under one hour away from market open in australia, japan and south korea. shery: good evening from new york. to daybreak:me asia. paul: our top stories this one day, warning signs are flashing. the world economy sounds the alarm as new data shows --ufacturing exports stop

stuck in a slump. the winning streak comes to an end. more pain from protests in hong kong. retail sales and hotel occupancy tumbled more than 40%. check let's get a quick of the markets. we are seeing u.s. futures gaining a quarter percent but this of course after we see all -- saw the s&p 500 fall the most in a month. every session was in the red. week manufacturing number this morning. industrials let the declines, not to mention we had banks under pressure as was our rates move lower towards the 1.6% for the 10 year yield. volatility was also pronounced. we saw the vix headed towards the 20 level. it is known for price swings. it could be one of the most volatile months of the year. let's see how things are shaping

up for asia. selina: asian stocks look to be pressured by the weak manufacturing data after the u.s. reported which of course follows very weak did any manufacturing sector we have seen across europe as well as in china, japan and south korea. take a look at the futures. looks like the kospi is going to be reversing two straight days of gains. also of he hong kong protests showing no signs of letting up. also seeing some center trading. hong kong coming up to the markets after a holiday market -- yesterday. taking a look at some of the economic data on tap. indian markets are closed. sales in august retail japan's consumer confidence data. taking a look at the aussie dollar, which has been dropping after that decision from the rba

to cut the cash rate to a record low of .75% would signals to cut even further. at the down about .7% .6750 level, after dropping earlier as much as .677 two which is the weakest since march 2009. more pressure moving ahead on the aussie dollar. paul: thank you. let's check in on the first word news with ritika gupta. china has agreed to buy one million tons of u.s. soybeans. after beijing issued more waivers from import tariffs. state owned and private companies purchased about 16 cargoes. the move may help an atmosphere between high-level officials when they meet next week in washington. the u.s. and north korea have agreed to revive nuclear talks in the coming days building on a

vague agreement by president trump. when not clear where or the talks will take place, nor exactly what will be on the agenda. news comes as japan and south korea are concerned about a new north korean missile launch. the long-running protests in hong kong are taking an extreme roll onan increasing the economy. the unrest has battered tourism with business to mainland china down 42%. that has devastated the shopping and hotel industry. retail sales have fallen 40% from a year ago and hotel occupancy rates slid 66%. crowds are gathering again as macau starts its golden week, gaining revenue last month touched its lowest level in a year as casinos are battered by economic and geopolitical troubles. growth revenue was $2.7 billion

in september. analysts were expecting it to strengthen in the second half but continuing hong kong unrest has hurt traffic. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. book -- could good paul: let's turn to our top story. the global economy flashing clear warning signs showing manufacturing stuck in a slump. exports falling and sentiments letting. let's bring in senior trade markr sarah mcgregor and cranfield in singapore. that was much worse than expected. everything pretty much weatker - - weaker. guess we can expect a fairly rough ride in asia. >> indeed. it will not be pretty for equity markets. they certainly have a bleak

picture to look at, especially -- a pretty bad start we can expect in asia. we can expect some rocky bond markets as well. everything really started yesterday with the very poor jgb 10 year auction. we had a huge saw across bond markets across the world. weak ism data. that will not go away. japan wants steeper yield curves. we will see more volatility in the jgb market. certainly the focus will be on what happens to asian equities. index look at the ms ci it was already starting to decline a bit since the middle of september. that decline looks as though it has a fair way to go before it finds any serious support. a lot of red on the screens today and there will not be much that they can help today. shery: so how much of the manufacturing slump that we are

seeing around the world is due to the trade tensions between much.s. and china, and how -- we know the chip sector in south korea has been incredibly under pressure. seems to be spreading. i think it is more about across-the-board not just about chips. it has really been declining for about of year. we have been below the 50 line for several months. although it ticked up very slightly in september, it is still at the 49.7 level. it is not giving a good picture. the ism number drop is a bit of a shock. the u.s. has been holding up better than some parts of the world. now just getting in line with the rest of the world. it is really spreading to all parts of the world now. really a function of the fact that the tariffs have been in place for such a long time, so the world has had to adjust to a high level of tariffs on chinese markets.

they are trying to rebalance their distribution lines, it is affecting everybody. china does business with most countries in the world, so of course everyone who is in line with that has to find a new way of supplying china from different places. no one can be spared. he saw the rba cut rates yesterday. if you look at the statement, the statement outlook was pretty bad. the rba is usually a good judge of how the global economy is going. so they will be looking at this and saying we are fully justified in lowering rates and we may well do more because the rba does not see outlook improving in the near term. that is a message for the rest of the world. if they don't, then the whole world is in trouble right now. shery: so what are the chances of a breakthrough when trade chances restart next week here in the u.s.? that is amentioned,

sliver of hope in these trade talks. but the sides have much bigger fish to fry. this will be the solution to easing trade tensions. a few more purchases from china. they have some really hard issues to deal with. and i do think that while the expectation is not that they come out of talks with any sort deal, there does need to be concrete signs of products -- process. they can show the world where they are willing to make progress and really give a sign of hope. thisrk was just saying, manufacturing data is more evidence piling up about the impact of the trade war the global economy, whether the u.s. wants to face up to it or not, the manufacturing sector now seems to be taking a hit from it. shery: thank you both so much for joining us. the chairman of three house committees say they expect full compliance from secretary of

state mike pompeo as they investigate president trump's dealings with ukraine. trump is have chip -- saying lawmakers are bullying his staff. let's go to washington now. why is mr. pompeo rejecting the committee's request? >> it was not an outright rejection but what he argued is the schedule was unrealistic. the house committee tried to get a quick start on getting testimony, depositions from people who were mentioned by the intelligence community whistleblower regarding the president's phone calls to the ukraine realtor -- leader. they tried to get them going starting tomorrow and continue through next week. right now most of that is on hold, the we do know that the former special envoy to ukraine, kurt volker, who quit last week,

he will be planning to give a deposition tomorrow. there is a plan for the former u.s. ambassador to ukraine to come in at a later date. but it is unclear what exactly at this point he secretary of state is going to allow for his employees and regarding other documents. this is just the very start of a fight over demands by house committees for documents and witnesses. paul: so what is the next step for the inquiry? >> they will go ahead and get those depositions from the envoy and from the former ambassador. they are also scheduled to get a deposition from the inspector general of the intelligence committee. then we will be waiting to see theriday whether both justice department and state department are going to comply with requests for additional records. it may well be that we will come

to the issuance of subpoenas by the house committees and attempts to block it by the trump administration. and a number of these instances are going to end up ineffably in court because the administration's strategy so far has been to as much as possible defy the house committees seeking information or documents. paul: thank you for joining us. still to come, u.s. auto sales took a big step back in september, setting the stage for hefty incentive spending by carmakers struggling to clear old models. we will look at the rocky road ahead. shery: and the latest on the hong kong unrest as a protester was shot by officers for the first time. we will look at the most serious clashes. this is bloomberg. ♪ is bloomberg. ♪

shery: this is daybreak: asia.

i'm shery ahn in new york. paul: and i am paul allen in sydney. a ceo has survived a spy scandal which saw a longtime confidant leave the bank. an internal memo says the shadowing of a former executive was deeply regrettable and has hurt the reputation. he was exonerated saying there is no evidence he knew about the plan. groups are set to be having second thoughts. -- they are increasingly undecided about worrying maintaining relationships with regulators. oversold thebook extent to which regulators were comfortable with the project. paul: apple closed within

striking distance of a record amid optimism over the latest iphones. tim cook told a german newspaper a strongiphone has had start and he could not be happier. about two .5% above the all-time high a year ago. you can get a roundup of the stories to get your day going in today's edition of daybreak. go to yourubscribers terminal or on mobile. you can customize your settings so you only get news that you care about. this is bloomberg. ♪ this is bloomberg. ♪

paul: this is daybreak asia. shery: auto stocks took a beating in the latest session as

the first round of september sales numbers sounded the alarm bells. initial u.s. numbers looking pretty grim, suggesting hefty incentives will be needed to move cars off the lot. su keenan has the latest. give us the numbers. su: double digits across the board for some of the big asia automakers. that is a concern with nissan leading the decline. gm and ford reporting on wednesday. there is concern on how stocks performed in the latest session. that the declines we are seeing in the latest report will increase the downward results. as we have seen in every other automaker, they are well beyond that. that showpanel here sales fell 16% for toyota. almost total percent decline was expected, so that is way more.

worse than the 4.6 percent decline that was expected. a dismal decline of more than 20% was expected. it was a grim start to u.s. auto sales and of course the concern is not -- is that auto sales which have been propped up by on-and-off significant incentives for years now are finally at the stage of collapse, where it will pay significant incentives to get them off the lot. in the last quarter the average incentive is about 4000 plus dollars. we are seeing even the recent model cars difficult to move off the lot. bmw actually area, beat mercedes by just 34 cars in the very tight u.s. sales race, with both automakers having increases. paul: how about the asian

automakers? what do these results mean for them? su: the declines are significant. for nissan, which beat results which were far more dire than expected, the company is struggling, showing signs of struggling in this new era. companiesows that like toyota and honda, it was a rough september. toyota saw sales plunged. concern is that the carmakers, particularly the dealers, will see their tight profit margins squeezed even further as we go into the year possibly with much stiffer incentives. shery: thank you so much for the latest. u.s. stocks slid and treasuries rose after a gauge of manufacturing posted the weakest

readings since the end of the last recession. readings since the end of the last recession. that is because of fears to a deeper and global slowdown. great to have you with us. we have the s&p 500 fell below its 60 day moving average. 500truth remains the s&p has been pretty range bound. it has been stalling near its record high for the entire month of september. what is going to drive the equity markets in october? guest: well, i think that the issue right now is that markets are starting to look at risk a little bit more, which is probably a good thing. as you pointed out the s&p 500 has not much recently. if you look at the past year you did better in treasury bonds than s&p 500. so i think that this risk off story is actually a little more stealth than perhaps investors have been giving a credit for. for the month of october i think we are going to continue to see there is no shortage of

headwinds for what is going on in the environment in terms of risk to economic growth and global growth and there will be a lot more attention paid to that. shery: no wonder we are seeing these downward revisions to estimates, especially smaller caps. take a look at this chart on the bloomberg which is pointing to the yellow and blue line. are the big cap estimates also going to follow the smaller stocks lower as we head into the third quarter earnings season, which is not that far away? i think the probability is more to the downside than the upside. i think those earnings are at risk of coming in. the consumer in the u.s. is really quite healthy. plenty of jobs. people buying houses. this lower for longer environment has really turned into lower forever and the implications are you are seeing significant increases in corporate debt will start to

pressure earnings as they need to pay that and refinance it. paul: you point out that the u.s. consumer is still in unreasonably good shape. are there warning signs flashing as well? it is only a matter of time before these weak readings translate into weaker job numbers. then a weaker consumer as well. are the risks on the horizon for the consumer? guest: i agree there are potential risks for the consumer. what we are concerned about and have been waving the flag over is the fact you have the three-month treasury build yielding higher than the long treasury. and that is just not normal. that is a big warning sign from the bond market that there are risks going on that the broader market is not paying enough attention to. so again, i think there is a lot more region -- reason to be cautious right now.

we are certainly recommending to our clients that they manage that risk profile pretty closely. high-yieldo prefer a bond over equity. i want to bring up this chart, it is one of our favorites. an enormous pile around the world. what qualifies this high-yield carrydays, and does it variable risk? guest: good question. that is a really interesting conundrum. have all that negative yielding debt and yet i am only seeing high corporate debt over equities. so i want to be careful with how we phrase our recommendation right now. debtke emerging-market over emerging equity. because they are less risky. and you bring up a really interesting point. this negative debt around the , it ispick a country

unprecedented and it is a race to the bottom with yields. -- that is ahas loud signal from the market that we need to be careful right now and be really careful with the risks you are taking and not chase returns but be mindful of risks, which we can return. shery: let's look at corporate debt in america. last year we had a massive selloff in ge debt. scott miner came out and said this is the beginning of the collapse of investment-grade debt. what is happening right now? there is nothing like that and leveraging continues. isst: i think the leverage being driven by the fact that interest rates are so low and not being driven by a desire to borrow money in order to grow your business, which is typically how debt is structured. we really have to be careful because fourth quarter last year we did start to see higher

corporate debt spread. you gave up all your returns in 2018 in q4. it was the year of the dog. it was the year of the dog for every asset class too. invested buts be truly tactical. get out of the way and make sure that you stick to your plan because there are a lot of risks out there. seconds, what 30 is the biggest risk at the moment? guest: what is the biggest risk? the biggest concern we have right now is simply not normal to have a two-year that is so high and a 10 year so much lower. the longer end of the curve will continue to get pulled down. when you look at the fact that our 10 year trades at a higher rate than italy that will continue to put pressure on interest rates in the u.s. so the fact the bond market is

giving a confusion -- confusing message concerns us. paul: thank you so much for joining us. plenty more to come. this is bloomberg. ♪ this is bloomberg. ♪

i have the first word headlines. the global economy is flashing even clearer warning signs as new data shows manufacturing stop -- stuck in a slump. factoryy watched u.s. index dropped to the lowest since 2009. south korea reported a fall in consumer prices and the rba cut rates to a record low. finally the wto cut its forecast for commerce to the lowest in a decade. toyota led the u.s. auto sales race last month not in the good way. overall delivery fell in september by 12%.

toyota recording a 16% decline year on year. automakers have to pay record incentives of more than $4000 for vehicles last quarter according to jd power. and the party is over for subaru, whose record growth streak has finally come to a halt. the u.k. prime minister boris johnson will lay out his final brexit later wednesday, one in the country will crash out of the european union if brussels will not engage. it daily telegraph reports will see no than island special relationship with eu until 2025, subject to custom checks the irish border. the eu is said to be discussing a potential time limit on the backstop mechanism. president trump resumed bashing the fed, tweeting that jay powell and his team has put u.s. manufacturing at a global disadvantage. he continued his campaign for

lower rates, saying the governor is that worst enemy. he said they don't have a clue. pathetic. jay powell has yet to indicate whether he will cut rates again this year. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. shery: we are half an hour away from the open in tokyo. let's turn to selena for what to watch in the markets. watching electric which is set to disclose details of a big scandal in which they try to contain the damage from revelations executives took payments from a company that works on one of its nuclear plants. the company will identify the 20 officials who accepted gifts. we have seen the stop drop more than 25% since the start of the year over investor concerns as well as more government scrutiny

and investigations. i am also looking at will surge, which announced a recent leadership change. the 25 year veteran is stepping down, coming at a challenging time in papa new guinea. investors are concerned about how his departure may impact engagement for that company. shares are down more than 20% over the past year. we have seen the stop go down 1.87%. switching the boards, taking a look at how global concerns are impacting volatility. we have seen it spiked up recently. as you can see here in the red. that of course is off the back of manufacturing data for the u.s. which came on the heels of weak data from europe as well. we have also seen pmi contractions across asia with an especially sharp contraction in japan and south korea. of risk also concerns

may be escalating with trump saying the dollars to strong -- dollar is too strong and blaming the fed as always. paul: let's get more on what we should be watching is trading gets underway in asia. datad the u.s. factory playing into the hands of bond bulls. how soon could we be looking at lower yields? adam: remember is one in a series of indicators on the health of the global economy. of course this is a big one and was a real disappointment is why you have that basis point move in the 10 year treasury. this clearly was not being factored in by the markets and we see that followthrough with asian equities about to open in a pretty cautious tone. going into that what you have is

sentiment on treasuries in the u.s. bond market getting to fresh highs. we have seen a lot of money moving back into bonds. a lot of people seeing that backup and yields being a flash in the pan. could be testing multiyear lows pretty soon. australian yields have been down this morning on the 10 year. they are only 10 basis points or so away from hitting fresh all-time lows. so clearly that is a trade back on. it is emboldening. the question for equities is how much further do they believe central banks can support the cause. we saw a little bit of an uptick in pricing for another fed cup at the end of the year. and equity markets are starting to show that maybe things have run pretty much as far as they can go. we saw notable declines in u.s. equities. looks like it is a pretty

disappointing number showing just how weak economic growth is at the moment. shery: at least when it comes to japanese equities. what do they like? this is many regards the tried and tested argument coming from people who want to be bullish on the japanese equity market and that is the valuation discount you are getting for japanese stocks. youhis chart really shows had that discount for a number of years now. the folks at morgan stanley and jp morgan say a lot of that is being reflected and negativity is being overpriced by the market. they see improvement in the long-term return and equity there. part of the increase in corporate governance changes, and some more investor-friendly attitudes are changing, albeit very slowly with an increase in buybacks and dividends for many

local companies. so they are arguing really that on 13 times pe from a topics, relative to global equities, where it has expanded significantly this year. fresh highs in places like the u.s. as see that fresh valuation every recent you want to continue to keep adding to japanese equity positions. shery: adam, thank you so much. ofr in hong kong, months protests are taking an increasing toll on the city's economy and retail sectors. sophie kamaruddin is in one of the districts affected by the protests. what are you seeing today? data comes in the wake of an intense day of protests being billed as the most chaotic and violent for the city yet which we saw the situation escalate when an 18-year-old student was shot by a police officer.

condemned.is being six live rounds were fired. were made180 arrests and more than 30 people hospitalized. that gives you the sense of the scale of the protests that went down on hong kong island with the worst hit districts across the harbor. just to give you a sense of the impacts on the retail sector, that is likely to continue. anticipates a 14% drop in retail sales for august. that will be the seventh straight monthly decline. place --ave specific pacific place among the shopping centers affected. some small stores to close down. the weakest level since 2011.

of falling into a recession in the third quarter. the government says that is prepared to take more release measures and release more stimulus for the ailing economy. paul: not just the retail sector has been suffering. tourism as well. what is the story there? they have certainly taking a hit for anyone who has had -- we are seeing rivals from the mainland as well. visitors from china set default 42% in august. that would be a second straight monthly drop. hotel rates are also under pressure. 66% in august from 94% last year. making for a very bleak golden week stretch for the hotel and tourism-related sectors in hong

kong. remain asike it to more unrest is anticipated. along with disruption to the mtr lines with stations set to reopen wednesday. paul: sophie in downtown hong kong, thank you for joining us. plenty more to come. this is bloomberg. ♪

down toe are counting asia's first major market open. japanese features under pressure. 1.4%. this of course after the nikkei fell for two consecutive sessions. noworgan and morgan stanley favoring japanese stocks on those valuation discounts. i'm shery ahn in new york. paul: and i'm paul allen in sydney. almost 800 days into the

u.s. china trade war and after a dozen unproductive meetings, the expectations are not high for october's trade talks. but let's get the perspective from a man with an interest in both sides. tim, thank you very much for joining us. the rhetoric on both sides on these trade talks has gone into security issues and pretty much into everything. risk ofs -- what is the enduring damage between relationship of u.s. and china? timothy: it is clear the relationship will not be quite the same as it was before. both countries recognized that there needs to be a very significant recalibration, new rules of engagement of how we deal with trade, national security, law enforcement and other issues. so there is quite a lot that has

to be sorted out between these countries. we will be in washington on the 10th of october. bestis the realistic outcome we can hope for this time around? whatwe need to think about are the issues being negotiated and what is a broader context. in terms of the issues, i would lump them into three baskets. the first would be a very long list of items where the u.s. believes that china has made commitments in the past and is not fulfilled them. there is a five-page single spade list. -- spaced list. i believe negotiators have made quite a bit of progress in talking through that list. the second basket of issues would be areas where china has not made any commitments, but it is the view of the u.s. that the world has changed since china negotiated and certain existing commitments are not fair anymore. for example, china's internet

companies are allowed to do quite a bit of business in the u.s. what american internet companies are largely blocked from doing the same in china. these are disregarded is not fair, not reciprocal, and the u.s. believes these things need to be negotiated. the third basket is probably the most difficult, and that would reflect areas where our two economic systems are different. and because of that we do not compete in quite the same way. so you may have american companies that are market-oriented competing with chinese enterprises that receive substantial support from the state and it creates an uneven competitive conditions. this third basket of issues is the most difficult. it goes to the heart of how the chinese economy feels it has made so much progress, but it also reflects areas where the u.s. thinks the current competitive conditions are not fair and something needs to be done to change that. shery: but i wonder how domestic politics will play into the trade negotiations. we have president trump at the moment tweeting that the

impeachment inquiry is a coup intended to take away the power of the people, their vote, their freedom. so, does the impeachment drama playing out in washington give more leverage to china for the u.s. do want to make a deal? you have thethink discussion about impeachment, you also have the upcoming election. i think that on the one hand, it is very much in the interest of both countries to try and conclude the deal as soon as possible. there's a lot of lasting damage being done right now, and also it is not a comfortable position to be a leader and have the situation not under control. on the other hand the chinese might think that as they get closer to the election perhaps president trump will feel a need for a deal and will soften his position in some areas. so i think there is some interest on the part of china to wait and see a little bit. at the same time china might

have concerns about what is the overall objective of the united states and china relations. there are many in china who think that in addition to this trade friction, there are also different views about national security and until they really understand what the u.s. government is trying to do in these other areas they may hesitate to want to make a deal. shery: and bloomberg learn president trump may be considering also considering the u.s. limiting capital to china. i just wonder how concerned your members are. someone citing a power the president can actually 19977r this, an act from -- it allows the president to unilaterally freeze assets and/or payments to enforce asset divestments to deal with any unusual and extraordinary threats from outside the u.s..

how seriously are your members taking the potential of this power being used and how big of a deal would it be for businesses in china? tim: the u.s. president does have very broad powers. but the question is what would make the most sense for him to do. the u.s. and chinese economies are very broadly and deeply integrated. and it is not so simple has to say we will not do business anymore. we have billions of dollars in u.s. investment in china. we have a lot of important sourcing coming from china and we have chinese companies that are buying a lot from the u.s. just to try to end this is not simple. such a major change is something that would require a lot of nuance and a lot of careful consideration and i do not think we see that type of consideration being given to this issue yet. i do not think it is imminent. on the other hand, u.s. is investigating national security

rules related to new regulations coming out and related to the national security reviews for inbound investments into the u.s. so i think we do anticipate there will be some changes in the scope of business that companies from both sides are allowed to do. moste meantime, the immediate concern is a lot of uncertainty. so companies are delaying investment or sourcing decisions. american companies are adopting what they call a china plus one strategy, which means that if we are sourcing from china, or selling to china, we need to have another alternative source or market so we don't rely exclusively on china. paul: national security is definitely one consideration but regional security is another. to circle back to my original question, how big is this dispute really, i want to bring up this chart which shows comparative defense spending. the white bar is u.s. spending in the red bar is china.

the u.s. is catching up. how much of this is about trade and how much of it is sitting on china? the problem is that economic relations and national secured relations are not as easily separated as they used to be. it used to be that you could block exports of certain high-tech items that had national security uses or block inbound investments in certain sets of industries and the rest of the economy be relatively open for trade investment cross-border. but now there are too many technologies used pervasively across economy and also have very important national security concerns. so separating these areas out is a policy dilemma both the u.s. and china and it is something that frankly, there needs to be a lot of work done. we have very comprehensive and high-level discussions taking

place on the trade agenda. but we don't really have the same level of discussion taking place yet in terms of how each country can protect its national security concerns and maximize the extent to which we can still do business. so that is in a way a gap in our bilateral relations and negotiations that needs to be filled before we can really be confident of where the relationship is headed. shery: in the meantime we have seen china take steps to open up its markets. them scrap for investment limits in the stock and bond markets. is there a chance the u.s. tensions with china could and have beijing raise more barriers in this? when i talked about the third category of issues, systemic differences between the way our economies operate, the thing that we have been most focused on is chinese industrial policies. and a lot of the opening that

they have offered to do in the financial sector does not interfere at all with their industrial policies which have been of such concern to the u.s. at the same time, it is true, chinese companies are finding ways to favor investors or companies from other countries rather than the united states when the tensions between the countries rise. and so this is a concern. it is also a concern that now chinese companies in many cases are being instructed to find an alternative supplier rather than american. and it is hard to see how that trend is going to be reverse. shery: thank you so much for joining us from washington dc. we have breaking news. releasingting the boj the company's average forecast for price changes within japan. companies not expecting a 1%

inflation gain in three years time. they also expect inflation growth to be 1.1% in five years. cpimber, the national excluding fresh food year on year in august was only half a percent. so that would be a pretty hefty goal but the boj now saying according to a survey of companies in japan they are expecting 1% inflation in three years time. plenty more ahead. this is bloomberg. ♪ is is bloomberg. ♪

this is daybreak: asia. i'm paul allen in sydney. shery: i'm shery ahn in new york. worke sharing startup we has had its credit rate cut to triple see in the aftermath of the shelving of a planned ipo. that is a reduction of two levels. it also lowered its level from

stable to negative, saying they had an uncertain liquidity profile. they often struggle to meet debt obligations if conditions deteriorate. paul: one certification to fly drones under similar regulations allowing it to vastly expand airborne deliveries. the faa has given them permission to use drones at hospital, university and corporate campuses. it is a major step forward. they promised to reduce carrier --ts as a surgeon on blanc on online commerce -- shery: markets open in tokyo, and sydney at the top of the hour. let's turn to selena for what to watch in the markets. selina: moments away from the open in asia trading. we are seeing the japanese 10 year bonds starting to trade,

down about .3%. yesterday we saw japan's worst bond option in years which spurred a global selloff. the decision to potentially/bond purchases in october and the announcement the government fund is pivoting towards buying more foreign debt. it had a big psychological impact on investors. investors -- we did also see bond futures earlier trade and tumbled the most in several years. we have seen it back some of the losses but still a lot of pressure on the japanese 10 year yields. come in the next hour, hong kong retail sales are out later today. they are expected to show a massive decline as protests

continue to grip the city. the market open is coming up next. this is bloomberg. ♪ this is bloomberg. ♪

paul: good morning, i'm paul allen in sydney. asia's major markets are about to open for trade. shery: from bloomberg's global headquarter in new york, i'm shery ahn. selina: i am selina wang in beijing. welcome to "daybreak: asia." . paul: our top stories this wednesday, concern growing about a global slowdown. slashingigns of manufacturing exports and sentiment stuck in a slump. boris johnson prepares to lay out his final brings a plan. the u.k. will crash out of the

eu if brussels were to engage. shery: more praying -- more pain from the farm tests in hong kong. hotel occupancy tumbles with terrorism down. -- tourism down. let's get a check of how markets are trading in japan, south korea with selena. selina: asian stocks pressured off the back of the u.s. manufacturing data. on the back of even worse data out of europe. b pmi's earlier this week down about six percent. the 107.7g around level. i was just talking about yesterday, japan's worst bond option in years sparking a global selloff. the japanese 10 year yield up about six basis points. taking a look at south korea. reverse twos to

straight days of gains, down about .7%. aboutrean won trading at 1.2035%. data, wefrom the pmi sought week contraction in the south korean economy. taking a look at australia and new zealand. the aussie dollar trading around the .6708 level. it is picking up a little bit. it dropped as low as .672. the weakest level since march 2009. less after the rba cut the rate of .75%, with signals of even them further ev -- even further easing. zealand and px50 showing change after four straight days of gains. paul: thank you. breaking news out

of australia from national australia bank. an announcement related to second-half earnings. estimatesing earnings by $57 million. taking a further 1.1 8 billion after-tax customer remediation charge. this is related to the ongoing fallout from the oil commission into misconduct in the banking regulations in the industry. of $1.1al charge billion and an impact of 57 million on second-half earnings. they are yet to begin trading. shery: we have an alert on the developing story with north korea launching a projectile. shinzo abe is speaking in tokyo, saying he condemns the north korea missile launches and they are a breach of yuan resolutions. we have seen south korea confirming the projectile that they went toward the east, now

prime minister shinzo abe says he strongly condemns the launches. let's get the first word news. >> the long-running protests in hong kong are taking an increasing toll on the economy. and declines for a seventh month in august. the unrest with visit from mainland china down 42%. devastating the hotel industry and shopping industry. retail sales may have fallen 14% from a year ago. 66% fromupancy slid to 94% one year ago. crowds gathering over macau at the start of golden week, gaining revenue touched its lowest level in one year. battered by economic and geopolitical struggles. growth revenue was $2.7 billion in september. we are expecting it to strengthen and the second half. the continuing unrest in hong kong has hurt tourist traffic.

china has given the upcoming trade talks by agreeing to buy u.s. soybeans after beijing issued more ways from import tariffs. estate owned and private companies at just about 15 cargoes. help a more consumer treat atmosphere between the high-level officials who may meet next week in washington. opec is set to lose another member in the oil game. ecuador is set to leave the cartel in january, saying it wants to boost oil revenue at the moment when the whole group and its independent allies are suffering from low prices. ecuador's move comes less than a year after qatar announced it would leave opec, saying it wants to focus on natural gas production. the u.s. and north korea agreed to have talks in the coming days, building on a vague agreement by president trump and kim jong-un at the demilitarized

zone in june. it's not clear where the talks will take place or what exactly will be on the agenda. withevised talks come japan and south korea confirming at least one new missile launch by north korea today. local news, 20 far was a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. isry: the global economy flashing clear warning signs, a wave of the manufacturing slump as exports fall and sentiments slide. garfield reynolds joins us now. no wonder we see red across asian markets and -- any hopes for risk assets? day. will be a grim it looks like there is not even much coming on the data front.

china is off for the week. no chance for a turnaround. there's been a lot of threading in asian markets over the last couple of months over what it auld take for china to pursue more aggressive monetary easing stance. perhaps some of what has gone on can do that. it will not happen for another week or so. everyone is left on their own. even australia had a rate cut yesterday. that is not doing much to help equities. up to theis facing difficulty that the u.s. had seemed to be somewhat immune to the global industrial breakdown that had been spawned in by the trade war. with that being the biggest economy and a key trading partner for most asian economies, it makes it a grim outlook. little bit of

action for havens. in particular, jgb's after yesterday. >> yesterday, it would have been a good one to buy if you were bold enough to do so. that has put japanese bonds truly behind the eight ball relative to their counterparts. there will be lingering pain that will remain. the boj made it clear it wants a steeper yield curve. even though jgb's should come back strongly, i don't think you will see the drive towards the negative .3% record low 10 year yields that we had earlier. is now a distant prospect. probably bond mavens will be looking to other markets to maximize the impact of the global slowdown. >> garfield reynolds, thanks for

joining us. you can follow more on this story and the day's trading on our markets alive blog on the bloomberg. you can get a market rundown in one click. there's commentary and analysis from bloomberg's expert editors and you can find out what is affecting your investments right now. our next guest says there's growing interest in asian credit and investors are looking at standalone allocations. isning us from singapore broadridge financial solutions aipac insights director. thank you for joining us. thanook at funds more individual equities. where do you see strong investor interest in the moment? on the fun side, we see a few major trends of the big teams that we see across the globe echoing in asia, as well.

things like volatility in the market affecting investors. equityprofit taking in mutual fund space itself. fund flows, equity space in the rate zone. a few positive points among the low picture. i think the impact of cost efficiency is really in that. especially within the passive with, we combine it passive equities and passive fixed income. .ombining inflows $90 billion in the last 12 months. purchases, it the has increased and brought in further 10 billion into the market. on the second fund itself, it is in the bond space. -- heightened risk, but

it is too expensive. investors are piling into the china,, particularly in where we see strong interest in the china policy back flows. paul: you are seeing greater interests in asian credit firm investors. >> yes. that's right. this is true across the globe itself. shift, a couple of trends. going fromallocation exposing themselves, to asian credit via global emerging markets, to actually taking a stand on allocation. some of the key drivers include china increasing accessibility, including in the global bond market. i think some of the future allocations we are expecting to of makingthe space

dedicated allocations to asia, but drawing distinction between emerging asia and developed asia. emergence ining the green space itself. china is a leader in green bond issuance. asia,see higher yields in which is really attracting the investors. what is the correlation like with other asset classes when it comes to asia high-yield? in terms of correlation with other asset classes, we see asia on a strong play. especially against the more developed market credit. it is been seeing as having strong ratings, especially with asian credit dominated by the big markets. japan and china both enjoying strong credit ratings.

for resiliencen against the markets. base, very asset classes we see investors flocking to it as a safe haven. shery: asia is a very connected environment. how big is mobile in this case, when it comes to purchasing funds? mobile apps when it comes to purchasing funds across asia. onere's a report discovering china's accessibility. didart of this research, we an investor survey. it is quite amazing to us to

find out that it is across all age groups, all financial wealth tears. mobile apps trying forms of interactions. it is one of the strongest and fastest growing channels. this is especially so in china. paul: what is the biggest risk factor? how often does the regulatory environment change in china? especially in the asset management community itself, asset managers are keenly aware of the regulatory risk involved in every single decision. times, the regulatory direction has been very positive, especially for the global community itself with the removal of coders, investment

restrictions, foreign ownership restrictions, the caps being removed and the deadline being brought forward to 2020. all of this has been positive news for the global manager community. for manyortant point of our global clients to look at is what this means for the business itself when there are more than 10 entry options into the marketplace, which will make both financial sense, not just in the short-term, but the longer term, as well. paul: broadridge financial solutions director, thank you for joining us. still to come, u.s. auto sales took a big step in september, setting the stage for incentives spending by carmakers struggling to clear old models. a look at the rocky road ahead. shery: the latest on the hong kong unrest as the protester

that was shot by officers for the first time. the serious clashes since the demonstrations began in june. this is bloomberg. ♪

paul: this is "daybreak: asia." i'm paul allen in sydney. shery: i'm shery ahn in new york. boris johnson is facing the moment of truth for his brexit strategy as he prepares to offer his final deal to the european union. bloomberg has learned the eu may consider a time limit on the contentious backstop for the irish border. jodi schneider is watching this. what is the prime minister offering the eu, and what will he do if the deal is not accepted? isit appears boris johnson offering the eu an ultimatum to take his final offer or he will

take the u.k. out of the eu on october 31 on the brexit deadline. he says it is a fair and reasonable offer, and if they don't accept, he is prepared to defy parliament, which has said it does not want him to pass legislation to leave a deal and they want an extension. he says he's leaving. proposing getting rid of the irish backstop that his predecessor had negotiated with the eu. isl: if the irish backstop gone, how does his new proposed approach work? -- it wouldlly require customs checks, something the eu nor ireland wants.

he has basically put northern ireland in its own regime, a temporary regime, saying it would get around having to have that backstop. he doesn't like the backstop because it can put an indefinite tie on the u.k. to the eu rules. he's proposing something different. it would require the checks that the eu has had opposing the past. shery: what response are we expecting from the eu? will he be able to get this through? >> there are two issues. the eu is not liking the customs checks. it is not likely to support this. talk that there may be some european countries willing to look at a time limit on the proposed backstop, which would change the equation. is it was notsue

accepted by many members of parliament. apparently the time limit they would only agree to it if they viewed the plan of the prime minister as workable. there's a lot of questions whether the eu will go for this. cleararliament has made they do not want to leave on october 31 without a deal. there's legislation that says an extension must be negotiated. boris johnson said he will not negotiate. will findses, he himself in court with members of parliament. senior international editor jodi snyder, thank you very much. get a roundup of the stories you need to know to get your day going in today's edition of daybreak. bloomberg some cry verse go to their terminal -- bloomberg subscribers, go to their terminal. it's also available on the mobile app.

customize your settings to get the news that you care about. this is bloomberg. ♪

paul: this is "daybreak: asia." i'm paul allen in sydney. shery: i'm shery ahn in new york. auto stocks took a beating in the latest session as the first round of september sales numbers sounded the alarm bells. the first numbers were looking grim for the u.s., suggesting heavy incentives will be needed to move cars off of lots. su keenan has the details. what do the numbers look like? >> they are bad, disastrous as one analyst called them. the numbers down in total digits. we are waiting for general motors to have a report. there is a concern because of the performance that the numbers will be worse than expected. stocks were down across the board, except for nissan, which even though sales and deliveries

were down about 18%, it was less bed than the drop of 21% expected. there was a relief rally. take a look at the actual numbers. you can see what a surprise they were. toyota sales fell more than 16%. 12% decline was expected. honda fell 14%. several times greater than the 4.6% drop forecast. nissan fell just under 18%. 21% drop was expected. the severity of this slide is feeding into fears that what has long been a concern for the auto industry, the sales collapse that is coming is now here. overears, the sales of all auto related vehicles had been propped up by these heavy dealer incentives.

in september, the average incentive was about $4100. there's concern the industry will have to double down on these under very tight profit margins and they will be squeezed greater. >> paul: what do paul: the results mean -- what do the results mean for the automakers? the numbers are far worse than expected for nissan. era,dicates perhaps in the the company is facing simple struggles. double did -- digit sales drop. not quite as bad as the worst case scenario. they saw declines in all of their brand categories. so did toyota. even the marquee names were down. this puts a lot of pressure on where gm and u.s. automakers will report. paul: thanks for that.

let's get a check of the latest business flash headlines. survivedisse ceo has the lead. he issued an internal memo seen by bloomberg this is it was deeply regrettable and has hurt the reputation of switzerland's second largest lender. there were exonerated over the scandal, saying there's no evidence he knew about the plan. shery: for payment companies join facebook and founders of the association set to be having second thoughts. paypal, andcard, stripe are increasingly undecided about formally signing the charter, worried about maintaining relations with regulators. the companies believe facebook oversold the extent, to which regulators were comfortable with the project. salesthe hong kong retail reached today are expected to

show a massive decline as protesters continue grouping the city. we hear from the greater china , all of that, coming up. ming up. from the couldn't be prouders

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shery: this is "daybreak: asia." i have the first word headlines. flashingl economy is clear warning signs as new data shows manufacturing stock is in a slump. exports falling and sentiment is sliding. a closely watched factory index dropped the lowest since 2009. south korea reported a fall in consumer prices and the rba cut rates to a record low. the world triggering is asian cup forecasts. the u.s. auto sales rate were led last month, but not in a good way. overall delivery fell in september died -- by 12%.

a 16% decline year on year. automakers had to pay record incentives of more than $4000 a vehicle last quarter. the party is over for the record 93 where it has finally come to a halt. u.k. prime minister boris johnson will lay out his final brexit wednesday. warning the country will crash out of the european union if they will not engage. the telegraph reports it would be seen northern island in a special relationship with the eu until 2025, subject to custom checks at the hours border. the eu is said to be discussing a potential term limit on the backstop mechanism. president trump has resumed battling the fed, saying jay powell and the team let them put low. manufacturing at a

he continues to campaign for lower rates, saying the government and fomc are their worst enemy. they don't have a clue, pathetic. powell has yet to indicate whether he will cut rates again this year. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 27 hundred journalists and analysts in more than 120 countries. this is bloomberg. in on what'sheck happening in the markets and get over to salina in beijing. stocks arean pressured by the week manufacturing data we saw out of the u.s., which is renewing concerns about a global slowdown and the hong kong protests that show no signs of letting up. asx 200 is leading losses. this is after the rba cut the cash rate to a record low .75%, seeing the aussie dollar pervak some of the losses after it

dropped to a decade low earlier. also looking at the nikkei, down with the maternal sector losing the most. mb x50 looks to be reserve -- reversing losses. mostly read across the board. i want to take a look at japanese and south korean stocks. as we were talking earlier, the auto sector has been facing headwinds. u.s. auto sales took a step back in december. that has been really disastrous for the automakers. toyota sales plunged 16% in september with its namesake and lexus brand dropping. honda sales are down. down moreares are than 20% over the last year. there's already been a lot of pressure on that stock with the internal turmoil at the company.

hyundai may have weathered it better than its japanese counterparts. sales slipping 8.8%. not pretty across the board for the auto sector right now. paul: as china marks 70 years of communist rule on tuesday, hong kong was rocked by the most serious clashes since widespread unrest in june. a processor was shot by police with a live round. sophie kamaruddin is in one of the districts affected by the protest. a real crowd hanging over hong kong this morning. front of a burnt out station here. passer buyers are being handed newspapers. one headline reads a whole world is entering an anti-communist era. certainly top of mind this morning. the city's most chaotic and violent day ever.

the city turning into a battleground between protesters, throwing petrol bombs and bricks. rubber bullets, water cannons, and using batons. the long day and night ended with people arrested. more than 30 hospitalizations, including a student who was shot by one of six rounds fired by police. he is stable, but in critical condition after surgery to remove the bullet. the police commissioner suspended the officer who fired that shot, saying he acted lawfully given the u.s. secretary has called that action disproportionate and saying it risks to inflame the situation. china has come under fire from republican lawmakers, including senator mitch mcconnell, who ofs it shows 70 years

communist china control. this is chambers of the u.s. congress seeks to pass whileation on hong kong they are marking the celebrations in beijing. back to you. shery: i could just see behind you people walking into the subway station. does it mean it is business as usual? are we expecting more protests? stations are closed on tuesday. this particular entrance has not opened, given the damage here. while the lines are set to reopen, there are calls for disruptions, including in downtown hong kong. our social media, there are also calls to gather this morning at 9:30 a.m..

charged on monday are set to appear. there are calls for a general strike to take place at 1:00 p.m. today. it's difficult to say how much participation there may be. back to you. shery: thank you so much for the latest. this increasingly violent protest in hong kong is taking a bigger toll on the economy. retail sales forecast to have declined for a seventh month in august. the outlook is for a 14% decline from a year earlier. the data is released wednesday afternoon in hong kong. luxury goods are being hit. even supermarkets are suffering. hasvalue of retail sales fallen to its lowest level since september of 2011. retailers are having staff take unpaid leave. some are planning layoffs.

much is down to plunging visitor numbers for mainland china, down 42% in august. let's take a closer look at what's happening in hong kong. joining us is david g. the head of research and consultancy. great to have you with us. in which segments do we see the biggest hit when it comes to retail? hit, the drops on the street front in the most , because thes others are growing unrest. people are unwilling to come and spend money. that's what's going to be mostly affected. if you see the reduction of tourist numbers, those are the

areas people visit. income for those will be greatly affected. they will be a problem coming to a time when you have to pay rent. shery: hong kong has been reliant on mainland tourists coming in from china. do they have any alternatives to this slowing? do they have other sources of income if the protests continue? there was a time when people were trying to think about diversifying from the single major source of income, to say local spending and community and so on. at this particular moment, when there's unrest going on, even the local malls and local spending are being checked, because people are not going to spend beyond necessity.

in the long term, people have to think about the challenges. diversify have to sources from other countries in asia or in europe. mentioned there would be a risk of tenants being struggling to pay rent. what sort of things can landlords do to mitigate the impact? moment, itparticular is hard to be hopeful about. it is more likely a political situation. people have to look beyond the unrest and see what's going on with the retail market. over the long run, people have to think about the competitiveness of the hong kong retail market. the roman be devalued?

import restrictions in china will be relaxed. china has become a very competitive market. and online shopping. people can do it at home. something hong kong has to think long term. in the short-term, it depends on how they can solve the political trouble at this moment. >> retail is on the front line these troubles. are you seeing spill over into other parts of the property market? at this particular moment, the impact hasn't quite been sectors, because you can see residential sales are doing well. is beginning to see

softening. that was mostly because of the final u.s. trade war impact, where many firms are holding back relocation plans. we can actually see some of the officess who rent beginning to think if they should relocate out of hong kong to these centralized areas. we will just have to wait and see. shery: how much of the pressure we see income hong kong has to do directly with the violence of the hong kong protests? how much of it started even before the protest? we have seen online shopping and other competitive pricing coming from the mainland. impacts arehe really being felt before the protests.

if you look at the figures at the beginning of the year, the house prices have seen a correction because the final u.s. trade war. also, the weakening of the renminbi. they are spending less. difficult to assess how much impact on the gdp or the overall economy is directly linked to the protest. it's only on the street level or you can see the shops beginning from staff changes and they are giving out some kind of relief. that is more on the street level, where you can see some impacts. one, dutch over the long run, if they are taking a hit, there is economic and

political troubles, then we see acrossng that can impact the board, rather than retail sales. on longer has dragged than anybody probably expected. how much longer do you think it will continue? what is your worst case scenario? if you're talking about retail sales, we already revised our forecasts this year. beyondts should be way 15%. will lasthe trouble until the end of the year. whether or not in the first quarter of next year, things , we need to look at the political solutions and the

final u.s. trade deal. there will be progress in that. beyond that, we can't really see much. over the long run, some of the political troubles can last forever. beyonds a glint of hope 2019 and the first quarter of 2020. paul: greater china director ahead of research and consultancy, thanks for joining us. planning more to come on "daybreak: asia." . this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery on new york. paul: i'm paul allen in sydney. let's get to the world of cryptocurrencies. bitcoin stabilizing after last week's brutal selloff. the bulls can look to technical signals. bitcoin regained its lower band.

the last three times, it executed this trading pattern. funded the company behind the stable cone -- coin. it is set to be listed as they avoid price fluctuation often through pegs or reserves. there is a maintain 1-1 pegged to the u.s. dollar. let's discuss that with the founder, joining us live from tokyo. bitcoin as we described has become a word for volatility over the years. that is putting it politely. for those unfamiliar with it, how does stable coin work and why is it needed? the main thing about stable coin is it is stable. the reason why that is so important is because if you want blockchain technology and crypto to be relevant to regular people

and businesses, because the volatility you see in something like bitcoin does not work in everyday life. there is a lot more emphasis and focus on stable coins. this is part of -- partly through facebook's libra initiative. theyany stable coins does -- are needed? are things get overpopulated? of stable coins issued by companies. i think because if you look at facebook, the thing about these coins is they are all issued by a particular brand. they actually get adopted based on how people trust that brand. that's because they are centralized. with a stablehat

coin like this, you have to trust the company will hold your money safe for you. what the maker is doing is trying to get beyond this model of trusting some custodian and creating a stable coin that maintains the value of blockchain by being decentralized. rather than having reserves sitting in an account somewhere or with a company, we have managed to make a system that maintains stability through code , entirely on blockchain. this way, we offer an lessnative that is requiring of trust and rather, it's about working through the technology. shery: order the implications of the decentralized finalists and what are the implications for regular people? how will this impact their life?

>> i think one of the most obvious advantages is the transparency you get when you have everything going on a blockchain. the blockchain is the database where you can see everything. when you look at something like and theor money, advantage is no hidden risk, because everything is watchable in real-time. accessdy gets the direct . you can always see in real-time what is backing it. things peoplen like to use the coins for and i'm inalized finance is tokyo now, i have been through a tour of china. asia is a big market. in china, we see people that like to use our stable coin to

lend out to other people directly peer-to-peer. this way, they can earn a return. rather than being through speculation, which is what you see in crypto, it is a exposure thatable you get. then you just get an interest rate, which is desirable in a country with a lot of inflation. shery: you said asia is a huge market for crypto. all crypto 70% of trading volumes. is that reflective in dye trading, as well? have been very focused on building the fundamentals of the technology. we are certainly focused on asia and building growth. we have presence in china, japan, south korea, singapore.

growing useing on by everyday people in the region, because they have this very relevant case of escaping inflation, getting access to better yields. we certainly think it will have the most growth potential. shery: thank you so much for joining us. makerdao's founder giving us a look into bitcoin. still ahead on "daybreak: asia." this is bloomberg. ♪

is "daybreak: asia." i am paul allen in sydney. shery: i'm shery ahn in new york. let's get a check on the business flash headlines. we works credit rate has been cut after the startup shelved the planned ipo. the reduction of two levels lowering the outlook from stable to negative, saying it reflects the uncertain liquidity profile. they work in the tier and struggle to meet in debt obligations if business financial or economic conditions deteriorate. paul: apple closed with striking distance of a record of optimism of the latest iphone. tim cook told a german newspaper that sales had a strong start and he could not be happier. apple is up more than 17% from a low of 2.5% below an all-time

closing high reached about a year ago. shery: sony slashing the price of the playstation now game and competition in online offering heats up -- heats up. it will cost 999 a month. their offer -- offering limited runs of titles. microsoft the box game pass also starts at $9.99. apple's new arcade service launched two weeks ago at $4.99, with games created exclusively. now a preview of what to watch later this morning. selena is in beijing. selina: as we have been hearing from sophie on the ground and our guest earlier, we are expecting a steeper decline from hong kong's august retail sales. analyst forecasting a 14% drop. this shows the massive drop in visitors coming from mainland china. the first decline in 18 months. as you can see from the red bar. the steepest decline since

several years ago. chart starts in 2014. the luxury sector has been hit very hard, given it is a common purchased area of mainland tourists. it's also devastated shops and hotel industry with hotel occupancy rates sliding 66% in august of 2018. back to you. on ""bloomberg markets."." china open gives us the market outlook and what is turning out to be a volatile period. and a check of the markets with our large bc immunity analyst. this is blumberg. ♪

tom: 9:00 a.m. in china, welcome to bloomberg markets. yvonne: we are counting down to the open of trade on hong kong markets. more pain from the violent protests in the city. retail sales and hotel occupancy tumbles with tourism arrivals down more than 40%. concern is growing about a global slowdown. warning signs flash with exports and sentiment stuck in a slump. yvonne: boris johnson prepares his final brexit plan and warns the u.k. will crash out if brussels won't