haidi: morning and welcome to "daybreak australia." we are counting down to asia's major market open. it's decision day for australia's central bank, with the virus outbreak, the delta variant taking a toll on supply chains. we will find out whether china benefits from covid-related disruptions across southeast

asia. the race to japan's top job czar -- he may win the backing of one of his most popular rivals. that's take a look at how it is setting up -- early upside when it comes to new zealand after the prime minister lifting the three week nationwide lockdown outside of the capital. we are watching to see whether these restrictions will further lift, but she says it's too early to declare victory against the outbreak of the delta variant. we see the 10 year new zealand bond yield breach 10% for the first time since 2019. in sydney, all about rba decision day. a split decision expected whether we will see the start of tapering or whether we will see downside indicators. really expecting to see the impact of the ongoing lockdown across new south wales.

nikkei futures looking like we will see another open -- we saw japanese equities extending their gains to a 30 year high. really increased expectations that the fed will be forced to delay the paper plan on account of that poor jobs report. s&p futures, we had the labor day long weekend. u.s. futures really continuing to rally. watching when it comes to the tokyo session. three of japan's larger firms to join the blue-chip. nintendo is one to watch in today's session. getting back to our top story -- rba expected to keep things unchanged at today's meeting. it could defer plans to paper bond purchases with the two largest states grappling with a cove at outbreak.

what are the chances we are looking at? >> it certainly is a live meeting. governor phil lowe's since he wants to stay the course on the taper plan. most want to reduce down to 4 billion a week. fiscal policies are better suited for this particular job at the rba gave itself a get out clause, indicating the bank would be prepared to act further if there was a significant setback to the economy. here's what we have at the moment -- new south wales and victoria are in lockdown. combined, they account for more than half the country's gdp. we have thousands of cases a day in sydney as well. they believe that qualifies as a significant setback and we will see a delay. haidi: what's the latest when it

comes to the virus situation? paul: much better than we saw on the weekend but the trendline is still hitting in the upwards direction. the prime minister singh they expect cases and hotspots in sydney to peek at 2000 day and icu admissions to peak in mid-november. a lot of pressure coming on the hospitals here, however, by mid-november, we should hit the target of 70% of the population fully vaccinated. well on the way to 80% and that's when we would see restrictions start to ease and that means the pressure eases on monetary and fiscal policy as well. haidi: let's get to the other market moving story -- the political situation in japan. we have a front runner emerging to become the prime minister. the current vaccine czar may get the backing of his chief rival. let's get the latest from david

engel in hong kong. what are we seeing and how this race is shaping up right now? david: it is his race to lose. he's got the backing of the biggest faction led by the foreign minister and deputy prime minister, so you've got that sewn up. he's probably the most popular among the japanese populace. the latest polls indicate he has 32% of the vote. the loan declared candidate just has 18%. he has the most twitter followers across japan and his social media active. now it looks as though he has the backing of his chief rival, the number two in the most recent popularity poll. asahi considering job now, throwing his support behind kono. now it is up to him to say i

will run, he's toying with us. he has not officially declared his candidacy, but the cards are lining up in his favor. he has four aces in his hand. will he fold or he play? haidi: the nikkei futures calling above and open 30,000, so he must be enjoying the prospect of new economic policies. what areas are we seeing this boost? david: that's another i did not mention. he's the leader among the business community. if he decides not to run, it throws things into disarray. in particular, green stocks yesterday surging as biomass power companies and clean energy solution companies were up considerably. why? kono wasn't the energy minister,

he was the foreign minister and vaccine czar, but he is on record against nuclear power. if we change the page, we can see nuclear power companies also down, not sharply on that sentiment. the subject of nuclear power in japan is a sensitive one after what happened at fukushima. we could see a bit of a change in policy and the market is reflecting that. haidi: we look like we are setting up for another great day. let's get to some of the other first word headlines we are watching. the military junta that seized power in guinea says it plans to establish a unity government. it's a urging mining companies to keep operating. the current leader assures mining firms that their

agreements would be honored. they also said curfews have been lifted in mining zones and courts have been open. in a step to reform the private education sector come authorities in beijing says that government should establish and mark fees and have price increases by the end of the year. china overcome halt its private education sector in july, banning some firms from raising outside capital. singapore has not ruled out a return to virus code. before raising the frequency of testing for higher rate environments and will ban social gatherings at workplaces until september 8. new infections in the committee rose to 1200 cases last week, up from 600 the week before. ho chi minh city is easing some virus measures, but maintaining its stay-at-home order until

september 15 amid get nouns outbreak. the city will allow areas with low case numbers to visit supermarkets once a week or access food takeaway services. about 80% of adult residents in the commercial hub in vietnam have been vaccinated. coming up, rbc capital markets saying it's a close call for the rba. it is leaning toward tapering being announced today. we will be discussing aussie growth. coming up next, betting that the rba will be holding off on tapering today. this is bloomberg. ♪

haidi: investors clearly betting

on hiring in the u.s. could delay the tapering. asian stocks rallying around a two month high, japanese equities to at 31 year high in hopes a new political leader will be liberal and get a handle on the credit crisis. we see nikkei futures pulling up around 30,000. let's get some market analysis. i went to bring in a market analysis. looks like the stars are aligning when it comes to all the elements supporting a further leg up in sentiment. kyle: the fact that we got those wage jobs on friday night suggest they will kick the can down the road on tapering. we are not going back to an emergency policy anytime soon. i guess it is going to be fleshed out a little bit with central banks that are going to

look to keep the conversation alive about the need to taper in the future. but there are headwinds in the future. the markets are fueled by generous liquidity from central banks, not to mention fundamentals are reasonably solid. that risk on move has really catalyzed on this notion that to normalize policy would be a little slower. haidi: it will be interesting to see how the aussie reacts. take a look at this chart. we are seeing a recovery to the tune of 4% in the last two weeks alone as well as the 10 year yield. the doves would be saying the rba needs to cool down.

i can imagine how difficult it is weighing all these factors on the board today. kyle: my view is they won't back on the tapering just because it would be a symbolic gesture. if you look at what qe could potentially do, the effect of maintaining qe at the current level is now would not be felt for another 12 to 18 months. to lower the cost of capital, support household spending and borrowing for businesses and primarily, this is what we have to a member, cutie was embarked upon initially by the rba to keep pressure on the currency. those things are not a problem right now because the lockdown, the monetary policy doing very

little from a material sense as well as supporting households at this point in time. my sense is -- church and state, to use a metaphor when it comes to fiscal and monetary policy. this is a fiscal task and as a result, pent up man should keep the economy out of recession. it's a positive one for the aussie today. it is a live meeting and if they don't go ahead with a backing on tapering, that could give a leg up which would benefit the aussie again. haidi: do you see momentum after 11 straight months of gains now? kyle: i see the trend to the upside but if you look at the stocks, they've gone through different regime shifts, whether

liquidity driven or a reflation trade, in times of consolidation , depending on which drivers continue to push the markets to new record highs, fundamentally speaking, we've got a lot of concern. there's concerns in the mining space and the chinese growth story going forward. cuts to steel output in china. i'm a little bearish on the reflation dynamic. probably won't see the upside momentum we have seen in the past but we've got to be in an environment, though it has been downgrading in the future, it ought to remain reasonably positive. if we come out of this in the next three or four months of lockdowns and sustain the pent up demand likely to be unleashed on the back end of this, that search for yield will remain

even in australian stocks. although the momentum is probably slowing to the upside, the trend remains to the upside and there are risks to the outlook because valuations are stressed and can be compounded in those situations, but it would be foolish betting against it because it looks like it's consolidating right now. haidi: japan -- that 31 year high. another gangbusters day when it comes to the start of trading in tokyo. how much further momentum is there and at what point is there a reality check as to what we expect from the new leadership? kyle: it very much looks like a headline-driven move to me. he hasn't controlled pandemic

well enough and maybe hasn't been a great success as far as trying to drive the progrowth agenda, so there is a sense may be it is opening the door. some of the headwind is it's a reprieve for global stocks to move away from the tapering conversation. asia disproportionally benefits from that looser monetary policy, so we have that sugar hit reflected in japanese stock prices as well. this is probably one very much driven by more air map -- more irrational impulses than firm fundamentals, though i will say investment will likely be seen as a more positive one under new leadership and it has in the last 12 months, which have probably displease the market if you had to put a pass or fail great on it. haidi: always great to have you

with us. you can get a roundup of the stories you need to get your day going. bloomberg subscribers can get it on your terminal. you can always customize the settings. this is bloomberg. ♪

haidi: the chilean government has approved the senate ask vaccine for children as young as six. one public health expert from johns hopkins says he wants to see more data before children under 12 are vaccinated in the u.s. here's our conversation. >> the question i get asked the most is when vaccines will be available for children under 12

and that's a question i cannot answer because we don't know the data yet for kids under 12. hopefully we will have some of that data and the fda will be able to share it transparently. look at it and help people understand what is there and help make a good decision. that may happen sometime this fall. >> when are you expecting the delta variant and huge surge in the u.s. to trail off? >> there are some signs in some states that it is beginning to happen, but there are other states that are potentially vulnerable. most of the models show by the end of september to mid october, it will be trailing off in some places. the question is how far down it goes and whether it goes really far down or just bubbles along and there's still a lot of people all affected. we will have to see where it

goes. there are different things we are seeing around the world and even in the united states it may look different in different regions. >> who needs booster shots at the moment? it can be quite confusing. two vaccinations, you are tech to but only if you have had two vaccinations? >> certainly people who are immunocompromised should get booster shots because of the risk you did not respond that well and there's evidence with a third shot more people are responding. beyond that, it's early to say. i'm looking forward to seeing more of the data behind it. there is i hope the fda will be able to see the raw data from israel and look at it. there are some statistical illusions. people really need to get into the data. if it is just waning, booster

shots have a stronger case. if it's the latter, it may not matter that much. one thing is really important is for people who are not vaccinated to get vaccinated, particularly people who have not been sick with covid before. haidi: the university school of public health is supported by michael bloomberg, founder of bloomberg lp and wennberg philanthropy. china is reportedly developing a covid-19 vaccine that uses the same technology as the pfizer and moderna shots. the conventional shots have dominated china's rollout. some studies show they create fewer antibodies. in a major shakeup, nintendo

will join the index in the first of october. it comes after the methodology was changed to include a cap so that it won't account for more than 1%. the three firms have a combined value of $280 billion. the british lender will invest 107 million u.s. dollars, allowing 60% of the business. the union controlled company will put in 71.5 billion dollars for the remainder. let's take a look at that day ahead for australia and new zealand. the rba decision is the main nine on the agenda. the decision on whether it will announce a delay for planned taper for bond purchases is keeping aussie watcher -- aussie dollar watchers on their toes.

one of its biggest infrastructure investors is pledging hard carbon emissions, talking about rsm. on the agriculture front, the government is predicting a record smashing year for canola crop production. the outlook bumped up to 5 million tons. let's check in on the markets. we will see how much of a reaction can be gauged given the announcement that the lockdown will be lifted outside of auckland as the outbreak of delta starts to rain -- starts to wane. we see the move in the 10 year yield. when it comes to sydney futures, we see a little caution as we look forward to the rba. whether the rba and bank of korea will decide to go the course anyway.

chicago nikkei futures looking like we are going to see another bump, the open above 30,000. a rally to a 31 year high on expectations of fresh policies out of new leadership. everything is quiet in the u.s. -- u.s. teachers trading to the upside. more to come on "daybreak australia." this is bloomberg. ♪

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paul: you are watching daybreak australia. one of the front runners to become japan's next prime minister is reportedly planning to step aside. he says the former defense mr. will not run for leader of the liberal democratic party and is considering putting his support behind the foreign minister. he leads polls ahead of the election. goldman sachs economist cut their forecast for u.s. growth,

pointing to a harder path ahead for the american consumer. overall expansion is seen at 5.7%. goldman fears the delta virus may have demand switching from goods to services. supply chain disruptions are also hurting inventory stocking. 10 men charge for killing police officers during a rally in 2019 -- the south china morning post says they are accused of conspiring to place explosive devices with the intention of causing death or severe injury. they've been charged under the city's antiterrorism law. angela merkel says she is shocked by the death of a close confidant just days after he took on the role of ambassador to china. he was among her closest advisers, having gain her trust during the 2015 refugee crisis. the chancellor said he has deep humanity and extraordinary

competence. the president of el salvador says the country has 200 bitcoins and plans to buy more, posting on twitter brokers would make more bit coin purchases before tuesday when el salvador adopts the currency is legal tender. businesses will be required to accept the digital coin in exchange for goods and services and the government will accept it for tax payments. 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 paul allen. this is bloomberg. haidi: the holidays are still a couple of months away but you may want to get in your gift orders. the global supply chain crisis is causing orders to pile up. companies around the world are struggling to meet man amid a damaging mixture of coronavirus and widespread auto next. in asia, it's being compounded by one of the worst covert outbreaks.

lockdowns are forcing factories to halt or slow productions. there are what some executives are saying about the challenges on their recent earnings calls. >> are merges -- merchant are taking steps, including adding leadtime to orders. out of stocks and certain categories are running above normal, given strong sales and supply constraints. >> we continue to manage the demand for home-improvement products despite numerous disruptions in supply chains. we are leveraging the scale of supply chain in partnership with vendors to prioritize key skews in high demand categories. >> i believe there could be shifting between q3 and q4. we are out to source product and bring it in by any number of new character -- any number of new carriers. we've got more shipping lanes than we have had in the past. haidi: the first in person major

european -- since the pandemic. he spoke about the outlook for business and regulation in china. >> we are accelerating our path toward full electrification and in fact, we are really going to go for it and see if we can convert our whole portfolio to fully electric i the end of this decade. that's why we have brought for world premieres to this show. the first amg, a sophisticated luxury and an suv as well as the fully electric g4 the g wagon fans. >> is there going to be an amg version as well? i'm not sure if that is confirmed. tell us about it. >> we hinted at what the drive

train would look at with four individual motors close to the wheels. all i can say is at this point, it will be insane. you have something to look forward to. >> what about sourcing the batteries? do you have to scramble to get supply before your competitors eat it up? >> we have sourced our needs up to 2025 or beyond that. with the new accelerated strategy, trying to be ready for 100% electrification by the end of the decade, we are upping the ante, talking to our partners and announcing soon a european addition -- european initiative on the battery side as well. >> you've got to get more supply and i assume across different parts -- materials, chips, how is the supply chain affecting you? >> you have to go all the way down through all the tears, going through electrification.

we are doing this in operations around the world. we are talking to our partners for all of the production plants we have around the world. >> when do you see relief in terms of the chip supply? when do you see that opening up again? >> in terms of the chip supply, we are hoping that q3, which has been mainly hampered by close down in malaysia, that we concert to get back on top again , but structurally, it is something chip suppliers and wafer producers are telling us will be with us next year. >> you have been allocating parts to your higher-margin products. are you able to keep profitability high with that strategy? >> we always have a dual perspective when you have a constraint like this. make sure we keep the waiting

time as short as we can and in a balance between those two, we are trying to navigate through this restraint as best we can. >> there is no shortage of demand now. how long does the big demand stay on? >> we have tremendous demand for the mercedes-benz portfolio. it has nothing to do with covid or any production constraints, we have the best portfolio ever. now, we are in a situation where this constraint meets the highest demand we've ever seen. >> in terms of mobility services, suppliers are talking about how this could make up a substantial part of their revenue and five or 10 years. is the same true for mercedes? >> the digital world in and around the car, the car being a digital thing, opening profit pools that have not been a

billable to us in the past, mercedes is a luxury brand, a blend between luxury and tech. your a to b in style but fully connected with a smart vehicle. >> what amount of revenue is going to come from ridesharing, ride-hailing, those kinds of services? >> how much of the market will go to those services is not clear. it is growing. the very upper end of that where customers are looking for something special in a chauffeur or ride-hailing services, not seldom do these providers come to us for the best vehicle. >> can i ask about china? it's important to most major carmakers. what is the visibility like in terms of regulation and the business climate?

>> we believe in the next 10 years, china presents a terminus growth opportunity for us. we've had a string of very successful years, but if we look at the gdp growth, if we look at how may buyers come into the segment that is relevant -- relevant for mercedes, this presents probably the biggest absolute growth opportunity for our company. >> you are not concerned by the recent regulatory changes we've seen on the tech side of things? >> regulation in the auto industry is more how fast can we get to zero omissions. everybody agrees the paris climate agreement, we have to comply with that and move transport into a zero admission world. in that case, china is no different. haidi: that was the coo -- ceo

of tyler speaking with matt miller at that car show in munich. we have breaking news when it comes to alibaba and the sexual assault allegations that resulted in the first arrest of an alibaba manager. it has been a case that has rocked the nation and gathered so much interest, controversy and anger. china saying they have disapproved the arrest on suspicion of indecency according to the state news tv saying the indecency charge doesn't constitute a crime. police saying the x alibaba manager would receive a 15 day administrative detention. the arrest was the first in the sexual assault case that involved a former group holding manager.

he had been in attendance at it in her that took place in late july where an employee from alibaba said she was sexually assaulted by her boss as well as details about extreme drinking. we've heard that government issuing comprehensive warnings about excessive work entertainment culture that is pervasive at a lot of big corporations. we are hearing china is disagreeing with this arrest of the x alibaba manager. we will stay with china when we get the latest trade numbers. they are expected to show healthy growth in august. what are we expecting? >> looking for a slowdown, 15%, there are two stories going on. we are comparing it with prior

years and that will take the gloss off. we are seeing some softening of demand showing up in that pmi's and new orders index. the official pmi shows forward booking going on there. the private sector gauge fell into contraction. then we look at what is going on in the u.s. and noticed the story there is slowing a little bit with goldman sachs warning the consumer faces a harder road back. perhaps china's export stories may have peaked for now. it is still a pretty robust figure but still slowing all the same. haidi: in terms of the supply crunch, how will this impact manufacturers and reverberate throughout the chain? >> it is still one of the biggest issues facing manufacturers in china. it's something we have been tracking closely. all the time, they were

complaining about on the one hand they either cannot source the component they need or if they can, they are paying through the roof to get them. that's driving up their own costs. on the other, even when they have the final finished product, they cannot get them to the locations on time. we've heard from several manufacturers speaking about how we are going in to the all-important christmas shopping season and they cannot get their goods across key markets. it remains a key constraint on manufacturers and none of them see it easing up anytime soon. it's another drag on the china trade story. haidi: coming up next, will the australia central bank taper plans? that's just ahead. this is bloomberg. ♪

haidi: you are watching " daybreak us truly appear code this one coming in from goldman sachs -- the latest on the effective lockdown index implies a drag on global gdp as other virus-related restrictions are currently in place. the model combines official

restrictions with data across 46 economies. here to put that into context, the latest reading is just slightly higher, but it is far below the peak of 20% we had in mid april of 2020. in australia, ubp is adding to the chorus of voices saying the abp will likely stick to its decision to taper. it will remain unchanged after the meeting later today. probably waiting until its november meeting to evaluate the situation as fiscal measures continue to support activity into the third quarter. my next guest says it's likely to be a close call but is airing toward the rba delaying the tapering. when you take a look at the current quarter, we know it's not going to be pretty. how much of that is going to impact what the rba decides to

say today knowing that it is a long runway to stabilization? >> it is and there is no doubt that the rba's forecast will have to be revised down quite substantially. the economy is probably tracking a weaker case scenario, so we think activity will contract at least 3.5% this quarter. but it's not so much about the current quarter, but what q4 and into 2022 looks like. as long as the bank is reasonably confident there is an exit here and there will be some easing in restrictions and return to activity later this year and more so in 2022, we think under that type of scenario, they will prefer to gently taper and move away from the extreme policy settings that have prevailed in the last 12 to 18 months. haidi: when you take a look at

this chart on the bloomberg that shows the issuance dynamics at play, it's a strong reason to taper. the rba may want to slow their purchases after they had to move issuances. they need to trim purchases to avoid effectively easing policy. is the substance more important than the symbolism at this meeting? it seems like we don't have her at the moment. in the meantime, you can tune into bloomberg radio and hear more from today's newsmakers and get in-depth analysis from the daybreak team. we are broadcasting live from her studio in hong kong. we have lots more ahead on "daybreak australia." this is bloomberg. ♪

haidi: let's get a check on the markets. it looks like strong sentiments for another day in asia, underpinned by the explosive rally we continue to see hold firm into plan -- in japan.

above 30,000 as we get this post super rally keep rolling in japan when it comes to the sentiment there. take a look at australia because keenly and focus is the rba and how will policy makers handle the spiraling outbreak and try to work out whether there will be long-lasting economic damage and whether that is worth putting off taper plans. the rbc capital market chief economist is back with us. we were looking at the dynamics when it comes to bond holdings because they will need to trim just to be able to stop additionally easing in effect. >> there is no doubt the pace of rba bond buying -- they are buying $4 billion -- that

management offices issuing $2 billion a week. look at -- look, at this juncture, it's not about distortions to the market or concerns around liquidity. that functions perfectly well. even if they do taper to 4 billion, that is an easing of liquidity and an expansion of the rba balance sheet. the draft makes a lot of sense in supporting the economic recovery. haidi: do you see the optimism when it comes to lifting when it comes to 70% vaccination? is that optimistic when you look at examples like singapore having to backtrack on these optimistic policies because of delta? >> there's no doubt there is a lot of uncertainty ahead and we are making a lot of assumptions

when we think about a stronger growth path. we don't expect the economy to fully recoup. we do not expect it to bounce quickly. we know australians may be cautious and hesitant even when we get to higher vaccination. we know there's a risk of mutation and questions over the efficacy and discussions about boosters. there's no doubt there is a lot of uncertainty and toward the back end of this year and 2022, where we get much stronger growth. nevertheless, it is an improving profile. we are still fairly cautious and the rba will be as well. they will note the uncertainty. at the moment, the two largest states in australia are in pretty sharp lockdown restrictions and there's very little activity going on. even if you do grow modestly

later in the year, you should see some rebound in activity, bit of pent up demand going into australian summer and holiday. that profile does look brighter by year end. haidi: how much downside do you expect to see from supply chain dislocations and the flow on affect into labor forces? we are seeing shelves bear going into the key holiday season. part of their workforce crippled as a result of covid. >> there's no doubt that there's disruptions across the board. more in some industries and others. that's something we are seeing, when we have lockdowns and restrictions in the two largest states. we know it will take some time to come back, but as a's

trillion to become more and more vaccinated and can move around more freely, that -- absolutely, there's pressure there. there's labor market pressure as well, but it is not substantial and broad-based. it's adding to current challenges. the reserve bank, it's about working through the current challenges beyond the current quarter and more into q4. as long as there a plan to open, i think they will be comfortable. haidi: always great to have you. infrastructure investors are pledging -- this is the private sector taking things into their own hands? >> exactly. investors are looking to cut

into 1.2 million tons out of their carbon portfolio. it's a 40% reduction on 2019 levels. they say that is on track to make it carbon neutral. he said the next decade is going to be the most important time to reach that goal not only for them but for their investors. they are not making any new bets on the fuel. they are trying to make sure all new investments consider climate change and physical risk. haidi: coming up in the next hour, them -- the talk about the

impact when it comes to dislocations in global supply chain as a result of the delta outbreak. this is bloomberg. ♪

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♪ >> good morning. we are counting out the asia's major market open. >> good morning from hong kong. let's welcome our top stories this hour. japanese stocks said to extend, the foreign minister may win the backing of arrival. decision day with a worsening virus outbreak set to la