paul: good morning welcome to "daybreak australia." we are counting down to major market opens. shery: the top stories this hour, u.s. stocks hit a record high. tech takes a hit and extended trading. paul: a make or break weekend.

the developer risks a default if it fails to pay a bond. shery: intel beats estimates. we will speak with the ceo. we are seeing u.s. futures dropping about a quarter of a percent. a disappointment with snap after hours earnings. the s&p reaching new highs september 2. we have a little bit more positive news today. jobless claims edging down. also, the dollar gained a little bit of ground. the two-year yield reaching new highs. commodity prices broadly

falling. oil holding steady. it has been an overbought territory. we are now seeing lockdowns in eastern europe and russia giving rise to demand concerns that weighed on the commodities prices today. take a look at the five year yield because skepticism about inflation is being transitory continues to rise. the five year yield the highest february 2020. expectation for inflation is that it will search to the highest in 15 years. we continue to see a jump in yield broadly. that is making jump on's in the u.s. more appealing. we have seen u.s. jump bonds see

$2.3 billion of inflows. we continue to watch the treasury markets. inflationary signals across the market. >> u.s. investment grade bonds on track for their worst performance since the global financial crisis. this is according to strategist at ubs. they're going to end the year at a negative yield. still a ways to go before we hit the 2008 mark. >> it's been interesting how traders are punishing these earnings misses we are seeing on the s&p 500. 84% or so of those companies report earnings beating expectations. a few companies that have missed have been punished severely.

we are seeing the aftermath with the s&p falling after hours. procter & gamble taking a hit. nestle as well. paul: evergrande also returning to trade in hong kong yesterday. an important date coming up for evergrande on saturday. the grace period expires. there's a bit of precedence for this. evergrande his negotiated a few extensions before, but saturday is shaping up as a key date. let's get more analysis on evergrande and the deepening concerns about inflation. kathleen, what is the latest we

are hearing from the fed? >> a federal reserve board governor, he has been in the fed for a very long time. he said again today he sees inflation back near 2% target next year. now, he sees more upside risk. he said don't expect the rate lift off to occur soon after the bond taper and. -- after the bond taper ends. today he said if inflation gets more, the fed would be have to be more aggressive in terms of the rate lift off next year. also today, the ceo of blackstone said he thinks inflation is getting more persistent. that is another strong reading. he said all the pandemic support

, that will pour a lot of cash into the system. that is still there. let's listen. >> inflation is becoming more pervasive, more persistent than people had hoped. i think that is happening for couple of reasons. one is money supply has grown significantly by more than a third covid which has -- is a monetary physical response to the crisis. at the same time, we have big structural shortages. >> markets are starting to price in to rate hikes -- 28 hikes in 2022. bond yields -- the belly of the curve starting to respond to this idea that there may be two rate hikes. shery: we are watching the bond

markets in china. we are heading toward the grace. ending for evergrande. >> it is crunch time for them as the expiry of the first grace period ends tomorrow. within the creditor community, bondholders saying a group of them are seeking talks with evergrande to avoid what could be a cascade of bondholder, investor demands. once the grace period ends. that could overwhelm evergrande and forced a default. some would like to see them reach forbearance agreement that

would shield the company from slew of investor demands for immediate debt repayment and discuss restructuring options. evergrande gave the market a bit of encouragement maybe a sign that it might be willing to negotiate when it announced that it had reached a three month extension on the bond issued by the joint venture partnership. there might be hope that there could be a stall on the demands for payment and that could buy some time. keep in mind, evergrande announcing yesterday or the day before that they had not reached a deal to sell the property services arm for a needed cash infusion of $2.6 billion. it is crunch time over and over again for evergrande. that's what we will see in the next couple of days.

shery: kathleen hays and susan engel joining us with the latest on evergrande. we will have more on the outlook for evergrande ahead with our guest joining us. plus, a real estate advisory firm is on later. we have breaking news. coming from the dow jones, reporting that western digital talks to merge with a japanese chipmaker have stalled. they have been speaking since early this year. they were supposed to be working to finalize this stock deal that would create a chip powerhouse. we are now hearing from the dow jones that those talks have stalled. we will be watching toshiba

which is the main shareholder there at the open in japan. paul: let's get a check of first word news. >> china has condemned the parliament decision. it says the u.s. support for the island could have an egregious impact and violates the one china principle. the eu report seeks an agreement with taipei calling it a democratic ally in the pacific. a group of 43 countries has denounced china's record at the u.n.. they blame beijing for the treatment of uighurs. for more countries including turkey joined this year weakening beijing's claim that the annual review is part of western efforts to keep china from rising.

china called the allegations baseless. the u.s. and five european governments have resolved a dispute. the deal was reached after -- under the deal, the european countries will retain taxes on companies like amazon and facebook. once it comes into effect, they will refund any levies in excess of an agreed-upon rate. this move follows an embarrassing scandal that led to fed departures and clouded jay powell's path to -- global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries.

this is bloomberg. paul: let's look at how markets are shaping up. new zealand has been trading for over an hour. s&p futures for sydney looking flat as well. we got market pmi numbers for australia for the month of october. back in positive territory. this coincides with the state of new south wales coming out of lockdown. nikkei futures a little weaker bite one third of 1%. shery: investors are balancing the impact of inflation and earnings on valuation. we will discuss the outlook. plus, mattel's latest earnings beat estimates. we will speak with the ceo.

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paul: the s&p 500 hitting new highs with inflation and corporate earnings are two of the big themes. talk about this more with a cio hillary kramer. a mixed bag for earnings. intel came in disappointing. mattel holding out against supply chain issues. when you stack up the earnings picture, which one is the bigger catalyst for markets? >> inflation, that's the problem. as well as the ports which is why we have inflation and the pricing pressure.

paul: supply chain issues, let's talk about those. eventually, they will and. -- they will end. then we might have a different problem. >> i'm expecting the pendulum to go in the opposite direction, especially in the large hardware areas such as automobiles especially. it's so severe at this point in time. the lack of inventory. yes, we are going to overcompensate. there will be a glut then the consumer will be in the driver seat. shery: let's talk about the inflation concerns. we are seeing the bond market pricing and higher inflation. this showing how the volatility continues to creep up but not necessarily when it comes to stock volatility. wouldn't this make stock

investors more concerned given the overvaluation concerns? >> we are all frightened. every institutional investor is scared because there is pain ahead because of the chart we're looking at. the 10 year yield at 1.7%. jumping up so fast like that and the knowledge that in november, the fed is going to taper. they can't keep it forever. this is definitely a problem that you are pointing out. shery: does that mean you are staying defensive and where would you go? >> be very defensive right now. instead of trying to catch a falling knife and jumping into the apples and amazon's and intel, stick with some of the stocks that have lower

valuations. we still like ingredient on which is starches and sugars. corn prices are down. it's used in every product imaginable especially food products. we like rubbermaid. that's a 4% dividend yield. they don't seem to be having pressures with their supply chain. we still like -- it's the beer company with blue moon. that's a defensive play. those are the companies we are looking at. goldman sachs is still the king. best-of-breed, no one can go wrong buying goldman sachs. paul: you are a little bit cold on big tech. this suggests that long-term,

these companies have a good story ahead of them. do you wait for a buying opportunity? it suggests you're looking for a correction. >> i am looking for a correction. what will be the right entry point? this is where individual investors get hurt. seeing a correction happen whether it be apple, i think facebook would be a good example. facebook could see a lot more pain, more downside. the fact are considering changing their name. there will be new technology companies. we joke about the cloud being an old story right now. big tech is too crowded and we will see it come down. shery: it was great having you on again. coming up, late earnings from internal -- intel and snap. this is bloomberg.

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shery: looking at tech earnings, intel is lower and after hours trading after a lackluster forecast for the period. snap dragging other stocks along with it after saying the supply chain crunch is discouraging businesses from -- advertising. they also had to suffer through some changes from apple. >> i think in the case of snap, it was price to perfection. they were trading at the highest multiple in that category. they caught the market by surprise.

it does affect everyone, but the magnitude of the drop in terms of where the consensus was was very pronounced. it looks like it will hit pretty much all the social media ad companies. paul: let's talk about intel. a disappointing performance. intel saying it's partly explained by the supply chain issue. what's the rest of the story? >> with intel, they've had issues for the last three years. they are trying to double down on the manufacturing side. in the process, they are bleeding market share to the likes of nvidia. that's what keeps happening quarter after quarter. they have to take the gross margin guide down and keep talking about how they are investing for the future. execution will take a while and

i think it's going to be a while before they return to the top line growth. shery: whether it's a case of intel or other tech companies the likes of snap, like you said priced perfection. given the surge in yields, is it inevitable that we are going to see disappointment when it comes to the share price after receipt results? >> the multiples are high. what snap did was kept reiterating how their business looks so good. talk about over 50% topline growth for the next three years. in the case of i dfa, it's affecting all ad companies because there ad accuracy and effectiveness is going down. who benefits? probably apple. you will see apple become a formidable competitor on the ad

side. if you are a highly valued stock, you have to keep beating the numbers, otherwise this is what could happen. paul: we work has finally gone public two years after its first attempt at an ipo failed. it has listed at $9.5 billion valuation. that's a fraction that it was valued at in 2019. joining us for the latest is a tech editor. what's the difference between now and 2019? >> we work has slimmed down. it laid off thousands of people. it no longer has adam neumann at the helm. now, it is really not describing itself as a tech company so much but short-term office rental company.

it is come down and investors have reacted much better. softbank has put in $17 billion. a little unclear if they're going to make that back. we won't know for a while. one take away is that even if they break even, people are going to think that it's a win. coming out flat on this will not be bad for softbank considering that we work has been close to death multiple times. >> adam walked away with billions of dollars. >> yes he is now worth $2.3 billion. that is not the $14 billion that

initially it looked like he was going to wind up with. at one point, he described himself as the future trillion or. the $2.3 billion comes down from that, but it's pretty good considering that thousands of people lost their jobs in the last few years at wework. shery: it's time now for morning calls ahead of the asia trading day. bmo capital saying the fed decision to begin winding down asset purchases is a foregone conclusion. the expression will be most apparent in the belly of the curve. they are expecting the first rate hike in the end of 2022 or early 2023. paul: jp morgan warns the pent-up demand for bitcoin could

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paul: the fed will ban top officials from buying individual stocks and bonds as well as limit individual trading. it follows a scandal that led to two departures and clouded jay powell's have to renomination. molly, why was this even an issue? this should have been done quite some time ago. >> [indiscernible]

shery: we have a little bit of an issue hearing you. we will come back to that story. we now know more about the whistleblower who gave extensive evidence to regulators in a rigging scandal almost a decade ago. he or she was given almost $2 million as an award and that is a record. the tipsters identity is still being kept confidential. >> his or her attorney is saying yes, the identity remains confidential. however, in may the washington journal reported it represented a deutsche bank worker who was said to receive a major payout. it was one of the most sweeping abuses back in the 2008

financial crisis. global watchdogs investigating what appeared to be traders at multiple banks submitting bogus rates. what we now know is the $200 million payout has been awarded to the tipster who provided extensive evidence that included documents and trading records and that helped the regulators bring the multiple banks that were found to submit the bogus rates to sanctions. more than $9 billion in sanctions or fines had to be paid in the end. deutsche bank alone paid $2.5 billion. neither the whistleblower nor the firm accused of his conduct -- accused of misconduct were identified. the cftc says the tip prompted another regulator and a foreign

agency to bring similar allegations. again, the london financial district was rocked as much as wall street by this. in this case, it looks like reporting the crime pays. paul: what do we know about previous awards? >> the cftc has begun this program of paying out whistleblower awards. the idea is clear. it takes a lot to convince people who are witnessing these kinds of white-collar crimes to drop a dime or supply documents. we definitely saw that with the facebook case where it can be controversial to come forward with this documentation. that said, the cftc has paid out $300 billion since they began

with the program in 2014. this is the largest payout to date. the rules allow up to 30% of the sanctions received or collected by the regulators to be paid to the whistleblower. that explains why there was such a large payout here. the whistleblower's attorney saying they are very thankful that the significant payout was made. they do feel the a significant contribution was made on the part of the tipster in this case. paul: let's get back to the fed banning top officials from buying individual stocks and bonds. as well as limiting active trading. molly smith is joining us with the details. this was inevitable, these reforms. >> yes. [indiscernible]

shery: we are still having difficulties there. let's get to vonnie quinn. >> evergrande may seek debt talks if it fails to meet a deadline. china's banking regulator has dismissed concerns of a fallout from the crisis while allowing to maintain control on the property market. chinese regulators are nudging didi toward hong kong. it is said to have raised the idea of talks with executives from the company. pfizer and beyond tech --

biontech say that there vaccine booster restores full protection. trial participants received a third shot 11 months after the second dose of the vaccine. the delta variant was a predominant drain during the trial. tencent has pulled all livestreaming for boston celtic games in china after one of their players hosted a video on twitter. the nba didn't immediately respond to requests from bloomberg. a chinese spokesman says the player was ran standing to draw eyeballs. -- grandstanding to draw eyeballs. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. paul: let's see how we are

shaping up for the final trading day. new zealand has been up and running. we are seeing a little bit of weakness. we were hearing from the prime minister earlier this morning about the roadmap out of lockdown. it is dealing with a small but persistent outbreak of the delta variant. here in sydney, we are seeing futures flat. we had some news on the lockdown front. melbourne is emerging from its six lockdown. vaccinations are hitting 70%. it has been six lockdown's a combined 260 days. the last one ended at midnight last night. what have you been seeing?

>> is good news from melbourne and victoria residents who have endured the longest lack -- lockdown during the pandemic. restrictions were lifted today. you couldn't go more than 15 kilometers from home and there were only certain reasons why you can leave your house. there was a curfew as well. that has all been lifted. hairdressers, bars, restaurants can all reopen vaccinated customers. there are still limits on the number of people they can serve at once. we saw that some ours and restaurants opened at midnight when the restrictions eased. there has been some footage on twitter as well people cheering and bells ringing. i think it's a happy mood there now that these restrictions have been eased. shery: qantas revealing more

about its travel resumption plans. what did we hear? >> a lot of announcements from qantas today. probably the best is 11,000 staff will be back at work by early december. that is because qantas is gearing up for a christmas rush. fully vaccinated residents will no longer have to quarantine in hotels. qantas is starting flights to india. there has been a lot of australians stranded in india unable to get home because of a lack of flights between countries. they are also going to resume flights to places like singapore and dg up to one month before had been previously scheduled. the airline is also going to bring back two of its large

aircraft in 2022. shery: that was the latest on travel restrictions. still ahead, the academic outlook for japan. up next, toymaker mattel announces earnings beat estimates. we will hear from the chairman and ceo. this is bloomberg. ♪

paul: the choice of doing nothing is not an option. >> we have seen and increase in the surge of demand for goods driven by e-commerce but also this shift away from services toward goods. >> the cost has gone up 30% to 40%. the volume is up 20% right now and will be more as the year goes on or as the fourth quarter hits us. >> the big issue is the labor force in the united states specifically getting more truck driver and truck capacity and warehouse capacity. shery: mattel was able to work

through the bottlenecks with earnings beating estimates. let's speak with the ceo. congratulations again for your results. it seems you guys are doing well when it comes to dealing with supply chain issues. you didn't completely beat it. we heard that you still have some issues in the supply chain. where are the bottlenecks and where are you seeing better posturing right now? >> let me start by saying it was another strong quarter for us with continued consumer demand for our products. we achieved growth and gained market share for five consecutive quarters. we expect to continue growing and gain market share. it's not that we did not have supply chain issues. we were able to work through them.

we anticipated short supply and longer lead times. we factor that into our planning for specific -- with very specific mitigating actions. this is where our scale, expertise, and supply chain model is to our advantage. we are ready for a strong holiday season. shery: when you say you're going to have a strong holiday season, how much of the orders were frontloaded because people were scared about the supply chain issues? are we going to see a fade when it comes to the fourth quarter? >> we are entering the fourth quarter with great momentum and off to a good start. we're are seeing the consumer demand continues to be strong. orders are strong. emotional plans are in place and

-- promotional plans are in place and we have exciting new products to release to the market. it's always hard to tell the phasing of consumer behaviors. we look forward to a happy holiday season with lots of toys for children to play with. paul: you did mention that you have managed to successfully reorganize supply chain. we have heard from numerous other companies that have had to pay over the odds for space on shipping containers and moving things around has cost a lot more. have you had to burden any additional costs? >> yes, we did see inflation. we expected. it is affecting our profitability. even with that, we just raised our guidance for the full year to be up to $925 million. it is the third raise this year

and we expect to continue to improve profitability and exceed $1 billion year. paul: we have been talking a lot about mattel's movie and television show pipeline. has that been impacted by the pandemic? >> no. we continue to work on the creative development of our project. we have movies that we have announced and are working on. also, you are seeing mattel television thriving with eight shows that we launched this year alone. 13 more in production and many more in development. there is a lot of activity on the content side. we are also making great progress on the digital gaming and digital experiences in general. this is where the strength of our product and our franchises is playing out so well with a lot of interest and momentum.

shery: you mentioned inflation. how much of a price hike of the materials prices is going to impact consumers? have us a sense of whether consumers will have to pay more for your toys? >> we already put our pricing action and plate. -- in play. this is part of our third-quarter results. we haven't seen impact on consumer behavior and demand. i can tell you when we raise prices, we always have the consumer in mind and we always make sure that it is thoughtful and we balance quality and value for consumers. paul: that was the mattel chairman and ceo. thank you for joining us. southwest airlines posted a third-quarter loss. narrower than analysts expected.

the chairman and ceo spoke to bloomberg about the airlines recovery. >> we are still working our way out of this pandemic. we are beyond the survival stage and into the stabilizing phase. it is a matter of getting our staffing aligned well with flight activity and customer activity. it has been a sharp improvement in demand and travel and revenues. the delta variant surge in the summer definitely hurt that. by $300 million in the third quarter, which is sort of an illustration of how volatile the world and the environment still is for us. our normal staffing models just aren't as effective right now. we're trying to make sure we don't overcommit and we deliver a great product for our customers. >> you said you were too

aggressive going into q3. you too conservative going into q4? >> i don't think so. it relative to 2019 as a reference point, our capacity was down third-quarter just 1.6%. we were close to being back to 2019 supply of seats. it will be about 8% less in the fourth quarter compared to 2019. that's a nice recovery from where we have been. just not quite as aggressive as the third quarter. as soon as our staffing can catch up, we will look forward to growing again in 2022. >> it's hard to have escaped the lines and rebooking problems over the last few weeks. i wonder if you have noticed anything in terms of booking passengers? are they going to other carriers? >> our capacity compares well in

terms of shares. there is not an issue there. we need to serve our customers very well. with the atc problems we were dealing with earlier in the month, that set us back. our bookings look strong, especially for the holiday time. we will work very hard to make sure we maintain the trust of our customers, because we clearly let some people down over that couple of days. it was not self-inflicted, the trigger was the faa atc issue in florida. nonetheless, we had to scramble to get our flight crews and airplanes back in position and that took a couple of days. >> where is the landing zone for profitability? will higher oil prices should further out? >> that's the main thing that is changing from third to fourth. one is the delta variant, that's

an decline. fuel prices are on the rise. you have a plus and a minus going into the fourth quarter. but for the delta variant, we would have been handsomely profitable in the third quarter. that bodes well. especially compared to where we have been for the past 20 months. demand is back. now, we just need to make sure we can deliver with operational quality and that's our focus. i don't know that we will be profitable in the fourth quarter. i'm not going to give up on that. we will get off hopefully to a good start in 2022 and hopefully, it will be a good year. shery: that was southwest chairman and ceo. still ahead, we will discuss the delta impact and supply chain issues with the major manufacturer of electric two

wheelers. this is bloomberg. ♪

>> we spent years -- we are now

using all of the learnings of the software to help others. i think we are being bold and helping others in the industry. shery: you can catch more from our conversation for generation next which airs monday at 7:40 p.m. sunday in new york. we are getting the latest from reuters saying the u.s. is seeking a virtual summit in november between president biden and xi jinping. we heard earlier this year that perhaps a virtual summit between the two leaders would take place before the year end. now they are saying it will take place in november.

here's a quick check of the business flash headlines. google is slashing the fee it takes from subscription services on the app store. beginning january 1, google play store charge third-party apps a 15% commission. previously, it was 30% for the first year than 15% thereafter. shares tumbled after hours after it lowered its earnings forecast for the fourth quarter. supply chain issues are weighing on advertising spending for snapchat. intel fell after the close as the chipmaker gave a lackluster outlook. the ceo forecast margins to be lower for the next two to three years and says it is trying to

regain industry leadership. paul: let's get a quick look for the stocks to watch. cobra is a mineral exploration firm, produces lithium. sales for the first quarter, it's an in demand commodity. texas -- dexus is in talks to share its stock in cardinal. qantas is one to watch. we heard from them today about plans to reopen, bring back

11,000 employees and start a new route from sydney to new delhi. shery: coming up, we will discuss the outlook for evergrande not to mention the push for more diversity. that's coming up next. this is bloomberg. ♪

>> good morning. i am in sydney and we are counting down to the major market opens. >> welcome today break a shout. stoc