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>> you are watching daybreak asia live from new york, sydney and hong kong. >> counting down to asia's major market opens. >> australia is online, the top stories. relief after a retreat in treasury yields following a volatile session. bearish bond views. hamas frees two hostages and chevron vies hess in the second major oil deal in a few weeks. annabelle: thank you, we've got the open of the asx 200. pricing with a staggered start. what is happening in the bond space is where we have noticeable moves and sherry can get through the details but there was a pullback in yields

coming across in the three and 10 year as we get trading underway. whether we see relief coming through for equities and a softer dollar, we are seeing the a sx coming online fairly flat as we get underway but if it trades in the green that would snap three days of losses for the australian benchmark. something to be monitoring. ubs saying we can expect more volatility because the relationship between bonds, rates, the fed is being worked out so expect choppiness in the day. let's change on because it's not just the wall street session. there are other markets we are watching and that is what is happening in china hong kong markets were shut but we saw weakness coming through for the mainland benchmark here. csi 300 has reversed all reopening gains and the optimism as the country exited covid zero

has dissipated. we got a story out on the terminal at the top of the hour saying anxiety is highest among investors in mainland equities going back more than one year at this point. shery: look at how u.s. futures are trading, upside of a quarter percent after u.s. stocks finished mixed with the s&p 500 following to lowest level since may. nasdaq is outperforming ahead of tech earnings this week. we had a mixed picture when it came to treasuries but basically rising we continue to see traders seeking haven assets, 10 year yield slumping after topping the 5% level for the first time since 2007 and we had comments from well-known investors like bill gross saying the historic growth has gone too far.

will at the moment is rebounding and above $86 a barrel for wti after falling in two weeks. all to do with what is happening in the middle east. paul: let's get more on that story. militants freed two hostages taken captive. let's get more from michael heath. hostages being released, how has this changed the picture in terms of the timing of a ground invasion? >> leaves it on hold. two women are in their 80's, their husbands remain in custody in gaza but again, the people coming out encourages leaders to encourage israel to engage and hold off the ground invasion until they can get more people out. qatar and egypt negotiated this release so we are waiting on the

ground operation and there are talks with the hostages. biden has said when the hostages are released we will talk about a cease-fire. israel is still conducting air attacks on hamas in the gaza strip so yes, it is static other than the movement of people out in the convoys going in. shery: the u.n. does not think that is enough. what's the latest in terms of humanitarian aid into gaza? >> that's right, aid is dribbling in but there's 10 million people and hundreds of thousands of moved from the north down to the south to avoid fighting, so they are displaced. 37 trucks was the last report that had gone in recently but people are talking hundreds each day in order for the needs of civilians to be met and a lot of

civilians have been killed in the air strikes israel is conducting. hamas is being degraded but they have underground tunnels and areas prepared for this action so it feels like the civilian population bears the brunt of this. the eu may back the u.n. and they described a cease-fire to allow refugees to move south into safe zones so we are waiting and watching on that. paul: in terms of the ground invasion from a military point of view this keeps getting put off. whose side is time on? >> good question. on one hand the talk is that the airstrikes are degrading hamas, but there is only so much you can do from the and and if you want to eradicate hamas you have

to send in ground troops. i'm not sure if it helps or hinders either side. israel is talking about a ground maneuver rather than invasion so there is an evolution of plans but i'm not sure it makes much difference in terms of when this starts, expectations that it will start at some point. paul: 10-year treasury yield have dipped for the first time in 16 years, the volatility setting off investor turmoil so let's bring in garfield reynolds. garfield, we've heard from a couple of big names in the bond space. bill gross and bill eckman saying short bonds right now, has he got a point? >> plenty of risk in long bonds as well has been the story of

this year. investors have piled onto bonds. bill gross is buying short-term futures on recession expectations by the end of the year which is a couple of months away so that is a bold call. i'm not saying he won't make money but the idea that a recession is coming brings more volatility if he is right. so the jury is out on it. part of what is driving volatility is that the market has no rudders. there is no strong core. why should 5% be enough? various fair model values have called 4.823% or something like that. 5.41%.

whatever you want everyone's got their own yardstick, everyone is struggling to agree on where the yields should end up but anticipation is over two years they will be lower. there have been a lot of people who have a lot of losses trying to pick where the top is and this time around we obviously had a large short covering. treasuries shorts are at record levels. cftc data, futures, the chicago board of trade obviously they got squeezed out when bill gross and eckman headed for the exits that trade became a stampede to get out the exit so you had a big move. that is positioning. fundamentally the situation has not changed. you've got a resilient economy,

inflation, a federal reserve that likes the high interest rates one more time in holding those up longer than investors expect read none of that is the all clear signal. shery: if we continue to go higher in treasury yields what is the tipping point when it comes to risk for stocks? >> the tipping point would probably be once the 10 year yield gets into the same sort of space as the feds cash rate which is 5.33%. you're looking at the effective cash rate, 5.5% of the fed raises again and if you did get a sustained move to those levels that would hurt stocks. any other angle you have to take into account is can the economy

support this yield? if it can you should buy stocks because there have been times in the past where bond yields were at this level in the economy did just fine and in that situation you want bonds as a hedge and bonds are attractive because they are offering yields but if the economy is going to go along to keep yields at these levels then the picture for stocks is not necessarily bad. it is more the case that if you see these yields spiking higher and uc d environment where the earnings outlook is starting to turn grim. that is the one thing you need. if equities are going to survive 5% plus 10 year yields, then they need sustained earnings growth. so ultimately that is as ever the question for equities.

it comes down to earnings and whether they are strong enough to justify further gains in prices from here. paul: we're closing in on the next fed meeting. interpreting big moves in yields. >> might be a bit concerned and one to the question some people have been raising is whether they want to call a halt to quantitative tightening because that places pressure on bonds and bonds are acting as though they got too much stress on them right now. so maybe that comes up but by the same token, some fed members have effectively welcomed the surging yields because they say it is a more realistic level given where in laois and is and because they see that as potentially helping to do their job for them and they will have to hike rates because the borrowing costs in the economy

have risen so far so fast. so that is going to play into it and also how they read the data, with the forecasts are looking like. they are also very much cognizant of the idea that they don't want to halt too soon and some level of volatility is inevitable as a result of huge rate hikes so far but also the idea that they are close to the end of the cycle. we should be volatile when the fed is volatile about its outlook. is it done hiking or not? paul: garfield reynolds there and you can find more on this story and the days trading action on our markets on the bloomberg and get a market run down one click. find commentary and analysis from bloomberg's expert editors

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steady after at one point touching the 150 level this week. our next guest says the risks are going down so we will discuss what that means for currency with cal kong international strategy associate director. great to have you with us. we are seeing risks to the downside, does that mean more safe haven flows into the greenback and a rebound from the levels we are at now? >> yeah, that's right. we have seen the dollar take a let down overnight. the u.s. dollar is still to the upside given that levels will deteriorate further here so from july last year we think the u.s. economy will fall into recession next year and if that should

happen it will cause a spike in market volatility and a pause of safe haven flows to the u.s. dollar and japanese yen and of course you still have the ongoing conflict in israel at the moment even though we have seen fears of escalation at this junction israel may call a ground invasion on gaza but the situation is fluid and we might see the conflict spread into the other countries in the middle east and i mean in that scenario i can see oil and gas supplies being disrupted and the global economy in the safe haven dollar. shery: usually what happens with geopolitical tensions it's not the first time we fed conflict in the middle east what does that mean for safe havens like the dollar and japanese yen and swiss franc? >> yeah, so historically

speaking the dollar bonds have been inconsistent and i think that comes down to the driver of the dollar. so recently the dollar has become positively correlated with oil prices so in previous years the correlation had been negative, so if we see a surge in oil prices the dollar can benefit this time around despite market volatility. shery: what is a bigger factor when it comes to the yen for where it goes from here? rate differentials or geopolitical tensions and safe haven moves? >> i think the u.s. trade differentials are going to be a major determiner of dollar-yen in the near term. the gap is wide at the moment

and i think the risk to dollar-yen has become more balanced just because we have seen heightened speculation that the bank of japan might try to pause yield curve control in the coming months, so that is taking pressure off dollar-yen and i think the risk is that the dollar-yen can break higher from here and we might see another intervention from the bank of japan to support the yen. shery: when could that happen will the level be? >> i still don't think there is for the bank of japan, they previously said that they are not desirable and i don't think they're looking at a specific level in dollar-yen to support the japanese yen, however market

participants, the level 150 seems to be the trader level and we've seen outputs whenever dollar-yen broke about 150. volatility is a major determiner for them to come in and if we want to ca a record spike in the dollar-yen, the bank of japan might support the yen. shery: 150.16 was the level. no confirmation if they jumped into the markets. talk us through at least of commodity currencies as well because if your outlook for global growth is to the downside what does that mean for commodity related currencies if we do not have a spike in oil prices because of the middle east crisis? >> if we don't see a search, the risk to commodity prices is to

the downside in that is dependent on the global economic outlook. as i said earlier we expect a u.s. recession next year and that is a very negative thing for the australian dollar. at the same time even though we have seen signs of stabilization i think there are major issues in the property sector and the risk is that issues in the property sector my be a headwind for australian commodity prices and the aussie dollar. the past couple of months we've seen economic data improve and that put the chinese economy on track to reach a 5% goal for this year. what this means is the chance of a studios package from the chinese government also faded and that is perhaps reducing

risks for the aussie dollar. i think the risks to the australian dollar have become balanced from an economic point of view. shery: carol, good to have you with us, associate director and you can get around up of both the stories are talking about. today's edition of daybreak. subscribers go to dayb and also available in mobile and the bloomberg anywhere app. customize settings so you only get the news on industries and assets that you care about. this is bloomberg. ♪

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for structure in the next two years. let's bring in australia government reporter ben wescott. what are the details of the investment? >> three main armaments to the investment. microsoft will spend $5 billion in australia, 3.2 in the u.s., reducing the data sets from 20 down to 29, those be in sydney, melbourne and canberra. they will be cooperating with the south wheels government to construct a data center academy which has the aim of educating about 300,000 australians on the skills for a more high-tech future. finally the third stage is collaborating with the australian intelligence agency to construct a cyber shield that will use microsoft data from millions of customers to help australia deal with threats to

the country cybersecurity which is an important thing is we've seen high-level hacks in recent times on austria's biggest companies. shery: this coming as the prime minister's visit to the u.s. this week. what else is on his agenda? >> it's going to be a big visit to the u.s.. this is just the start. on tuesday u.s. time, so wednesday australian time we are expecting to see critical minerals talks between australia and the u.s.. the prime minister is being joined by resources minister madeleine which is a strong indication of where the importance of the relationship lies at this particular point in time and then on wednesday we are expecting a state dinner which will be president biden hosting the prime minister in the white house and then a joint

meeting and press statement from them. paul: bloomberg's ben wescott there. wendy more to come on daybreak asia, this is bloomberg. ♪ (jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy.

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♪ paul: default is all but

official for country garden after a statement that it does not expect to meet offshore payment obligations on time. china's former top builder has become a symbol of the country's property debt woes which have intensified pain for struggling homebuyers, workers and investors. let's bring in charlie. charlie, how are authorities doing with the situation? what will it mean for country garden and developers? charlie: that's a good question. everyone who has read the story can probably feel the anger and the frustration. so a lot of them have put their life savings down for apartments billed by country garden. after a year of waiting what they get is not key to their dream home. telling them that their projects, their houses are still under construction. the project where the house is remains a giant mud pit.

that is the worst nightmare but for the chinese government, you know, the priority is to avoid, prevented from morphing into something like a big protest over home delivery or a new wave of mortgage boycott, something we saw in china in the summer of last year because the risk, for credit of country gardens, they are fully aware of this because all the government priority is to ensure that homes are getting enough funding and homebuyers get their homes. for them they realize the risk and that is why the bond prices are distressed, five to $.10 on

the dollar. some people pricing in liquidation or debt restructuring, that would lead to a deep cut. for country garden the debate seems to be whether the country has defaulted or not but it is clear that the company is struggling to make financial indications as they said, the writing has been on the wall. shery: given the risks of social instability we have really seen in a lot of effort to stimulate demand to help the property sector. what will the industry look like down the road? are we going to see another cycle and boost? >> the chinese property sector accounts for 25% of the economy

which is unsustainable and that's probably why the chinese government started to reduce the leverage. but despite all their efforts to stimulate home purchases again based on what we heard chinese government is not returning to the old path or using real estate to stimulate economy. the strategy is to gradually shift focus to manufacturing, high-end over the long term. deleveraging will continue because for years probably the sector is way too big. according to bloomberg economics estimates, and a lot of debts, maybe 14 trillion yuan of debt is at risk of default. and that is chinese gdp.

deleveraging will be part of the process. shery: we are getting lines that bondholders are adding repayment grace periods to their bonds. take a look at how markets are setting up right now for trading across asia. kiwi stocks falling for a third session after coming back from holidays. asx 200 of 3/10 of 1%, singapore nikkei futures are gaining half a percent. this as we had seen it fall for a third consecutive sessions of lowest level since the start of this month in fact. we have seen risk off sentiment in the japanese stock market as the yen hold steady after passing the 150 level earlier this week. u.s. futures point higher as we

see oil prices rebounding and of course we did have will prices falling the most in more than two weeks when it came to wti trading in new york. it is all to do with what is happening around the israel and hamas ongoing war and what that could potentially mean for the crisis in the middle east but we are seeing a second oil megadeal, chevron agreeing to buy hess for $53 billion. su keenan joins us with the latest in this deal is really showing that big oil is betting on the long-term future of fossil fuels. >> absolutely in the ceos are calling this a win-win. chevron paying $171 a share, a 10% premium to its recent average price and it leaves the combined company with a total value of 60 billion including debt. it follows the major deal

between exxon and pioneer just weeks ago and is expected to deliver faster growth boosting five-year production and free cash flow rates. will experts say it gives chevron a foothold in ghana, the south american country that is one of the newest oil producers. chevron will have 30% ownership of 11 billion barrels of recoverable resources. the deal gives it a new shale basin. the deal works for a number of reasons, let's listen in. >> i don't think you should read this as a lack of commitment. what we need to invest in and what the world runs on. it takes to great american companies and brings them together which is good for national and economic security. our companies are committed to bloomberg carbon energy system. >> good for the environment,

good for both companies and good for the economy. in fact they are totally in favor of it. the ceos do not anticipate antitrust issues and chevron's ceo says the root of the merger begin when he met the hess ceo for dinner. they have had discussions ever since and the deal entered the wind zone for both companies after hess shares doubled in value last year, both shares lower because analysts believe it may dilute the value of chevron but many analysts applauding the deal. paul: give us more context about the dealmaking that we are seeing in the industry. >> it is part of what is expected to be more deals. the latest deals your tongue much chevron and exxon and making u.s. oil companies dominant in two new non-opec

basins. it puts them ahead of many european rivals. chevron's willingness to pay a premium for hess after shares nearly doubled last year shows that they are ready to use financial power to secure low-cost oil suppliers for the long-term and this is happening as oil and natural gas companies are circling looking for potential matchups to keep investor returns growing and this is happening as the u.s. shale fields are showing signs of aging. the race is on in the words of one investor. the primary owner of sneed capital management says it is and eat were beaten world. people who can drive higher results will be the owners of the space and oil has been going higher and higher so as the ceo said the time is now for this particular deal, back to you.

paul: bloomberg's su keenan. we will speak with the chief economist of bhp on the outlook for the critical minerals market and the role in asia's energy transformation journey. this is bloomberg. ♪ i made that. with your very own online store. i sold that. and you can manage it all ince. i built this. and it was easy, with a partner that puts you first. godaddy. you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh

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shery: australia is becoming the world's most volatile power market when it comes to the biggest price swings around the world. let's discuss with bloomberg nef associate. what is the rule of cold generators here in what could be the impact of their closing on the market? >> sure, thanks. cold plants have formed the backbone of power.

they serve 60% of the demand on the national electricity market. receiving three main factors. coal plants are getting older. the average age of a coal plant is 31 years compared to the life of 3 yrs. these assets become less efficient. the increasing penetration of renewable energy, when assets produce large quantities they deflate prices and it is making it more difficult for them to compete. forcing massive renewable energy commitments by state governments and the reality is if these targets are to be achieved, global coins have to exit to make room for renewable assets to come in. a recent report that we published found 83% of the

capacity will exit the market by 2035, a significant amount of capacity that will have to come online to ensure security, a significant challenge over the next 12 years. paul: tell us about companies involved in decision-making. >> the companies are driving the transition. the biggest would be the origin energy which owns 30% of australia's coal capacity. both companies have committed to closing by 2035 and the high-level strategy is pivoting away from coal toward clean energy technology. agl energy has announced they would want one gigawatt and a half of storage. they've committed to building a

battery ahead of retirement in 2025. together with state commitments it is company level commitments that could provide the fresh impetus needed for australia to drive targets and we forecast that the uptick of batteries could increase tenfold from under one gigawatt to about nine and a half gigawatts by 2030, a significant uptake in seven years. paul: bloomberg nef associate there and for more on commodities our next guest joins us from singapore. hugh is chief economist at bhp and we heard a description from them about the current state of power generation in australia. want to bear in mind, what is your outlook for domestic coal? there's more and more of these power plants going off-line. >> look, i think he encapsulated the challenges very well in the

national electricity market. it is a nervous time to be a major consumer of electricity on that grid and with bhp's acquisition of minerals and our plans for australia we will be a big portion of the grid and until the new south wales inter-connector which will join the south australia markets together, we are anticipating heightened volatility. >> how about the outlook for coal demand more globally, particularly through the lens of china and its growth, it has not been what a lot of people have been hoping for. >> with respect to china's energy transition it is a paradox. we've had power generation demand improve in the calendar year and that means utilizing coal plants at a higher rate but china is leading the world in terms of investing in the energy

transition. its own solar and wind energy. and then's capital is flowing to the sector and flowing through to the demand for green metals, the energy transition into critical minerals. china is growing rapidly in that space and leading the world in terms of copper demand. we expect about 6% on an end-use basis versus flat outcomes and the rest of the world paul: i want to come back to critical minerals in a moment but one final question on coal is around electrical coal. bhp unloaded a couple of coal assets in queens land. as the transition occurs towards green steel what is your outlook for coal demand in his green steel there at the moment? >> the divesting which you are

seeing is a sign of bhp looking to tilt the conversation about the matter allergic goal coal portfolio to the higher-quality premium coals in which bhp specializes. we think the demand for premium coal has many decades ahead of it. there is a very young blast furnace in asia, 12 years old in china, 18 years old in india, those will live for a very long time. your previous presenter talked about the life of coal plants. age of capital stock is a critical factor in assessing the energy transition and we think that the incentives of chinese steel producers are going to be to retrofit his existing furnaces for many decades to come and if you go to india which is the largest importer of seaborne nicole, larger than

china or traditional markets like japan and europe and india has a very ambitious buildout of blast furnaces planned, it trickling of steelmaking capacity is on the way in most capacity comes with the conventional blast furnace technology which is absolutely what india needs to drive affordable steel supply to meet its urbanization drive. paul: let's get back to the critical minerals question. no shortage of demand as the world moves toward the energy transition but is there enough supply to support the transition? >> well, there is this year and there will be next year. so we actually have the two most critical minerals if i can use that term, copper and nickel. copper for the broader electrification and nickel for electrification of transport. both markets are in surplus as

we speak. copper inventory rising in the later part of the year, nickel has been oversupplied last year and this year and that will continue for a few more years given the massive ramp-up in indonesian supply. it's in the medium term and longer term where things get interesting for those markets and for copper in particular we do not think that the surpluses we see now which traditionally build up when the countries are going through an industrial recession or consumer durables recession, we are in that situation right now, very weak demand from those countries. surpluses are not big enough to give a sufficient buffer for the time later this decade, we really do think that the combination of rapid growth and material for green energy technology is really going to basically is on the copper mark and we do not see the investment

today being sufficient to keep the marketing balance in the 20 20's. we put a price tag on the x bill this decade to meet the demand. it's a quarter of a trillion dollars and that money will be an underestimate because there are conservative assumptions underpinning that but it is a very big bill and today we haven't seen projects committed which can keep the market balance in the 20 20's read paul: paul: that is a huge bill that you just mentioned inches quickly, is there an impact of inflation to consider when bringing on expensive objects online? >> inflation has had an impact on where these markets trade so there are two factors i think which are really important for considering where these commodities will trade, whilst

they are in surplus, which is the situation right now. one is what is the cost base of the marginal producer and the marginal producer has faced an inflationary uplift, a considerable one over the last couple of years and therefore the short run cost curve, the 90th percentile of the cost curve is unavoidably higher than it was pre-pandemic so that tells you where the market might bottom out were we to see a situation where the price went into a downswing. the other factor is the lien inventory position. inventories are rising but the absolute level itself is very low for this point in the demand cycle. so that actually is a source of stability or a buffer at the bottom if these markets were to be falling further.

there are two things that we keep a close eye on for the short run and then to transition to the medium once again, the inventory buffer is not going to be there to absorb the projected deficits we see in these industries. paul: all right, hugh mckay, thank you so much for your insights. chief economist at bhp, thank you for joining us. more insights on the global energy space later, live coverage from the singapore international energy week. speaking with the international renewable energy agency. this is bloomberg. ♪

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textures and styles. it's possible. with james hardie™. shery: taking a look at u.s. futures we are seeing a little bit of a pickup in the early asian session, stocks finishing with the lowest level since may although the nasdaq outperformed. we have tech earnings and a little bit of a mixed picture with the treasury space. futures under pressure after traders seek haven in the new york session. 10 year yields slumping after topping 5% earlier and through oil called rebounding above $86 per barrel. paul: let's take a look at how we are trading in australia.

underway for almost an hour. asn in positive territory and tear point on oil the energy sector is leading the way. energy stocks are doing the best australia almost 1%. we have the open in japan at the top of the hour, futures pointing to a bright start and a weekend, 149.78 against the dollar at the moment. not a lot of change for the australian dollar. we've got new zealand in slightly negative territory after returning from a public holiday on monday. the market opens coming up in tokyo next. stay with us. this is bloomberg. ♪

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>> this is the asian open. after a mixed picture here in new york. traders seeking haven in bond bearer. and some say that has gone too far, paul. paul: we saw the 10-year briefly breaking 5% before easing back again. that's something to closely watch when we get underway in japan. and bill eckman saying that yeah, it's too much risk in the world to be short on bonds. shery: some interesting views coming up in the prior session. but japan and south korea. it was that renewed volatility that was the hallmark of that recession and that retreat.

a 10-year yield that had touched the 5% mark. they were going in the early moments but we did see big swings, for instance in the 1046 year swing -- 10-year swing on monday. a little bit in the 10-year likewise. but that japanese yen very close to that 150 level. and we are seeing it trading in quite a tight range. perhaps a lot of traders waiting ahead before we get that b.o.j. meeting of when we would like to see some pivot away from negative rates. the nikkei is benefiting from that move and treasury. weak old prices and it's a gain of .6 of a percent.

the kospi one-point of echo data. we did gain 1.3% on the year for september. month and month up .4 four of a percent that's pretty hot when you put it in the context given it was a quickening of the pace that we saw for the august reading and we had seen it in negative territory. with haven't seen those sorts of price gains since april of this year. in terms of the direction for currencies today, we are continuing to monitor the korean wan there. it is trading a little bit higher against the green back. a pull back in treasuries coming through. but the korean wan is one to watch and the treasuries is how much they've been under pressure. let's change on because i mentioned low oil prices but we do have interpret crude coming online and is trading a little bit higher so above that $90 a

barrel level. a lot of investors are in wait and see mode for what happens next in the israel-hamas war whether that conflict is likely to stay contained or whether it will spread forward. we're one hour into the session and we are seeing some modest gains so snapping a three-gain slide. shery: the sharp decline in equities. with us now is kelvin tae at u.v.s. global management. kelvin, always great to have you with us. as bill says there's too much risk to remain short bonds or could we see short yields go higher and if so, how are you hedging? kelvin: we think the current slight is overdone. we do think where the fix income is concern we do think that the

bonds are at a really good value. we think the federal reserve is done with this cycle. it should make sense to have this in particularly the u.s. government bonds. >> where would you invest especially with the cup volatility? >> well, we think that anywhere within five years is actually good value for man goth the fact that you don't need to go all the way out on the curve just to get a 5% yield at this point in time. you would want to incrementally stunt a duration when you hit 2024 given the fact that the bond use at these levels and the fact that the federal reserve is at its peak might make more sense to extend your duration beyond the five year and beyond the five-year level. >> does that make sense when you're thinking that fiscal deficits are continuing to grow and your supplying more

treasuries to the mark? >> yeah, i think in regards to the fiscal deficit itself, you know, when you look into some of the numbers there, you'll probably think what the u.s. government will have to do is base lot not just reduce spending and increase the revenue from somewhere. 60% is a secret card. you can't touch that. military spending, social security and medicare what you need to do for the government to start increasing revenue from the corporates increasing our taxes is to try to plug this gap with what's happening in the middle east in the russia-ukraine war it's going to be hard to expect that the u.s. government will cut spending. >> we heard that the equity risk people yum doesn't look that alarming. what do you think about the stock markets and where do you position defensively in that place if we see a continued rise in ideas? -- yields? kelvin: the equity market is

take it from the bond use right now. you get a positive reactions from the equity market and vice versa. what's happening in the market is that the market is struggling with whether the ray cuts will come up next year. it's talking about two cuts next year. market is looking at about 75 to 80 business points of cuss. that's where the struggle is. no one is really convinced on how the -- the -- the -- the rate cut scenario is going to pan out. shery: especially if we have an escalation of the israel-hamas war with oil prices going higher. how do you hedge that? kelvin: the federal reserve is looking at core inflation. the data coming out this friday is crucial. it's on a down slide, right? there's seven components that have been resilient. if you look at copc it's coming

out nicely. it's coming from the 2% target of the federal reserve. it's going to be early 2024 or early 2025. it's very hot to expect the federal reserve to cut soon. unemployment is at 3.8%. shery: where do we have the u.s. dollar? we saw lower yields taking a to on the green back. but we're coming from incredible strength especially with safe haven flows but the japanese yen and the swiss frank are they effective hedges? >> to some extent, yes. the u.s. dollar is protected withity very high bond use right now. when you look at the, you know first 4.8 to 5%, it is expect for bonds to move to that level.

that's one of the reasons why the asian currencies has come under pressure especially where the concern is is concerned. as long as the tenure remains at -- 5%, the u.s. dollar will remain strong. you have all these conflicts and the swiss frank will remain strong for the short term. where the japanese yen is concerned, the repricing to 1%. as you notice it's currently trading at .866. there's still more gap for the japanese yen to react. i don't think it will be good any time soon. shery: .865 at the moment. when do you expect the b.o.j. to move? kelvin: i think that will depend

on commodity price. if it shoots up, then they will have no choice than to try to strengthen the yen. it's to basically abandon the strategy which will mean that a lot of the japanese pension funds and returment funds will have to repatriot it back to onshore and means more demands for the japanese yen. i think that's where the japanese yen will come into play. that's if commodity prices really shoot up from the current levels. shery: kelvin tay. good to have you with us. thank you so much. coming up, we'll get the latest on the israel-hamas war after the militant group freed two more hostages raising hopes for the families of those still being held captive. being held captive. this is bloomberg.

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♪ >> hamas mill tans have freed two more hostages, both elderly women from gaza and israel. concerns about the fate of some of those 200 hostages. michael heath joins us now. so michael, some good news. we don't have much of it in this story. how does this change the picture

for the potential ground invasion in michael: two elderly women have been released. their hiss remain in captivity. it's good news but limited at this stage. there's the opportunity to get more hostages out. and everybody's very keen to do that mainly because if or when the ground operation happen there is's got going to -- there's going to be a lot of collateral damage. the discussion about the ground offensive, it's been more than two weeks now. it's still ongoing. some debate that -- that's been reported that the government -- that some parts of the government are concerned if israel goes in that there will be so much collateral damage that it could be stopped before it could reach its objective. the ground strikes a better alternative although the

collateral damage is still bad as well. shery: how much add has gone to gaza? >> limited amount. the egyptian red cross has said 35 trucks have gone in. the u.n. said this is not enough. people are talk about hundreds of trucks needed a day to deal with the humanitarian. many have moved down to the egyptian border because they're trying to escape the fighting that is happening around gaza city and in the northern part of the gaza strip. they've displaced people. it's a very difficult situation. there's not enough aid getting through. the united nations are talking about a humanitarian pause. bloomberg is reporting that tempt u. is considering supporting that just to try to get more aid to create some safe

zones potentially for civilians so they can get out of harm's way. there's a lot of effort going into it at that front. >> there's a ground invasion still inevidentable. you mentioned air strikes ongoing. the fact that hamas has a very well connected network of ton nets. >> that's exactly right. >> it is inescapable. >> netanyahu have been saying that they must go into the ground and into ton else in an into strong holds and these sorts of areas and the casualtys will be high. this is difficult part for israelis. it always happens in urban areas. you'll have a huge number of civilian casualties because not anyone has been evacuated. it's not easy to distingui is h

from friend and foe. they'll only get one chance at it. >> lives are hanging in the balance. we spoke with the director amir shakir. >> much of the population has no clean water. they're rely on ground water which is the u.n. has said it's entirely unfit for human consumption. no electricities and fuel means that hospitals aren't able to provide basic services to patients, in some cases surgeries are being done without anesthesia. we have a situation where people are running out of food. a few trucks of aid have been let in. but that is woefully insufficient. the u.n. has said more than 100 at minimum were needed before

these things began so every day, every hour that passes means more life is at grave danger and lives hang in the balance if there isn't a fundamental shift. it's not only with israel but with the united states appear europe are failing to make the kinds of calls for aid. >> so we're seeing some aid into gaza but the border in the opposite direction has pretty much effectively stillest. what do you think is behind egypt's reluctants to open their border to accept refugees? >> i think for egypt it's been a concern that this would lead to a permanent palestinian population. there's historical analogy when hundreds of thousands of palestinians were forced to flee

or expel the majority of gaza's populations. and egypt is worried that we're witnessing another 1948 moment. again, under international law, they have an on application to provide refuge for those that are at risk for their lives. they have reason to be skeptical that those communities would be allowed to return. again, egypt should allow people seeking and needing refuge from -- for safety for their lives a way in. but israel should uphold the legal duty for that population to return when the violence subsides. every day that passes we're getting first and further down the abyss. i think we're really at moment in which there's a risk of mass large scale atrocities and the world must act before it's too late. >> human rights watch, director omar shakir here.

you can get all the stories including the ongoing israel-hamas war. bloomberg subscribers go to the app. you only get the news that you care about. of course, we're in the thick of earning season as well. let's turn to anabelle for some of the big moves. anabe ll: this is -- annabelle: the drop that you're seeing there is the biggest move that we've seen for this company in about a year. and it's lowest point since 2020. significant report for nidec. the headline reading from this is that the second quarter operating profit missed the

average analystest match. what drove that is a pullback in automotive products a lot of what investors are talking about is is the e axle which is the traction motor system. but that segment of the business was quite underwhelming given what some are saying is a substantial rise in cost. there's a concern that it could move back into -- to the black and also show perhaps a weeker recovery in this sector as we well. nidec a lot more to come in what is quite an interesting day for stocks so far. we are seeing them move broadly to the outside. really liking lower treasury yields and a weaker dollar that is fading through. plenty more to come on daybreak asia. this is bloomberg.

♪ >> i don't think you should read this as a lack of commitment to the energy transition. but we need to invest in what the world runs today. this makes us stronger producer. it takes two great american companies and brings them together and we're committed. both of our companies are committed to lower the carbon system. shery: mike werth on the move to buy he's he's for $53 billion. that's the second multi-billion dollar deal in the oil terrorism chevron's purchase has not only boosted production but betting more on fossil fuels. >> oil an gas will remain value to the world's energy mix for decades going for war. this is a went-win deal, the c.e.o.s say. chevron paying 171 per shares.

it's a deal that as we mentioned follows the big one between exxon and pioneer. it will boost their oil production and free cash flow rates. and most importantly oil experts say it gives chevron a priced foot high school into gayana. it's become one of the newest oil producers. chevron will have 30% ownership of 11 billion barrels of resource. chevron's c.e.o. said the roots began a while back when he met the c.e.o. for dinner. they've had friendly discussions ever since. and it entered the win zone for both companies after shares almost doubled in value last year you're looking at pictures with gayana. both c.e.o.s believe that this

will pass. any antitrust scrutiny and have smooth sailing in terms of regulatory approval. both shares entering the day lower. that has a lot to do with concerns about dilution of shares as they currently stand. >> tell us a bit more about the race to lock down the deals that we're suddenly seeing in big oil? >> it's clearly a race. one big firm invests in oil. companies talks about how it's really eat or be eaten if you groom bloomberg, you'll see that with these mega's do by chevron and exxon, these oil companies become dominant in two key opec basins. they far eclipse the european pures in terms of valuation and while the european companies have really won back some investor favor by moving away from the low carbon energy back to fossil fuels, the valuation

is really the story here. now, the race for some companies to partner up with other drillers and chevron's willingness to pay a premium for hes even after the shares nearly doubled, showed that they're ready to use their half to secure the oil suppliers for the long-term. shery: sue keenan with the latest on the oil industry. and as the big players work toward the energy transition in a battle against climate change. jamacan president calling ate social justice issue that disproportionately affects all? developing companies. i spoke with him and asked how the caribbean island nation is preparing. >> we have integrated climate thinking in everything that we do. in terms of our financing and managing of the public finances,

we recognize that a climate event which is not within our control could devastate our economy. and has indeed wiped out several economys in the region. and therefore we have to budget for that. we have to prepare for that. we have to put buffers in our budget. and so in terms of the fiscal management, climate considerations are a part of the fiscal management. so we have taken out catastrophe bond recently, which is kind of like an insurance that if there were to be a major climate event that would be without access readily to financing to recover and grow as a result of that. but in terms of building the infrastructure, the resilient spot, very important. the infrastructure that we're now building, we're building it

with climate proof central strategies. we're making sure that our roads are moving inland to higher territory. we're building them with the necessary civil works and support that if there would be 100-year event that those infrastructures would be able to offer service to the public. >> our exclusive conversation there with jamaica's prime andrew holologistness. we have plenty more to come on daybreak asia. this is bloomberg dear moms and dads, what you have achieved here today is going to help us and our futures. it is why we're coming up on stage to collect your diplomas. mom, love you always.

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♪ >> we have an alert on the bloomberg. we are getting the japan p.m.i.

numbers, the composite for the month of october preliminary coming out at 49.9 falling below the 50 expansion threshold for the first time this year. the previous number was at 52.1 we're now seeing the composite number for october preliminary data at 49.9 in contractions territory. the manufacturing p.m.i., not surprising 48.5, same level as the previous month. this is the fifth consecutive month being in contractions territory. it has deteriorated from 51.1 to 53.8. still in expansion territory but easing from the previous month. i think it's a composite number that we're paying attention too because we're in contractions nair territory at 45.9 this year. let's see what the broader market is with bell.

annabell: we're half an hour into the session for toke you that point. and broadly we are seeing equities trailing, fairly choppy actually because we're seeing moves between positive and negative but broadly we are looking fairly flat as we head through the session at this point. going into today's trading there have been a couple of support of factors. we had lower treasury yields. we had some moves coming through in the currency space. so a softer dollar. that was another story. still that's playing out because of the likes of the malaysian rnget that has been under pressure. they're trending higher. these are supportive factors but it's interesting to know. it is really is choppy trading but fluctuating between gains and losses at this point. something else to watch, we saw the lower oil but it rebounding

you have w.t.i. this puts entire further perspective over a longer ray. w.t.i. that tease line in rate. interpret crude that's the line in in brew. really a very rocky few session. again as i said we are higher in the session even though we haven't seen any sort of major movement in terms of that ground offensive into gaza. trail israel has held off for that now. but there's a lot of concern and trepidation amongory traders. this war in the middle east could widen the scope and bring pressure into oil markets, in particular, shery. shery: default is all but official for him country gardens. the former top military has become a symbol of the broader

property debt rolls which has picked up the payment for struggling workers and residents. charlie, we know that all of these conscious around the property market around home buyers lead to social instability. how are authorities dealing with the situation especially with them and their creditors? >> you can feel the anger, the am of anger and frustration of the home buyers in that kind of situation. the worst nightmare for a home buyer is the property you bough with your life savings and probably life savings from your elderly parents. there are hundred thousands of people in that kind of situation at a moment. and the top property is to insure the project got delivered.

the social stability key. tell remember last year, last summer, there was a mortgage boy from those home buyers. and that's undermining the chinese system. that's system that the chinese government doesn't want to see. that's probably why order -- cash flow, distressed developers are being prioritized for housing completion, wages payment and also payment for contractors for those two developers. and that's probably why bond holders overseas -- overseas bond holders are not getting their money back easily because ahead of their -- in a debt claim cue there are other -- you know, creditors and also, staff, employees working for them waiting to be paid. and you know, for -- for bond holders, they're not holding their breath. they have price in their risk. a lot of property net the

offshore market trading at 5, 10 cents on the dollar. they're not expecting to get a lot to their money back. for country garden, everybody seems to be be debating whether the company has publicly defaulted on its debt or not. the company has said it has difficult meeting the finance obligation. the warning is really out there. >> can we look a few years down the road of what the chinese property industry will look like? are we going to see a boom cycle? >> currently as you know the chinese property sector is way too big. it accounts for 25% of the country's g.d.p. which is unsustainable and very unhealthy. the government's strategy is to gradually shrink the economy over time. they want to focus on high end

manufacturing technology instead of, you know, property which is unsustainable. they're racing to prop up demand. it's because they want to avoid hot landing of the sector as demand has been drying up, you know, following three years of covid lockdown restrictions. households are not optimistic about their future income. but the -- the -- the -- the -- the method to shrink g.d.p. is going to be a painful process given sheer slice that it accounts for 25% of the overall economy, right? and bloomberg estimates that chinese developers have $14 trillion yuan. that's equivalent to 20 -- sorry, 12% of the country's

you're all g.d.p. they have to strike a balance between maintaining financials stability while differentiating the property bubble. >> already, caller shu. anxiety continues to dominate china's $9 trillion stock market. a measuring business second strength for the composite index has fallen to its lower levels since september last year for more on that, the managing editor joins us now. are we seeing some signs of panic china's stock market? >> yes, hi, morning, paul. we are seeing things get into the panic zone finally. the father and greed gauge is the highest since october 2022. and the second one for the shanghai composite. the it is getting dangerously close to breaking the level or the trend line that has not been broken in the past 18 years this

time around we're looking at the -- the level of 2900 points. and think we are just about 50 points away from breaking that level. and some people have said if that level is broken for the shanghai composite, we may see at downside of 30%. and the third thing we're seeing in terms of size of panic is northbound outflows, the outflows are the highest since august. i would say that people are starring to really panic when the market cons to fall. >> is it too soon to take it as a contrarian signal? >> yeah, that's a million dollar question, shery. for the shanghai do posit trend line the record has been pretty strong it has not been broken in the last 18 years, it does seem like it could be a time for them to take some lump positions while putting on some hedges to prevent or protect from some

down side if you look at the father and the greek gauge, the record hasn't been very strong. intense period of selling doesn't necessarily see a period of -- of rebound after that. but overall, i would say risk-reward is skewed toward outside because as you saad we have been writing about national stabilization fund and the wealth fund stepped in yesterday to buy the e.t.f.'s which is relatively a sort of innovative move from the team that we haven't seen for a long time >> bloomberg's managing editor, liang tu. coming up, we hear from their recent public listing an expansion plans. this is bloomberg. thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh

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♪ paul: asian tech firm followed the completion merger with the blank check bringtown. they have credit cards and other financial products. joining us now is preshond. we listed about a week and a half ago and it's ban rough ride

for shares down about 80%. what's your message to investors? >> well, thank you very much, paul for having me in the studio. it's just very, very exciting times for us here. selling pressures is quite common in a spark transaction. and you you would typically see panic from shareholders f but what i want to focus is the actual transaction. the shareholders have an option of redeeming before the actual transaction before the listing. we had record low redemptions. redemptions were 36% versus what you see quite standard in recent times. about 90% redemptions. what we are really excited about is that we were able to raise funds in a capital mark. we -- raised about $100 million.

we are honored to have our shareholders who are supported us through the entire process and really believe in the business. we talk about the business. what is really excited about money hero group is that is it a market leader in its space in southeast asia region. we lead in four out of the the five markets as the number one provider of financial service platform. we are in a growth phase. we grew from 2019 to 2022. and you knew 2022 was a tough year for everyone. we changed our profitability profile in 22 and started moving from top line growth to profitable. we did a really good job in the first half of 2022, we lost it

to negative 900 billion. and we improved that. huge g.d.p. growth in digit zation. our chart not pretty. we have raised $100 million. i don't think the share price truly reflect it is valuation of the business. >> i do want to come back to your growth strategy. in terms of that listing, it was a speck listing as you say. there was an opportunity there to let it lapse in retrospect do you think it's the right time to list especially around the difficulty of the environment? >> absolutely. absolutely. i think the timing has been absolutely immaculate for us. we know that most companies

today are struggling. if they are able to raise debt as the best option. we took a deep hard look at all of the options that we have. and this gave us access to incredible names like richard lee. and i think the proof is in the pudding. now, the timing has worked out really, really well for us. again, 36% redemptions, almost unheard of in the recent times and gives us fresh capital of $100 million. that will fuel our growth strategy. so very excited timing. >> so you've got this $100 until capital? does it involve m.n.a.? >> look, we're open to all options. first of all, with see any amount of organic growth opportunities. the region, southeast asia has a total market opportunity of $9 billion u.s. dollars.

we are only scratching the surface. we have significant opportunity to grow within our existing verticals. number two, we will be investing in insurance. insurance is significantly under and the segment. from a digit tie zation% second only 4% digitization in insurance. we will be doubling down in that space. there's inorganic growth opportunity. there is a lot of company which are great companies they have really attractive valuation. and we will be assessing those. paul: and how about in terms of significant geographys? you have withdrawn from thailand but there are other companies that you're looking to expand or open your services. >> we are very open to market expansion. and that is a plan.

we are reviewing, i think there's a lot of opportunity in the southeast asia region itself. because one of the things that i want to point out we are very proud of is philippines as a developing mark is our fastest growing market, we have delivered significant amount of growth and we've proven that this model works both in developed economies but also works equally well like developing economies like the philippines. we will be monitoring new market entry as well. paw: you said that you've demonstrated that money hero can turn profitable. with that in mine what's your time line for returning money for investors in the form of dividends? >> well, right now because our region is still significantly underpenetrated.

we have proven our ability to invest wisely to grow without spending too much money. i think our focus right now is going to be to get back into the growth phase. we have received the funding so we can continue the growth, continue to gain market share. i don't think we are at a scale right now to justify creating cash flow in the near -- in the very near future. our focus will be continue to grab market share. continue to expand markets. and at the same time, our new verticals like insurance. paul: preshant. thank you so much shery: k.k.r. is nearing a deal with a group of private credit lenders to refinance the entire debt load of the portfolio company kid bed care centers.

they are close to receiving a new $2.3 million loan. if you missed any part of our conversations today, tv go is your function you. can watch us live. there you can dive into any of the securities or bloomberg functions that we talk about and become part of the conversations and send us instant messages. this is for bloomberg subscribe only. this is bloomberg. s design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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♪ paul: bit coin price climbing sharply. the biggest digital token now at nearly its highest in about 18 months. annabelle has been tracking that what's driving this? >> well, paul, really it's all around to do with anticipation of what we could do on the regular true front. a lot of investors are starting to gear up. but perhaps we're going to see a spot bit coin e.t.f. finally being approved. like within other financial assets it's focused on the u.s. and without that spot e.t.f. being approved we're seeing a lot of institutional investors continuing to stay on the sideline.

the reason why we could start to see improvement is talk about that price action because you can see that big rally in the last 30 days. that ooh climb of nearly 30%. and really interesting to see bit coin breaking out of that tight price range that's been around 24,000, 28,000 that's been there for the past several months. liquidity is starting to improve. and you're again seeing that play out in the lakes overseer, solana and over doj coin. shery: to your point, that u.s. court now formalizing the victory. give us more details on what's going on in that front? >> just a bit of context to start here. because essentially gray scale operate as bit coin trust. now, a bit coin trust, you can see it that does trade at a discount right now to bit coin.

but it operates to a manner that's similar but has certain restrictions. so grayscale will turn it into a spot bit coin e.t.f. they rejected that appeal. and that was overturned. the s.e.c. decision by u.s. appeals court back in august. this is what's been formalizeed with a u.s. federal appeals court overnight. and so this matter is being sent back to the s.e.c. it tells us that there's a lot of pressure that's starting to build on u.s. regulators to take this bit coin e.t.f. filings seriously. when we heard the black rock smiling that sparked a a lot of interest. there's fi dill dellity and a lot of big -- fidelity that wants them approved. that's about testing more into the mark. further price gains for the

concern similar on the timing of this, there's a lot including our bloomberg intelligence teams that says perhaps would we could see one approved by tend to the year. but it's shaping up to be sooner rather than later. and it's just a matter of time, shery. shery: the latest on crypto. that's source say nvidia are developing that's would challenge intel processors. and nvidia whose chips dominate the market is atending to make units for c.p.'s. i would run windows operating system and go on sale as soon as 2025. india's reliance industries is set to be nearing a cash and stock deal to buy walt disney's india operations. the entertainment giant may sale controlling stake in the bizone

star business which is around $10 billion. the acquisition could be announced as early as next month. take a look at early trading. a little bit of a mixed picture as we have the a.s.x.200 gaining ground in about to two sessions. the nikkei is down-half a percent. and the kospi at the moment down .10 of 1%. the stocks losing ground after being back from a holl day that's it from the our asia mark. we'll look to the trade in hong kong and shenzhen. bloomberg open is next. this is bloomberg

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♪ >>