Transcripts For BLOOMBERG Bloomberg 20240703

Paul hello and welcome to daybreak asia. We are coming down to asias market opens. Shery asian stocks are poised for a week open with Interest Rate risk overshadowing the deal to avert the u. S. Shutdown. Mixed messages on factory activity. Data picking up for the first time. Plus fords ceo blasts thuw demands for future battery plants with expanded strikes into their third week. Paul lets look at markets around the region. Trade in australia, we moved to weekend the assets is trading. We may see soft volume t because it is a bit of a strange day. Outh wales here, much of the country is trading, the ai sex is trading but we have action at the moment. The bon side is quiet. We do course have a reserve bank meeting rro with Michelle Bullock having hr first meeting in charge as governor. We seem Consumer Prices taking up inustralia, adding some weight to the idea that the rba ma have one more move left in the. The inflatiead later on. Aussie dol is 64. 31. Elsewhere have nikfutures looking like this. The n a lot of change. 149. 59 but fes pointing to a ghter open. Weve got the survey out later on as wel a bit of a mixed bag. Bloomberg intelligence seeing the Manufacturing Index may sink on demand out of china although services might pick up. The yen making japan attractive trading in chinese futures as well. 850 futures are weaker although markets will be closed in china today. A number of markets closed throughout the region for the holiday. Not just china but also hong kong, south korea, no action today read shery u. S. Futures trading in the green. The first reaction since the u. S. Government averted a shutdown very narrowly. Risks remain because we are talking about the government until the funding runs out. So it is kicking the can down the road and we continue to see signs of stress emerging broadly. We are talking about big losses for the s p and fewer big rebounds than we have seen in the last month or so. All of this as the nasdaq 100 outperformed because we had treasury yields down but still multiyear highs. 10 year yield at the highest level in 16 years. 30 year yield peaking at the highest since 2010. We continue to watch where the fed goes from here and the narrative to get some sort of clue about where yields can go. In the meantime, the dollar is strong. And we are seeing very big gains for oil prices which would be pressured by a stronger u. S. Dollar but of course we continue to see supply issues with russia banning exports of diesel and that really playing into the supply and demand dynamic. Paul we had a deal to avert a shutdown of errol agencies. The government will run until november 17. It will come at a heavy political cost to Kevin Mccarthy. Lets get over to bloombergs washington correspondent kailey leinz. So how did the deal happen and what are the questions that we are left with . It was extremely lastminute. They barely got this done before the deadline but the deal did happen in a bipartisan way read you have more democrats in the house of representatives voted for it than republicans who are in the majority read and they won by a landslide in the senate. This will temporarily keep the government funded through november 17 at which point we may have to do the whole song and dance again, but it is keeping the status quo of spending or not spending cuts and 16 million in disaster relief. Something the Biden Administration been pushing for. Something else the administration has been pushing for and did not get in the package was ukraine funding. This has been a Sticking Point among republicans. Many far right republicans are not supportive of funding for ukraine. In order to get enough people on board, funding was not included. Something else not included were measures related to the border. That was something that they did not get. Spending cuts as well they do not get. And it is endangering Speaker Mccarthy even though this was technically a victory and the government is open and not shut down. Shery Speaker Mccarthy, the bipartisanship that we saw in passing the lastminute deal, it means potentially he could get help from democrats in staying in the role . Theoretically yes, he might need help to remain speaker. This has hung over his head for some time. When he became speaker he had to agree to terms including that anyone member could file a motion to vacate and now matt gaetz of florida is saying he will do that within the week because he thinks the speaker has defied the wishes of conservatives when it comes to spending and Appropriations Bills. The motion to vacate will require a majority to oust the speaker. If there are republicans who decide they would like the speaker to exit the position, democrats would need to come along. The republican majority would not vote for this. Ive spoken with democrats and they suggested that if the speaker worked to keep the government open they would lend a hand to protect him, save him, the speakers gavel. We would have to wait and see if that was going to happen and Hakeem Jeffries has not committed either way at this way. Shery kailey leinz in washington as the government is running until at least november 17. In chinas economy, mixed signals on the outlook to businesses. A sign that confidence in postpandemic recovery is fragile. Annabelle joins us with analysis of the pmi survey and i want to start with the official manufacturing data because really good news is few and far between when it comes to chinese economic data. A little bit of upside here. This really was a bright spot out of the pmi data because we had official numbers coming out in the private surveys that came out yesterday. Kicking off with the manufacturing gauge, this is where it looked more encouraging. Take a look at that chart. 50. 24 september. We have not seen above the 50 line since march. So that is positive. Better than what economists had expected because the consensus had been 50. 1. Lets look at manufacturing pmi numbers because those climbed to 51. 7 in the latest reading. It had been 51 for august. So above what economists expected. Both readings overshooting expectations. And as well with the nonmanufacturing pmi managing to achieve that in september even though we are past the peak of travel for china. Definitely positive signals coming out of this. We are looking for any indication that we have seen the bottom for the downshift in chinas economy. But of course not all good news as you can expect. Mixed signals coming through and what showed was the pmi for small firms that extended a contraction to six straight months. It gives you a signal of the fragility of economic recovery. And any sort of hike will be in support of measures from policymakers. Paul how about private surveys . Annabelle so this bucked the trend from what weve seen from official readings. The manufacturing pmi declined to 50. 6. It had been at 51 flat in august. The consensus is undershooting expectations for private manufacturing pmi readi. That was driven by a swing in the employment component an that went into contraction. It had been expansionary in august a sign that businesses in the private sector is cautious on hiring. There is a difference between these surveys because you have the official reading and the state owned enterprises. The private readings focus on private businesses and exporters. So again it just tells us in aggregate what were hearing, perhaps the state owned enterprises are looking healthier. It is small and midsize businesses that are under pressure in china. Shery also the property sector and the golden week holiday seem to be a key test for the sector. What are some signals we are seeing at this point . We are in the midst of the golden holiday. In china and this will be tracked for just how much appetite there is for property in the market. And while that is underway we had data coming out from the september time that showed us that declines clients prices started to moderate. We still saw a contraction in the value of home sales for the 100 biggest real estate companies, down nearly 30 on the year but better than august because the contraction at that point was near 34 decline according to preliminary data from the china real estate information court. Its a time in which we see more stimulus support measures from policymakers to try to spur homebuying in the market. Its interesting to note that the Bloomberg Survey from chinese stock investors, they are still saying that the worst is yet to come for the property prices. You can see what the top risks are for chinese equities going into the fourth. And its a property crisis that people say still has a ways to play out. And ahead of geopolitical tensions has been another reason why theyve been so bearish on the economy in general. Paul lets turn to broader markets. Few signs of panic that pushed the index into its first losing quarter in a year. Signs of stress are emerging that go beyond the u. S. Government shutdown. For the outlook for the Fourth Quarter, lets bring in our strategist mark cranfield. Weve been talking about how weve taken one risk off the table in terms of the Government Shutdown. But weve got the fed talking higher for longer. How is the Fourth Quarter looking in this environment . Hit really all comes down to tury yields and oil at t moment. Traders are gunnin hher treasury yields. From a p l point of vi bearish traders have got the incentive to try to push options next week. We have options next week and at the moment, the mood seems to be that they want to try to push back the 10 year yield close to 5 , so still more than a week to do that. The 30 year is a tricky one to get done. It is unlikely to improve in the treasury market. That means we will be in for a negative week that will spill over into equities as well. Even though we have this deal, the good move is not going to last very long. Its going to be treasuries and if Oil Prices Stay in the 90s as well, that just adds a bearish dynamic to the whole situation, so we will get a continuation of what we were seeing through september where the dollar stays strong, treasury yields are biased to the upside and that is underpinned by oil prices. Very little respite in the near time for equities. Shery we had a difficult couple of weeks in the later part of september for equity, but at the same time we have continued to see any sort of excuse for investors to jump into the markets. When we are looking at the market moves behind, are we seeing signs of stress that are not so visible in terms of the index . At the same time, some risks that investors are not perceiving at this point . Still very concentrated in aia and other tech names, if you look robbie, the market is not doing well in the United States. People are being very selective about where they put their money. Its not really working, has not worked as a disaster gauge for a very long time. People are fed up with losing money and finding it does not really respond to market dislocations. For now, if you want to take a defensive approach, youre better off using u. S. Treasuries to do that. That seems to be working better. So people will avoid using the vicks, we can discard that is useful the time being. And look toward options on the s p 500, the skew to see if traders are biased or not. Its going to be a tricky time course, traders will be able to find gems in ai. For the rest of the market, theyre looking at shortterm yields, thats a huge hurdle to be. As they go toward the end of the year, they will be thinking i might as well just lock in some shortterm yields and forget about equities until 2020 or. Shery mark there with his outlook on the markets. Still ahead, Investment Strategies from integral which went public less than two weeks ago. A partner joins us for that. But first, to hear why Oxford Economics says china stimulus measures could prove virtual for demand on the golden week holiday. That is next. This is bloomberg. Shery taking a look at the week ahad, its a big week f central bank decisions. On tuesdahlle bullock will make her first Monetary Policy call as the new governor of the rba. Econsre divided on whether the ll raise its key rate again this year. On weds days after gdp data show the economy pulling out of recessio economists expect the bank to stand pack. Lanka cutting rates to keep upwith a plunge in inflation. The fed sends borrowing costs upward and in india a hawkish hold with tio above the 6 target ceilin read paul we have the u. S. Government avoiding a shutdown. Jobs data on friday will show a slower pace of hiring and other economic releases to know, the s p manufacturing pmi figures throughout asia and inflation data and Industrial Production numbers from south korea and the cpi print on the philippines. That is your week ahead. The Bloomberg Economics says chinas officials show the pmi survey picked up new drivers of growth and highlighted economy recovery unbalanced. Lets discuss this with luis, lead economist at Oxford Economics. A mixed bag from pmis out of china over the weekend. Official number showing improvement. The gauge in slight decline but we have everything in expansionary territory, so is this a sign that the economy in china is starting to stabilize even though we have got the property continue to lurk in the background . Yes, it is clear that we are at the bottom. The question is how long the bottom is. And i think they will look at data that has come out of the official pmis and private surveys and be encouraged by the expansionary territory. What will be in irving is the fact that markets are not performing. Markets in china are presenting a risk so we will be looking to more stimulus and economic recovery a little bit more. Paul a holiday in china and hong kong and optimism around travel spending, food consumption, that type of thing. Is it really possible to tease out Consumer Sentiment from what is going on in the property sector . I think going into our ons, this golden week will provide a trigger to the economy. The initial sales,in terms of spending, intentions, though seem to be on a positive trend. We are positive that this could be the engine that starts an increase in decent note for china. And we think the property risk is likely to be meaningful. But we should expect temporary boost. Some of these structures have come into play again. Shery who will be the biggest winners in terms of neighboring countries that banked on chinese spending . If you look at where you might get a boost from travel, they suggest countries like japan remain quite weak, relatively cheap. Japan, singapore, korea seem to be key. Taiwan as well but it has been a destination for tourism anyway. So those are the key economy that seem to be benefiting from a temporary spending boost. But beyond that, it might be a stretch to assume that the region would get a meaningful boost from this. Shery we have a centralbank decision in asia with the are b. I. What is your expectation for the key rate . Because weve seen a hold in the environment with inflation being pretty high. At least for the target. Ay at hold, keeping its policy rate at 6. 5 . The key is really the guid it is providing. Is hawkish guidance that weve seen. In general, given the fact that inflation has climbed, there will be authorities taking on that inflation is declining. And that should provide comfort for them to keep rates. The other thing that we are tracking is Consumer Survey is when it comes to inflation. Those do not appear to be anchored despite good prices. In general, it should be fair to assume that they would keep risks on hold this week. Paul just quickly we have the survey for the Third Quarter coming out in a little under 30 minutes. What are your expectations . In terms of what it mean for boj policy . In general, we have seen that consumption and Business Investments in japan has had some moderation. The survey that is coming out in the next few hours will reflect that. But whether that shifts bank of japan policy, its unlikely to move the needle. Weve seen a surprise move in the july meeting, but in general, the 10 year yield, they would stay quite comfortably there which old allow them to assess the situation and in naion to where the trend goes. Shery lead economist at Oxford Economics with what to expect on your Economic Calendar this week. We take a close look at the state of economy in todays big take. A recession is more likely than a soft landing with risks including higher rates in oil prices. Subscribers can read that on the terminal and bloomberg. Com. Plenty more ahead, stay with us. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Shery take a never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. So. I know you and george were struggling with the possibility of having to move. Hows that going . We found a way to make bathing safer with a kohler walkin bath. A kohler walkin bath provides a secure, spalike bathing experience in the comfort of your own home. A kohler walkin bath has one of the lowest stepins of any walkin bath for easy entry and exit. It features textured surfaces, convenient handrails for more stability, and a wide door for easier mobility. Kohler® walkin baths include two hydrotherapies whirlpool jets and our patented bubblemassage™ to help soothe sore muscles in your feet, legs, and back. 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Managing to avert a Government Shutdown over the weekend so a lastminute deal coming through. It is the first day of the trading quarters so for the Fourth Quarter i should say. Essentially seasonality factor taken into account this is typically a period where we do see stocks rise around 4 if you look on a 10 year basis. A positive factor as we get trading underway, the first day of the fourth trading quarter but a lot of key markets shut for the golden week holiday and for other Public Holidays. Shery we are watching the u. S. Market reaction in the future session given the Government Shutdown averted narrowly at the last minute. There are more challenges ahead for the u. S. Economy, auto workers strike into its third week now. Attentions tensions are rising, su keenan joins us now with more on this and the walkouts being expanded at this point. Sue that happened friday and no surprise, both gm and ford who were part of this escalated activity the ceos expressing frustration. The uaw using a new strategy of upping the pressure as the strike continues. This chicago plant was newly targeted on friday, lets listen to what the uaw president had to say in a livestream address. Sadly despite our willingness to bargain ford and gm have refused to make meaningful progress. That is why at noon eastern time today we will expand our strike to these two companies. To be clear, negotiations have not broken down. We are still talking with all three companies and i am still very hopeful that we can reach a deal that reflects the incredible sacrifices and contributions are members have made over the last decade. Su ford ceo swiftly had back on friday saying in his own webcast he thinks the union could have reached a compromise on pay and benefits already but is holding the deal hostage over battery plants which are not even built yet. And the gm ceo had similar tough words accusing the uaw leadership of dragging out the strike longer than needed as part of a plan to further their own personal and political agendas. She says it is clear there is no real intent by the uaw to get to an agreement. Those are tough words. Notably stellantis the parent of chrysler and jeep was spared this latest escalation in strike action because the uaw president said there was a lastminute breakthrough in their negotiations and that there is progress. Even so stellantis is saying they are still far apart and there are gaps in their negotiations. It looks like all three automakers nowhere near resolving the strike. Yes, a resolution a lngway off but as the union said negotiations havenot collapsed so what happens next . Su it is interesting to note that the uaw is saying talks are continuing and that is wh the three automakers esaying, hey we are at the table. Meanwhile there are concern that the lonethe strike goes the more damage it does to the already fragile auto supply part supply supply chain which is yet to fully recover from the pandemic. So while originally offered 25 raise the key isuewasnt concessions, not so much on the money. So there is concern that the uaws monetary demands are an issue, further the expanding workout runs the risk of depleting the uaw strike fund too quickly. We have seen all of the automakers take hits, particularly on friday. You are looking at the red on the screen there, striking workers get a 500 a week stipend and not fund it looks like it could be drained fairly quickly. Lastly, ford says it is waiting on a deal with the uaw as well as clarification on an inflation act from the Biden Administration and is therefore hoping all plans to go forward with a battery plant. That is only increasing tensions between ford and the uaw. A difficult week ahead for strikers and the Companies Still at the negotiating table. Paul bloombergs su keenan there, we are talking batteries and socalled Critical Minerals are becoming more important as the world starts to change how it produces and uses energy. We spoke to one company that is looking to recycling rather than mining to provide a cleaner, greener alternative. Think about all the cell phones that we have. Everybody tends to get a new phone every one to two years and then you think about an electric vehicle. It is a much larger form of electronic waste, what do we do with them at end of life . Every piece of Clean Technology it starts with clean up Minerals Like cobalt, nickel. We need more of those metals to transition in the timeframe we want to transition and need to in order to move away from fossil to hit our climate goals. To do that we need a better way to refine these Critical Minerals and we need to figure out that Waste Management solution so that we do not have massive landfills of these electronic components. The world is changing its entire system for producing energy attempting to replace the whole base of the economy and with that has come a growing need for critical metals. These are the materials that go in to make everyday items that people have come to rely on it like smart phones cars. And cycle is a metal Refining Technology company sophie look at the existing Refining Technology out there today there are hydrometal energy which is a long word to say they use solvents and acids to pull these metals out at end of life in these different bodies or they use pilot pyro metal energy which is a fancy way to say they melt everything. Those have very high Carbon Footprints. We wanted to pull these metals out with the same efficiency or even higher at a lower cost and with a much lower Carbon Footprint and so it is our technology that can reduce Carbon Emissions by up to 92 compared to traditional mining and we can reduce the Carbon Footprint by up to 44 compared to traditional methods in recycling. This is the proprietary abstraction cell that will get the cobalt in the nichols into the form we want and then we pull it out into a separate tank. I like to think of electoral extraction at the highest level like a brita water filter that she would have in your home fridge. You put tap water in it and there as that activated carbon cartridge you put in the top. Then activated filter takes out all the heavy metals that could be in your Drinking Water in that single stage. We have taken the same basic idea of using a high surface area filter and filtering out water but applying an electrical current across that carbon filter so that it selectively removes one metal over another. So when we work with scrap facilities they will collect all of the batteries from your cell phones, laptops, then they shred them into a material called black mass. This is where all of the cobalt, the nickel, the lithium in the mac means remain. It goes through our filter stages with a different electrical current across it, you can pull out the cobalt and any of the other materials in there and we pull them out in their metal powder form. This is the product on the others. And cycle says its process has far lowered Greenhouse Gas emissions in standard from standard methods but like any Technology Deployment and use will be the true test. The startup is also dependent on two types of demand, demand from people who have dead batteries and scrap and demand for the recycled products. While there is possibility for serious growth could be a bumpy ride. This is a community that is not used to seeing innovation, they tend to be very slow moving and using the technology they have used for hundreds of years. And for good reason, they always worked before. But as we move into this new Energy Economy we need to rethink what the technology looks like and one of her biggest hurdles is helping this community undertand what were doing, why we are doing it. The world of refining has always had these large centralized facilities because that was the only way to reach cost parity and make the economics work. What we have done that is very different from what has done been done in the industry before is create a modular distributed recycling and Refining Technology that can go on site with our Technology Customers both in the recycling space and mining space so we can cut out transportation. The cost and emissions associated and then meet the volumes of these stocks we have here at our disposal here in the western world. We are currently at our commercial scale which is a single unit that can process 3000 metric tons of input per year and scaling for us is simply adding modules in parallel. We will always need more metals. You can think about Critical Minerals as the new oil, they sustain the clean Energy Economy so we needed to figure out a new way to refine these materials to create a world as sustainable as the one we have always imagined. Shery coming up a conversation with newly listed japanese private equity firm integral on their Market Outlook next, this is bloomberg. Ahhh shery we are counting down to the start of trade in tokyo. In a few minutes will begetting some of the results of the thirdquarter survor businesses which Bloomberg Economics expects to show a mixed bag. Also out in the next hour the bank of japan manufacturing pmi for september, we will also get more insight on the bojs thinking when it releases its summary of opinions from the september policy meeting that is out at 8 50 in tokyo or 7 50 in hong kong. Integral is a japanese private equity firm that listed just last month on the tokyo stock exchange. Its ipo followed a 16 year history of investing, it amassed more than 1. 8 billion dollars in assets. Lets discuss the opportunities they are seeing and bring in representative director and partner, it is great to have you with us. We have seen a lot of optimism about the japanese markets. Is that a key reason you decided to list now . Tell us about your motivation behind going public in this environment . Good morning from tokyo. Thank you for asking. Thisis Good Opportunity for us to see the japanese property market, we actually set up the company in 2007. In the pas years we have seen a of development in the Company Country in the past 10 years or so. We have seen a very tiny market of chinese Property Fund market but since 2000 onwards we have seen a lot of growth in the private equity sector so this is a Good Opportunity for investors to see the japanese market. Haidi i want to delve into the listing itself bcause we have seen some Companies Going the other direction because we have more activism in these markets and they dont want to be a Public Company anymore. Do you worry about those changes we are seeing in the environment in the stock market or is that just net positive for the development of the japanese stock market . There are so many undervalued companies which valuations are under book value even. Over a thousand companies under the book value. So in our Investment Firm we have taken say even private transactions even so this is a Good Opportunity for the investors to see the going private transaction. This is our way as well. And in our case we actually had listed so we got some cap injection to our Balance Sheet. Using that we will go ahead for more opportunities utilizing our Balance Sheet money as well in addition to our fund investment. Paul so you invested in 31 companies so far, which sectors and stocks at the moment are exciting you the most . There are some ups and downs in the market. As a private Equity Investor we have seen a lot of industries may be going up, going down, some restructuring issues would be very important to economic downturn. And upwards maybe the i. T. Sector would be a good sector for us to see more growth. We are trying to see as Many Industries as possible but seeing the economic cycles at this moment i. T. Is very promising. We have also made investment in some chapter 11 cases. We see a lot of Different Industries as well. Paul as you are speaking we do have a taker of the japanese yen it is a very weak 149. 54. I am wondering to what degree this weekend is helping to attract Foreign Investors . Yes indeed. 50 of our Fund Investor partners are from overseas. They probably see some promising situations for the yen market, maybe in the coming years later. There will be some strengthening of the japanese yen that they may enjoy the Currency Exchange valuation as well, but at the moment for the conservative investors as well there will be a Good Opportunity for them to see the japanese market with a weaker yen as well. You have a good point. Shery you talked about how the japanese pe market is now growing but at the same time is so much smaller compared to other developed economies like the u. S. Why is that and what are the challenges for the industry . In my personal history i was with the merging equities advising business 20 or 30 years ago the japanese market was very small. But now the japanese market is very huge and promising for the future as well. Likewise, private equity sector has been very small but i believe it is high time to see big growth of the japanese private equity sector. Yes this is a good time. Shery what do you think is the biggest change that japan needs right now . If you look at all the systems, taxation, accounting system, and all aspects you can see the good developed market. It like the u. S. Or the u. K. The same way. And transparency, everything is good. Just japanese management of the industry sector people, they tend to see more stable change in the industry or market. But we would like to give them a Good Opportunity to use the private equity money for them to seek good growth in the industry sector. They gradually understood how to utilize the private equity money for their growth so as i said since 2015, transactions will be huge as well and many business succession cases from Family Business also took place in many occasions. We see a lot more opportunities because they got accustomed to the private equity ney or behavior. In all senses. Paul all right representative and director at integral, thank you for joining us. We do have breaing out of japan. It is the team can thirdquarter survey results and on most metrics it is looking lik a beat, te large Manufacturing Index coming in with a rating of nine. The expectation was for a reading of six. We were expecting a bit of a weak demand outlook from china but the large Manufacturing Index coming in pety strong. Nonmanufacturing also trngerthanexpected reading of 27. The expectation s for a rea of 24. A big jump up from what we saw in the Second Quarter as well when we had a reading of 23. The Large Manufacturing outlook also beating expectations, a reading of 10. One area of a mess the larger nonManufacturing Outlook for the Third Quarter, a reading of 21. They were expecting a reading of 23 there. All industry largecap acts, 13. 6 , and that was a beat as well. Not a lot of change there for the yen. Shery very surprising numbers that youre going to beat on the Manufacturing Outlook but missed on the nonManufacturing Outlook. Given that foreign visitor arrivals, i thought that the nonmanufacturing Services Side of things would be stronger but theyre also getting the boj releasing their summary of opinions of the september policy meeting. They are now saying they need to continue with easing patiently, we are seeing that Japanese Companies are seeing 2. 5 percent year on year inflation in one year so that is still above their target. One number saying there is no need for additional why cc ycc tweak with yields staying stable. The yield from japan was when the central bank kept the ultraloose policy and kept rates on changes unchanged and were worried about extremely high uncertainties and we are seeing that one boj member still seeing the need to continue with easing patiently. Plenty Bloomberg Bloomberg more ahead, this is bloomberg. Pau lets ke a look at how we are tracking around the markets that are open at the moment. We are open here in australia earlier than you might anticipate, we did move to daylight savings time over the ekend so the asx up and running. To the bid of 4 10 of 1 , it could be a bit of an unusual day in australia. We have a Public Holiday here in new south wales, with trading going ahead today as well as the rest of the country soa ittle weakness in the market at the ent. Financials, one of the worst performing sectors. We have energy somewhat weaker as well but the materials sector, one of the heavyweights pretty much flat at the momnt in new zealand the any easy x half of 1 , closing on election day with just 12 days to go. The Prime Minister hsovid at the moment so he is unable to campaign. Have nikkei futures meanile do to open at the top of the hour, a bid by a third of 1 after that most pitive read out we just had. It lets tak a look at how we are trading on currencies at the moment, not a lot of change from the yen after that survey. At 149 point 57 at the moment keeping a close eye on that at the moment for any potential intervention from the mnistry of finance. No sign of it happening yet, dollar spot index continuing to show strength in the offshore yuan meanwhile at 730 point 15 we wont have any trading in china today of course closed for the golden week holiday. Coming up in the next hour we hear why you bp has downgraded Consumer Discretionary to underweight and upgraded global financials, placed plus credit sites joining us to discuss the fallout from evergrande. The market open in tokyo next, this is bloomberg. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Nice footwork. Sman, youre lucky,. Watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Paul this is daybreak asia we are counting down to asias major market opens. There will be a few missing today, namely the kospi. There will not be any trade in south korea, it is a Public Holiday and the golden week holiday across much of the region. No trade in china or hong kong. We will be up and running in japan. We are trading here in australia as well, a little weakness at the moment but we just had a pretty interesting read from the third qua Tankan Survey. Ey the outlook for manufacturers came in below expectations which was interesting especially the nonmanufacturing side of things because we thought fori arrivals would lead to people being more optimistic about the services sector. We are getting the first reaction in terms of the markets when it coto that Government Shutdown in the u. S. , nrwly avoided. We will run into that conundrum again in november. For now we are saying that upside in u. S. Futures being translated io he markets in japan. Nikkei coming online of 8 10 of 1 . We have seen two sessions f losses alrdyor the nikkei so perhaps a ltlbit of a bnd there in todays session. Has the japanese yen also is trading at that 149 level. Very close to 150. We have been losing ground against the u. S. Dollar for four consecutive weeks given the strength of the greenbc that just saw the best qrt in a year as well. We hvebeen watching the 10 yearields closely trading at that 77 level given that we had seen the biggest selo in jgbs in about 25 years or and the boj having to announce that unscheduled bond purchase operation because long end of the yield continues to surge to decade highs. Of course we are digesting the latest when it com t those Tankan Survey numbers with the large manufacturers coming in at nine with the estimate at six. We are seeing the 10year treasury yield, also passed that 4. 6 percent level after treasury yields consolidated in the previous two sessions. They are talking about the highest levels in abot 16 years. Paul we just got an alert here on the terminal, melbourne insite inflationfo the month of september. A little weakness in fact flat reading on the month year on year figure dclining to 5. 7 . We are down from six point 1 . The melbourne insitute inflation is the official gauge we get from the bureau of statistics encouraging heless to see that number edging down. As we look ahead to the rba ing which is on tuesday. A quick look at markets, bit of an odd day here in australia at we are weakened by a third of 1 but a check of the country is out on a Public Holiday. Things are a little quieter than usual the aussie Dollar Holding Steady at . 64. Crude prices, pretty strong. Brent at the moment 92. 49. A very strong oil price causing a few concerns for inflation and growth. Shery lets bring in our next guest who is looking to add to Global Equity exposure on the current weakness, we have seen already two months of losses for global stocks. With us now is head of Asian Equity Research at ubp. Always great to have you with us. Where are you looking for opportunities in the Global Markets . We are looking to add to equities into the year and. We think the current weakness is an opportunity to do that. We have made a couple changes to our global sector preferences, both related to where we are in the cycle, we are about 18 months after lift off of Interest Rates. First we think it is going to get a little tougher for Consumer Discretionary. You have obviously got savings being depleted, savings from covid. You have the labor market in the u. S. Weakening slightly, it is still very strong. You have got student debt repayments starting again probably. And obviously globally china is a little weak as well so we think that is an opportunity to take some profits in Consumer Discretionary. At the second level, on the others of that we have been underweight in financials so far in the rate hike cycle and we think it is time to neutralize that. If you look at previous rate cycles, the bestperforming and most frequently bestperforming sector in the six months after the last rate hike, which we may or may not have seen already, has been financials. We think it is not a time to be actively underweight on financials and we will neutralize that position now. Shery how does equities compared to cash because we have seen a rise in yields making it more attractive for sixmonth treasury bills that are yielding 5. 5 at the moment or so. Kieran if you are just looking at five year yields on cash obviously it is better right now. I think you need to worry about in the longer term. Where we are in the cycle and are you a believer in the soft landing scenario which increasingly the market says it is. And that is our base case as well. But current s p 500 performances more closely tracking rate hike rate hike cycles in recession that then the soft landing. We think thats the opportunity and we would be more biased towards equities rather than cash. Paul i just want to get your reaction to the Third Quarter Tankan Survey we had out of japan. A lot of the numbers encouraging buturied in the data one year Inflation Expectations coming in at 2. 5 . Do you think the bank of japan might be right that may be more is needed for inflation . Kieran they might be right but certainly the boj really does not want to do anything. I think they are to wait it out. See when the fed stops tightening and starts possibly cutting the middle of next year and the effect that that could have on yield differentials and possibly the yen. It really does seem like the rise is to try to do nothing as long as possible, and the current performance of the topics so far this year, a lot of it is due to the weak yen and for thu. Dollar investor, japan has not kept up with the s p this year. Paul on the subject of the weak yen, we do have a chart that shows hedge funds really raising their bets on yen at shorts so an expectation that we may even go further south from here. What is your threshold for the ministry of finance doing something about this and would it be effective as long as the fed is keeping with this higher for longer narrative . Kieran it is definitely a headwind for them. Higher for longer and we think that longer is going to be at least six to nine months of that terminal rate and we might have 25 basis points to go until we get that terminal rate. So we are talking about the middle of next year. We have had former Officials Say 150 to 155 is the level and thats possibly with the market is betting against a little bit. And at some point, especially with Energy Prices high there are a lot of import costs in japan and also for households, certainly we would agree that once we start to get past 155 is going to be a little problematic. But the default for the bank of japan is to try to do nothing and wait it out. Shery this week we are watching chinese spending during golden week. How much do you expect there to be a boost in terms of stimulus coming from beijing and not being able to boost the chinese economy also when it comes to confidence in the Chinese Markets . That has been pretty fragile. Kieran indeed. It is one of the reasons why we downgraded Consumer Discretionary is weakness around spending in china for example. Beijing, their policies are clearly very inward focused. The remedies that they are trying to put into the market are very piecemeal. It does not seem like there will be a big bazooka type plan in the cards. If it was easy to fix it would have been fixed already. I think they need to be braced for not so great data coming out of golden week spending this time. Paul alright head of Equity Research for asia at ubp. Thank you for joining us. Still to come why evergrandes escalating legal troubles could spell good news for chinese buyers waiting for their homes to be delivered. But first the next headwinds from u. S. Politics as congress narrowly ofh its a disruptive and costly shutdown of federal agencies. But maybe not for long, this is bloomberg. That first time you take a step back and see everything youve accomplished. I made that. With your very own online store. I sold that. And you can manage it all in one place. I built this. And it was easy with godaddy. I am doing this. With a partner that puts you first. Start for free at godaddy. Com sell shery the deal to avert a shutdown of u. S. Federal agencies will keep the government running until november 17, but may come at a heavy political cost to House Speaker Kevin Mccarthy. For more lets bring in washington correspondent kaylee, up until friday before he went on the weekend holidays everyone was saying we are going to be headed to a shutdown and then that didnt happen. How did this last deal come to be. Kailey it looked friday a shutdown was inevitable because mccarthy tried to pass a continuing resolution that would have funded the government through october 31 and all democrats and 29 republicans voted against that so the only option he was left with was to do something bipartisan. Its something democrats could get on board with so that is ultimately how this deal came together. It was a clean cr which is what essentially means spending levels stayed the same. There were not spending cuts in this package at all, it included 16 billion in disaster relief. Given those two things, that it did not come with Stricter Border measures, conservatives wanted spending cuts, they were not able to get democrats on board and the house of representatives more democratic members voted for the package than republicans and it won enough votes in the senate by a landslide. There were only about 10 or so senators less than that who voted no on this. It was a bipartisan effort that really came together in the 11th hour. They barely met the deadline of midnight on saturday. Paul so a bipartisan effort but a big chunk of republican members did not get what they wanted so what sort of a risk does this pose for Speaker Mccarthy . Kailey a large one. I was on capitol hill on friday talking with a number of republican members who said the last thing they wanted Kevin Mccarthy to do was turn around and try to do a deal with democrats. Because he did so that puts him in more danger. Republican congressman matt gaetz has been for weeks threatening a motion to vacate against the speaker. Basically a motion that would try to oust him from his job. Any one member is allowed to do that under the agreement mccarthy made in order to get the speakers gavel. He said he would be coming this week and then it becomes a question of whether there are adequate votes to actually oust him. There are only a handful of republicans who are outwardly against the speaker, the thinking here according to many of the conversations i have had a, the majority of the Republican Caucus is behind Kevin Mccarthy. It would mean democrats would have to join in with some members of the Republican Party who would like to see him go. At this point it is not clear whether or not democrats could help save him because he worked with them in a bipartisan measure over this weekend. Jeffries, the democratic leader has not committed either way but several democratic members of congress i spoke with have suggested if mccarthy works with them they could work with mccarthy to help him keep his job. Shery one key item that did not make it into this bipartisan deal was the aid to ukraine. Here is President Biden urging Speaker Mccarthy to deliver on that item. Lets take a listen. Biden i fully expect the speaker to keep his commitment to secure the passage and support needed to help the ukraine as they defend themselves against aggression and brutality. Kevin mccarthy i support the ukraine having the weapons they need but i firmly support the border first so we have got to find a way that we can do this shery together. Shery shery what would be the way for them to do this together, what are the chances of a separate package being passed on ukraine . Kailey it looks like this is how this is going to need to get done, either through a supplemental spending measure or as part of the appropriations process but as you just heard mccarthy say, there is potentially a necessity that will have to be linked to border issues. That is something a lot of these hard blind conservatives are pushing for. It is worth noting a lot of members of the house and Republican Party would not like to see any more money going toward ukraine. There are a handful of republican senators as well who are not posing any additional aid to. It is not a given the u. S. Congress can get this funding passed. That said it is something that Speaker Mccarthy has indicated he would try to do depending on whether or not other measures are included. You also have the republican Minority Leader Mitch Mcconnell in the senate who is one of the most vocal advocates for additional ukraine funding in that chamber. Hopefully he could get enough republicans on the senate, certainly it gets trickier in the house. We will have to wait and see when this gets done. They still have to pass the rest of the actual Appropriations Bills but we now have until november 17 to avoid shutdown risk happening again. They have a lot of work to do and we will see where this ranks on the list of priorities. Paul kaylee there in washington, turning now to china where the postpandemic recovery is looking increasingly unbalanced. New Growth Growth drivers may be emerging while significant parts of the economy are in rough shape. Annabelle is joining us now on the outlook. This is what we are taking away from chinas official and private pmi readings, right . Annabelle we had both surveys out over the weekend and for investors a lot to consider. Yes there were some bright spots and also some causes for concern but the big positive that came through was what was in the manufacturing gauge. This is the official reading here because we saw it above 58 for the First Time Since march of this year, coming in at 50. 2. Even at 50. 2 that was still a little better than economists expected. The official nonmanufacturing gauge, that Beat Estimates from economists. Coming in there at 51. 7. It tells us broadly that it appears the stimulus measures and also policy changes are starting to take effect. And also perhaps we are starting to see some new Growth Drivers because we are seeing consistent and rapid expansions in the media and communications areas. Also in financial services. This all again more positive, more bright spots for the economy. On the downside there is that weakness in smaller firms. We saw that pmi reading on an official basis contracting for a sixth straight month. It tells us how fragile this recovery is and also that to speed we are seeing. Shery especially when it comes to private businesses, exporters. It was a surprise drop for those pmi numbers. Annabelle it really actually reflected what we saw in the official pmi for small firms. Again what we saw in that survey coming in over the weekend which as you say, tracks more of those exporters and smaller to midsize illnesses. The manufacturing pmi coming in with a reading of 50. 6. It had been at 51 in the prior reading so deceleration there. Also the private Services Reading coming in weaker than expected so what really drove that, a swing in the employment component into contractionary territory. It tells us the businesses, particularly those in the private sector are still very cautious on the hiring outlook. It is those differences in the surveys being reflected here as well because as i said, the private survey looks more at those exporters, the smaller to mediumsized businesses. And then you have the official gauge looking more at the esso ease, these are really the ones that have benefited the most from government reform so far. Paul heading into the Fourth Quarter, what are the biggest risks we are watching . Annabelle it is interesting because we just took a survey of about 15 or so people in china and hong kong. The vast majority of them are saying what is going to be the biggest risk going into the next quarter is going to be the property crisis. That is standing out there, double more than the second biggest risk which is geopolitical tensions. It tells us perhaps at least from an investment perspective there is still a ways to go for the property sector was to continue playing out. Even though when we saw the preliminary data for september, it does show that decline in housing prices starting to moderate somewhat. Essentially yes looking into the Fourth Quarter it is worth noting that we will be monitoring any sort of signals around consumption and demand in the property sector. That might come out in the golden week holiday, that period is still underway so markets for mainland china, also hong kong shot today and also over the course of this week. Paul annabelle they are in hong kong. You can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers go to dayb on your terminal, it is also available on mobile and on our app. You can customize your settings so you are only getting news on the industries and assets you care about, this is bloomberg. Shery u. S. Auto workers strike is into its third week with tensions rising and concerns growing about the impact on supply chains. Su keenan joining us now with the latest on this, we heard the union has actually expanded the walkouts on friday. Su this is part of the strategy, publicity maximum pain. They are upping the ante, each week. As it enters the third week the uaw added a walkout at a ford motor factory in chicago which you are looking at their. And a gm plant in michigan in addition to the previous actions. You president taking to a livestream address on friday, lets take a listen. Sadly despite our willingness to bargain ford and gm have refused to make meaningful progress at the table. That is why at noon eastern time today we will expand our strike to these two companies. To be clear, negotiations have not broken down, we are still talking with all three companies and i am still very hopeful that we can reach a deal that reflects the incredible sacrifices and contributions to our members have made over the last decade. Su ford ceo hit back saying in his own webcast saying that the union could have reached a compromise by now but it is holding the deal hostage over battery plants which he says are not even built yet. He is concerned the union is reaching outside the parameters of the contract in these negotiations. Gm ceo had a similar tough words on friday accusing the uaw leadership of dragging out the strike longer than necessary as part of a plan to further their own personal and political agendas. She said it is clear there is no real intent to get to an agreement. A lot of frustration on the part of these automakers and we noted that stellantis which is the parent of chrysler and jeep was spared this escalation of strike activity going into this week in that is because the uaw said that they had showed progress with a lastminute breakthrough in some key concessions before friday. However even stellantis is saying there are huge gaps in the negotiations indicating that all three automakers are still far apart. Paul it feels like a long way to go before there is a resolution. What is going to happen next . Su we do know there is starting to be increasing concern about the supply chain. You have to realize that the auto parts and auto supply chain had already been fairly strained and had yet to fully recover from the pandemic. Now with a strike going on three weeks, there is concern it is really going to start impacting a lot wider area. Meanwhile stellantis while they initially offered a 25 raise on the people of the strike, they are still not talking about coming in on pay. That remains a major issue for many of these automakers. Plus the expanded workout runs the risk of depleting the uaw strike fund too quickly. Striking workers get a weekly stipend. That fund of about 820 5 million now in its third week is starting to run thin. Lastly there is a tweet now from the uaw which says that uaw workers at mack trucks could strike as soon as monday. The current agreement signed after a twoweek strike in 2019 expires sunday night. You have yet another possible expansion of the strike activity which appears to be a sign of the times. No indication of a resolution anytime soon. Paul lets have a check on how futures for europe are opening at the moment. We have stocks futures in modestly positivterritory by a third of 1 , similar story for dax futures as well. If we take a look at the euro there, continuing to weekend. We do see speculators adding to net long annabelle this is daybreak asia, with a check on markets we are 30 minutes into the session so far. For the nikkei today, it is really exceeding or continuing to move higher at the start of trade. Up 1. 6 . There are a couple of different factors driving that. Just had the Tankan Survey coming out at the end of the last hour showing that confidence among large manufacturers in japan is continuing to improve for a second straight quarter. The reading coming in at nine beating estimates that were for sex. You compound that with the moves we have in u. S. Futures because they are moving higher up 6 10 of a percent. This is the first chance that investors are reacting or having to react to the u. S. Managing to avert a Government Shutdown over the weekend. A spending deal in place. What is moving to the downside of course, these numbers coming through. We are into the session as well for the asx 200 and kiwi stocks, both of those a little in the red as we get trading underway. For what is the first day of the Fourth Quarter, lets change on and take a look at what we see in terms of a seasonality basis. Taking a look at the moves over the past five years, what we see is that in the Fourth Quarter typically is a chance for stocks to improve gaining around 5 on a three month basis. That really sets the stage for us, looking over the past five years we have had pandemic disruptions really a major focus for us. Even on the 10 year horizon we continue to see asian equities gaining around 4 in the last quarter of the trading year. Will could really set the tone is whats going to come through in commodity prices. Lets take a look at this chart because we have brent crude wti underway this morning moving a little higher here. As we continue to see oil and wti and particular moving into backwardation territory. Oil traders willing to pay more to have an earlier delivery date. Tells us how much the supply concerns are continuing to reverberate around the oil market. What really could impact asian exporters that really rely on energy like japan and korea for instance. Shery lets see the numbers when it comes to those pmi numbers we are getting around asia at the moment. The final pmi numbers, jeep loom bank for japan is coming in at 48. 5. Which is a slight deterioration from the previous month. The one that stands out to me is the philippines because you are seeing it rising into expansion territory from 49. 7 in august. Although for the philippines that pmi number has been going in and out of contraction. We are now in expansionary territory at the moment, indonesia is still in expansion but using a minute a bit a bit but vietnam has fallen into contractionary territory. Taiwan improving slightly, tylan actually worsening. A little bit of a mixed picture. Its bring in averill in singapore. Avril as you say, it is a mixed bag but as far as the largest economies of Southeast Asia are concerned, if you take a look at the indonesia pmi manufacturing numbers we are seeing that number still in expansion but slipping slightly from what we saw in the previous month. If you look at what we are seeing out of thailand, one of the biggest economies in the region sliding further into contraction territory. This is of course against the backdrop of what we are seeing out of one of the biggest if not the biggest trading partner for any of the Southeast Asian economies, that is china. Fragile recovery there and concern still about the property sector so that is raising concerns about the weakness we are seeing in terms of some of these new export orders and a manufacturing as a whole in the region. Lets not forget also at the prospect of higher u. S. And euro Interest Rates have been waiting on the demand for the region. It is not just the china story or what we are seeing out of major economies, that is affecting what we are seeing in terms of demand for the region. We also have some domestic challenges in countries such as vietnam for example. We did get that bump up in the growth because exports are rising. Again based on data we got last friday, but that being said there is weak Credit Demand in the Prime Minister there has asked for more flexible Monetary Policy. Given how the central bank has already cut several times this year, it is raising questions just how much policy room there is to maneuver really. So overall more headwinds than tailwinds for these Southeast Asian economies and in a way in hopes that we are going to see a quick turnaround for the region. Paul bloombergs averill hong in singapore, indonesia has opened its first highspeed rail line which runs from jakarta. The project is the only one of its kind in Southeast Asia and was built as part of chinas belt and road initiative. Speaking to bloomberg west month the president defended the rail line which has seen cost overruns and faces off original losses. Mrt, lrt, highspeed trains should not be calculated by profit and loss. Dont count profit. Which be calculated is the benefit. Because of congestion in jakarta and elsewhere the country loses more than 100 trillion rupia therefore Mass Transportation must be built to offset transportation, pollution and provide services to the community. So if we calculate the loss per year and compare with highspeed trains, these items still provide net benefits for the people. Paul you can watch more of that exclusive interview with the indonesian president on the Series Premiere of latitude coming up on october 26. Up next here why credit site says chinas local government financing vehicles are unlikely to default on public bonds over the next six months, this is bloomberg. Paul the line of the 15 analysts polled in a formal survey says the worst is not over yet for chinas property sector. Six of them listed housing woes as the biggest risk for equities for the final quarter of 2023. However it seems investors are turning optimistic on the overall market thanks to recent policy support measures and inexpensive valuations. Lets bring in our senior credit analysts at credit site. I want to talk about what has been happening at evergrande, we did have not unrest but Police Involvement with the head of evergrande. What is your read on what this is all about and what it might read mean it not just for bondholders but people waiting for their apartments . Overall i think it was not really a surprise for the market or bondholders because the Senior Executives of the company have been under investigation already. I think the government is trying to pressure the company to cough up more cash for wholesale delivery which is critical for the social stability in china. Of course this incident is not great for dollar bondholders because they are going to face more with additional delay of the debt restructuring process and with even more uncertainty. And in the liquidation scenario likely the bondholders are not getting much out of the restructuring so overall it is not great for the dollar bondholders given it they are deeply in the payment waterfall but it also shows the government is trying to comfort the general public that they are trying to prioritize the delivery. Paul most of those that we surveyed in our informal poll suggested that the worst is not over for chinas property sector. Where you stand on the question, is there more to come . We do think there is going to be a multiyear structural downturn of the chinese property sector. Our team was actually on the ground in china and the past two weeks trying to gauge the recovery of the chinese property market. It feels like the recovery is emerging but not very strong. In some of the tier one cities after the recent policy easing measures the transaction volume and prices have not really seen a visible recovery. It just because at the local level there is a certain delay of the implementation of the Central Banks policy. And i think the other thing to note is the general public in china, their expectations of future home prices has dramatically come down. So even with lower Mortgage Rate doesnt make sense for them to take more leverage and buy into a lot of properties. Shery the fact we are seeing these issues with evergrande when it comes to the restructuring process, does that signal we are going to see similar issues for other developers . Could we see a broader Systemic Risk here . I think the incident does not imply that the other Development Developers are going to see the same process or be in limbo. If we look at some other Chinese Developers such as sunak, the officer creditors have just approved a debt Restructuring Plan and it is going to court. I think we need to assess the restructuring process casebycase and not everybody is the same as evergrande. You have to look at their offshore assets, you have to look at the amount of homes to be delivered. And the government will definitely take a little bit of different stance to developers. Shery having concerns arising about Wealth Management products linked to the property sector leading to financial contagion into the trust sector as well, you have been on the ground in china in major cities talking to local mutual funds, hedge fund and financial institutions. Were there any trends you noticed that are worth keeping an eye on . I think a few trends we have observed, first of all the overall offshore investors are not very concerned about Systematic Risk related to property sector spilling into the financial sector. That is because of the travel trust companies, they account for relatively small portion of the overall au and outstanding of chinese Overall Trust sector. The second thing is the local government financing vehicle sector, their condition has significantly improved year to date. The onshore investors including the neutral have been quite aggressively chasing these onshore bonds. Overall it seems like the other part of the big outstanding market in china which is the has been improving so overall i would say the Systematic Risk from the point of view of onshore investors has abated. Paul in terms of those local government financing vehicles, you say the situation has improved but a lot of them would still be carrying a lot of debt. Which ones are in reasonable shape and which ones look as if they still have problems . I think for a lot of the week provinces government budget is still a lot of difficulties but the thing is the local government as well as the Central Government are trying to use bank loans to swap the outstanding Corporate Bond lg sector so to buy time or kick the can down the road. But over the medium to longterm definitely a huge debt pile of the local government is still an issue for the chinese economy right now. And buying time is to contain Systematic Risk but over the medium to longterm the government still needs to face this big challenge of the economy. Shery good to have you with the senior credit analyst at credit sites. Coming up next macaus casino Revenue Growth slowing in september as it nets big on a boost from chinas golden week holiday, the outlook next. This is bloomberg. I wouldnt have my business if it wasnt for my website. Once i decided to go with godaddy, the process was seamless. I was able to create my website on my own. To have it be exactly what i want it to be. Be able to integrate my appointment app. Godaddy was able to provide everything that i needed. The whole image of who i am and what empire is is presented through my godaddy website. Shy yilds on most tury notes gaining ground at the ment after he saw two sons of losses. Were still talking about the 10 year yield hanging around the highest levels in about 16 years of of that for 60 level while the 30 year yield peeked around the 2010 level. We have seen a report on friday showing the feds preferred measure of underlying inflation has risen the least since 2020 the expectation right now is a more hawkish comments coming from the fed that will be higher for longer. Blackrock Ceo Larry Fink says he is expecting u. S. 10 year yields to top 5 . He told us exclusively how geopolitical and supply chain shifts are creating embedded inflation. Larry i dont know what is a new normal, i think every day is normal. The markets go up and down, markets move, markets respond, markets respond to political issues, political uncertainties. But i would clearly say we are in a period of time with these mega cycles, we are in a period of time with so many transitions. Whether it is a transition from deflation to inflation, geopolitical transition, and how does that go. The fragmentation of supply chains is just beginning. We have policies and so many democracies and policies that have moved and were embedded for more deflation in their are policies that are more invalid it embedded in inflation. As we adjust so that we have jamie dimon saying rates in the u. S. Could go to 7 and we are not ready for it. Is he right . Larry we all have opinions. My opinion is we are going to have tenure rates at least at 5 or higher. Because of this embedded inflation, the structural inflation is unlike anything. I think Business Leaders and politicians are not providing the foundation to help explain this. We have not seen inflation like this in over 30 years. I was a young bond trader during the late 70s where we have hyperinflation. I dont think we are having anything close to the inflation of the 70s but we have so much deeper structural inflation and we are underestimating the change in geopolitics it is so structurally inflationary. When i was in davos earlier this year i heard the phrase National Security uttered everywhere. Quite frankly i had never heard those phrases uttered that often in all my years. Its a National Security for chips or energy. All of these issues in the question is at what cost . Nobody answers that question. You said politicians, governments and you do a better job of explaining this. What would that actually look like . Larry they have to recognize if we are going to focus the whole idea about restricting immigration. A big topic. Germany. A big topic in the United States. We are down in the United States close to 3 million legal immigrants. We changed our immigration policy. At the same time there are so many job needs and in the United States we have close to a trillion dollars a fiscal stimulus just beginning its j curve. These are huge job creators and at the same time we have restricted immigration and as a result we see more wage pressure. At what cost . Do we have, in the United States we have a very protracted strike between the autoworkers and the auto companies. It had been reported that the union is asking for a 40 increase. So at what cost . Paul that was blackrock chair and Ceo Larry Finksaking to daniuer in berlin. Lets take a look at how we are tracking in markets around the region at the moment. Hade weaker, a strange day as ia mentioned. A chunk of te ountry is out on a Public Holiday so volumes a little lower than yight otherwise expect. The nikkei having another strong day. Up by 1. 5 , we do have a weekend helping propel this. At 14966 at the moment. Pretty decent Tankan Survey as well for the Third Quarter adding to a sense of optimism. Over in new zealand a little week is, the index off by half of 1 at the moment. Macaus casino gaming revenue slowed in september but the sector does expect to get a boost this month from chinas golden week holiday, for more lets bring in our intelligence Senior Analyst angela. Is theenue growth slowing purely due rvenue reasons or other other reasons we should be paying attention to here . Angela for the number of september i thnkit is purely resistance becau the two weekends got wastd he first because of a typhoon the second bcase of i think the number has been weak just because of that reason. If you check the number, the visitation numbers in the october golden week they are very strong. The tourists coming in yesterday, it was far above the number that came in 2019. For that reason we believe that the macau gaming revenue is keeping pretty strong on a strong trend in october this year. Shery what are we seeing in terms of broader sentiment around chinas Tourism Sector given golden week . Angela we feel like this is going to be a super golden week this year just because people traveling, especially domestically. But i feel like people cannot travel more than one year or the trouble started earlier this year so probably this is the kind of peak of the travel season for domestic market may be. I think were going to see smart recovery on the outbound side but probably per capita spending still might be pressured to so the thinking is that given the latest traveling might go down a bit we have to monitor whether Business Travel can pick up next year to support this growth. That is kind of skeptical because there are so many answers around this to the economy in china as well. Paul bloomberg has been running a story about pork demands in china. Is weak pork demand a sign that maybe consumers are still feeling a little cautious . Angela true. Not only the pork but i have a restaurant and i see the numbers, the catering number in china in august actually was weaker than expected. We wondered whether even the demand for is coming down as well so that is a big but concerning and the number will be week for restaurants in september 2 because of people going out and other reasons. I kind of feel of the later demand it used to be very strong compared to other consumer segments but i feel like the major consumption might also kind of weaken from august to september of this year. Maybe accept macau because in macau we are having new supply, le new customers have oed and we have more new stuff. Shery angela there with what to ask back from golden week andwe will be watching all differet assets as training sarts across asia. I will personally be watching what coco prices do here in new york this week because we are talking about 12 year highs. What that means is that chocolate is getting pricier and pricier. We had output being heard in the ivory coast, bad weather and crop disease,also we are expecting to see the impacts of el nino. That i nt going to be great. Paul i do wonder what freaks people out more, expensive chocolate or exe coffee. At least the price of coffee is coming down. We v our applico prices now the lowest since january. There are a couple of factors are as well, the weather factor. The rain and keep poduction areas seeing dry conditions. With hopes that maybe there will be a big crop this year and more supplies coming but that we resilient reality, the lowest against the u. S. Dollar since may. Maybe the price of chocolate is going up at you can still get your caffeine fix. Here is a reminder about exclusive light live interview with jamie dimon coming up later monday from the jp morgan tech stars forum in london. Next hour we discussed prospects for chinas economic recovery with maybank Investment Banking group, plus lumet shared shares their outlook the chinese property sector. This is bloomberg. 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