Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240714

Official think lowering to a negative rate will not provoke a backlash. Attention on the trade war. The deficit seen widening last month. Lets get a quick check of asian futures right now. In japan we got the nikkei futures pointing modestly higher. A similar story and south korea. While here in australia we have got futures pointing higher. New zealand been trading for an hour now. Not a great deal of action to report. Paul shery ahn u. S. Futures not doing much of the moment. After stocks drifted throughout the session, and then we had a slight uptick for the s p 500 to gain. 3 . We have consumer shares rounding and Energy Stocks were some of the big losers. Losing a lot of ground after that huge surge we saw a 15 for crude monday and continuing to fall below 60 a barrel. We also have banks underperforming. Ahead of thatll fed Rate Decision on. Wednesday ahead of that, we are now seeing the money markets and turmoil. Take a look at this chart on the bloomberg. We saw the rates surge as high as 10 . This causing the effective funds rate to jump to 2. 25 . If it continues to could have a broader impact on borrowing costs. We had a combination of reasons. The market trying to absorb record sales of treasury debt. Also, Corporate Tax payments and coupon settlements. In combination. We have the new york fed stepping in with repo operations that will continue on wednesday. Lets continue to discuss the turmoil in money markets and bring in our fx reporter alex harris. Alex, what is this telling us about the fed and is control of shortterm rates . Alex if you ask a lot of people in the markets, they are telling you the fed is losing control of shortterm rates. Ofyou look through a lot their communication, their minutes, everything is about controlling shortterm Interest Rates. They are slipping. And people are getting nervous because when fed loses control of insurance rates in the shortterm, that is the ballgame. That becomes a credibility issue. Its really going to test the efficacy of their policies and what they can do further to control the short end and. Whether people will believe it will actually work paul we have the new york fed attempting to regain control, conducting another scheduled operation tomorrow. Keepis the plan, sticking on more bandaids . They can do. L the market was surprised at how long they dragged their feet and implementation of a standing repo facility. There is a lot of existential questions about what a facility could look like and who are your counterparties . Just about reserve scarcity and getting the banks to convert some of those reserves into treasury securities. Not sure what it wants to be yet. People are hoping tomorrow when we hear from Jerome Powell in the press conference, hell get more questions about this and we will actually get some answers about what they are thinking, where they are headed. Strategist are not think that we are going to have any sort of facility in place even by the end of the year if this is going to be a 2020 issue for them. Shery ahn i mentioned earlier some of the reasons for this funding squeeze. How much of it is because of how much is structural . Alex it is hard to say. There are so many variables. There are things they are discussing but do not know for sure. Were going to need more dat a. A lot of it is turning into a structural issue. The last time you really saw a surge in supply from the treasury the fed Balance Sheet have not hit those macs max caps yet. Right now they are doing issuance for the Balance Sheets so, it just takes a lot more for them to absorb a lot of this debt. Treasury supply is continuing to go up. The way in washington is spending, it does not look like there is any relief in sight there. Then you just have regulatory structures that were put in place post financial crisis where in some cases the money, you know, was just the same kind of money and the same kind of being regulated and it just cap papering over the same collaterals on the market. Thats starting to have an effect. Theres a lot of things they can do in the long run to alleviate theseures and the structures in the market and for now i think it will be repo operations and more bandaids. Shery ahn thank you for that. Now, the money markets rise, the Federal Reserve intervention to bond markets. Certainly be a topic at jay powells News Conference on wednesday after the latest policy decision. We discussed all this with veronica clark, an economist at Citigroup Global markets. So, what are we expecting tomorrow . Will all of this sho overshadowed the potential rate cut everyone seems to be expecting . Will certainlyl bs about it in the press covers of the main purpose is to make a decision. We are expecting another 25 basis point cut. Lookingwill instead be for are updates to the summary of economic projections. Forecast for things like gdp, inflation and an updated dot p lot. And anything about how the fed is classifying this rate cut. They ahn we had just blackstone executive vice chairman tony james and we asked him about the repo market moves. Take a listen to what he has to say because he does not think it is a systematic issue. Tony the rate spike looks very scary but it is only overnight. The actual cost to the system is not high. It is more of a concern to very technical. It is a technical problem, very shortterm the feds addressing. The fed wants stability. I am not surprised they stepped in here. Shery ahn is that your take of what is happening in the repo markets as well . Definitely ais shortterm issue. It started yesterday and continued again today. We will see that fed come in again tomorrow morning or but anytime you see that ticking higher, like what we saw yesterday. Thats going to worry the fed a little bit. Our base case is for a 25 basis point cut, but the risks have increased so we could see a larger reduction in interest reserves. The press conference, following the fed decision, what would you anticipate will be questions on th emuch expected 25 basis point reduction or some more questions on the ioer . Veronica we will definitely get questions on what is happening in repo. If you remember back in july, we classifyingwell that rate cut as an adjustment. That was taken as hawkish. Were not expecting him to repeat that language tomorrow. He will probably sound more like he did a jackson hole. The base case for the Economic Outlook is still very solid. Industrial manufacturing is still solid activity but the Downside Risks have increased. Paul they called that last cut a hawkish cut. Are you satisfied with a clarity of medications coming out of the fed . Veronica they have had some communication stumbles, thats true. But i think powell has gotten better footing. Jackson hole, he delivered pretty well. No big surprises on markets. Thatng as he keeps messaging, that is what is expected and there should not be any big surprises. Part question. O weve seen the clear hawks and doves. Stand . Oes chair powell veronica more on the dovish size. We have done a sample dot plot estimate for tomorrow. Markets will first be watching what happens with the 2019 dot. The meeting in june the last time we had an update was for no cuts at all in 2019. That has to come down. We think it comes down to reflect a 25 that happened in july and the 25 tomorrow. Because you do have these more hawkish members who have been hesitant for any rate cuts little. Dont even want to be moving there dots. We think powell may be leaning towards another cut this year. And then we have more dovish members who could be leaning towards two more cuts. Shery ahn it is really clear that the doves are focusing on what is happening outside of the u. S. And the hawks are focusing on the strength of the u. S. Economy. Where do we stand . Veronica the Downside Risk that they have communicatioed are mostly external. Things like the trade uncertainty, chinese growth, even brexit, italian political situation. The base case for most numbers as solid activity. The risk of that base case is shifting towards maybe the u. S. Is not going to have a broader slowdown. You have also seen some communication around inflation, as a reason for easing policy. So evans in particular has cited inflation, weak inflation for cutting rates. The inflation story is probably improving a little bit. Weve gottehn the last three core cpi numbers have been increasing. We can see that inflation story take more of shery ahn will that actually be oiled by the surge in prices, although they are coming down, not to mention the potential tariffs on chinese goods . Io that will affect for oil, that will affect core inflation. In the past, Higher Energy prices, the floor is fairly limited. We have not seen too much of an effect yet from the tariffs on consumer prices. We have seen a little bit on things like producer prices, most of the tariffs have been on capital goods, so not consumer goods. That would be a risk later in the year if we get these tariffs on a broader range of consumer goods, yes. Paul veronica clark, Citigroup Global markets economist. Into bloomberg special coverage of the fed decision kicking off at 2 p. M. On wednesday in new york, 2 a. M. Thursday in hong kong. Now lets get a check of the first word news. The trade spat between japan and south korea is widening. With seoul removing its neighbor from a list of most trusted partners. Mirroring similar action from tokyo last month. Trustedt korea from its nations list and plans to terminate the sharing of intelligence. Talks get back on track for wednesday with working level officials heading from beijing to washington to prepare the ground for the next negotiations. The u. S. Side has discussed a limited agreement that would roll back some tariffs aides. Ed by economic there is a certain optimism. The two sides last met in shanghai intellect. This is like the two parents fighting and the children are hiding. And they are upset. Which is slowing trade. But longterm, a potential decoupling of these two giant countries results in lower growth for everyone. He World Bank Says Global Growth will decline more than estimated with negative yielding debt indicating expansion will be slower in the coming months. Bank president says the slowdown is broadbased and expansion will fall short of its june production projection of 2. 6 to he spoke ahead of next months world bank imf meetings. Polls in israel so the election is too close to call. With Benjamin Netanyahus gamble on a float failing. The gone to the people in hope was strength in control but initial results show him that in net with the former military chief. Ld obligates efforts to dodge a possible indictment for corruption. All results are expected on thursday. Spain is heading for a fourth election in as many years after acting Prime Minister sanchez failed to muster support for a government. Lipe says no candidate is Strong Enough to form an administration and voters will try again in november. Spain has been ungovernable since the Peoples Party lost its majority four years ago amid a string of corruption scandals. Global news 24 hours a day on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Paul thanks. Still to come, we will have more on the money market with rate strategist zach griffiths. Hell tell us if the fed will unleashes big guns. To calm markets. Shery ahn saudi aramaco has part fully restored partially restored production. Is it enough to calm market nerves . Shery ahn this is a break asia. Asia. Reak as saudiry ahnoil has fallen begun production. Brothers and sisters, with the abilities of god almighty and the efforts of the workers and the Productive Work environment made possible by the government, in the last two days, there was a containment of the damages in the recovery of more than 50 of production that was disrupted as a result of the terrorist attack. Paul well, Bloomberg Energy reported james joins us now. Jim, tell us more about how the market is responding to the signs that some saudi production is coming back online. Jim we saw a sharp pullback on the price on the back of the news. Two billion barrels with production has been restored after the 5. 9 million that was taken out by the strikes. Sed disruptions in the markets on monday. We are still in a very volatile price environment in the market went up the most on record on monday. They are telling us it is the busiest day they have seen in the market i think it will take some time for that to smooth out. Even with this production coming back on stream. Concrete details on how long it is going to take for production to come back. Saudis are currently indicating that it might be as soon as the end of september before they are back up to full capacity. If thats the case, i think we could see somewhat more of those gains that we saw on monday unwound. Shery ahn even more than back to capacity, 11 Million Barrels septemberhe end of seems to be higher than what we are seeing for august. Are there any risks we should be watching out for now . Jim thats right. I think what you will see is that the production itself will become less of a factor as becomes clear that saudis can get back up to full speed in a very short order. Of course what the focus will be on is what the political response will be. Yemen havels in claimed responsibility and they said they will not stop here. They will continue targeting Saudi Oil Installations to make their point. The saudis and the u. S. Are both pointing the finger at iran in terms of directing the actions of the rebels. Overnight they are preparing a report on who they thought carried out the attacks, and thats going to be delivered in the next 48 hours. That will be another news point the market will be watching closely. It is not clear to me why the u. S. Would want to escalate this into a military conflict. An attack on the saudi arabia is no attack on u. S. Huawei the saudis have plenty of military hardware if they feel the need to step up the defenses of their installations. Obviously, there is huge uncertainty over what the reaction will actually be. Until that becomes clear the next cfew days, there will be something hanging over the market and will limit any crawl backs in price. Beyond that we have the fed decision was might start to come into focus for the market as the situation plays out in saudi arabia. We might find the markets starts to remember the factors at play and react accordingly. Shery ahn the. Demand picture. Fedex tumbles in extended trading after its slashed its forecast on the weakening Global Economy. Su, how bad was it . Stock drop the significantly to lets go right to the afterhours chart. So much, more than 9 , wiped out the entire year to date gains in that one after our session. If you go right to the statement by the ceo, he said, our performance continues to be negatively impacted by weakening global macro environment, driven by increasing trade tensions. They are blaming this on the trade war and policy uncertainty, all of the changes that have taken place. Theres also that pressure from amazon. Fedex slashed its forecast Going Forward. Blamed the trade war, squarely. Its forecast projected earnings the11 to 13 a share is below the lowest estimate of analysts. Drop from last year. A have predicted a decline a mid singledigit level in june, but this was far worse. They also pointed to specific declines in exports from china. And said a lot of u. S. Customers were using lower cost shortened Distance Services that definitely hit their bottom line. Paul su, lets talk about how it impacts their plans to make some costly changes on ecommerce delivers. Su it is definitely cutting into their plan to ramp up, because they are not cost cutting. If you look at what the plan was, they are moving away from their contracts with amazon. Com, so that they can ramp up and have a more competitive shipping business. The contracts with amazon were at a lower rate. But it will have a dent in their bottom line because it accounted for 1. 3 of their annual revenue. They are betting the decision to not renew is going to boost Profit Margins but they doubt to upgradetinue their Flight Service and the service itself where they moved to a seven day a week service in january. They are implementing a lot of Cost Reduction strategies. At the same time, they are ramping up their offerings. It will be a challenging year. Investors are already concerned as you can see by the selloff. Shery ahn su keenan with the latest on fedex. You can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Also, available in the mobile and the bloomberg app. You can customize your settings so you only get the news to use and the assets that you care about. This is bloomberg. Shery ahn lets get a quick check of the latest business flash headlines. Toyota is waiting for the u. S. And japan to finalize a trade deal, investing 400 millions at its texas plant, six months injectedsuffered 3 billion in its u. S. Operation by 2021. As efforts to head off threaten u. S. Tariffs on auto imports from japan. They insist there is no connection to the trade negotiations. Forissues are piling up Office Sharing Space Company wework. Just hours after delaying a share sale, the Company Announced a small number of job cuts in new york city. The layoffs affect fewer than 10 step in wework now division. Weworks parent postponed its ipo after criticism about the Companies Corporate governance. Holdings may expand its new online brokerage venture with a mobile venture group. Speaking exclusively to bloomberg, the coceo said it may include foreign stocks on the service as a way of having people take a first step into global trading. A unit of chinas largest bank icbc plans to sell two big tran ches of yuan denominated bonds. Ll total 1. 5 billion in could come as early as next month. Some say the pricing has not been fixed but the first batch will be a threeyear 7 billion yuan note. And the second is a fiveyear 3 billion bond. More to come. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. This is daybreak asia thatlunged on reports saudi aramco is close to restoring 70 of the production lost in the attacks on a key refining plant. Almost 7 only prices steady done claimed the u. S. Identified locations in iran where the attack was launched. Irans Supreme Leader was ruled has ruled out talks with the u. S. U. S. Factory output increased last month in a sign that manufacturing maybe starting to stabilize. After falling in july. Total Industrial Production which includes output at mines and utilities also increase the most any year. Cost a slump in manufacturing after the sector fell into recession in the first half. The bank of japan thinks lowering the negative interest a backlash spark because investors are aware of the possibility. Soon given continue robust domestic demand. Day of legal hearings into this pension of the u. K. Parliament have been seen as a small win for opponents of the no deal brexit. The case threatens to undermine Boris Johnson and force him to recall lawmakers. Boy you say it is hard to predict how things will turnout for johnsons legal team did promise to reveal what he would do if you were to lose the case. Mlaysia is employing crowd arketing. Haze comes from forest fires in indonesia and is affecting other countries. Neighboring countries are urging him to do more to stop the burning. Six provinces have displayed eclared states of emergency. India expects to control the entire state of kashmir. The region is claimed by both splits, but has been between them since they were created by the partition in 1947. Minister of external affairs says he expects it will one day have jurisdiction over the whole of kashmir. Weeks after india imposed security measures on its part of the region. Global news 24 hours a day on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Lets get a quick check of the asian markets and how they are setting up. We are seeing pressure for kiwi stocks after stocks gained ground. We are seeing Futures Holding ground and gaining. A little bit of more risk on sentiment spreading as crude Oil Continues to lose ground. The past gains for five sessions we have seen the aussie dollar falling against the u. S. Dollar. Holding at 68. 63 cents after the rba reaffirmed its prepared to cut Interest Rates further. We have seen nikkei futures gaining as the nikkei stocks continue to see the longest winning streak since october of 2017. Yen holds neare sixweek low. Paul thanks. Lets get some more on what we should be watching us trading gets underway in asia with the bloomberg Global Markets editor. More and more investors are queuing up to see bond yields. How much of that has been driven by easing expectations from Central Banks . Sentiment has gone a little bit too far. Adam that is part of the picture. Of course, markets had run so high. August got toin extreme levels. There are a lot of people who wanted to get slightly shorter and thinking that yields would climb someday. You can see the Market Reaction in the last month. That chart shows it clearly. How much of a move we have been. Weve barely retraced any of the past 12 months moves. Were 30 basis points on the u. S. 10year off that 150 low. So, its getting into the realms where in two weeks, it is a big move but if you compare over 12 months, of course, it is not huge. As you say, before we know anything from the fed policy meeting today in terms of the likely scenario for the next 1 months, its difficult for the market to pare back expectations for just how much raise move rates move with that to five basis cut guarantee for day. Although those expectations have been wound back thing differently. Economic data mixed across the world including in the u. S. And in china. Really not much to move the dial now ahead of hearing from the fed later. Shery ahn you mentioned china despite the economic headwinds we have seen the shanghai composite rallied 20 yeartodate. Tores one fund that managed returned 54 in its first year. Tell us what is going on there. Adam failry remarkable fairly to get in Equities Fund up and running with a one performance, greater than 50 . And really what it has been there, that story is driven by consumer and a tech appetite. Broad basets a very of, of equities, but there on the screen, some of those to highlight. A favorite with many investors for a number of years. That Telecom Equipments maker and the broader swath of Consumer Tech shares have allowed the fund to outperform even the mainland chinese equities markets which is among the best performers in the world, anywhere, especially in asian. Is way ahead of markets like japan and some others that have lagged behind given the trade outlook in the last 12 months, of course, has soured significantly. There is a ray of hope for some active managers. Places like china that continue to find some specific idiosyncratic opportunities when of course lots of people very concerned about equity valuations in certain parts of the world. Shery ahn thank you so much. Bloombergs Global Markets editor. You can find his charts on the g tv go library. The Federal Reserve are repeated first in a decade intervention in money markets wednesday, despite the short ter the spi ke in shortterm rates highlights a number of issues. Sacra griffith is a strategist Zachary Griffiths is with me in the new york studio. Number of reasons put forth by analysts including Corporate Tax payments, and settlements. How much of this is seasonality and how much of it is structural . Zach we think those are somewhat oneoff, the Corporate Tax payments. Settlements. On we think those two things coinciding with such a big issuance figure of 54 billion on monday. And Corporate Tax havens taking out 100 billion from cash markets. Those two things happening at the same time had a big role in what we saw this morning and yesterday. Shery ahn is it right for the fed to try to do something more tomorrow, or are they behind the curve . Zach they acted appropriately this morning. They had to do something to show they would not allow things to get too out of control. As far as what theyre going to do tomorrow and how what happened today impacts that, it would put another tweak to the ioer. Before that weve seen in the middle of the target range. Ther what we saw today and disruption and money markets we think that is pretty likely tomorrow at this point. Paul so, were talking tweaks. The new york fed has been stepping up with interventions as well. Over the longterm, is that going to be enough to address this, or is it a transitory problem and will it go away . Come one thing that will into focus is the appropriate level of Bank Reserves. Fed is not 100 certain on this as a have ended the Quantitative Easing Program and stopped the Balance Sheet runoff. So, this is somewhat uncharted territory. We think they will take a more hard look at what the appropriate amount of Bank Reserves is to conduct Monetary Policy in this new regime that they are in. Paul were describing it ourselves as a plumbing of the repo market. What is the worstcase outcome . Or something that does not overly concerning. Zach we think what you saw today is probably not likely to persist longer term. These issues tend to come up at quarter end and yearend dates. If it gets to be the end of september and we see another loop the fed is going to have to see that implications seriously and how they want to conduct Monetary Policy Going Forward. We will keep an eye on that. Just to highlight there is going to be a pretty large settlement date on september 30 around 50 billion in coupons, net issuance then as well. That will be a good Temperature Check to see if this is something that will persist Going Forward. Shery ahn you mentioned earlier the focus on the amount of reserves, given what is happening in the money markets. What about the focus on the u. S. Budget deficit . Wall street has been struggling to be able to absorb this record amount of debt. Zach that is the other side of the coin you need to look at. For the longest time, yields have not gotten o ut of control even if we had the argest budget deficit. You need to wonder what kind of initial impact this will have. You saw today is another reminder we are issuing a pretty remarkable amount of debt. We do not see that changing. Shery ahn what you think about secretary Steven Mnuchin bringing up the long debt issuance, the 50 year century bonds. Zach it is interesting. From the perspective of borrowing at low cost it makes sense to lock in borrowing for longer. They look to this issue from 2017 and what they came up with was there wasnt the the man they think they could issue enough or issue on a regular basis. He main goals of treasury is for patterns to be regular it easy for the markets to digest. You got to wonder what has changed over the past two years if rates are lower, why are investors going to want to buy more longerterm debt at lower rates . They are working through that but it is something they seem to be considered seriously. Shery ahn so, tomorrow and wednesday, if there is any tweet on the ioer tweak on the ioer, that could take the spotlight away from the expected fed rate cut but it seems like the markets have already price that in. However, how challenging is it for the fed at the moment given that we have been getting conflicting signals from the economy, including cpi, rising retail sales being strong as well . Zach you highlight a couple of important things, as far as the fed cutting rates, these are insurance cuts, and they are really taking into account all of this geopolitical uncertainty, stemming from the trade war, brexit, hong kong protests, all these things seem to have improved somewhat. Think that has contributed to rates moving higher in the u. S. The amount of uncertainty out there is pretty substantial. And as chairman powell has said in the past, there is really no playbook for conducting Monetary Policy during a prolonged trade war. So, they are doing what they think is prudent, but i agree. The u. S. Economy is solid. Expected to remain that way through the end of 2019 and 2020, which is why we dont think they are going to need to take rates down to zero anything too severe. Shery ahn or even more or less than zero as President Trump wants. [laughs] paul wells fargo security rates strategist zachery griffiths. We are counting down the trade data from japan. Well break the numbers down and next. This is bloomberg. Shery ahn this is daybreak asia paul im paul allen in sydney. Japans trade deficit may have expanded in august as declining supply chain demands wore on both imports and exports. Joining us is jesse lewis. Jesse, we will have those trade numbers in under five minutes time. Suffice to say, we are not expecting great things. What you looking out for . Tradee i think the numbers are going to show continual weakness and next role demand. I think the export conditions continue to remain challenging, despite some recent of elements. The u. S. And japan are edging closer to a deal, although we think a trade deal may be a bigger win for the u. S. Ofre has been a fair bit goodwill gestures from the u. S. And china during the past week but we are still cautious of the outlook between the u. S. And china in the coming quarters. In japan, south korea, trade tensions remain. Thats going to put the pressure on exports for both countries in the near term. Paul also putting the pressure on for japan in august was these numbers that coincide with a period of yen strength. To what degree is that going to weigh . Is indeed aink yen problem for japan but japan is an export reliant country. A stronger yen could undermine the export competitiveness and also put downward pressure on inflationary pressures as well. So thats also one of the biggest concerns for the boj. Moment, weat this are also seeing news coming from the u. S. That we could be headed for initial trade agreement between japan and the u. S. And the expectation is that it could cover agriculture, industrial tariffs, and also digital trade. What are your expectations of how this could affect the japanese economy . Jessie well, i think for the the mainthe u. S. , concern for japan is the higher auto tariffs. The Manufacturing Sector in japan has already been hit by the current trade tensions and higher auto tariffs from the u. S. Is going to put further pressure on the Manufacturing Sector. For japan standpoint, a trade deal with the u. S. That will allow them to avoid higher auto tariffs would be a big relief for the manufacturers in japan. While a lower agricultural tariff for the u. S. Products is going to be a big win for the u. S. , because the Agricultural Producers and the u. S. Have already been hit by the higher tariffs between the u. S. And china. Shery ahn could the non Manufacturing Sector in japan offset some of that manufacturing weakness . Theie i think nonManufacturing Sector does show some areas of resilience, while the Manufacturing Sector is showing some weakness due to the current trade tensions. But were stil l cautious of how much support japan can have four non non for the Manufacturing Sector, given that the household demand from the upcoming sales tax hike. That may dampen demand, the domestic demand in the months ahead. Paul jessie, we have got these numbers, trade numbers for august less than a minute away. Quickly i wanted to get your thoughts on how well japan is placed to absorb the impact of that sales tax increase. Impact well, i think the of the sales tax hike is likely to be smaller this time, and from the front loaded increasing demand that we can see, it has been quite modest so far. The consumers have not, like preloaded their demand compared to the previous tax hikes. The demand after the tax hike might be smaller this time. Also, given the fact that many of the items are still having a constant tax weight of the previous tax. So, i think the impact is going to be smaller this time. Paul all right. Just to interrupt you because we are getting those trade numbers for august. Looks to be substantially better than expected. Trade balance coming in at 136 billion yen deficit. We were expecting a deficit of 365 billion yen. Exports contracting, but only by 8. 2 . The market were looking for a 10 contraction. Ae expectations there was for contraction of 10. 7 . So, exports contracting less than expected and the trade deficit itself coming in half of what was expected. On the spott you but what is your initial reaction to these numbers . Jessie yeah, i think thats more or less what we expected. Conditions export continue to remain challenging in japan. We are going to see for further weakness in the months ahead, given their expectations are going to weigh on japans trade numbers in the coming months. Were also waiting on bigger japan this week. Talking about getting further into negative rates territory, the levels oft what it can achieve with this plan . Jessie i think it is going to be an interesting for the bank of japan. We think the chances of boj easing are on the rise. The bank is indeed to more open to further easing. In terms of what the bjo can d boj can do, given the pressure on the longterm bond yields due to Global Factors beyond the banks control, we think that the boj may it can allow more flexibility to manage rapid changing, to make rapid moves in yields. We think they will allow for the 10year yield. We expected to be plus or 30 basis points from zero. It will add some flexibility. Its possible and we think, we have also previously highlighted the possibility of a preemptive easing package from bank of japan. They may cut the negative rates further, but it will depend a lot on the outlook for global trade and the Global Economy growth. Shery ahn thank you so much. Economics. M if you missed any of that conversation, you can catch up on past interviews and watch it live. Part of the conversation by s. This is for bloomberg subscribers only. O. Ck it out at tv paul lets get a quick check of the latest business flash headlines. Largest ecigarette brand is prying to find out why its price have been pulled from online shelves in china. Juul was selling its nicotine vaporizers by alibaba last week. They have disappeared from the site without exultation. The company says it wants to make the promise available again in one of the Worlds Largest tobacco markets. Afterahn fedex slumped cutting its profit forecast for 2020 and the face of a trade war and a global slowdown. Earnings for the fiscal year ending in may will be 11 to 13, which implies the fall of 16 from the previous period. The ceo says it continues to be badly affected by the trade tensions and policy. Paul Virgin Atlantic said he would add 80 new just a nations destinations including china and australia with the expansion of london heathrow. The airline is pushing a model that would effectively create a second carrier to rival british airways. The slot scheme is already under review. Hold ahn sony plans to onto it semiconductor and Financial Services operations. Of proposalseries from an american investor dan loeb. Osed a 1. 5 billion stake in sony. Sell itsaged them to insurance operation and focus on its entertainment business. Lets get a quick check of the asian markets. Kiwi stocks under pressure, coming after again in the past session. Futures in the green. Sydney futures slightly higher coming after five sessions of gains. More risk on sentiment across the board as we continue to see crude Oil Prices Falling with saudi arabia saying that they are seeing some of their production come back. Nikkei futures up. 2 , despite the fact that japanese stocks have been in their longest winning streak since october 2017. Paul . Paul thanks. Still to come on the next hour of daybreak asia china is the second largest market for diamonds in the world. Demand is slowing is Economic Uncertainty picks up. The ceo of the diamond Producers Association. I am shery ahn. Welcome to bloomberg daybreak paul our top stories this wednesday. The fed stiffens for a second day to keep rates from rising. Treasuries rally ahead of expected cuts tomorrow. Investors await decisions from japan. We will assess the outlook for share sales in hong kong with a revised ipo from budweiser brewing. Lets get a quick check on oil. We had uti under pressure and brent coming down 3 10 of 1 . Still above 50 per barrel. Wti, below 60 per barrel. Saw monday. Officials say they have restored 40 of output lost. To take a look at how japan is coming online, we had seen the decay rally for the past weekend. Nikkei at the moment slightly higher. Remember, this is after 10 consecutive sessions of gains to japanese stocks. The longest since october 2017. Not surprising given that we continue to see japanese yen around six week low. Risk on sentiment as crude oil prices continue. Down 1 10 of 1 . Already intopics overbought territory. Look at whatake a is happening in this part of the world. Just opened. Not a lot of action. Flat. The korean wall and weaker. 149 as well. The asx has been trading for a couple minutes. Stocks do to open alphabetically. It is early days. The aussie has been trading in that range for quite a while. Still steady at 6865. A story there has been going sideways all morning. Off by 1 10 of 1 . Lets check on the first word news. On reports that saudi aramco is close to restoring 70 of production lost in an attack on a refining plant. Brent crude fell 7 , though priceys studied on claims that the u. S. Has identified locations in iran where the attack was launched. Leader has ruled out talks with the u. S. At any level. With the grace of god almighty and the excellence and madebility and its workers possible by the government, in the last two days, there was a containment of damages in the recovery of 50 of disruption as a result of the terrorist attack. The trade spat between japan and south korea is widening. Mirrors similar action from tokyo last month and means strategic products will receive greater scrutiny scrutiny. Whitecut korea from its nations list. Factory output increased by more than expected in a sign that manufacturing may be stabilizing. It rose half of 1 after falling in july. Industrial production includes output. Utilities increase the most in one year. A rise in manufacturing after it fell in session. Is heading for a fourth election in as many years after the Prime Minister failed to muster a government. Enough tote is strong form an administration. Spain has been increasingly ungovernable since the conservative Peoples Party lost its hold four years ago i made corruption scandals. Malaysia is employing cloud seeding in an effort to clear thick haze. The choking haze came from forest fires and affects singapore. Expectedn president some tree clearing for himself with neighboring countries urging him to stop the burning. Six indonesian provinces have declared a state of emergency. Global news 24 hours a day on the air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Shery the Federal Reserve starts day two of its policy meeting. It continues with a spike in a key money market rate. Global economics and policy editor the feds will have plenty to debate. Economy the Federal Reserve has made it clear. The domestic of money the domestic economy is mixed. Global risk is rising. The last time a fed official spoke about the economy, the same mantra was repeated. A strong labor market, counting on a solid consumer to keep the economy going. 2 gdp at the second quarter. 5 yearoveryear growth. Investment down 6 . The trade war taking a toll on manufacturing uncertainty, causing businesses to pull back. Lets look at something that causes an aspect of this economy. The white line is the institute for supply management services. Look how they stayed in a healthy range. 56. 4. Back below 50, signaling contraction. The fed is seen making the 25 basis point cut, because the Global Economy is growing. It is starting to fade. It would have to be a 100 spike to correlate with the recession but it underscores the geopolitical risk, Brexit Hong Kong and more. That is why the fed will do an insurance cut. The fed does seem divided on what to do. Some saying no need to cut. Others saying it is below 50 basis points. Theers are expected boston fed, the cons assist city fed the Kansas City Fed says savior ammunition. Once again arguing for a 50 basis point cut. Worried about week inflation expectations. Worried about the yield curve, which is still inverted. This is going to send a signal. Everybody is watching. Side, one or two rate cuts by the end of 2019. People will wait to see how this changes. 2022 is where people will have a sense of the aggressive fed. Turmoil in the rate market could still the market. Tweakeded has already excess reserves three times. This is how they keep the funds rate from not moving higher. They dont want that Interest Rate to move up. When the repo rate is out of whack, that is what you could see happening. Jay powell is seen facing questions about what happened to the rate. Investors are hoping to see more about a standing repo facility. This will clearly capture a lot of attention. Blackstoneairman of group on television a couple of hours ago says he thinks the fed has it under control. A lot of banks these days dont carry the inventory or have the liquid capital that they once had. I think the fed has got the tools, as it sits today to solve the shortterm problems. I dont think they ripple into the basic economy. In the near term, the fed said it is due another 75 billion operation. The fed used to do those before the financial crisis. That is how they held the rate steady. With a balance rate, they have had to change how they operate. There is evolution underway. Focuss certainly a big out of the press conference tomorrow. Our Global Economics and policy editor. Lets now bring in our next guest ahead of the Federal Reserve decision. The chief administered chief investment strategist joins us in hong kong. Thank you so much for joining us. How close they are you watching the funding squeeze . Is an important issue, but in the broader context, what investors care about is further easing not just from the United States but key Central Banks, to give us that offer and we proceed in the late cycle environment as growth slows to make sure this does not get out of control. A markets are now pricing in rate cut. How concerned are you that markets will overreact if they get another cut . That is very interesting. We will have to see what pans out. It is not just about the United States. It is also about what japan signals. Everybody is trying to ease, and broadly speaking, it is about getting as much insurance as we can out there. We are getting late in the cycle. Do you have any concerns about the degree to which Central Banks are propping up equities to the detriment of fundamentals like earnings . Earnings are under more pressure. We talked this morning about the issues in manufacturing and the fact that services have held up well. If we seenings, broader contagion coming from what we can call a bit of a crisis in certain parts of manufacturing, when that spills over into services, which dominates the major industries, that is when investors will take notice. Paul how about the risk from the oil price . We have seen oil pullback from the big spike we saw monday following the attack on the Saudi Arabian facility. Thesesson there was facilities are very vulnerable from drones. Are you concerned that spikes in the oil price could put the equities rally at risk . That is absolutely right. The main take away from the shocking events over the last weekend where the vulnerability of saudi arabias Oil Infrastructure and could that happen again. I think what youre going to see Going Forward is a larger risk premium priced into the actual price of oil, which was arguably missing before. The oil price should come further down as saudi arabia brings back production. We also have the Strategic Reserve in the United States, which is very important. People will be more worried about oil because of the security risks. Shery of course, asia relies heavily on these imports. You are quite neutral on asian equities. Why is that . We have too many crosscurrents. The consumer is still doing ok. Labor markets are fine across the region. It is really the issue of trade and how long it will take the United States and china to reach not just a symbolic or superficial trade deal, but something meaningful. If all we get in the next few months is that china commits to buying more soybeans, that is not enough. That will keep nervousness elevated across asia. Can we expect the chinese yuan to remain stable given that talks continue . Yes. I think that is right. Usingt think china is this weaponized way, as a lot of are saying. Stability may have some slight depreciation, but nothing significant. Not a massive depreciation against the u. S. Dollar or Something Like that. Paul safe to say, expectations are low heading into the trade talks. What does success look like by your measure . All, we have two categories of topics that need to be covered. So first are the quick wins, commitments to buy more Agricultural Products and narrow the trade imbalance that exists between the two countries. That is relatively easy. A lot more comforting a lot more complex are the issues about property rights. If we move in the direction of the second group, the market will be happy with that. Soybeans,nly about you will have a fair bit of disappointment and it means the trade dispute will linger potentially for years. From we saw this rotation growth into value stocks. What are we expecting given forward Going Forward given that we are in the late cycle stages of this Economic Cycle . Where do we go . Very longterm, growth has outperformed value for the past 11 years if not longer. To calllittle too soon the end to growth basic outperformance. We have to bear in mind that constituents have changed a lot or their characteristics have changed. Have 250 million in liquid assets on the Balance Sheet. Pictures become a lot more muddy these days. Bank investment manager, thanks for joining us. Revives come, inventive plans to bring products to market. Next, the latest onlineg tied up for brokerage services. We check on the turnaround plans. This is bloomberg. Paul this is bloomberg daybreak asia. I am paul allen in sydney. Shery i am shery ahn in new york. Sony plans to hang on to hang onto its semiconductor and Financial Services operations, snubbing advice from shareholders. Lets cross to tokyo. The Semiconductor Unit spun off and why does sony disagree . About sony. Bullish sony has renamed its Image Sensing Solutions and that has to do with the fact that it is not about image sensors with sony. That is where the company has a great lead. What that sees is great growth opportunities. We have just seen with the iphone 11, it has three new. Ameras we see a lot more cameras in smartphones and there is growth there. As sony isolates it technology. Been how has sony stock reacting . That is the thing. Sony stock has been doing well this year. It is primarily driven by the Semiconductor Business and in terms of investment, it has gone up 40 since april when it first emerged that investment was happening. I dont think we will be particularly disappointed now that sony says it wants to hold on. Steady profit driver for the company. Arotech reporter in tokyo. Thanks for joining us. The online brokerage venture with a Service Provider is looking at expanding its menu. It is continuing allows users to trade stocks with more companies than the current 100. Speaking exclusively to bloomberg, the lion ceo explains why they felt it crucial to expand the focus. For a long time, it was hard to target working people for Stock Investment activities as security firms operate only weekdays from 9 00 to 5 00. Our services are easier. As people are living longer in japan, it is crucial that we expand our user base. Is our asiag us finance editor. What are they trying to achieve from this . Morning. They are trying to get new, younger customers, like Many Companies in japan. Number a is suffering from an aging company base. Its owner customers are retiring. It needs to get this new generation of customers. Be engagingather through these online platforms. Access to some 80 million get their product before potential new customers. The Online Business is very low margin. We are just going to have to see how quickly they managed to accumulate customers and whether they will stick around. The ceos we interviewed yesterday declined to say whether the venture would be making a profit, when it will make a profit. Isis very early days, and it one of these experiments no merit is pursuing as it tries to modernize its Retail Business at home. Shery shares have jumped more than 40 in three months. What is driving this . While nomura is struggling with Retail Business, wholesale business has turned around sharply. One of the big catalyst of this move was the end of july when no merit reported firstquarter results which showed the wholesale business retaining a profit. As you recall, the ceo announced an aggressive costcutting plan, 1 million of costs to be cut and they are already making progress. The cfo said half those cost cuts have been implement it, so there is a very rapid turnaround for the business. That probably buys them more time to fix the Retail Business at home, which is not just from the aging customer base, but weakening business sentiment, which is affecting all Japanese Investment firms. Japanese are notoriously strong savers. Especially at times like these. A lot of challenges still for no more ahead. The evaluation is still low. Room for no merit to rise, we will just have to see it. Our Bloomberg Asia finance editor joining us from tokyo. Take a look at singapore. Air quality worsening. A grim picture. Hayes hitting unhealthy levels. Seeing elevated readings at the singapore environment agency, advising the public to cut down on outdoor activity. More to come on bloomberg daybreak asia. This is bloomberg. Paul this is bloomberg daybreak asia. I am paul allen in sydney. Shery i am shery ahn in new york. Lets get a latest look at the headlines. The issues are piling up for we work. Just hours after delaying a share sale, the Company Announced job cuts in new york city. They layoffs affect fewer than 10 of the staffing division. The Parent Company postponed its ipo after criticism about financial discipline and corporate governance. Paul Virgin Atlantic says it would add more than 80 new destinations including china and australia if the expansion comes with a stick up of the way spots are allocated. The airline is pushing a model that would create a second flag carrier to rival british airways. The new runway before 2026, but the is already under review. Shery fedex slumped in late trade after cutting profit forecast. Earnings for the fiscal year ending in may will be 11 13 per share, which is a fall of 16 . The ceo says fed ex continues to be badly affected by trade tensions and general uncertainty about policy. Discussp next, we will budweisers reduced price share offer, whether it will raise a cheer. Forook at in bevs plans its asian business. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. This is bloomberg daybreak asia. Japanese exports fell for the ninth straight month in august as trade compounds the global slowdown. 8. 2 , betters fell than a 10 decline in a bloomberg estimate. That leaves a deficit of 1. 2 billion. Week exports make japan particularly vulnerable ahead of next months sales tax hike. Trade talks back on track from wednesday with officials heading from beijing to washington to prepare for next week negotiations. The u. S. Side has discussed a limited agreement that would see a rollback in some areas. Larry kudlow says there is optimism. The World Bank Says Global Growth will decline more than estimated with yielding debt indicating expansion will be a slower. The Bank President says the slowdown is broadbased and expansion this year will fall short of its projection of 2. 6 . Annualoke ahead of the world bank imf meeting next week. Global news 24 hours a day on the air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Check lets get a quick on markets in the asian session. It is a down day for most markets. We are seeing Energy Stocks in the biggest losers. We continue to see wti and brent crude prices coming down. They had restored 40 of the output they lost. Remember, the nikkei has been rallying for the past 10 sessions, the longest winning streak since 2007. The cost unchanged is your level. Stocks are down 2 10 of 1 . Traded talks get back on track from wednesday. Chinese officials preparing the ground for next weeks negotiations. White house economic aid larry kudlow says there is a certain optimism. We spoke exclusively to the executive vice chairman blackstone about his expectations for a deal. A time worry we are in of deep globalization. Postworld war ii, we had 70 years of an economic engine for the whole world, particularly asia and to some degree, extremely up. Australia. That is in danger of changing. It is not just trade, it is populism and it is everywhere. You see it in every country. I do worry about that. The president s approach he has one he has raised some questions, but his approach of going it alone is questionable. However, i am hopeful we will get some improvement in the trade with china. We have already gotten some with nafta. I am hopeful that however awkward some of the process has been, we will come out in a better place. Paul has this really gone beyond trade . A is starting to look like cold war type struggle for global supremacy. I wouldnt want to be associated with the words cold war right now. I do think there is a strategic rivalry aspect of our relationship. However, i am hopeful that we can be rivals as well as constructive trade partners. China is a strong economy. It is going to be growing. They are not going to cut back their ambitions or their investment in technology. But, i think we can live with all that without a getting to cold war. That a trade deal will help that, which is one of the reasons it is more important than its impact on the economy. Paul the question is, when is that going to happen . We had comments today from a ceo saying he sees zero chance of a deal before the 2020 election. You were an optimist in the early stages. Where are you sitting now . I am still an optimist in a sense. My optimism has been tempered in terms of timing and scope. I think it is in both economies interests to have a deal. Both president s are under pressure from business communities that need stability and product ability. Both are dealing with hardline sectors that mean they cant do much in terms of concessions. I think you will see a lot of signs of thawing after china pulls back from the prior deal. I am optimistic we will get something. I just dont think it will be as ambitious as we once hope for. Paul executive vice chairman of blackstone, tony james. Speaking to us exclusively. On, buts plan is back it did scale back. 4. 2rewer is set to raise billion, half of its original target. The unit is expected to price shares next week. Joining us from hong kong is Senior Equity Research analyst. This is a new listing. About half the size of one in july. Why the conservatism . Is a different scope of business now. Australia, which we saw a couple which is sold a couple of months ago. The business is 30 smaller. Surprising that the range is lower. Paul in terms of timing as well, you say this came a little earlier than expected. They certainly do have seem to have the bit between their teeth about getting this underway. What looked like they were being greedy on valuation last time turned out to be a negotiation masterstroke. I think they always plant to get this ipo away by september. They just had the opportunity to sail the Australian Business between then. Most people thought they would come back to market but take longer. We can see the rationale for coming back quickly. Valuations are at alltime highs. Attempt, last ipo inbal multiples are up 1. 7 and a key comparable multiplier is up. Bigger rationale is being able to do that in the region over time. We believe they need an attractive and valuable listed toan equity to get Companies Come to the market. One of the reasons we thought they could be pushing for this ipo is because of debt. This chart showing that they debt 100 billion plus after the acquisition in 2016. Has the australian sale materially reduce investor concerns over debt . I think it has. By selling the Australian Business, they will reduce the net debt by. 4 times. Reactionhe share price after they sold the us trillion business. The stock reacted positively. I think the wolf is already away from the door in terms of investor concerns. That is why i think the core is reallyfor this ipo about that strategy. The ceo yesterday seemed to be a lot more forthright about future m a creating a consolidation vehicle. Shery what about the Business Outlook in asia, not just in china but also south korea . Business outlook in china is very strong. They have been going from strength to strength, outperforming the competition. Korea has a tougher outlook. Over the last three or four years, you have seen beer consumption declining. That has got to do with societal changes around working culture and a tough economy. Backdropnot a strong there. Imports have historically been the high point, which has been driving value in the industry. Inse were growing at 20 2018. It dropped to 4 yeartodate. Part that is to do with japanese trade tensions, but even when you strip out japanese imports, imports are down. We think there is a tough consumption backdrop and i dont think that is going to go away soon. That said, there are potential tax changes coming up and if those are indeed passed by the givesment, i think that flexibility to reach the production. , potentially bring production back on shore and take advantage of the favorable regime for domestic beers versus imported beers, as is anticipated by the tax changes. Paul what about the backdrop in hong kong right now . Listing waswhen the first attempted, social unrest has risen substantially. You dont think that would give them reason to wait for a little longer . Situation incal hong kong adds a degree of uncertainty to the ipo. If you look at what has happened to beer valuations in hong kong over the last month and a half, 7. 5 , and, beer is up in terms of the multiple, it is broadly flat. It has not hit the beer stocks. Part of that is to do with the fact that none of these companies have meaningful operations in hong kong, and that goes for asia as well. So far, we have not seen an impact from the political situation, but that is probably the biggest risk to this ipo over the next couple weeks, if there is some major material change. That is the only thing i could see that might derail this. Shery thank you so much for joining us. Coming up next, feeling the squeeze from demand, we speak exclusively with the Diamond Producer Association ceo. This is bloomberg. Paul this is bloomberg daybreak asia. I am paul allen in sydney. Shery i am shery in new york. China is the second largest diamond market in the world but demand is slowing as Economic Uncertainty picks up around the world. Diamond Producers Association ceo joins us with an outlook. Thank you so much for joining us today. Give us your take on what you are seeing in the industry right now as we continue to see concerns over a Global Economic slowdown. Perspective,ngs in the diamond market is an 85 million market, which 45 is in u. S. And 60 in china. Historically, the past 24 years, we have seen good growth, 24 percent in all major markets. Slowdown,has seen a especially in this part of the world, as you can expect, as a result of a number of factors. U. S. Gold prices, high dollar and obviously, trade tensions and unrest in hong kong are having an impact. Shery is the slowdown bigger than in other regions . Really to the same extent. We are seeing good resilience in the u. S. Market. That is really a trademark of the u. S. Market. It keeps growing year on year despite the fact that it is the largest market in the world, and europe is also fairly resilient. What we have seen is india, china, hong kong being the pain point this year for a number of reasons that we all know well. Linked of course to the macro Economic Uncertainty, but also specific factors to the region. Market,thin the diamond if we look at to beers, it saw a 44 slump in sales year on year, some buyers raise concerns that they would not be able to raise money. Is there a surplus at the moment . The way the diamond industry works, it is a huge supply chain. It is a big pipeline that takes about two years from the time the rough diamond enters the pipeline to the time that the jewelry is sold. Whenever you have got a slowdown or a shock on the demand side, it ripples up the value chain. One of the things we have seen as a result of the current uncertainty is not only in this part of the World Consumers being precious and postponing cases when they get married when they get married, they dont postpone usually, but when they can. They are trying to reduce inventory levels, whether they are retailers or traders. That has a direct impact into how much rough diamonds you can sell in the pipeline. That has resulted in lower rough diamond sales and prices at the moment. Paul how long do you expect to see that situation persist . Is a good thing the Mining Companies are responsive to the situation of their customers. We have seen that in the past, in 2008, for example. There was massive relief given to the trade. What you see,run, if anything, diamond supply is plateauing, if not going down. Low Single Digits every year for the next 1015 years. That situation is going to balance out. The longterm fundamentals are quite strong. China represents 60 of world diamond production, when it is over 30 of luxury goods. Huge opportunity for catch up. More and more women are buying diamonds for themselves, where in the past, they were buying luxury brands. We see the growth of the affluent middleclass, which will make china a major Growth Engine for years to come. That is still in the pipeline. We are going through a soft time, but in the longer term, the fundamentals are strong. Shery are there other parts in asia that you can still play the consumption card that youre actually betting on the middle class to go and increase purchases of diamonds . Mentioned the main asian markets, with china, india, and hong kong together with less than 25 , but we see Southeast Asian markets, like indonesia has great potential. Obviously, a very high population, but they are far behind. The japanese market is strong. It is a very mature market. It had its glory days in the 1990s during the bubble. We are looking at china and india as the Growth Engines for the future. Paul diamond Producers Association ceo, thanks for joining us. Coming up on Bloomberg Markets, we will be sitting down with the malaysian Justice Party president for an exclusive interview at 11 00 a. M. Hong kong time. 1 00 p. M. In sydney. This is bloomberg. Paul the u. S. Semiconductor industry is waiting to see if President Trump will make good on his promise to ease demand on sales to huawei. Our Technology Analyst joins us now. How far is this uncertainty creating Downside Risk . Morning. We are seeing significant Downside Risk. Right now, the Consensus Forecast is. 2 percent, so pretty flat. We see risk that will be deeper this year as the trade war extends and way way extends. Uncertaintiesal are causing tech buyers to pause. Isyou look historically, it hardware, switches, routers, semiconductors that bear the brunt first. Software and services tend to get hit later. We see Downside Risk for those key sectors. When you think about i. T. Infrastructure, 1 trillion per year in spending, that can have a major impact on the Global Economy. Shery what is it going to take to reverse it . A trade deal between the u. S. And china, or what else . We really do need a trade deal. It is not just in the sense of removing tariffs. It is easing uncertainty, getting greater clarity of what the supply chain looks like. The Technology Supply chain has a focal point in china. You cant replicate that anywhere else in the world, and technology companies, between the smartphone makers, servers, they rely on china for lots of components. Getting greater clarity on the Global Supply chain, and when you flip the script to the buyers, people providing broadband to homes in rolling out 5g, they are not going to invest until they know the situation with way with way way. That is a key for many carriers globally. Matthew counterman from bloomberg intelligence, thank you so much for joining us. Lets get a quick check on the latest business flash headlines. Americas largest ecigarette brand is trying to figure out why its products have been pulled from online shelves in china. Juul started selling its vaporizers last week, but says they have already disappeared from the sites. The company says it wants to make products available again in what is the Worlds Largest tobacco market. Paul toyota is not waiting for the u. S. And japan to finalize the reported trade deal. It is investing almost 400 million at its texas plant six months after a pledge to inject 3 billion into its u. S. Operations by 2021. The moves are seen as efforts to. Ead off american tariffs toyota said there is no connection to the trade negotiations. Shery a unit of chinas largest bank plans to sell bonds. Almost 1. 5l total billion and could come as early as next month. People close to the move say the pricing has not been fixed yet, the first trench will be a 7 billion yuan note, while the second is a fiveyear, 3 billion bond. Paul sony plans to hold onto its semiconductor operations, rebuffing a series of proposals from american investors. Ae fairpoint fund disclosed 1. 5 billion stake, and encourage the company to sell the insurance operation and focus on entertainment. Holdings may up expand its new online brokerage venture with a global venturing Global Holdings venture. It is an this top 100 stocks on the platform. Speaking to bloomberg, the coceo said it may include foreign stocks as a way to help people take a first step into global trading. Lets get a preview of what to watch later on this morning. Bloomberg markets anchor joins us now from hong kong. Good morning. We are starting granular, then i will move to the big things we are watching. Oil is back below 65. This is your contract on the chinese economies trade. We will see when that updates in a couple of minutes. Should reflect the downside. Pacific, reporting that it has asked its unit to seek a bye out of its building run smart properties. It is part of this cathay pacific. We reached out and they declined to comment. Very quickly, we hit a technical level last week in shanghai and dropped out. We hit our head on the ceiling and we are back to level. We had a big drop yesterday in the chinese market. The biggest drop since early july. A will track this after weaker fixing for the first time in 18 days. Shery thank you so much. We will be looking forward to that show. That is it for bloomberg daybreak asia. Our markets kittredge our markets coverage continues in hong kong and shanghai. Bloombergd for markets the china open up next. 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. Yvonne you are watching Bloomberg Markets china open. We are looking at the mainland markets and what is going on in hong kong. Readerif youre a lip you probably understand tom. Top story, the fed will stack and step into keep. Yvonne investors will be indicatethe figure may a changing level of