♪ haidi: very good morning and welcome to "daybreak: australia." i am haidi stroud-watts in sydney. we are counting down to asia's major market opens. shery: good evening from bloomberg's world headquarters in new york, i am shery ahn. the top stories this hour.

u.s. stocks snapped before-day losing streak as traders speculate on higher for longer rates. the bond selloff extends to another week with the 10-year yield hitting a 16 year high. haidi: china's evergrande crisis deepens of default pileup and some executives are poorly detained by chinese authorities. shery: also ahead, australian warns of soaring costs from climate change ahead of time usually disastrous wildfire season. haidi: plus, an exclusive with lg electronics ceo, as he looks to evs to help drive its growth. shery: u.s. futures coming online in the asian session pretty muted after the s&p 500 saw its first gain in five sessions. fluctuating between gains and losses throughout the session. we saw energy and material stocks leading gains. of course, there is recognition given that we continue to see the treasury selloff.

we are talking about the 10-year yield not only at the highest level since 2007, by the 30 year yield at the highest level since 2011. the selloff is hitting the longer dated bonds more. the yield curve inversion easing a little bit. that is also leading to the dollar seeing the best day in about three weeks, taking it to the highest level this year. that has pressured commodities like oil, which has fallen now below the $90 a barrel level, despite the fact that we continue to see supply challenges. haidi: let's bring in bloomberg's chief rates correspondent for asia and mliv contributor garfield reynolds for more. what are you watching for in sort of this higher for a longer narrative as it is starting to settle in a bit more. garfield: it is becoming entrenched, and it is interesting to see the way that treasury yields broke to fresh 16-year highs for the 10 year,

fresh eyes for the 30 year. the long end is really under pressure. that has been the part of the bond market that has actually been more resilient over the last six months or so, because even as the fed kept raising rates, investors cap going well, yields are attractive. and there is a recession coming so the long end will do very well that narrative is collapsing. we have the combination of the fed as a big trigger with its holding rates restrictive for longer, putting down the rate cut thesis. but there has also been a surge in oil prices. and then to many people surprise, including mine, this time around, the government shutdown potential, that funding battle in congress, that is really playing a role. it's helping to emphasize just how big the deficits are. and how intractable they are. because you have got a split

congress. there is very little sign that is going to change in the coming years. so how does the u.s. government manage its way out of this increasingly frantic and fragile fiscal conundrum that it faces? it is borrowing too much at a time when the economy is still robust. and then, what does it do if the economy turns down and the spending metrics become even worse? all of those things are playing in. and we had moody's signaling the fact that it may end up following or at least thinking about following the other two major readings companies in downgrading the u.s.. that would mean the u.s. has lost its last aaa rating. shery: shery: after the downgrade in august and the s&p it 2011, right? given the end of low rates, we are also seeing this slow and perhaps painful end to another

industry -- private equity is taking a hit. tell us about what is happening here. garfield: you mean the private equity difficulties are very much linked to those higher rates. because the higher for longer -- first of all, rates have gone up, and of course our private equity, a big part of what they tend to do, a lot of times they take over companies that are embattled and turn them around so they can sell them. they also just faced the general difficulties, the whole point of taking over private equity, is they think they can do a better job of running the company. that means it is a vulnerable company. it needs perhaps some reforms. that always costs. one way or the other. and benchmark interest rates and treasury play a big role either directly or also indirectly in

that cost of capital. so the cost of the turnaround is increasing. and it is staying up. that is the thing too. there has been a lot of chatter about concerns regarding also credit. which has some of the same metrics as private equity, that if you thought, ok, we just have to hang tough for a year or so and then the fed will bring rates back down, so worst-case scenario we have to take a bit more time because we can't afford to borrow as much money as we want to, that is not going to work anymore. so with that, we have a lot of concern about private equity coming to the fore. that is another one of the straws in the wind for those people who think we are headed for recession. although so far, it has just been limited patches of the economy, of assets that are having difficulties, not the broader economy. shery: we continue to see resilience in economic data so far. our chief rates correspondent

for asia and mliv contributor, garfield reynolds. let's turn to china. property developer evergrande, now facing a more complex path to restructuring one of its units. it has failed to repay an offshore bond, while former executives are repeatedly in detention. annabelle is tracking the developments from hong kong. belle, we knew that trouble was brewing given they scrapped creditor meetings at the last minute. what is the latest? annabelle: the problems facing evergrande just continue to pileup. the latest one is that it has missed yet another debt repayment, this one was by its major unit hungdao real estate. first was a principal payment worth 4 billion yuan, nearly $350 million plus, interest rate payments also do. a/c unit failure to make both of these. we saw a similar situation back in march when hengda missed

another interstate payment on a note that was issued in 2020. at the time it promised to work with bondholders to find a solution, something we are also hearing from the company this time around. but hengda is a major unit of evergrande. another missed payment index and you layer of uncertainty because it is not just canceling the creditor issues. yesterday it was also unable to issue new debt. again, it makes that hole? over whether it can fully restructure its offshore debt origins that much more difficult to answer. the path ahead, very uncertain. shery: and more uncertainty being injected by the fact that we arts of former executives have been detained? what is this about? annabelle: that's right, this was from local media in china. hearing that we have an ex-ceo of evergrande and also next chief financial officer, the c-suite, very senior leaders.

they were still at the company until july of last year and then they stepped down because they had alleged links to a banking deposit scandal. we understand both of those two people in question have been detained by chinese police. not the first time, of course, that we have seen police action facing evergrande. it just tells you how serious this issue is becoming for the company. a couple of weeks ago, we had personnel at its wealth unit who were detained. when you put those two headlines together, you have the ex-ceo, the ex-chief financial officer, the missed bond payments, we saw a huge selloff for evergrande yesterday, closing down more than 20%. it fed across to the property sector more broadly and you can see in this chart. we saw property stocks release slighting to multi month lows. haidi: and, of course, that comes ahead of a key test for the broader property market.

annabelle: yes, this one we have been discussing as well, it is golden week holiday kicking off on friday. an eight day vacation period but a key buying period for blistered in china. it comes smack in the middle of the september-october busy season. but this year, the stakes are even higher. you can see home sales are still hovering near an eight year low. we have not seen it the pickup. what we want to find out in this buying period is whether the support measures we have been tracking recently in terms of things around cutting down payments, rules around buying multiple properties, all of these support measures that we have seen, with her that is enough to entice people back into the property market and to help lift sentiment. because if sales are not good enough by the time we get into the end of the october period, this question marks, we could see -- whether we could see more stimulus coming through. buyers have been held back by

concerns that their property may not finish or that its value would drop. the china property sector is facing structural use shoes -- structural issues because you have general oversupply, youth unemployment, all these factors combining together to make the property market in very, very uncertain. haidi: annabelle in hong kong with the latest. let's take a look at beijing street relations now, with europe and china's vice premier expressing strong concern and dissatisfaction on monday to the e.u.'s chief trade negotiator valdis dombrovskis over the probe into chinese electric vehicles. the comments were made after dombrovskis warned the e.u. would be more forceful in upholding fair competition and defending its interests against china. they both spoke at a joint briefing in beijing following the talks. >> we hope that the e.u. would exercise caution. to continue to keep this market free and open.

this benefits european consumers, benefits the development of europe, and it benefits global climate change cooperation. >> the e.u. is having a trade deficit with china of almost 400 billion euros. and the european companies in china are raising a number of concerns about business environment. addressing these concerns will help china retain its capacity to attract and retain foreign investment and meet its objective of a sustainable, high-quality economic development. haidi: still ahead, mort market analysis as the reality of higher for longer rates sinks in for investors. we will speak to mottley for wealth management, next. ! this is bloomberg. ♪

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>> i think it's going to be hard to get the inflation back to the target, and that probably means if inflation is sticky, we will see additional interest rate increases, and ultimately, that probably does lead to more of a slowdown in the economy. whether that is a recession or just a slowdown, you know, it's hard to say but it would be unprecedented to go through this type of a tightening cycle and not see us get to a little bit of slower economic growth. haidi: goldman sachs ceo david solomon speaking at the american energy security panel in oklahoma city. joining us is shelby mcfaddin, investment analyst at motley fool asset management. this narrative of higher for longer, perhaps more work that the fed needs to do is similarly starting to take hold for investors. has it changed the our positioning in this market?

shelby: i would absolutely agree that it is finally starting to sink in. i would also say that at motley fool asset management, it hasn't changed how we are allocating and thinking about opportunities. for a couple of reasons. we are trying to choose companies that will be high-quality and resilient anywhere in the business cycle. that means that if all the packages are followed out of the sky, we want to choose companies that have a parachute and will have a softer landing. . the second reason is that when we look at the environment we have been in for over a year now in this tightening cycle, we did expect this to happen, that rates would have to get where the fed one of them, that they would have to see results, and that we would have to hang out for a while at these elevated rates. that we would be in a structurally different rate environment. on our team, we can't see the future, but we have prepared for this and we have changed our expectations accordingly. haidi: i find that your top two

calls, costco and netflix, both consumer facing in different ways. tell us about why, how it links to how you feel about the outlook for the consumer, particularly for netflix -- obviously we have these latest developers in terms of the writers strike having a resolution, but the actors strike still ongoing. shelby: when we think of costco and netflix, first thing you think of is the consumer. they have to have some exposure. but when you dig deeper, you realize costco will have the stickiness of of middle-income and upper income consumer. they also have a massive cost advantage when it comes to even their other wholesale competitors. they are able to constantly deliver value. customers know that they are not being shocked on prices, their membership is almost like an annuity for shareholders. the price increases are not very often and not very aggressive, so customers know that they're able to trust costco with that, and again, being middle and upper income, it's going to be sticky. you look at not flicks --

netflix, and competitors dealing with stress across industry, netflix, a lot of their content has not been as interrupted because they have more content in different geographic areas that have allowed them to continue without disruption. they were already cash generative, and so now, with slightly lower costs during the duration of the strikes, they have seen a greater influx of cash. we look at those two nbc these are consumer facing, but they are two of the best they do in this sensitive spot. shery: when it comes to risks, how much are you paying attention to potential government shutdown? this is also coming at a time after which already downgraded the u.s. credit rating, and today we heard from moody's, the last credit rating agency to give the u.s. a top rating, warning about the shutdown. shelby: i do think that the market is absolutely considering a government shutdown. and unfortunately, it's not something that would be surprising if it were to happen.

we saw it in 2013 and in 2018. it is unfortunately somewhat familiar to u.s. market participants. it is a risk we consider in the short-term. and long-term, it is something we would expect, that valuations would probably suffer, that there might be some opportunity for some misunderstood stocks to come back to earth that have high valuations. it's possible the market has started to do some pricing in, but we do expect that things will get more volatile the closer we get. a government shutdown, unfortunately, has become more and more the norm. and we don't live to see it. but i do think that the market at this point is expecting it, because unfortunately with the state of politics in parallel to the market lately, there have been some pretty accurate predictions. so expecting some volatility, but also not expecting a sufficiently long duration that other decisions like the interest rate decision will be impacted. shery: are you expecting a soft

landing for the u.s. economy? i ask this because the chinese economy is not doing any better? shelby: a soft landing for the u.s. economy is absolutely still possible, but i do also think that in the next six to nine months we are going to see how that probability is going to shift. we have to still see the lagging effect on localized economies, thinking l.a., all of california from the results of these strakes. any effects in detroit from the results of the auto workers strike, and also the lagging effect if there is a prologue government shutdown. all of that is not going to come right away. it may not hit all at once. it may trickle out in its after effects throughout 2024. so i think the concept of a soft landing is going to be in a bit of jeopardy over that period as those effects roll out, and as their holding of interest rates continues to have its own effect. so i understand that that is the desire of the fed, of course,

they are not desiring a crash landing, but i would say we might be in a little more jeopardy than six months ago. haidi: who do you think will be the market leader in the -- going into the start of next year? you have talked about it's going to be a testing period for ai and tech related and ai-adjacent stocks. shelby: i think the leaders at this point will be those that actually deliver or are going to deliver some sort of roadmap or proof that they are actually using this technology and it is beneficial to the product that they deliver and ultimately lucrative for shareholders. we saw in the first half that there was a friday and it delivered sky high valuations, more funding for these companies. so i think going into this period where everything will become more sensitive, shareholders will demand better returns, they are going to demand agility when it comes to cost leverage and opex.

those who will come out on top will be those who deliver tangibly on those promises. those companies that may have been using ai as a buzz word, are definitely going to be up to the plate to deliver for shareholders, because we are coming into a time where results have to be tangible this morning season. shery: shelby mcfaddin, great to with us, investment analyst at motley fool wealth management. you can get a roundup of all the stories to get your day going in today's edition of "daybreak." terminal subscribers, go to dayb , also available on the mobile and bloomberg anywhere app. this is bloomberg. ♪

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now to the latest on worker strakes. the uaw says it is in active negotiations with ford, well actors remain on the picket lines even after hollywood writers clinched a deal with studios. bloomberg's su keenan joins me here in the new york studio. let's start with autoworkers. any progress? su: we are hearing from the uaw that they are in active negotiations with ford. g.m. and stellantis, meanwhile, are starting to deal with an expanded strike hitting 38 of their parts plants in 20 different states, which began over the weekend. the uaw strike is in its 11th day, and the union says contract talks with ford, which made some concessions on friday which was the deadline the uaw had given, are quite active. it says there is still work to be done, however, and ford has issued a statement indicating that they are not quite as optimistic. significant gaps remain in strike negotiations, ford says. meanwhile, biden and trump are

planning dueling trips to michigan to speak to the striking workers there. we know that biden is presenting himself as the most prounion, pro-worker president ever, even though he is not going quite so far as to endorse the uaw wage demands. we know that the strike began on september 15, and the uaw is taking a different strategy. they initially started with simultaneous strikes against all three plants, and then using a carrot and stick approach, they have spared ford, which is now in active talks, from expanded action. and g.m. and stellantis have the expanded strike action. g.m. and stellantis rejected the union's demands on friday, but they are continuing to negotiate all the automakers have said particularly that the wage demands are excessive. the automakers have offered

basically 20% wage increases. the union, seeking close to double that. ford's ceo saying at one point, if we conceded to that demand, we would be out of business. the strike continues and negotiations with our active. haidi: the five-month writers' strike in hollywood has come to an end, but we are still waiting for resolution for the actors. su: what we know is that the writers guild has a new labor agreement with the studios including walt disney and netflix. and there writers guild board could, within the next 48-72 hours, approved that contract and allow these writers to go back to work. but production remains shutdown, because the actors remain on the picket line. they have been sharing a lot of the picket lines with the writers throughout the summer. a new contract is needed between sag-aftra and the screen actors guild and the many motion

picture and tv producers, that bargaining group, before productions at big-box movie studios can begin. so a lot of focus is on that going forward. haidi: bloomberg su keenan there with the latest. coming up, over exclusive interview with ex-ceo about how the company is looking to evs to drive growth. this is bloomberg. ♪ ¡se fue la luz! pero todavía tenemos wifi para hacer las tareas. ¿y eso es algo bueno? wifi y estudiar. buenísimo. wifi y pedir una pizza online sería buenísimo. presentamos storm ready wifi. solo de xfinity. ahora puedes mantener una conexión confiable durante apagones, con datos celulares ilimitados y batería de respaldo de hasta 4 horas para mantenerte conectado. obténlo solo con xfinity. el hogar del 10g network. entérate más hoy.

shery: south korea's lg is betting on evs to help drive its growth. in his first media interview since taking the helm in 2021, ceo william cho spoke exclusively to bloombergs even angle about the company's plans to generate sales from its so-called vehicle solutions.

stephen: lg electronics will transform from its current position as a consumer electronics company into a smart life solution company with the goal to achieve an 80 billion u.s. dollars in revenue by 2030. stephen: what will be the cornerstone of that strategy? you said appliances are key, but they are not high-margin products. services would probably be more high-value, and also the telematics and the connectivity between the appliances not only in the home, but in vehicles as well. william: that is true. we have been in the consumer facing business for nearly 70 years. the biggest strength is consumer insight. and a deep understanding of the consumer and their living spaces, especially the home. but we are going beyond the home

and aggressively entering into other spaces like commercial and mobility and even the virtual space. i would like to emphasize that we are going to secure the global leadership through consumer electronics, because we need to generate cash and support and drive the corporate wide transformation. it is also very important foundation for success of platform-based services. we view our devices becoming a platform and providing diverse content and services. that will be our main stream. stephen: so, the vehicle solutions division, you do a lot of components, you do the telematics, you do this inside the vehicle and the connectivity of the different infotainment

systems and the like. how much will tv a percentage -- ev space be a percentage of your company by 2030, and would you consider going into the ev space with your own brand and product, like foxconn, like xiaomi, like sony has already done? william: it's a growth engine for lg electronics now, and it has been growing at an average growth rate of 30% over the past decade. it accounts for 40% of total revenue in the first half of this year. the order backlog is expected to reach 80 billion u.s. dollars by the end of this year. so we are in the middle of expanding our portfolio as a vehicle industry. at the moment, the industry is evolving at a software-defined vehicle.

for your questions -- to be an automaker, no, we have no intention to be an automaker, because we are going to focus on what we can do well. this means being innovative and reliable partner for the ev automakers around the world. stephen: who are you really talking to in earnest, with very active discussions right now? there have been reports that you could be making the apple card, o help apple make its car -- making the apple car. is there any truth to that? william: this is the most frequently asked question that we receive. i believe that is because the market recognizes us as top players in the mobility sector. with a proven record, we are confident and ready to cooperate with current automakers, any future automakers as well.

stephen: including potentially apple, if they do go forward -- i know they are dl to may be 2026, some of the autonomous technologies may be need a little more time to work out. william: we welcome them. stephen: are you in talks with the likes of apple? william: again, -- [laughs] -- we are ready to cooperate with any future and current automakers, including any brand. stephen: how did the u.s.-china difficulties affect your investment plans? william: lg is a global company. it is trying to provide as much access to our product and services as possible to our customers. however, like many other global companies, we are closely monitoring the current geopolitical situation.

we were strained from the supply chain point of view. again, we like to provide as much access to our products and solutions as possible. we will keep analyzing the situation until we can make him optimal decision from the midterm and long-term point of view on the supply chain. at the same time,, there are certain needs in the chinese market. although we have the largest presence in the chinese market, we are going to focus on premium products which we can manufacture in korea and other countries, and distribution through the all -- the online channels so that we can customize our product to fit chinese customers, going forward. we do have several products which are working quite well. we have the modular products and systems -- when something goes wrong, we can always manufacture

from either side, either chinese or asia. we have not intensively shifted our production to southeast asia for now. haidi: lg electronics ceo william cho there speaking exclusively with bloombergs stephen engle at the company's headquarters in seoul. australia is warning of the cost of disaster recovery ahead of what could be a severe wildfire season. paul allen joins us with more. this comes as we have already had some pretty crazy weather so far in spring. paul: yeah, we're just getting started and we will get another taste of it in the next few days as well. the speech will be delivered this afternoon in queensland at the national drought forum, a properly named. he will outline how the disaster recovery costs have increased 432% in the past three years. the costs being 1.6 billion u.s.

dollars until the year 2030. we had the northern rivers region of new south wales flood twice in 2022. before that, there were the black summer bushfires. each of those events cost about $1 billion to recover from. the speech jim chalmers will give is to the farmers, saying if more is not done to combat climate change, agricultural production could decline by 4% by twice 63. that would be a hit to gdp of one billion u.s. dollars in today's money. shery: the world knows about australia's fight against those terrible bushfires. what is the risk of drought and fire this summer? paul: it was just a month ago that the prime minister anthony albanese, was talking about that coming summer with a sense of, quote, "apprehension."

and it was also this month that the bureau of meteorologist released august rainfall figures that showed 50% below average rainfall, so, yes, we are setting up for another hot and dry summer. el niño has been declared, and another possible indian ocean diapole has been declared. these things together mean that we are shaping up for a hot summer ahead. we are one of the world's worst emitters and also one of the world's biggest exporters of coal. jim chalmers will warn today that a lot more needs to be done. shery: bloombergs paul allen there joining us from sydney. coming up next,, we look at risks in emerging markets from higher-for-longer u.s. interest rates, to rising oil prices. hear why this company thinks we are entering a more treacherous period for em's. this is bloomberg. ♪

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>> we are going to continue to see blood living in the $80 to $100 oil price environment right now. let the higher price is a reality that we will have to deal with as we think about our investments, our energy needs. >> we don't increase oil significantly and in a market where we don't see the balance,

it would only be in a market where we see the balance that we would increase production, and then, it would be at a moderate pace. shery: executives speaking to bloomberg at the american energy summit in oklahoma city. the surging oil price has appended that is sufficient trade in em's. of course, it has revived price pressures and dampened hopes that interest rates will follow. it has put inflation assets at a defensive position. you can see in that chart how indian bonds are the most vulnerable within the e.m. complex due to oil price shocks. let's bring in our next guest for said we are entering a more treacherous period for em sentiment. with us is louis lau, director of investments group at brandes investment partners. great to have you with us. how cautious are you on the e.m. complex? are there still opportunities

there? louis: i think the bar for taking risk is higher now given that you can leave your money in cash and make money. the fed raising rates or keeping rates higher-for-longer is intentionally a more risk off period. at the same time we're having a lot of other events. the u.s. presidential election cycle next year, the taiwanese election in january. also, valuations are not as low as they were last year in e.m.. we are getting more cautious. we don't think a potential u.s. slowdown or the knock-on impact on em's is adequately priced into markets right now. shery: are there still regions that you like with this more defensive mindset, though? louis: we are pivoting more towards defensive sectors, for example, utilities, telephone companies, food and agriculture, they still have very stable income streams.

in terms of regions, we are looking at places where domestic demand is a bit more insulated from geopolitical tensions. for example, chinese asia is a beneficiary as the u.s. and china try to invest more in the region. and india will be another bright spot. haidi: is there any interest or appetite for china? if you look at this chart, gvernment bonds might be quite compelling given the almost complete lack of correlation to some of the other major narratives going on in developing markets. you look at this chart, it really is anchored in terms of the local relation with global stocks and bonds. is this an asset class that you could diversify into? louis: perhaps it is not, but the interest rate environment in

china continues to inch lower. in terms of yield, you are probably not getting a lot of attractive carry on chinese bonds. on the other hand, we think equities have priced in most of the negativity. in terms of what looks cheaper and more attractive, it will probably be chinese equities at this point. we are probably in for a holding pattern, if you will, unless something changes to bring the status quote in terms of the economy, the real estate market, and also geopolitics. haidi: what would be a trigger point? we know valuations across chinese risk assets are cheap at the moment and there are some selective investment houses that have been compelled to go in now. is there a point or a development or a type of stimulus that would make you find this more attractive? louis: there is a few. one is that the chinese government has stepped up

support for the property market. homeowner restrictions being rolled back, down payment limits being lowered. in the next two years, the drag coming from real estate will start to fade, then you will see more of a cyclical rebound in china, from less drag from real estate. that is one. the second of lament i think that is worth looking at is the new ford from huawei, which kind of signals that china may be reaching a point where it is getting some technology self-sufficiency. if you look at the chips, they are made by smic a lot of the components are actually made in china. if china reaches some tech self-sufficiency, that will definitely alleviate concerns about export controls that the u.s. is trying to impose on china. so a couple of those data points starting to look better, may actually trigger better sentiment towards china. shery: talking of tech, how do

you feel about the semiconductor trade, especially across northeast asia, like japan, korea? louis: i think in terms of semiconductors, one area that is getting more well priced is ai-related stocks in taiwan, i think that is getting to fair value. but where we see a lot of upside still remaining would be companies tied to memory. so, companies in japan or korea. the memory cycle is still coming off the bottom, prices are in the process of inflecting and inventories are coming down. so in semiconductors, we still see a lot of good prospects. 2023 was kind of a down year for earnings, but 2024 and 2025, there is still a lot of promising growth in the semiconductor space. haidi: always great to chat with you, louis lau, director at brandes investment partners there. we do have breaking news when it comes to president biden, he

will join the uaw picket line at noon eastern time on tuesday, that is according to the white house. this comes as the strikes against the big three automakers in detroit continued to the start of the week. we heard praise from democrats on this visit bye-bye in michigan, to show support for other workers on the picket lines. we are now getting confirmation that the u.s. as it will join the picket line of u.a.w. employees striking at noon eastern time on tuesday. this, as we saw uaw members walking out of 38 parts warehouses and distribution centers for the likes of general motors and stellantis across venti states. we continue to watch the prospect of further escalation in these strikes ahead of president biden's michigan visit. labor experts have said this is probably the first time in a sitting president has visited a strike in at least 100 years. it comes a day before his expected rival in the

presidential race next year, former president trump, will be delivering his own speech to union members in michigan. we have plenty more to come here on "daybreak." this is bloomberg. ♪

shery: ubs's sergio morley is reiterating the bank's

commitment to china as he makes the first trip to beijing after taking over as ceo. in an exquisite interview, sergio ermotti says the integration of credit suisse is moving forward seamlessly as he looks to reinsure investors in asia. >> things are progressing very well. we made very swift progress in integrating credit suisse. we closed a transaction in record times, also thanks to the big cooperation of regulators across the globe. that is one of the reasons why i am here today in beijing, because this is my first trip to asia since taking on my role at ubs. i need to reach out to the chinese take --

stakeholders and reiterate our commitment to china, while also updating them on the reintegration. >> in your second quarter results, it mentioned specifically that client confidence, sentiment and activity here in asia was muted. are you still finding that that's the case into the third quarter? >> i think we saw in general a little decoupling in terms of client activity. so the most important topic for us was to see returns of assets that left credit suisse in 74 an d q1 -- in q4 and q1 this year. we started to see assets returned to credit suisse at the end of the second quarter. that is the most important issue. also, in general, it is fair to say. investors are more constructive than they have been recently. >> on the momentum you talked about in q3, there was a net new

money inflow, about 16 billion u.s. dollars. in q2, you said you expect that to continue. what does that good momentum mean? >> we are pursuing similar patterns. we are not going to be specific on numbers, the quarter is still ongoing. the most important is that we see substantial -- substantially, our forecast being confirmed. and we are get into the close of the quarter. so i think that is very encouraging to see. to see so quickly that our clients responding to our actions to stabilize credit suisse, and to offer them the best. >> it has taken your headcount, your staffing, to about 120,000 globally. and you have talked about, you

have been pretty forthcoming about the need to reduce that number. how much of abduction do you think is needed, at the end of the day? >> i never really spoke about the need of reducing count, because it is not our philosophy. what we need to do is restructure the bank, credit suisse needed to be restructured profoundly, because of the situation, and that we need to extract the synergies that are necessary to make our business viable and stronger. so we are taking actions, as we speak, to resize the business. we are also taking advantage of the fact that we have natural attrition that is helping across the globe, we have demographic trends helping in that sense. people exiting the bank through

retirement or early retirement. we are working also in facilitating movements of people within the bank, between the two banks, as we speak. so i think i am comfortable that we can mitigate the painful part of the job, which of the social cost. but it is very necessary in order to create a business that is sustainable. haidi: ubs ceo sergio ermotti, speaking exclusively to bloomberg's jean-luc. take a look at what we're watching when it comes to trading in austria and new zealand. we are seeing following the trend we have seen across treasuries overnight, the australia 10-year yield rising 11 basis points following a similar move that we saw in treasuries. the 10-year yield in the u.s. climbing by the same amount, above the 4.5 four level, that is a level have not seen since 2007. we also saw a renewed strength

when it comes to the dollar, the bloomberg bella index rising for a fourth day, rising to its highest level since december. interesting implications when it comes to the start of trading in asia, including potentially being on intervention watch for the yen as the japanese currency nears 152 the dollar. that is just about it for "daybreak: australia," as we counter to the start of trading in an hour or so across the major markets in asia. this is bloomberg. ♪

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