>> good morning and welcome. >> we are counting down to asia's major market opens. shery: from new york, i'm shery ahn. the race is on to replace liz truss as the u.k. prime minister with the conservative party aiming to choose a successor within one week. >> u.s. stocks and in the red as treasury yields rise on more hawkish fed remarks. >> the white house they be looking to expand plans for quantum computing and ai. we're keeping a close eye on what bloomberg has learned in terms of tech exports controls.

we are seeing u.s. futures under pressure right now. we had seen selling and treasuries continue with 10 year yield above the 423 level. we are seeing them pricing and a 5% peak policy rate in 2023 and a hawkish fed record -- rhetoric. we also had oil rising but paring back some of those gains. we have a little bit of optimism that china was going to roll back some of its quarantine requirements for visitors. the broad market pessimism his weight on oil prices as well. 85 barrels per barrel. look at the 30 year yield on guilt. these are the key events over the past few years, but liz truss becoming the shortest serving prime minister of the u.k. with 44 days in the job.

the question is, what happens next for this country? >> another big currency we are watching is the yen. we did see it moving above the key level of 150 in the previous session. speculation of course that more will be needed to support the currency but some say the government and boj don't want to give the impression there is a particular line in the sand. the japanese government so far has not commented on whether it is stepped into the market. there has still been a lot of talk about stealth interventions. it doesn't address the overall heart of the problem. what's really at play is the ongoing policy diversions between the u.s. and japan. we saw that and what's happening in the jgb's because they are hitting the upper end of the

targeted band and the boj has been forced to defend its policy. we're looking at a pretty mixed start. the asx 200 futures like this. new zealand online fractionally higher but we do have the other news that the u.s. could be expanding on china technology to include quantum computing and ai. other tech stocks and focus given more of a broader picture. we have seen a huge selloff in china tech stocks over the past few sessions. really there are so many drivers of volatility including fed speak, earnings coming out, and what's happening in the u.k.. >> absolutely. a news which day to be sure. start with britain. the question, who's going to replace liz truss?

resigning 44 days into the job, we knew that she was on borrowed time and now it's up. who are we looking at as a front runner? rishi sunak is the former chancellor under boris johnson. penny mordaunt is also considered a choice. there is no unity candidate and this is what the conservatives could use. at least one mp on the right said they are begging anyone but soon i court penny mordaunt. potentially boris johnson could return to the top job even though he is still facing an inquiry over the party scandal. >> at least we are setting the bar high when it comes to letting these candidates run. we are talking about at least 100 backings from mp's just to make it onto the ballot. this comes at a time when he

would face a lot of challenges especially on the economy. the u.k. housing market now seeing signs of warnings that we have not seen since the 1980's when we had a property crash. same thing with u.s.. mortgage prices rising. home prices standing the longest decline since 2007. other countries all seeing these challenges when it comes to the property market. >> the u.k. could see a new prime minister as soon as monday. hard to tell how long this contest is going to take. guy johnson joins us now for more. do we select a candidate than vote, who does it look like it's going to be? >> let's deal with the sequence. as you say, you're going to need 100 mp's to get onto the ballot. that is a hugely high number. many in london are saying that

number is being a barrier to boris johnson getting onto the ballot. you have to have the 100 by monday. you could see 1, 2, or three potential candidates. there will be voting by mp's to whittle that down potentially from three to two or one. that result will be not on monday evening. if it gets down to one, we will know who the premise or is by monday evening. in theory at that point you will see a confirmation vote by mp's on which candidate they would like. there is a lot of pressure i understand being brought at that point. for the second candidate to step down. the odds are we will end up with prime minister by monday evening. we can't do that, if we can't do that, it could potentially go to the grassroots members of the party by friday. they will have until friday to vote then we would definitely of the results of who is going to

be the next prime minister. the expectation is monday possibly as late as friday, but they want to run this on a much more expedited process than what we saw last time. the u.k. can't afford weeks and weeks of nothing happening. >> given the turmoil we continue to see in the u.k.. this would be that conservative party's fifth premier in less than seven years. tell us about the challenges this party faces not to mention the broader economy. >> this economy, that's the issue. there would be a huge amount of turbulence over the past few days. that is exacerbated on an already serious situation. we have an economy slowing down quickly. we have consumers being stretched by rising mortgage rates. on the other hand by the energy market. they are not receiving as much assistance as was expected even a few days ago. the economy broadly is slowing down.

business is slowing down. huge challenges for whoever comes in as prime minister. i will add that the chancellor of -- jeremy hunt is likely to remain on post and he is bringing stability to the markets. it's unlikely that whoever comes in as prime minister is going to want to mess with that process. shery: guy johnson saying -- staying late for us in london. more on the reaction from the market, let's bring in our bloomberg opinion columnist. when it comes to the markets, who's the favorite? >> who with the markets like to see win? rishi sunak and they would take penny mordaunt. they were not totally freak out over oris johnson or possibly one or two of the other right-wing candidates. who might want to make a run because there is so little opportunity for them to do something stupid after the events of the last month.

jeremy hunt is in charge. the bank of england said about as clearly as central bank ever does that the market has got its estimates for interest rates to high. the markets are markedly calm about an extraordinarily chaotic political situation and i think that's the sort of sanguine judgment they are making. shery: do you want to take a moment to reflect over what has happened? i feel like i'm asking you what's the market favorite and we have been talking about this for the past few weeks. it seems to be nonstop. tell us about the market reaction but also taking everything into context, what are the key things we should be watching out for? we are getting confused. >> in terms of what lessons we have learned from this, to quote margaret thatcher, don't block

the markets. -- don't buck the markets. it was an inexcusable error that they went ahead with trying to do such a big fiscal stimulus at a point when it was plainly a really bad idea. i'm not saying active policy in a smaller state, but it's an incredibly bad idea to try to start it as aggressively as they did at a time like this. i think that much is clear. i don't think this means an historic reversal for libertarian agenda. a lower tax in general, because it was so much about really terrible implementation. in terms of britain, i doubt very much that any politician is good to argue for this kind of economics with a straight face for another decade. in terms of where the british economy goes next, i think we

probably have a rather weakened version of what has happened under david cameron and george osborne. you will have austerity and pretty easy money. by international terms relatively easy money, inflation is going to be taken as the lesser of many evils. the pound can be allowed to devalue and that gives you something fairly similar to the weight john majors government pieced the country back together after the disaster black wednesday which was already years ago but is still a similar event. >> good to have you give us perspective. let's turn to another story that keeps going. elon musk reportedly planning to

cut 75% of the twitter workforce. 75% of the workforce would leave skeleton crew to run twitter. >> it's hard to imagine twitter would continue to operate given how quickly this is done. three out of four employees if you lay them off overnight, it hard to see how this plays out. there has been reporting there will definitely be cost cuts. we all know the layoffs are -- are expected. from elon musk, it has been extreme in terms of what he thinks for revenue or user growth. that could be extreme in the other direction. while he has been telling

bankers 75%, regardless this is a really big deal because this is a lot larger of a layoff man i think anyone expected for twitter even those were bracing for them. >> to your point, sometimes hard to tell with elon musk if he's joking or a thought bubble or it's going to happen. if it does happen, he has ruffled a lot of feathers twitter. could a monstrous cleanout be a precursor to a hiring spree of new stuff? >> as with any acquisition, what you see is the new owner wants to move the direction of the company. in this case, i would imagine it would be layoffs, scaled-down reprioritizing the company, trying to figure out what those new priority should be then rebuilt in that direction. i would be surprised to file tough 75% and that's it.

it's a weird economic time right now, a lot of companies are doing layoffs and not hiring so maybe that would have to be delayed a little bit. shery: this would happen once the acquisition is complete. how was that process right now? >> the deadline is coming up it's a week from tomorrow. friday the 28th. as far as we know, it's still moving in that direction. both sides have said they want the same price of the deal. love the equity and debt financing has been there since the spring. it seems to be there's a lot of last-minute deal paperwork. if i had to guess, i would imagine it would go right up to that line. we are probably still a couple of days if not a full week out. everything we heard elong say yesterday during earnings about twitter suggests this is moving

forward and probably going to happen. >> let's get over to vonnie quinn. >> a pboc happy governor says china will push forward with reforms to make the exchange rate more market based. he also told briefing on the sidelines of the party congress that china is one of the few nations implementing normal monetary policy. the pboc has put further stimulus on hold. european natural gas surged snapping five-day losing run as policymakers remain divided on capping prices. france, italy, and poland want to limit prices but germany is supposed. the failure to agree on a joint response risks fragmenting of the already fragile eu market.

the white house has accused tehran of sending trainers and technicians to crimea to support russian attacks on ukraine with drones. a spokesman says iranian advisers are helping russian pilots based in crimea to operate the drones. he also says the u.s. will consider more sanctions over the weapons transfers. >> malaysia will hold general elections. the election commission fixed nomination day for november 5 and the campaigning time will run for 14 days. multiparty contests will make it tricky for any party to win an outright majority. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. paul: still to what next economic policy with liz truss

is plan set to make her the shortest serving british prime minister in history. our next guest says she sees economic downturns hitting stopping point. this is bloomberg. ♪

shery: take a look at how u.s.

futures are trading. we have the s&p 500 reversing earlier gains and falling in the new york session for a third consecutive day. now nasdaq tech futures are under more pressure. we saw news that the biden administration is looking to expand china's tech band to include quantum computing and ai. this is after already sweeping conditions on beijing earlier this month. let's bring in our next guest who sees nearing signs that we are reaching a market bottom. we continue to see the market pressure not only from the hawkish fed rhetoric continuing to come every day but also some other news related to china, u.s. rivalry, now we are seeing more focused targeting on

quantum computing and artificial intelligence when it comes to the tech export ban tour china, we already have actions on chipmakers. how much of an impact will this have on broader market levels not to mention more focus on tech as well? >> it feels like week by week we are picking up additional headwinds in the market. this could affect compound growth rate for companies invested in these tech roberts. -- products. staples of the next industrial

revolution types of innovations rely on both the u.s. and china so you have to hope we get to a point where we can become to both what's going on in terms of ip and tech transparency and government oversight and things like that. hopefully, they get back to a point where there is some sort of deal and collaboration on the table versus going the opposite way. i do think impact tech and economy in a negative way. >> broadly, your positive on the tech names especially when it comes to the likes of amazon and microsoft. given the more aggressive tightening stance from the fed and rising yields, how convinced are you about these trades at this point? >> i think it's going to be a stock ticking market in terms of the tech names. i continue to like microsoft and amazon. some of these names are down. if you have the s&p down 25%,

some of the tech generals are down about 32% during that same time. meanwhile, they have strong balance sheets. they are part of every single innovation and technology trend for the future. for example, some of the biggest build outs are going to be in cybersecurity and cloud microsoft touches both of those. amazon has the cloud business. e-commerce continues to be strong. they touch so much of what corporations will be spending on in the future regardless of rate hike scenario the goes on longer than we like or recession. the other issue is look at what's going on. why are we in this where the fed is so hawkish? one of the big reasons is there too many jobs in not enough people to fill them. wage pressures have been too high so it come point, technology has to resolve that. yet to think about optimizing workers and automation of factories and things like that. without these major tech players

in that space, doesn't happen. the next 5-10 years, you need these companies. are we going to get the quick double digit in the near term? i don't think so. i think it's more likely that they suffer than they don't, but i like long-term outlooks. paul: unfortunately, we are out of time but acute for joining us. -- you for joining us. we have plenty more to come on daybreak australia. this is bloomberg. ♪

paul: snap shares plunged. a decline in advertising spending dragging on results.

third quarter sales rose 6%. a bloomberg source says deutsche bank has laid off dozens of origination and advisory staffers globally from its investment banking division. the move comes as fears of recession crimp dealmaking. at least one managing director will report -- depart. coming up, with china's party congress wrapping up, we will look at the changes that will emerge. this is bloomberg. ♪

vonnie: the u.k. conservative

party is looking to quickly replace liz truss. a maximum of three will be able to run and conservatives aim to choose her successor by october 28. she is set to become the shortest serving british prime minister in history. >> there will be a leadership election to be completed within the next week. this will ensure that we remain on a path to deliver our it is plans and maintain stability and security. i will remain as prime minister until a successor has been chosen. vonnie: fed officials are continuing to flag the need for highest entry -- higher interest rates. one says rates are likely to be raised above 4% this year. another fed governor says inflation is too high and will require ongoing rate hikes and restrictive policy for some time. st. louis fed says it will think

friendly about officials participating in private events. this comes after criticism of jim bullard for speaking last week at an event hosted by citigroup. it could be seen as a violation. indonesia's central bank has raised borrowing costs by 50 basis points to stop the slide of the currency. most analysts had protected the increased. the currency has slipped since the september ratemaking -- rate meeting. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. shery: sources are telling us that the biden administration is exploring the possibility of new export controls that would limit

china's access to emerging computing technologies. our reporter has the story. we saw sweeping action from beijing about semiconductors. what would this action be? >> we are hearing there is an effort to find and explore and find ways to limit china's access to quantum computing as well as artificial intelligence technology and software. this is really, regulators looking to stay ahead of the curve in terms of what is china or an adversary trying to get that could potentially have ella terry implications? -- military implications. it is the part of computing that is seem to be able to get around current security and encryption measures and technologies. you are able to infiltrate and

get access to some of the things that are protected by today's technology, that's a scary prospect from an intelligence standpoint. paul: is there anything in particular that has motivated the next step in increasing china's access? >> i should emphasize and underline that this is in the early stages of development. these are conversations that are happening between people in government and people in industry. when a place like the commerce department looks to craft these kinds of rules, they are always looking for industry input. they want to make sure the rules prevent china from doing something that could put u.s. national security at risk. they also want to make sure potential rules down the line do not include or pull in more things than are necessary to of cheap -- achieve the objective.

that's where this input and even take and back-and-forth in these conversations is important. paul: china's 20th party congress wraps up this weekend with the biggest mystery yet to be revealed, who will xi jinping place in supporting roles for the next five years? let's bring in stephen engle and hong kong. how is this going to play out and what are the likely ramifications? stephen: there is a bit of intrigue going on. we know that xi jinping will likely secure the third consecutive term. the question is, who is he going to place in key economic positions? is a list of names that i will not run down the possibilities of all of them. i want to break it down into xi jinping's power-play. i'm looking at for individuals

the anyone should be looking at for clues to how xi jinping values these kind of positions. willie stec the standing committee with his key loyalists or will he give a signal of party unity by offering a compromise to those tied to the faction the communist youth league? wong young is thought of as being forced to retire. let's look at the four head shots of the ones i'm looking at. if you want to determine that xi jinping has won the party congress, he has not compromise, you are looking at people like these. the and drc chairman in line potentially to be promoted to the 25 person bureau and become economics are replacing mr. fix-it.

then the shanghai party bus. if he gets promoted to the premier replacing the outgoing one, that would be interesting. he is an extreme royal -- loyalist but he was tarnished by perceived missteps in the two month long lockdown because of covid. those are the two individuals on sunday if we get a promotion of the first two, xi jinping has an extreme absolute power mandate. i mentioned the other two, they could be seen as compromise picks. it is very critical going forward for the key economic positions are likely to be shuffled under xi jinping on forward for the next five years. what i'm looking at more immediately is bloomberg scoop we got yesterday on the possibility that senior leaders are looking to reduce quarantine for inbound travelers. i think that's what the market is willing looking at. if that gets legs as the party

congress and the premium gets pushed off to the side, can they move on covid zero customer? shery: one guest says they will give up policy tightening. is it giving a nod to the potential pivot? >> yes that's exactly what he is saying. central banks are going to be forced to crack and. because they can't withstand the pain. i'm talking about the economic or market pain as a result of the rate rises. he is known as dr. doom but he has a habit of making correct predictions. we have the 2008 housing crisis also in 2020, he said anytime of

economic recovery would be followed by inflation as well. even that is the prevailing narrative we are facing, it's worth paying attention to what he is saying. this new conviction stems from the fact that central banks are not going to be able to bring inflation down fast enough and that we are only just starting to see the consequences. >> this is just the beginning of the pain. wait until it's real then you have a major financial institution that might crack globally not in the u.s. may be but certainly internationally there are a couple of firms huge that are systemic that could go under. might have another lehman effect. then, the fed will have to win out. you have a recession and a financial market shock. >> one of the pain points that he is seeing so far is in high-grade debt yields.

they are back at levels that we have not seen in years. what he said is this is really just the beginning and what we are facing is a time ahead that combines the worst of the 1970's but also the global financial crisis. >> we have to talk about theyen. we are through the 150 level out. is that all psychological? >> what we are seeing in the options markets is we could be bracing for more volatility ahead. the gap between implied and realized to lily -- volatility. what this tells us is we will have more moves on this currency in the weeks and months ahead. this is a very tricky situation for the japanese authorities. we talk about this 150 level.

perhaps they don't want to make that line in the sand because you will see bets against it in the marketplace. but there is also the talk have we already seen stealth intervention in the market? this is another talking point. basically some are saying policymakers are painting themselves into a corner. this is really not working and that's because any sort of stealth intervention or otherwise is not addressing the crux of the issue which is the policy diversions between japan and the u.s.. shery: let's get more with kathleen hays. we talk about this all the time. the governor is speaking to his loose monetary policy. even if authorities try to shore up the currency, i have to wonder whether or not that will work. >> when you're fighting a trend, that's the problem. the most effective intervention

happens when it's at the peak. then when you surprised traders, you can have a big impact but the trend seems strong right now. as the yen has overnight reached 150, now it looks like 150.12, that is the level people wonder if it gets them going. bond yields rose sharply, more hawkish fed talk as you know. this is what got the u.s. bond market going. this is what is continuing to potentially drive the yen higher against the dollar. we have so far heard from the finance minister saying that they won't tolerate speculative moves. we have heard from the man who is the chief currency official that these moves are speculative and they will be a problem and

to intervention resources are limitless. that's a threat like don't think we don't have enough need to do this, we have all the resumes we need. what we are seeing now on this chart is the latest thing is traders are pushing up against the lid for yield curve control. the boj did another round of bond buying options yesterday. did that headline as well? it's a test of traders against the boj, the governor. they don't sound anywhere near close to ending stimulus. he says it is still needed as long as he has driven that line in the sand, no doubt the question on the other side is what will it take to get the government to take more steps and see if they can send a signal that they will try to put a on this and they won't spare any resources if they decide to

do it. i think for all the reasons people are looking at, it's not always very effective. they will be a slow to do it they can't. paul: that's -- let's talk about japan's september inflation report. what will this mean going forward? >> troubled way not much because it's not going to change this line, these ideas about inflation. the core cpi the one that is most important that takes out food prices is expected to rise in september from 2.8% to 3.0%. it is continuing to reach these new highs but again, the governor says it's not going to last, it's not sustainable. he thinks economies were to be under pressure. even with the boj meeting days from now, this is going to make

that meeting all the more in focus and it will make the pressure that is on the yen. what is he going to say about the continued decline and how we could get and what might get them to change his mind? if we know what to expect from him so far, his term is up in april and most people think there is no chance the boj changes his stance in any way until the new governor is in place. paul: still to come, the u.k. conservative party seeks to draw a line under liz truss's term as prime minister with a rapid contest. this is bloomberg. ♪

>> i have a bold plan to grow the economy through tax cuts and reform. >> it was becoming a distraction so that's why we immediately change the policy. >> we will keep an iron grip on the finances. >> the last thing we need is a general election. >> we need to act now to reassure the markets of our fiscal discipline. i have therefore decided to keep

the increase in corporation tax that was planned by the previous government. >> i am a fighter not a quitter. >> i recognize given the situation i cannot deliver the mandate on which i was elected by the conservative party. i therefore have spoken to his majesty the king to notify him that i am resigning as leader of the conservative party. paul: from bold plans to resignation in 44 days, there is a snapshot of liz truss'brief time in office. the u.k. is on the market for a new prime minister. i will have the unenviable task of having to rebuild the conservative party. let's talk about successors. it seems to me rishi sunak is in the box seat and also penny

mordaunt and possibly boris johnson. >> is going to be an interesting week. one of the things that are seeking to do is quickly fill the role of leader. the leadership contest went to a parliamentary vote for liz truss then three months to get into place what consumer -- conservatives are mindful of is to get the new leader into place. they have changed the rules around this and any candidate must secure 100 members of mp's to be in the running. that basically means that only three candidates can come through. as you have indicated, the three most likely would be rishi sunak, perhaps penny mordaunt, there was talk about ben wallace the defense minister and of course the return of boris johnson which would be quite

external. -- extraordinary. paul: we could come back to boris johnson and a moment. is there another requirement change as well? i was thinking it was the 170,000 rank-and-file numbers of the conservative party that brought her into power in the first place. only to suffer an epic case of buyers remorse after that. is it time to let the party pick the leader? >> this is a wider issue for many political parties. in the time when the mass membership was very common in the 1960's and 1970's, there was a big push to include the rank-and-file. one of the concerns of the representation gap is that the party membership is so atypical of the broader british public. it tends to be older, more affluent.

as a result, the policy issues that might activate that membership base are probably out of step. once it's the mandate that liz truss received violated that of a certain sector of british society but was out of step with the wider needs and claims going on. to answer your question directly, party has and will continue to revisit the balance between whether just mp's or the rank-and-file will select. what conservatives are hoping for a think is a single candidate to emerge in the next day or so enough votes to win so it becomes a coronation rather than another divisive factional warfare and contest for the leadership. shery: how of the past couple of weeks affected how much markets can influence policy and

politics? have the dynamics fundamentally shifted? >> yes and no to a certain extent. there is always been a question about the relationship between economics and politics and the way in which economic settings can change and influence political settings. what you would say is this is a multilayered crisis in british politics. the most recent roots are in the referendum to leave the eu. in that one sense, it is caused significant economic damage. it has been compounded by the global turbulence at the moment. that would place pressure on any leader but what comes out of perhaps liz truss's time is she will go down on record as the worst british prime minister since the second world war because her leadership was so inept and so unable to deliver fiscal discipline or response to the markets.

it's interesting where conservative party have always had a very strong reputation amongst the public for sound economic management yet they were chastised by the imf for those unfunded tax cuts in her any budget. once the conservatives have lost their credibility of economic management. >> quickly what will it take for the party's reputation to be repaired? >> good question. probably a type of opposition. the party is so divided, so factional eyes that even a placeholder is unlikely to deal with the short time even if they were to manage to write out an election to 2025. this is applicable party on its needs -- on its knees that needs

a time of opposition. shery: be sure to tune in from bloomberg radio to get more analysis. they are broadcasting live from our studio in hong kong. don't miss the new economy forum taking place next month. daybreak asia will be there live. we will have exclusive interviews on tv and radio. you can watch the full event on bloomberg new economy.com and live go on your bloomberg terminal. this is bloomberg. ♪

paul: let's take a look at what we are expecting in terms of trade. aussie opens at the top of the hour on a very wet day in sydney. we are expecting to see a little bit of a downside. nikkei futures moderately in positive territory. the yen is just above the 150 psychological barrier. that's it for australia. this is bloomberg. ♪

♪ shery: