shery: you are watching they back asia. annabelle: we are counting down

to the major market opens. >> traders await nvidia results. bond yields still causing concern even as moves moderate. a new report says a third of office desk worldwide remain unused. president xi makes just his second overseas trip this year. shery: we saw u.s. stocks falling in the new york session. we have a couple of catalysts with financials leading the declines in the energy sector also down. when index falling to the june low, really fighting that tough environment we are seeing. we're also watching the tech sector because nvidia fell

almost 3% on the eve of these results, and all of this as we continue to see that optimism and excitement over ai and nvidia's results will be testing that. treasury markets really muted today. 10-year yield falling but the two year yield higher, extending gains above 5%. we also had pressure in the new york session and we are watching closely that supply rebound that we are seeing globally. >> just got an alert on the bloomberg terminal, australia pmi's for the month of august, a 47.1 read on pmi composite, actually weaker than what we saw back in july. there's weakness all around, manufacturing pmi 49.4, a little

bit worse as well. so pmi's in australia still in contract three territory. let's take a look at what else is going on. annabelle: the set up for today looking like we will see risk tilt to the downside and stocks likely to open weaker. the set up today, there's a couple of different factors we are continuing to keep and i on, first is the higher yields we are continuing to see, putting pressure on equities, dollar moves as well, another factor. and the malaise of china's economy, really taking center stage in this region. yesterday the session was pretty interesting in china. different factors being attributed to that but one of

those being state backed funds injuring that market. what is particularly interesting, take a look at this terminal chart because it really does put these moves into further perspective. essentially we saw foreigners taking about 870 $5 million out of mainland stocks in session yesterday. that extends the streak of net selling to delve days, the longest we have seen since the -- since it was established. they can -- nothing yet that can start to modify that in any way. shery: and who can blame them given the slew of economic data we've seen. our guest was watching jackson hole closely this week and whether there was any mention of china's slowdown.

she is a global investment strategist at charles schwab. great to have you with us. if we do hear from fed chair powell or ecb president lagarde talk about china, should we assume this is a dovish signal? >> i think so. there are two main things i'm listening for, one is any mention of china slow down and the potential impact it could have, that could move up the markets expectation for when the fed might continue to cut rates. on the other hand, they continue to mention the tight labor markets, that is maybe a hawkish signal. i think the markets position either way, they are likely to mention both topics, but where is the emphasis coming from? i think that will be important. shery: we just went through some of those signals out of china

and many of them are not very positive. we have seen concerns over the property market linked toward investment products. we do have bank earnings this week as well. should we be concerned about financial contagion here? jeffrey: certainly we should be concerned about the slowdown in china and the impact it has on many businesses. it will probably linger for some time given the factors weighing on consumers spending in china. but we don't think a financial contagion within china is likely. other high-yield bonds from industrial and commercial bank of china are trading on par. so we are not seeing a contagion from the housing space into other parts of the economy, even within the high-yield bond market, and that is encouraging. and in commodity prices we are

not seeing some kind of contagion fear being priced in there. the price of bank stocks and china have outperformed those in the u.s.. so i think contagion is unlikely. what we have seen the passes that the government with its majority stakes in the largest banks is kind of shifting some of that bad debt around or extended maturities to kick the can down the road. we will see a lot of property easing measures that will keep us away from calamity. paul: how sure can we be, because china is notoriously opaque. youth unemployment is not even getting reported anymore. can you be completely confident there is not going to be a contagion, and ultimately, someone is going to have to backstop all of this. is it going to be the chinese government? jeffrey: i think it is going to be the chinese government. what i am encouraged by lately is that there has been an incremental response and some of

the real-time data launching in china to some of the stimulus measures that have trickle down since the july politburo meeting. an example, air pollution, epa air tests are done every hour. they plunged in the second quarter, suggesting manufacturing and transportation activity is falling. it started to rise here again in august. they have started showing some signs of rebounding. and box office results, we are seeing more consumer activity, showing maybe some response among households to what has been taking place to try to support them. so i am encouraged by what i'm seeing but i'm not entirely convinced we are out of the woods. i will continue to watch the data closely. paul: how about in terms of stimulus, what do you expect, according to magnitude?

targeted stimulus or an ongoing piecemeal approach, what is your expectation? jeffrey: a little bit of each. the piecemeal approach is not working in the market but is working at the margins. the new infrastructure spending is green tech come parts of the economy in china are moving. electric vehicles, solar, wind powered batteries. those are growing at double-digit rates. it's kind of high tic regrowth -- high-tech regrowth president she wants to see. -- president xi wants to see. shery: we continue to see the weakness of the yuan, despite of these measures the government is taking. how does that affect the economy? ? and also the stock markets given the boost it would give to exports, but at the same time financial stability, what do you

make of it? jeffrey: it's hard to balance all these factors out. certainly a lot of stimulus would ignite the economy as it has in the past, but wouldn't raise stability concerns and crush the currency? one of the reason we are seeing money pull out of the stock connect is concern about the decline of the yuan. all these factors combined together and that means a slower covering. when you look at so many companies around the world dependent on sales to china, it may mean more bad news for earnings and not just china's local economy as well. paul: i'm interested in your opinion about what we saw on the hang seng lake -- late yesterday. if it was the national chain, what is the point in that kind of action because it may just be providing more attractive exit point for people looking to get out of the market. jeffrey: i don't know the answer

to that. i like to think that that national team's got a little smarter than maybe a decade or two ago when those types of things were more common. i'm not entirely sure. there is a lot of movement in the markets right now there could be some positioning ahead of that regarding that entire tech space. it's interesting to see these types of moves, and shock waves coming through the market when we see this type of data. paul: thanks so much for joining us. still to come, major insurers take -- say claims for weather-related events could top hundreds of billions of dollars. plus foxconn's founder keeps taiwan guessing about his plan for resident -- presidential bid. plenty more to come. this is bloomberg. ♪

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shery: romans taxes dialing up the pressure to enforce its and -- policy of employees working from the office five days a week. let's get more details from vonnie quinn. >> it's been three years since the pandemic kick people out of

office buildings. still banks are trying to get their employees back. this time it seems to be different, a statement from goldman sacs saying we're simply reminding are employees of our existing policy. we have a continued to incursion ploys to work in the office five days a week. it should be said that revenue producing ploys have returned full-time in the main, but senior managers are reluctant to put so much pressure on people and other groups, and that is going to change post labor day. after that, it's going to be head first into the fourth quarter. it has been a tough year for banks have laid off staff. goldman isn't really having it anymore. that said, some of the other banks also have those kinds of policies in place. in april, j.p. morgan told managing directors they want them commuting five days a week. citi may be little bit more flexible, but has told employees

in the summer that the really need to comply with these workplace policies. otherwise there will be consequences, and that could even mean -- an incentive to get back in the workplace. we are down more than 50% since the pandemic, and that has been the case since the beginning of the year. paul: this tension over it return to office is not unique to the banking industry, can we put some numbers on this? >> there's a lot of granular data on this. one company monitors cubicles, the use of workspace, it is monitored around the world, and it has found something a little terrifying for people who are paying rent and leases. it found that of all the workspaces out there, 36% are

never occupied. that is more than one third of your property that is not even being used in a day, never mind a week or year. and more than a third that are not being occupied, we have obviously nearly two thirds at our, but only 14% are being occupied for five or more hours a day. the ratio productivity to the workstations you're paying for, the data also shows that meeting places, places where you can be quiet and get the work done or meet with other people, those are being used. so that might be a little hit of where the design of the future workplace goes, if that is what people are actually coming into the office to do. right now 80% of all workplaces are filled with workstations. it's only 20% of those workplaces that have meeting rooms and so on. so we could see a big change

there. one last statistic for you, this could all change because according to one brokerage, there are million people with mandates to come back to work five days a week through the year. a big real estate group has found that more than 50% of big organizations expect to reduce the real estate footprint over the next three years. i guess it will depend on whether people comply with the mandates or not. paul: vonnie quinn there. let's get some numbers from santos, this is one of australia's natural gas producers. first half net profit $790 million, down 32% on the year. we did have a warning that sales could fall on weaker asian demand for gas due to things not being ideal in china in terms of the growth picture. first half revenue for santos,

$2.97 billion, down 21% on the year. the dividend percent toast, 8.7 sent, underlying profit $801 million. up about 9%, strongly outperforming the asx. but those numbers are painting a rather difficult picture, cento still seeing for your production of up to 93 billion barrels of oil. those numbers just crossing now. a big day for the lng space. we're waiting to hear news from negotiations with woodside by close of business today. as for whether that will be a strike, and that could affect up to 11% of lng demand. and one ceo says markets are in for a rough road ahead. saying he believes the u.s. economy will experience a hard landing and that the fed has already gone too far. >> i'm still in the heart

landing camp. we have had a consensus around soft landing but the reality is we have already landed, core inflation is down to 3%, core inflation minor shelter is down to 1%. so the reality in my view is that we have already landed in the fed will do what it has historically done, which is way too late to get started and then go too far. we will see what mr. powell says on friday and we will see what happens in september, but we've got $17 million of household debt excuse me trillion. $17 trillion of household debt, $1.6 trillion auto debt and $1 trillion plus of student debt. so we are a consumer driven economy and we are in for a rough road ahead. >> you look at the two year and

the handle on the 10 year and you think about the trajectory of rates, and what else has to break as rates stay this elevated? where has the market not yet seen pain that you expect? >> you were talking about the regional banking downgrade. we are very close to that. on the debt side, we have 1.5 trillion of maturities coming in the next 18 months. obviously that is going to be difficult to do in this environment. regional banks are big provider of capital, or historically have been. private equity is coming in and filling some of that gap, but there's a lot of mortgage debt that has to be refinance and those rates are lot higher. a lot of those excel spreadsheets just don't work. >> you have seen a few defaults are to hit the market, but nothing so crazy yet. do expect there will be significant distress, and frankly you have made your name and some of this real estate distress. at what point do fine assets

that are cheap enough to buy? >> is true, i have been through a number of different crises. i don't see capitulation yet as a lagging indicator. the issue is that you got a 12 month lag on shelter being factored into the inflationary dynamics. i think we are going to see capitulation prices that are interesting, and private credit and real estate credit get very interesting from a buyer perspective later this year and into the first half of next year. paul: you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. it is also available on mobile and you can customize your settings for the asset you are

interested in. this is bloomberg. ♪

paul: microsoft's $69 billion activision blizzard deal has a new chance after the tech giant submitted a substantially different deal. >> we had a real concern previously that microsoft would be able to control the way that market was going to develop. we see with this new deal and we will have to test it cash -- carefully through our review, but what we see from the announcement today is that microsoft being able to control how those cloud streaming rights will use will shift to a different company. paul: let's bring in our technology reporter, where does

the deal stand now? >> as you just heard, the uk's competition markets authority opened this new probe that after microsoft offered some concessions to allay the concerns that the transaction would stifle competition in the cloud industry, and with that microsoft said it would sell the cloud rights of its current and future activision games released over the next 15 years to ubisoft. that's a pretty big move considering that includes activision, one of its biggest games, call of duty. but it was a pretty big concession and one that it clearly had to make, because it has been months of this back-and-forth with u.k. regulators. they had previously blocked the transaction in april and asked microsoft to come back to the table with the new proposal. they came back, they didn't like it, and u.k. regulators launch this new review after microsoft made some of those bigger tweaks to that initial offer. shery: so what is next in this

u.k. deal? >> regulators have set october 18 for the magic date for when they expect the review to be over. it has been months of this, but it was always a deal that was going to entail a lot of scrutiny. this initially was announced in early 2022. u.s. regulators challenged the acquisition in december of last year, lost in court last month. you had the european union's antitrust regulators approving the acquisition in may and activision makes videogames, so with cloud gaming being the future, it is attracting so much more scrutiny because of microsoft controls both, the fears that it could really lock out competition by not having some games like the wildly popular call of exclusive to the xbox and locking out consult

makers like sony who makes playstation. so the hope is that microsoft can get approval by having activision divest those rights, but the u.k. has to review this and october 18 is the deadline. shery: our technology reporter with the latest on microsoft and activation. we have more on "daybreak: asia." this is bloomberg. ♪

annabelle: this is daybreak asia. the fx policy is very much in focus. we are seeing moves in the yuan, we have seen a lot of intervention measures coming through from china but taking a

look at some of the second order effects from that and part of it is showing up in iron ore. the contract in singapore just coming online in the past 10 minutes or so and telling us we seeing prices now rising over the past 10 days. part of that move can be attributed it seems to what is happening in china, specifically that support for the currency i was just discussing, because when we see a stronger chinese yuan, it helps local buyers inside china, he gives them greater purchasing power, so that is part of what is driving the moves. and the price holding above $100 a ton can be attributed to expectations perhaps of stimulus measures to come in china, given iron ore makes up about 40% of the demand for construction. let's take a look at what else we are watching. taking a look at offshore funding costs for the yuan, we can see that spike in the overnight rate.

what it tells us essentially is that liquidity is tight, supply of the you want is tight and it could be down to intervention, given that we understand that china has asked its banks to either stop selling or withhold the yuan as well. shery: time on selections in january will help set the course for u.s.-china relations for years to come. the foxconn founder is toying with an independent bid for the presidency, but has yet to make a formal announcement. stephen engle joins us now from the unofficial campaign trail. tell us about this island and why you are there. stephen: it is strategic in the course of the cross trade relations. it is far closer to mainland china.

the city is about 6.2 miles across the bay. yesterday you could see the gleaming skyscrapers perfectly, as well as the beach down below that has those steel spikes full of barnacles. they were put in place decades ago to repel a potential come a traditional landing invasion by pla soldiers. so it is kind of the front lines between the cross strait relations which have been strained under the leadership of the more independence money party -- independence minded party. none of the three declared candidates have more than 35% of the vote so far in opinion polls. that's why this is the wildcard in this, he is trailing at number notched -- number four in

unofficial polling because he is not a candidate yet, but he is acting like a candidate. he is here today, as is the afd candidate. they are all here because 65 years ago today in the waters off me here there was the biggest battle between pla forces in the republic of china which was won by taiwan. so it is a symbolic day and is kind of the launching point of the campaign that will last for the next five months. i got front and center yesterday and asked the million dollar question. let's hear it. >> what can the next president do to improve relations with china? he says we will talk to you later. we will be with you most of the

day today with his unofficial campaign so hopefully we will have the opportunity to talk to him. it again, he is pro-business, no doubt. he runs foxconn i'm of the biggest supplier to apple. he is a multibillionaire, 72 years old. he wants to make his mark and improve dialogue across the straits with china. he told his unofficial campaign rally yesterday, he addressed the elephant in the room about the prospects for war. this is what he had to say. >> i'm asking beijing to realize the continuous intimidation of using force to have time on except unification will have the exact opposite effect. the biggest common denominator of mainstream people's will is 23 million people who want freedom, democracy, and peace. stephen: is going to be a very interesting next five months leading up to that january

election as the people here decide what direction they want to go. more engagement with mainland china, or more of the path toward being the fact on independent. paul: so given the proximity to china and the history you talked about there as well, what else do the people there actually want? stephen: keep in mind, this is much closer to the skyscrapers then to the central business district of taipei. that is an hour's flight away, the main island to taiwan. when vacationers come here, it is good for the local economy. again, it's all about proximity. i talked to a local counselor and he said essentially there is little the 127,000 people in the electorate here can do to change the outcome in taipei because again, this island and taiwan is

locked in a geopolitical battle with the superpowers. >> is caught between taiwan and mainland china. it's just like how taiwan is copy between china and the united states. that's the way it is. when caught in a geopolitical confrontation between the two, it's like an ant underneath the feet of an elephant, being trampled again and again. stephen: we will be embedded all day and maybe he will tease us more, maybe he will declare his candidacy and maybe he won't. paul: stephen engle in time on there. still to come, major insurers claims for weather-related incidents this year could top $100 billion. the asian development bank joins us next to discuss how the industry can mitigate climate risks. this is bloomberg.

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shery: economic losses are mounting from the devastating wildfires in maui. duties risk modeling service estimates damages could reach six booing dollars as business

disruptions combined with property disruptions. most of the losses come from lahaina, whose historic core was reduced to ash. it did not include the broader impact on maui's tourism industry. paul: bloomberg intelligence says it seems almost certain that claims for weather-related incidents will exceed 100 billion dollars for the third year in a row. in the first half of 23 the cost is 43 billy dollars while swiss re has it pegged at 50 boone dollars. that's with a look to climate change becoming more frequent. let's welcome our guest, thanks for joining us. you say that asia has a catastrophe protection gap. can you give us a sense of how underinsured the region is?

>> good morning. indeed there is a gap in asia, the projected gap in asia is 92% because of underdeveloped insurance markets, and also it puts pressure on governments in terms of managing its contingent liabilities. paul: how affordable is insurance for low income households and small businesses in the parts of asia that are the most vulnerable? >> insurance has been a little bit of an issue because of cultural factors. there are family systems and community systems which took care of the risks, the idiosyncratic risk, but with

catastrophic risk, communities are unable to manage, and therefore in the absence of insurance schemes in the public sector and also in the private sector, the insurance gap has not been reduced in that sense. shery: i was just going to ask, how critical is the insurance sector and insurers in really managing climate risk, and in what way do they play a bigger role? >> insurers are responsible for diversifying risks, and we said there's is very little insurance penetration, as a result of that, when it catastrophe

strikes, everything depends on the personal balance sheet of individuals. within insurance mechanism in place, and helps reduce the cost of managing catastrophes, reducing premiums, and also in terms of releasing money for more development expenditure. shery: how difficult is it for the insurance sector in the emerging markets to access capital and data, and what more needs to be done? >> the insurance companies in most of the emerging markets are undercapitalized. the premiums they charge or not risk based because of lack of data and also because of lack of risk information infrastructure. these are things to be tackled,

and we need to put internationally consistent standards and regulations in place which can attract private investors and insurers into the market. once they come to the market, the insurance market can expand with the new players playing a role, not only in providing underwriting capacity, but also in terms of transfer of knowledge. where insurance continues in terms of sensitive pricing also, it also helps financial institutions, governments, and manufacturers to price risk better and allocate resources more efficiently and effectively. shery: we touched on this briefly when it comes to vulnerable people. how important is it that insurance is inclusive?

>> insurance needs to be inclusive, but most of the vulnerable people live in areas that are most prone to disasters. so we need to also marry some of the insurance related knowledge with the real sector, like enforcing building codes, installing risk resident instructor -- infrastructure in place. once we do that, the cost of insurance premiums will come down. there will be certain populations which cannot afford insurance, and that's where the government has to step in, by subsidizing some of the premium or trying to relocate some of those populations away from those centers. shery: really good to have you with us, with a very interesting theme and angle to look at climate risk and insurance.

principal financial sector specialist joining us from the nilla. you can dive into any of the securities or bloomberg functions that we talk about and become part of the conversation. to send us those instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪ so why do we leave so much untapped potential on the table? this is a next level bed, for a next level you. my circadian rhythm is kicking your circadian rhythms butt! it's not a competition. i know, but i'm still winning! so, it is a competition. save 50% on the sleep number® limited edition smart bed. plus, 60-month financing on all smart beds. 76% of 23andme health customers surveyed shop now only at sleep number®. reported taking healthier actions.

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>> we are making good progress on the discussions, we are engaging constructively, we are listening, trying to really understand the areas of concern that our workers have. i think the meetings are going well, so we will just continue to engage. shery: meg o'neill speaking about labor disputes in australia that could disrupt natural gas supplies from early next month. su keenan joins us with more on this. su: it makes for a 1-2 punch for natural gas prices which have already been on a tear or number of reasons, including concerns about availability. now you have a potential strike and heavy maintenance in norway resulting in outages, and that

has added to market nervousness. at one point natural gas was up 9.9% before pairing those gains. the workers at the lng plant of what's on energy group have threatened to strike as early as september 2. that's unless they reach an agreement during scheduled talks , which are continuing wednesday, and that's when we are expected to get more clarity. staff at some chevron considerate -- are considering walkouts. what is the market most nervous about? the size of the potential impact. a strike risk interrupting as much percent of global lng supplies. you see that reflected in the increase in price. asia and europe are preparing for the winter heating season, and those are two regions that buy a limited -- an unlimited amount of the supply worldwide. paul: a few factors on both the

demand and supply side as well, chinese demand, a few question marks there but of possible supply risk from iran, how is that impacting prices? su: right now we are seeing oil prices flat in asian trading. oil did post a slight decline in the u.s. session, and this is coming amid lingering concern about demand from china, the world's biggest crude importer, and signs that supplies are rebounding. west texas intermediate futures for october are holding right around or just below the $80 level in new york trading. the market is left struggling for direction. observed imports from iran, turkey and iraq have had a sudden flurry of talks, both seeking a restart in major oil

pipelines. the rallying futures for west texas intermediate and crude have taken off but faltered in recent weeks. you can blame that in part two efforts by saudi arabia and russia to curb production. they tightened the market and now it is really a question of direction at this point. paul: bloomberg's su keenan there. investors bought austrian lithium stocks at the start of the year and could doubled their money, or lost more than half of it. shares from some of the most volatile returns on the asx 200 index. james, a bit of a freak willing stage for the lithium boom at a moment. what are the factors that are driving this? >> the key driving factor is the transition to going electric.

for that, we need lithium. it was a niche market but it is now becoming something quite different. the miners going out looking for lithium deposits, the results will be published and investors will just pile in. not quite understanding the true value of the results. that expands why in some cases there are fantastic results and in some cases, not so great. shery: so what should we be looking out for when it comes to separating the losers and the winners in australia's lithium race? >> investors tell me, he gets quite technical, but basically you want to find a really fantastic deposit, and it needs

to be close to the surface and in an accessible part of the world. australia is a great place because it is a very stable jurisdiction. other places are not quite as stable. it is one thing to have a good deposit, it's quite another to get it out of the ground and to market. paul: james, lithium right now dominated by small and midsize players. what are you watching in terms of m&a? james: this is interesting about lithium because it is one of the hottest commodities. it's growth trajectory is just going to go up and up as carmakers continue to go electric. strangely, the really big players have pretty much stayed out of it. the m&a activity, smaller

players merged to become larger. this is something you will be interesting -- interested in. it's going to move very fast. carmakers are also getting involved. so that is another one to look out for. shery: i cover emerging markets and i come from bolivia, so i been watching the lithium triangle of bolivia, chile, and argentina. it is not all about australia, right? james: it's a different kind of lithium, is contained in water underground. argentina, chile is the second

largest producer of lithium. argentina is going to become big over the next few years. canada's also becoming a major player. africa as well. everywhere is looking for lithium now. paul: james there on the lithium space. these are the stocks to watch when trade opens in korea, japan, and australia in just a few minutes time. we are continue to track the impact of potential industrial action in australia's lng sector. talks continue on wednesday to avert a possible strike at an export plant. and the first have underlying profit fell 37% on the year. grocery giant woolworths missed the average analyst estimate. shery: japanese seafood

companies fall as hong kong imposes import curbs over this week's release of treated wastewater from fukushima. the market opens in sydney and in tokyo -- are next. this is bloomberg. ♪

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>> this is daybreak asia. we are counting down to major market opens after declines on wall street, and we are still waiting for nvidia's results and

not to mention we also have jackson hole later in the week. paul: more earnings news to digest, australia will hear from woolworths and santos, and the threat of strike actually still casting a long shadow over the natural gas sector for australia. annabelle: earning still a focus in australia, china bank with the earning focus still in asia. ahead of the open today, really what is going to set the stage for us all these numbers out of the u.s., the likes of macy's as well, one of those in focus. macy's one of those that was in focus in the session on wall street. credit card delinquency starting to accelerate, starting to paint a picture of the worsening outlook for the u.s. economy because a lot of the savings are becoming depleted. treasuries, little change with

yield still around the hyson 16 years on the benchmark. investors positioning for the fed to keep borrowing costs elevated. little surprise, overseeing the nikkei to 25 coming online to the outside. still holding above the 145 level. as you mention, the other key focus is nvidia, we saw that stock weakening, in the context of more than 220% rally, up 8% to start the week as well. certainly big focus on that because the chipmakers earnings, given its heavy weighting as well on the s&p 500 is seen by many as setting the tone for markets alongside jay powell speech on friday. in korea today, we will be really watching some of those supplies into nvidia. stocks looking weaker as we get underway. what else we will be watching of

course is the countdown we have in korea to the bank of korea decision on thursday, no change is expected to the key rate, likely to be kept restrictive in the battle against inflation do we have rising risk to the economic outlook. we continue to see that currency weakening. in australia today we do have a earnings, woolworths we will get it in a few minutes from now. broadly there still the picture of contraction or deteriorating outlook that came through in the private pmi reading this morning. the composite falling be full -- below the 50 mark and you can see the deterioration to 46.7. and the impact of the chinese slow down, given that trading

relationship between australia and china, showing up in oil prices. in the red there to start the day. shery: take a look at how u.s. futures are trading at the moment. we are seeing fluctuations between gains and losses early in the asian session after we had stocks falling in new york. annabelle mentioned that we will get nvidia's results in just on the eve of that report we have nvidia falling almost 3%. a test of her market excitement over artificial intelligence, but at the same time, financials leading declines in the new york session with the kbw bank index falling to the lowest level since june. remember two weeks ago, moody's carried out a similar action. we are also watching consumer health, and perhaps a little bit of concern, macy's sinking in the double digits, credit card

delinquency's accelerating here in the u.s.. we spoke to the ceo of kayne anderson energy state advisors. he says markets are in for a rough road ahead. he told us exclusively that he believes the u.s. economy will experience a hard landing and that the fed has already gone too far. >> i'm still in the hard landing camp. i know we've sort of had a consensus around soft landing at this point, but the reality is we have already landed. core inflation is down to 3%, the reality in my view is that we have already landed, and that the fed will do what it has historically done, which is way too late to get started and then go too far. i believe they have already gone too far. now we will see what mr. powell says on friday and we will see what happens in september. but we got $17 million of household debt -- excuse me, trillion.

17 truly dollars of household that, $12 trillion of mortgage debt, $1 trillion plus of student loan debt which they will have to start paying on that debt sometime soon. we are in for a rough road ahead. >> you look at the two year, and the handle on the 10 year, and you think about the trajectory of rates, and what else has to break as rates stay this elevated. where has the market not yet seen pain that you expect? >> you were talking about the regional banking downgrade. we are close to that. we have a big real estateon th'5 trillion in maturities coming in the next 18 months. obviously, that is going to be difficult to do in an illiquid varmint. now private credit is coming in, private equity is coming in and filling some of that gap but the

reality is, there's a lot of mortgage debt that has to be refinanced, and those rates are a lot higher. a lot of those spreadsheets do not work. sonali: what about default rates? you have started to see them hit the market, but nothing too crazy yet. frankly, you have made more name and some of this middle state distress. what assets do you find that are cheap enough to buy? >> it is true, i have lived three number of different crises. i do not see capitulation yet. there is a lagging indicator. i mean the issue is you have a 12-month lag on shelter being factored into the inflationary dynamics, so, you know, i think we are going to see capitulation and prices that are interesting and private credit and real estate credit getting really interesting from a buyer perspective this year and into the first half of next year.

paul: that is albert rabil. in tokyo, sydney, and soul, annabel, what is moving at the moment? annabel: i think it is a question of what is not moving instead. if you take a look at this terminal chart here, this is the turnover or average time function. essentially, what it tells us is where the training line is that, and the dotted line, the likely one, shows us projection over the course of the day, versus the darker line at the top, the 20-day moving average. right now, we are about 35% lower for trading volumes from where we would be typically over the last few weeks or so. it really points to how much uncertainty there is no market at this right given those two big events later this week, nvidia earnings that do after

the bell in the u.s., and also you can add to that jay powell these eking later this week on friday and giving us an indication on where rates go from here. so rates are sitting on the sidelines. let's take a look at what is moving so far. one of the key focuses will be japanese seafood companies. one of the top gets about 5% of its revenue from outside japan, so essentially why we are focusing in on these is because hong kong has just imposed import restrictions on seafood, seaweed, and that is really in response to japan's plan to stop releasing treated wastewater from the fukushima nuclear plant that could start on august 24. hong kong is the second largest importer japanese seafood, so that curb that has come through.

what else we have seen moving ahead of this relief, fukushima wastewater assault stocks. today, one decline, but putting into context some of these were about 30% over the past session or so. it does appear it is more about backed retail participation, because we have seen again those futures, so perhaps that shift with the market. the last thing we are focusing on today is the asian supplier of nike, nike holding a record streak of losses, concerns considering to build around the health of china's economy and that consumer recovery, which we are not really seeing that taking shape just yet as we saw nike down more than 1% on tuesday, ninth straight session of losing streak.

a little mixed reactions of our in some of the agent suppliers -- asian suppliers, shery. shery: still ahead, we will discuss china with cornell university's eswar prasad. 20 says many are a consequence of its own policies. hong kong planning to curb seafood imports from japan over the relief of treated nuclear waste. details next. this is bloomberg. ♪

>> next week, bloomberg's live from the annual jackson hole symposium. our x routines with fed presidents and other economic leaders as they shift the global economy. >> it is not how fast we do it, it is where we go. >> cover starts wednesday, august 23, with a special

edition of "bloomberg surveillance," live from jackson hole starting at 8:00 a.m. eastern. bloomberg, your global business authority. paul: country garden is leading investors in the dark about the exact date the grace period ends. for more, let's bring in china editor kevin kingsley. why all of this uncertainty of the payment date? kevin: paul, they are not exactly clear on when the grace period ends for the two dollar vons that country garden earlier did not pay interest on, august 7 was the effective date when these payments were originally due. the actual due date was august 6, so 30 days from those is either in fifth or september 6.

because the bond documents are not specific as to when exactly the grace period begins, whether the actual due date or effective due date, there is some uncertainty in the market as to when exactly the re-date -- this 30-date period runs out. moody's told bloomberg this week they themselves are not entirely sure which data potential default would happen if payments throughout the 30 days still does not happen. shery: so calling on default becomes relate fuzzy. does that mean we could see more legal issues around that? kevin: sure, certainly if they decide to pay at the end of the 30 days, we can see bondholders push some kind of default action. but chances are, the bondholders will kind of layoff, especially because we have this 3.9 billion yuan bond that is also coming do the same week. of course bondholders over the next several days will be voting on a proposal from country

garden to extend this bond by three years. there's an alternative proposal to demand repayment now, so we have this meeting this week. that should give us some clarity as to how likely or not country garden will pay the dollar bond interest in a few weeks, because if they default on the yuan bond, there is no chance that the dollar bond could then be paid. paul: all right, bloomberg's kevin kingsbury there.let's look at trading in the asia-pacific at the moment. not a lot of action. europe invesco yeah pretty flat, -- europe and australia pretty flat, not a lot of volume, either. struggling conviction in the asia-pacific right now. let's bring in kelvin tay now, regional cio at ubs wealth management. i know that you prefer the bond space right now, and we have seen the yield on the 10-year, for example, reaching levels we

have not seen for a decade or so. how much higher do you see yields moving from here? kelvin: well, i think it really matters what the speech will likely be from the chair. he is pushing back on asia's big cut in march of next year. that is the key thing to see. the bond is a big concern. perhaps even turned up in little bit higher. but we do see a lot of hikes in the cycle of concern, so barring any change, data over the next six months, that it will likely stabilize at this level and perhaps even move back to the 4% level. paul: so if you think we have seen the last rate hike, what sort of rhetoric you expect to hear coming out of jackson hole? chair jay powell has wrongfooted markets before with his speech. beyond that, what you expect to

see what the next set of dots? kelvin: he has set a little bit of panic in the markets, because in recent weeks, you know, they have been trending upwards, and it is more upward looking, more bullish than before. it depends on the consumption, likely to come out in the next couple of months, the data, and they look to be data-dependent, and that can be an indicator of where the cycle will likely be. but, from our perspective, we do think a lot of the details will play out over the next couple of months, largely because of the fact that it is a concern. the u.s. consumer at the end of this year will likely be up. so this spending cannot go on forever in that sense, and at some point, the hydrate will be -- high rate will be impacting the u.s. economy on a more gradual basis.

shery: calvin, if yc emergency market equities downing -- kelvin, is that why you see a emerging-market equities downing u.s. equity? kelvin: we see the dollar become increasingly resilient in the last two months, and you know it is going to be very hard for the emerging markets, so that is one condition that must be in place. the second condition is that the chinese market must recover or at least show some signs of civilization. unless you get more coming the roof coming from the chinese government -- more coming through from the chinese government, it is not likely to move the needle, where the property market is concerned. the property market needs to stabilize and recover before emerging markets. shery: kelvin, we still have

baidu, for example, receiving support, optimism over their ai product. we have nvidia coming up as well. how convinced are you on the ai nam right now? kelvin: well, we've always been very positive on the ai narrative. we do think it is quite a major game changer, you know, if you want to talk about the industrial revolution, in the very early stages, it is that early stage of that particular resolution. there's more room to grow, but of course, it always boils down to valuations. sometimes valuations will get carried away. i think the fundamentals are strong, but, you know, if we go back to the valuations that i alluded to at the top. paul: i just want to get your views on the u.s. dollar as well. it has been enduringly strong up to this point. do you think weakness might be at the -- on the way?

is that connected to be fed's next move? kelvin: yeah. i think what has really spooked the euro investors is that in the last couple of weeks, the data coming from the eurozone is weaker than expected. i think if you look at the last time pmi actually came up, it was all of the eurozone countries, and that in turn means where the ecb is concerned, it will be a little more constrained. they can grow as much as they want. asians are very resilient and strong in the eu, and that means you can get between the dollar as the euro bonds. we keep a handle as to how strong or how high the euro could actually appreciate. so i think it is very important. and i think it can manage to come despite your removing above 1%.

-- the euro above 1%. and you want, that will be where we should be. weaker expectations. and on top of that, just before the fomc meeting angela, the market was very long the euro, and i think at this point in time, there is a thrashing of positions. but it will depend on what they say on friday, and that will be the direction of euro-dollar over the next three we. shery: kelvin tay, regional cio at ubs wealth management. thank you. you can get a roundup of all the stories you need to know to get your day going in today's edition of daybreak bloomberg subscribers, go to dayb . you can customize your settings.

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shery: we are watching japanese seafood shares as morning trading is underway. hong kong curbs a range of imports. this is ruled by japan to start releasing treated wastewater from the fukushima nuclear plant into the pacific ocean. we are seeing downsides of as much as .5% for those stocks. let's discuss this with economy and government reporter carrie sue bloomberg. we know that hong kong was the second largest importer of japanese seafood last year. what exactly are they doing right now? carrie: that's right. hong kong's chief executive immediately instructed officials to prevent seafood from coming

into hong kong, and they will be in permitting a band that they mentioned several weeks earlier. what this means is that moving forward, seafood, all live from a frozen, chilled, dry, among other aquatic products, will no longer be able to enter hong kong from what has been outlined before. paul: so what is the fallout going to be for hong kong once the city's band is in place? kari soo: that's right. this move threatens a whole swath of product, which contributes hundreds of millions of dollars, and we are already seeing the follow for the past couple of months, when fears have arisen between consumers that maybe these products are already damaged. so restaurants are seeing as much as a 30% decrease on the revenue for japanese restaurants

in hong kong, and this is expected, if this pattern holds to the end of the year, they could be facing as much as $10 billion hong kong losses, which is quite significant, given the fact that they are finally starting to recover from the past three years economic recovery. shery: economy and government reporter kari soo lindberg joining us from hong kong. here is a quick check on some of the corporate stories we are following. baidu's quarterly revenue rose the most in more than a year, with a larger than it did -- projected 50% jump. riding a bounceback in advertising following the death of the covid zero era. investors are focusing on baidu's ai ambitions, awaiting beijing's approval to roll out its chatgpt rival called earnie. nike stocks fell for a knife straight session on tuesday

after -- ninth straight session on tuesday after second quarter disappointing results. this is nike's longest losing streak since 1980. it comes over concerns of an inventory stockpile and chinese sluggish consumer recovery. namura securities international will pay a $35 million fine to the u.s. government over securities fraud, dating back to 2009. the government investigation found that the firm misrepresented the facts to keep its customers intrigued. the company had previously paid over $20 million to victims as part of a settlement with the s.e.c. the former of jp morgan's precious metals and its top trader has been sentenced to prison. michael and greg smith were both convicted of market manipulation and spoofing last year.

spoofing of the act of placing fake orders in a bid to manipulate prices. we have putting more come on "daybreak asia," as we see fluctuating gains and losses in asian markets. this is bloomberg. ♪ wow, you get to watch all your favorite stuff. it's to die for. and it's all right here. streaming was never this easy, you know. this is the way. you really went all out didn't you? um, it's called commitment. could you turn down the volume? here, you can try. get way more into what your into when you stream on the xfinity 10g network.

>> we have breaking news at japan, getting the latest pmi numbers, a composite for august in japan, the luminary number coming in at 52 point six, which is a slight improvement from the previous month, also in positive territory expanding all of this

year. when it comes to pmi manufacturing, 49.7, a slight improvement from 49.6 in the previous month, but still in contraction territory for a third consecutive month. the services side of things strong, 54.3, an improvement from the previous month. it's the manufacturing side of things where we are continuing to see slumps across asian factories. china's manufacturing slump is not helping, and domestic demand not being able to offset that either. a third consecutive month of being under that 50th expansion level. now, time for a broader check of the markets. >> 30 minutes into the session now for sydney, seoul and tokyo, and i have the g and m function here, not really to point out any big move in particular, it's really about indicating how subdued trading activity is so far in this session when you

take a look at currencies for the hang seng up more than a percent in shanghai that could be a signal for that support measure coming through into the chinese one which could be biased in shanghai in a better position when you have that strength in the local currency there. in terms of bonds, fairly steady, not seeing any big boosts, equities are range found in the session. when you change it on and look at turnover we talked about this at the top of the hour, but pointing out again, trade volumes up very very muted so far in this session, 30% lower than where they would typically be on a 20 day moving average basis. it tells us how much investors are sitting on the sidelines here. ahead of those key events that are coming up later with jay powell speaking at jackson hole on friday setting the stage for

rate cuts and earnings do after the bell on wednesday on wall street. this chart looks at the implied moves. options tells us that the pricing could see around a 10% jump in the stock, quite elevated when you compared to other reporting periods over the past year or so, why nvidia is so important for us, and has been up more than 200% over the course of this year, it is a key play, and it makes up a weight of 3% on the s&p. certainly those results from nvidia will be a factor alongside thoughts at jackson hole setting the tone for markets. >> thailand finally has a new prime minister, ending three months of political stalemate, they won a parliamentary vote

with the support of the military. we have got a new prime minister in place, what is next for time politics? >> we have a new prime minister in place, he has received the endorsement of parliament, and man who is gotten the support of forces allied with the palace. what is next? this is a promise to end the political deadlock that has gripped the nation for months, and we could see this paving the way for the formation of the next government. his party is effectively held by certain individuals, and people want to know what role they will play in time politics going forward. and this is a man that after 15 years of self-imposed exile returned to the country on the same day that the prime minister vote was held. it has been said that he has

effectively cut a deal with the military staff went which could see him serve less time in jail. he is also expected to receive a royal pardon. all eyes will be on what happens next went he goes on to form his cabinet. >> we know that thailand's economy has started to slow down, it's one of the slowest growing in southeast asia. what does the first quarter of business look like for him? >> it will be to follow-up on campaign pledges to fire up the economy. his party had previously promised to hike the minimum wage and the government has also pledged to handout cash land and subsidies as well. it was penned -- it will depend

on whether or not they follow up on these pledges. as you said, thailand is among the slowest growing -- growing in southeast asia. but so far it has been pre-well-received, the idea that their stocks have had stability returned to tie politics, finance stock market was actually the best-performing in asia on tuesday. >> are reported there with the latest on tie politics. -- our reports are they with the latest on tie politics. we are also looking at me on mars with the military junta delaying general election. a nationwide senses is scheduled next year which should come ahead of parliament repulse preventing elect -- regularities. the report is that 1.6 million people have been displaced since the military seized power in 2021. still ahead, here why cornell university thinks that many of

china's problems are a consequence of its own policies. this -- the professor joins us next. this is bloomberg. ♪ how can you sleep on such a firm setting? gab, mine is almost the same as yours.

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china construction bank and the china citic bank are reporting on wednesday and those come with property developments from country gardens slipping towards a potential default and a big private wealth manager basic payments to investors, let's bring in our opinion columnist. how can they are lehman brothers moment be averted? that's a good question. with the property wars and the fiscal local government fiscal problems, anywhere else in the world there would be a lehman brothers moment. i have to say that the chinese government has a very very different political system, let me just give you an example. we see that u.s. big banks have been rushing to sell their long sales to commercial real estate projects. in that way, like in china, they will just pretend to extend basically. if the property is no good, we will extend it.

local government bonds, it's ok, we will extend that way, nonie does a fire sale and know what he any of their books, and they continue on. that is why that happened recently kicking the can down the road and rolling the ball bigger and bigger until the next decade, i guess. >> is that why you are arguing your latest opinion piece, you are actually telling your opinion piece, china needs its own lehman moment now? is this why china needs this sort of scary echo -- scare? >> i think they do need to stop attending and extending. let me give an example of municipal debt. this is not the first time they tried to resolve this. in 2014, they did a huge payout, bailing out two thirds of municipal debt. a decade ago, it was 12 trillion yuan, and they thought that problem was going away.

one decade later, they had -- are much bigger than before, local banks and asset managers say this is beijing report, they keep putting money into bad products. i think that the chinese government needs to teach the markets a moral hazard lesson. >> and letting something blow up, is that a politically viable answer? would that be a violation of the social contract? >> i think at the communist party, they do take stability as the priority. the president keeps talking about stability. but you would be surprised at how abrupt its policymaking is. and recall a year ago we were at covid zero and people were saying china will never let go of covid zero until 2024. or 2025. and all of a sudden, in

december, they basically let the chinese people go for herd immunity. you can be surprised at how can -- house of correcting the could be. >> let's bring in our next guest, who says that china's long-standing problems are coming home to roost. here is the senior professor at cornell university who previously served as the head of the china division at the imf. really good to have you with us. we were just talking to our reporter about this potential lehman moment that has not come yet but it might need one. what do you think? >> i think certainly, that more market discipline would help, with their financial system and the government, and the government does seem to want to permit discipline. -- market discipline. they have tried to introduce an exquisite deposit insurance system rather than implicit,

they are trying to get local governments to be subject to market discipline, the difficulty is the incentives that have not changed because people have come to believe that whether it is trust companies or local governments, that beijing will step in and not allow anything more than minor accidents to take place. market discipline has not worked well yet, and the additional problem is set for markets -- market discipline to work, not only do they need better wreck of tory frameworks, they need better transparency and application of the rule of law. those frameworks are not in place yet. what the government wants to do is introduce market discipline which is not happening yet. >> do you see moves in the right direction? the way that i see some of the support that is coming from beijing, it really has not been the type of bazooka style that we have seen in the past. piecemeal solutions for problems

across economy because i get the sense that they do not want to create another bubble. >> right now there is a confluence of very difficult domestic and external factors coming into play. china is a very large economy and cannot export its problems, especially when the rest of the world economy is weak. domestically, the property market is facing significant headwinds in addition to financial distress spreading to some quarters as well as banks that might be exposed to that. then you have a problem of very weak private-sector confidence, which is showing up in week household consumption, private investment which has basically collapsed, and on top of that you have slowing growth momentum, rising yield unemployment, which is a problem for social inability, and all of this feeding into weakening confidence. what the government needs to do is some amount of stimulus, but they really need to reinvigorate

private-sector confidence, and that is going to take a lot more than stimulus at this stage. >> in terms of private-sector confidence, on your travels to china, what do private business people tell you? is there prescription? >> towards the end of last year, when xi jinping ascended for a third time by amending the constitution, there was a tightening of restrictions on the private sector and we saw already at the beginning of the previous year with some of the tech tightens cutting down to size, and we saw the private-sector enterprises and the medical sector and the education sector being put under significant constraints. beijing has been trying to send a message this year that the private-sector is back in favor and this was very important for beijing, because the reality is that with unfavorable demographics and a variety of

financial system problems, the only way for china to grow in a sustainable way is to generate activity growth, the labor force is shrinking and relying on -- inefficient investing is not the way to go. you need activity and employment growth and the realities is that the private sector is much better at generating that growth. the problem is that the financial system is not directing much resources, especially to small and medium enterprises good at both of these things. they also don't seem to believe that beijing is on its side. they seem to believe that beijing really favors staying where they are. getting over the hurdle is going to take a lot more than words, it is going to take concrete actions. >> we often talk about the risk of japan if occasion for china, but might that be a best case scenario, because if we think about japan's lost decade, during that time japan never got involved in geopolitical disputes and other arguments with key trading partners.

couldn't be japan if occasion square? -- could it be japan if occasion square? >> in mesa difficult to see how china will be able to accomplish this higher objective because there indigenous programs are not working well so far. china needs access to for technology, in addition to foreign markets, and rising tensions with the u.s. and the west are not helping at this stage. i think that china really needs to slow down tensions with the rest of the world, but more importantly, start putting in place the market oriented reforms and institutional reforms i spoke about that many it in china -- in china have been arguing are necessary. there has been slow progress for a few years, but i fear some of it has been reversed over the last year or so. getting back on track with those

reforms, especially liberalizing the financial sector and moving towards the market duty economy and showing with clear signs that the government is willing to improve the institutional framework as a effort of the corporate and governance system and auditing and accounting rules, that framework is going to be important for china's balance growth >> japan has its own problems with its elderly population and demographics. china's not quite there, but it's becoming challenging. even without it becoming challenging, the fact that youth unemployment is so high, we are talking about one in five young people not being able to get jobs. when you're talking about when the business confidence is building, you really need transparency for that to happen. beijing is not even going to release that youth unappointed data anymore? how problematic is that? >> that is absolutely spot on. in terms of confidence building which is really key right now,

the fact that the chinese government tries to hide by essentially making those status unavailable -- that data unavailable, not only that but a bunch of data trends that have been squashed because they look like bad news, this is not the right way to go. unemployment is certainly a strange and dichotomous picture because the labor force is shrinking and we hear about rising unemployment, but it seems to be that there is a very significant mismatch in the labor market and the labor market is not functioning well in terms of generating good jobs that match up with what the economy is trying to do and what the labor force can offer. >> professor at cornell university there, thank you so much for your insights. you can watch us live and see our past interviews on our interactive tv function tv . you can also dive into any of our securities or factions and we talk about and talk about --

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>> take a look at how asian markets are trading, we see a mixed picture because the nikkei is getting for a third

consecutive session and we see utilities, real estate, consumer staples gaining ground. energy and materials are leading the losses. and this is coming at a time when the kospi is reversing some of those gains that we saw earlier, the korean won is also under pressure, and above that, 1300 level. 1388 is the level right now, and we see also kiwi stocks and australian stocks gaining ground at the moment. but really, the lead from wall street is not quite strong. we saw u.s. stocks falling and reversing yesterday's gains. perhaps a bit of a mixed picture across markets in asia. we are tracking oil prices at the moment, given that we continue to see that downside pressure. and enersys -- energy stocks are suffering from that. >> we want to get you across some breaking news, hearing that huawei is building a secret

network for chips, a warning from a trade group, bloomberg news just reporting about hallway technologies is building a collection of secret semiconductor fabrication facilities across china which would start u.s. sanctions and further the nations technology ambitions. the u.s. commerce department put huawei on its entity list in 2019. that report that huawei is building a secret network for chip manufacturers according from -- to a trade group. >> and we are watching for the market open across china. shares tied to the services sector in china emerging as a rare bright spot with consumers continuing to spend lavishly on food and travel. for more, let's bring in john chang. what can we expect from the markets after we saw that late market rally yesterday? yesterday, that rally in the

afternoon was baffling for a lot of traders. people we spoke to were scratching their heads online there was such a search desk search. -- on why there was such a search. there are just speculations about why it jumped at the same time. all of the benchmarks have been oversold, so a rebound could be possible. amid the market gloom, we are seeing china's economy slowing down, but also seeing bright spots in certain pockets of the sector like chinese consumers not spending on big-ticket items like cars or home appliances, but a lot on restaurants and domestic travel. we are seeing those shares tied to those sectors are performing in the broader markets. the broader move is quite gloomy, but we see pockets of strength there. >> major china banks will be

reporting earnings in the coming week. what can we expect from those earnings, given the concerns that we see on margins and property as well? >> analysts are saying that the second quarter margins could see some small improvement from the first quarter, but overall the margin is still there -- entrenchment is still there. they are expected to cut to the lpr rate earlier this year, more evidence that the margin pressure is still very persistent in china banks and people are still worried about whether the property crisis will continue to spiral and china banks are bound to take a hit. they have so much exposure to the property sector. all in all, people are still very worried about the quality and the ongoing march in pressure on china banks. those will be carefully watched by investors and traders in the upcoming earnings reports. >> john chang, joining us from singapore. and these are the stocks are

watching -- watching in hong kong and singapore. hkex in focus, china continued to exempt individual investors, capital gain taxes, for the hong kong stock connect. why don't cap show -- and we also have more earnings, some of the big ones we are expecting include big banks. bloomberg markets china open is next. this is bloomberg. when you automate sales tax with avalara, you don't have to worry about things like changing tax rates, exemption certificates or filing returns. avalarahhh ahhh

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