We will hear exclusively from the economy minister in japan. Betty just moments ago, breaking news out of europe, germanys chancellor Angela Merkel, her push to unite for parties together into a Coalition Government seems to have collapsed. They were just running up against that deadline. This is going to put germany into uncharted territory. And really puts Angela Merkels job on the line. You can see there is immediate Market Reaction already in the currency markets in particular, the euro dropping right as the news broke about the talks. It was already uncertain if Angela Merkel could pull this off and it looks like at least for now, the answer is no. We talked about how intense these negotiations have been come and they were in deliberations for 12 hours on sunday. It seems like there is more uncertainty, we could possibly see another election triggered. Merkels job could be on the line. Atre was a lot of doubt even the beginning after the election earlier this year that they would be able to form this kind of party on a national level. We are seeing more friction here. We will see what happens next. Betty that is right, it is already adding under the risk off sentiment debt sentiment that emanated on friday. We saw a second week of declines here in the u. S. Markets. The s p down, nasdaq all closing in the red, the dow off by 100 points. Setting up for a lower session it seems in asia. We are starting up makes so far. Lets look at how things are feeling in new zealand. Upside about 1 10 of 1 . That is dollar weakness, going from bad to worse. There is some angst and the kiwi of late given help china has started to manage expectations of a possible slowdown in its growth. It has intervened in some of these stock markets. 15. 05 for the kiwi. Seeing shares down on the asx 200. Expecting minutes to come out on tuesday later this week. Korea,s in japan and taking a look at futures in chicago. Could be a little bit of a retreat this morning as well. Dollaryen, continuing to see strength. Lower i should say, yen seeing strength. , ony more breaking news alibaba, going to buy 26 in sun art retail for 16. 1 billion hong kong dollars. They will make this possible, mandatory, Unconditional Cash artr to buy 26 in sun retail for 16. 1 billion hong kong dollars. We will continue to watch the headlines coming out on this and the impact on hong kong trade. Meantime, lets get to the first world first word news. Ramy some ball boy remains in a state of confusion after president mcgaw they ended a residence address mugabe ended and address without resigning. Sources said he would go after a ruling against him. They were fired four days at them after the military is some under house risk house arrest. Showinghosing market is signs of stabilizing. It indicates china is having some success in curbing prices without forcing a sharp deceleration. The president has said homes are to religion, not for speculation. Toshiba is planning to raise about 5. 5 billion to avoid being delisted from the Tokyo Stock Exchange regarding its Nuclear Assets. It is selling its holdings and claims against westinghouse. Needs to channel the funds into new businesses. Analysts predict policymakers will eventually raise the benchmark rate from the current therd low of 1. 25 2 by middle of 2019. Solid growth and inflation support that view, but a survey points to a short hiking cycle. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Ramy Inocencio. This is bloomberg. Betty thank you. Later this week, we are expecting minutes and accounts from the recent meetings at the fed and ecb. The former held a line on raises but hinted the costs will rise next month. The ecb said it will be buying bonds at a lower rate but for a longer period. Joining us is pressed each economics president Prestige Economics president and kathleen hays. What will investors be watching for when it comes to the fed . The fed is going to release release the minutes of the meeting. There was no rate hike but there is a chance to look at the minutes and see just how strong a consensus was, the convention for the rate hike december 13, where the markets ernest seeing markets are seeing 100 chance the fed will move. The question is now, not just at the end of the year, where does the fed go next year . If you look quickly with me, here is the cluster for the majority seeing three hikes in 2017. Interesting now. This cluster, less concentrated, still looking for three hikes, but then late last week, i think the story got some new life into it over the weekend as people put the water context, Goldman Sachs looking for for rate hikes. Goldman sachs is one of the top dots. You think inflation will be 1. 8 . They think unemployment will be 3. 7 . We can, flattening yield curve, could the fed move that many times next year . Lets look at another chart. Inflation and unemployment, is the phillips curve broken . Why we ask this question. Unemployment is already down to 4. 1 . 2 is the target, along with way. Janet yellen, the other focus this week when it comes to the fed, she will be speaking at nyu on tuesday along with mervyn king from the bank of england. Is asked toif she address this question, and if she will stay on at the fed, because she could when her term expires as chair, she will still be a member of the board. We shall see. Will definitely be looking to her comments carefully. Jason, i want to get you in on the conversation, and Goldman Sachs in the prediction of for rate hikes. Four rate hikes. Its a plausible . Likely,ink its quite given the inflationary pressures you can see from the tightening and labor market. We are seeing a pretty good job gains month over month. The Unemployment Rate keeps inching lower and that is creating some inflationary pressure. Also, there are some yearoveryear fx, base effect that are likely to fade out to actually give us a bit more andde surprise for cpr other measures of inflation as we go into the next year. That will become more of a concern, especially if we get fiscal stimulus. If we get tax cuts and more money being thrown in into a tight labor market, you have a risk of more inflationary pressures and the said could be trying to fight a fire quickly. Yvonne what about the flattening yield curve . The flattest in 10 years. We have a chart that shows it, 1604. This is the spread between the 10 and twoyear. It can move the long end of the curve, would they be willing to zero out this yield curve . Jason they are two things about the 10to spread. While it is coming a little bit, its not what we think of the dangers on. The second thing is, if we get more inflation and we could see potential he the back end potentially the back end kick up, i think the fed will have more wiggle room with rate hikes. A third factor is what the fed watches the yield curve, they are really looking at inflationary pressures in the shortmedium term and the labor market. The labor market has been flashing a green light for rate hikes for a while. When is inflation showing up to the party . It looks like we are just about their where it begins to become about there where becomes more of an issue. Ratesy might be raising even if it flat the curve. Yvonne youre saying we havent reached Dangerous Levels yet. Where would that be . Were looking at the spread, the two and 10, at what point does it get more bearish . You look at some of the technical charts about where we are, what is happened is the spread prior to previous recessions, that is where you would be a little more concerned. I dont have the same screen in front of me that you do and the viewers have come a but thats what you would be looking for, looking to go more toward levels where you see traditionally, over the last two cycles, that there has been a bit of an issue where it has engendered slowing growth. But if we get tax cuts, that is something that could make things up in a way mixed things up in a way that wasnt necessarily true when weve had the last inversions of the yield curve. Curve has the yield not inverted yet, but it is getting flatter and flatter, and at least one of the charts we have shown shows that the flattening has occurred, it started, as you know, when the fed started hiking rates. I want to show you another chart. You are in the camp saying we would see a recession, jason did you have really jason. That has you have flipped yourself around. Core cpi generally runs higher than the feds main gauge, but the core is still so far below it. I would like to know what inflation you see creeping in . Some people think the world has changed and you look at the Global Economy in structural changes. Maybe the fed should not wait for inflation, but it looks so far like it is not happening. Aain, making four rate hikes bit of a stretch for some. Certainly bond traders would be saying that. Jason a couple of points. 2017xpectations going into were tied closely to what our clients expected and what we were seeing in Business Investment. U. S. Business investment, including residential investment, as line items of gdp, was in recession in 2016. 89 of our corporate clients in a survey of october last year expected this was the year for a recession. By june, that number had really , it has even by april slipped significantly, but we had seen just and a six months window between october and april of this year, 89 in 2016 expected a recession and by april it was only 11 . You have the complete flip on the other side. Of reason was expectations fiscal policy stimulus and a tax cuts. Those completely changed our , itook for this year completely change the outlook for all of our corporate clients for this year, and that changed very much what happened with Business Investment this year. There were recessions laster year, that was not true in 2017. Looking at 2018, our largely corporate client base is very optimistic and that is something that should provide stimulus, even from a gdp standpoint, mathematically if youre spending more money and the Government Spending portion goes up of gdp, it should be a good growth year just from a mass basis. Basis. That is what has fundamentally changed. Thats why equity markets have been so supported all year long. Its not a reflation trade, it is a reevaluation trade predicated on lower taxes. And speaking of these expected tax cuts, not only every markets but you say gold is set to rise based on tax cuts. Jason we expect that if tax cuts were to fail, you could see upside risks. Betty if they were to fail, ok. Jason yes, if they were to fail. We have seen that in the last week where there were concerns the tax cuts could be pushed next year even though we have seen things move forward in the house. If anything holds that up, you could get pop and go prices. If we get the tax cuts, we are likely to see that should contain gold prices because it would send equities in the dollar higher. I have to ask you a question about oil. So watch it so quiet closely, if you look at a lot of asian countries, it will play a big role they are whether a continues to move higher, sells off more, all of the stuff going on in saudi arabia. What is your outlook as twice 17 draws to a close twice 17 draws to a close for oil . Jason we actually had a bloomberg profits column out about this about a week ago. There are number of Different Things pushing up prices, Global Demand has improved. You look of the Global Growth expectations, the imf forecasts, they have improved. And you look at the supply side. Opec and nonopec members have been holding back production, global inventories, they have fallen. U. S. Inventories are down. They are below the five year average. Those things present fundamental upside price risk for twice 17, and then of course you have technicals that kicked in a couple of months ago that are also bullish and you have geopolitical risks. You put all that stuff together and you have a potential for prices to rise. We look relative to industrial metals, oil prices have not risen as much. Great to get you to kick off our week. Thank you to you both. Looking ahead, Congress Introduces legislation that would cap checks on overseas investors. Up next, we will talk tax and more tax, and see why one republican senator says the bill needs work. That is an understatement. This is bloomberg. Betty good morning, i am betty liu in new york. Yvonne i am yvonne man in new york. And hong kong. Not everyone is on board with the republican tax plan. Senator Susan Collins says the bill still needs a bit of work. There are provisions in both bills i like but i think the bill needs work. The biggest you cant vote for it is written. I have not reached that conclusion yet because i think there will be further changes, but the biggest mistake was putting in a provision from the Affordable Care act into the senate bill that is not an house bill and i hope that will be dropped. Yvonne lets see where it goes now. Potentially a pretty big week here when it comes to tax reform. Susan collins, how crucial of a vote is that for the gop in the senate . Know Susan Collins was one of the republican senators doomed the failure to failure of the plan to repeal and replace obamacare. She isa crucial vote and not happy the obamacare element has been added to this tax bill. She was noncommittal today the clearly has a lot of worries. She also had worries about the Corporate Tax rate and how low that is supposed to go in the senate plan as well as the highest income tax rate. She has a lot of issues. We need to remember that while passed by the Senate Finance committee, that is just 14 lawmakers, and there needs to be a 50 vote majority to pass the bill. There wasnt too much action this week because the senate is out for the thanksgiving break, but it is likely lawmakers, both house and senate, could hear from constituents when they go home this week. Yvonne that is true. As the white house listening to what Susan Collins is saying . Are they in any position at all to change right now the current framework of the senate bill . Ros absolutely. I think that was a key point may today i mick mulvaney, director of the office of management and budget. He basically said that if the inclusion of the obamacare individual mandate repeal became a Sticking Point to get the measure passed, they would not be unhappy to drop it. Keep in mind, it was not and the original senate plan, it was inserted at the last moment. Some may cynically think this was a ploy, and the treasury secretary said it wasnt, it was a bargaining chip being put in merely so they can take it out and get support. I think when the bill goes to the senate floor, you could easily see the element taken out. As we know, the house and senate have to come together at the end, and the house does not have the obamacare individual mandate repeal and their version. Betty what are lawmakers likely to hear when they go back home to their own districts over the thanks giving break . Basically going to get in your full from constituents . Ros they could in selected states. Collins is one of the lawmakers we expect to be targeted come a possibly by some Television Ads in her home state of maine. There is a lobbying group called not one penny that has come together in the past few weeks to oppose come a specifically to oppose a cut in the Corporate Tax rate. People like Susan Collins, people like house lawmakers from many districts in the northeast. Representingho are suburban districts can start to thata lot of pushback, and will certainly speak to what happens when me get to the house and Senate Negotiations and how much bills will change. Betty certainly a lot of questions for the lawmakers. In washington. You can get a roundup of that story and many more you need to get your they going in todays issue of daybreak. Bloomberg subscribers confided on their terminal, it is also available on the bloomberg app. You can customize your settings so you only get the news on the industries and assets you care about. This is bloomberg. A quick check on the latest business flash headlines. Honda is recalling 800,000 odyssey minivans in the u. S. After reports of injuries linked to faulty passenger seats. Between 2011built and this year and the recall comes to months after honda agreed to pay 484 million to settle claims tied to potentially lethal airbags. Betty nissan says it will have to build a new production plant in the u. S. As sales continue it feels continue to grow as expected. The president said it would need to be an entirely new facilitys existing plans in tennessee and mississippi are working at full capacity. Spend 4w is going to billion in the next few years on terypowered field goals vehicles and ride hailing systems. Talk about big unveilings, it was a big one on friday with elon musk, with the big unveiling of his longhaul semitruck. The video really showed the drama behind and got everybody excited. It was almost like a scene from night rider. A goes from zero to 60 in early five seconds. It had that surprise, the cute little roadster, as well. If he never fails to surprise. He is a showman. Particularly at these events, where you would think it is more than just about cars, it is really about the future, and you got people talking about, what is he going to unveil next . A flying car . Maybe that is next. Yvonne [laughter] of course he mentioned on twitter that he is going to blow our minds, and it seems like most people were quite impressed i the big showing there. Speaking about technology, china wants to build its own Silicon Valley and its economic output could be bigger than hong kong, tokyo or San Francisco in the next 10 years. This is bloomberg. On this soggy, chilly monday morning in hong kong. Just getting over the festivities that happened this weekend. We are 30 minutes away from asias first major market open. Betty quite hazy there. It is 6 30 p. M. In new york. Beautiful letup Empire State Building in purple and red in port of Lucas Research lupus research. The markets on friday down considerably, in the red. I am betty liu in new york. In hongi am yvonne mann kong. You are watching daybreak asia. Ramy in germany, talks to form a new Government Coalition led by Angela Merkel have collapsed. That is causing the euro to slump. The democrats walked away, saying there is no basis for a four party deal. Partiesanted the other to join her christian democrats. She lost her previous partner, the spd. Philip hammond has indicated the government will they can offer on the socalled brexit divorce bill before a key eu summit next month. He said there are signs london breakke concessions to the deadlock on talks. His comments are in line with comments by davis last week. China says it is cautiously optimistic a diplomatic solution can be found to stop north korea from developing nuclear weapons. To the u. K. Has said theyve done every thing they can to stop kim jongun and thinks it can be done if all parties engage. Tosident xi sent an envoy north korea just days after speaking about it to President Trump. Invested is retail. G in sun art boa alliance will help tao explore food. Will check on the trading when it starts in hong kong. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Ramy Inocencio. This is bloomberg. Thank you. Lets get the latest from what was just mentioned out of germany with chancellor Angela Merkel. Government isext a good the four Party Coalition. Lets get the latest from our reporter joining us from berlin. Tony, obviously this is not the result the chancellor wanted. What comes next . Yes, it all can about quite suddenly. There were optimistic noise earlier the day and just before midnight, the Free Democratic party, one of the smaller ones she wanted to get into the four Party Coalition walked out and said it was too much disagreement with the other small party, the greens. Where does that leave merkel . It basically forces her to pick up the pieces. We are expecting her to come out , give her first assessment in about half an hour. It is not easy. She may approach the social democrats again, who were in her left government, or germany may head toward new elections. Can she survive this . We really have not seen a repeat election before in history of germany after world war ii. Its her job on the line now . We dont expect her, since she is duly, or her party, which is really what it is, duly won the election in september. Whois not really the one pulled the plug here. We dont expect her to resign immediately or anything like that. The question is really, how much strength and power of persuasion does she have left to build a new government . And if it comes to new elections, will people blame merkel and her party for the failure of these talks . Those are real unknowns at this point. Certainly, the one thing you can say tonight is her authority has been weekend weakened. Betty were just pulling up a chart here for the session for the euro, down over half a percent, trading at a low for the session so far. The i would say, certainly you are not seeing it tank on the news, it is down. That andou read into is it a sign that euro bears need more information before they really selloff on the euro . Tony i think that is certainly the case. Clearits not really very whether the talks are really over for good or if this might be a negotiating tactic by the Free Democratic party. Also, the German Economy is going to investors. Angbusters. People dont expect merkel to fall. In any case, there is a broad Political Center in germany that would sort of keep markets on board. That at least is how i would read the first reaction. Betty the initial kneejerk reaction, so to speak. Thank you so much. Our editor in the in berlin about Angela Merkel failing to put together a coalition. Thats get more from sophie. ,ets start with the euro hitting the lows of the session. Trading coming online, we are seeing more lows for the euro, but when you take a look at the outlook, we must have more potentially on the docket for euro traders to consider. Tpi,xample, we have german we also have the ecbs policy meeting due out on thursday. We might need more impetus to really see if this will move the direction for the euro and pushing it further, as 20 mentioned, merkel will have to pick up the pieces when it comes to forming a Coalition Government. There is a read that she will still be at the heart in leading whatever government is formed, which is very much key for investors. There is going to be a lot more potentially for euro traders to consider before they send the euro any lower than we are seeing right now. Yvonne what about for the aussie . Trading at lows ahead of the minutes been released. Will this persist . Sophie there has been a series of disappointing economic data. If you look at this chart, you can see the steady decline in the aussie dollar. Investors are unwinding their long positions. The aussie could target the 74 , and cost 71. 5 u. S. Cents by next quarter. Also you can talk about how we have been getting these headlines coming out from china and how they are talking about the bond markets as well. Some of the stock moves, perhaps some jitters when it comes to the aussie. And yen, holding prestudy this morning. How is the open in tokyo going to shape up . Sophie we do have jitters spilling over from china, we have the shenzhen market fall to about 2 on friday. We could be set up for a weaker open. We could see a slide of about 1 . The yen, picking up now below 112. , we are seeing a volatility pickup for japanese stocks, as welcome as well. This after months of calm. Jpmorgan said it is hard to tell where markets will go from here, up or down, and volatility looks like it will get bigger with the neari volatility index april highs. We are set up for a tough week. Ofhave cap was in the shape centralbank policy meetings as well as other catalysts. Yvonne thank you. Now, move on to china which has San Francisco in its sights, with an ambitious plan to turn the parole river delta into the worlds biggest tech hub. We spoke with executives and entrepreneurs. This sounds like a hugely ambitious idea. What has been the response, tom . Big and than San Francisco, bigger the new york, bigger than tokyo. The response from the executives we have been speaking to over a companies herest as well as innovators, has been a broadly positive and optimistic. Theyre very enthusiastic the region is being elevated in terms of being a national priority. Ae spoke to the ceo of mede group, a big white goods maker. He says it builds on the manufacturing strengths already here, ultra numeral spirit entrepreneur world spirit. Take a listen to what he had to say. Doubt, the greater bay area plan is a great magnificence. It is very much consistent with the orientation of current industrial development. This region has stood on a solid foundation, be it the manufacturing structure and skill, the intensity of capital or its appeal to talent, not to mention its consummately economy with hong kong and macau. We have seen enormous opportunity in this wave. We interviewed executives, went into the factories, saw the automation going on here. Morgan stanley put out a Research Report on the greater bay area here, they say it is evidence of chinas shift from super cities to hubs. Part of that will be building the infrastructure. They are planning to quadruple the highspeed rail network here between now and 2030, and then bridgee the cross bay from hong kong that is expected to open at the end of this year and cut journey times from about three hours to 30 minutes. So yes, there is enthusiasm and questions about how the plan will be implemented and how quickly. Betty who is likely to benefit from all of this . Again, citing morgan stanley, they say property prices are expected to double, and Property Owners will benefit. Population is expected to grow to about 86 million from 66 million. Then you have the Companies Looking to move internationally, expand their footprint overseas, and one of those is an auto corporation. They have a joint venture with fiat chrysler. The hoping to sell cars in the u. S. By 2019. They hope this plan will attract more capital but also talents. Some of the top engineers and innovators. Take a listen to what the president had to say. This is a golden opportunity under this National Strategy and government support, more and more capital, talent and advanced technologies will converge in this region, which is key for us to integrate all kinds of resources from across the globe to further improve our products, brand and competitive edge. So optimism about the opportunities to attract foreign investment, of course, but also talent. It is an increasingly competitive sector, you need the best talent to innovate and drive companys board. Time this is coming at a when the chinese authorities are trying to pull down the Property Market in various cities, and this will take a lot of collaboration among local governments. Absolutely spot on. The property tightening and property curbs is the one key risk highlighted by some analysts. There is concern among some about how redhot the Property Market still is here despite the curbs put in place. The different cities are super competitive with each other. We spoke to a local official here, he visibly bristled when we mentioned we liked going to another city. Eating the governments to coordinate will be a key challenge going for it. We will get more from the executives this week, not just about the area but international and expansion plans as well. Yvonne thank you. We will talk more about chinas greater bay area as tom mentioned there are implications on the nations economy later. We will be joined by an economist at 8 40 hong kong time. We will also be going to Property Data we got of the weekend. Also coming up, japan releases its latest trade numbers in a moment. We will have immediate reaction. This is bloomberg. , this is daybreak asia welcome. There are still faint hopes of persuading the u. S. Back to the tpp. President trump dropped it in favor of bilateral trade deals. The japanese economy minister spoke exclusively to bloomberg. Frankly, the possibility of having u. S. Back on tpp soon is quite low, but japan would like to make a persistent effort to persuade the u. S. To return. I believe the fact that 20 items are put on hold will encourage the u. S. To come back to the table. Can you tell us when you expect the tpp to be signed . There are elections a different political events of the member countries next year, so we hope to sum it up before this offense. There are remaining issues to be solved in japan will take the leadership to get this signed as soon as possible. Canada asked for cultural exceptions. Exemptions. It was abrupt how canada brought up exemptions for cultural goods and services. We expect them to get more clarity on what is really involved in this and make more effort to come into other member nations to accept it. Japanesehat was the economy minister, speaking exclusively with bloomberg. Joining us to talk about that is Japan Equities strategist live from tokyo. Good to see you. Does the tpp need the u. S. To stay relevant . I dont think they needed to stay relevant it would be a whole lot better if the u. S. Were part of it. Quite they seem to be ambitious, they want to get things done by mid2018. When it comes to cultural exceptions, there is still some friction. Are you optimistic we will get something by early next year question mark next year . Theseits hard to know things, but japan is extremely keen to get trade deals done. Japan has very low import tariffs, lower than the u. S. , lower than europe. It can tie up trade treaties with anybody and come out ahead. It would be a pity for it not to tie up deals as fast as it can. Interesting too, after President Trump left japan and the finance minister was saying the country has no intention of signing any bilateral trade agreements with the u. S. , and would possibly work to eliminate or at least bring down of the u. S. Trade aticit through modest steps best. To think President Trump and his trip to asia changed the rules when it comes to change to trade . Nick japan is very key to stay good very keen to stay on terms with the u. S. When it comes to trade. Unfortunate, japan doesnt want to buy u. S. Guards. Theyve gotten around the tariff rates by providing an markets. Trade surplus down by building more and more in the u. S. But certainly it is more efficient to produce in, say, mexico. Hang on one second, we are getting breaking news on a japans trade balance. ¥285 billion is where the surpluses coming in. That is a little bit below what the surpluses were expected by economists, ¥330 billion, but it represents a smaller surplus from the month prior at 600 62 ¥7 billion. Exports coming in, 13 , below what economists expected at 15. 7 . Pretty much even. The surplus here affected by imports coming in at 18. 9 increase, that was expected to rise 20 , with what weve seen oil price increases in and commodities, but the imports coming in a little bit lower than what was expected, which is why you see the surplus coming in and ¥285 billion. Next,low along on that, we see the nick surplus smaller than last month. We have seen the turnaround here in the trade balance in japan for a while it was sitting at a deficit several months ago, several quarters ago. How do you expect this will impact investment, particularly trip to japan, investment in the u. S. And the economy . Japans exports are just one part of the puzzle here. The important thing for japan and most countries is the global trade continues to grow. ,t has been bouncing around october last year it was flat your own year. Now it is bouncing around at 5 , 6 year on year. It could be 7 . That is pretty healthy. The auto company, for example, produce the vast majority of production overseas. Onould not get too hung up just one month of japans exports. Betty right. Its always hard to get hung up on one months data. In the meantime, speaking about a month, weve seen monthly gains in the nikkei to 25, lots of people wondering, are we in japanese stocks. What you say . Miss out, if iot were you. Japanese stocks are strictly cheap, they have some of the best growth rates anywhere and the early forecasts have some of the best upgrade rates anywhere. We are at 49 times earnings. You have to member, the bond japan, 3. 2 zero in in the u. S. Versus over 6 in the u. S. At heck of a difference between the two. The important thing is you buy japan, global trade is doing very nicely. I would not miss out on that, if i were you. Thought foreigners would come back to the buy side. Yvonne even with the rebound, it seems like what was on friday, is it time to perhaps adopt more barbell strategy even that volatility is coming back into the market and perhaps get a little more defensive . Nick i dont to the point of going defensive when foreigners market thatght in a is on fire at the moment. Pmi you would be nuts to be going to defensive. Yvonne all right. Thank you. Cl is a japan equity strategist. You can follow all of todays trading on our blog, it is on the bloomberg. You can get a rundown at one click, theres commentary and analysis from our expert editors. This is bloomberg. We are counting down to the opening in japan and south korea, and japanese trade members just coming in for the month of october, ¥285 billion exports not rising as fast as imports. Imports at 18. 9 percent. Below estimates, but faster than exports, rising at 14 . Sale of electronics, autos. However, the imports of oil and other commodities blunting the impact of the surplus. Yvonne that set us up for a lower open. We could see a drop of about 100 points from the nikkei 225, this is after we saw the topics seeing its worst weekly decline since april. Also sing the strength continuing on when it comes to the yen, 112. 05. We are seeing there is no need to be defensive, but some analysts are saying it could go either way. This is bloomberg. We are live from bloombergs asia headquarters. Daybreak asia. Extending last weeks losses, bringing a stellar run to a close. Chancellor merkel must think ldp walks away. It is just after 7 00 p. M. In new york. Japans recovery on track, straightrew for four months, best performance since the financial crisis. Aims to avoid delisting in tokyo by selling shares and Nuclear Assets in the u. S. Resiliencenue to see in trade numbers in japan and we are still seeing double digits but still slightly off some of the estimates, but the big question is what will happen next. Will that be a good impetus for the japanese market now that we see volatility picking up once again. This chart shows the implied volatility in the nikkei 225 flirting around the high we saw back in april. The big question is is this a natural reaction to equities, that selloff in the last couple of days that have gone too far, too fast, or can you call this the start of some kind of correction . That is the predominant question for japanese markets as we continue to hit those record highs. Right . Iss this train, you have got to be writing this along. No into at least for now to the record run in japanese stocks. The next catalyst will be earnings as well from japan, still looking cheap compared to the u. S. Lets get to the market open with sophie kamaruddin. Were looking at the yen, the euro, and these Coalition Talks have failed in berlin. Here is the lowdown. You want to keep an eye on the lows,often session slipping, following the collapse of germanys Coalition Talks. Foro have the outlook german ppi data and Mario Draghis hearing at the European Parliament which could be impetus for you euro traders this week. Going back to the japanese session, the nikkei two to five down 6 10 of a percent, set to snap a two day rise, keep in mind that last week was the first weekly loss for japanese stocks in 10 weeks. Said yousmith also want to get on this trade and said he cant get too hung up on one month of data p or do we did see japanese exports and imports rise less than forecast for october. It has been a rocky stretch for japanese stocks, but taking a look at some of the forecast we have Goldman Sachs for example penciling in 22,000 in three months, 23,000 in six months, and 25,000 in 12 months. Decline followed by a pickup for japanese stocks and keep an eye on the currencies base with the aussie continuing to hold at fivemonth lows down. 2 with the rba and thethis tuesday, u. S. Dollar edging higher after its worst week in two months. A last look at oil, taking a look at this, Brent Holding gains above 62 on saudi arabias cut extension appeared quite a bit to watch out for this morning. Thank you so much with an early look at the movers and more headlines out from germany. Germanys chancellor Angela Merkel speaking to reporters in berlin, saying after the talks with the four parties collapsed, saying there is no stone left unturned to form a four Party Causation and said she regrets coalition and says she regrets no common solution possible for parties. This is the beginning. There will be more discussion. Again Angela Merkel saying no stone left unturned. Will turn germany into uncharted territory we will continue to monitor. Near lows of the session as investors continue to digest what this exactly means for the future of Angela Merkel p lets get to first word news with more and Ramy Inocencio. Zimbabwe remains in a state of confusion after the president ended a televised National Address without resigning. Robert mugabe had been expected to quit after meeting the leaders who seized powers last week. Sources said he would go after the ruling party dismissed them, but Robert Mugabe and his wife were fired from the party on saturday, four days after the military put them under house arrest. The white house said it would not oppose removing a provision in the current tax plan that calls for the repeal of the individual Health Care Mandate in the Affordable Care act if it would help be bill pass. The budget directors said it would be dropped if he could secure the support of key republicans. Sunday talk shows were blankets to support the plan on capitol hill. Chinas Property Market showing stabilizing after house prices snapped. New home prices rose. That indicates china is having some success in curbing prices without forcing a sharp deceleration. D all ent xi jinping said hope our the lived in. Withe alliance will help new opportunities in food and plans to retain the listing and we will check the stock when trading starts in hong kong. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you. Want to recap some lines from chile on that election outcome. The billionaire took a small the than expected lead in the first round of voting coming in at with 80s 7 vote or so of ballots counted so far. It looks like because he was unable to obtain that 50 of the vote that he is now heading to the second round, which is something that he was trying to of more aid, so that runoff could be said december 17. We will continue to watch that and we are watching shares in japan of toshiba now falling as we had seen at the open in now, the Company Planning to raise 5. 5 billion and six for the sale of Nuclear Related assets to avoid being delisted from the Tokyo Stock Exchange. We want to bring in our asian tech reporter in. Pressure is toshiba facing over this delisting on the exchange . Ever since they announced massive losses at the westinghouse new can in the United States in early last year bankruptlly went and in march, basically they needed to wipe out negative financial equity by march of next year, the end of their fiscal year, and that was part of the reason why they went through this whole fire sale of their chip unit, but they also needed Additional Capital and the ¥600 billion in new capital will go a long way to close that ¥700 billion gap. , speaking about the , has anybodyunit expressed interest . At this point, we only know toshiba is exploring options and i can add more to that. What about the demand for toshiba shares . A we likely to see people interested . I think it is a done deal. If they will not be a public offering. We have several dozen funds, mostly overseas funds buying the shares, among them prominent is Capital Funds that have made large longterm investments in toshiba. They are in on the deal as well. Talking about the chip sale progress, what developments have been made and what will it do for toshiba . That is one big outstanding question. A group has committed ¥2 trillion to buy the chip unit, but the deal has yet to close, and the reason is because toshibas manufacturing partner Western Digital is fighting it in court and the arbitration proceedings are happening as we speak. Western digital expects to block the deal as early as december this year, but at the same time toshiba says they did not have a case. Ofind the scenes a lot pressure has been put on Western Digital to drop the lawsuit in exchange for participation in the next round of investments in nonflash memory, with Western Digital absolutely needs to survive. The question is who will get them first. Through yet. Not thank you. Attack reporter joining us live from tokyo. Snapped ame prices threemonth drop, but the cycle expected to trend down. We will discuss that later on. We speak to ubs Wealth Management about where they seek stocks rising in asia. This is bloomberg. Enjoyed merkel speaking in the last couple of minutes after this four Party Coalition talks collapsed in the final hours of her hours of negotiations and they did not form this government and chancellor merkel speaking here saying there is no common solution possible, but she would do everything to get germany through these difficult weeks. Pants right. Really putting germany on track for uncharted territory and possibly another political and economic crisis for germany. Trading do see the lower, but it is stabilizing at this point, it was down 0. 6 on the back of this news. I want to bring in someone watching the asian markets, but the Global Markets at large, the head of equity and credit for the asiapacific at ubs Wealth Management, the cio office. Thank you for joining us before we turn to asia i want to get her brief reaction to these headlines coming out from germany and how concerned you are that that might have a spillover effect if this crisis escalates and we see Angela Merkel in her position in danger further, whether that will have a spillover affect in asia. Yeah. I think the markets are likely to take it in stride. The reason why i am saying that is because unlike some of the other previous elections this year in europe, you dont really have populist parties where you can say ok, if there are new of elections, there is a high chance one of the populist parties comes to power or has a big role to play, that is very unlikely in germany, therefore both for europe and the stock markets there will be a bit of a negative reaction and disappointment, but given that it is not an outside massive risk scenario, i doubt we will see pressure. Have seen those populist movements take hold in france and italy. Why do think that might not be the case in germany . Fraction is too small. You could say may be one party that means a little bit in that direction, although it is not clear they would eggs it from the euro necessarily, so markets thequite well aware that fraction that promotes populist policy is quite minimal in germany and as long as that is the case, eventually there will be a new government even if there are reelections, and it is very unlikely to be populist. That is why i think it will be a limited down reaction. Down reaction. D back in asia, there is already a risk off feeling throughout the asian markets, maybe not as much in japan, but certainly there seems to be concerns about foreign outflows of money from equity markets. 6647, which shows you a bearish signal is emerging , asian shares at a whole represented by the msci index, failing to break their record, failing to break the record for the second time here since basically before the financial crisis. Do you take that as a signal that if they cannot hit their record, you are seeing outflows that may be there is a risk off attitude in asia that will permeate going into 2018 . I think it is more akin the two some profit taking. Would not read it as a bearish signal. We had a very strong pull up in asian markets, especially china, so it would not be unusual to see some profit taking. We expect 11 Earnings Growth , andsia combined next year just as important if not more , unlike this year with a very bipolar Earnings Development or Earnings Growth in asia, tech and materials, we think Earnings Growth is going. O broaden out next year what that means is a typical scenario where you have some sectoral rotation rotation and regional rotation next year, but i dont think it will be symptomatic of a pullback at the same time. Frenzyave seen this ipo of Chinese Tech Companies in hong kong, which we have not seen since 2009. Do you think tech itself is getting too crowded then . Is that why we could see some rotation here . , especially the ipos you mentioned, they are oversubscribed for sure, but it does not seem like previous waves in the u. S. Where we have several quarters if not years of people buying these previous ipos on leverage and you have that bubble forming slowly, and also the scale of it. , i could argue whether it is overheated in some places, but i dont think it looks as to to me. Looks systemic to me. We have seen a 30 trying to manage expectations when it comes to the slowing economy. We have seen that with the bond market as well and friday it was one spock in particular, which is pretty rare for Chinese State media to be talking about stock moves in general. What do you think is that the rationale behind these moves . s china easing off the gas pedal after the Party Congress . Know. Ont from all that we can say or we rules, also the new amp everything come also the super regulator come all these things point to a gradual, but nonetheless, derisking of the system, even call it a bit of tightening. It is the right time to do it because the last couple of quarters in terms of growth have seen a positive surprise some now is the time to do this and i think they continue this of tightening the regulations and derisking the system, and yes, that in effort of will he has an effect on growth. We have seen 6. 4 next year, may be slower than this year, but nonetheless for our case, and in any formula for valuations, there is also a risk component, when that strengthens, it becomes more sustainable even if growth this lower, so overall it is not something that worries me particularly. You just got back from india ubs change your outlook for equities there. This is one of the most expensive stock markets in asia right now. It is just too good to be true. Andes, i see two things think many investors would agree that the government is doing all the right things. Unpopulardone some reforms and now they are consolidating reforms. That was the message we got when we visited authorities come a dont expect any big thing , additional measures, consolidating, making sure they hold and get more growth before the election in 2019, but i would agree that my issue is even if you account for the temporary drawback and demonetization, lets say you normalize everything, even if you normal allies everything and get low doubledigit Earnings Growth, the market in my view has pulled far away from that. It is a big cap that has opened that i think needs to close first. The way i expected to close is that the market trade sideways for a while and lets the earnings grow into better valuations and then we can take another look and i think technically it is not interesting right now. Want to switch over to the u. S. And get your scenario on interest rates. I know you see a gradual rise in interest rates. We heard Goldman Sachs note that they see for rate hikes in 2018. What is your base case, and would you say if there are any biases, yous might see an upside on rates in the u. S. . Ahead anda little bit have one for december come although i think that is consensus by now. , so we two for next year are behind the fed, but ahead of consensus. It is certainly a space that we are watching. If i look at the history of recessions and the history of when bull markets and typically are the most common phenomenon is not buy you wish ands or the length of the cycle, it has typically been when the fed was forced because inflation went up fast and the fed was forced to hike a couple of times. That is the scenario in which stock markets would also get more affected. Notre not expecting and seeing it come a but i must admit that it is one of the risk factors that we are watching the most at this point. Thank you so much. The head of equity and credit for asiapacific at ubs Wealth Management. You can get a roundup of that story and many more to get your day going in todays edition of daybreak. Bloomberg subscribers can go to dayb on their terminal. You can customize your settings so you only get the news on industries and assets you care about. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. This is daybreak asia. I am betty liu in new york. Plenty of big stories this ofk on daybreak asia course. Opec meets thursday in vienna to discuss the oil market before the cartel ministers gather next week. That will be a big meeting. The discussion will focus on demand, particularly the Northern Hemisphere winter. Taking a look at the oil price and what we have seen since the last opec meeting, we have seen jabs between what the russians want. They are not convinced to extend output curbs next year, but a lot of people in the markets they dont be full by this backandforth right now from opec and its friends over whether to extend those curbs. Know that failing to send a clear signal would send oil prices plummet, which is what we saw in may. A lot hanging on these next couple of weeks. A lot. Mentioned, and of course what happens in saudi arabia is so key to these oil prices. In the meantime, a lot of political crises in africa, particularly south africa. Onings agencies updating theay, s p and fitch cut foreigncurrency debt to junk theowing the removal of finance minister. South africa loses its Investment Grade assessment for randdenominated debt and could see massive outflows of capital. You are already seeing investment jitters in south africa. Take a look at bond yields. Bonds maturing come in yields have risen to the highest level in a year and a half in zuma canion of whether deliver on the promises he has made without plunging the economy further into chaos. Also looking to its neighbors, in particular in some bob way, and how that might affect what is happening at home, so a lot to deal with in africa and investors in africa. Much more ahead. Signs london may make concessions to break the brexit deadlock. That is next. This is bloomberg. Yvonne 8 30 in singapore, half an hour away from the open of trading in the lion city. I am yvonne man in hong kong. Betty i am betty liu in new york, you are watching daybreak asia. A shortened holiday week in the u. S. , but lets get to first word news. It ischina said cautiously optimistic a diplomatic solution can be found to stop north korea from developing nuclear weapons. The ambassador said they have done everything they can to persuade kim jongun to halt the program, and they believe an answer can be found if all parties engage. He sent an on bag presidency sent an envoy last week after meeting with donald trump. Hopes japan hopes to persuade the u. S. Back to the transpacific partnership. Donald trump took off in favor of bilateral trade deals. This would cover 12 nations that account for 40 of the Global Economy. 11 countries are pushing ahead, and the japanese economy minister said there is a chance the u. S. Can return. Frankly the possibility of having the u. S. Back on tpp soon is quite slim, but japan would like to make a persistent effort to persuade the u. S. To return. I think the fact 20 items that are still on hold will encourage the u. S. To come back to the good negotiation table. Ramy japans recovery remains on track with exports growing by dental double digits for a fourth straight month, the best performance since 2008. Imports and exports rose from eight year earlier, leaving a trade surplus of 2. 6 billion. Improving Global Demand has fueled exports, but new Electronic Devices creating orders for parts and machinery. Singapores Prime Minister said growth could top 3 this year, and addressing his party convention, he said singapore is benefiting something improving World Economy is benefiting from the World Economy improving. They will look at social structures to keep rising, raising taxes not a matter of whether but when. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Ramy Inocencio. This is bloomberg. Yvonne time to see how the asian markets are shaping up this morning. Seeing some fatigue. We are mixed with equities, flat on the regional and smart, but a lot of stimulus with the currencies. Sophie the euro is losing ground against g10 peers. This is what this chart is depicting, falling to a twomonth low on the back of the german collusion top collapsing, but excited we are seeing leveraging, this initial loss being paired. Ground againstng of the dollar. We are not seeing clear directions for the dollar were the yen. We have the or the yen. Tokyo. Eye on we have japan exports growing by double digits in october, continuing the best year to date showing since 2008. Improvement for smartphones helping japanese parts and machinery makers, and the more this appetite continues to support japanese exports. We are seeing euro, electric more. Wa electric and this is the second best investor on the nikkei so far this year. I want to highlight these two under pressure after they cut their annual forecast on friday. And looking at the board, checking on toshiba. It fell as much as 4. 1 financing plans to raise capital , and it did get upgraded to a buy. It has got a little bit of a way to go before it hits new levels. Betty it does have a ways to go. Kamaruddin with the early movers. Affecting the Market Sentiment today is another blow to german chancellor Angela Merkel. The talk supporting her new government collapsed. During this leader into doubt and pushing germany towards new elections. Kathleen hays here with more on the fallout. Kathleen it is interesting because Angela Merkel not only one of the most powerful leaders in europe if not the world, certainly the most powerful woman many would say. Here she is suddenly, how her fortunes are starting to slide. Form apt to fall four Party Coalition is falling apart after 12 hours of talks. The promarket Free Democratic party said we cannot do it. We cannot sit down and agree with the environmentalists, the green party. And merkel was making the alliance key to her and her christian democratic block for the coalition. But disagreements on immigration, climate, energy, is what doomed these talks to failure. She has been in power for 12 years. What is happening . She is the anchor for europe in times of crisis. What are her options . She can set up a minority government, but how much will that diminish her power and her partys influence as they move ahead . She can ask the president to call a national election, but that would seem to be undermining her power and raising more questions about her future. The bottom line, the Bloomberg News team suggesting germany is looking hamstrung on the global stage at a time when leadership from germany on relationships with russia and turkey, brexit, are so many things important. Not something that merkel thought the beginning of this year was how the year was coming to a close. Yvonne does this kind of set back, affect the brexit negotiations . What are we expecting . Kathleen it does not seem to biggesthave europes economy, most powerful economy, fourth largest in the world, having leadership questions taking over. What happened over the weekend in an interview with bbc, philip hammond, the chancellor of exchequer, said a the u. K. Is going to be ready to put forth a proposal to settle this whole question of how much the u. K. Leave pay to brexit, to the european union. How many thousands of dollars will he have to pay to settle all kinds of issues that have been at play. Donald tusk home of the European Council president , said theresa may sent theresa may a letter and said you have to get this figured out by early december. This question of brexit, soft or hard, another big Sticking Point here. Iso this week, hammond presenting his budget to parliament. That is not a Sticking Point so much, but he has to factor in the impact on the u. K. Economy, something mark k of the bank of england has been watching closely. Yvonne, it interesting, you think you are moving one way, and you are not. Angela happening with merkel will reverberate through europe, and is something that is one more question hanging over these very important brexit talks which are already tough to move ahead. Yvonne thank you, the Global Policy editor. And we talked about the regressive stalemate with a member of the bundesbank executive board. We asked him what he thinks. Phase one ofll in brexit negotiations, and is not at all clear whether or not as originally envisioned we will go two in december. We will have to wait for that. It is my impression that they will go slowly, and it will take some time until we have clarity. When we have other banks to write take precautionary measures not knowing the outcome, deciding under uncertainty and preparing for a hard brexit, does not mean we will have a hard brexit, but it is a scenario you have to be prepared for. Reporter can i get your thoughts on what is being considered at the moment in a number of american institutions, which is the branch back option, which is effectively the exact opposite of what we have got now . With that the too far from your point of view would that be too far from your point of view . It is not exactly my point of view, but i dont comment on individual banks. We would have to look at the concrete proposal. We are with some banks very concrete about what their model will be and their implications, and that is the place to discuss it. We have to make sure it function be transferred to the continent in europe, regardless of dublin or frankfurt, it is not clear we. Ill send letter offers we will have a real Bank Business here. We have management and compliance functioning, risk function, ip function. We have to have a bank. The bank has to operate outside of that, and there will be no deviation from that. Everybody can open a litter box in germany, but if you want a light switch, that is what these applying banks want. They have to apply with rules. Betty that was a member of the executive board of the Deutsche Bundesbank speaking to bloomberg. We will run through the data coming out of china with our chief china economist to discuss where the good news lies for the economy. This is bloomberg. Asia. this is daybreak i am yvonne man. Betty i am betty liu. We got the bettis the latest reading on china home prices. It snapped a three month fall from october versus the previous month. This partysight into data, Ramy Inocencio with a chart you need to know. Ramy thank you. Beijing has been trying to avoid this hard landing in the property sector for the economy as a whole. They do seem to be cheating that for now. The first chart, chart 786. Looking at chinese home prices and how many actually rose or fell. For the month of october, it is not here yet, but that did rise to 50 out of 70. In september that was 44. You can see the downturn over the past four months, and looking over the past few years, this is at its it was at the lowest in september, but there is an uptick to 50 out of the past 70. In terms of other numbers, 14 cities softball in home prices, six unchanged. Whether ller was a rise or fall, new prices rose about 5. 5 . This is in contrast to the rise of the month before. This rise is not even across all cities. G btv 498, looking at the colorblind here, the first tier cities are in white. You can see this is the steepest fall in terms of home prices. The shallowest is the perch line, and you would guess that , and youtier cities would be right. The policy beijing is pushing forth, they are trying to squeeze firsttier cities and push money into first and second second and third. We are seeing mixed results for first year. Beijing saw a contraction. Shanghai 0. 3 , but for second and third, they saw rises month on month. Chengdu, there is talk of whether it is first or second, but we will call it second. 1. 7 . Seeing the money get out of the first year cities where the steepest line, the first year, shallow, third tier. Looking at another data indicator, this is from last monday. Even though we are seeing home prices rise, we saw home sales actually fell, falling the most in three years. 8087, this is the latest number we are seeing here. It is interesting we are seeing 3. 5 in terms, 8. 5 for volume. As betty was saying, this comes amid falling yuan loans, social financing. We are seeing the start to drag on chinas gdp because this does make 6. 5 of the countries economy. The countrys economy. We will have to wait and see the impact, but maybe our next guest any talk about that. Yvonne joining us is the china economist. She thinks prices will soften. Good to see you. So seeing these property curves starting to bite into the Property Market, we see the pickup in prices. What do you make of it . Julie what is happening this time around in the property cycle is housing prices we have seen quality stock in tier with the factand that you see earlier on the chart the big divergence beijing is trying to encourage tier one cities and the rest of the economy. As far as economically meaningful, meaningful in terms of growth, members are concerned. Housing stock is starting to slow. So if you look at the chain reaction, it probably means Housing Investment will start to slow by three Percentage Points over the next 12 months or so. Yvonne the imf also sliding some risk, saying it is spreading from bigger cities to smaller ones where quite frankly they do not have a robust wage, the population is slowing, they are quite subdued. Is this the recipe of disaster . Julia i think that tier three and tier four cities in terms of organization, in terms of home, they are still better compared with tier one and tier two, but what is important is the government recognizes the longerterm mechanism necessary for the market. We can see these discussions reemerging after the government has attempted to deal with this Housing Market cycle the past 12 months. Pushing for broader rental market in tier one cities, even property taxes, very much on the agenda of the next few years. Yvonne what do you make of this divergence . We were talking to a pboc advisor as they there is divergence with credit data with money supply, aggregate spending. He thinks it is a signal that deleveraging efforts are working right now. Is it obvious . Limited think we see success with financial deleveraging in the banks pulling back from financial investment. We arek at liability and over a trillion or so, so these are down with Risk Appetite being scaled back. Proposal by a several ministries to fund or regulate Wealth Management businesses. I think that the regular trade is also one of tightening, but everybody recognizes that the biggest debt when it comes to chinese economy is in the corporate sector and the state owned enterprises. That remains the biggest challenge to policymakers over the next couple of years. You about,nt to ask related to this, the pboc injecting cash, because they are worried about the debt and the corporate sector. You think that has any fundamental change to the Monetary Policy of the pboc . Julia i think if you look at Monetary Policy, we have china Monetary Policy indicator, there is tightening since the beginning of the year. Either at this point, there is not much, too many policies assigned that part is that policymakers think it is too high. If you look at the pboc Third Quarter margin, which came out over the weekend, they say it is neutral to tight that will continue for the foreseeable future. We will continue to see a relatively tight liquidity allen in the bank market which will hopefully transform into the next language of deleveraging. Of,y is there any policy any marker where we might see the pboc change the neutral to tighter stance, possibly go to easing . Julia i think that given we have these tight dimensional going on at the moment, we have tightening Monetary Policy and regulatory policy, Environmental Protection being enforced more strongly on the ground, we also have fiscal policy tightening, there is this risk which some investors are talking about, which is policy and tightening goes into overdrive in the economy and drive the economy down with it. We have tightening. We think the economy might pull through because they have been fairly strong with inflation, the minute factoring sector. We think this will strengthen further next year. In our best case, the economy will be able to take that, but it is a risk some investors are talking about. Yvonne the bond market see it as turbulence. Do you think it will go higher . Scarlet as far as monetary julia as far as Monetary Policy stance, there is no sign they think it is too high. There is no one trying to change. Was the target what do you make of that move . Julia it is a balancing move. As far as markets are concerned, Monetary Policy is one sector. There is also the factor of regulation, expectations for front,ion, and on that things may change, there will be opportunities for investors, but fundamentally i dont think there is as much policy to reason to ease at this point. Yvonne we certainly have seen that recently. That hsbc china economist joining us in hong kong. You can check out tv for previous interviews. If you miss this one even. You can watch us live and join in with security functions we talk about. Become part of the conversation. You can send us instant messages. This is for bloomberg subscribers only. This is bloomberg. Yvonne this is daybreak asia. I am yvonne man. Betty i have betty liu. Jack ma pushing into the brick and Mortar Retail space. Alibaba is acquiring it controlling stake in chinas. Ongest largest paper market this broke a few hours ago. Our chief north asia correspondent following these developments. What do we know . Stephen this is jack ma pushing into new retail. He has unveiled his supermarkets and cashless Convenience Store model. This is something amazon is trying to do with its whole foods purchase, but jack ma has a leg up because he has purchased a number of other retailers in china. The brick and mortar, going in the opposite direction of the early going of the internet, where the brick and mortars went online. No Companies Going back to brick and mortar. Originally they had bought stakes in sunni commerce. Now the latest one is the largest hypermarket operator in china. Retail. Sunr oceana is joining with retail of france and another group, taiwanesebased, by a combined 77 stake in sunar retail group. Retail group. This is a good injection for this company. It is Hong Kong Listed and will resume trading later today, 2. 9 billion is the price tag we are reading for this 77 stake. Yvonne they are making much bigger waves when it comes to retail than amazon. What do they see . To kind of embolden this strategy they have . Stephen they see the 400 hypermarkets in china, the largest operator of the rt brand and the french brand. They see giving that last mile distribution if you will to shoppers. North asia chief correspondent. That is almost it for daybreak asia. Time for a look at the next few hours on Bloomberg Markets. Rishaad we have equity markets. People dive straight back in, but they could invest. We would get a look at this with our reporter from j. P. Morgan. And property prices in china, another way to look at it. Research andead of real yield, where is the juice . Looking forward to that. That is it from daybreak asia. Market coverage continues. Standby for bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Rishaad 9 00 a. M. In hong kong and singapore. 8 00 sunday night in new york city. I am rishaad salamat. Sydney. Am haidi lun in this is Bloomberg Markets asia. Rishaad signs of strain, asiapacific pairing declines. The regional benchmark flat. Slumping asuro Coalition Talks collapse in germany