haidi: welcome to "daybreak asia ." i am haidi stroud-watts. sophie: i'm sophie kamaruddin in hong kong. kathleen: good evening. i'm kathleen hays. our top stories this hour. asia stocks look set to follow wall street lower on economic data ahead of the fed's policy decision and possible clues on a taper timeline. china blasts the u.s., calling

it very ill. allies for united front of -- against beijing. organizers release their infection control rules ahead of the games, warning of penalties for athletes and officials who breach protocol. haidi: let's take a look at how we are setting up. in the drumbeat towards the fed meeting despite no expectations of a really strong change in policy. how is asia setting up for that? sophie: asian stocks start after a four day again. we have the asx -- four day gain. it is european stocks that are leading the world in 2021 as they play the fed waiting game with markets staying calm. they say brace for more volatile -- in global stocks if the

dollar breaks a major support level. the offshore yuan has little change ahead of china's data dump. they say that the aussie dollar and the loonie are seeing gaining the most against the greenback as the global economy recovers as central banks tighten ahead of the fed and we are seeing treasury futures continue to go higher after the 10 year u.s. yield lingers around 1.5%. i got a highlight in the survey and we saw a bond taper tantrum coming to the top of the risks when it comes to that survey, kathleen. kathleen: thank you so very much. markets are counting down to the big said meeting. the central case remains that it will stay dovish and bloomberg economics sees policymakers maintaining their assessment of the recent inflation surge as transitory. weaker than expected jobs report since the april meeting may also quash any taper talk for now. watch the dot plot.

fomc officials could project the consensus moving to a lift off in 2020 three with two more participants mated to tip the status grow that direction. haidi: let's get more with the chairman and cio of the company. always great to have you, especially on a day, or the day before fed day. i want to look at financial conditions because it is quite extraordinary. three key measures pointing to the loosest financial conditions we have seen since the 1990's. financial conditions under pending the exuberance we have seen so when you assume that this is both a function of liquidity and market sentiment, are there risks? would the fed be looking at a chart like that, thinking something needs to be done sooner or later because there is a level of complacency in the market that is worrying? david: you have just described

and put up a chart which is so remarkable and if we look at critics spreads, you use the word risk. if we look at the critic spreads, they are so tight that investors are not getting paid for taking credit risk. they are chasing yields. we have been doing that for a while so how the fed tiptoes its way out of this is the real challenge and transitory is a great word to allow gradualism. i believe that is so. we saw the first fed move. they said they are going to stop the corporate bond support. they announced it. there was a little ripple in the corporate bond market. it was absorbed and it did not shock the market. it was not viewed as a threat. let that one get completed and then the fed takes the next step.

maybe they add a few basis points and correct the zero interest rate problem. one step at a time, very slowly is how it looks to us. haidi: the fed reverse repo -- money markets are just awash in cash right now. is there pressure on that for the fed to at least tweak auxiliary rates to make sure these markets are still functioning properly? >> it certainly looks like there is a debate because you can look at repo and the issue of the collateral, and you can see an occasional trade into negative yield because they must own collateral. there is a problem in the system because of this abundance of cash. at the same time as the federal government spends cash, it removes the cash from the treasury balance and puts more of it into the banking system.

the banks do not want that cash because they get penalized for it so they get it into the repo system. this system has flaws in it which ought to be corrected and the fed could correct it without a policy tightening, just a mild increase in the interest rate. retargeted interest rate goes from zero to 10 basis points. make it 35 basis points. maintain. perhaps that is under discussion. there have been a lot of folks you have talked about the need to fix this part of the system. kathleen: i like the point where haidi started this conversation looking at financial conditions because the argument for the fed to move on tapering is not so much about inflation, is it? it's more about the sense that there is just so much liquidity out there and we have heard more than one fed officials say that they are worried about the frost.

what are the odds, in your mind, of the fed at least saying, ok, we are thinking about inking about when we do it? david: kathleen, you and i have known each other for a very long time and you have followed the central banks around the world and we have done some seminars together. i have a question about your question. when have you ever seen monetary policy start with the words thinking about thinking? that is the ultimate way of gradualism. we have gradualism and that is the way it has to be. if that does not want to do anything to trigger any negative outcome so they tiptoe one step at a time. kathleen: i think there's other minority -- those other outcomes. this transitory inflation, even

if it goes away eventually, it might last longer. look at those breakevens for the 10 year, first negative number since 2021. now, we are going to show you inflation expectations. we looked at the latest survey on daybreak australia and that number shows a substantial jump in the one your expectation and the three-year expectation. it's going to be 3%. should the fed respond to that? at least start talking about it so people know that they are watching this closely and it may make a change in policy? david: there is no question the fed is seeing this information and again, a picture is worth 1000 words. so how do you reconcile two issues? survey data, the punditry, the opinions, and market-based pricing? and market-based pricing is saying slowdown.

too much rhetoric, not enough facts. let's get to october november. let's get beyond this upward surge and begin to see some flattening out, some normalized type of economic data before we pronounce the inflation is in an upwards accelerating trajectory. the fact is that market-based pricing is saying it is not in such a trajectory but the opinions of people say the opposite. kathleen: got to go. do you side with the market-based expectations? david: i put a lot of faith in market-based pricing because that is a real money bet by a real money investor or institution. >> david, thank you so much. chairman and cio of cumberland advisors. whatever you do, do not miss our special coverage early thursday

morning in asia, 1:30 p.m. wednesday in new york. that's get to vonnie quinn with the first word headlines. vonnie: thank you. china's air force has sent more than two dozen planes near taiwan, raising pressure on taipei as it strengthen ties with united dates. taiwan's defense ministry says 28 chinese aircraft entered the identification zone and it is the latest exercise of its kind this year and the largest. chinese military in craft -- aircraft have frequently entered that zone. u.k. lawmakers are set to decide on an extension to england's lockdown the vote is widely seen as a formality as the labour party said it would support boris johnson's call for a delay. bloomberg has landed johnson is facing a backlash within his own party with as what -- with many mp's saying this is the last extension they support. the reopening plans may be pushed back for weeks.

athletes and officials at the tokyo olympics will face a range of penalties if they do not follow virus protocols. the final version of the playbooks as failure to comply with social distancing rules could result in disciplinary action. the penalties range from warnings to being disqualified. opinion polls suggest the japanese public is divided over holding the event. astrazeneca's covid-19 therapy failed the late stage trial which found it only be 2% effective at preventing symptoms in people exposed to the coronavirus. the company says it is running other studies of the medicine that may help clarify those findings. the u.s. ordered as many as 700,000 doses for delivery in 2021 while the u.k. was already reconsidering an earlier order for one million. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: we will be speaking to

j.p. morgan's representative about his outlook for the dollar as the taper discussion gains pace. we will be joining him later this hour. president biden solidifies an international coalition against china as he heads into talks with russia. we have the latest from his trip across europe. this is bloomberg. ♪

haidi: it sets the stage for a new era of transatlantic cooperation against china. let's discuss this with emily wilkins and tom mackenzie. emily, we are talking about the airbus and boeing accord that has been going on for the best part of two decades. why now? and what does the deal signify? >> the main reason is china.

when you look at the agreement, it says that brussels and washington will be looking into nonmarket practices of third parties. china's state sponsored commercial aircraft corp. is on track to rival boeing and airbus in terms of aviation and airlines and officials in washington and brussels say beijing has given these companies state aid and that has allowed them to have an unfair advantage so when you send to europe and u.s. officials chatting today, they talk about the two of them coming together to sort of face and address some of what they see as discrepancies and abuses in international trade policy or the trade policies of other countries. kathleen: what about the response from china? do they feel under attack from the u.s. and europe? is this a response that they have to give? do they generally feel this is

completely unfair? tom: they feel like this is completely unfair. we have not had a comment in beijing regarding airbus and boeing but what we have had is clarity in terms of comments from the ministry of foreign affairs about their position regarding the g7 communique and nato and they were strongly worded. they describe the u.s. as a nation that was ill. it was a nation that had sewn turmoil around the world. it really underscores and is playing up what they say are the divisions between the europeans and the u.s.. conflict of interest is hard to hide in the e.u.-u.s. summit, talking about the ties between russia and china. the folly of trying to divide moscow and beijing. what is clear is that the closer cooperation we are now seeing

between the u.s. and its allies has touched a nerve in beijing. >> tom, do we take this to mean that there is genuine concern about the ambitions in china? tom: it's bigger than that one story. market distorting practices that they europeans complain about, some cities, the provision of cheap credit and land, for many of the industries and companies that operate in sectors of the economy that china things will be key to its future development. this is a company that is going to see its flagship narrowbody plane really take a bigger part of the market here towards the end of this year and that is when it will be operational. as emily was saying, it will compete with airbus and boeing, the 737. it is central to the made in china 2025 plan laid out by beijing to boost these kind of

central and key parts of the economy but it is also a symbol as well as just how far china has to come. much of the hardware supplied actually comes from american and european companies including the engine. haidi: >> ---kathleen: what are they expecting? emily: a pretty long meeting. they are expecting the two leaders to meet for four hours to five hours. the two will not be sharing a meal. biden has two big goals for this. number one is to lay out the circumstances in which the u.s. could retaliate against russia. what the u.s. is concerned about in terms of hacking and private companies, interfering in elections, the political -- alexei navalny. biden is trying to find areas

where he can cooperate with putin. that includes the renewal of the arms pack that is set to expire in 2026 so the idea i think both countries going into this is that relationships between them are at an all-time low post-cold war. they want to find a way to stabilize the relationships that the two countries continue in some capacity even if biden and putin are not going to be best friends. haidi: emily will it did not go as far as maiming china as a threat on countering nonmarket practices by third parties. that was the undertone. the commission's executive vice president is speaking with bloomberg about the strategy. >> that level playing field globally so what we are agreeing to do today is to work towards

this to the extent possible to ensure a level playing field globally and this is not the only initiative we are launching today. we also announced the launch of trade and technology council where e.u. and u.s. will cooperate in the area of new and emerging technologies on digital economy, on international standard settings, for some examples. >> is that a yes or no to china that this is a united front against china? >> well, once again, if you look at our statement on our approach, we are not naming specific countries or companies. we want to achieve a global level playing field and we want to potentially tackle challenges. >> nonmarket economies.

you keep saying it. you are talking about china but you will not say the word china and i'm fascinated as to why, commissioner. is this because europe is not united in its attitude towards china? the different countries have different positions. germany, for instance, has a very different and some would argue more mocon total approach to china. china is very important to its economy and therefore you find yourself in a position where you could talk about nonmarket economies but you cannot talk about china. >> definitely, we can talk about china and we have been issuing policy papers for relations with china which we acknowledged are complex in some areas for cooperation partners in some areas. in others, we are systemic rivals so we need to navigate this complexity and the e.u. is

willing to discuss it and cooperate with the u.s. on china. that is not an issue. what i'm referring to is specific language of the statement and understanding of the cooperative approach which we agreed today between e.u. and u.s. >> the commission and the european union pushed very strongly over the last year its sustainability agenda. there is a huge pivot taking place in europe right now and globally, we need everybody to be on that same page. bringing china along, making sure that china is part of that narrative, does that mean that you do not push so hard in other areas because you need to china on the sustainability front? >> when i was outlining this broader strategy vis-a-vis

china, indeed, i was outlining where we are cooperation partners and indeed, the fight against climate change is a prime example. china is the largest emitter in the world so it's important if we want to take on -- keep global warming in check. china is making a commitment towards climate reality. we have this commitment by 2050. china is setting it by 2060 but nevertheless, it is clear we will need to cooperate in this area because climate change is a global challenge. >> the executive vice president. up next, msci index is maybe about to end as it enters a 50

estate in hong kong. details come in. this is bloomberg. ♪

haidi: a quick check of the latest is news flash headlines. marc mason signaled revenue from the banks trading operations will likely fall by around 30% from a year ago as wall street braces for the recent pandemic driven boom to run out of steam and the adapter, jamie dimon said treating revenue at j.p. morgan would fall by 38% for the same period. >> investment banking revenues are likely to be down in the low to mid single digit range. we see strong mna performance and we do feel good about the pipeline and the dialogue that we are having in investment banking. >> apple is facing renewed

scrutiny over its compliance with secret trump era subpoenas for user data. adam schiff says the administration will take a closer look at how big tech companies respond to requests from government agencies. the move highlights the tough balancing act between user privacy and demand from law enforcement. shares of oracle fell after a report that was not good enough to exceed robust investor expectations. the second largest software maker had been up 26% this year on enthusiasm for the company's cloud computing business but it still lags behind amazon, microsoft, and alphabet sales of cloud infrastructure. earnings will be between $.94 to 98 cents per share. average expectations were for one dollar and three cents. the final set of guidelines is out. they detail a range of penalties.

we get more out of tokyo, next. this is bloomberg. ♪

kathleen: it is that time of day. we are counting down to the start of trade and here are some of the big stories we are watching today for you, starting in korea. the national assembly begins an extraordinary -- a bill on providing compensation for covid-19 related losses. korea's kim as his countries food situation is getting tense and tencent game maker crafton has filed to raise as much as $5 billion in what is set to be the

country's largest ipo ever. we want to move on and take a look at japan. we will be watching number a as it is among the global banks affected by the $970 billion bond sale ban. 10 of the lenders have been -- as they assess whether they have done enough to fix previous breaches of antitrust rules. the return of the cyberpunk 2077 videogame to sony's playstation stores sparks a rally in the biggest computer game studio and softbank claims to offer free vaccine shots to cover 250,000 employees and their families and will set up 50 vaccinations centers around japan. haidi: we are going to stay with japan and as you know, the tokyo olympics is coming up. organizers have released a new version of their daybook for athletes and officials. these guidelines outline how for breaking virus particles during the games next month.

isabel reynolds joins us now with the latest. what does the playbook detail, what will happen, and how will they make these games safe? isabel: the idea of these final protocols, the final playbook, is to show the government are taking this really very seriously. some of the participants will be coming from countries where people are already widely vaccinated so they might not be taking those risks as seriously as japan stalled us so the penalty for breaching protocols, by refusing to take a test or deliberately breaching social distancing guidelines at this year's games will include disqualification, which is the worst nightmare for any athlete who has dedicated years to reaching peak condition next month but it remains a question of how is this going to be implemented? and we do not have full details on that yet. kathleen: it's hard to imagine any athlete would risk losing

this again and we are five weeks away from the opening ceremony so besides those details, is there anything that remains to be decided? isabel: the biggest question mark still remaining is the issue of spectators. in march, we knew that spectators from overseas would not be allowed but the final decision needs to be made on whether the olympics will be held without any spectators or whether some found -- fans will be allowed in and how many. we are expecting a decision on that next week. an opinion poll in japan show the public remained divided between those who wanted to go ahead with the olympics with empty stands, a spectator free event, and those who want some spectators to be allowed so obviously, some people still want it to be canceled but there is a division of opinion as to how exactly it should be done if it goes ahead. haidi: in the meantime, is the government banking on a post olympics swell of support? we are hearing the murmurs of a

september snap election. isabel: i'm sure they are hoping for that. i went back and looked at the 20 problem fix and found that that then prime minister of the u.k., david cameron, is not getting any boost in support from the olympics even though they were widely viewed as a success so i think prime minister suga will be hoping for a boost but the most he can hope for is that it will go smoothly and he will not suffer a downturn in support. kathleen: we shall see. isabel reynolds joining us from tokyo. let's go to vonnie quinn with the first word headlines. vonnie: thank you. the european union and the united states have agreed to extend a suspension on trade tariffs, and being a 17 year dispute over the subsidies for boeing and airbus. both sides will remove taxes on $11.5 billion worth of goods in the next five years. they were imposed by both sides as punishment.

the breakthrough was also designed to confront china's air ambitions. >> today, the u.s. and e.u. have taken another step. it includes a commitment for joint collaboration to confront the threat from china's ambitions to build an aircraft sector on nonmarket practices. >> china says the u.s. is very ill after president biden rallied european allies to school beijing over a range of issues. they announced the g7 statement to sizing chinese politics in taiwan. it sought to minimize the size of biden's coalition to the u.s. and a few others. beijing took aim at nato, alleging that the alliance inflicted turmoil on the world. the u.k. and australia have signaled a free-trade deal as britain tries to expand its ties around the world. it will cut tariffs on scotch

whiskey, clothing, and cars and reduce levies on agricultural products, sparking anger from some u.k. farmers. it's the first trade deal britain has negotiated leaving the european union. >> the u.k. will potentially get access to the cp tpp and this paves the way for that a so for british farmers and other british exporters, that potentially opens up huge markets for them as well as the australian market though a deal of real substance. >> china's stockpile of u.s. treasuries dropped for the second straight month in april, falling by more than $4.3 billion. despite that, the latest figures from the treasury department show foreign holdings of u.s. rose with japan increasing its holdings by more than $36 billion. japan is the biggest holder of u.s. treasury at more than $1.27 trillion worth with china coming in second. global news, 24 hours a day, on air and on bloomberg quicktake,

powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. kathleen. haidi: troubled chinese bad debt manager -- faces a new challenge as it faces the 50 day threshold in hong kong and that would see it removed from the msci indexes. for more, we are joined from hong kong by our chief north asia correspondent, stephen engle. foregone conclusion that it will be dropped? stephen: not necessarily a foregone conclusion but it states pretty clearly that if that company that has been having a trading halt -- for 50 days, that of course was because it did not release its 2020 earnings. then that company must be dropped from the msci indices within three trading days of that 50 day threshold so these next three days could bring some more bad news for them and that would impact etf's, exchange

traded funds, with $210 billion worth of assets that track msci benchmarks and yet it is another in a string of bad news and weighing on investor sentiment, definitely. obviously, we can bring up this bloomberg terminal chart. 3966. we can see the correlation between the trading halt at the top line and the bonds that have plunged while equity investors have been kind of locked out of the market and delaying those 2020 results has cast serious doubt on the financial health, whether it will default on those bonds. worries built about a possible restructuring. questions also swirling about how much, if any, state support might be forthcoming. again, this might be the first domino to fall because the ftse russell -- the second domino i

should say because the ftse russell indices removed to the company on june 4, but it still remains in the hang seng composite index as well as the s&p hong kong listed china index and if you look at the hang seng composite, regulations call for removal "as soon as possible after a three month trading halt so that is the 90 day trading halt for not releasing results. as far as the s&p china index, removal is reviewed quarterly after a stock is suspended for more than 60 days so in another 10 days, we might get the shoe to fall on the s&p china index with the company. haidi: how big of a setback is this? it is trying to claw its way back from the brink. stephen: absolutely. mutual funds and other investors obviously track the msci indices quite closely. if it is dropped, it could become much harder for it to

raise equity capital even if it emerges -- i don't want to say unscathed, but if it avoids default and it faces, if it is dropped, it faces a long way to rejoin those msci indices. msci does not consider a chinese stock for inclusion if trading was suspended for a 50 day period over the past year so you might have to wait another year and a cautionary tale or good example is a solar powered company. at one time, the chairman, who i interviewed a few years ago, he was one of china's richest men. this company is a good example. msci removed it from its indices in 2015, a few months after my interview with the chairman, after a $19 billion stock lunch prompted a trading halt. activity in this company never resumed an energy was taken private in 2019. >> that is a lifetime ago when

it comes to the china stories that we cover. stephen engle, our chief north asia correspondent taking a trip down memory lane. coming up next, j.p. morgan says it is tactically long. there strategist joins us, next. this is bloomberg. ♪

kathleen: markets around the world waiting for the outcome of the federal reserve meeting. people are watching the tensions rise. let's get to sophie kamaruddin. what are you watching? sophie: a whole lot going on but the fed is front and center and we are seeing some indicators signaling weakness for asian stocks with the nfci gaging hopping around that 60 level and switching out the chart on the terminal, focusing on china, we are seeing liquidity concerns play out on the mainland with upward pressure creeping in to borrowing costs. you can see the overnight people rate around the february high when it comes to the borrowing costs and we did see stocks fall on the mainland but we could see sentiment warming up as we are seeing retail investors pile into mutual funds this month despite equities in china. later today, we are waiting on

china's activity data dump from a which is expected to show a slower pace of growth. pulling up the board right now, a slowdown in china is one of the tail risks seeing but we do have a bond tantrum topping that lists. kathleen: sophie kamaruddin, thank you so much. turning bearish on 10 year treasuries ahead of wednesday's fed decision. they say markets are pricing in a shallow rate hike outlook. our next guest from j.p. morgan says u.s. real yields must rise as u.s. growth continues to outperform and generating inflation and support for the dollar. joining us is executive director and global fx strategist at j.p. morgan. you guys are maybe a little bit out on a limb. i don't think you are completely alone in the markets but everybody is hitting back and saying the fed sees transitory

inflation and they want more data and they think that is what we are going to get. what about you? >> may have been clear that they are going to withhold judgment on higher inflation while the reopening is underway. they're calling it transitory for now. we look at the data and it is quite clear that growth is strong in the u.s. and underlying measures of inflation even though it's measured by some of the regional -- the fed regional bank, underlying inflation could mean that is on the rise. we think that is ultimately that the fed cannot ignore this for too long. the big question for tomorrow is talking about tapering. it's clear that they are going to initiate that discussion. there is a broader eternity as to whether we get a fed that tries to stay dovish for a little too long or whether they ultimately take a look at the data and say that we need to

move forward with our plans for tapering and normalization. we are of the view that that for this latter scenario, higher yields, higher real yields and that means a dollar that should be better supported for the second half of the year. >> we can be pretty sure that the other reporters will be asking chair powell, aren't you at least inking about tapering? can't we even talk a little bit about it? and people might see that as hawkish. how much hawkish miss do we have to hear from powell to move the dollar? >> look, we think about the dollar with respect to fed policy through this rate dynamic and we think that there's upwards of 45 basis points on the 10 year yield from now until year-end. that could be multiple percentage point plunge for the trade-weighted dollar. on the question of how hawkish he will be, in recent weeks, he has already set the expectation that they will start talking

about talking about tapering. that is going to happen and i think we may be a little bit disappointed for more concrete expectations on exactly when that is going to happen. we think talk about the specifics comes later on this year so there'll will be enough ambiguity that the market may be still constrained to the ranges in fx that we have been trapped in. ultimately, we think that the dollar breaks higher, especially against other low yielding currencies where central banks are not as eager to start moving. haidi: that was our question of the day. the flipside of this, the pair that we are watching his dollar yuan. does that mean we -- is dollar yuan. does that mean we have passed the peak? daniel: we are pretty flat on renminbi. we have a target of 640. look, i think the backdrop of gradually rising u.s. real yield

will be a headwind for em currencies, especially those that are relatively lower yielding in north asia but you know, the backdrop for renminbi is pretty firm. it will be hard to perform against the dollar so we are looking for a flat renminbi from here on out. haidi: what about dollar euro? daniel: we have been non-consensus for some time. this is a scenario we think we will see in the fourth quarter. the fed will be much more explicit about when it intends to start tapering. it will be sometime around the turn of the year early next year and around the same time, we are expecting the ecb to expand its qe program as part of its framework review announcement. if something gets fx moving, it is policy divergence and here, you will have one central bank that is ending qe and another that is expanding qe so we think that there is downside on euro-dollar and that has not been expected.

haidi: daniel, always great to have you with us. daniel hui at j.p. morgan. and you should tune into bloomberg radio. daybreak is broadcasting live from our studio in hong kong. listen in via the app, radio plus, or bloombergradio.com. this is bloomberg. ♪

haidi: we are getting the japan trade numbers as well as core machine orders out as well. the trade balance coming in at a contraction of 187 billion dollars so the trade deficit coming in much worse than expected. the trade balance adjusted number for may coming in at $43.1 billion and missing 200 ¥41 billion that was expected. when it comes to the breakdown, you on your export coming in at a jump of 49.6%, slightly shy of expectations and an increase from the previous month. we have some serious distortions going on because of the pandemic. imports year on year coming in at 27% -- 27.9%, also slightly higher than expectations. we have really just seen that

balance driven on account of the stronger export picture as well and we have seen of course unadjusted for seasonal factors, looking at that deficit. our bloomberg economics expecting japanese exports to remain above pre-covid levels as we continue to see that strong recovery globally. let's get the core machine orders month on month for april. that misses expectations of 2.5 percent. year on year, that number increases to 6.5%. a miss of expectations of 8% so we are seeing that slower pace of increase in april and clearly, we are seeing some from the state of emergency delaying company investment and spending plans when you are talking about the slowdown seen in the services sector. kathleen. >> toshiba continues to be on our radar ahead of the open as our details continue to emerge for the investigation over unfair voting practices. four toshiba board members

described parts of the independent investigators 139 page report as "deeply disturbing. for more, we are joined by -- in tokyo. deeply disturbing. when the story first broke, and i thought what is going on -- when you see some of the details, you can only agree. what jumps out at you from this? >> absolutely. it takes a lot of time to get to the bottom of the report which is 139 pages, nearly 800,000 emails were sent in regards to this. the key thing about this report is that it gives us a rare public, on the record look at just how far toshiba was prepared to go in order to influence shareholder voting and really, for people looking at japan, it shows exactly how they work hand-in-hand with figures in the trade ministry, which carries a lot of sway, in order to influence voting. the report mentioned nine times

that toshiba acted in unison with the trade ministry in order to sway the vote. haidi: the key protagonist, the actors in this report, you don't get any more high-profile than that. >> exactly. one of the surprising things that came up in the report was that of prime minister yoshihide suga himself, who at the time was the chief cabinet secretary for the influential cabinet post. he is, according to the report, alleged to have been briefed on the plans by toshiba officials and according to one part of the report, is said to have expressed support for aggressive action to use legislation in order to further the goals. yoshihide suga has denied any involvement in it.

the other figure is a man referred to as mr. m. the report implicitly basically makes it expressly clear that that is the person who was the head of the pension fund here and he worked with them in order to attempt to influence the vote by harvard. kathleen: extraordinary story. in tokyo with the latest on toshiba. let's take a look at some of the stocks we are watching going into the start of trading across major markets around asia. sophie. sophie: you are watching video game makers with the tencent backs -- seeking a listing in what would be korea's biggest ever ipo. also watching hyundai motor which has seen more factory disruptions from the chip shortage but operations are to resume at its plant on thursday. in tokyo, we are keeping an eye on mizuho with the top

executives set to take pay cuts after they found management lapses. sony on watch after its playstation store added a new wish list button the cyber 2077 game. a step closer to reinstating that. let's get a quick check on market action ahead of the fed. we are seeing futures pointing to some marginal losses and quibi stocks are .25% this morning. -- kiwi stocks at .25% this morning. kathleen. kathleen: thank you so very much. coming up, citigroup's joe hana joins us to preview china's may activity data dump later on wednesday. a lot riding on this. how much will the year-over-year affect pullback retail sales? can the consumer pick up steam and keep the economy going? the market outlook as the

countdown continues. market opens our next. -- are next. this is bloomberg. ♪

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>> hello and welcome to daybreak asia, i am kathleen hays in new york. >> i in hong kong. haidi: asian stocks to follow wall street, ahead of the fed policy decision and possible clues from the timeline.

across the u.s., calling it very ill for president biden's plan against beijing. and as trading halts in hong kong. >> a big story in the markets, the federal reserve meeting is one, a chinese data dump also being watched closely. what is on your radar screen? >> we have markets calm, when we look at indicators we are seeing downside moves for stocks early in the session, about .4%, toshiba under pressure. trading above that -- japan's latest trade data to digest and we have potential moves when it comes to turnouts in japan, we have a faster pace in vaccination and japan as well as the olympics getting g7 support.

medium topics are higher eventually on those -- stocks have outpaced the topic this year including this month. we have a parliament session that kicks off today that will include the issues such as the extra budget and a covid related compensation from the u.k., $2.2 trillion -- 2.2 trillion one -- one -- in australia, we had the high floyd off a 10th of a percent, 8000 points before the year is out as we have seen the index drive the year to date rally that has helped australia. globally, it is europe that is leading. australia 10 year yields are kicked -- taking higher, ahead

of the fed and seeing what is going on in treasury markets, we have the 10 year yield for the u.s. still staying. haidi: let's get to our next guest, he says inflation will depend on the economy opening and -- the head of asia-pacific macro strategies at markets, talk us through those three elements and transitory could be a drinking game right now, what is the meaning if we go beneath the catchphrase? >> i guess transitory has been done to death. the main thing with inflation is we know about the reopening effect, it has had an impact on inflation over the past month, we all know about specifics. the bottom line is these

reopening effects are stickier than people would have thought a few months ago. but they will wash out with the data when things reopen and -- when things open up and we get more normal with economic activity. it really depends on real demand and conditions in the economy and in order to get a sustained level of inflation you do need to have some demand led inflation and that is driven by higher wages. we do need to see a tighter labor market, particularly in the u.s., we need to see that translate into higher wage growth and into higher demands for worker compensation. we are not quite there yet. without that it is hard to see a sustainable level of inflation be on the next two months. haidi: i want to get your look on three measures with the financial conditions we have seen since the 1990's, and underpinning of the risk asset

exuberance we continue to see across assets. when you look at the chart and money markets, awash in cash, are there serious distortions and risks? is that the right way to look at what the fed says and what happens to inflation? >> conditions are a number of factors combined, it is not as the level of monetary policy, it is also tied in with the level of the currency as well. where the dollar goes from here is important. you could argue that a loose monetary policy equates to a weaker dollar and there is some semblance of truth behind that, but two go hand-in-hand. but the economy needs to be re-inflated, the reason you are seeing all this monetary accommodation and there's a reason you are seeing the fiscal policy and the stimulus, there does seem to be a reflation of the economy simply because of

the adverse impacts of covid over the last 18 months or so. whether this is necessary depends, if the national commissions are so loose they become at risk of -- financial stability, that should be reflected in the number of yields because if you have that stability you have potential to get ahead and that should be affected in the markets, pricing in that potential for romantic scenarios. -- problematic scenarios. the financial conditions are a prerequisite of inflation and economic recovery. to the extent that are decade those for now does not bode ill for the economy, it is really part of the governing process. >> a lot of people are saying there is a lot of strength in this rebound and remember, the u.s. economy, this is on a classic this is not a classic recession, it was a strong

economy hit by the pandemic. record historic stimulus thrown at it and it is responding quickly. when you talk about a weaker dollar, sure the definite sit -- the deficit is going to get bigger but at some point is that an argument for a dollar? >> it argues for investors to become more invested in assets. whether that necessarily translates to a stronger dollar actually depends on how they perceive the dollar in the future and that may explain what i mean, i can purchase u.s. assets or equities because i'm bullish on the economy. that is not necessarily translated into a stronger dollar, what i might do as it investor is -- as an investor's head out my dollar, where that currently heads -- as we know with the fed, it is quite happy to sit on its hands and do

nothing at of federal funding. where that also ash with that also implies for dollar is that it depends very much on whether the deal of financial conditions runabout are such that they do not give the dollar any real support. -- you will start to head out so you can be very positive on the u.s. but you can also be negative on the dollar, that is quite a positive -- possible scenario for foreign investors. >> an important question for the fed right now, a question of a rate hike is in the distance, the question about when they are talking about tapering seems more like a near-term possibility, if not this meeting than soon, maybe the end of the year. how does that affect your investment strategy? >> it depends to some extent on what they really mean by tapering. i know we could be splitting hairs but there is a continued

purchase of u.s. assets by federal reserve, clearly this process of ongoing as it were -- if tapering implies a reduction of purchases, that would be on the margins for risk assets but this in time we do need to see a far more aggressive fed 42 have a negative impact on risk assets. until the fed really hikes or removes stimulus, the flow of stimulus into the market is ongoing and the fed is only one federal bank added to global liquidity, by a number of central banks around the world. i think tapering would have an impact on the margins but we would need to see a roadmap that would be more aggressive in terms of normalization before we think risk assets would get hit. partly on the recovery story. >> thank you very much, dwyfor

evans. now let us go to vonnie quinn with the first word headlines. vonnie: israel and gaza, it reacted to -- from the border and hamas territories. it comes after two days after the new prime minister, ending benjamin netanyahu's 12 years in power, and 11 days hamas killed at least 243 people in gaza and 12 in israel. the u.s. ending its 17 year dispute over boeing and airbus, half $1 billion worth of goods for the next five years. the tariffs were imposed by both sides as punishment as they accused each other of -- fox repair makers. it is also designed to control china's air ambitions.

>> today the u.s. and eu has taken another step, the deal for aircraft includes a commitment to collaboration to confront that threat from china's ambition to build an aircraft sector on nonmarket practices. vonnie: the u.k. and australia have a free-trade deal as britain tries to expand economic ties among the world. it could include whiskey, clothing and cars. sparking angry -- anger across some u.k. farmers, it is the first trade deal negotiate a from scratch since leaving the eu. >> the u.k. will potentially get access to this -- four british farmers and other exporters, it opens up huge markets for them as well as the australian market so that deal of real substance. vonnie: global news 24 hours a

day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn, this is bloomberg. haidi: let's look at nintendo, a decline in the early part of the session, we are seeing broadly movement when it comes to asian videogame stocks including the last day at the e3 showcase where nintendo said the highly anticipated game in the zelda franchise would be out in 2022. they did also not give any update on when the switch consul could be updated which was rumored, down about 3.5% in the tokyo session, watching other gaming stocks -- stocks as well, player unknown battleground up to -- more than a billion dollars in the korean market, but nintendo is seeing that the lack of the switch -- the

release of a new zelda game dulling the outlook. >> still ahead, a preview of china's ec economic data -- economic data, however next president biden solidifies an international coalition against china as he heads into talks with russia. we will have reactions of that. this is bloomberg. ♪

>> we are not aiming specific companies but we want to have a global playing field and we want to work together to potentially battle challenges posed by a market. >> today the u.s. and eu have taken another step, the deal on

a large aircraft includes a commitment for concrete joint collaboration to confront a threat from china's ambitions to build an aircraft sector on nonmarket practices. >> u.s. trade rep is into to catherine and commission executive outline their unified stance against china's air mission after agreeing to a five-year truce in the boeing airbus dispute. on his first overseas trip as president, write plan for an international coalition to stand up to china and it has come into focus and not surprisingly drawn the ire of beijing. joining us is our greater china executive editor john loan -- john low. -- john. how serious is this? is this a new trend or will it come and go? >> i think it is quite

impactful, you have the u.s. and europe saying we are going to stop -- go after china for its subsidies, i think that is something that could be potentially quite powerful if beijing has to negotiate with both the european union and the u.s. as a unified front. i think you will see beijing react notably affective element. haidi: is this the strongest messaging yet about the biden administration's intentions when it comes to how it deals beijing? >> i think the biden administration has been clear it wants to deal with china sort of with a united front, the traditional american allies, this trip to europe is underlying that in terms of what has happened with the nato allies and the g7 and now with the eu as a group. i think you are starting to see

how and a detailed way the biden administration is going to go about this and what it is going to give up to make this happen. we are talking about the airbus dispute, the u.s. and eu will next talk about the steel tariffs during the trump administration. haidi: that is the greater china executive editor john liu. china is raising -- 28 chinese aircraft entered the island southwest and -- arizona, the largest of its kind. what we make of this development and the message beijing is trying to send? >> haidi: dan, want to check that you have me.

we seem to have some difficulties getting through to him, we will try to get back with him to get the latest on those chinese planes. we have lots more to come on daybreak asia, this is bloomberg. ♪

haidi: china's air force has sent more than two dozen planes near taiwan, raising military pressure on taipei for strengthening ties to the u.s.. 28 chinese aircraft entered the identification zone, the largest exercise of its kind this year. let's go to dan, what is the significance of these develop men's? >> -- developments? >> coming after the g7 and

instability in taiwan, it is a clear message from china they are going to start back. they do these exercises routinely, a number of fighter jets is large, but this was the largest this year. and they are all going -- into the main taiwan part between and other outlying i'd--island taiwan holds, so the concern is that china might one day try to seize one of those outline islands that would provide a test to the u.s. and allies. >> this -- the south china sea tensions are strong, the philippines pushing back. what kind of response is embedded in the relationship, the agreements that are already there? >> the agreements, the u.s. canceled its defense treaty with

taiwan when it recognized beijing so -- there is no obligation on the part of the u.s.. there is speculation that the u.s. would in fact intervene if there was a taiwan conflict but that remains at the point of ambiguity in american foreign policy. this in the south china sea, particularly with the philippines defense treaty and the disputed islands, china has been testing that over the past few years. this year in fact with more disputed territory in the philippines, a lot of this is kind of seeing how the other side will respond, testing the air defenses, pushing the limits of -- step-by-step to change the status quo on the ground. haidi: taiwan is seen as one of the biggest risks when it comes

to any kind of clash between the u.s. and china. how did the alliance in this part of the world play out? >> taiwan is the main issue that could really spark a wider u.s. china conflict. there is danger on all sides if that were to happen, that could lead to a full-scale war between the u.s. and china. that scenario would be devastating for the rest of asian and dutch asia and have the u.s. responds to japan and australia, -- asia and how the u.s. responds, the understanding is that if the u.s. does not come to taiwan's aid it will undermine all of the u.s. alliances and commitments around the world. -- globe. >> asia government managing editor dan ten kate.

a quick check on business flash headlines, a south korean giving company to raise $5 billion in the largest ipo ever. the creator of the mobile games will sell more than 10 million shares at 450,000 -- that would smash the record among south korean companies which raised $4.6 billion in new york earlier this year. alibaba has reportedly fallen victim to software which secretly collected or than a billion pieces of user information. dow jones says it was from popular shopping websites over eight months starting at the end of 2019. allie bybee -- alibaba reported as soon as they notice but they would not reveal the number of people affected. apple facing scrutiny over its compliance and a trump era

subpoena of user data especially u.s. lawmakers. adam schiff says the administration would take a closer look at how big tech companies spohn to requests from government agencies. a move highlights the tough balancing act with tech between user privacy and demand from enforcement. a financial regulator has recommended aia and others related to risk management and pay. and found numerous instances where supervisors were paid encountered action of requirements of the financial advisors act elated to a sale of investment products and premium life policies. not good enough to exceed robust excitations, the world's second largest software maker is at 26% this year but still lags behind amazon, microsoft and alphabet sales. earnings will be between 94 and

$.98 a share, average citations were for $1.03. haidi: here in australia we are seeing a rise in news that president biden is moving forward with a -- this is what we are seeing when it comes to energy, almost 3%, gains when it comes to deep yellow. more moderate for energy, one of the top dinners up by 4.5 percent, we saw u.s. geranium minors as well, the energy secretary says the biden administration is moving forward with a uranium reserve despite the fact that the white house's budget request eliminates spending for that initiative. we also see a bounce back after reports of a mishap at a chinese power plant. let's take a look at the broader markets, off by about .2%, -- .0

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>> this is the first freestanding free-trade deal the u.k. has done since brexit. it's also, therefore, a to further deals. and it's the way in to the comprehensive and progressive transpacific partnership. >> u.k. prime minister boris johnson there, discussing that free-trade deal with australia speedily concluded.

following free-trade deals with the likes of japan and south korea and indonesia. the deal is a win for exporters at home and in the u.k. >> we're able to get those trade flows up and running again, especially for our agricultural producers. to similar levels to where they were 50 years ago. the u.k. will potentially get access to the cttpp. this paves the way. for british farmers and other exporters, that potentially opens up huge markets for them as well as the australian market. a deal of real substance. the of outcomes on investment and movement of people. all huge, huge outcomes in this agreement. >> i know is important for you to get this in the bag, first, but where does that leave e.u. negotiations? at what point are we able to get

closer to a deal there? dan: so, we've just concluded the 11th round of negotiations with the e.u. they were taking place concurrently while we were finalizing this agreement in principle with the u.k. that 11th round went incredibly well. 12th round scheduled for october. then, hopefully we are in a position to move to the end game with the e.u. so, my hope would be we might be looking towards the end of this year for the end game for the european union. a lot of water under the bridge but we are making real and substantial progress with those negotiations as well. >> i want to ask you, is it especially important to have deals like this made and others at a time when australia has so many tensions, some of the issues right now in china? dan: look, it is always important to diversify your

trade. and that is what we have done since we came into government. we had about 20% of our trade covered by free-trade agreements when we came into office. we've not got over 75% when we finalize with -- the u.k. really important to be able to diversify export-based. >> the history of free-trade deals for us to really have not gone so well, looking back to the 1970's in the 1980's, the australian united states free-trade agreement that did not go so well. why are so sure this new one will be as positive for australia, for ti industries and its workers and businesses as you sy? >> 50 years ago we had a strong economic relationship with the united kingdom, especially when it came to the agricultural successor. -- sector. we will be able to resume that relationship. and i think also grow those

investment flows. in many ways, i am incredibly confident that this will be a gold standard free-trade agreement because it is a free-trade agreement of real substance. it will be the best free-trade agreement we have done outside of the closer economic relationship with we had with new zealand. >> with this deal potentially under the belt, does that mean australia is giving unequivocal support for the u.k. how quickly can we get that process wrapped up given -- i've been covering these talks round and round back in singapore for so long now. dan: so, this does mean that the united kingdom will get the approval of australia for cptpp.

we wanted to make sure was a gold standard fta. the process will be how the united kingdom can negotiate with all of the cptpp countries. you have to remember the speed in which we have done this free trade agreements with the united kingdom has been unparalleled when it comes to free-trade agreement negotiations. to knock it over and get an agreement in 12 months is unheard of. we'll now move to finalize the complete legal tax -- text by the beginning of november. >> now let's go to first word news with vonnie quinn. vonnie: china says the united states is "very ill" after president biden scolded beijing over a range of issues the foreign minister denounced -- criticizing chinese policies in taiwan and hong kong. it minimize biden's coalition

for just the u.s. and a few other countries. beijing also took aim at nato, alleging it inflicted turmoil on the world. andrew cuomo has lifted estates pandemic mandate, saying 20% of the -- of the adult population has received at least one dose of the vaccine. california has removed most mask mandates for vaccinated people. governor newsom marks the full opening of the economy and tuesday with a $1.5 million lottery award for 10 vaccinated residents. mckenzie scott has announced new donations to 286 charities for a total of $2.7. billion the former wife of jeff bezos criticize the disproportionate concentration of wealth saying she tried to gave way a portion of the -- to systems that need change. she's given away $8.5 billion in

the last year. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. kathleen: investors around the world are waiting to see of china's latest monthly economic data confirms supply and demand continue to recover in may. let's get more on what to expect and how important it is. with an asia pacific economist. we want to start on the fed in china. investors everywhere are watching. what do you see there, effects that pulled on the numbers and take some of the steam out or underlying assets showing that china is still chugging ahead? >> the base effect will bowl down some of the -- pull down some of the headline numbers.

the interesting data to watch is what happens with retail sales in china because if you look at the last round of data one of the surprising things that came out of china was if you look at the base effect and the average, retail sales disappointed in china. this kind of subdued comes -- subdued consumption was in contrast to what people were expecting. we are actually below consensus in terms of our forecast for retail sales because we are a little bit more concerned the recovery in retail sales is a bit slower. in this rounds there should be a little bit of recovery uncertainty -- over the last months and a half china has accelerated as a nation. hopefully that picks up some of the data on the catering services. oil sales are still weak. on the other data, will be interesting is industrial production. one of the things we have seen his china was a disappointment in industrial production, because china was pursuing some of the decarbonization efforts.

so we had some cuts in capacity like steel. we should see a little bit of improvement in the may data. overall the underlying data will show the improvement and we have already seen 0.5% percentage point increase in the pmi out of china. with the sharply rising --prices on steel they might use on the production customs in april. in may. then, fixed asset investment, investors should look ok. fairly strong. we're seeing a pickup in infrastructure investments, property investment should be resilient. but, overall, the story in china i am curious about is when you look at the underlying consumer story, the retail sales. because china has a very diversion path to what we have seen in the u.s. where we don't really worry about inflation pressures. kathleen: in a nutshell, are

these numbers still strong enough for the government to say, we do not have to keep bolstering liquidity? the mlf facility yesterday was considered disappointed. does this, which case does it support when it comes to liquidity? >> right. we have to remember that part of what is driving on a trade policy is not just the pace of economic recovery. china has been marginally tightening its credit policies since late last year. the desire to manage and leverage. i think that sort of process of gradual tightening i think is going to be an ongoing process. the last credit data that we saw was a little bit better than the previous month, but directionally, china is upper margin tightening. the roll over was in line with

expectation. they still want to manage liquidity. again, china has multiple policies. there's more concern about the national stability. they normalized some of their normalization of policies not based on credit like interest rate but on the quantity of credit and liquidity. on the credit front we have seen a tightening of credit inflow. and i think that will still continue this year. the data we are seeing in terms of, still on even recovery but still the recovery nonetheless, will continue on at this pace. haidi: it is interesting probing the reason that central banks feel like they knew may need to move soon, beyond just reflation. take a look at this chart, loose monetary conditions. we are looking at three measures. the financial condition since the 1990's. that is pushing up risk assets exuberance. and this is not just easing

monetary policy. this is liquidity as well as market sentiment. is this a good gauge for what central banks are thinking for systemic stability when they have to move or at least talk about normalizing sooner rather than later? >> i think, obvious to be look at the national conditions. it is a useful tool. but we have to remember is different central banks have different approaches to how they address the national conditions and national risks. some central banks, for example, new zealand where people worry about housing prices. there is more biased using policy tools rather than monetary policy instruments as a way to address these risks. on the other flipside, we moved our call in kora, because we think bank of korea will move earlier. what is driving korea. the economic recovery is better but i think the motivation, the bank of korea is more willing to

use monetary policy tools because it seems low interest rates - sees low interest rates as a problem. in china, the pboc policy framework, the fact that it clearly shows they also care about national stability and that is part of the reason why we have already seen a tightening of credit. the question is different central banks have different mandates. some would rather use macro policies rather than interest rate policies. which is more blunt. but other people argue that interest rates is an important tool for risk-taking. again, this varies and depends on where you are in the lever cycle and what are the other keys available to you. it's not a one size fits all. but clearly, certainly the financial risk-taking and is something that markets a very attuned to. the most important central bank in terms of global liquidity and risk assets is that fed, which is why everyone is so focused on the upcoming fomc and what they

are going to say. haidi: we are indeed. our chief asia pacific economist at citigroup. china's economy may be set to lose momentum in the decades ahead if its labor force continues to shrink. china has been trying to tackle a problem by letting families have more children. economist say it is not enough to reverse the trend. tom. mckenzie explains tom: china has a problem with his demographics. its 1979 one child policy may have kept the world's biggest population in check but has resulted in a 7% decline in working age citizens over the past decade. the united nations projects this group's size will shrink 10 percentage points by 2045. by which time the over 60's will makeup a third of all citizens. china has started easing its family planning policy and new moves may further shift

dynamics from the 4 to 1 blueprint to allow three child families. it could help china maintain its population pounds. it also means a burden on the only child generation growing heavier. studies show that many working women find multiple children fundamentally incompatible with career success. other initiatives like birth and parenting family policies and an increase in the pension age are needed as quickly as possible for china to slow the looming workforce decline and aging crunch. >> up next, the trading halt enters the 50th day in hong kong. we'll look at the serious consequences of that next. this is bloomberg. ♪

>> we just had a nice look at china's big deluge coming up in the next hour. let's look at what the markets are focused on. sophie: this wednesday after a small start to the session we have seen the kospi lead early asia gains heading for a fifth day higher set for another fresh record high potentially. ditto for the asx 200 in sydney.

tokyo now we are seeing some, the nikkei under pressure for the topix extending gains at a two-month high. now, let's get a quick check on european stocks futures. we're seeing an advance to the upside after the longest run since 1999. as euro remains a favorite play, the biggest overweight. now back in asia, energy stocks are leading gains in the region. we have oil trading at 2018 highs. we could see a play toward 75. but some top oil trader see more games ahead. seeing $100 oil as a possibility on a new commodity super cycle. some refuting that pointing to temporary imbalances in crude markets. the latest survey, for the

transitory inflation theme as well as the fed taper, but inflation and a bond tantrum is there when it comes to tail risk as long -- along with a slow in china. haidi: the trouble chinese debt manager huarong facing other challenge on wednesday. that means it would see it removed from msci indices. so, what does the index deletion potentially mean from huarong, as it continues to come back from the brink? >> morning,. so, what will happen is it will almost certain he be deleted today. we'll get the announcement probably tomorrow, and then all of this is effective within three days. so it means that huarong is no longer eligible for the index tracking fund. we calculate it's more than $200

billion in assets that track these benchmarks of which huarong is a constituent. locked out of those funds, a key overhang for the stock that has not tradedin 50 days. we have no idea when it could trade. kathleen: when are we expecting huarong to releases 2020 earnings? >> the indication is that this will happen in august. we had an excellent note from s&p global analysts who recently that suggested some investors might demand huarong to release their earnings in june. the earliest they can do so in june -- that allows him to do that. and then huarong will have until august to do this. if it does not do this it would be in a technical default. we reported, my colleagues in the finance team have reported, that huarong's parent, the

listed unit is preparing for august. that's the next key date we are watching for. kathleen: thank you so much. china ever grants favorite tactic -- is to repurchase shares mopping up liquidity and driving up its price. unfortunate for the company that strategy is about to hit a wall. joining us for the detail is our asian investor for bloomberg news. how much powder does the company have to reverse the trend? >> not much, because the property developers -- will fall to 23%, as of after friday, after recent buybacks. the company needs to maintain a

bare minimum of 22.04% of a free flow, according to regulators. right now, it seems like they are running out of runway. also, the path the -- the fact the company has limited capital because they have been -- fun ding to meet a debt threshold. so, it seems like the short-sellers are back in fashion. haidi: what are the reasons for the fall? >> well, it's just been a string of bad news. the local government has been looking into their dealings with a local banking affiliate. and then the shares further deteriorated after news outlet reported -- the state capitol into the state lender to dilute evergrande's shares.

on top of that, the government is trying to crackdown on wealth management products. and these are a very important channel, funding channel for chinese developers. kathleen: how big of an impact will the crackdown on cash management products be? >> well, the overall market for that, that type of product has reached $1 trillion. this grew since 2019, under the watchful eye of the government. these products, they have been branded as low risk and high yield, but there's a lack of transparency and also -- beyond the maturity dates. and the risk of these type of the products. what the government right now is

doing is making sure they will be regulated by market funds. all in all, the market should -- with banking revenue. haidi: be sure to tune into bloomberg radio to hear more from today's big newsmakers. we're broadcasting live from our studio in hong kong. or bloomberg radio.com. this is bloomberg. ♪

>> time to look at asian stock markets as the trade a continues. sophie: we're watching for the update from malaysia. outlining a plan to reopen the economy from the end of october if covid cases average below 500 a day. futures under pressure. in china after the tumbling socks that saw the cfx 100 lose more than 1%. futures are hinting at future losses. retail buying picks when it comes to be true funds in china. haidi: our markets coverage

continues ahead to the start of trading in hong kong, shanghai, and shenzhen. a tranche -- out of china is due as well. the china open is next. this is bloomberg. [♪

>> it is not :00 a.m. in beijing and shanghai, welcome to bloomberg markets china open, i am tom mackenzie. david: i am david ingress. -- david ingles. beijing lashes out at the u.s., calling it very ill for the g7. the chinese air force sends its biggest fleet of fighter jets to taiwan.

>>