>> good morning and welcome to daybreak australia. >> we are counting down to asia's major market opens. >> the top stories hour. israel's defense minister warns of a long war against hamas as u.s. secretary of state antony blinken for further talks to deescalate tension. >> those diplomatic efforts boosted equities. >> sales of. >> u.s. futures coming online in the asian session a little bit more positive, extending gains from the regular session where we saw u.s. stocks and yields gaining ground. the s&p 500 rose and we were

watching the tensions in the middle east and the florio diplomacy that happened across the board. we are going to see if president biden will make a trip to israel. secretary blinken met israeli officials in the region. every sector in the s&p 500 gained ground. the two year yield was steady. the 10 year yield around the 470 level, as we saw the flying to safety easing in today's session. we saw a dip in oil prices. we had already seen the rally in oil last week. we are also watching for potential supplies coming from venezuela. >> perhaps a little bit of a

sense of calm coming into markets. most in the region are pointing to some modest gains. one hour out for the open. a slightly weaker dollar coming through. that is something that could help the japanese yen from touching that 150 mark in the session. in terms of what else we are seeing, inflation data out of new zealand. the key take away from that is the cpi came in softer than what had been expected from economists. it was that 6% in the second quarter. the drop coming through for the kiwi dollar. kiwi stocks a little bit in the red.

there is a key market we are tracking over the course of the year that has seen pressure. it is the csi 300, a slide over the course of 2023, more than a 6% drop despite a lot of support measures coming through various points from policymakers and beijing in order to try to turnaround sentiment there. china is now tightening curbs on shortselling activities. a lot of details in the latest effort to help sentiment. will this one be the one that pushes through and spurs a rebound? >> let's see what the risk sentiment looks like given the geopolitical situation around the israel hamas war.

israel's defense minister told antony blinken to expect a protected -- protracted conflict. >> this will be a long war, the price will be high. we are going to win for jewish and the israel people. >> israel has continued to urge civilians to move to the south of gaza as a ground offensive looms. let's get more from our political news director. what is a safe corridor that israel has announced for citizens in gaza? will it work? >> that is the question. they have announced they would like to move citizens further away from the northern part of the where most of the bombing has been. one would expect the ground war would be worse. the question is where can they

move? it is a relatively small parcel of land and you have more than a million people. egypt has at this point not opened a corridor to them. there is some talk that president biden will visit israel and may make a trip to egypt to try to get them on board. it is a real question of how you can move this amount of people. the united nations says it is a growing humanitarian crisis in gaza. we do not know that the president will make that trip. we have his people close to him say he is certainly considering it. the german chancellor will be going tomorrow and there is talk

of president biden going. he canceled a trip to colorado today. it was canceled this morning saying he was at the white house very focused on security concerns and obviously the war in israel and gaza. the president has been very vocal about the u.s. standing resolutely behind israel and wanting to deal with hamas. he has made that very clear in almost daily speeches since the attack more than a week ago. so it is clear where -- that he stands this way. the question is does it make sense to send him on the trip back up we heard from the israeli ambassador and he said that will have to be a safety consideration for the u.s. to make. obviously the president has security around him internationally when he travels.

but given the situation, there is a real question and the question is when a ground war be delayed by such a visit? we heard from the ambassador a few minutes ago who said that obviously they are not going to give out the timing of possible military action. it is really a question and they will have to decide pretty soon. israel has been amassing its reservists. haidi: we had more comments from iran as well. >> iran saying that the united states is telling it to stay out of this and to try to make sure this does not spread. iran said it cannot air t that.

iran -- cannot guarantee that. iran us that he was not behind the attack on tober seven and the u.s. has said there is no direct evidence it has been behind the attack. haidi: we continue to watch the latest developments and i want to bring in a senior lecturer from the university of sydney. we continue to see israel urging civilians to get out of the way. as the concern really that this is a complot -- conflict that

will be protracted? >> good morning. the challenge of forceful transfer of population is not an international crime, but at the same time the need to prioritize the safety of the civilian population of gaza is predominant. there are no good solutions. in terms of further escalation and expansion of the crisis, i do not think hezbollah in lebanon has an interest to intervene. they are beholden as much to the lebanese people as they are to iran, but you run has a strong say. everyone is trying to guess what their endgame is. i hope the ground invasion will be delayed as much as possible, first of all to find some alternative solutions and to try to protect as many people in gaza as possible.

certainly we are at the crossroad that keeps going forward and forward. what kind of ground invasion will take place is everybody's guess at the moment. haidi: you said there are no good solutions at this point. does that go for diplomacy as well? >> i think the main diplomacy at the moment is focused both on trying to work on some kind of hostage exchange against palestinians and israeli prisons , and at the same time to try to make sure the conflict does not escalate. in terms of what is taking place on the ground in gaza, i do not see any meaningful diplomatic work being done except for maybe trying to open the humanitarian corridor towards egypt in the south. shery: what happens to the

hostages taken by hamas? is there a diplomatic solution on that front? >> know, at least not for the moment. it would be very difficult. i think there is various channels and some talk about may trying to get those lucky so-called hostages with foreign passports, maybe women and children and the elderly. other than that, both sides seem to dig into their positions. israel wants to release the hostages, but does not want to give up too much for that. hamas has the hostages as an insurance policy as well as hoping to release the palestinian prisoners. at the moment we do not see anything meaningful. haidi: we are waiting for

confirmation about president biden's visit to israel at a time when secretary blinken has already returned to israel to talk to officials. i wonder how stretch the u.s. is at this point because in congress we do not even have a u.s. house speaker at the moment. when we do not have aid to israel or additional aid to ukraine at a time when geopolitical tensions with china are also rising. >> the americans have positioned themselves squarely behind israel. they have both a historical relationship and it is also very much in their interest that the conflict does not expand and lead to other major conflicts globally. what the americans are doing with sending two aircraft

carriers to the mediterranean to try to prevent an escalation is very useful for everyone. hopefully that will continue. at the same time, it is not in america's interest to see a rising death toll in gaza of civilians. hopefully the americans will be able to contain or persuade israel to wait and try to minimize the death toll, which is not an easy thing to do if a ground invasion takes place. shery: the senior lecturer at the university of sydney, thank you. still ahead, reports show apples latest iphone is trailing in sales compared to its predecessor. how it could impact the company's strategy in the country. but first, we will speak with dana d'auria from envestnet. this is bloomberg. ♪

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the u.s. futures, a pullback of their risk aversion. a broad extinction of some of those gains. bonds falling amid diplomatic efforts to stop the israel hamas war from expanding. we saw declines when it comes to oil after the rally last week.

we are looking at a potential rebound regionally. let's get to our next guest, dana d'auria from envestnet. even before we have this additional were some layer of another conflict, there was already quite a bit a defensive positioning. has that changed for you? >> no,-anything -- if anything, we seem to be doing better economically this year. the possibility of a soft landing looks better and better, but if you are the average retail investor, i do not think you necessarily better on it.

being defensively positioned, having good fixed-income in your position, not necessarily chasing the foam out -- fomo, going after riskier areas of the market. it is entirely possible the good news is less that we will not have at least a mild recession but that may be we were able to kick it down the road. haidi: how are you feeling about this earnings season? >> i think it could be brighter than it has been over the course of the year. i do think that if it is not and if we are not beating the modest expectations we're seeing, that could's -- could be negative for the market. the markets are pricing in an

expectation that the earnings season will come in pretty good and demonstrate the fact that we maybe have gotten over the hump and headed toward a soft landing. the market has priced in the best case scenario. anything that comes in less than that might be concerning your best concerning. haidi: do we have more room to rise when it comes to big tech given the big gains we are seeing already and how your yields as well? -- higher yields as well? >> i think in terms of your more standard indicators, low volatility, high quality. tech has really -- what we saw

with the war in israel is that immediately money went to safe havens. those are gold, treasuries, tech. we saw big tech benefiting. the s&p 500 increasing as a result. the tech companies have become this bellwether and a place money likes to go in bad times. it begs the question, what is the reason we are seeing inflows? even from a growth perspective, tech is kind of leading the way. it is not remotely my recommendation the focus you are getting out of there.

you by default have a lot of big tech. i went up a in its. -- i would not put more in it. shery: we are nearing the november deadline when it comes to another potential government shutdown in the u.s. and we still do not have a house speaker. >> if you had asked me the last time around, [indiscernible] we actually avoided it for six weeks. i think it is the most a foregone conclusion. the turmoil in the house, not having a speaker come i think we are headed for shutdown. typically, shutdowns do not do much to markets. it does not even impact growth. everything gets caught up. it will impact individual

businesses that count on workers in certain areas. but for the general economy, for gdp and stock markets, generally does not do much. that being said, given the fact our cost of carry on debt has increased significantly, there might be noise around that. we are going to see a hard push for some austerity because of interest rates being what they are. shery: when you are more concerned about u.s. debt, it shutdown, you see this rally to safe havens and you actually end up with people buying more treasuries, more u.s. dollar. what does it mean for the greenback echo -- the greenback

echo -- check out. >> i am in the camp that the dollar will remain a safe haven. you get these downgrades on our debt and it certainly makes sense because of the ship we are seeing and the chance and there is a technical default for a period of time. i think that is not the likely scenario. it is not surprising given the deficit being where it is, given the cost of debt increasing, that you are seeing downgrades by the rating agencies. that is a far cry from us not being able to pay. we can meant money. -- mint money. i do not anticipate the dollar loses its place any time soon as being one of these safe havens

that it is. i think you see it continue. shery: dana d'auria from envestnet, always good catching up with you. we have more to come on daybreak australia. this is bloomberg. ♪ to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

shery: here the top corporate stories. fortis: on the uaw to stop the strike. they say both parties need to end acrimonious talks. uaw present shawn fain has called on ford's ceo to get a deal done. the clock is ticking for country garden to avert its first ever public bond default. they miss the first deadline for

the $15.4 million coupon must month. the bond carries a 30 day grace period and ends on to a bird 17. -- ends on october 17. bernard are no has lost its spot as the second richest person after a selloff in luxury stocks. the wealth of the founder of lvmh fell. the power goes out and we still have wifi to do our homework. and that's a good thing? great in my book! who are you? no power? no problem. introducing storm-ready wifi. now you can stay reliably connected

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amid diplomatic efforts to prevent the hamas israel war from expanding. we actually did see some easing of the flight to quality. is this about managing deal political risk echo -- geopolitical risks? annabelle: yes, it is the risk if this conflict expands further into the region. this is certainly a big risk on the horizon and something that j.p. morgan is watching closely. they are saying investors should be seeking safety in this sort of environment given the rising geopolitical tensions.

he has been quite bearish for stocks over the course of the year. let's take a look at the recommendations in more detail. jp morgan saying buy bonds. citing gold as well on the geopolitical risk. recommending investors say defensive. underweight on credit and equities as well. the sectors they are looking at are retail, autos, luxury. chemicals and semiconductors as well. haidi: in terms of the upcoming earnings season, is it a upside risk or downsize risk? annabelle: we actually has some pretty good numbers to start off. in terms of what we are watching , we seeing some moves that have

come through for earnings revisions. you can see revisions generally have been a focus because we started to see downgrades of piston upgrades for four weeks straight. morgan stanley has been saying when you see that breath in the market it tells you the outlook broadly is weakening. it is about macroeconomic risk on the rise. certainly this is going to be the big touch point for u.s. stocks and the direction we take. shery: we are in the thick of it. goldman sachs and bank of america the next ones to report. they warned up pressure on for the industry. su keenan joins us with the latest. they were talking about loans and write-offs. what are we are expecting? >> three banks wrote off $4

billion in bad loans and that is double what they had written off previously. we should point out those three banks kicking things off friday saw profits soar, a third quarter record. that is why analysts are saying this has been a solid start so far. they are hinting up pressure points on the horizon, but overall interest income has fared well. that is my morgan stanley, goldman sachs and bank of america are really following a mixed result, strong profits, but warnings of uncertainty i had. -- ahead.

goldman sachs has announced the green sky sale will dent third quarter earnings by $.19 per share. analysts will be watching to see how trading business performed at goldman sachs with many predicted it did not fair as well as competitors. a lot of a has to do with comparisons to very strong trading one year ago. bank of america has been viewed as the poster child for a multiplicity of problems. shares are down 18% year to date. analysts will focus on how the bank does on this higher for longer interest rate environment. net interest income a main source of income for bank of america and others and is expected to climb 2.5% from a year ago. this is something analysts are

focusing on for all of the banks. loan growth has stagnated across the industry due to higher rates. haidi: morgan stanley reporting on the 18th. what are the expectations? >> a lot of analysts will be focusing on key themes of how they are doing in this interest rate higher for longer environment. analysts expect the banks wealth management and investment units to support third quarter revenue. although they are warning that weaker equities could weigh on outlook. higher rates are starting to pressure the banks in a number of ways, keith team as we head toward the end of the year. the pace of new assets could slow while still supporting morgan stanley's goal of $1 trillion in three years.

treating is expected to climb -- trading is expected to climb. haidi: su keenan with the latest. we are also watching apple. its latest iphone 15 is trailing sales in china compared to what we saw with its predecessor. tell us about the magnitude of how much slower the sales are going. >> it is interesting because we have seen very long lines and long lead times for iphone shipment in china and for everywhere in the world. it was a little surprising when this report came out overnight. there has been a heightened sense of nationalism. there are been new phones from other companies.

obviously, this has had some sort of impact, but a bigger impact than we had anticipated. apple will be reporting earnings november 2. we have to wait for those to get a complete picture. i think there is a little bit more to this. shery: we know sluggish sales in china will have an impact on apple. what about apples suppliers? -- apple's suppliers? >> the reverberations obviously take some time. apple buys bama these components many years in advance so these are adjustments that may need to be made at other periods. just because there is a sales

shortfall in one region does not mean there is not a big increase in sales in another region. the good news it appears for apple is that the acting -- the iphone 15 pro is doing very well in other countries. they may need to ramp it up in other places in the world and reallocate those components and phones. shery: bloomberg tech reporter mark gorman, thank you. coming up next, we look at how some asian banks are defending their currencies amid high u.s. route to's -- interest rates. this is bloomberg. ♪

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shery: we saw a little sure on the bloomberg dollar index, right now holding steady after a little bit of a slump. the dollar has risen more than 6% from july. we have seen incredible weakness in the is really shekel, an eight-year low against the u.s.

dollar. this of course given the ongoing israel hamas war and despite the fact that the central bank has launched measures to smooth out fluctuations in its exchange rate. the offshore yuan passed the 730 level. central banks across asia intervening through the bond market as well. we have seen china employing a range of measures to shore up its currencies, same thing for the reserve bank of india. it is looking to sell more bonds , could bolster the rupee a little bit. let's talk a little bit more about this story because policymakers turning to unconventional tools to protect their currencies will continue to have fears over higher for longer rates.

marcus wong joins us now. we have not necessarily seen such measures coming from european, emerging markets. why do asian central banks need to resort to these tools? >> i think a lot has with differentials between asia and central banks. the policy rate in emerging markets -- despite the fact that in india the central banks have started to cut rates. policymakers were trying to look for ways to increase yields while keeping policy rates unchanged. india and china are selling

bonds. [indiscernible] haidi: have these unconventional tools been successful in propping up currencies? what are the limitations? >> i think there have been varying degrees of success. in china in september, we saw the pboc engineer a supply of offshore yuan. [indiscernible] they were somewhat successful. we had managers who are long

offshore bonds. they want to hedge the exposure. they pare down their long holdings of chinese bonds. for indonesia, with the rupee up it introduced, demand has not been terrific. investors are saying it will pick up once u.s. rate stabilize. shery: marcus wong joining us here. our next guest says the e.m. local currency debt could be the big winner if the fed is done hiking. spring in -- let's bring in eric fine from vaneck. what is the likelihood the fed

will need to pause? >> i think it is pretty unlikely in the near-term given the two major conflicts going on. they have told us that the long end of the bond curve is doing a lot of work for them. it is not so much the level love yields -- of yields. shery: so you cannot imagine the fed actually hiking. >> it is unlikely in the near-term. there are specific investment conclusions from that. haidi: tell us a little bit about the investment opportunities if the dollar declines from here. >> number one is to avoid duration. that is one of our long-standing convictions. the short end is going to be

potentially incurred. at the end of the day, u.s. borrowing is competing for a pool of savings. the cost of that will go up everywhere. one way to protect yourself is low duration. the other is finding countries with high yields that commodity exports. columbia is a good example. one of the only pure oil currencies if you want to think of it that way. yields around 9%, external accounts are strong. unlike a lot of develop markets, there fiscal accounts are pretty under control. they cannot afford a lot of spending. they have real fiscal constraint. another example would be brazil. also around 10%, 11% interest

rate. you can get attractive yields in the dollar as well. you can get bonds in the mexican state owing -- state owned oil company. haidi: what is the prism in which you look at china at this point? are there indirect ways you see benefiting? >> not benefiting. i do think china is a potential positive global risk. there is now stimulus risk out of china. when it plays out is a different question but there is clear stimulus risk that could be positive for commodity exporters. the opportunities in china are constrained by the interest for

uncial -- differential. it is low between china and the u.s.. that is a potential constraint. inside china, there is a letter pessimism, particularly in a lot of property sector bonds that reflect the bad news. one particular asset class that we find interesting and attractive is characterized by maximum bearishness. a 20 percentage of our colleagues see any opportunity in china. that is the interesting thing in china, is finding these things that already reflect the bad

news. shery: we have not talked about [indiscernible] how do you view the israel hamas war? >> the absence of that was what allowed treasuries to sell off. that is one clear implication. the biggest implication for us is the ongoing risk to commodity supply. that is a global phenomenon. when events happen or one the market acknowledges it, it was only six months ago that china and russia have a strong relationship, is another, but i think this will be a reinforcement of the idea that

there is real risk in commodity supply. that will be a key transmission mechanism. e.m. has a lot of commodity producers. shery: good to have you with us, eric fine from vaneck. this is bloomberg. ♪

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