shery: welcome to daybreak asia.

we are counting down to asia's major market open. haidi: treasury features are higher as fitch cuts u.s. credit rating citing worsening debt and deficit and an erosion of governance. janet yellen blasts the decision saying it is based on outdated data. the white house is blaming republican extremism. a grand jury and date donald trump on the attempt to overturn the 2020 presidential election. shery: inflation numbers from south korea for the month of july, the headline numbers is a gain of 2.3% year on year. coming in low expectations by economists not to mention it is easing from the previous month. the slowdown in inflation was pretty much expected due to the comparison with elevated figures during the month last year. month to month numbers a gain of

.1% which is again below economist expectations. we are expecting this number two perhaps push higher in the month ahead. this is after july's heavy rains could apply pressure on this number. the core cpi number which is what the back of korea has wesbanco korea has been following excluding food and energy is a gain of 3.3% year on year, we are still remaining elevated, uber economics is not expecting the bank of korea's hawkish policy stance to change due to this number. haidi: one thing to look out for is we did see the cost be really hitting a fresher today, they are performer that we so broadly asian equities -- saw broadly asian equities falling going into the midweek session.

australia seeing stock features -- futures down. stocks are reacting positively to the rba hold for a second straight meeting. the intense guess is on what happens in november. we see markets passing at this point, the broad consensus from this hold is that the rba is at the end of his tightening cycle. so much of it is dependent on watching the currencies given that we have the weakness in the aussie dollar. and the upside and there is so much uncertainty as to the china recovery and when it comes to china, the stimulus measures continue but we did also see that pullback when it comes to the rally that we have seen in chinese equities and china futures at the moment. a by a quarter of 1%, chicago and u.k. futures down by 1%. we are looking like a risk off session.

shery: we are saying that pressure being exacerbated with u.s. futures down by 3% for s&p futures also down to the downside. this is after u.s. stocks and bonds have already fallen in the regular session with the s&p 500 under pressure from that 16 month high. not surprisingly given that we have those concerns over strategists catching up to the s&p 500 rally, given the 30% less gain from october lows, there is more caution up there. we are seeing food prices being up a little bit, we were down on the risk off sentiment, late in today's session we saw the biden administration delaying that replenishment of reserves with sources telling us those news we actually have crude pushing a little bit higher. the big news on the treasury

space with yields jumping to the highest level since november for the 30 year yield, we are expecting treasury on wednesday to come out with that boost in their quarterly refunding of longer-term treasuries given of course that we are expecting the 100 billion dollar waiver treasury bond sales on that widening budget deficit. perhaps not surprising, one of those reasons is that fitch cut the credit rating from the top ranking of aaa. our global economics and policy editor kathleen hays is here with more on that decision which of course, she follows the s&p in 2011, follows all of these concerns about the debt ceiling, all of that political stuff in washington as well? >> that's what they are looking at, there concern about governance and about the fact that the budget is rising and they see that the budget

deficit rising to 6.3% of gross domestic product at this year from 3.7% in 2022, that is not quite doubling. they are saying the rate is looking at the physical deterioration -- fiscal deterioration. in the years 2022 they were a total of three big infrastructure plans, that has widened the deficit and help the economy. the erosion of government, debt ceiling back and forth, republicans, down to the wire, democrats taking a wild to find the middle part of the rope with them. this is relative to other countries where they are aa and aaa ratings and the is the best you can get. relative to them they are saying this is why the u.s. is losing some of its fiscal responsibility luster. two out of the big three that have taken the rating down to aa plus from aaa, that is a high

rating but it is not the best, the most pristine. janet yellen is saying that she thinks that this is wrong. she disagrees with the ratings decision. she says it is based on outdated data and she goes on to say that it does not reflect what investors around the world already know. the treasuries security, it is safe, liquid asset, the american economy is fundamentally strong. no surprise that the treasury secretary would push back of it remains to be see in terms of how much the markets react to this. this happened in 2011 and it did not have a long-lasting impact and it did not hit the markets and continued to put a dent in them. it is something that we can assume is the last thing the market needs when you have this poorly refunding. every three months, through your notes, very popular. in your treasuries, 30 year

bonds, some of the most volatile in the world. the amount for this refunding was 770 3 billion, three times the size of the refunding used to be. it is a big amount of bonds for not just the u.s., but for the world to absorb. everybody holds treasuries and everybody buys them. this is a concern. haidi: when it comes to the fact, two of the dogs are not on this -- doves are not on the same page. >> the jobs numbers we got today, the numbers came down from 10 million openings or there is something well over nine million openings. that is still pretty high, it is much higher than it was before the pandemic. there are some signs of easing up but not anything yet that shows that is really slowing

down and it is close to the payrolls report on friday. the president of the chicago fed is a voter this year and he has been dovish. maybe we should slow it down here, he says he does not want to pre-commit to the september high. when you are around the transition point every meeting is a live meeting and trying to figure out friends, i just one month's data and he goes on to say that he reminds us last summer that u.s. inflation numbers started coming down but then it went back up and he says you do not need to watch out for a headwind. raphael bostic has been a centrist, one of the first talk about doing a skip which they paused in june. they say eggs are evolving in a way that is consistent -- he says things are evolving in a way that is consistent. he does not say that he will vote for the hike but he is a voice saying we have done enough and this is all we need to do for now.

haidi: kathleen hays there. donald trump has been indicted on federal charges accused of conspiring to overturn the 2020 presidential election results. jack smith spoke shortly after the indictment was unsealed. >> my office will speak a speedy trial -- see a speedy trial. in the meantime i must emphasize that the indictment is only an allegation and that the defendant must be presumed innocent until proven guilty beyond a reasonable doubt in a court of law. haidi: let us bring in jodi schneider. take us through the key points to you through this indictment? >> one of the key point is that it is the third indictment of the former president who is now

the front runner for the republican nomination for 2024. that is the backdrop here. he had been charged in new york by the manhattan d.a., on charges related to hush-money payments paid to stormy daniels and i am not disclosing those. he had been charged in florida several months ago in the case involving the classified documents found at his home in mar-a-lago and that has been an upgraded charge, they have a superseding indictment, he saw to cover that up. we have charges of several conspiracy charges relating to january 6, 2021 insurrection here at the capital. the conspiracy charges are quite significant, they have stated that he conspired to basically try to break the election, interfere with the 2020 election

and then basically conspired to allow people to come to the capital and lead to the things that happened that day. we heard from jack smith on this as you noted, his statement was fairly remarkable. he said the attack on our nation's capitol was an unprecedented assault on the seat of american democracy. this one in some ways and is also telling us is more significant than the other charges because it has to do with that insurrection at the capital that they would people died that day. they are stating that president trump, the former president, was behind this and conspired to try to rake that election, interfere with that election and that led up to what happened on that day. a 45 page indictment and it has very detailed charges relating to what happened at the capital

that day. what happened in the months before leading up to that mcdonald compass come out and -- donald trump has, and said this is all politics and he has been saying all along about the indictments that they would not be charged if he were not the front runner that this is all politically motivated and the justice department has been issuing these charges as politically motivated charges. it will be arraigned here in washington on thursday on these federal charges. haidi: that is the latest indictment against former president trump. shery: more reaction to u.s. credit rating cuts was pepper stone group. chris weston warns us next. -- joins us next, this is bloomberg. ♪

76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme. the chase ink business premier card is made for people like sam, who make- everyday products, designed smarter. like a smart coffee grinder, that orders fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more. plus unlimited 2% cash back on

all other purchases. and with greater spending potential, sam can keep making smart ideas- a brilliant reality! the ink business premier card from chase for business. make more of what's yours. when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh

>> on people talk about this environment, it makes me think the characters running or crashing with parachutes. that helped them through it, the keyword is uncertainty.

we are not sure how to react. when we provide is address this. -- what we provide is to address this. haidi: that is a speaker on the volatility of the markets. we have the head of pepper stone group. does this decision have implications? >> i do not think it does, i think they will forget about it by tomorrow, it is a great headline and it comes at a sensitive time when they're looking to refund the session ahead. we are losing focus on the fact that the basis on the debt is over a trillion dollars. we can use situation with borrowing costs. i think this will not surprise the market in any kind of capacity since the debt seen debacle. the issues that have been going

on, i think that the estimates are pretty punchy relative to market estimates. it is 50 basis points or so above consensus. going into below 7%, certainly above consensus and calling for recession this year which i think were not given what the -- this surprises us in terms of estimates by the absolute downgrade itself once, it is not going to be something anybody will liquidate their country holdings on, the pension funds or sovereigns. you have seen the reaction in treasury futures since they reopened, there has been dollar selling, and fairly illiquid periods. i think this is something by tomorrow we will be focused on. this happened on outlook negative and i think this is the investment fee anyway. this comes at an economically

sensitive time. visit the last thing that yellen really needs for a market -- this is the last thing yellen really needs, but from a market perspective, i do not think it matters. haidi: do you think we have seen a change in direction over all for the greenback? >> is still pretty choppy in the u.s. dollar and you look at on every dollar is created equally at the moment. we are seeing big moments, the aussie dollar looks pretty weak at the moment. i depends on what happens in dollar cnh, we can continue going higher. we have a target of eight, if that continues to be the case, the aussie dollar prefers the downside. the dollar looks ok. i think the dollar yen, i think we are thinking it will be close to 145 here, we are noticing the

inflows from japanese pension funds some people have been speculating, it would happen if we were to see yields moving up to 1%. we are not seeing those slows at the moment. the dollar is benefiting from this exceptionalism story, the u.s. is the best place in g10 at the moment from a growth perspective, and i think the 120 basis points that are priced in for next year are looking a bit punchy in my opinion. we get down to 1%, i think that will be supported, the dollar-yen continues higher, the dollar cnh is important and we went up to eight despite the intervention from the pv ac to push back. shery: you see the u.s. credit rating downgrade will not necessarily have a major impact that when you are talking about as you said potentially japanese funds going back home, because of what the yields rising there,

the u.s. china tensions being factored in and anytime we see that we will worry about beijing dumping treasuries, is this a long-term story that could be problematic for the u.s.? >> if china was to dump more treasuries, they would use this downgrade as an excuse to why they were going to be doing it. i have no doubt about that. the physical situation in the u.s. has been deteriorating, -- fiscal situation in the u.s. has been deteriorating and there is no plan to repair this. i think with japan, it is a different issue in the short term. there has been a lot made about the level of overseas capital that the japanese pension funds have got abroad given the level of hedging costs going through as yields rise up. it will be nonlinear.

the japanese funds will be to come back into the jgb market which is supportive of the yen. we are not seeing that in the weekly flows that are coming through. getting an extra 50 basis points that you are going to see that massive inflow back into jgb. i think if you are a pension fund and you are acting on this fitch downgraded alone, i would be skeptical of that situation. shery: we have been talking about the shift when it comes to why cc and potential legal going higher and the implications of the other, those traits that have been pretty popular especially with emerging market currencies on the others for example, the stellar gains we have made in the resilient real, -- brazilian rial, or that change what the doj is doing? >> it is the strategy and the

money managers are looking at it very closely because it is such a liquid -- lucrative trade and there is so much capital in the carry trade. i think for me, the reason why you would look to at those holdings to carry and look to redeploy them into other strategies is volatility. until we see broad asset volatility, there is no chance of that happening, volatility is so low, it is why we think that people are looking to sell rallies and you are looking at all currencies if you look at one week or 25 or 26 percentile. you see that moving up and you can talk about u.s. and the move index and implications that it has four repo. we see volatility pickup, looking to stay in those carry

trade's, using weakness in those areas to carry through. i think that the yen, now that the market has had time to digest, they are looking to use the yen as the preeminent under in the g10. until we see the market sees market volatility here. shery: great to have you with us on a significant day like today on the fx currency space, the head of research at pepper stone group, we have more to come on daybreak asia. this is bloomberg. ♪ . yeah. but with my stuff, we can rewatch all the games we've recorded. the minnesota comeback! jj's finale. butt punt! oh, is that what the my stuff feature was invented for? saving butt-related content? cause i thought it was for keeping your favorite tv shows and movies all in one place. i'm sorry, mr. sanchez. live tv and sports. and more! but mostly sports. that's fubo!

was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com shery: the light trading after

t amd is making further inroads in computing, vonnie quinn is here with more details. >>in a statement, the ceo said

engagements increased by more than seven times. multiple customers initiating or expanding interest and products related to ai. that definitely providing some oomph to the shares. spending seems to be coming back. the market looks to be bearing out in the set of results. >> vonnie quinn there.

we have much more to come here on "daybreak: asia." this is bloomberg. ♪ so... i know you and george were struggling with the possibility of having to move. how's that going? we found a way to make bathing safer with a kohler walk-in bath. a kohler walk-in bath provides a secure, spa-like bathing experience in the comfort of your own home. a kohler walk-in bath has one of the lowest step-ins of any walk-in bath for easy entry and exit. it features textured surfaces, convenient handrails for more stability,

and a wide door for easier mobility. kohler® walk-in baths include two hydrotherapies— whirlpool jets and our patented bubblemassage™ to help soothe sore muscles in your feet, legs, and back. a kohler-certified installer will install everything quickly and conveniently in as little as a day. they made us feel completely comfortable in our home. and, yes, it's affordable. i wish we would have looked into it sooner. think i might look into one myself. stay in the home and life you've built for years to come. call... and take advantage of our no interest

>> the bank of japan's decision to loosen its grip on domestic bond yields has potentially profound

consequences for high finance and households across the u.s. let's bring in our cross asset asia editor, chris henderson. market participants are trying to work out what the potential long and short-term impacts are. what are you looking at in terms of japanese investors repatriating assets back to japan from the u.s.? >> yes, this is quite significant, in the sense that obviously japanese investors have historically put a lot of money outside japan, the u.s. bank, the largest or one of the dominant places where that money goes the ramifications here could be profound in the sense that yields may go up if there is less demand for certain types of debt instruments, mortgages may go up, putting extra stress on homebuyers, and of course the context here is this is happening in a tightening environment. quantitative tightening,

interest rates still elevated. so there could be extra stress on borrowers in the u.s. because of this. in the equity market as well, less demand for equities, for u.s. equities, taking off some of that premium u.s. stocks have had relative to the rest of the world. quite profound potential impacts. >> coming out a very sensitive time for the u.s. economy. especially when we have the downgrade of u.s. sovereign debt as well. what are the implications for treasuries? >> well, the strategists and investors are talking about -- were talking about this this morning in various notes to bloomberg, making the obvious parallel with the 2011 downgrade by s&p, this means two of the top rating agencies have downgraded to the -- downgraded the u.s. from their

top tier. back in 2011, there was a bit for treasuries among the uncertainty. the focus is very much on the fed coming up to the end of the interest rate cycle. we are near or at the peak, according to market expectations. so i think it will be different this time. and the more immediate sense as well, we did have treasury selloff yesterday, yields at the long end of the curve quite elevated, and futures this morning in terms of treasury futures are rallying = slightly. -- rallying slightly. there might be a small bid for treasuries. >> lumber's cross as it asia editor, chris henderson. we saw the dollar rally in the u.s. session. we are seeing the downside pressure for the bloomberg dollar index now. key levels we are watching

are the 1220, where we could potentially see a possible bearish reversal according to bloomberg strategists. we were watching on the upside the technical level of 1240. that would've meant a bullish breakout. this is how the picture was for emerging-market currencies given the rally in the u.s. session. in the dollar, we have the other side of the trade, em's pushing lower. right now we are seeing the offshore you on gaining a little bit. the japanese yen also getting a little bit against the greenback. let's discuss the currency markets with our next guest, the head of asia research at a and z. we have seen the downside a little bit of the dollar given the u.s. credit rating downgrade. how meaningful is this? how long can we expect it to continue? >> it came as a surprise,

but i don't think is going to cause the kind of volatility we saw in august of 2011 when the s&p downgraded the u.s.. i think we will see a bit of a slight volatility. the treasury yields will probably back off. i don't think it will do much for the u.s. dollar pier i think it's going to be bearish for the u.s. dollar over the medium to longer term end. whether or not this downgrade will hold the u.s. equity rally -- halt the u.s. equity rally, if earnings or the u.s. economy continues to show resilience, markets will brush off this rating decision and the focus will be the ongoing fundamentals. which at this stage still look quite positive in the u.s. economy. >> what about the other side of the trade especially when you have china pumping so much stimulus into the economy? what that support --

would that support the yuan? the euro? would that have an impact on where the dollar goes? >> i would be cautiously optimistic because china is one of the most important trading partners for europe and part of the reason why the european economy is faring quite dismally is because the chinese economy is not doing well. with promise of further support from the government, following last week's bureau statement, i anticipate to see more announcements coming out from various ministries and bodies in support of the objective of instilling investor confidence and boosting consumption, finally addressing the rules of the property sector. we have already started to see sentiment improve on the back of these recent announcements.

we have seen and flows back into the chinese on shore market -- inflows back into the chinese on shore market to support the yuan. i am looking for the yuan to be able to rebound. my target is 6.0 by the end of this year. -- 6.80 by the end of this year. i think we have reached peak pessimism over chinese asset prices last month, when pretty much every single bad news was already priced in. low and behold we had this announcement from the bureau. they recognize the challenges the kind -- the chinese economy faces and take whatever measures to address that. i think from that perspective, we shouldn't bet against the chinese government. they have shown their willingness in the past to do what they say. all eyeballs are on the execution.

marcus will try to front run this. -- markets will try to front run this. >> in the context, do you still have that strong anchor from the chinese or are they simply idiosyncratic stories when it comes to the likes of thailand and india? >> there are country specific issues that will start to play out. in thailand, i'm somewhat optimistic as long as the political uncertainties can continue to fade away. once they finally decide on a prime minister and a ruling coalition, i think we will clear one huge hit against the vet. with the tourism recovery going quite nicely, we expect the bank of thailand to hike by another 25 basis points today. recently rice prices have shot up following india's decision to ban rice exports.

thailand being a major rice exporter, that should help the overall trade balance as well. that is another tailwind for the rest of the year. >> the head of asia research at and said. great to have you back. we have more to come on "daybreak: asia." this is bloomberg. ♪ change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh 76% of 23andme health customers surveyed reported taking healthier actions. ahhhhhh because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

but everyone's looking at their phones for financial insights from merrill. is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and build a new home. so they're talking numbers with their merrill adviser. she's not researching her next role. she's learning how to handle market ups and downs without the drama. personalized advice so impressive your money never stops working for you with merrill. a bank of america company. >> we are seeing a little bit of

a bid for treasury futures at the moment. this of course as we have seen that risk aversion set in into the markets after they cut the u.s. credit rating -- fitch cut the u.s. credit rating. in 2011, s&p did that. we saw that flight to quality for dollar and u.s. treasuries as well. it also follows a selloff in the new york session where we had the 30 year yield jumping to the highest level since november. the treasury, coming out on wednesday with that boost of their quarterly refunding of longer-term treasuries given of course the widening budget deficit. with us now is the senior economist at berenberg capital markets. great to have you with us. this, really following smp in 2011, after a lot of political debate in washington, issues

with the debt ceiling. how significant is this move by fitch? >> it is significant in the short run, because obviously markets are quick to respond. in the long run, very little impact. on the one hand, you could say it's a surprise. on the other hand, everybody knows u.s. debt is rising. the increase in interest rates is increasing. we know what fitch has said, deterioration, no news there. on the other hand, the market is going to have to respond. it'll just be temporary. >> are there any long-term implications in how the international worldviews the u.s., especially when you have u.s.-china tensions, and a news

of a potential beijing dumping treasuries is an issue, the boj perhaps moving and japanese funds possibly repatriating funds away from treasuries as well? >> that is a very good question. yes, this is clearly negative "press" for the u.s. and a fairly fragile time internationally as you point out. on the other hand, there's no replacement. placement for the u.s. as the dollar currency. japan, probably russia will make a big deal about it. it shouldn't have lasting implications. but it is absolutely true -- and this is shown in the congressional budget office's projections -- that the raison d'etre is large -- rise in debt is large, it is

unsustainable, all of the increases entitlements the debt ceiling agreement at an event such. so there is a long run problem. i don't think the fact that fitch comes out and lowers the trading rate has that big of an impact. >> we saw congressional democrats put their claim on the republican colleagues for holding up the debates earlier. given the u.s. finds itself time and time again, is that deterioration when it comes to the politics side something that is concerning in the longer term, too? >> absolutely, yes. this is a trend that's been going on for a long time. keep in mind the debt ceiling has been increased over 100 times since it was first put in place in 1917. but in recent decades, the

debate between the political parties has become more and more rancorous. to put it into perspective, the big issue about the size of the government, the amount you tax, the amount you spend is a critically important issue. the debt ceiling limit is a pretty lousy platform for having a serious debate about. it creates a lot of political theatrics, last-minute negotiations that don't add up to very much long-lasting. so there is a governance problem. that is truly a problem that will face going forward. a critical point here, as the fed has hydrates and bond yields have increased, that has a dramatic end compounding impact on the cost of servicing the debt. so sooner or later the u.s. will have to come to grips with it. but the immediate responses by the politicians,

unfortunately, is all about politics rather than we need to address the substance of the issue. >> janet yellen refers to the substance, referring to the liquidity, the safety of treasury securities. have we seen examples of other countries that have had that aaa rating slashed and continued on business as usual in the longer term? does this have a longer-term risk of deterioration, not just reputationally but regarding future economic shots? >> no country that has the strength of the u.s. is going to be affected -- has been affected like this. i disagree with treasury secretary ellen's notion that it was arbitrary. it was not arbitrary. the facts were there. on the other hand, the u.s.

is the strongest potential growth economy among advanced economies in the world. investors around the world shouldn't be concerned at all about the u.s. being able to service its debt. it'll be after we get over this initial market response -- it'll be back to normal. in your prior segments, you noted there is a flight to quality and people are buying treasuries. well, we couldn't it be that concerned about owning treasuries. >> does this have any implications for other countries that are left with aaa in terms of vulnerability to being downgraded? >> no, not necessarily.

every country is different, has its own growth patterns, has its own tax and spending structures. so, no, it doesn't suggest any contagion to other countries. >> it was really great to have you on, mickey levy, senior economist at berenberg capital markets and visiting scholar at the hoover institution. we are following oil prices. we saw a little bit of fluctuations throughout the session in new york. we are seeing a little bit of upside. traders and analysts seeing fresh signs that china's demand may have picked for the year. su keenan joins us with more. what are we seeing in terms of chinese demand? >> they are the biggest importer of crude oil in the world. as demand in china goes, so often goes, analysts

projections go, the latest analyst commentary is starting to reflect china's appetite for fuels and other oil derived products may have picked. the recent headlines -- may have peaked. the recent analysts point to strong demand but many point to that gas having been stockpiles. stockpiles ever since we record high. the economic recovery has continued to show strains. analysts say there is not much room for growth in the second half. specifically in fge, saying chinese oil demand growth is going to slow to 1.1 billion barrels a day over the second half of the year down from the first half and we are also hearing from other analysts that there will be specifically a much tighter demand going forward. a lot of this has to do again

with the fact that you are not seeing the rebound that so many analysts have been counting on. so revisions are being adjusted as we speak. >> these opec-plus output cuts are starting to take effect, too. >> we know the saudi's had imposed a surprise cut and cut much deeper. now a bloomberg survey is showing opec-plus crude production tumbled by 900,000 barrels a day in july. that is the biggest reduction since the group and its allies slashed supplies during the covid pandemic back in 2020. most of these production cuts are coming from the saudi's and traders expect saudi arabia to announce and extension of the cuts in the coming days. oil halted its rally in trading in new york. with this news and headlines the biden administration is now delaying its purchases of oil to replenish the sbr, the emergency

oil reserves, we are seeing oil take up -- tick up and extended trading. we are seeing brent crude above 85. many analysts are pointing out that the short-term path of oil is fragile right now, given the shifting fundamentals. >> number's su keenan -- bloomberg su keenan there. we still have more to come. this is bloomberg. ♪ ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. the chase ink business premier card is made for people like sam, who make-

everyday products, designed smarter. like a smart coffee grinder, that orders fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more. plus unlimited 2% cash back on all other purchases. and with greater spending potential, sam can keep making smart ideas- a brilliant reality! the ink business premier card from chase for business. make more of what's yours. wealth-changing question -- are you keeping as much of your investment gains as possible? high taxes can erode returns quickly, so you need a tax-optimized portfolio. at creative planning, our money managers and specialists work together to make sure your portfolio and wealth are managed in a tax-efficient manner. it's what you keep that really matters. why not give your wealth a second look? book your free meeting today at creativeplanning.com. creative planning -- a richer way to wealth.

>> hsbc shares made modest gains after the bank announced a new buyback program and painted a bullish earnings outlook for this year. the ceo told us how they are focus on capturing growth in asia fast-growing markets. >> was a great opportunity still in china, here in hong kong. we see opportunities within india and singapore. not just for singapore alone but singapore and its gateway into asia. we are investing equally between all parts of asia. and we are seeing good performance across the whole of asia. we are also investing in new business lines. i think in the past, we've under invested in our wealth business across asia. we had a very good business here in hong kong. we invested in that.

but we didn't invest enough in mainland china or in singapore or in india. we are correcting that now. you can see the evidence. in asia we took in $27 billion in net new invested assets on behalf of our clients. globally, in the last 12 months, we took in $75 billion in net new invested assets into our wealth business. that is a function of the investments program we started over two years ago. >> how active are you financing some of the belt and road project? >> look at all the projects that are taking place. all big infrastructure projects. we are focused around infrastructure projects around sustainability. new hydrogen plants, new wind and solar. we are working with our clients across all of asia, but globally, we have done big transactions as well in the middle east. we help clients invest in

new technology to build the new, greener economy of the future. will look at them on a project -- we look at them on a project by project basis and some of them are within the silk road, the belt and road initiative. many of them will be outside. >> we do have the bank of japan's june meeting crossing the bloomberg. this is a meeting before they did that shocker of a tweet to ycc. we have one boj member saying the treatment should be discussed early. others are saying it's important to continue with the current easing measures. this is from the june policy meeting. one boj member, saying we must avoid a surge in rates. ycc and how they potentially

exit. the minutes of the next meeting will be more interesting. we are not seeing any further policy shift and 2023 -- in 2023 shift that we saw last week. take a look at how u.s. futures are trading at the moment. we had so much to deal with, including the move from fitch to downgrade as well as the market file that we saw. we are seeing broad positivity. perhaps sentiment is fragile going into the start of cash trading in asia. we are seeing some vulnerability to the downside. this is bloomberg. ♪

>> this is "daybreak: asia,"

counting down to asia's major market opens. expecting reaction now from fitch's cut of the u.s. credit rating. perhaps one example of what we might expect might the what happened in 2011 from smp. we saw global stocks tumbling. we have treasuries gaining ground because people were risk-averse. [laughter] >> it is such an interesting cycle. janet yellen has a point, when she points to the safety and liquidity of treasuries. you can see that being played out on the markets -- in the markets. it is looking like a pretty muted start to trading. >> we are watching the treasury space given that we have seen a selloff in the new york session when the 30 year treasury yield jumped to the highest level since november, given of course we are expecting the quarterly refunding from the treasury on

that widening budget deficit. we are seeing the 30 year yield coming online at that for percent level, same for the 10 year yield -- 4% level, same for the 10 year yield, under pressure at the moment. we have seen the 10 year yield surpassed the 4% level, leading to that momentum in yields in the new york session, relates to do with that 100 billions wave of treasury bond sales. we are expecting this year given the borrowing needs here in the u.s. with the rate at a 22 year high. take a look at how the nikkei is coming online, downside of 1%. this also coming at a time when we are hearing from the boj minutes of their june policy meeting before the way sisi -- the ycc tweak that is important to continue with current easing according to board members. the yen, a little beat up

against the u.s. dollar. we are seeing the dollar seeing a little bit of pressure in the asian session after rising to that three week high, given what's happened with the credit rating here in the u.s. we are watching of course the jgb market as well, the debt market has been pretty volatile given the boj surprise tweak of the yield curve control program. we have also gotten the boj minutes signaling they must avoid a surging rate -- the surging rates from exit speculation according to one member. take a look at how the kospi is coming online. .6%. we have seen the inflation rate and south korea easing -- in south korea easing from the previous month. the core cpi, above the 3% level. 3.3% year on year.

we are seeing downside for the korean won. risk of sentiment -- risk off sentiment, being felt across risk assets at the moment. the korean won was week given the week trade data we got this week from south korea lead ing to risk aversion and the korean markets. >> risk off is kind of the name of the game when it comes to the start of trading here in australia as well. we are seeing implications of the rba's second straight hold. they may not be saying this is the end but they feel like it is getting close or perhaps november we could potentially see another move. this is the picture. we see a staggered open here in sydney. equities down just about .2% as we get that start to trading. the bond market will be interesting. it would think this is kind of greener pastures going ahead for

the aussie bond bulls. but we just heard from kendall group. they are not concerned, saying inflation is still high and the labor market is running so hot at the moment, so there are concerns the inflation risks and the rate hike risk could come back to haunt the rba after yesterday's hold. that is one point to keep in mind when you take a look at the aussie bond markets. more weakness for the aussie dollar. some uncertainty is ongoing from the china slow down theme as well. 1.6% lower in the previous session. the lowest since july 6. some weakness when it comes to trading in the aussie dollar and the kiwi as well. the unemployment rate, hitting a two-year high. that is another economy where we are seeing both a technical recession and the impact of that early tightening cycle from the romaine: -- from the rbnz.

we are seeing crude up by just about 1%. we may have peaked at least when it comes to china's oil demands. we are seeing the appetite for fuel and other oil derived products, potentially peaking this year as the economy continues to struggle. that's going to be something to contend with given the week gains we have seen -- weak gains we have seen. >> the spring and the global strategist at j.p. morgan asset. great to have you with us. we of course are reacting to the u.s. credit rating downgrade. how significant is this, when you have the second downgrade after smp in 2011? now you have the average rating getting lower. does this affect any of the investment vehicles which are rating sensitive? >> i think it maybe does, to a certain extent.

when you look at the market role broadly -- more broadly, it still represents a flight to safety of there is a risk out there, the implications outweigh a lot of what you are seeing and how investors are trading. that is what we saw the last time we experienced a shock. i don't think it is as meaningful at the moment given the other risks that are out there. >> we have seen credit spreads and various markets already tightening significantly. do you think this accurately reflects the current macroenvironment? >> if you look across a range of assets, some are thinking more about a recession down others. -- about a recession than others.

high-yield was a function not thinking about a recession. as those recessionary fears start to fade away, even if they don't go away completely on the u.s., we can see scopes for the spreads to remain relatively tight. given the income yields are still pretty high, the risk adjuster returns are looking attractive. we think about the quality bias. high-yield, obviously you can see spreads widen out with a more severe economic outcome. the markets might be more muted than we would expect to see, if we experience what we saw during 2008 or even jerome covid. >> do you think the valuations when it comes asian investment grade right now are justified? >> there is more risk applied to the asian space because of the fallout from the chinese property sector. we look at how emerging markets

are performing on the debt side. the focus more toward latin america. we are thinking about the prospects of rate cuts to come through, thinking about the asian credit market and this environment. there are definitely opportunities across the em top space -- em that space. -- em debt space. >> how do you feel about china at the moment? the stimulus announcements continue. do you have confidence in chinese assets right now? >> when it comes to the economy, you will see a bit of growth the second half of the year. it is encouraging, the noises you are hearing from chinese officials. they are very much focused on providing stabilization to the economy and reaching that 5% growth target.

i think there's a prospect of reignition of animal spirits when it comes to the outlook for china. the risk, it comes down to how investors lost faith in this environment. we still think there are low gone term -- good long-term prospects. the sustainability and tech. those can provide opportunities for investors in china. there is volatility in the near term. it is still a good case with u.s. assets and china.

>> carry trade joining us there for a look as we continue to watch the market open. we are watching asia ship companies at the moment -- chip companies at the moment. the losses being led by she's you semiconductor, samsung, seeing some weakness, amd, gaining in the previous session, onthe exuberance from the ai story. touting these and roads when it comes to artificial intelligence, computing, putting it closer to competition with the likes of nvidia. we saw profits beating analyst estimates. enthusiasm, not quite trickling through when it comes to the tech sector. so far in the first 10 minutes or so of trading. coming up, why the biden

administration says fitch's u.s. rating cut is a bad call. this is bloomberg. ♪ 76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

when you automate sales tax with avalara,

you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh >> futures have been trading

higher as fitch stripped the u.s. of its top-tier sovereign rating, spurring demand for top haven assets including treasuries. it seems quite counterintuitive. but we are seeing 10 year treasuries rising. longer data contracts climbing by 11 basis points. fitch cut the u.s. from aaa, held since at least 1994. if you recall, smp was the last major credit agency to downgrade the u.s. in 2011 on the heels of another debt ceiling crisis. if you take a listen, many are saying treasuries are providing risk off hedging during periods of stress, which is a risk posed by this

downgrade at the moment. this kind of circular situation when it comes at treasuries and the fitch downgraded is something we are watching. >> very reminiscent of what we saw in 2011, one global stocks plunged. at the same time he had treasuries trading higher. take a look at how commodities are looking at the moment. we are seeing oil, a little bit of a rebound from the new york session. late today we heard from sources that the biden administration is again delaying that replenishment of emergency oil reserves. we had weaker factory data. a lot to do when it comes to commodities with what's happening in china. wheat also hitting a two-week low in the new york session.

we are seeing it at the 650 level. the export prospects coming from ukraine, improving a little bit. let's actually delve into the energy markets. what i was saying about oil has to do with chinese demand here as well. let's bring in su keenan. we are seeing of course industry reports on u.s. inventory as well. >> it's a real confluence of data hitting the market. what seems to be driving oil higher right now is wti trading above $80. we are also seeing brent crude near $85, $86. it is a story and contrast with what we are getting out of china. traders are telling us it's possibly hit peak demand in terms of all of the oil they have consumed so far. it is starting to slow down going into the second half. analysts say it's likely that

china's oil demand already peaked at 16.4 million barrels a day on the second half. even the recent headline numbers out there for crude imports show strong oil demand. much of that is why it's been stockpiled or stored rather than turned into oil product. china's crude stockpiles have risen to a record high. they say it's not want to be china that drives oil higher. meanwhile, just coming out in the past hour, sources close to the api data, a private industry report that comes out the night before the u.s. energy department releases the official government statistics on u.s. inventories, and other words, u.s. oil stockpiles, what it shows is surprising, api, saying 15.4 million barrels. that is a record rdawer. it is just huge.

the industry estimates are also, according to the api, pointing to a drop not just in crude holdings in general but also what the key storage hub in oklahoma which we historically see has a strong impact on price, it will be interesting when the government report hits the tape wednesday morning here in the u.s., sometimes there is divergence and what the private report and the government shows. a lot of times they are similar. with this kind of hundred indication -- this kind of indication, it could be a good run for the bulls despite the data coming out of china. >> is it pretty certain and unsurprising given the strength of weak data and the intense stimulus we see from china that we have peaked when it comes to oil and crude related products? >> it's not just the weak data coming out of china,

some groups have said it's caused bulls to prematurely get bullish. he has been pointing out in recent weeks that the oil market is very fragile right now. but opec's crude production fell by the most in three years. the saudis imposed a deeper cut back. again, that is setting this fragile fundamental picture. crude production pummeled in july. it's the biggest reduction since the group and its allies cut supplies during the depths of the covid pandemic back in 2020. we were also hearing from traders that it is highly likely the saudi's will extend that cut in the days ahead into september. again you have very weak data coming out of china and terms of demand going forward, but very strong immediate supply data out of the u.s. that will be

confirmed for government data wednesday morning here in the u.s. and on the bigger picture platform, you have the opec production cuts, which appear to be taking oil off the market. back to you. >> lumber's -- bloomberg's su keenan there. >> our global politics editor kathleen hays is here. the timing is the most awkward at the moment, why is fitch doing this? >> they are doing this because they are concerned about first and foremost a growing budget deficit. they know that there has been a steady deterioration. they think that the percentage of the deficit, the gdp is going to go up to 6.3% this year from 3.7% last year, and that is a

pretty big gain. they are also talking about all the back-and-forth. it was worse than back-and-forth. it was distressing, it hit markets. they created a lot of consternation on all sides politically and financially when they couldn't get the debt ceiling passed quickly. they are concerned about the politicization. i think they are just tired. they are concerned that these problems are not going away. i think it's interesting that janet yellen, the treasury secretary was very quick to note that she doesn't agree. she thinks they are wrong. she thinks they are making a mistake. she thinks the fundamentals of the u.s. economy are very good. she thinks it is arbitrary

based on outdated data. that's just not cutting the mustard. the u.s. treasury market is the deepest, most liquid one in the world. the strong fundamentals for the u.s. economy right now, she thinks it makes no sense that fitch is now the second credit rating agency to downgrade the u.s. from aaa to aa+. 2011 is when smp did it, also over the debt ceiling. >> everybody's concerned, at a time when the policy benchmark is at a 22 year high. you are making things very costly for the government. what are we getting in terms of clues coming from fed officials right now? >> the fact that the fed has raised rates so much, it will be more expensive from here on out to finance the u.s. deficit. you do it by selling treasuries. the funding announcement coming out at a time when the net borrowing looks a lot bigger than it used to.

the president of the chicago fed has been in the camp of saying, maybe we should slow down. kind of going back and forth. he almost didn't vote for the june pause, etc. now he's looking at the fact that he's not ready to commit yet. i don't like recommitting what you are going to do in september. when you are in a transition point like this, every meeting has to be a live meeting. you are not going to just reflect on one month's data. he keeping that option open. remember what jay powell said last week, the four big numbers. two inflation reports, two jobs reports. raphael bostic, the president of the atlanta fed, he is a centrist, when he has needed to be hawkish, he has been, but the last two months he was one of the first to say maybe the fed would do a pause. maybe they do a skip in the meeting in june when it comes to doing a rate hike, which is what happened. we got the july hike,

no one dissented. now he seems to be leading a little more to the side, inflation is coming down, things a revolving in a way that is consistent with a slow down, i think this argues for us being cautious, patient, and resolute. he seems to be a little more in the camp of saying, we've got to think this over pretty hard. but again, two doves, not exactly in the same camp, but they are watching the data for sure. >> bloomberg's kathleen hays. so much to watch out for when it comes to our top stories today. photo the daybreak edition. dayb is on your terminal. you can customize your settings so you only got the news on the industries and assets you care about. this is bloomberg. ♪

>> let's get more on the earnings reports we have been tracking. the head of [indiscernible] recorded a bigger than expected look quarterly profit. they expect second-half revenue to be higher from a year earlier. caterpillar also forecasted a dip in profit in the current course, warning about weakening conditions in china. starbucks quarterly sales slowed in the u.s. higher prices and add-ons helped bolster profits. sales rose 10% in the third quarter from the prior year. we are also watchingnomura, reporting weaker than expected

profit in the quarter, missing average analyst estimates of $240 million. the loss overshadowed the retail business during the quarter. much more to come. we are just about half an hour into the start of trading across major markets in sydney, seoul, and tokyo. major markets, getting some downside pressure. this is bloomberg. ♪ sleepovers just aren't what they used to be. a house full of screens? basically no hiccups? you guys have no idea how good you've got it. how old are you? like, 80? back in my day, it was scary stories and flashlights. we don't get scared. oh, really? mom can see your search history.

that's what i thought. introducing the next generation 10g network. only from xfinity.

>> we have breaking news out of china, pmi numbers -- out of thailand, pmi numbers coming on.

it is weakening a lot from that 53 level we saw the previous month. not to mention a couple of months ago we were at the 60 level. we are seeing manufacturing pmi numbers and thailand weakening right now. not really surprised given that's been the global trend at the moment. take a look at fx, seeing downside pressure at the moment on a little bit of more risk off sentiment across the world given the u.s. credit rating downgrade. we had seen already a rally of about 3% further thai bat in the month of july given expectations the bank of thailand will continue its gradual and measured policy which means a potential rate hike of 25 basis points just today. a little bit of downside for the offshore yuan. the japanese yen, holding

steady and stronger against the greenback. that risk off sentiment, spreading. the dollar is under a little bit of pressure at the moment. the japanese yen, keep a close eye on it. we are watching the jgb debt market as well which has been pretty volatile. we have seen the boj releasing minutes from their june policy meeting as well. plenty for investors to digest in today's session. >> the elephant in the room when it comes to potential volatility remains china. the manufacturing housing sectors in the country continue to show weakness -- continued to show weakness in july. export demand, slumping. officials and china are now pledging more loan support for businesses and to extend other funding measures trying to shore up confidence and support the broader economy. our next guest is more concerned about the interplay in china between the asian population and weak productivity.

the senior fellow at yale law school previously served as a chairman at morgan stanley, stephen roach, we appreciate your time. the weakness we are seeing in the shorter term, how much does it play into the broader restructuring, the slower new normal, the demographics you talk about for china? because we know that even pre-pandemic, these were longer-term concerns that were well flagged. >> we've got to balance -- the first quarter of this year, as we had expected, following the ending of the zero covid lockdowns, the big surprise was what we call a dead cat bounce. there wasn't much momentum afterwards. i think that reflects the fact that the undercurrent to the chinese economy is a worry someone.

and resembles to some extent that which we saw in japan in the 1990's, which of course persisted for two more decades. the working age population in china has peaked, peaked in 2016, which is 18 years, after the same peak in japan, and like japan, with a very weak underlying productivity, that's very much the problem in china today. it's really hard for the economy to sustain the type of momentum it had for that one quarter after the covid related lockdowns. >> we have talked about the fiscal buffers beijing has in terms of how much big bank stimulus they can pour through, is there a concern over the

productivity of the stimulus? the productivity of debt has also been dwindling for china. >> yes, that's an important point. the productivity headwinds in china now are starting to blow quite fiercely. if you look at the broadest measure of productivity of any economy, total factor productivity, the numbers are a little bit dated. but in the nine years ending 2019, it was down .7% per year, in part and not in significantly reflecting the fact that a lot of the economic support has shifted under xi jinping to low productivity estate owned enterprises -- state-owned

enterprises. the pressures that xi's leadership pressures have put on the once dynamic private sector, especially the platform companies, is even going to be more worrisome for productivity going forward. this is a big issue and one that the policymakers need to address. >> all of this, coming at a time when president xi jinping and the chinese leadership have tried to really internationalizee china, open up, at least the rhetoric has been that way. they want to expand the usage of the chinese yuan overseas as well. what are the implications in that sense of china's economic might on the global stage when you have these domestic challenges? >> well, china has been the single most powerful engine in the global economy for the

past 15 years and the years following the financial crisis, chinese growth was 35% of the cumulative gains in world gdp. so the world needs china just as china needs the world. but the slower growth we have seen recently is reduced -- has reduced the power of that growth engine and china's global clout in driving world gdp considerably. if you ask yourself who is going to take china's place, is the world itself headed for a slower growth trajectory until or unless china can successfully address its growth problems. >> we have for a while talked about how u.s. dollar dominance

might come under pressure. especially with perhaps china trying to read internationalize the yuan. with the cutting of the credit rating of the u.s., are we going to see more of this rivalry between the u.s. and china, and what are the broader implications when beijing holds so much of the treasury market in its coffers? >> well, i have learned very painfully that one never wants to forecast the demise of the dollar. i did that a few years ago and wrote several opinion pieces on the bloomberg platform. the final one was a mea culpa for my wrong way dollar crash scenario. certainly there is a case against the dollar. current massive deficit,

shortfall of domestic savings. -- and a federal reserve that, while it tightened dramatically and gave enormous support to the dollar over the last several years, has now neared the end of its tightening cycle. what you have to consider the alternatives. i did that. i was wrong. i all -- i argued in favor of the euro, the yen, even for a while i was dumb enough to suggest that some currency allocators would consider bitcoin as an alternative to the dollar. all of that was wrong. i regret that. but that doesn't mean the dollar is going to stay as dominant as it has been

forever. but i think it's a story for another time. >> stephen, stop self-deprecating there a bit. what options are left for china? when we are talking about long-term structural causes to the weakness that we see petering through the economy here, there is perhaps a rhetoric when it comes to consumer support, enterprise support may not be enough. what could actually have an impact? is it direct fiscal transfers to households? more bold market reforms? is there anything that is actually going to steer the ship around? >> let's hope there's more for the overly levered property market. it would be an unmitigated disaster for china right out of the script and playbook of japan.

the missing link is internal private consumption. i've argued for years and written books about it. it's not that difficult -- they've got an excess of fear driven precautionary savings driven by the rapid aging of the chinese workforce. they need to build out their social safety net, health care, and return meant to convince chinese households that they need to put more of their discretionary income to work in fueling discretionary consumption, rather than putting it away for a rainy day to deal with the safety net issues of health care and pensions. they haven't done that. and they continue to suffer a lot from that.

>> your latest book is about the clash of what you call false narratives between china and the u.s., we know this is a great strategic competition and relationship about time, does the economic weaknesses, the policy challenges change the calculus of how president xi deals with the u.s.? does it change the amount of leverage the other side has? >> that's a great question. sort of the political/ psychological answer to that is if you are facing growth challenges, you deflect attention away to other matters and conflicts with other nations have always been a candidate. there was a great movie in the u.s.-made about that called "wag the dog," that put the hat on the other end, with the u.s.

concocting a fictitious war to deflect attention away from its problems at home. i'm not saying that xi jinping is going to follow the hollywood script. but nationalism, the pride of the chinese dream, the conflict with the united states certainly does change the debate, shifts it away from the growth problems that have occurred on his watch. so it is a convenient inflection -- deflection of responsibility versus addressing a more serious issue at home. >> thank you so much for your time today, stephen roach, senior fellow at yale law school. we have more to come on "daybreak: asia," this is bloomberg. ♪

e. health happens now. e. start your dna-powered health journey today with personalized insights from 23andme.

>> singapore's prime minister is set to address parliament about the ongoing investigation involving the country's transport minister and the property billionaire, a series of scandals, putting the city states'image to the test just as he prepares to pass the baton to new leaders. for more let's bring in

derek from singapore, what's this investigation about? >> well, singapore's not a place you would traditionally think of as having political intrigue. we got the big news out of the u.s., right? but here we are in a country where there have been three prime ministers in history and the current one is the son of the first one. he is going before parliament to talk today about a whole mess of things that have enraptured the country. the country's transport minister was arrested in a graft probe people are seeking additional details on. we will have a ton of details in terms of what it does involve. there has been a lot of speculation. in addition to that, two parliamentarians from the ruling party including one who is the speaker of the house were forced

to resign over an affair. all of this is kind of raising questions in a country that really is not known for political intrigue. political stability has been one of its biggest, most marketable aspects. especially in a region here where there's been so much going on, in hong kong and elsewhere. singapore has leveraged the fact that it has a lot of political stability and good governance, that it's courts are seen as fair and independent and unbiased and all that image has been central to the moves inbound singapore you have seen over the last couple of years. we are going to be watching it extremely closely. it'll be interesting to see what he says. he has the ability to go up and make news. there is also the specter of a coming election. it's not an imminent election.

there should be one happening by 2025. this is a country where the political ruling party here has been in power since independence and they get in the neighborhood of 60% plus of the vote. what i find interesting is that in singapore's electoral system, there are these group constituencies where multiple members are elected all sort of together. if you are looking at those, the most vulnerable constituency based on the last election is one that is headed in part by the minister who was at the sent who is at this -- the minister who was at the center of this political scandal. you are looking at a possibility where there is potential electoral implications here.

again in a country where electoral change is really not something that we are all used to. >> as you said, singapore consistently's near the top if not at the top of rankings. this is certainly one to watch. we are also take a look at some of the other political headlines today. one of our top stories is the former u.s. president being indicted on federal charges, accused of a conspiracy to overturn the 2020 presidential election. this is trump's third criminal prosecution as he makes his latest run for the white house. he denies any wrongdoing. special counsel jack smith says the u.s. will push for a speedy trial. he has been ordered to make a first court appearance on thursday. >> take a look at how asian markets are trading at the moment. we are seeing brought downside -- broad downside and a sea of red.

fitch, cutting the u.s. credit rating. not to mention of course, we have been following the latest earnings results across the board in asia. we will be bringing you some of those numbers later. take a look at thekospi, down .4%, despite the fact that we did see inflation easing and perhaps moving slowly towards the bok target. core cpi, still above 3% growth year on year. the asx 200, also down .6% after the rba held rates steady for a second month. kiwi stocks, not necessarily doing much at the moment. we have more to come on "daybreak: asia." this is bloomberg. ♪ ir phones for financial insights from merrill. is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and build a new home.

so they're talking numbers with their merrill adviser. she's not researching her next role. she's learning how to handle market ups and downs without the drama. personalized advice so impressive your money never stops working for you with merrill. a bank of america company.

>> take a look at what's moving in tokyo, we are following toyota shares up more than 3%, likely to remain strong in the near term. that is under earnings calls, according to analysts. the first quarter operating profit beat expectations. we had seen toyota profit topping estimates and sending shares to an all-time high. nomura, seeing a completely different picture at the moment. it fell more than 7% at one point. we are seeing that downside of

6.9%. profit rising less than analysts had expected and the first fiscal quarter. net income also rising, about ¥23 billion in the three months ending june 30. we are seeing a miss in expectations of their net income for nomura. let's take a look at other earnings we are watching as well. the chinese liquor company, set to release first-half earnings later wednesday. let's get a preview with our consumer goods analysts. what are we expecting? >> we expect moutai to report in line with the preliminary resort which is net income up by 20% year-over-year on the back of a 19% year-over-year increase

on revenue. what is interesting about this set of results is how they managed to remain very solid despite a typical weaker quarter. so, second quarter this company in particular normally is a weaker quarter, and with a strong earnings performance as well as sales growth, it actually gives us a very good indicator of how resilient this company is in terms of its operational performance. >> what's really behind expectations for this resilience? does the e-commerce business kind of plan to that? >> well, as we all know, moutai is one of the favorites among chinese drinkers. it is the national liquor for china. but besides that, we think there are three key contributing

factors for the solid set of upcoming results. the consumers in china are going back or resuming activities in terms of ceremonial locations and business events. the consumption has risen because of that. secondly, we are seeing a shift in product mix. the company has been pushing sales of its product lines, shifting away from the flagship product lines. it effectively gives the company more leeway and flexibility in its pricing. lastly, it is its shift in channel mix. the company has been pushing a shift towards direct sales to consumers through its imoutai channel. this is one of the key drivers for margin expansion as well.

>> that was bloomberg's intelligence consumer reporter there. take a look at u.s. futures. a lot for investors to digest, fed speak, on top of the u.s. being stripped of its aaa rating by fitch. we saw the haven play straight into u.s. treasuries. we are also watching the political front as well with former president trump indicted on federal charges there. a little bit of downside into the start of trading in taiwan and across the broader china markets as well. that is it for "daybreak: asia." our markets coverage continues. ♪ ers fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more. plus unlimited 2% cash back on all other purchases. and with greater spending potential,

sam can keep making smart ideas- a brilliant reality! the ink business premier card from chase for business. make more of what's yours. you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

david: good morning from hong kong