanctions. talks, about about being tougher, although he said he wants to rule out any kind of military action that would raise , buttakes of the conflict

once to impose more sanctions. secretary ofas state pompeo was arriving in saudi arabia to meet with the crown prince. it looks like that is the route they will go, even though there have been a lot of sanctions already imposed on to run in the economy there. >> it is not just about saudi arabia and opec, it is u.s. shale supply and how that is affecting markets, so what is the dynamic playing out? >> exactly. month,eventh straight u.s. shale oil production increased to a record high. what you are seeing is the market is oversupplied. the iaea director said earlier wednesday that we are in an oversupply situation despite this attack on saudi arabia and the disruption of 5% of output

of global oil supply. it is not creating a different situation. we are in an oversupply market. pump as continues to much as they have ever pumped, and the reason why prices are up 5% this week is mostly because of a risk factor of any further conflict in the middle east. what is saudi arabia saying about the strikes on the aramco facility? theredi arabia is saying is no doubt that iran was the culprit, that it is unquestionable, that they have no question iran was behind it, even though they are not able to pinpoint where this actually occurred, where it, the force, is inact force, and that keeping with what the u.s. was saying. pompeory of state mike

was less emphatic, but said the u.s. has high confidence the culprit was iran. saudi arabia and the u.s. are on the same page, and imposing sanctions is where the u.s. is going at this point in supporting saudi arabia. >> all right. jody snyder and oil reporter, thank you for joining us. still to come, the world's best thisrming hedge fund year's founder joins us next. this is bloomberg. ♪

♪ shery: this is "bloomberg daybreak: asia." i am shery ahn in new york. paul: i am paul allen in sydney. the latest headlines. wework.iling up for the deals for two major properties in london are in doubt. when deal for one building is

worth more than $110 million, while talks have stalled on the property called waterloo. alexa showings off its language skills in india. ands able to speak hindi the unique blend of hindi and english. to make the experience feel more local it will respond in an indian accent. amazon is launching the service in time for the indian shopping season. paul: cisco has made an offer for data dog. sources say data dog rejected it. it has raised almost $650 million after pricing shares above a target range. the ipo values data dog at 7.8 plane dollars, less than cisco has thought to have bid. performing hedge

fund of 2019 so far has skyrocketed 270% since the start of the year. let's bring in the founder. he manages $230 million. great to have you with us. share your secret with us. how are you making these huge returns? >> good morning. thanks for having me. there is no secret in particular. our main philosophy is to stay diversified across different asset classes in different geographic regions. we stay continuously invested at all times. that is the simple secret. shery: you are in the business of exchange traded derivative contracts, so how is the risk involved in that? >> we diversify across the three major equity classes and

maintain a buffer in terms of liquidity. so, when you are looking for things to add to your portfolio, but do you like at the moment? , we remainoment bullish in terms of equities. i like equities and emerging-market, the southeast asia region, which is undervalued given the trade wars between the u.s. and china and depressed at the moment. paul: emerging markets, perhaps the outlook is cloudy, particularly after the fed decision has we have seen more dollar strength. what is the strategy there, hold on? >> yes, how strategy is simple. we are long assets in the long run. in the long run, the asset classes will balance themselves. we maintain a portfolio that can

the ups and downs. shery: the volatility has been huge. 260%, then lost 50% following year. how do you stay put? >> i can still sleep well at night. , one, it is aact huge portfolio, in the volatility is 30% to 40%, the magic is the intricate balance between the three asset classes. we always balance the three asset classes will in terms of the asset classes, so diversity is definitely the key. shery: how many investors do have now come and do you plan to raise more money? >> we have 15 to 20 investors. raising money is on the cards, but realistically, our target

investors are those who have the risk appetite. they don't want allocating a portion of their portfolio in risky assets, so people like equity investors, family offices , and other funds. paul: you say despite the volatility that you do sleep well, but is there anything that keeps you awake at night, or at least give you bad dreams in terms of global risks? >> not at the moment. the biggest risk at the moment in terms of financial markets is the bond markets. i think a lot of investors are underpricing the risk of higher inflation pressures at the moment, and given how rates have fallen over the past eight months, i'm worried about the interest rates at the moment. paul: one potential risk we have been discussing this morning and all week is the oil price. buteems to have stabilized,

things like the drone attack in saudi arabia, do they concern you at all? do you watch that kind of thing closely? have exposure, probably 15% of the portfolio, but i am not overly concerned about the knee-jerk reaction. i'm more concerned if that knee-jerk reaction results in a spiral upwards into higher oil prices to the next one or two years. that could potentially affect inflation in the long run, even the fed or other central banks could address the issue. the: all right, that was founder of swiss-asia financial vanda global fund. mliv .t to watch

this is for bloomberg subscribers only. you can check it out at tv . this is bloomberg. ♪

♪ paul: this is "bloomberg daybreak: asia." i am paul allen in sydney. shery: i am shery ahn in new york. the delta airline ceo on the latest addition of businessweek

talk, discussing the volatile landscape and the ongoing trade war, and the company's bottom line. >> not in a material way. we are seeing some affects and asia. they tend to be around for corporate customers, automotive, manufacturing that are not seeing the same demand for their products or pulling back some of their spend in travel patterns, but asia is one of the smaller regions within our total revenue pie. we are watching it. we are not seeing a major decline. >>, week like this when you see another geopolitical issue in the middle east, the disruption in the oil market, how does that pay through, if at all, in terms of fuel costs, hedging strategies? any elements popping up there? >> it is a reminder of how volatile the business climate and environment is in which we

operate. that said, we are seeing prices moderate after the spike over the weekend. we built our business to be sustainable at much higher fuel prices than $65 where it is trading today, so we are on the front end of that, anticipating what we might face in terms of future challenges, but from a revenue durability standpoint, balance sheet perspective, we are well situated. , you have wonors a lot of plaudits from customers , and by certain measures, the stock is done well, but by other measures, it feels a little stagnant, dare i say it. what is missing? >> how largest investor, warren buffett, owns 11% of delta. cubs of thehicago business world, not a bad

decade, bad century. we are on a different platform now. in the last 10 years, we have invested in the fundamentals of running a great airline, reliability, performance, and service levels unseen adult is history -- unseen in delta's history. seen that in customer satisfaction scores in brand loyalty we have never seen before. theontinue to reinvest in customers, airports, and technologies, while at the same time, generating meaningful free cash flow. that is the thing investors have not seen from the airlines historically. back with aent mate on labor, technology, on capital, and fleets. we are doing that, but returning a meaningful amount as of this year, we expect to make over $5 billion for the fifth year in a row in terms of profits, but we

will have free cash flow of over $4 billion this year, so that performance and consistency of performance over time is rewarding, and i do think that investors will stay with us and hopefully see improvements. >> there has been at the vergence across the global airline industry. it feels like you are one of the haves. we will see more consolidation and you will participate? >> i don't think we will see consolidation in the u.s. in a meaningful way. we may see that in other parts of the airline market. internationally, i do think you will see. europe, you are seeing it from a bankruptcies in terms of european characters -- carriers. so on the global scene from it that is where we have been investing, investing in partners, and it is more to have influence within a global network of carriers.

he was see more of that from delta potentially, but not on the u.s. side. >> what do those partnerships look like now? with mike they look like in the future, geographically, or are there new and different things you can try to create that family, as it were? >> one at the things that has not been successful in the airline world are the alliances. have brought ae lot of great value to customers. we've brought value to member airlines. we are going at it through a different approach, delta making bilateral investments in the most important partners. we own 49% of air mexico and vir gin atlantic. we are invested in air france, klm, korean, chinese turn. -- eastern -- china eastern.

you have seen this network of influence we are having within those companies, so those companies want to know what delta has learned about operational efficiency. we want to learn what it takes to win those local markets. over time, while we can't own them in terms of consolidation, we can have meaningful enough investment that we create an international network of carriers that will be uniquely tied to delta as the centerpiece. that is our goal. when you think about the long-term, delta today, we serve 200 million customers year. when you add the customer small those carriers i mentioned coming you are over 500 million customers a year that we serve. there has never been an airline --work, airline, nomination combination kind of value. >> do you have people knocking on your door?

>> there are lots of questions and conversations at all times. the delta airline ceo. that's get a preview of what to watch in markets this morning. sophie? >> asian central banks are in the limelight. were expecting a hold from the boj my but yield curve control and focus. indonesia, were expecting a rate cut. taiwan is expected to hold for a 12 quarter. the hong kong monetary authority followed the fed with a 25 basis point cut to its key rate. immediately feed into the cost of credit for businesses. in households are under their own funding pressures. hsbcal lenders including had recently raised their rates for mortgage loans. be likely to may

be impacted by possible cuts in the prime rate. citic is forecasting the banks will seen that contraction in 2020. "daybreak: asia" as our coverage continues. standby for the china open. this is bloomberg. ♪ here, it all starts with a simple...

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