Stimulus, not less. Yvonne glad you could join us. We are hitting a pause button in the trading, after what seemed like a long runup in stocks. We did see the selloff when it comes to equity markets in the u. S. A lot of talk in asia about the fed and centralbank talks. Indonesia coming out later today. We could see centralbank emergence playing through in this part of the region. Kathleen isnt it interesting coming into this year, the whole story was about Central Banks moving in the direction, that they would all be heading toward the exit. Now the Federal Reserve is like, where is everybody . Everyone has their own reasons to hold tight, including the european Central Banks. I should say reasons to stay easy. Yvonne yes, that is certainly the case. We did not get a good lead up for asia. How are things looking in the wall street session thursday . Seems a lot had to do with tech. Kathleen a lot of digestion, people trying to figure out where they stand with the fed and capital markets. There is a sense of a need deposit and reassess. We will talk about this shortly with su keenan. Yvonne lets get the latest in asia. We did see that pause inequities in the u. S. , dow snapping a nine day winning streak. I mentioned the tech stocks leading losses, apple with concerns of the week iphone 8 orders. As a catalyst, were not seeing today. 7302d that 50 down 0. 1 , for the kiwi on the eve of what will be a nailbiting election. Australia, a key market to watch. We are saying possibly an upside of the 19 points at the open, after we saw 0. 9 drop of the asx 200 thursday. The aussie taking a beating, the biggest out of the g10 space. Saw a slump in iron oree overnight. The rba saying no need to follow the fed when it comes to rate. The boj held rates unchanged yesterday. Futures flat, down 10 points for chicago nikkei futures. The dollar yen is a key one to watch after we saw the boj dollaryen hitting 113 in the coming days, despite the latest on north korea, President Trump expanded sanctions on pyongyang. Kathleen lets get the first word news with courtney collins. Up, hewlettpackard enterprises said to be planning 5000 job losses. The cuts involved 10 of hps global staff and are expected to begin before the end of the year. Whitman has been swinging the asked for two years, cutting divisions, including personal computer printers and services. Pressureer increasing from cloud providers like amazon and google. Sovereignhad its Credit Rating cut for the First Time Since 1999 with s P Global Ratings fighting the threat of soaring debt. The agency said three foreign banks operating on the mainland, including hang seng china and dbs china, would be unlikely to survive, should china default. They reflect concern china can strike a balance between maintaining growth and cleaning up its finances. The European Central bank and other e. U. Authorities are stepping in to provide a alternatives alternatives. The ecb will publish a new overnight rate for unsecured lending. Within a three years, it would complement, not replace, the current. They are not looking for alternatives to missing benchmarks after the u. K. s scandal. Puerto rico is cleaning up from the worst storm in a century after Hurricane Maria left of the whole island without power. Maria followed Hurricane Irma and left to the bankrupt u. S. Tort territory facing billions in costs. Said hisnor of barbuda island is uninhabited for the first time in 300 years. Irma and maria have left the entire population homeless. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. Kathleen a volatile week in the markets. Joining us to talk about what happened today, su keenan. You have a lot on your plate. Su we saw the stocks fall from alltime records. Go to the close, you see red. This was the first time in five days we saw a downturn after that. The dollar come a changed after rallying wednesday. Metals from copper to iron ore. Lets go into the big movers. Apple, taking a dive again. That partnership with google and htc, a lot of speculation. Maybe they will come out with a hyper efficient digital assistant that will give siri a real run for their money. Proctor and gamble Consumer Staple Companies were down. Lets go into the bloomberg at g btv 5133. We have seen weakness in the dollar. It was fluctuating in the latest session. Can it regain the dot plot . We see the dollar in yellow has pretty much tract with the fed as it was going up. Check it out, it is coming back down. The question is, where does it go from here . Kathleen hays will have more on that. 500, wee, the s p talked about how it will be narrow. Not all stocks are rising. Lets go to g btv 5726. What you see is the s p 500 market grows. 200t of members over the daily moving average more than normal are starting to grow. They are above the average line. That shows us there is more breath in the market, which is what the bulls like to see, even though there are caution flags out there. Yvonne i thought it was interesting we thought and energy socks selloff, despite oil resilient, 50 for a second day. We are getting mixed signals from opec ahead of its meeting in vienna. Su there is talk about the cutback. One of the veteran traders said is it is proving somewhat supportive. Prices could get punished. See a pullback. Interesting to listen to the ceo and founder on harold him forecast isid the wrong and it is not a good time to hedge because he thinks it will go higher. Is still 360,000 barrels under forecast. If they get it right and the market gets it right, we should pick up 20 . That is about the same amount of barrels. Today is theieve environment you should be hedging barrels in. He sees between 50 and 60 going forward. To be in the oil business and make those calls. Veteran traders say there are rumors around the market that veteran traders say there are rumors around the market that opec members are going to make a call to implement extension of the cutbacks. What opec says and does our two different things. That is where the traders ride up in limousines or ambulances. Yvonne thank you, su keenan joining us live from new york. President trump has stepped up pressure on north korea, announcing new sanctions on anyone doing business with kim jonguns regime. It only impacts those who continue to do business with north korea. Does business with north korea, yes, it will impact them. If there are countries that do business with north korea, it will impact them. It is for countries that continue to support north korea. Yvonne lets bring in bloomberg u. N. Correspondent following this out of new york. Good to see you. It is very interesting, we heard from nikki haley about the National Community was pleased with the blunt words that came from President Trump this week. How do you think the president did, overall . The committee was horrified by some of the words that came out of President Trumps mouth, like you threaten to destroy north korea, threatened iran, and venezuela. The interNational Community was mortified at some point that President Trump was worse than they thought he was. On bilateral, he did well. His speech was a dip disappointment to many diplomats at the u. N. Ambassador haley thinks the world likes the words of President Trump. But President Trump should have been more diplomatic. Yvonne that is true. We also saw the news about these sanctions, the new sanctions on north korea, in particular when it comes to Financial Institutions that do business with pyongyang. Are any of these developments going to get kim jongun under start listening to demands from the u. S. And china, russia and rest of the community . First, the Un Security Council resolution, and of the u. S. Is adding more sanctions. The North Koreans are responding, threatening to do countermeasures. We will see what that is like next week. Presumably they will launch more missiles just to upset President Trump. There is not much more the u. S. Can do. We have to give time for these sanctions to take effect. I think a lot of people are a bit shocked. Especially about trump as speaking so bluntly. On the other hand, saying to republicans and democrats, nothing has been really done to stop north korea developing these missiles and weapons, and that at least donald trump is finally confronting it, and finally pursuing a more direct line. How is that being discussed within the walls of the u. N. . Are they acknowledging that we got to where we are because we have not done more . Is a, nobody likes to support President Trumps tough actions, that we are here because of those blonde actions. [indiscernible] they are worried about what is next, and went we enter a military phase . That some space, the sanctions will not work. If they continue talking the u. S. , what then . Kathleen thank you so much for reporting us today. Still ahead, do not miss our exclusive interview with lloyd ceo. We get her views on how the insurer is tapping china, especially in cyber insurance. Later this hour we hear from john mcafee, the man who made his name and antivirus software. He is now into bitcoin. We turn the conversation the Central Banks with here in the new york studio. This is bloomberg. Counting down to asias first major market open this morning. Japan futures firmer this morning, up 30 points. The dollaryen above 112. Given centralbank diversions we do see what the fed and boj. Plenty more to come when we talk about this is daybreak asia. I am yvonne man in hong kong. Kathleen i am Kathleen Hays in new york. They are planning to our already winding down assets, wondering how to balance forces in the future. Lets bring in the executive Vice President at cls bank. Worked at the new york fed for over 20 years. Lets start with the fed, because they did what was expected. They are starting their Balance Sheet reduction, they are sticking to the view almost a promise, that they are going to hike the key rate one more time, even though janet yellen admits it is a mystery. It is below target, not moving in the right direction. As someone who worked in the fed and watching from a market investor standpoint, what do you make of this . What is the logic . They want to normalize the Balance Sheet and Interest Rates. This has been a goal of janet she got into that position as chairman of the fed. Have that bee to her legacy that she began or got the mobilization process well underway. We already had on the rate size moving multiple zeros to a little over 1 . She has moved off of zero. On the asset side, we are still at ¥4. 5 trillion. Still would like to change that direction while she is still in office, since we do not know if she will be renominated or not. Kathleen the Balance Sheet reduction is the easy part to understand. Dont worry, it is not really a policy tool now. During the crisis, it was. But now we are focused on the funds rate. The feds datadependent. One of the key indicators is far from it should be. Did they not change anything, in fact got further behind because they do not want to rock the boat . They start the challenge and Balance Sheet reduction they wanted to be very smooth. In december if inflation is down at 1. 4 , we might see the dots change. Dino you might see the dots change. If the s p is hitting new highs day after day, which is what it has been doing recently, that is an invitation for them to keep doing what they set out. You are number 2013 when the taper tantrum happened and they floated the idea of unwinding the qe, the markets reacted, volatility spiked, and then the fed backed off. Right now we have a market that is much more open, willing to accept tightening on both the rate side and asset side, and they are taking the opportunity. Can that change . You bet. If the markets react or the data really turns, what is going to be hard is what is happening with these hurricanes. Because how will that impact data . Will the fate be datadependent or marketdependent . The next few months they might be more marketdependent. What will the markets let them get away with . They will take advantage of what they can get away with. Yvonne the mystery along with inflation is, is quantitative tightening going to have a different effect from quantitative easing . We the success of qe. Saw the success of qe. Why is the mark what is the fed confident markets will stay calm . Dino neither they nor we nor anyone else knows what is going to happen with the unwinding. Youre talking about going from a Balance Sheet of 4. 5 trillion lets say it goes down to 2. 5 trillion, that has never been done. No central bank has ever done that kind of unwinding of a qe program. They are talking a good game. But there is a lot of guesswork here. The markets begin to react adversely, they will modulate and slow down the redemptions or even stop them for a time. Janet yellen told you as much in the press conference yesterday. Yvonne there seems to be offthing room, starting quite slow at 10 billion in the Balance Sheet runoff. In terms of indicators, what are they looking for in the next couple months, if not years, on how this will be a success . Dino we will be looking at the initiatives you would expect. How is the economy doing . If the economy goes into recession quickly, they will have to react. Oft will tell you the tale whether the Balance Sheet is a tool to be used in the future or not. Will they just use rates or reactivate and Asset Purchase Program if the economy dictates . You cannot put the genie back in the bottle. Once the market knows these tools are there and can be used and effective, they will expect them to be used again and there will be pressure on the fed to use them again. I would like to go back to appoint you raised earlier about the inflation mystery. This is a very interesting conundrum. If inflation stays low in the is the case for hiking the federal funds rate in december . Especially because we will do tightening through the Balance Sheet channel by doing these redemptions. I do not think the case is closed for december. It would not take much for them to take that back and decide to take a pass on december. Kathleen i told someone yesterday if they gave me points come i would bet that is what happens if inflation stays low. Is the fed not being clear enough about what their real concern is . Are they more concerned about financial instability . It is not a said tool to burst bubbles. Is that the elephant in the room . Dino if it is not, it should be. We have had close to zero Interest Rates for 80 years going on nine years. The real fed funds rate is not negative. The inflation rate is above 1. 5 . Monetary policy is still easing. Abouthould be worried access levels and exuberance, and i think they are, whether they say so or not. Kathleen there are a lot of right. That think you are i think i mixed my metaphor, unspoken elephant in the room is not quite right. He knows what i am saying, when i dont. Thanks so much for joining us. You can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers go to dayb on your terminal. It is also available on mobile in your bloomberg anywhere app. You can customize settings to get news on industries and assets you really care about. This is bloomberg. Kathleen this is daybreak asia. I am Kathleen Hays in new york. Yvonne i am yvonne man in hong kong. Dividend, rio tinto is to buy back another 2. 5 billion of its shares from the sales of australian coal assets. 560 million will be used for Rio Tinto Limited shares with the remaining for existing buyback of Rio Tinto Plc stocks. It is a rebound in commodity prices. Japan said to be fully subscribed, offering domestic investors, account for 3 4 of the deal, with overseas portion completed last week. It is partlyt said to fund rebuilding after the earthquake and tsunami. Yvonne a second dreamliner order this week. Turkish airline 4 wants to buy7 new airlines when it bounces back after a terror attack from last year. The deal is worth 11 billion before customary discount. It helps Turkish Airlines work toward the goal of making istanbul a leading travel destination. Around, oneopping of the biggest debt deals to hit the asian market this year, as it looks to fund a purchase. They said would be bond purchasers are looking around. That means syngenta may not confirm pricing until next week. Yvonne chinas sovereign Credit Rating gets cut for the First Time Since 1999. Is it cause for alarm . This is bloomberg. Yvonne 7 30 a. M. Friday in hong kong. Beautiful look outside of the harbor this morning. 30 minutes away from asias first major market open. Kathleen i love those gray clouds. It is 7 30 p. M. Thursday here in new york. Evening has set in, look at the empire state building. And blue, white turning to green. I am Kathleen Hays in new york. Yvonne i am yvonne man in hong kong. Youre watching daybreak asia. First up, the nikkei news says president xi is trying to talk chinas anticorruption chief out of resigning. It said he has expressed a desire to step down and next months communist congress meeting. Members aged 68 or older usually retire. He has led resident xis anticorruption drive since 2013. President trump has ordered new sanctions on north korea, targeting individuals, companies and banks that do business with pyongyang. He met south korean president moon jaein and japanese Prime Minister shinzo abe to step up the pressure. It also bans any ship that visits north america from north korea from american ports. Ukip Prime Minister theresa may appears to have won cabinet support for her brexit vision ahead of the landmark speech friday. The buyin from her most senior ministers is critical for may, as she prepares to appeal directly to the other 27 e. U. Governments and strike a more conciliatory tone than she did in january. Per top diplomat Boris Johnson has hinted at resignation if she softens her stance too much. German chancellor Angela Merkel has called on voters to stand up against populist, antiimmigration parties as she heads for a fourth term sunday. Support is fighting for the christian democratic union, with the alternative said to be the first far right group to Enter Parliament since world war ii. Markle for the number of Refugees Germany has accepted. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. Yvonne lets get more on what we should be watching is trading gets underway in asia. Sophie kamaruddin joining us on set. We heard President Trump upped the ante on pyongyang. New sanctions being proposed. Are we going to see any reaction the markets . We see dollaryen doing not a whole lot. Sophie it looks like investors are not feeling the heat, given the fundamentals are laced with the economy. Thursday, latest export figures, a solid number. Pulling up what is going on with that on the terminal. Exports grew at the fastest pace in six years in the first 20 days of september. Shipments to the e. U. Grew more than 40 . To the u. S. , 36 . And growing 26 for the month of september. Aa gradel ratings have of first south korea, saying this has underpin the resilience for the south korean economy. That has helped korean bond buyers take a geopolitics in stride. Terminal, this shows you offshore Corporate Bond sales up 22 on year for the third quarter, jumping to the highest since 2013. That is the blue bar, as compared to 2013 here. The breakdown includes koreas Development Bank one bond. Resilient demand from bond buyers. Kathleen important for you to point this out, bullish demand, good news for issuers that want to lock it in before the fed gets the hiking rates, as they seem to plan to do in december. Sophie the corporates want to lock in the race before they are push tires pushed higher. This appetite has brought down the average yield premium of the korean dollar notes by five basis points since hitting a peak december 8. Premium,a higher yield more than the u. S. Are aussie notes, for example. Steve goldman says that is why they are paid to take on higher default risk. That rising risk has been shown in the bonds. You can see this in g btv 7048. Have beenorean stocks resilient in the face of tension. You can see this is outpacing the like of the philippines, thailand and china. Kathleen sophie kamaruddin, thank you. Lets move on to hewlettpackard enterprises. Big news. They are said to be cutting 5000 jobs, about 10 of the global workforce. Brian is joining us from our San Francisco bureau. What is going on . Meg whitman has been cutting back for a while, indicating she would. Month,call earlier this she said they are benefiting from going demand across key areas of the business. Is this anything we should be or is shek by, continuing on track to get hp in a stronger, more profitable position, even if it means that shedding people . There is also discussion about 1. 3 billion over three years. Ande is demand going here there, but this is definitely a company talking a lot about slimming down, getting smaller, more nimble. This is part of that. Of people were looking for Cost Reduction and things like that. Looks like we are going to be getting serious reductions. 10 is not a small amount. Even in afterhours trading, the stock went up a bit. Some investors might like what they are seeing. Yvonne is this a sign of the times we are seeing in the industry . Has been realistic or more responsive when it comes to the likes of the cloud writers, thisn, alphabet, is reality sinking and more for hp . Brian i think the reality has been there for a while. But you are right, the cloud is the huge pressure on this industry, not just for hpe, but for dell. This is an industry trying to find their way, trying to say, how can we respond to this massive shift, with everyone spending more money on amazon and google . Becausehuge change, people are not buying household servers like they used to. More . En could we see what is your take . More cuts . E cuts kathleen yes. Brian i do not know, we will have to see what happens. The company is finding ways to save money. They need to invest. Theyre trying to find places littlehey can grow, find spots showing more promise. They are not going away anytime soon. They have plenty of revenue, but have to find their spot. Yvonne thank you, joining us live it from San Francisco. Staying on the tech theme, facebook will Hand Congress all evidence of paid ads connected to the russian government on its site. This comes in the wake of mounting criticism by lawmakers, including those who want tighter regulations of online political messages. Sarah frier is covering the story, joined us from San Francisco. We did get this video they came out a couple hours ago from mark zuckerberg, coming back from maternity leave. The paternity leave. Sarah this completely blew up over the course of the last few weeks. They revealed russian actors have spent 100,000 worth of Advertising Money on 3000 ads before the president ial election that saw it to cause them political discord, get people to hate each other more. Facebook has turned over this evidence to the special counsel looking at the Trumps Campaign ties with russia. Now they figure they should also give it to congress. They have been hesitant to do that because they were worried about privacy laws. The Congress People have been very vocal the last couple weeks about how much they want facebook to be more transparent. We are coming up to crucial elections. The german election as well as midterm elections in 2018. What are we going to see out of facebook when it comes to policy changes . They did say they are not exactly going to be checking that as before they post them. Sarah you are right. What facebook promised was a complete overall of how it deals with political ads on its platforms. The number one thing they are adding is more transparency. Political ads on facebook are not subject to the same Disclosure Rules as more traditional mediums like television. Now what is going to happen on facebook, they will make it easier for people to know who is paying for an ad. Also, you can click on the advertiser and see what other ads they are currently running for whatever audience on facebook. It is a step in the right direction. They are adding 250 to work on election integrity, and the company vowed to work more closely with other Technology Companies and government to work in the future. They haveid so far seen no bad actors doing that kind of thing in germany, but they assist ended house and the fake accounts. It seems this is a task that is more subtle and maybe requires more human interface to detect than Something Like terrorism. There is also been more of a crackdown on allowing terrorists to spread their message online. That is pretty obvious. I know they have threatened to shut up people who violate standards. They are adding 250 people. Is this something Companies Like facebook have to face up to . Or are we expecting them to do when it comes to what they do or do not allowed to be posted on their platforms . Sarah as a zuckerberg said today, it is extremely important to facebook, the freedom of the do review stuff before it goes up, he thinks it is important to freedom. After the fact is when they find things and take them down. They will make it easier for people to report abuses to the ad system. We should think about this, at least in the minds of these companies, it is a new problem that is similar to hacking or spam or fraud. Internet companies are dealing casebycase, whackamole basis. It is not efficient and requires human intervention. They have to work hard to great systems that make it technologically less easy for bad actors to do with they are doing. There isg said today, no way they can clean this all up and it will never come back again. There are always going to be people figuring out better ways to exploit the system. Now they have to build out a team to deal with that. It is really an expensive problem. Kathleen new platform, new world. Sarah frier in San Francisco, thank you so much. Raising concerns, s p downgrades china for the first time in nearly two decades. A look at how soaring debt is posing a threat to the economy. This is bloomberg. Yvonne we are counting down to asias first market open this morning. Japan futures losing steam, up 20 points on the board. Shirking the geopolitical risks that came after north korea after President Trump posted to bring new sanctions to pyongyang. The dollar yen holding above 112. This is daybreak asia. Kathleen s P Global Ratings has cut chinas sovereign Credit Rating for the First Time Since 1999, citing the threat of soaring debt. Tom mackenzie joins us from beijing. It is interesting to me, the debt has been theres some time. Why the downgrade now . How serious is this . Tom in some respects, they are stating it blindingly obvious, something articulated by the imf a few weeks ago. Christine lagarde talking about the risks around chinas profile. It was articulated by moodys. And another, about the banking crisis. In other respects, china cannot ignore red flag warning from a major credit agency. What they are talking about, s p, is the buildup of debt. We have a chart to illustrate what has been going on since 2008. This is g btv 624. It breaks down Component Parts of debt, it has all been rising since 2008 up until the last quarter of 2016. That is the debt profile, the s p and others are worried about. Other analysts will point out, there have been moves in the right direction from chinese policymakers, as well as the fact thatws, caps on better controlled and corporates are pressured to pull back on leverage. Despite that, what policymakers have failed to answer is, how they failed to get 6 growth for the next two years while pulling back on credit. How do they square that circle . Maybe this s p downgrade will push them closer to that. But the timing is interesting. Yvonne not a big surprise given they are behind the curve. You mentioned about the timing, which is weeks before this Party Congress. How significant is that . China certainly is not going to be happy about that, leading up to that big event. Tom no, they certainly wont be. We saw an article from the staterun newspaper pushing back against this raising the downgrade. We will expect strongly worded statements from chinese policymakers on the back of this, pushing back against this, as we saw when moodys downgraded in maine. The timeline is interesting, given we are weeks away from a political reshuffle that will change the agenda for the next five years. That will be a big question. It is not great for the optics. National funds in china may be stepping in to support the market. What they do not want to see is an stability in the markets leading up to this political event. Its own aooking for sovereign debt issuance for the First Time Since 2004. Billiont to raise 2 and help fund to pull down there refinancing costs. Heard from Stephen Roach from yale that chinese authorities on top of this, trying to tackle the debt issue. Take a listen. China has a debt problem. China has talked directly and explicitly about its debt problem for a number of years. You can be critical of china for to having moved aggressively force its Stateowned Enterprises to deliver delever. Tom also saying a key focus should be on what happens with the reform of the Stateowned Enterprises after the Party Congress. He thinks that will be crucial. Yvonne Tom Mackenzie joining us live from beijing. Makerunder of antivirus mcafee, john mcafee, says this will help the momentum of cryptocurrencies. He sees bitcoin soaring fivefold within a year, to 20,000. Speaking to us at the Blockchain Global summit, he says it is reactionary and he does not think beijing will ban bitcoin mining. In china everything is extremely concerned uncertain. [indiscernible] they have been told privately they should stay in beijing. The rest of the world is in chaos because no one knows what is coming next. It would be extremely disrupt to the chinese economy and to the world. A lot of the bitcoin mind globally are in china. Tens of thousands of machines mining today. I do not think that will happen. I truly believe the Chinese Government is a rational government, and in the long run, will come back and legalize rcos with a certain legislative concerns, to legalize exchanges. People have taken advantage of china. People of come over to do cios promising achina, return in a week. It makes everyone look bad. It looks good for the cryptocurrency. Do think there will be too much regulation . They might overregulated and crackdown. [indiscernible] will, but thisey will be a seesaw effect. When legislation is enacted, people will get around. About aalking decentralized world, decentralized process, where peertopeer activity is there. How will you enforce it . You have to have an enforcer in everybodys home. You cannot do that. More legislation will be enacted, people will get around it. But in the end, the power of the technology supersedes and goes way above the power of centralized government. I know you are on record expecting significantly higher prices. We saw this dip after the china crackdown. It was at 4000, not just china. Jpmorgan. Ie dimon of another said, please sir, wake up. It cost my company over 1000 to create bit going. What is the cost to create a 100 bill . You see hong kong playing a significant role in other china is not playing in the game at this point . A lot of Cryptocurrency Companies have started here. Here is the problem with hong kong. It is still legally part of china. While china has a difficulty ,ntegrating it, if they choose [indiscernible] hong kong is too close to china. The world is a large place. Kathleen that was john mcafee speaking to stephen king Stephen Engle at the blockchain summoned in hong kong. One feature on the bloomberg we would like to bring your attention to come interactive tv. Find it at tv. You can watch us live and see previous interviews and dive into any functions we talk about. Become part of the conversation by sending us instant messages during our show. It is for bloomberg subscribers only. Check it out at. Tv. This is bloomberg. Onne this is daybreak asia i am yvonne man in hong kong. Kathleen i am Kathleen Hays in new york. Londonbased food service deliveroo has been hit by ubers potential deal with softbank. They were in talks to invest in softbanks vision fund, but was abruptly terminated. They think it is becoming serious about buying into uber, and the ride hail are is also in ridehailer is also in food delivery. They become dominant in natural resources, the second in natural gas trading in north america, as other banks cut back. They suffered their worst performance in commodity since listing in 1999. Kathleen china has raised the bar in fast change with the new service. The transit designed to operate between beijing and shanghai, covering the 1250 kilometer journey in four and a half hours. In 2011 after a two train collision that killed 40 people. Yvonne plenty more coming up on daybreak asia. Withxclusive interview, our guests views on how insurers are tackling china, and cyber insurance, as well. Seeing a markets open, selloff when it comes to equities. This is bloomberg. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. 8 00 a. M. Here in hong kong. Daybreak asia. The top stories, President Trump increases pressure on north korea. Pyongyang fires back saying the president is deranged and america will paid dearly. On bloombergs it is just past 8 00 p. M. Thursday. China downgraded for the first time in 18 years. They point to the threat of soaring debt. Banks onop central diverging paths. First, talking about that diverging. It was a surprise after the fed looking at decisions coming out of indonesia. We see this divergence between and this rolloff of the Balance Sheet versus what we see out of vietnam. Thes interesting how language has changed overnight, thethey will not follow fed. It is important they made that clear. That was one of the big stories for the markets, something we would watch. The fed seems to be the loan diverge your because the ecv diverger. The ecb will not raise Interest Rates until they see more evidence it is time to do so. Reality is sneaking in when it comes to the fed. The market is focused on that more than the geopolitical risk. I have a chart. Seeoes to show how we complacency in the dollaryen. Take a look at the yen volatility. Line isere that white showing. That range captures most of the move we have seen. Is this a sign over missile fatigue . You have to add in the boj with that. Kimissile fatigue would be jongun as well. Lets go to paul allen in sydney. Planning 5000 job losses, staffing 10 of hp global expected to begin before the end of the year. Meg whitman has been swinging the acts for 10 years two years. Froms under pressure amazon and google. The European Central bank and other authorities providing alternatives for the benchmark of the old the markets. It would complement, not replace the current rates. Authorities are looking for alternatives for existing engine marks benchmarks. Ratenchmark interest was left unchanged. Taiwan kept its benchmark unchanged for a fifth quarter as weak sentiment and retail sales clouded the outlook of economic growth. Puerto rico is cleaning up from the worst storms in a century. Maria followed Hurricane Irma and left the bankrupt territory facing billions in costs. The Prime Minister has told the isted nations his island uninhabited for the first time in 100 years. Opec an independent producers are offering mixed messages of what to do next to bolster the oil market. Some said the issue will be discussed but Russias Alexander Novak said it is to learn too early. Global news 24 hours a day powered by 2700 journalists and analysts. This is bloomberg. And how the markets are trading on this friday morning, looking at the market opening, we saw a pause button for the latest industries. Session as weed kick off the last day of the week. Apanese stocks are rising for fifth consecutive session. Aussie stocks are edging higher 2 10 of a percent. Fighting for ao second day ahead of the National Election in new zealand. Assets. Ook at risk you are not getting much in the way of reaction to pyongyang. Nor to the downgraded china Credit Rating. Were seeing subdued moves. We are seeing the dollar give up some gains. That fed fueled rally is falling slightly. Metals are on the back foot and we are seeing a plunge in iron ore. That is Holding Steady for now near a threeweek low but with that could be creating a perfect storm for the aussie dollar. You can see that. This currency has touched a 50 day moving average. It has not traded below its technical level since june 6. It is keeping steady for now after its biggest loss since may. Taking a look at the sydney share market moving higher this morning. Thursday selloff, there is concern given the drop. Three quarters of the index fell with volume more than 10 above the average. We are seeing it be kept on the up to date. While the yen is Holding Steady they may be smelling an opportunity given the policy divergence. You can see this on 5175. Option traders are filing up against the yen. They are seeing the pair move. Ast in the coming days speculation over a snap election is fueling bearishness. A 2017 two weeks ago. We have reaction to the latest around north korea. That could be an added boon. That could reinforce the message higher rates need to lineup for 2018. There is one group that may be pleased and that is everybody at the jacob japan. Thank you. Lets move on to President Trump stepping up pressure on south korea north korea. It impacts those that do business with north korea. If china does business with north korea it will impact them. Really it depends on countries that choose to continue to support north korea. The Bloomberg News asia editor tracking all of the developments. This is a dramatic chain of events. Give us the details on the sanctions. Just how restrictive are they compared to anything in the past that has been there. Ofit is a new level sanctions that would basically restrict anyone from doing iness with the cam regime regime. Im they are looking to isolate them. They said china, the China Central bank was not going to allow its banks to lend to north korea. In terms of how successful this will be, we will have to see. There have been sanctions already. Toy really have not seemed do that much in terms of changing the behavior of the regime. It is a most like clockwork. He willhe response that tame the mentally deranged president with fire. We continue to see this war of words. Right. Sanctions seem to provoke am further in terms of war of words and we have seen that is when we of another publication missile being lobbed over japan after the last round of sanctions. It seems to be this backandforth. His latest comments were quite fiery in terms of talking to President Trump directly. Nikki haley mentioned the Iran Nuclear Deal as well, dancing around by the president s leading towards. How will the impact where the president is going to move when it comes to iran . These seem to be time tied together. The president talked about north mostly aboutn, and north korea and iran. He is deciding whether to program october 15. It is a day where he has to certify to Congress Iran is in compliance. We have a lot of things happening. A war of the words. We heard from the iranian president , not happy saying they wouldnt violate the agreement but it would be wrong of President Trump to get out of it. Frommore fiery words today president kim. Thank you. There is more on the north korean sanctions later this hour. We would hear from Tomas Pickering about the tough talk turning the area into a pressure cooker. Next, joining us in just a moment, this is bloomberg. This is daybreak asia. , this year isest the 10th anniversary of lloyds. Hina joining us, great to have you. Thank you for joining us. Talk about the market in general, you have been in china for a decade but the insurance industry, the mainland has gone from boom to bust. What is your read on the industry so far . It has been an incredibly fantastic journey. We have been in sharing this for 200 years. That was done back in london. We decided we need to get close to the market. T has been an amazing story from a very small start here we are now writing to billion rmb of business. , we our business volume have assets of over 6 billion. The Insurance Market is out pacing gdp growth in china. This is why we see it as a great opportunity. Lloyds has always done specialist insurance. We are here introducing new types of products, really working with local insurers to enhance their product offering. Risks. Omplex insurance some of the latest are ensure yourself against cyber attacks. We have exponential growth going on at the moment. Theertainly you mentioned infrastructure as well. Is part of the initiative, when it comes to these infrastructure projects, 26 trillion, saying insurers play a big role, funding these projects. Not exactly a common thing. What is lloyds take on all of this . This is too risky of an investment. We dont necessarily lend money up front. Insurers have a massive asset base. If we think about the core product of insurance we will be , weharing some ensuring are excited about what that might mean. Some of this will be groundbreaking. Whenever there is anything new, a new project, that is what we do best. It is the unique market. A bunch of syndicates. We share risk which enables us to take on pioneering new things. As they start to grow and develop, once the funding is there to start these projects lloyds can come in and provide insurance that some investors will want. We do see it as a good opportunity. Over the long run. Certainly you have to take on risk. In question is how uss it such a way that you make money regardless. It is interesting to look at cyber insurance. One of the trickiest things of cyber attacks, no matter what you put up, the hackers find a way around it. That is even a riskier proposition than ensuring the belt and road, unless youre going to charge a lot to make sure you come out on the profit side. Is aning on any new risk unknown. But that is what lloyds has always done. We didnt know the chances of the satellites not making it. We have always been at that pioneering end. One of the new elements is it knows no geographic down trees. ,any of the risks we take on earthquakes, hurricanes, wind storms, they are usually confined to a certain geographic area. Noer Security Risk knows geographic boundaries. This puts a different angle on trying to assess the accumulation. We have done a lot of research into cyber attacks. One of our latest pieces of of the clouds one Service Providers was taken down. Event, ad take a cyber financial loss. That is putting it around the magnitude of the damage incurred by superstorm sandy. That is the extent that we see cyber losses. It is not going to put us off. Businesses need the protection. This is the way the world is moving. No business is going to be immune. Weve got to be there to fulfill the purpose, take risk away from companies. In able human progress. We are willing to take the cyber risk. We probably have a 25 market share. We have a billion dollars of cyber premium. Most of that is coming from the u. S. 80 is bought by u. S. Firms. We are seeing an increase in other parts of the world particularly when there is regulation introduced. Ahlstrom really introduced new data regulations. We saw an uptick in cyber insurance. Regulation and the Regulatory Environment drives the demand. I have to ask about brexit. ,mong your colleagues, friends people you know, is there a buyers this point . . Hat is the move weve got our own contingency plans ready for the brexit. Most financial sir firms are doing. We are going to set up a subsidiary in brussels to provide coverage for customers in the eu. Im sure many other Financial Service firms are doing the same. Aboutjust read potentially trying to negotiate Something Different for Financial Services so there can be a long transition so that companies within the eu 27 can actually trade together and there could be segregated Financial Services agreement laid out that could mean businesses and customers can have liabilities and policies fulfilled. This is very new. This is just recently came out. That would be good news for the entire segment. We are in the risk business. We are always going to make sure we can secure things for the future. Is it too late to sell brexit insurance . We are not selling brexit insurance at the moment. We do sell most types but not brexit insurance. Thank you for joining us. Congratulations on your new shanghai office. Thank you. Quite she is the ceo of lloyd. One feature them away like to bring your attention to our interactive tv function. Find it at tv. Also see previous interviews and dive into any functions we talk about and become part of the conversation. Messages while we go. Welcome back. This is daybreak asia. Check of headlines. Buying back another two and half billion dollars of shares using coaleds from australian assets. He remaining 1. 9 billion they are increasing dividends and buybacks following a rebound in commodity prices. Sell fullyon share subscribed with orders for the entire retail offering. It is three quarters of the deal with overseas portion completed next week. Rework will make its debut in japan with the first office set to open in the our kills column oak hills area. That plan includes a half billion dollar workshare project in china. Theore analysis on one of latest u. S. Sanctions against north korea. Will it have the desired effect . This is bloomberg. 8 30 in singapore. Blue skies. We are a half hour away from opening of trading. A great way to finish the week. Im in new york. You are watching daybreak asia. Lets get to the first word news. Paul allen in sydney. The nikkei news as xi jinping is trying to talk the anticorruption chief out of resigning. He has expressed a desire to step down at next months communist Party Congress. The anticorruption drive since 2013. President trump has ordered new sanctions targeting banks that do business with pyongyang. The executive order bans any ship that visits north korea from american ports and says china has told banks to stop dealing with the north. The u. K. Prime minister appears to have one support for her brexit vision. The by and from her most senior ministers is critical as she prepares to appeal directly to the 27 eu governments and strike a more conciliatory tone than she did in january. Hinted that ahas resignation if she softens her stance too much. The latest polls suggest support a sliding for the christian democrat party. The afd vilifies merkel for the number of Refugees Germany has excepted. Global news 24 hours a day powered by 2700 journalists and analysts. Im paul allen. This is bloomberg. Time to see how the asian markets are shaping up. The benchmark is pretty much flat. Looking for some sort of catalyst. Take a look at the equity markets. The yen is looking study. We are seeing japanese stocks edge higher. The all is the aussie share market is looking to snap a threeday decline. We have shares sliding for a second session on course for a weekly advance. Kiwi dollar is sliding a third. It could be ripe for a postelection rally. The kiwi has been keeping closer to the year high. Those have been paired back which could allow for a fresh buildup. When you take a look at technical indicators it may be extended for the kiwi. They are both pointing to bullish trends though not looking to stretch for now. I want to check in, it has swung to losses. Investors shrugged off the downgrade for china. The gyrations are consistent with the objective of greater volatility to avoid a oneway bet on the currency. Morgan stanley have turned neutral on the offshore is they wait on signals when it comes to the dollar. A very important thing to be watching. Thank you. S p global and rankings, citing the threat of soaring debt. Beijing, i have to ask my how serious is this and did this surprise you . The debt has been there for a wild. It has been there for a long time. It is not a big surprise. In junere murmurings saying they would reassess their ratings. We got moodys ratings downgrade in may. It is not something everyone can ignore completely because it is a major Ratings Agency but they are stating the obvious from many perspective. We heard from the imf pointing out the debt level was a concern. We heard from the bank of International Settlements talking about the risk it posted the banking system. It can be taken seriously. Here is what the s p and others are looking at. We have a chart. Fromows the debt profile 2008 to 2016. It is all edging out and that is the level of concern. There have been strong debates. There have been great inflows. Things are looking more positive. How do you get growth that has been predominantly powered by credit to continue while cutting back on credit. What is the likely response in light of this downgrade . When they said when moodys downgraded they exaggerated the level of risk. They are likely to reiterate that. We are likely to get an official statement. The Party Congress is important. China headinggot for its First Sovereign debt issue since 2004. The timing is interesting. We heard from yale university, the s p has close the door after the horse had bolted saying china was getting to grips with its debt conundrum. China has a debt problem. China has talked explicitly about its debt problem for a number of years. You can be critical of china for not having moved aggressively to of force its state owned enterprises to do lever deliver. He pointed out the as so we perform as so we reform is going to be important. A lot of countries have their own debt problems. It is important to make this shift. How is this going to translate through chinese bond market . We have heard from Morgan Stanley they dont think theres going to be any significant reaction. There was a marginal pickup in yields but they came down pretty quickly. It comes at a time when the policymakers were trying to encourage the 10, trillion dollar market here. As well as defaults. It may raise questions before investors looking to get into the domestic market. They have raised a record amount of debt in dollar denominated bonds. From of that demand coming domestic investors and most Analysts Expect that to continue if there is any big market reaction. You might get a national team, these Big Government backed funds supporting equities and bonds because they dont want to see market instability ahead of this. Certainly going to be interesting. Thank you. We have some lines coming out from china. Chinaay the rating cut on cant reflect the real China Economic situation at the moment and the rating cut wont hurt foreign investment. Plenty more to come here. President trump ordering sanctions on north korea that opened the door to back listing individuals doing business with pyongyang. Tomas berdych ring said the tough talk needs to be backed up with diplomacy. They have some room. China and russia are going to cooperate. If they exceed and getting them to quiet rate they will shut down north koreas most vital trade with china and petroleum which in the past the chinese have done. They say they have to maintain the pipeline. That has had an effect. At this stage it doesnt look like we will have chinese and russian cooperation. Both pushed back over the day. They have pushed back pretty hard. What is hard is the language that continues to be thrown out between the u. S. And north korea. Trump deranged, saying he will pay dearly for his threats. We know President Trump , outsided rocket man of the namecalling if he cant get russia and china could do much of anything, at what point are military options a serious option . Answer butfficult to it is also a difficult step to take. We see those difficulties combine. Where we to use military options short of responding to north korea military options im not sure we would have a great deal of support. On a tracke would be that would be hard to stop. What bothers me most is there is no diplomatic counterpart going on with this increasing pressure. You well did to the valve shut on a pressure cooker, and turned up the heat, and expected everything to come out the way you wanted. It takes diplomacy to shape the answer. There is a failure to put forward diplomacy to shape that answer. I think pressure can help but it can only help if it is aimed and direct it. Scarlet i want to share some pertinent breaking news with you. North koreas countermeasures could mean a Hydrogen Bomb test according to the news agency citing north koreas vice chairman. Escalating. Ords is concerns are it could escalate into something more severe. , other just ahead Central Banks look like they are heading in the other direction. A closer look and what it means for the markets, next. This is daybreak asia. Ofthe fed may be on the path policy normalization that other Central Banks are not joining in. A new policymaker pushing for more stimulus, not less. We joined by Bloomberg Intelligence and i want to introduce the chief economist. Off with you. The fed and announcing they are going to trim the Balance Sheet. Plantrying to stick to the markets are seeing it as quite hawkish. The central bank and the philippines already weighing in seeing little impact. That could be for a couple of reasons. The decision was well telegraphed. That itral bank knows grows quite strong in the philippines. Heard overnight they both were saying we dont have to follow the fed. Previous cycles you dont hear statements like that. What do you make of this . Is it going to last . Even if the fed is tightening , we still have the ecb adding global liquidity. You have toreason turn more cautious. We think most Central Banks will just look at the growth and see where these trajectories lying. Anthey are not going to rush the hike rates. Analysesy reading your on the Bloomberg Intelligence. I tried to follow these asian Central Banks. It is so important. Each Central Banks has to respond and its own economy. Lets take a look at bank indonesia. Leaving the policy rate unchanged. Saying one of the few they are going to cut again. Why . The decision take in the context of last year. We had the central bank cutting Interest Rates, it improve its transition mechanism and loosened lending standards. Growth has been quite stable. Weak in thefairly context of indonesia. Think in the eyes of the central bank wanting to see more of a pickup in growth, needing to do more, i dont think 25 basis points is going to move the dial. More cats to come to boost that growth. Also, yes. More to come but also we have a short window. Off butn has just come we could be seeing that picking up. 11 . Rices are picking up i think perhaps we have a short window. The central bank, saying it needs to do more. I want to ask you about the Central Banks in general. We have a discussion about divergence. The asian Central Banks, dont they have to watch equally closely what the bank of japan does and the peoples bank of china. It has such an impact on currency. Isnt this a powerful factor they have to take into consideration . For sure. China, of course it matters what they are doing. From a capital flow perspective there is still the fed, that matters a bit more. That is really what they will be looking out for. That is one of the reasons why we think some volatility, that will sway in the shortterm and result in them being more cautious. But bek they will retain very cautious in doing so. The other extreme is the philippines. The only country where a rate hike seems more plausible. What might push it to the height . Things, inflation is in the middle of its target range. Strong,although quite the momentum is slow in the first half of the year. Riskse a host of external in the world ahead. These factors allow the Central Banks to wait. Oil andwe have to watch the peso. Publicly the central bank is not really highlighting these factors as risks. Those i think we need to watch. Is signaling it is watching wages. A littlemy is growing bit of both potential. It is going to be eyeing the possibility of second round of facts. In hownt you to weigh you view their decision. Some people thought they would hike the key rate. We have been saying they are not going to hike rates. At the end of the day the wanted the Central Banks to be a little more straightforward. An yes unless we see very adverse weather, these are the things that will sway that central bank. They find themselves in a sweet spot. The growth has held up. I dont think they are going to be in any rush. We see the next move as being a triple archive. They doubt want to jeopardize the current momentum they are saying. Unless they start to see risks forming with this, excessive Household Debt growth, these are the types of things that might cause them to change their outlook. We have time for a quick comment may be from both of you. Bureau, talking dissented. Ter he lets start with you. How important is this in terms of watching the boj now . When they come they will have to be keeping an ion them. We dont expect any change to policy. At the end of the day there is no significant pressures. Same question. Idle have anything to add. Its the same point, really. Thank you. Joining us here in hong kong, we are going to have the Philippine Central Bank governor joining us later on this morning. All of those questions directly to the man himself. That is midday. This is bloomberg. This is daybreak asia. Time for a quick look at what is coming up on Bloomberg Markets. We were just talking about this report coming out about north korea saying these countermeasures could be a potential of another hbomb test. It is quite timely. We have mr. Yen coming on the program in 30 minutes from now. How does this factor in . Structurally the yen is meant to strengthen in times like this. Where the yen goes from here. You could also call our next guest mr. Currency. Governor central bank joining us to talk about the latest decision. How likely is that we will actually see one over the next six months . Just for the Zombie Companies and the author of the , joining us live in about an hour and 30 minutes. Thank you. That is it from daybreak asia. Stand by for Bloomberg Markets. Is 9 a. M in hong kong. It is a war of words. And cutting china for the first time, the agency concerned. Haidi coming up, we will look being diverging paths taken by local Central Banks. Ahead on Bloomberg Markets asia