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shery: welcome to "daybreak: asia." we are counting down to her major market opens. haidi: asian traders are assessing a u.s. stock rebound. the two-30 year yield curve reaches its biggest inversion in history. signs that the bank of japan is preparing an intervention to prop up the currency. and we are watching crypto markets and counting down to the much awaited ethereum merge in a few hours. shery: shery: u.s. futures are extending the gains in the late-day session in new york. perhaps some of that information anxiety easing, with producer prices falling for a second consecutive it was still a difficult session in the treasury space. we continue to see inflation concerns, expectations. of a perhaps more-hawkish fed. .

-- the shorter yields continue to rally, the 2-year yield curve expanding. the 2's and 30's are the most inverted since the year 2000. the concerns are being fueled by what is happening in the commodity space. oil is rebounding, headed up towards the 90 dollars a barrel level. we are seeing more optimism about renewed demand, especially with covid restrictions being eased in china, but this also comes at a time when the aea lord today global demand expectations -- lord -- >> lowered global demand expectations today. haidi: take a look at the broader picture, it looks like a more subdued session being set up in asia despite the rebound rally in the u.s.

sydney futures are looking flat at the moment. the big move, though, is in the kiwi dollar. the second-quarter gdp number came in rigidly above expectations. . we are watching for a hold above the $.60 line, it could establish more upside given on some measures we are seeing the kiwi a bit more oversold at the moment. and intervention from the bank of japan is holding the strength in the currency, the yen. signs are emerging that the boj is preparing to prop up the yen as it bounces off about 24 your low. let's get more from mliv contributor garfield reynolds. we have had several weeks of warnings of intervention. what is the market seeing? garfield: the market is getting nervous that japanese authorities are willing to back their words up with some sort of action. yesterday we had the boj calling

their trading desks to ask for what they are quoting the yen at, taking the safety catch off. that is as close as you get to intervention without intervention actually happening. now, it is not as though there is a strong expectation that japan will come in to intervene, but the way that it happened as the yen approached the one 45 level, which it has not breached since the early 1990's, that makes it clear to the trading desks that that is a line that japan is not willing to see cross. so that is the level you could get intervention at. when you have a pullback, that creates a pullback, and you have a lot of people who have been shorting the yen, betting it will go to 146 and beyond.

they have been taking profits now, because they cannot see a breach in the near future. . they have got plenty of profits that they are sitting on because the yen not that long ago was at 140. so why not get out of the game when you have the risk, the extra volatility, you are paying to play, as it were. so take the prophets, get out, maybe reset into the might drive the yen back up. it will be fascinating when that happens. and if that is more hawkish than what people have been expecting, does diana go back to the 145 level again? and if it gets close again, will the authorities actually intervene in the markets physically? shery: and of course ahead of the fomc, we are seeing reaction in the treasury space, deeper inversions, short-end yields continuing to gain ground. garfield: very much so. there was not much in yesterday's data in the u.s. to

signal that the fed will be happy with where inflation is. so, 75 basis point is fully priced in. there was a bit of zeitgeist yesterday in the asian session and before that is a u.s., of the idea that they might go 100 basis points. that seems to have faded, but even so, 75 basis points for a third straight meeting is a lot. and there is the potential that they will stay higher for longer. the other side is that the market is confused that the fed is going to tame inflation. the flipside to that is, what is going on with longer-term yields. they have been staying down or even dropping, well 2-year yield's rise because investors are expecting a severe economic slowdown. that is what you would need to slow inflation at the rate at which people are looking for it to slow. the question that there is, whether that severe economic

slowdown will actually deliver the results for corporate when it comes to earnings, that would match some of the actions that we have been seeing in the equities market. shery: garfield reynolds there with the top market stories. let's bring in a steven major, global head of fixed income research at hsbc. good to have you with us. tell us what the bond markets are telling you about the state of the economy, and what is the outlook here on out. steven: we are in the midst of our global energy markets conference and all the customers are asking the same question. it seems to be about the strong dollar and what the fed is doing. and interestingly, there seems to be more of a focus on the global picture, because it isn't not just the fed, there will be other central banks that could be ahead of the cycle, which i think is quite interesting. i am sure most people come on

your show and debate whether there will be some kind of transition in the fed's dance at some point next year. but some are thinking that it is already moving on, there are some big emerging market that hiked in advance of the fed and may be in a position to be easy next year. so what is going on with bonds, it tends to be a big focus on the u.s. curve and the dollar and the inversion. but what would anyone expect? the fed is hawkish, they will push rates up again. i think everybody knows that now. shery: to your point on emerging markets is that why we are seeing bonds performing better in some of these economies, more than in advanced economies, proving to be a better safe asset? steven: that's right. who would have thought brazil and mexico would have generated a decent positive return in dollar terms?

developed markets like the u.k., the eurozone, and actually korea , have all had negative performances. so we are comparing against the u.s. treasury market where we are down 11 percent this year, but zoo is in deep positive territory. when we talk about emerging markets, we have to define what it actually means, because some of these countries qualifying as emerging markets actually have very low yields and seem to me to be quite developed. south korea for example, and china. china has a 2 handle on bond yields. even china has beaten the u.s. this year. haidi: i was going to ask you more about china. do you see that as an idiosyncratic story? is it still the anchor for emerging markets? steven: i look at chinese government bonds and i think they have more developed

-market properties and behaviors. in our emerging markets conference, people are talking about the outflows from china. in fact, it is true that there is, on aggregate, and outflow, but it is not surprising given some of the things happening in the riskier corners, say, property bonds in the high-yield area. so some flow will go into the government, because they are the highest quality, safest asset in china, and some of it will go out, and that is reflected in the cheapening of the chinese currency versus the dollar. but mind you, just about every country is seen here currency weakened against the dollar. in fact, in the context of what is happening globally, the cheapening of the chinese currency is not that traumatic. haidi: you don't like australia as an alternative? steven: so, if you look at the

performance this year, australia looks similar to the u.s.. it hasn't really offered a great diversification. it could be something to be looking at as the yields are reaching the peak. i have to say this quietly, because i have been waiting for some time and i have been wrong, but we must be getting close to that peak. [laughter] the governor of the rba has indicated that they will be prepared to slow down the pace, he actually said that. you could say the same thing about the rbnz. i would put them in the category of central bank that is not looking to accelerate hawkish and it and could be looking to do the opposite. so, when this cycle turns, these yields are greater scream lower and the markets that will perform best probably are australia and new zealand.

shery: shery: i always find it is better not to mention the word peak. i know for a fact garfield gets mad at me when i question, where is the peak of everything? [laughter] dollar strength. we continue to see the narrative of where bond markets and returns are going. when can we expect the dollar strength and bond yields to part ways question mark steven: can i use the word peak again? [laughter] just so i can focus on the dollar. i think at some stage they will be at peak. whilst the fed is indicating a willingness to stay hawkish, it is very difficult for the dollar to turn. you are right, the bond yield and the dollar have been moving together. that does not always happen, we could be looking at them parting their ways at some point. it doesn't tell us much about the direction, because bond yields could keep going up while the dollar is going down.

it all depends on the context. but i would have thought investors would be seeking some diversification away from the dollar now, because they have seen 13% or so in the sxy, -- in the dxy, and that is quite some move in a calendar year. i think it will be a temptation for investors to start diversifying away from the dollar after such a big move. that is just the way it works. nobody can get the timing right. no one knows what the peak will be. we will find out afterwards. so now is the time to be diversifying. and the performance of emerging markets this year, those with high yield, shows to me that diversifying your risk actually pays. it pays to take some risk to protect your returns.

haidi: we have seen jgb's, particularly the 10 year, continue to test the resolve of the boj. there seems to be uncertainty in currency markets, with young traders and in terms of what options there are for the government. what do you see for the yen going forward? steven: this one starts to get interesting, because everyone knows when the 10 year jgb bumps up against the 25 basis point level, it is going to stop, because there is a huge intervention with the yield curve control. but also, the clock is ticking. it could be that at some stage next year we move on from this, but again, it depends on the context about where the fed is and everyone else, because that is what is driving the dollar-yen. the dollar-yen is a combination of the fed's hawkishness and the determination of the bank of japan to hold the line. of course, it is very difficult for traders to justify shorting jgb's, selling them short.

it's expensive because of where the forward is priced. so most of the frustration is taken out on the yen. that is why you keep seeing these big moves. think about it from an intra-asia perspective, it's not just about the dollar versus the yen, think about how cheap the yen is going to be against the chinese currency. there are a lot of potential interveners or governments who will not be happy with how much the yen has moved. haidi: steven major, great to have you with us, global head of fixed income research at hsbc. still ahead, we will get the latest when it comes to xi jinping's visit to central asia and his much-anticipated visit with vladimir putin. plus, how hot weather is weighing on energy markets in the u.s. this is bloomberg. ♪

vonnie: this is "daybreak asia". i am vonnie quinn with the first word headlines. the w.h.o. says the world is within reach of beating the covid pandemic. fewer deaths whirling to linked to covid last week. more than 76 million cases have

been recorded with nearly 6.5 million deaths. after two weeks of lockdown, officials in the chinese city of cheongdo say they will start raising curbs. six other districts will remain under lockdown and undergo another round of mass testing on thursday. only 35 new cases were reported on tuesday in the city of 21 million people. typhoon muifa has made two land falls on china's heavily populated eastern coast, ringing strong winds and heavy rains to areas around shanghai. major container ports and airports suspended operations, along with several lng import terminals. china issued the highest ever level typhoon warning ahead of the typhoon's arrival, the first time it has done so this year. the international energy agency says china's demand for oil will drop for the first time in three decades. it sees chinese oil demand

falling by one -- falling by 2.7%. that has led the iea to trim its outlook for global crude consumption to an increase of 2 million barrels a day for 2023. 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: alright, a looming strike by u.s. railroad workers is starting to roil commodity markets, raising concern about higher prices from natural gas to board. bloomberg's su keenan has more. natural gas jumped 10% in the new york session. how much worse could it get? su: it is estimated that if we have the strike, it could cost $2 billion a day and that is adding to inflation concerns. the immediate concern is disruption in the delivery of cold. not gas soared 10% by the close

of u.s. trading. it was up 12% intraday, probably on fears that if you curb delivery of coal which generates about 22% of u.s. electricity, it will force power generators to rely more heavily on natural gas. and futures have been surging, which would add to the momentum. these surges in both european and american natural gas have not had an effect on energy stocks. the deal with natural gas, check this out -- energy stocks have been hurt by the pullback in oil. but those focusing on natural gas are up double and triple so far this year. there is just one silver lining for investors in natural gas stocks. meanwhile, corn futures have also been on the rise because of the fact that there is a five percent premium almost and it could go even higher, for corn that would be delivered by

barges. it's expected that number will rise astronomically if there is a real strike. we have not had one in 30 years by the way, here in the u.s., so if we do, it will add to inflation and other costs. the baited administration is working to avert any kind of strike. meanwhile, there has been a focus on what is going on with oil, also climbing on optimism about demand, despite the fact that china has apparently put a big damper on demand and usage because of the lockdowns. the iea sees the biggest drop in three decades. but the fact that we have the lockdown being lifted a bit is creating optimism. you are seeing oil try to breach key levels since january. wti crude had fallen to the lowest we had seen since january but now they are up in very close key levels. back to you.

haidi: bloomberg's su keenan. next, singapore's minister speaks to bloomberg about fighting cancel culture. this is bloomberg. ♪

haidi: singapore is considering a to address cancel culture. single -- singapore's minister of home affairs and law and culture spoke to haslinda amin. i think on the repeal of 337a, we are trying to forge consensus and move forward with some social harmony on an issue that has torn asunder the social fabrics in many countries, the

culture wars and so on. today, marriage is defined in law as marriage between a man and a woman. and any debate on that is in parliament, and not dealt with through the courts. haslinda: are you encouraged that perhaps the definition of marriage could be tweaked at some point in time to include two men? >> i have said what the current position is. the current position is that it is between a man and a woman and that is the policy of this government. haslinda: there has been opposition from religious groups concerned about how they may be attacked for the views they hold against lgbtq as well as equality of marriage. would singapore consider a law to ensure that there is no, i guess, cancel culture? might that happen here in singapore? >> this is an issue that has

concerned us, not just the debates about 337a or sexual mores, but on a wide variety of issues. people's freedom to express their views is curtailed in real life in the physical world. we cannot allow people to beat you up. that is against the law. it seems to be possible and it has happened in a virtual sense on the internet. so these are not easy questions, but they are questions that we have been studying for some time , and if we find the right solutions, yes, that should be something that we could see in legislation. haslinda: singapore's tough stance on drugs is well noted, but it is a changing landscape. if you look at the island, it has already legalized marijuana. does it make it even more complicated for you to police?

>> of course, it creates challenges. the more the availability of drugs, the more challenging it is to deal with it. but by, a vast majority of singaporeans understand that drugs are bad for society. shery: next, chinese president xi jinping's return to the world stage in his meeting with russian president vladimir putin . our next guest discusses the signals it is sending to the west. this is bloomberg. ♪

♪ >> ethereum's merge is a really

big story. >> it is a huge step for ethereum. makes it much more secure and ready to be much more scaleable. >> there will not be any more mining, so it will go from a big problem to not a problem at all. >> now, you can earn full credit and that is definitely a turning point for ethereum. >> we have been much more excited about ethereum over the past month or two. >> i am really in love with ethereum. >> i don't think it is great for ethereum in the short run. >> if this upgrade does not have a technical glitch. >> it will be as smooth as your

iphone when it has upgraded its operating system automatically overnight. >> ethereum has been promising proof since they started. wake me up when the transition happens. caroline: lending protocols are going to temporarily disable ethereal functions as the network goes through the most ambitious change attempted in blockchain technology. let's bring in cross -- cross asked -- let's bring in our cross asset editor. >> is going to be a big upgrade we need to be watching for all sorts of little glitches that might take place, but i could go smoothly as well. a lot of the exchanges and people around ethereum are pausing for a while to make sure everything goes well. it is expected at 1:00 p.m.

singapore time, 1:00 a.m. new york time at this point. we will see what happens. and then, there will be potential, if you do ethereum proof of work, there could be of the things coming up after the merge takes place. haidi: why is this such a big deal? what is going to change comparatively, other than from an esd perspective? >> the esd perspective is one of the big things. it does change the narrative on crypto, that people have been concerned about energy consumption. and this helps with that with ethereum. we will see what else happens with it. sometimes in the past when there have been things like this and

bugs and scams come out, people will have to watch for that. but it does help with that and changes the power structure of ethereum. ed will be interesting to see how that shakes out where you have different groups that had been doing mining and might need to move into other things to make things continue to work. haidi: our bloomberg cross asset editor joanna austin. first word news now with vonnie quinn. vonnie: a measure of u.s. producer prices fell for a second month in august. the producer price index decreased 8.7% from a year ago. fuel costs were leading the decline. still, ppi rose more than forecast. a court has issued an arrest warrant for a co-founder over violations of capital market

rules. prosecutors say six individuals are currently in singapore. the suspect is the founder of the terra founder -- the terra labs, do kwan. talks continue over diverting a national rail strike. the stoppage by 100 25,000 rail workers will be the largest of its kind since 1992, potentially costing the economy $2 billion a day. liberals and unions continue to negotiate a head of friday's possible shutdown. creeping sanctions against russia have caused the country hundreds of billions of dollars according to an internal finance ministry document that says there have been significant hits to the stock market, bank capital and frozen -- foreign exchange reserves frozen by the sanctions. russian president vladimir putin says the country is headed for a growth trajectory. global news, 24 hours a day, on air and on bloomberg quicktake,

powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn, this is bloomberg. ♪ haidi: chinese president xi jinping and his russian counterpart vladimir putin are about to hold their first in-person meeting since russia invaded ukraine. our next guest sees reason to further consolidate the relationship between china and russia. alexander korolev is at unsw. great to have you with us. alexander: russia may not need military aid from beijing at the moment with the exception of military drones. and that has not been confirmed yet. i think the meeting will send a strong signal to the rest of the world, to the west pacifically, to the united states, that russia is not as isolated as it

might look in that china is reluctant to distance itself from moscow despite the reputational costs and risks of secondary sanctions. it is definitely -- the next round of china -- it is definitely the next round of china-russia strategic alignment, at the parameters of how to realize it will not be revealed right after the meeting, but we will learn about them soon after the meeting. haidi: xi jinping has not left the country for almost 1000 days. why now? what does it tell you about the relationship and the domestic situation that he is doing this with just weeks to go until the party congress? alexander: this highlights the importance of cooperation with russia and the broader so-called

non-west. recently, china found itself in a tricky situation due to the deteriorating u.s.-china relations. we will know if the visit to taiwan i nancy pelosi crossed the line with beijing and after that, there was another visit by a congressional delegation to taiwan. taiwan is really a redline for china, and this creates extra incentive for beijing to look for, to look into the consolidation of alignment with russia. because russia is isolated. and russia is in a very difficult international situation, but things don't look great for china either, especially given the strong support the united states provides taiwan, and the neglect

by china against the visit by u.s. officials to taiwan. there is a very strong look -- strong external push my zhe zeng -- external push by beijing to consider the relationship and alignment with russia strongly. haidi: is it for better or worse? alexander: i think taiwan is really a sore issue in relations and g jinping is determined to keep taiwan -- xi jinping is determined to keep taiwan as a redline. it if it continues to take place, visits by u.s. officials to taiwan, beijing might consider a military scenario. even though, at the moment, it

is still a distant prospect, but you never know. xi jinping is more authoritarian in his style compared to the previous generation of chinese leaders. he is more assertive of policy in the south china sea and elsewhere, so definitely there is more determination on beijing's part when it comes to the taiwan issue. shery: could the calculation of the taiwan as you propel china to do more for russia other than political and moral support? and as we discussed earlier, the military aspect of things? if not, what other ways of support could beijing offer? alexander: definitely, the taiwan issue put used -- taiwan issue pushes china closer to russia. and it adopts this dance of an

element of fence sitting, but it is a fact that economic cooperation is growing. china continues business as usual and if u.s.-china relations deteriorate further as a result of the u.s. policy toward taiwan, it is only natural to expect china leaning more and more towards russia. because russia is the only ally of consequence of china. it has pakistan and smaller powers, but that could not affect the balance of great power politics. russia is a permanent member of the un security council, so definitely diplomatic channels and apple emetic platforms for china and russia to support each other. yeah, it is only logical to expect that the more u.s.-china relations deteriorate whether due to taiwan or economic trade

wars or whatever that might be, the more likely our china-russia relations to move to the next stage of consolidation. haidi: is there a risk of secondary sanctions on beijing, with the level of closeness in regard to the ongoing war? chinese risk assets are seeing a geopolitical lashing with fears of western reaction to this visit. could that play out in a negative way domestically? or does that galvanize patriotism and the urge to make the relationship with russia closer? alexander: in political regime like china, political considerations and national interests always prevail over economic opportunities. we believe china cares so much

about economic growth that, if you look at the most recent development like this covid zero policy and the lockdown in shanghai that was quite detrimental to the chinese economy, we can actually discover that economic development might not be as much of a priority. so, secondary sanctions, definitely beijing worries about that but at the same time, i think such issues as taiwan and the legitimacy of xi jinping's political regime will trump economic considerations. shery: alexander korolev, good to have you with us, senior lecturer at the university of new south wales discussing the u.s.-china relations. coming up, a discussion of the possibility of a third vision fund. details next. this is bloomberg. ♪

♪ haidi: a quick check of business flash headlines -- google making

cuts to area 120, it in-house integrative object. reports say it is to control spending. affected workers will need to find new roles google within a certain time or lose their jobs. hong kong's a.m. tv digital has risen 312% in new york mid another wave of frenzy buying in new york. a.m. tv has seen its stocks skyrocketing. at one point, the financial services firm was one of the most valuable listed companies in the world ahead of goldman sachs. hedge funds are venting elon musk will be forced to buy twitter. musk is trying to back out of his $54 -- is $44 billion agreement. hedge funds have been buying up stock options and bonds, convinced musk will buy twitter.

an audited financial statement has been released after months of delay. it says losses multiplied 13 fold since march 2021 and $575 billion of increased spending to produce growth. it blamed changes that byju's -- byju's founder blamed changes -- to fight climate change and environmental conservation. shery: fx space easing the dollar strength we saw after the hot u.s. cpi numbers. a little bit down, treasury mixed with short and yields edging higher.

we have a deepening version of the 210 and even the two/30 year curve was most inverted since the year 2000. we continue to watch the aussie dollar because it is holding at the 67 u.s. dollar level. it fell on a stronger u.s. dollar the previous session but today, jobs numbers are expected to show how the recovery is holding up. the offshore yuan is very close to the seven level, even after the pboc extended its current defense and set the reference rate for the yuan with the strongest buy on record. we see the property sector and covid lockdowns weighing on the economy and the rate differentials, we have seen a reduction in reserve armen's for banks by the voc. but really not enough -- reserve funds for banks by the pboc.

but not really enough. we continue to see verbal intervention and perhaps the finance minister coming into the market as we continue to watch what is happening in japan trade up next, the yen rebounding now that we have a sign from the bank of japan that it may be briefer -- may be preparing for an intervention.

♪ shery: breaking news out of japan. august trade numbers, exports rising 22.1 percent year on year for august. this is below expectations of growth of more than 24%. but suffice to say it is an improvement from the previous month. the imports growth number is 49 .9%, higher than expected. also on growth for the previous month as we have a week yen inflating import numbers. when it comes to the trade balance, there is a trade facet of 2.7 yes, 2.81 7 trillion yen. that is there trade -- 2.817

trillion yen. we are not surprised, given the weaker yen, that the trade deficit in japan is growing. it is a bigger deficit than the previous month. we continue to watch on this is going to affect the japanese yen as we continue to see the weight on currency exports to the u.s., rising more than 30%, to china more than 13%. haidi: let's get more on the yen. we saw the rebound from the 24-year low amid times the boj is preparing intervention to prop up the currency. our bloomberg rates reporter joins us now. this rate check markets are reacting to come is this a sign of potential intervention? >> intervention, i love it. according to investors i have spoken with, the boj did indeed conduct a rate check in the currency market yesterday,

meeting officials called banks to ask for a price potentially in the yen, the next step for intervention by japanese officials seeking to limit yen loss records we have seen. in 24 hours, it is going to 145 to now under 143, so there please -- there appears to be some effect or at least traders are eating that signs of intervention could be real. they appear to be tolerating yen weakness but they are warning they want to take much more than that. shery: bloomberg rates reporter ruth carson. discussions underway for a third vision fund, for the latest on softbank, hstech a in order --

latest on softbank, asia cac editor peter -- asia tech editor peter elstrom joins us. peter: it is a bit of surprising news that to vision funds have been started so far. the first one was $100 billion. the second was $40 billion. performance of those funds has been poor. in the past two quarters, they announced losses of more than $40 billion as the value of the companies and their portfolios to client. it is surprising they are thinking about raising a third fund. but this is an unusual character. he founded softbank, make himself a billionaire, and writes himself on these contrary and bets -- these contrary and bets -- these contrarian bats,

he feels investors in fear. shery: vision fund 111% versus 38%, in the industry, 0% compared to 45% for the broader industry. this is one of the hurdles if he decides to go forward with this. peter: that is right. those members are from -- those numbers are from the end of march. they only disclose the irr's once a year. they have certainly gone down since then armed are probably at -- gone down since then and are probably underwater. he has funded vision fund to with his own money and will likely fund vision fund three with his own money, to give him more control over what he wants to do with that money. softbank has built up a good amount of cash.

it had $50 billion in cash equivalent in june. that number has gone down, so they don't have cash to go out and try ambitious things. shery: peter elstrom on softbank. coming up, eastspring investments and a closer look at china on mls day, the medium-term lending facility. that is coming up with s&p 500 global ratings. the market opens in sydney, so land tokyo our next. -- sydney, seoul and tokyo next, this is bloomberg. ♪ .

♪

shery: this is "daybreak: asia," counting down to major market opens as authorities in the region defend their currencies on a stronger dollar. the greenback as easily little since u.s. cpi numbers but we are watching china's mls right -- rates. last time we saw a cut in august, we saw incredible yuan weakness. haidi: potential whiplash for beijing as the president is on a trip to meet vladimir putin, his first trip outside china in 1000 days during the pandemic shutdowns, but also we are seeing a muted reaction when it comes to the recovery rally in the u.s., here in asia. shery: we are watching the currency markets very closely because we have seen incredible weakness in the currencies, the japanese yen now seeing a little

strength against the u.s. dollar, 142 level after we have more indications of a potential intervention from authorities, a rate check performed for market participants in the fx space after many instances of verbal intervention from authorities. we are seeing the nikkei rebounding .2% as we continue to see the 10-year yield very closely watched level at 25%, already at the upper limit of tolerance of the boj. the central bank having to come out again and talk about bond purchases and capping yields, which does not help the japanese currency. that leading to the trade deficit widening for august. not surprising, exports missing expectations. we are also following the treasury market opening in asia as the two-year yield continues at a run at its 2000 high.

weakness in the currency, the korean yuan close to the 1400 level after touching the 2009 low. we continue to see concerns about output despite authorities coming out to say they are closely monitoring the fx space, the cost be rebounding slightly in the early session. haidi: a different picture when it comes to the kiwi dollar, speaking of currencies, a big move to the upside. holding about the 60% level would see it potentially reversing recent losses. the situation when it comes to the kiwi, the second quarter number above expectations. otherwise, a muted start to the start in australia. once it gets underway properly, we will watch energy stocks after we saw hope climbing on optimism that demand prospects

would improve in china as megacities loosen lockdown restrictions. we are watching the bond market. this is on the shorter end, aussie bonds, we are getting critical jobs data looking to show more workers in the month of august. watching shorter maturity bonds continue to trade lower, three-year yields climbing two basis points in the 10-year unchanged at 3.64. our next guest sees the fed pivoting in 2020 three, possibly even reintroducing qe. where joined by the asian equity portfolio specialist. rate cuts next year, is this because of inflation or stagflation? >> this isn't our base case

scenario, but what we see potentially is, with interest rate rises, and the fact it doesn't impact what is going on in ukraine, it doesn't impact china's covid policy. it also doesn't impact specifically the high minimum wage across the u.s.. because of these factors that potentially what happens next year when we see further rises in inflation, the fed might need other options. one potential option is potentially to dial back down on interest rate policies and at the same time reintroducing qe. these are more extreme measures, but something the fed does have to look at, especially if inflation continues at elevated levels for some time. haidi: what are the implications for asia? and what sort of opportunities are you seeing? it is difficult in trading,

going into the fomc decision, but are there pockets of opportunity in this part of the world? >> definitely. we see have value investing in certain markets like japan certainly has a lot of merits, especially with the weakening of the yen and in rising inflationary numbers, potential increase in further exports and with japan reopening its borders now to more tourists, especially with a visa free waiver program. we think those are positive aspects and when you look at places like china because of growth stocks and new economy stocks have been impacted the past year, we think there is definitely pockets as well in new economy areas within china as well. shery: what do you expect before and after the party congress? will the investing environment become better in china? and what expectations do you have for covid zero policies? >> we think there is going to be

more clarity after the national congress. overall, when you look at new members who will be running china over the next five years, we think they will be more prone markets, or at least pro economic growth. in that instance, if we see more clarity, a bit more transparency as it regards what china will be implementing over the next five years, there could be more pro economic growth as opposed to pro reforms, then that could actually benefit the markets and investors could see that as a very strong positive. when you look at overall opportunities and you look at where investors are placing their bets, they are very much underweight in china by a significant amount. that is why we think after the national party congress, potentially see buying from those investors who have been heavily underweight in china for quite some time. shery: is the weak yuan a net positive over how it helps

exporters in china or a net negative because china can't do more when it comes to stimulating its economy? the yuan weekend after the surprise mls got in august. >> yeah, it does help you have a big disparity between the china 10-year versus u.s. treasury 10-year bonds. because of that and also the fact there is a slightly weaker renminbi, and investors going back into china when things are more subtle doctor the national party congress, that could help china into 2023. shery: ken wong, asian equity portfolio specialist at eastspring investments, thank you. vonnie: passenger operator amtrak has canceled all drains in preparation for a strike.

the strike by one of 25,000 workers -- by 125,000 workers would be the largest since 1982 and could cost the economy $2 billion a day. the world health organization says the world is within reach of beating covid-19. the organization says fewer deaths were linked to covid daily last week than at any time since march 20 20 -- march 2020 with the pandemic was declared. more than 650 million people have been infected and nearly 6.5 million deaths. after two weeks of lockdown, officials in the chinese city of chengdu will begin easing curves. one district will gradually return to normal. other districts will remain under lockdown and undergo mass testing tuesday. only 35 new cases were reported tuesday in a city of 21 million people. typhoon muifa has madetwo land falls on china's eastern coast,

bringing strong winds and heavy rains to areas around shanghai. container ports have suspended operations as well as several lng terminals. as the first time china has extended a warning this year. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. ♪ shery: -- haidi: coming up, more on boj moves to a yen intervention. a preview of teddy's meeting between china's xi jinping and russia's vladimir putin. this is bloomberg. ♪

♪ shery: chinese president xi jinping and russian leader vladimir putin are set to meet face-to-face for the first time since the ukraine were started. the big question seems to be whether beijing will offer military eight let's bring in chief north asia correspondent stephen engle in hong kong. -- military eight.

let's bring in chief north asia correspondent stephen engle. i guess we will test the relationship. stephen: xi jinping hasn't left the country except for hong kong in the last 970 days. his victory lap is for essentially solidifying his precedent-breaking third term in the upcoming party congress that starts october 16. it is extremely rare for the head of china to head outside china so close to the party congress. he must feel he has got that sewed up. he is today going to meet with vladimir putin and vladimir putin, you can't say there is any victory lap on the war in ukraine right now. he is been dealt a number of battlefield defeats of late and the fear is that putin will

directly ask when they meet today for military support to counter losses on the battlefield. that is a high-stakes gamble for xi jinping, because they have been delicately balancing their very vocal support diplomatically for russia while at the same time not going so far as supporting the war in ukraine. headlines we get out of uzbekistan today in the meeting between xi and putin, it will be interesting to see which tack xi takes. haidi: chief north asia correspondent stephen engle. let's look at the fx space. very far from the 145 leveled we were watching yesterday. this after verbal intervention the currency chief as well amid reports of rates checks conducted by the boj, seen perhaps as a prelude to

intervention. we are seeing the yen holding pretty steady in the boj, 143 at the moment. also watching the chinese yuan as we look to the mls decision and the bloomberg dollar index. greenback strength continuing to dominate the narrative for many asian currencies. let's bring in our senior reporter for rates. when it comes to russian companies being him and in by sanctions, how are we seeing chinese currency used by russia in global trade? >> absolutely it is being used by russia. xi jinping and vladimir putin prepare for a likely meeting this week and what area they want increased financial ties is in the yuan, so russia is using

the yuan for trade and is also buying more debt in chinese currency. it is a multipronged approach used by russia. the government there is considering a plan to buy as much as $70 billion worth of yuan and other so-called friendly currency. on a global scale, russia could also serve as a template for other chinese trading partners looking to gradually reduce their reliance on the dollar which drives global trade. shery: talking about fx reserves, japan has more firepower than it did in 1998. are we expecting intervention, and when? ruth: that is on everyone's minds at the moment. today, the boj did indeed step up its intervention by doing

so-called rates checks in the currency market. that is basically what officials pick up a phone, they ask banks for an indicative price on the yen, and is the next step in intervention for japanese officials. it signals the yen's rapid losses. the yen has pulled back a little, we have seen it go for nearly 1.5 to 1.43 now, under 1.43, but appears to be having some effect or traders are heating the sign that intervention could be in the cards. 1.45 is the line to defend. i speak with people about how much tolerance the boj has four yen weakness and yes, that is what investors clearly want. shery: we continue to watch the 1.45 level on the yen, what about 1400 level on the korean yuan? i can't believe the incredible

weakness we are seeing in korean currency despite warnings against this. ruth: almost every day. on most every day we are getting signals professionals in korea saying we are not happy, we are watching the yuan closely and it seems every morning as soon as the yuan opens, we see another mega move down compared to the dollar. the dollar is incredibly strong in the wake of a hawkish federal serve and haven demand around the world for their currency, it is everything falling against the dollar and 1400 seems to be in the crosshairs for traders over here. it is a round number and we know how much markets love nice, round numbers. we shall see if they defend that level. shery: senior reporter for fx and rates, ruth carson with a look at fx. let's look at equity future openings, equities extending

losses after a hotter than expected u.s. inflation print. more news upside after the recovery rebound in the u.s.. asia looking like subdued trading at the moment. msci europe still deeply negative territory, futures up .3%. ftse 100 futures after the u.k. inflation reading, slipping from the 40-year i, providing a little respite -- 40-year high, providing a little respite. a lot of concerns about property values and the property market in the u.k. at the moment. coming up on -- more coming up on "daybreak: asia," this is bloomberg. ♪

haidi: singapore considering a new law to address canceled culture. the minister of affairs said it may be needed to protect things including same-sex marriage. >> we are trying to forge as much as a -- as much of a consensus as we can on an issue that affects many countries, the culture wars and so on. marriage is defined in law as between a man and a woman, but any debate on that is in our lament -- is in parliament, and not through the courts. >> could the definition of marriage as being between a man

and woman could be tweaked as being between two men? >> marriage is between a mend and a woman. that is the policy of this government. >> opposition from religious groups, they are also concerned about how they may be attacked for their views on lgbtq and marriage. what officials consider passing a law to ensure there is no canceled culture -- cancel culture? >> this is an issue that has concerned us, not just in arguments about 277a or sexual mores, but on a wide variety of issues. people's freedom to express their views, and the physical world, we don't want people to get up and beat you up. that is against the law.

it seems possible and it happens, it a virtual sense, on the internet. these are not new questions, these are questions we have been studying for some time. and if we find the right solution, yes, that could be something we see in legislation. >> [indiscernible] but it is a changing landscape. it is very legalized, marijuana. does it make it more complicated for singapore to police? >> of course it creates more challenges, because the more availability of drugs, the more challenging it is to deal it. the vast majority of singaporeans understand drugs are bad. drugs are bad for society. >> i want to touch on the noninterference law passed in

singapore. i am curious to see, to know what you perceive is the biggest challenge you are trying to address with the noninterference law? >> it not just singapore. let's define the problem. the internet has allowed both state actors and nonstate actors to intervene in your country and pretend to be somebody else, and say provocative things which make people angry with each other, and enhance what somebody called the protest potential and create unrest in the country and weaken that country. we have a suite of tools to deal with some things, not all, and we hope to bring the law

into force soon. shery: this singapore minister for law and home affairs speaking with bloomberg's haslinda almond. -- haslinda amin. korean yuan, a careen officials saying the levels are not at a worrying level. earlier this week, they said the south korean account balance could swing to a deficit in august. that pressured the korean yuan, fx reserves dropping by 27 billion dollars in south korea this year already, so the number of the imports combined with fx holdings has dropped for seven months. the korean yuan, you can see -- you can see the week level. it is headed for the worst years as the global financial crisis. haidi: continuing to watch weakness in the yen as well. let's get you caught up with business flash headlines.

hong kong amtv digital sees 312% in new york and a wave of frenzied buying and $27 billion of market value. that triggered multiple trading halts. amtd has seen its stock skyrockets and's listing two months ago and it went on, the financial services firm was one of the most valuable companies in the world. aic corporate financial raise nearly $1.7 billion for its ipo, biggest in the u.s. this year. the retirement company sold 80 million shares at $21 each on the low end of the range and is expected to begin trading thursday on the new york stock exchange. the softbank founder as revived discussions about setting up a third vision fund just weeks after apologizing for the poor performance of his first two funds. he has raised billions of

dollars of cash recently and sees another start fund is one of several irt's for his money. let's look at how softbank is trading at the moment. we are seeing a little downside at this point in the tokyo session, down by .25%. we talked about the downside performers of the region compared to industry standards, it has really been underperforming, but it still has more than $50 billion in cash equivalent on the balance sheet. that horde continued to grow. up next, the latest on typhoon muifa making landfall in chin

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shery: typhoon muifa makes tw lando falls on china's eastern coast. let's bring in charlie, how bad could this get? charlie: shanghai has escaped largely unscathed from the typhoon. it brought heavy rain and strong winds to the city last night. but things are getting back to normal. you can see behind me, the weather looks pretty calm. the city downgraded the alert to the lowest level, from orange the day before, and people are coming back to work. also, better services in the city have resumed fully. haidi: what do we see in terms of disruptions across multiple industries?

you talk about transport, tourism, air travel. charlie: it was forecast to be the strongest type phone -- typhoon to hit the yangtze river delta in years. cities around the region took it very seriously. yesterday, there was an announcement that all flights in shanghai at all port operations in the city, which is the world's largest, was canceled, and also halted operations. we will hear today whether there will be an update from the airport in the container port. we expect them to resume services gradually if the typhoon leaves the city without damaging the city further. haidi: our shanghai bureau chief charlie zhu. the demand for capital goods,

credit creation and bond issuance, putting all this into context for us. you are always here for bad news, i think, david. david: three and a half percent for the currency is where we are. there is a collapse in onshore and offshore bond issuance. the big story out of the iaea, the first time since 1990, annual contraction in oil demand. it was 32 years ago. as far as growth forecasts coming here is the headline on all of this. it is when you look at how the consensus growth forecasts have change, -- changed, we are now 3.5%. that has fallen quicker than

economists said revised. at the global slow down, this has also fallen 2.9%. this is .6%, and this is something, to be clear, we don't normally see. you don't normally see china barely growing faster than the global clip. it is now quite discernible. when you look at times, very few years of the past four years, it has basically been the same. 1989, 1990. and if things don't change, .6% is the growth differential between china, and the global context. this is how it looks on the bloomberg chart if you don't believe me. from a visual perspective, you couldn't chart chinese growth and global growth on the same axis, because of the

differential from 1990 up until a couple of years ago. i do see that right now, you really have to zoom in to see how close these growth clips are right now. it is the narrowest oath gap in 32 years. and here is the -- narrowest growth gap in 32 years. and here the good news. there is a report coming out to coming out tomorrow. if tomorrow comes at good or better than expected, then this might be the low point of the year. and that is as positive as i can get right now. haidi: david ingles -- shery: david a glass with desk david ingles-- davin ingles. the chief economist at s and p

global writing joins us, good to have you. have we bottomed on the chinese economic recovery? >> we have, and we haven't. we have in the sense that we think next year will look a little better than this year. we have not in the sense that our own forecast is less optimistic than the numbers showed. we would be looking at growth lower than 3% for china this year but as i said, we expect overall growth for the year to be better next year. shery: then what sort of policy support could we see coming from authorities? and now that we have also a pretty weak yuan, does that limit monetary stimulus expected to come? >> you are pointing to one of the constraints, and there is a few constraints.

on one hand, they want to help the economy and the fiscal side. on the other hand, they are wary of local governments and local government entities to go to much in debt. that is one constraint on their willingness to boost the economy carried -- economy. the other was on the monetary side were the bank and pboc wants to cut rates further and expand credit more, but the are wary -- but they are wary of capital outflows. and are taking measures to dampen capital outflows. haidi: one of the other strengths is that of demand. we understand it has to do with covid lockdowns and confidence to spend, but is loosening or turning on more aggressively wise when we see that subdued

demand? louis: the key constraint on the chinese economy at the moment is the covid stance. as long as the covid stance has not been eased, even authorities themselves realize there is only so much you can do, only so much you can push on the strings. that is another reason why they have not gone all out on stimulus. more generally, we can see that the restrictions that take place hit the economy directly. people can't move, they can't spend, and they also really affect confidence among consumers, among businesses is at very low levels historically. we see that it all the numbers. we are not optimistic about tomorrow's numbers and we are not optimistic about recovery. we think there will be a little

recovery in the second half of the year that will be quite shallow. haidi: d expect a meaningful overlay -- a meaningful reduction of covid zero with weeks to go until the party congress? louis: every time we discuss this, we feel that at some point, it will change. but we at s&p global do not think there will be a significant change in stans until next year, likely after the first quarter. -- change in stands until next year, likely after the first quarter. haidi: when it comes to the property sector, we continue to see the fluctuating nature of what has been a managed process. do you see the process coming to a head?

is this something policymakers have managed to engineer as a soft landing, or is this one the main pressure points for the economy? louis: i think it is both at the same time. it is definitely a huge pressure point. because the chinese property sector has such a large economic footprint that is not just about the sector itself. you look at steel and other imports into that sector, it is a very large part of the economy. and if you constraint that, if you try to discipline that and put that on a more healthy financial footing, this exerts a lot of paint of pain to the overall economy. that pain is being felt. the authorities conclude that that pain is not leading to systemic financial instability or excessive pain in the sense that they are willing to accept the pain as it is now. i don't want to be too somber,

but this is not a short-term issue. we have to see a more longer-term retrenchment of the chinese property sector and it looks like the authorities are more serious about that now than they have in the past. it is unlikely you will see china's property activity bounceback soon. shery: we continue to watch the japanese yen, a little above rebound recently given the rate check we heard has happened, coming from the central bank. is there any recourse for the boj or finance ministry in japan to fight japanese yen weakness when they also continue to ease monetary policy because they don't expect inflation numbers to support it? louis: there is not a huge recourse if you don't want to step into the market and spend your reserves. the bank of japan, especially

the government, is quite adamant in maintaining its very accommodative monetary policy stance. it says as long as inflation is not sustainably above 2%, then we are not going to ease. well, then you open a very large interest rate gap between you and the u.s., where rates are rising. in that context, there are not a lot of measures authorities can take. they can talk about it, expressed dislike they can do rate checks, they can do verbal activity, but most market players would say, unless you really step in, it is unlikely to change. haidi: louis kuijs, great to have you with us, chief asia correspondent at s&p global. coming up, the pboc setting up

stakes with the strongest buyers on record after the break. this is bloomberg. ♪

>> i'm vonnie quinn with first word headlines. a u.s. senate panel approved a bill to boost ties with taiwan and sent military aid in a move

that could overall decades of white house policy. beijing condemned the bill for undermining its one-china policy put the biden administration says current u.s. policy is working on legislation will take policymaking out of the president's hands. the time when policy act will be sent to the senate for consideration. the international energy agency says the chinese demand for oral this year will drop by the most in more than three decades as covid lockdowns and the property prices weigh on growth. the agency has seen chinese oil demand followed by 420,000 barrels a day coming to 7%. that led the agency to curb its projection for global consumption, 100 10,000 barrels less a day than forecast. a tiktok executive says the company's negotiating with federal regulators on access to user data being respected for users in china. but the coo did not commit to a total cut off. the video app is owned by chinese tech giant bytedance.

a court in seoul has issued an arrest warrant against do kwan for alleged violation of capital market rules. officials say the six suspected individuals are all in singapore. their actions earlier thes -- earlier this year sparked a global crypto rout. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ shery: let's look at how asia stocks on trading. a flat session for asian stocks. two sessions of losses already. health carrier -- health care and materials dragging the index but energy is gaining ground. oil is higher, moving toward $90 per barrel for wti as we see more optimism on a weaker dollar

after the jump after u.s. cpi numbers and also, chengdu easing covid restrictions. we are a half-hour away from start of trading in china and before that, we will get the pboc latest mls rate. let's bring in our guest, what are we expecting from the markets? it seems no move in the mls rate is baked in. >> this could be really interesting. it is maturing from 600 billion yuan. economists surveyed by bloomberg expect only a partial rollovers of the pboc's expected to actually withdrawing equity this month and no change in the interest rate come of course. last time pboc did move on the exchange, the interest rate, that was a surprise to the economists. let's see what it does today.

reducing cost of borrowing has proved to not really be effective, because there isn't demand for borrowing. it wouldn't make sense. only five minute before that, we will get the pboc fixing that has been stronger than expected for a succession of days and yesterday was the strongest buy on record. the market moving and potentially, for the yuan. shery: in terms of the yuan, what are the locals that we are watching at the moment as being really key and what signals are we getting the pboc? sofia: they are fluctuating, just stronger than seven seems to be the level the pboc is comfortable with now. if the dollar doesn't strengthen again it we see the kind of moves that we saw on cpi data in the u.s., then the pboc is likely to let the yuan we can

against the dollar. there is no point inviting a strong u.s. dollar. that seems to be the message. but managing yuan weakness seems to be the message the pboc is sending. not enough really though to push the yuan stronger and it is clear the pboc does not want to do that because it has stronger tools at its disposal if it wants to end it has not used them yet. haidi: bloomberg's sofia horta e costa on the china trade. policymakers are dry demented -- are trying to manage weakness in their respective currencies and we are seeing levels policymakers would be more comfortable with, pretty steady trading in early tokyo session as traders continue to consider the strongest warnings yet from japanese policymakers that would act to hold the currency slide.

we see a report on preparation for intervention on these rate checks by the boj being in focus and the weakness in the yuan is in focus big we had the bank finance minister holding and at yariel -- holding and internal making after a surprise of the u.s. inflation rate in big rising u.s. yields. the aussie dollar is holding steady. we have seen nice gains when it comes to the kiwi dollar this morning, holding above $.60 as we get a bead on second-quarter gdp. more to come. ♪

shery: south korea's top trade negotiator says he is hopeful of a break room it talks with the u.s. over electric vehicle subsidies. he spoke to us exclusively have had of death exclusively -- spoke to us exclusively. >> the legal provision in the law is difficult, but including

the possibility of amending the current provision, we will try to find all the feasible options , including the guidance implementing of the systems as well as amending the law. >> would it be ok to say it is good to be hopeful about progress going forward? >> i hope so. we are sincerely trying our best to solve the problems as much as possible. what is concerning is how to maintain the trust between korea and the u.s.. we have many things to do in the future. these kinds of things happen. but the more important thing is

how to address the situation, and both governments can rectify the problems. >> how worried are you about the growing rivalry between the u.s. and china given that korea is sandwiched between those countries? >> yes, the tension between the u.s. and china continues to grow, and we have lots of concerned about the situation in taiwan. particularly after what is happening after the ukraine situation. we have lots of concern about the potential situation in this part of the world. so, maybe the taiwan situation is one example, but there are

numerous other pockets of uncertainty. that is why we have tried to reestablish and stabilize the commercial relationship with china. haidi: the south korean trade minister speaking exclusively with bloomberg. let's get a check of the latest business flash headlines. an indian education startup bjus has released its financial papers after months of delay. $575 million in increased spending to reduce growth. the company blamed his performance on the changes in accounting practices that let it to defer revenue. the pentagon he a founder has reportedly given up his company. the new york times is reporting the entrepreneur has transferred ownership valued at $3 billion

to a specially-designed trust and a nonprofit. the report says all company profits will be used to fight climate change and boost environmental conservation. shery: these are stocks we are watching in china and hong kong, apple using updated chipmaking technology in iphones and mac computers next year. some of them are reportedly cutting -- some chinese banks are reportedly cutting personal deposit rate after today. that is yet from "daybreak: asia." "bloomberg markets: china open" is next.

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