Worlds biggest processing station in saudi arabia which will be affecting a crude oil supply. President trump announcing a few moments ago he will allow release from the strategic result Petroleum Reserve to stabilize oil prices. Shery look at brent crude prices, surging above 70 a barrel. We are seeing a surge of 19 at the moment. We have seen brent and wti being pressured in the last week as we continue to see this demand going up, really clear given the ongoing trade war, print has fallen rent had fallen last week really clear given the ongoing trade war. Fallen last week. It is up 19 at the moment. Look at brent prices. We have seen huge moves when it came to prices of oil, given the ongoing tensions when it comes to the u. S. China and macro narratives as well, not to mention these are International Energy agencys warning of it agencies warning of a surplus of crude. Down 16 . Crude prices are up 12 . 61 aice of wti above barrel, around the 62 a barrel. When it comes to wti, we could is weing holding of trade see this 7 rally, Circuit Breaker kicking in. Atht now we see wti prices 62 a barrel. Big moves. Lets bring in our middle eastern executive director. How serious of a blow is this to oil supplies . Do we know the extent to that processing facility . Reporter the damage is significant because we know almost half of the output has been taken out of the market. There is an expectation half of that have will be returned by the end of tomorrow. This has not been confirmed, but there is a lack of clarity from the saudis. They are still assessing the damage and there is a lack of clarity whether they will be back tobring the output where it was before these attacks and that it might take a few weeks for that damage to be repaired. Paul the picture obviously still shifting. A few weeks, could it be longer . Reporter it is hard to say. The saudis arent announcing. They are assessing at this time. This is the big this is the biggest attack on a saudi oil facility, not the first time. Recently there was one, but it had hardly any impact on oil market production. As you have mentioned, oil markets are reacting because there is a view geopolitical risk is back in the it has to be taking it into account. Thank you so much, the middle eastern editor. Lets look at oil supply with our Senior Market analyst great to have you with us. We are seeing wti up 13 , brent barrel4 , above 69 a level. How much is this supply, and can the markets meet demand . They can because of this lackluster picture. Saudi has enough to meet reserves let reserves next week area that was enough to build out these resorts, and that is what they are tapping in to. It is this demand assessment that is critical. Is it a 48 hour outage or a fourweek outage . That is what will drive. Shery opec plus is trying to drain the global stockpiles. It will help in that aspect. Ashley yes, it will. Problematically the oil that has been affected is arab light and air of extralight. With the opec has been taking off line is medium and heavy grades. You have refiners i can only run like roads and that can only run light crude and now have no other place. There is not a quick way to put these supplies back into the market and it will cause a pain point and drive the brent, wti spread for the next few days whiter. Wider. L do you see these look wide reserves whiten of enough to bridge the gap . Ashley we can, it is not suddenly that we are out if we dont have enough gasoline. It will cause pain in prices and it will hurt refiners bottom line. It will have difficulties in asia which is saudi arabias prime market over the last year and a half. Paul we have seen huge moves in the price of both wti and brent since the market opened. Do you think the moves are overreaction . At one point. 9 ashley given the lack of information on the damage and a lot of questions on what is the geopolitical response, how will saudi respond and the united there is dont know such a thing as overreaction in the immediate term. I dont think the spike is sustainable if it turns out the damage can be brought back. If we get half back online we should see moderation in activity. Shery we see the japanese yen 107ng back, trading at level, given the fact President Trump has authorized a release of oil reserves. I want to talk about saudi becausend saudi aramco we were expecting the huge ipo to happen. Does this affect that . Ashley i have to imagine it affects the risk premium when they price these shares. They were having to take into account alternative fuels, the likelihood of oil longterm and chemicals and now they are being reminded all of this value is located in a region known for instability. How does this change the conversation around the opec plus meeting . Ashley it certainly does. If we see an extended outage to drop stock levels, it makes the opec less meeting easier, but we will see concerns about demand. We have had lackluster demand all year. 2020 was supposed to continue being difficult for balancing. Extended high prices will hit the demand side of things set prices up for more pain when the supply is back online. Shery we see geopolitical risk being factored in to the oil markets, because so far we have seen focus on trade tensions, the slowing global economy. Ashley we are certainly going to see it priced in. Assessments,amage and this happened recently, if there are followup attacks or followup pronouncements from the various governments, that will factor in to prices. The question is how transient the price impact. When we had issues in the strait of hormuz, it was seven days of impact, almost taken out of prices completely. Shery we have known saudi arabia was vulnerable to these tensions, especially given the proxy wars in yemen, so how repaired is there infrastructire prepared is their infrastructure . Ashley it is as much as it can be. I am sure they were primarily thinking geopolitical. They have expanded Pipeline Capacity for exports in order to circumvent the gulf of oman. The companies and country have been taking steps to protect themselves, investing in air defense capability. They are as prepared as they can be and have some of the best engineers looking at bringing the facility back online. It is a matter of how badly was it damaged. Peterson, thank you very much for joining us. Move for brent crude, the biggest since 1991. We will have more on saudi aramco throughout today. Jason will join us at the top of the next hour. We will speak with the spv energy founder. And we will speak with a researcher from Credit Suisse australia. Lets look at first word news. Start in hong kong. The protest has taken an aggressive turn. Demonstrators setting fire to eat in onestation area and police hitting back with tear gas anwar th is a foue economy under strain. Air traffic slumped 12 from the yearearlier with passenger numbers down in china, taiwan and southeast asia. In the u. S. There is another sign the economy is slowing. The cash rate index, [indiscernible] it saw 3 in august from a month ago a year ago. It is the ninth consecutive month of declines. They blame the terrorists and trade war tariffs and trade war for declines, contradicting donald trump who says he has the greatest economy in history. U. K. Prime minister Boris Johnson is ready to defy a new new deal brexit. Johnson is taking an increasingly hardline as he prepares for talks with that e. Commission on monday. Jeanclaude juncker is arguing this will create utter chaos which will last for years. Initial estimates of the damage caused by typhoon in japan put the bill it up to 7 billion. Sony and nissan factories closed and stranded thousands of people a squadirport including preparing for the imminent world cup. Power on thecut east coast and a local utility has almost half a million customers affected. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am su keenan. This is bloomberg. Paul to get you across some breaking news on the bloomberg this one in australia getting a takeover offer from another company, valuing them at 13. 25 per share. Getting headlines on that now. T is a Chinese Dairy Company the offer includes a special dividend of six cents per share. s board is unanimously recommending that offer. We will keep an eye on that. Plenty more to come on daybreak australia. This is bloomberg. This is bloomberg. Paul lets get you across some of the big news we are seeing in oil prices this morning. We have brent crude up 12 . It was up 19 at one point, the biggest move since 1991. We have got wti also up 10 . Those moves did trigger the Circuit Breaker which was trading for a couple of minutes in response to the attack we saw on the crude processing station in saudi arabia over the weekend. Looking at the impact for the attack, this chief investment strategist. Thank you for joining us. We have seen huge moves in the oil price this morning. Do you expect to see impact filter through the equity and bond markets . Ed i am sure we will see a bit of a reaction at the open but in terms of dampening of the original reaction and there does seem to be a response from the u. S. With strategic i would agree with the reaction but not expect it to be huge, maybe 8 or so. You can see the saudi market after being down 2 closed 1. 25 . I would not expected to be a big reaction. President trump did say the strategic Petroleum Reserve would be tapped if necessary. The intention is to protect u. S. Consumers at all cost. Strategicw the reserve in a tactical way, but some might argue with that. From the point of view of the markets it will calm things a bit. Shery we have seen the ongoing theme that you called muted but positive. Where are we heading given we marketnow when these shots could occur especially on the geopolitical side of things. Ed it is a challenging time in the markets because any time things can come out of left field that have an example on prices and expected returns. This attack reminds us drones are a cheap way to do damage around the world. At the same time we have growth even though it is slow. I am confident the u. S. Economy is not going into recession in the next 12 months because of a strong consumer. Although asset prices are elevated generally across the board, we can see stocks work higher as long as we dont have recession for the economy. Shery this gtv chart on the bloomberg showing the stock prices are not really cheap. We are talking about the s p 500 valuations near oneyear highs. Would you be able to justify adding . Ed our positions are close to benchmarks. There is a saying in politics, new you cant beat somebody with nobody. Even if they are expensive from historical averages, they look like a good buy compared to the asset class bonds where yields are low. In many parts of europe and japan and elsewhere they are still in negative territory. Stocks look expensive compared to the average. Compared to the big alternatives which look even more expensive compared to i think stocks are ok but i would not expect a lot of big returns from here. David you say you are waiting for a dip in equities to buy, but how patient do you think you will need to be when it comes to waiting . Ed that is why we are hanging around benchmark weights so that we are not wrong and markets keep going higher. If at the same time [indiscernible] if markets do take a potential drop, we will find positive stocks. Paul one of the big geopolitical stories we would normally spend time on but we have barely touched is the trade war. No one is expecting a grand bargain in october but are you will cautiously optimistic something will happen . Ed i have no idea. We have seen so many fits and starts for the beginning. The u. S. And china are rivals and will continue to be for many years. The notion that we will have put grand bargain that will the relationship on some stable basis, i wish that is true but it is hard. If we can make incremental progress and avoid further escalation, i think the market can do ok as long as things dont get worse. Shery we are seeing resilience in emerging markets stocks gaining for the Third Session last week. What are we expecting when especially we have to contend against the potentially stronger u. S. Dollar, if everyone is trying to ease at the same time . Slightly ver so simply because they look so cheap. There is a lot of risk factors, the dollar being one, the trade war, those are huge risk factors. Like everywhere else, emerging markets and Central Banks generally are becoming very accommodative. That is true in europe, united states. It is worrisome we are dependent on Central Banks but with the support of Central Banks around the world and what looks like compelling valuations that emerging markets and still work their way higher. Shery i love the point you make that is worrisome you have to depend on central bank easing to even get a little bit of growth in these markets. How sustainable could this be, how long can we expect the markets to be asked markets to be sustained in this environment . Ed i think the aging population is affecting real economy and markets. Older people are conservative in expenditures, saving rates are going up there there are there is good growth in consumption but not tremendously robust in the u. S. So bond prices are up. Onre is a private qe going as older peoples put money into bonds, which indirectly helps the stock market and those who can take volatility on. The aging of the population is part of the reason weinslowly be money is being invested directly in to bonds and indirectly stocks benefit that. Much fornk you very joining us. You can get a roundup of stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers can go to dayb on their terminals. This is bloomberg. Paul i am paul allenpaul . Shery i am shery ahn. Softbank is said to be doubling its stake in a brazilian online lender that offers zero the products. Zero fee products. Masayoshi son took this in july and is now buying the same amount for a controlling family. Intbank is on a buying spree south america and has spent 1 billion on Technology Companies in the region. Paul the world oldest lender is continuing considering spinning off its nonperforming loans to ease the controlling stake of the government. They are pinching a plan that would seal most 9 billion transferred into a separate entity. 10 years ago after a string of deals backfired. Shery mcdonalds is phasing out plastic in france. Plastic straws and drink lives will disappear in november while plastic cutlery will be replaced by wooden knives and forks. They are aiming to serve only organic pokechecks in the next few months and intends to turn used oil into biofuel. Paul lets get a quick check of the oil markets. The story of the day, we have 75 . Igher by nine points nine. 75 . Crude was up where one point and that was the biggest move since 90 91. We will continue to keep you the biggest move since 1991. We will continue to keep you updated. Shery we will continue coverage of the aramco trump attacks the drone attacks. Plenty more to come. This is bloomberg. [indiscernible] quite significant. The market needs time to find out what happened and when closure is reached on that, imposition taxes that otherwise [indiscernible] can be a big challenge for the oil markets. Opec plus agreement taking on offline, you have refiners that can only run light crude and now dont have a source for that crude and there is no easy replacement other specifically aramco, there is not a quick way to put supplies back into the market and it will cause a pain point and drive the brentwti spread over the next few days. Crucial oil institutions set ablaze. And aramco processing facility and the second Largest Oil Field in the and him. Rebels in yemen claim responsibility for the attack but the u. S. Is pinning the blame on iran. Iran denies involvement. Withtrike is significant but they call the plans the single most Important Oil the facility in the world. These attacks knocked out 5. 7 Million Barrels per day of output or 5 of global supply. Saudi says it can restore almost half of the lost production. That is although a full take weeks. Ight oil markets have been rattled with crude gaining ground at the moment more than 10 , not to mention brent crude at one point jumping 19 which would have been the biggest jump since 1991. We are talking about brent and 3 ,falling last week about given the outlook for demand has been shaky, given the ongoing. Rade tensions now these attacks on saudi arabia facilities sending prices much higher. Paul Bloomberg Energy markets reporter robert huddle joins us from calgary. Saudi arabia likely to restore half of the lost production over the weekend, but how big is this disruption . It is significant isnt it . 5 of the global oil supply, we have not seen anything like that in a long time. Even if half of it is restored you still have 2. 5 Million Barrels a day cut, it is more than anytime recently. There was an uprising in libya a number of years back, that is more production that was caught there were fires in canada two or three years ago. It is a massive amount. If we have to wait several weeks for that to come back, we could see strength in the price for a while. We have seen this huge rally at the open. I believe most analysts had not expected such a rally of 20 for brent. How sustained will prices be as we move forward, and we have not much clarity when we could get the supplies back . Robert there is a couple of things. Saudis, Energy Aspects put out a note saying the saudis will be able to supply their customers with oil around the world. President trump is authorizing the release of oil from the strategic reserves. What is more significant is this shows one of last week we had this growing warming of the relations between the u. S. And iran in a sense. Very Hawkish National Security Advisor John Bolton must relieved of his position was relieved of his position by President Trump, tough on iran. We had talk of a loosening of sanctions. It was an idea iranian oil could come back on the markets. This makes that less likely. Secretary pompeo squarely put the blame to this attack on iran. That put a halt to what we were seeing last week. The other thing if it does make saudi which has been seen as a reliable supplier, it makes their position more vulnerable. If this could happen now, what will prevent it from happening again . The war in yemen has been going on for a while. I was talking to an analyst today of a couple of dollars a barrel risk premium, beyond the price of oil from now on. Thank you for joining us. Lets get to first word news with su keenan. Su we start with the u. K. Financial Services Regulator which says a bid from Hong Kong Exchanges and clearing pretty londons talk exchange could face examination in the u k and abroad. The Daily Telegraph sites sources inside the llc and said the regulator stamp underpinned the initial rejection of the hong kong bid. The Commerce Authority has declined to comment. The trade spat between south korea and japan will heat up with seoul ready to exclude tokyo from a list of trusted export destinations. They say japan will be bundled together with nations part of koreas export regime, but Broken Ground rules will have unsatisfactory policies. Japan removed south korea from its white list last month. There is another sign the u. S. Economy is slowing. The cash rate index, a monthly index of real and trucking, fell 3 from a year earlier. That is the ninth circuit of month of declines. They blame tariffs and the trade war which hundred and President Trumps claim he is presiding over the greatest economy in u. S. History. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am su keenan, this is bloomberg. Shery a 15th consecutive weekend of protests in hong kong has seen teargas and Water Cannons used to disperse crowds of demonstrators. Tens of thousands defied the ban on a mass rally through the Business District and gathering of the british consulate. Sophie kamaruddin is in one district in hong kong. How aggressive river clashes quote were the clashes . 14 weekend,he last anyone paying attention would have noticed the violent activities took place earlier in the day before sundown. A small group of protesters used petrol, bombs and a water cannon was deployed to push back some of the more violent protesters. This all along the main column of the illegal rally. Wasaceful march on that traffic disrupted and places closed on the road as well. This is one of the sides of the this emphasis. The subway operator has said legal action could be taken. The government and Police Condemned the violence of the protesters. We also had remarks on the protests. Condemning violent activity while maintaining confidence in the future of hong kong of also alongside this activity we saw several hundred protesters around the british consulate in attempt to encourage more International Support ahead of this weekends activities. Articles stating International Support should not be looked to given it is an international affair. Paul what can we expect in the next couple of weeks . The calendar is counting down to a very politically sensitive 70thon october 1, the anniversary of the founding of the peoples republic of china . Demonstrators indicated their determination to keep going until all five of their demands have been met including an independent inquiry into police activity. Future rallies have been planned including the Human Rights Fund for october 1. This all while speculation may invoke Emergency Powers last leftist riots. 7 several Hong Kong Government officials spoke of measures to address Living Conditions in the city in a blog post. Paul chen indicated 100 billion hong kong dollars will be set aside for hard for the housing a set aside for Affordable Housing along with hospitals. These are hot button issues, but the economy is not top of mind for the protesters as they seek for all five of their demands to be met. Paul Sophie Kamaruddin there in hong kong. The influential editor in chief of chinas stateowned global Times Newspaper says the military could still be centered on hong kong but only as a last resort. She was speaking to Tom Mackenzie who joins us from beijing now. What did he say . Editoris person is the of the global Times Newspaper which comes under the peoples daily, stateowned nationalistic tabloid. He claims to have good sources here in beijing. This year he has predicted on a number of occasions forecast beijings actions around the trade front. We focus on hong kong. The first question, or the major question is whether or not beijing is seriously considering at some point sending in the military to hong kong if things continue to spiral out of control. This is a question i put two listen to what he had to say. This option should not be ruled out. Our armed forces gathered in shenzhen, sending a warning to hong kong. Theink it is obvious Central Government would only take the measure in a cautious way. They would not make the decision rationally. They would like to see the problem resolved by hong kong itself. So this would be a last resort for the pla. He also said, and we have seen this come up Peoples Armed police and members of the military pairing out exercises, he said it was a signal to what he described as hong kong extremists. He said it was symbolic and there was a reason the Peoples Police was down there. If the military was sent in, it would be a last resort when the local government has lost all control. Beijing wants to see the Hong Kong Government deal with this. With that october celebration and the preparations already underway, it is a key question, the extent of processing coming october 1 and the response in china what it will be. At a time of this when china is engaged in a trade war. What are we seeing in terms of the impact on its economy . The key data points include industrial production. That fell to a 17 year low. To pickst we expected up marginally, looking at 5. 2 . That is the forecast from 4. 8 . There is the trade tariff pressure. In terms of retail sales, it has been relatively well. Looking at growth of 7. 9 in august, 7. 6 in july and fixed Asset Investment will remain in john the data out around 10 00 a. M. Local time. Shery thank you so much for that, the latest on china ecodata. Following to follow from the saudi aramco attacks in the currency market. The yen paring back earlier gains against the u. S. Dollar. More ahead with the senior currency strategist. This is bloomberg. The yen and other commodity linked currencies have reacted to the drone strike in saudi arabia. This is the start of a busy week of decisions in japan and the u. K. And of course from the fed as well. Lets go to the senior affect strategist with nav National Australia bank. Yen. Off with the you expect to see this in the environment of geopolitical risk like we saw over the weekend. The first reaction for dollaryen is to show strength is and particular for the yen to show strength. Youll control policy, and we saw it going significantly last weekend friday as well. Supply what and it might mitigate someshing strength. Paul for the paul yen, when will that become a concern . Expecting any comment . We have seen intervention in the past. For now the bank of japan, similarly to qe stimulation is limited what it can do. They will wait and from the domestic side the economy is doing relatively ok thanks to investment and fiscal spending that have occurred. Any talk of intervention, you have to see dollaryen closely 105 many havethan suggested. Shery what are we seeing in terms of Oil Sensitive currencies . We are seeing the cad rallying but not the aussie dollar as of yet. I suppose close for some they are more sensitive the oil crisis whereas the aussie and kiwi are more risk sensitive currencies and sensitive to the Global Growth outlook. In the current scenario with the spike in oil, as well as the thinkitical factors, we it is reasonable for the cad cannot be supported. But for what will keep the aussie and kiwi more constrained. Shery where are we heading for the aussie in terms of reserve banks and moves when it comes to more easing . Rodrigo for now we think the rba is on an easing path. A rate cut is likely and we think another cut in february looks likely. For australia trade in the limits are a concern because we are an export economy and have a domestic story but it will be challenging. The labor market is weakening. We expected to be weakening more and therefore the rba will need to support this as well. Paul you have a call on the aussie recovering to . 70. Rodrigo we have two calls. Then the near term we are concerned. Because he could hit 65 cents by the end of the year. We see weakening or strengthen in the past week given all of that sort of mood music is changing in terms of trade developments with the u. S. We remain reluctant to sort of run with that theme. There are tensions between china and the u. S. Which stay longer. If that is the case it is reasonable to suspect another round of weakening, and that should take the aussie down to . 65 by the end of year. With some trade hesitation it would be good news. Paul british pound, is the worst priced in yet or is there more bad news to come . Rodrigo we think a hard brexit will be difficult to do so it is reasonable to see the pound recovered. We expect lower volatility because the risk of election and what an election outcome means, the pound could trade lower even if you have brexit [indiscernible] with some sort. But 120 at least not for now. We have seen the pound be resilient against the u. S. Dollar, not to mention we are seeing the best run against the euro since 2016. We continue to see the ecb and the qe drive, what do you expect the poundeuro to look like . Extent qe isome out of the question and most of the volatility will come from brexit developments. The big step at the moment is whether not going to get a hard brexit or not. That sort of probability is being priced out which is supportive for the pound. The question is whether we get some kind of soft brexit or extension of the withdrawal agreement. We still think the pound will remain supportive so it is reasonable to see it go higher. Shery what about the u. S. Dollar . We have priced in more fed rate cuts but at the same time everyone around the world seems to be easing. Rodrigo our sense is the dollar looks expensive when you look at fundamentals, but it is expensive recently. The u. S. Is still growing better than others. Every economy could grow better even theless, u. S. Economy is still doing fine. That is one factor supporting the dollar. Even though the fed may cut later this week, the dollar still benefits from a yield premium relative to other majors. In that regard the dollar remains supportive. It doesnt mean the dollar is going to go back to 100 but we think a drift or push lower in the dollar, we need to see fed more around 75 basis points. Much fornk you very joining us. Some breaking news, President Trumps twitter feed is active. He said the oil supply attack, reason to believe the culprit iran he says we are locked and loaded depending on verification, waiting to hear from the kingdom as to who they believe was the cause of the attack and under what terms we will proceed. President trump there saying the u. S. Is locked and loaded for a response on the oil attack. Plenty more after, on daybreak australia. This is bloomberg. G. Shery you are watching daybreak australia. Lets get you a check of the business headlines. The boeing 737 max 8 will be back in service anytime soon. Aviation regulators in the United Arab Emirates are contradicting boeings optimism boeings optimism. Boeing says it for sees approval in the coming weeks at the uae general several but the uae general Civil Authority doesnt expect it to be back until 2030. 2020. Paul the two carriers have held highlevel talks although jal says back in june it is too early to speculate about investment. Malaysias Sovereign Wealth Fund goes anna is the sole shareholder. They are looking at other options for the carrier. Shery General Motors staff has called the first strike in 12 years, halting work at dozens of facilities across the u. S. Over jobs, pay and benefits. They walked out midnight sunday despite a lastminute offer to pay hikes, billions in investment and 5000 extra jobs, most of which would be new hires. The uaw says this fall short in several areas. Lets check in on what is happening with the oil price at the moment. We have wti higher over 11 . 13. 5 , both settling down within that range after showing some big spikes when trading began. We also have President Trump tweeting a few moments ago about this attack on saudi arabia, saying the u. S. Believes iran to be the culprit and the u. S. Is locked and loaded depending on verification. Shery we will continue that coverage of aramco attack with our guests upper stage. This is bloomberg. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Paul good morning. We are under in our l. A. From the open. In our away from the open. Away from the oven. Shery welcome to daybreak asia. Our top stories this monday, oil sores after the attack on the key aramco facility. Cutting production by half. It will take weeks to return to normal