♪ >> welcome to daybreak: asia. >> we are counting down to asia's major market open. >> good evening. i am shery ahn. a global stock selloff set to spilling to asia after wall street -- worries include the debt ceiling sendoff and inflation.

on bills pile up as u.s. banks are questioned about their exposure. japan's ruling party set to choose a successor to suga in the most open race in a decade. >> we continue to watch the ever grand story. in asia, we are seeing another $45 million. ahead of that, the one i am watching is the bloomberg group suggesting creditors saying ever grand is on the hook for two into $60 million bond new sunday -- due sunday. according to sources we have spoken to, this was issued by jumbo fortune enterprises, a joint venture. one of the parties is hung now -- ever grand's main subsidiary as well as another unit as well. to me, we talk a lot about what

is off the books feared what else is there when it comes to debt obligations? >> especially as we face another one. 45 million dollar coupons, and we have not heard anything about the $80 million bond. a lot of drama around evergrande and a lot of drama around congress. we are talking about no resolution to raising the debt limit. janet yellen saying they will be running out of cash. this coming at a time when we heard from elizabeth warren, saying she would not be able to support jerome powell for a second term as fed. there has been a lot of news in washington. >> we are watching the ldp election. whoever gets voted internally we know is pre-much certain to become the next prime minister after suga stepped down.

we are seeing -- the frontrunner reforms revived the economy, driving this gain we have seen in japanese stocks. we are also seeing -- in the mix. slightly wider support among the party lawmakers seems to say fiscal consolidation with the first woman candidate. as a successor to continue the reflationary up. of course, we will also be watching the market impact. we need another catalyst to see whether this rally in japan continues. >> the nikkei near the 19.90 hi -- 1990 high. the world economy facing risks of stagflation given we continue to see commodity prices at a seven-year high global commodity

prices rallying. copper and coal as well. this at a time perhaps they could also lead to the economy slowing down. a lot of risks that investors have to watch this week. >> huge risks associated whether it be for global recovery. the inflationary outlook, what are you seeing what it comes to oil prices at the moment? >> the great inflation debate, oil prices elevated. blue ti below 75. demand outrun supply and we have seen oil prices move higher as inflationary pressures suggest nominal race. we are seeing a correlation in benchmark treasuries, no the highest in more than a year against the inflationary backdrop. pulling up the board, we are seeing the officer you want up. hsbc -- as rising commodity

prices weigh on china trade and exports get hit. dinero yield cap to treasury for china is overseeing cap on human strength as divergence widens amid speculation the pboc will need measures to prevent pretextual -- potential contagion risks. >> evergrande facing another bond interest payment. a separate one do last week to discuss the impact, let's begin bloomberg opinion columnist john authers p as heidi was talking about, we are seeing this $260 million note from jumbo fortune's. according to sources, how significant are the next deadlines echo --

>> [indiscernible] >> -- exactly how far it is we have got consensus on the market that the government plainly does not want a lehman incident on its watch. it is going to do something to create an orderly workout of all of this outstanding debt at evergrande. this sounds like the moment when the government will have to show its hand. we will need to see exactly how far it is prepared to introduce itself into the process, how

much it is prepared to lean on other players, particularly state owned enterprises to help out in the process of dealing with what appears to be a -- >> what is interesting, but perhaps not surprising to anyone who has observed how chinese corporations work and how the system works, the bond issuance. if you lift the hood commit is it concerning there's a lot of unlisted obligations, that -- i did not know there was a $260 million note potentially do this weekend. >> well, we work for bloomberg. we are used to the notion that you go to our terminals, click the requisite buttons and see all that a company has outstanding, or listed.

it is very frightening. what it does play to and what is significant is the degree to which international investors are concerned about transparency, or the lack of it, in china. that is a very big echo of what happens with the lehman crisis. there were so many cdo's the mortgages had been packaged up so many times, even the banks who owned the toxic securities themselves was quite sure who was holding the baby. that makes any given situation like this more dangerous. plainly, that appears to be the case here. i will speak diplomatically, but that is very problematic. [laughter] >> great having your insight,

bloomberg opinion columnist. >> elizabeth warren denounces strohm powell, calling him a dangerous man because he is making it too easy for big banks to take big risks. the fourth democrat to openly oppose powell for a second term. let's get more from chris condon. what does this mean for his chances to have another term? >> that is not entirely clear yet. it certainly will make things more difficult for president biden to follow through in re nominating jay powell. the anti-powell contingent within the democratic party had started to run out of gas. they had not coalesced around an alternative and it was petering out. elizabeth warren gave that a new shot today. it happens just at a time when

biden is trying to keep his party unified in order to pass a number of crucial measures. it is a headache he does not need, to go into a fight with elizabeth warren over the fed chair. there you have on the screen, brainard is the preferred candidate for progressives in the democratic party, but they have not coalesced around her openly. at the moment i would still say powell, with his republican support is likely to get nominated but it is going to be a bigger fight than we thought yesterday. >> meantime, the debt ceiling. it feels a bit like the boy who cried wolf. we have been here before, right? what are the next steps? u.s. assets in question, as janet yellen that she could

potentially see wuhan to be the haven for the dollar. >> you absolutely could see mayhem and financial mark -- markets it does not take an actual default by the government. if we get close to the cliff, you're going to see a lot of disruption in short-term yields that will potentially affect the dollar. you're going to see huge amounts of uncertainty. financial markets hate uncertainty. another thing to remember, she laid out october 18 is a date by which the treasury is likely to run out of money. those cash flows the treasury overseas every day are very large and very volatile. there is no guarantee they will get to october 18. you could see surprises.

it is not outside possibility that something could change in revenues could come in under forecast. and then we could see us hitting the cliff before october 18. that could be dangerous. >> u.s. treasury and economic policy reporter chris condon. japan -- who will replace yoshihide suga as prime minister. the race is considered the most wide-open leadership contest in a decade. so, this comes to a head today. can we draw conclusions as to all of the horsetrading has been going? >> different from a year ago when suga was a shoe in. shinzo abe stepped down because of illness. he took over, but it only lasted a year. this time it is more open. there are four main candidates,

but two frontrunners, including the administer of reform, the defense minister and former foreign minister who has wide public support. he is also said to be a favorite of the business community. he is the youngest of the bunch of 58 fluid english speaker, georgetown graduate but his biggest competition is keisha -- a bit more of a party stalwart. he has wider support among the older more established ldp leaders. and then there is the wildcard, backed by shinzo abe, considered more of a conservative nationalist and proponent of

continuity. i can also mention the least likely of -- her primary platform has been on social causes. there's going to be a rank-and-file revelation of the vote of more than one million or so plus lawmakers voting this afternoon. we will know results this afternoon. in that first vote if there is not clear geordie, there is a runoff between the top two. it get ins -- it gets interesting because the first vote most likely is that kono will likely win. and i comes to a second vote. if it comes to a second vote, there is more heavily weighted vote -- weighted voting by bigwigs that could favor ishida

san. >> let's get a vonnie quinn. >> outgoing japanese prime minister yoshihide suga lifting the state of emergency. the restrictions on tokyo and 18 other areas -- he says the fight against covid is entering a new phase. restaurants will be allowed to resume alcohol service. u.s. democratic progressives lining up to the five nancy pelosi end oppose a bipartisan infrastructure bill. it is a blow to the measure and potentially endangers president biden's economic agenda. the infrastructure bill has already passed the senate. liberals in the house insist democrats passed a larger tax and social spending package before voting on roads and

bridges. the french ambassador to australia will return after being recalled two weeks ago. in a show about rich from paris after france lost a submarine deal and left out of a defense pact. the exact date of return has yet to be decided. french officials will also seek new partnerships with asian nations including india and indonesia. xi jinping targeting a significant boost in tech professionals, plus more research and 11 spending. state media says -- reliance on high-tech industries. the call comes as -- calls for common prosperity. 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. >> we have an alert, the united

states has reached out to china on cutting iran away all imports. this is according to reporting by reuters. they have reached out diplomatically about reducing purchases of a rainy and crude. u.s. and european officials saying washington is seeking to persuade tehran to resume talks about reviving the nuclear deal and they have reach out on china on trying to cut imports of oil from iran. this comes at a time where we have seen easing of tensions between the sides with the release of huawei cfo from canada. the u.s. now reaching out to china diplomatically about reducing purchases of iranian crude oil, according to reuters. oil has seen a rally. we are seeing a little consolidation in this session. still ahead a vote for the top position in japan with ldp lawmaker you noguchi -- chris

campbell -- as the u.s. approaches the debt ceiling.

>> it is imperative congress address that debt limit. >> raise the debt limit in order to divide -- avoid default. >> the treasury will likely exhaust its extraordinary member -- measures by october 18. >> potential effects could be severe. >> amerco a default for the first time in history. the full faith and credit of the united states would be impaired and our country would likely face a financial crisis and economic recession.

>> jerome powell and janet speaking before the senate banking committee about the u.s. debt ceiling. -- expects volatility to continue. chris campbell's chief strategist at the pearl institute and former assistant treasury secretary. we have been here before. obviously, things have ultimately been sorted out. what do you assign the magnitude of risks? we had janet yellen flagging the potential for harm of the u.s. dollar as a haven currency. >> there is always a challenge pushing the debt limit. it is the single most hated vote on both sides of the aisle every year. but it is probably the most important. the full faith and credit of the united states and the safety and soundness of the u.s. dollar is paramount, as is our reserve

currency. secretary ellen and jerome power -- jerome powell are right. but, we are at an impasse. the good thing about washington, d.c. is there is almost always a way to get to yes. the democrats possess that by changing their reconciliation bill. the way they would pass the larger tax-and-spend package. they can change that bill to include the debt ceiling that would allow for them to do so on partyline basis. it is important to note, the house, senate and presidency are controlled by democrats. that would give a path forward in passing this measure. >> what does the extended wrangling say about the prospects of biden possible

brought her economics package -- biden's package? >> it is a dissident ointment -- to try to find a way to get to yes on so many of these important things. three important spending measures and the debt ceiling, which we talked about. although are important and critical. the broader biden economic agenda is uncertain. the reality is that the largest component of that package, the $3.5 trillion social spending and new taxes which could have challenges on inflation later on. i think that is telling that democrats themselves can't get together on that. >> inflation, transitory or not? how long could it last? >> we have been talking for some

time about this. [indiscernible] the fed has evolved to our position. not happy about it but it looks like inflation will be here for some time. we are suggesting that as the democrats can pass this large tax increase, corporations will pay every bit of tax that are due but they typically tend to pass that new spending, the new increase and burden on the consumers by increasing the cost of goods and services which causes initial inflation. importantly, as is often times -- [indiscernible] the impact this has on higher interest rates along the line on

consumers and the potential for greater defaults. >> consumption is a big part of the economy. >> we have plenty more to come. this is bloomberg. ♪

>> quick check of the latest. -- facing a bond interest payment worth $45 million wednesday. last we, the developer left the deadline without giving any public statement and holders of that debt say they have yet to receive the coupon. they have a race. before evergrande is considered in default. -- 8.5 billion dollars stake in first holdings this week. officials expect to be meeting wednesday as the state plans to cut to one third from about 68% currently. the move with let japan host

another third share amid private citation push. the energy crisis continues from europe to china with more -- in place. this is bloomberg. ♪

>> the future cannot dependent on carbon as a source of energy. to meet that zero by 2050. that is an economic reality. with that ambition of net zero by 2050. therefore, it is going to happen over time. our clients will transition their business models to alternate sources of energy and that will be why we transition our balance sheet, because they are transitioning their

businesses. >> hsp see -- hsbc speaking about getting to name zero. -- that's era. for more on the coal shortage impacting china and threatening to leave less fuel for european coal prices now trading near all-time highs. -- we are talking about an historic rally. >> economies around the world scrambling to get coal, but it is in china, the center of the scramble, where -- is low and there is demand at an all-time high. mines have closed because coal is considered the dirtiest fossil fuel. it's come back is complicating climate talks. if you talk about thermal coal futures in china, they are soaring. european coal has risen to a 13 year high. australian coal has surged by to 50% from last september.

-- 250%. with winter coming, natural gas, china is in a dire need of more supply. they are willing to pay any price and while more than 90% of the coalfields are local, you really can't bring more supply back online without the mindset. if you look at commodity prices, dive into bloomberg, they are running records across the board for all kinds of commodities. you can throw: there. it is off the charts. >> meanwhile opec saying oil demand continuing to 2035. >> opec secretary-general saying they are optimistic that demand will continue, albi at at a bumpy pace. >> once it is over from this pandemic that we are past the peak commit if you like -- peak,

if you like, the recovery will continue very slow. it may be bumpy. we are on the path of responsible trajectory. >> let's talk about the upward trajectory. we are seeing oil prices at three year highs. in the u.k., that is creating panic buying. long lines for gasoline. some stations have shut down. let's go into the price charts, you can see britain crude had hit $80 a barrel. it pulled back a bit because of the selloff we saw in more risky assets, but if you dive into the bloomberg, you can see west texas intermediate is a three year high. it was above 76 in the most recent session, pulling back because of unexpected surge in our weekly supply data, which we

will get confirmation of later. how much higher does it go? analysts from goldman to bank of america are saying a lot higher. goldman sees oil prices possibly seeing 90 -- $90 this year. bank of america talks of an outside chance of $100 over the winter. you are looking at that drop in the middle of the chart to almost zero at the height of the pandemic. you can see how strong that comeback has been. the story here is that demand at this point is coming back ahead of supply. that is what has prices at this peak we are seeing. >> the latest on the energy patch. the wto says the energy in the u.k. and china have different causes. china's crisis impacting key trade. -- spoke exclusively with bloomberg.

>> the energy crunch in the u.k. and china may be slightly different origin. i think the u.k. is more of a labor problem, not the supply of oil. with respect to the recent situation in china where factories have been asked to cut down on energy use, that is a factor. we are -- when there is demand, pent up demand due to the fiscal stimulus that was given very appropriately by many countries to households and businesses. there is demand on the side of households, but not much demand on the side of businesses, some of whom are stocking up inventory. this is another way they manage risk. if you put that business demand together with households and you mix that with a cut in supply

from china, i think this trade will be impacted. i hope not for long. >> -- china's growth because it is slowing. chinese manufacturers are cutting production. this is the latest stock to global supply chains already delayed by chip shortages. soaring commodity prices as well. >> you know, when we have seen a lot of supply chain disruption at the beginning of the pandemic , than the supply chains became resilient and really moved goods around. especially medical goods. at this part of the pandemic, we are seeing disruptions again. that is because of what we spoke about, the demand that is pent up.

of course, if you have factories slowing down, not being able to produce as much, that is going to impact growth and recovery. that is why i say i hope it is not for long because that will start a feedback loop into the rest of the global economy. >> -- speaking exclusively with his endowment. -- gaining traction throughout the market. >> we are seeing the debate heating up once again over the transitory nature of inflation. colleagues assessing where we may go from here due to the analysis for treasuries. you can see it breaking through horizontal areas. the redline denoting -- indicating bond traders are positioning for the return of inflation which may suggest the transitory argument may not hold. we have seen energy costs stay

elevated. the jury is out on that. wti under pressure over what is going on with space commodities. we have seen pressure come through on crude, 1%. wells fargo, as long as opec continues to be patient and not overreach, crude could continue to climb this year and next, especially after we saw -- hit $80. we saw that in the wake of call auctions. aussie yields continuing to climb. curve steepening continues down under with the opening bets in the mix. higher u.s. yields, we are seeing that weigh on the yen against the greenback above 111. nikkei futures up 1.2% ahead of the open in tokyo. >> let's get you to vonnie quinn with headlines. >> japan's ruling party votes

wednesday for a new leader to replace yoshihide suga. four candidates are vying for the position. it is unlikely any contender will secure a first-round majority. attention will turn to a runoff vote in the winner will almost certainly be the next prime minister. u.s. senator elizabeth warren says she will not support jerome powell for a second term as fed chair. she is a high-profile democrat. powell is -- powell's term expires in february and it is not clear warren's disapproval would derail, and is likely to be -- again. >> your record gives me grave concern. over and over, you have acted to make our banking system less safe, that makes you a dangerous man to head up the fed and i will oppose your renomination.

>> officials are said to have questioned wall street lenders about their exposure to evergrande. banking supervisors routinely ask about ties to struggling companies. jerome powell said last week he saw a note u.s. direct exposure. hong kong has asked -- chide to the property developer look -- tied to the chinese developer. 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. >> up next, the race to succeed japan's prime minister enters its final lap as the ruling party heads for an election. we assess the contenders. this is bloomberg.

>> japan's ruling party picks a new leader wednesday to replace outgoing prime minister yoshihide suga. four candidates are contesting one of the most wide-open election in years. let's discuss the implications with an ldp lawmaker kuniko inoguchi. thank you for joining us today. how much do you expect the path of japan to change depending on who becomes the next prime minister?

>> we have to continue some of the efforts we have accumulated. we are in the process of overcoming covid-19 and the new administration will have to do that. we need a better national security environment. in east asia, we have some difficulties in security matters. we need a better economy. we need to redistribute some of the gains we have made in our economic progress. we need to unite people and we have to bridge disruptions. >> let me delve into security, do you think japan should step up defense spending given the risks coming from china's military expansion and north

korea possums the tests? >> of course. almost all candidates ask for bigger national security defense budget. i think that will be just fine. at the same time, we have to make sure we put a lot of effort in diplomacy. north korea is sending signs they may want to engage in diplomatic -- some kind of negotiation. we have to be alert, in both ways. diplomacy, building up our deterrence capabilities and making sure that we have a friendly international environment for diplomacy. including the united states.

>> we take a look at the lineup, there are women contenders. this is going to be a big deal for japan if one of them is successful. is it time for japan to finally appoint its first female leader? >> we have two female contenders and two male contenders. we have a good gender balance. for the first time in history, the ruling conservative party. the gender issue is not all that definitive in this particular race. i support mr. kishida. he is a liberal and he speaks a lot about disruptions and have to deal with disruptions. he is very mindful of

redistribution efforts we have to make. he is also very much mindful of multilateral disarmament. he was the foreign minister who for the first time after the war to bring u.s. business to hiroshima. he represents the district of hiroshima in the lower house. he is very much into diplomacy it also, he speaks a lot about defense spending. it does not matter whether you are a man or a woman, i could support choosing a contender that more -- is taken by this mr. kishida, at least compared

to -- i am sorry. at this point, i may be able to say that japanese voters are very mature. they are willing to accept a female prime minister at this point, but they are also deeply looking into the ideological positions that each of these contenders state. as i understand at this point, kishida is at the top of this race. kono is very liberal. kishida is center liberal. madame takaichi's center-right.

madame noda is very liberal. the voters, the party members and most of the politicians -- but the party members and politicians will respect the wishes of the voters. as we understand at this point, people are leaning to take more liberal lines than before. , but -- but not too literal -- liberal because that could ignite center-right enthusiasm. >> so -- >> that is something that many want. >> i am interested to see how you feel about this particular alliance. we are hearing the backers of

both kishida and takaichi are set to cooperate if either are to go to a runoff. what do you feel about this arrangement? >> in the runoff, there could be realignment. there could be medications. that is what happens. this is -- elections. what happens in the ldp party. we are ruling conservative party. we believe in -- markets, open economy, free trade, and opportunity for all. there are variants within the party lines, but in the end there could be in the runoff a realignment of madame takaichi's group joining mr. kishida's group or some other arrangement.

that can really balance out what ldp stands for good -- four. these people are making their voices heard. whoever wins must take into account the positions and strong policy preferences of the other three. >> kuniko inoguchi, thank you for joining us. lawmaker in japan's upper house previewing that election to come today. breaking news, we are hearing that evergrande is disposing of $1.75 billion -- 1.7 5 billion shares for 10 million yuan. this would be held in non-publicly traded stock in shenzhen bank. the asset that will be disposed is of 1.7 5 billion nonpublicly

traded domestic shares held by the vendor representing about 19.9 3% of the existing issues shared capital of changing -- shenzhen bank. this is as we see a race for liquidity as more creditors are demanding payments including $260 million note on sunday, according to sources speaking to bloomberg. 20 more to come on daybreak: asia. this is bloomberg. ♪

>> we have seen a number of changes. the world learns to live with delta. emma o'brien has been looking at the -- for some time. case in point, you are currently stuck in new zealand. what are the big shift we are seeing and how we perceive the idea of resilience? >> new zealand is one of the biggest -- we have seen. they have been deteriorating in the -- which has been updated monthly. because while the covid situation is under control, among the lowest in the world, they haven't done that pivot

toward reopening a lot of other places and other places that were leading in september have done. that is going towards vaccinated travel, vexing ports, quarantine -- vaccine passports and opening the economy. we have a new number one this month, ireland has beat norway. norway had the number one spot for a couple of months. ireland's embrace of opening up has gotten rid of most of their quarantines. they have vaccinated impressively some 90% of the adult population. that puts them in a really good place, one of the best places to be in bloomberg's covid resilience ranking. >> are the vaccines helping? how is this variant affecting

the way countries are ranking? >> it is affecting them in different ways and some of it has to do with where they are in the cycle. a lot of places in europe had been exiting and had been hit hard by previous variants, not seeing quite the impacts from delta other places are. but they are more vaccinated than places like the u.s., which dropped a couple of wrongs this month because its vaccination rate has stalled at 60%. going ahead with this no holds barred reopening, leading to increasing cases. delta also making quite the impact on the so-called -- countries. new zealand and china. the border curbs that had been the saving grace of a lot of these places, putting them in a conundrum of whether they keep trying to go back to zero cases.

>> emma o'brien, our asia managing at her with the latest on the covid resilience ranking. we are a few minutes away from the open in japan, south korea and australia. >> we are watching asian semiconductors after micron soft guidance. global supply chain struggling to keep up. micron's rival said china's power crunch is not impacting a chip plant. toyota, some operations are being affected. the car baker produces more than one million vehicles annually. we are watching the -- prices in japan. japan puts holdings on watch as the government is set to have started to sell a stake in the company this week. >> next, we will be back with sophie for a look on how markets

are trading. more to come. this is bloomberg. ♪

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shery: welcome to daybreak asia. haidi: we are taking a look at the major market open. a global stock selloff splits asia after wall street's worst day since may, marie's include -- worries include inflation. japan's ruling party is set to

choose a successor in the most open race in a decade. plus, ever grabbed bond follow-up. global banks assess potential exposure. such a confluence of risks. let's take a look at the market open. sophie: politics in japan, the leadership vote kicking off. traders are focused on the race as the country prepares to exit a state of emergency by the end of this month. the nikkei opening 2% earlier, extending losses over the past two days. we had the yen trading above 111, potential moves to 112 if u.s. yields are higher. we have seen japan under pressure, this as the government starting a third estate sale

process. switching out the board, bargain hunters are in the mess with the kospi set to a third monthly drop. valuations are looking good, check out the kospi losing ground. tech heavy is slumping by more than 2%. the korean won on the back foot, against the dollar, has been on the rise. there could be more upside pressure for the greenback if u.s. yields move higher. switching out the board to check out the open in australia. downside moved to one third of 1%, we're seeing energy gain ground have we has been pressure

for crude. given the elevated energy costs fueling the inflation debate, we have seen higher yields. the aussie yield curve continuing to steepen. we could see aussie bonds. jp morgan recommending going for treasuries and we are seeing u.s. cash yields open above 154 on the 10 year. there is divergence with the pboc, which is expected to ease given the desire to contain risk around the evergreen saga. -- evergrande saga. the officer you want is trading about 6%. coming up on9u vgy67u coming up on bloomberg.com77 haidi: always great to see you.

not that uncommon, this is happened in the past. markets are unsettled given the speed of the move. do you take a chance this time around? given the bond selloff, or you just stay out? guest: we think it's possible in the near term you have volatility. markets could pass levels in the next few weeks because we are dealing with supply-side shocks. happening in the aftermath of the fish. in the near term, we are focusing on opportunities, high

yields has gone through a selloff because of evergtrande. ? ♪ the duration is much lower. it's mostly shorter in duration. haidi: evergrande is raising the uncertainty everywhere. guest: there will be some back-and-forth about the company's ability to meet obligation. we are in the 30 day grace period. we think the restructuring is an inevitability at the structure.

-- at this juncture. the good news is the government has a strong incentive to intervene to make sure homes are delivered to the homebuyers, so we think the financial aspect is not systemic risk, but we have some uncertainty for the macroeconomic fallout. it is definitely affecting the real estate sector which is significant for the chinese economy. we think there will be a policy intervention from the chinese government to limit the impact. unfortunately, we have another wrinkle which is the power crunch that can potentially -- haidi: how much of an impact does that have when it comes to the supply-side shocks? how do policymakers address that? guest: this is a tricky

challenge. it's a setback to our scenario. for the fourth quarter, we were counting on a strong rebound from stagnation. now, we are hoping with increasing restrictions on power usage, and our base case is by the end of october there will be a plan to address the situation and different provinces with compliance. if this lasts for the entire quarter, [indiscernible] that will be from 6.5% growth we were expecting. this is a risk. it is slightly more difficult because it's a sub eyesight shock. we think at the end of the day there will be incentive for the government to increase policy

support once there is a credible plan to deal with the restrictions. haidi: what does a stagflation-proof portfolio look like? guest: that is a word that comes up in conversations with clients. at the start of this quarter, we are getting that dynamic. we have faith, and we think inflation will moderate. the hawkish indication from the fed will add credibility to that. in the near term, there will be volatility in the markets both in equities and fixed income markets. our stagflation portfolio, the first step is to freeze cash levels. on the fixed income side, the

shorter duration front, there are interesting opportunities especially in asia high yields. we will be very opportunistic and try and take advantage of those opportunities, and for investors, if you take a view that the chinese economy will stabilize, the region offers a lot of opportunities. that is what we are focused on right now. haidi: always great to have you with us. let's get you to vonnie quinn. vonnie: elizabeth warren says she will not support jerome powell for a second term. she is the highest profile democrat with a say. his term expires in february, it's not clear if her disapproval will derail powell who has bipartisan support and is likely to be confirmed again.

>> your record gives me great concern. over and over you have acted to make our banking system less safe, and that makes you a dangerous man to have the fed and it is why i will oppose your renomination. vonnie: that officials have questioned wall street lenders. a u.s. banking supervisor questioned lenders about their ties to struggling companies. jerome powell said he saw no direct u.s. exposure. hong kong has asked banks to report risks. the french ambassador to australia will return after being recalled about two weeks ago, it was a show about rates from paris after france lost a submarine deal. the exact date is yet to be decided. french officials will also seek new partnerships with asian

nations including india and indonesia. japan's newspaper is saying backers of one candidate have agreed to cooperate if either goes to a runoff. the ruling party votes wednesday, with the race likely to be decided in a second round runoff. the winner will almost certainly become japan's next prime minister. 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. shery: up next, more on the leadership race as lawmakers gear up to vote. we are live in tokyo with the latest. plus, payment pressure as another coupon comes to an off the books demand their share. this is bloomberg. ♪

>> there are variations within party lines. but in the end, there can be a runoff. or some other arrangement. that can balance out what ldp stands for. haidi: a newspaper is reporting ldp leadership candidates have agreed to cooperate if either goes to a runoff. let's get the latest on the election race from tokyo. this is an interesting development. reporter: this is a confirmation

that a lot of people expected. on the surface, it is unlikely because going into the election they were seen as a hawk on china and defense, where the other is seen as a dove, anti-nuclear campaigner, comes from hiroshima. he spent a lot of working to resolve disputes with south korea over japan's past colonialism. as we have gone into the leadership race, they have come closer together on policy. he has shown to have more of an hard edge versus china, which is japan's biggest trading partner. it wouldn't be so difficult to imagine them working together in the future. shery: working together to

become prime minister? reporter: that is yet to be seen. we have to see what the result is of the election. there will be a first round of voting which involves wider membership as well as lawmakers, but none of the four candidates managed to get a majority, it will go to a runoff. in that case, the most likely scenario, we don't know for certain, most likely is it will be -- there is an outside chance takei sheet could be one of the final two. shery: isabel reynolds joining us from tokyo. you can turn to bloomberg for more on this vote. you can get commentary and analysis from expert editors. let's turn to the other big story. evergrande facing another bonds

interest payment, let's bring in our china credit editor. this is not even counting the other potentially off the books bond of $260 million. what do we know? reporter: that looks like the debt piles are mounting up over the next couple of weeks. we have the $45 million coupon due today, but we also have more details of this $260 million bond that is maturing on sunday. that bond was not issued by evergrande itself. it is said to be guaranteed by evergrande and another unit. indications are of course, there are big questions over the

nature of this type of debt that evergrande may be guaranteeing that is not perhaps very widely known. haidi: how many more of these private placement debt obligations do you think there could be? reporter: this one was not listed on the exchanges, there was not a lot of clarity for a long time about the precise nature of the guarantee. quite simply, we don't really know the scale of this. when you look at the complexity and sheer scale of evergrande's operations and guarantors, you can get a quick sense of just how complicated that might be. haidi: we know that there is a long list of potential disposals. does this put a dent in terms of

that debt burden? reporter: it depends what type of burden we are talking about. when it comes to thinking about the wmt or supply, these pressing payments, yes. that may be directed towards those concerns. when we are talking about creditors and bondholders in particular, because of the grace note on some coupons in the context of hiring these advisors, they have a bit more legal route to work out any type of restructure or negotiation. shery: we will see what kind of wiggle room we can glean. our china credit editor, as always with the latest. haidi: coming up next, the wto sending another warning on vexing inequality. supply chain issues are broiling

networks. here our exclusive conversation next. this is bloomberg. ♪

haidi: global supply chain disruptions are weighing on the global vaccine rollout. the wto is holding talks in an effort to improve access. still, the director general told bloomberg that progress has been slow. >> it's moving very slowly. we do think that with flexibility members can come together and find a solution. that would allow developing

countries the kind of access they want. at the same time, showing that the objective is incentivizing innovation and research. that middle ground or landing zone. hopefully, we will be able to have a strong statement at the end of november about trade contribution to the pandemic. >> you think nations will be able to fund this before year end? >> we are hoping. we want a strong statement on the issue of trade and the pandemic. not only about the ip issue. we have monitoring function of exports and prohibitions that

can impact the supply chain, if you recall we have been working with manufacturers on this issue, helping them to monitor supply chains so the shortfalls and disruption we can help, see where those are. so production can be ramped up. that is a big part of the contribution we can make. we have been working with manufacturers on encouraging manufacturing on the vaccine side, in emerging markets and developing countries. that is another part we can talk about. the third part has to do with technology transfer and ip. that is the part where we need to close the gap between the two sides, thus proponents of waivers and others. if we get these three aspects together, i think we can have quite a good statement.

shery: the wto director speaking with haslinda. we continue to track the biggest cap vaccination campaign, check out the vaccine tracker on the terminal and bloomberg.com. that's exciting because we do have the new resiliency ranking. giving us an inside into what is happening around the world. what a turnaround for our berlin. it was the worst place -- ireland. it was the worst place at the beginning of the year and it is now the best place in the world. i think the big takeaway is they gave more domestic freedoms to people who were inoculated, that actually helped boost vaccination levels. haidi: what i find fascinating is the idea of resiliency and high-performance has changed since this index was launched in

november. back then, new zealand was at the top of the ranking. it has now fallen nine spots. this is as we know large parts of the country remain in various degrees of lockdown, the borders are still close. clearly, that focus has moved on from low case numbers, the impact on the public health system, to this idea of which countries are reopening, allowing travel, life getting back to normal. quite clearly, europe is taking the lead. shery: please normalization might not be that great either. the u.s. stands at the opposite end, because we have dropped three spots and inoculation has hit a wall. we continue to track what is happening. do check out the covid resilience rating. this ranking. companies trying to bring back staff during covid.

deutsche bank bringing 5000 staff back to new york city and expects offices to refill quickly. a.c.l. told bloomberg that many returning employees will have the option of flexible arrangements, deutsche bank saying workers in many industries are feeling isolated. >> we are excited to be part of this return back to the city. we are bringing close to 5000 people back to this office. we are absolutely thrilled. shery: demand may be waning. earnings per share are projected to be lower at $2.10 per share. micron is coming off a record

year for chip demand. coming up next, we speak to a guest about the on and offshore risk and implication of evergrande issues. this is bloomberg.

reporter: this is daybreak: asia. democratic progressives are lining up oppose an infrastructure bill, it potentially endangers president biden's economic agenda. the bill has already passed the senate but liberals in the house insist the democrats pass a larger tax and social spending package before voting. china's president is targeting a

significant boost in the number of tech professionals, plus more research. state media says he held a meeting in beijing that china must embrace self-reliance. it comes as he pushes the doctrine of common prosperity and continues a regulatory onslaught. the cdc says covid booster shots produce mostly mild side effects. data shows 71% of recipients had pain at the injection site while 56 were 50. less than half experienced headache. more than 2 million people have received additional shots in the u.s. which are currently approved for at risk groups. the outgoing japanese prime minister is looking the virus state of emergency. the restrictions have dragged on the economy. he says the fight against covid is entering a new phase.

bars and restaurants will resume alcohol service on friday. 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. shery: elizabeth warren is opposing jerome powell for a second term. calling him "a dangerous man". for more, let's bring in dan. she doesn't like his record on financial regulation. reporter: no. but it's also hard to see what her gains are from this. she voted against powell the first time. does she have an alternative candidate in mind who actually can get 51 votes to be confirmed? that is the key to this.

does she have a viable alternative? haidi: when it comes to where we go from here, what are the implications for policy continuity? daniel: i must someone -- unless someone from outside the fed is appointed to succeed powell, the monetary policy continuity is exactly what it was. [indiscernible] has been completely in the mainstream for monetary policy. she has carved out a different road in financial regulation which she has favored tougher measures than jay powell. i would emphasize if they are to

be the candidate other than powell, it's not clear she has 51 votes to be confirmed. republicans were very upset she donated to the clinton campaign, so that is probably a mark against her in their view. with that huge spending package. they blocked efforts to raise the debt ceiling. what can we expect on that front? daniel: we can expect more brinkmanship as we head towards mid-october. if you remember in 2011, the big

showdown over the debt ceiling, that went right down to the wire. just days away. i brought that was pulled out of the proverbial hat. we still have a bit of time to run. markets don't need anymore unnecessary anxiety. the debt ceiling is in-home goal -- and own goal for the u.s.. haidi: sophie is in hong kong. sophie: it's a risk off day with stocks having the biggest drop, levered by japan. the china is dragging on the benchmark for a third day of losses. the kospi hitting a six month low. chip names, battery makers, health care. in sydney, banks are the biggest drag, set for a 3% drop. flipping the board, we are seeing the global bond selloff

continuing with benchmarks above 155. nomura expecting more for aussie bonds, you have the aussie 10 year knocking at the 150 level. broadly speaking, we are expecting more upside pressure for bond yields given the inflation debate is back in the mix. checking in on oil prices, checking in on friends, falling below $79 a barrel as we saw a rebound in u.s. inventory. the currency markets are in focus with an anticipation of dollar strength. the korean won hitting the 1188 handle, jv financial saying we could see more by the end of this year. the dot is expected to hold rates. we are seeing -- the offshore

yuan is under pressure. commodity risks as well as a narrowing yields gap for china adding to that pressure. haidi: china ever grande facing another deadline on wednesday work $45 million. i would next guest says it will lead to more stress. let's bring in the head of china microstrategy. great to have you with us. bloomberg reporting a 216 million dollar bond paper due on sunday. that is what we understand guaranteed by another entity and issued by jv, part owned by evergrande mainland entity. there are lots of implications.

how much of the debt obligations are there under the hood? how much of a risk is that aspect of the story? guest: that is exactly the risk we are seeing. the situation has -- if we look at the outstanding offshore dollar bonds that accounts for only 6% of total liabilities and onshore is even smaller, 3%. aside from these, we understand there will be some other forms of liability, either for retail and other structures including the guarantees you mentioned. however, we do not see the situation leading to a financial crisis in china, we see it as a local situation rather than anything that will spill over into the international market.

based on previous experience, we might be expecting a period of liquidity stress in china markets if the default comes less orderly. taking from experience with a local credit event, we typically see liquidity tightening a little bit with companies under stress, then the pboc responds by injecting more liquidity into the system. however, the evergrande situation will have much bigger implications for china's macroeconomic outlook rather than financial market risks. haidi: even if there is no direct intervention, clearly there is indirect intervention. we had news of the stake sale over the past hour, that was sold to a state owned asset, as

has been encouraged. is this problematic for a moral hazard point of view? even if there is no bailout or intervention, it is pretty clear that debt and obligation is being shifted from one part of the state system to another. guest: from this perspective, we believe the moral hazard would come secondary. the primary consideration is to prevent any systematic risk. the fact that the central authorities direct involvement in the situation means there will be limited risk for immaterial spillover, but over the last few days, we have seen the central authorities become more proactive in trying to support an orderly fallout of the situation, for example by

encouraging state owned and or blinds -- enterprise to bid. the support of the chinese government will be very different than the other situations. it's almost impossible for the chinese authorities to be bailing out evergrande. it's our belief that involvement is to ensure -- to buy some time for the developer so they can facilitate asset sales, increase pay for the retail investor liability. we have already seen retailers protesting. those would be -- shery: uncertainty, pain in the property sector with the power shortage. how big of a risk is this for the overall chinese economy? guest: we are increasingly more

concerned. the situation is just one trigger. the overall property sector, its associated industries, they all together account for some 20% of china's economic activities, and therefore a slowdown of the property market will lead to a deceleration of those activities, not to mention the evergrande situation has already spilled over to other developers where we have seen other developers facing higher liquidity stress. on the property sector alone, there will be implications for local governments fiscal positions. in recent weeks, we have seen cities [indiscernible] the importance of income to the government. are any local government as --

is likely to decline. you mentioned the power shortage. we see a disruption in production having a smaller impact. we have no certainty how long this is going to last. they will definitely have some impact to china's production, which was the only bright spot that exceeded pre-covid levels. shery: great always having your thoughts. coming up next, the energy crisis continues across the world with more and more power curbs put in place from china to europe, but opec says it sees demand recovery in an upswing. our conversation with the secretary-general. this is bloomberg. ♪

shery: taking a look at the commodities space, gas prices easing but around the seven-year high. when it comes to thermal old, the storage continues, more than 40% gain just this month. fertilizer prices on the uptrend, rise in concern on food

inflation. the energy intensive aluminum plants have been hit by the power crunch, aluminum prices around the 13 year high although pressure in the previous session. oil, another alternative, the demand continues, opec expecting fuel consumption to fully recover by 2023, oil demand to continue growing to the middle of the next decade. the secretary-general spoke to bloomberg about the forecast. >> the worst is over for the pandemic, we are past the peak. the recovery will continue, it may be slow, maybe bumpy, but we are on the path of a positive trajectory. >> what you release today says

we won't need as much oil from opec as we did in 2019 until 2026. is it correct to assume between now and 2026 you are going to have restraint and cuts? >> the outlook is the first outlook released by any reputable institution. we have taken the first step, and we are positive in the outlook in terms of demand. demand will continue to grow. this will ease. we are projecting 28% growth in energy between now and 2045.

the world population is going to grow by about 20%, 1.7 billion people will come into this world. the global economy will more than double between now and 2045. we believe going into 2026, that energy will be on the front banner. together with climate. therefore, the world will double its efforts in achieving the united nations resolve. haidi: the opec secretary-general speaking to our colleague. surging food prices are adding to stagflation risks in the world economy.

let's take a look at this. we speak to analysts, we speak to traders and investors. fending off these conversations about stagflation-proof portfolios. how does this complicate things for central bankers? haidi: reporter: that's right, good morning. that returns us to the debate of the year. what inflation is transitory? versus what might be longer-lasting or making an impact on consumer confidence to dense growth outlook. we have seen some signs over the past few months in advanced economies that some of this is transitory in the sense that the recovery sectors are going to have temporary price comes, we know about the supply chain tangling prices and will hopefully wane sometime in the medium-term or maybe the near term. these commodity places -- prices

are quite a new concern, fresh concern. highest in a decade. the jumping oil, natural gas, cotton, food, others. there are some winners in this, russia, saudi arabia, australia. the bigger concern is where does it dense confidence, it has started to enter confidence in some economies. she wants to warn against keeping -- overreacting to price shocks, and a lot of economies have signaled willingness to keep on track to remove accommodations. we will see how this plays out. shery: especially places like thailand. we have the bank of thailand decision today. how will these concerns factor in? michelle: it's been a question about whether thailand will be

an outsider picked to cut rates. we don't really see that is a likely scenario, bloomberg is not seeing a cup for today. that is not really their preferred tool. the governor told us it's more of a blunt tool and there are other ways about this. they have a lot of growth concerns, thailand has been hit with the delta search that derailed plans to reopen the tourism sector. they have to find some solutions. i think what we will hear today is hopefully some views from the bot there are not quantitive easing might be on the table. perhaps they will talk about the fiscal aid and where that is needed. we know the government recently raised its debt ceiling, gave more room for that accommodation. there in a tough spot. 0.7% growth forecast for the year.

it's been a mixed outlook over the last month since their last meeting. it will just have to see how optimistic they are about getting this recovery back on track. shery: great to have you on, bloomberg senior economics reporter. you can get a roundup on all of these stories in today's edition of daybreak. bloomberg subscribers go to the terminal, it's also available on mobile. this is bloomberg. ♪

haidi: evergrande group is facing a bond interest payment on wednesday, it is also said to be on the hook for another $260 million note due on sunday which was issued by a joint venture. last week, they let the deadline for a separate bond payment pass without any public statement. several holders of that debt say they have not received the coupon. the developer has also agreed to sell its stake a regional chinese bank for more than $1.5 billion. evergrande says it will sell nonpublic shares of the bank. proceeds will be used to settle financial liabilities. evergrande noted liquidity

issues have adversely affected the bank. the japanese government may start the sale of an $8.5 billion take this week. officials say they are said to be meeting with bankers as the state plans to cut its ownership to one third from about 68%. the move would mark japan's third share sale amid ongoing privatization push. the japanese carmaker is on track to achieve goals despite the recent partridge. the company has laid out operating profit margins targeted at 2% or more last year, with a focus on cutting fixed costs. shery: as we head towards the open in china, let's turn to sophie. his evergrande still weighing on investors minds? sophie: still very much top of mine, seeing that ripple through credit markets.

dbs says along with evergrande default risks, any further declines in home prices could also dent sentiment for chinese developers and dollar notes. turning to futures to check out the price action in singapore, china and hong kong, seeing potential for further downside. the aipac index headed for a second day of losses. off by 2%, electronics under pressure, growth stocks ragging on the kospi which has had a six month low. we are seeing bombs continuing the selloff, the 10 above 155. shery: coming up, i guess joins us with her market outlook -- a guest joins us with her market outlook. goldman sachs sharing his outlook when it comes to china's growth forecast. that is it for daybreak asia. looking ahead to the start of

trade and shanghai. standby for china open. this is bloomberg. ♪

>> not a.m. in beijing and shanghai. welcome to "bloomberg markets: china open." i'm yvonne man. top stories this morning, inflation fears part of global selloff once again across risk assets. evergrande said to raise $1.5 billion by selling shares and why china's coal