China. The expectation is for the weakest reading since september. We have world coverage here on daybreak asia. Live in San Francisco soon to talk about ubers latest speedbump in self driving cars. Betty what a story there. We will be live in washington, the controversy surrounding the trump administration. , live daybreak asia from bloombergs u. S. And asian headquarters. I am betty lou. Yvonne it is just after 7 00 a. M. In hong kong, i am yvonne man. Breaking news from south korea. Industrial production, a big miss of the month on month protection figures, falling for the month of april. We were hoping for a slight rise of 0. 6 . Inramatic fall from the 1 march. Those have been revised to 1. 2 . Year on year coming in at 1 at 1. 7 . Of 5 from estimates economists. We continue to see this recovery in global trade reaching a peak. Export growth figures have been off of the highs. We seem to have stabilized. It continues the story, is this as good as it gets when it comes to the numbers . Business confidence numbers from south korea a couple hours ago. Those remain at threeyear highs. Still optimism when it comes to manufacturers for moon jaein and his efforts to raise fiscal spending and create jobs. We will see how korea reacts when the markets open in about an hours time. Lets get a quick check of how asia is. New zealand heading lower as we get the u. S. Market return from the holiday, with a pullback from record highs. 7086. I at says there is risk to the dairy center, which remains vulnerable. 7459. Sie dollar at we did see modest marginal gains yesterday. Futures are flat. We did see a wider selloff in commodities overnight. Crude heading lower. At lets go to japan for details on the bojs monthly debt purchases. Analysts are saying the stealth tapering may take a break. We do see mediumterm bond yields pickup. 0. 85. Ryen changed, 11 seeing a modest losses at the open at the nikkei 225 in tokyo today. That is what to expect in the region this morning. Wall street, trading and tight ranges. Betty and we ended lower. We have been seeing this winning streak of seven days of gains in the markets. Lets pull up the board. We had Consumer Confidence numbers come in this morning. They show we are spending, but not as robustly as we are looking for. The s p ending down 0. 1 . The dow off by 50 points. The nasdaq lower, as well. Back in the red for the u. S. Market. Now we have first word news with nina melendez. The next couple of hours will bring a check on the chinese economy, with manufacturing pmi ae, economists are expecting reading of 51, the weakest since september. The lower pmi rating would be consistent with the view that chinas growth this year has passed its peak. The data are out at 9 00 in beijing, 9 00 p. M. In new york. The fed governor says inflation may force a rethink of the pace of rate hikes, even if Global Outlook is brightening. Unemployment is at postcrisis low and Consumer Confidence is strong. Yet inflation has cooled, making policy decisions more complicated. Brainard said it is hard to make the call. There are signs the economy is holding full employment, signs of tentative progress on inflation may be slowing. If that tension between a progress on employment and the lack of progress on inflation persists, it may leave me to reassess policy in the future. Although, it is premature to make that call today. North korea has released pictures of its latest missile launch. The scudtype rocket had automation, and hit a target seven meters wide in the east see sea. It landed in japans maritime economics lunch. It is the third launch since moon jaein took office on may 10. China discussed at the launch at rare talks in tokyo. The counselor began a threeday visit, saying the situation on the divided peninsula can only be resolved with negotiation. It Japanese Foreign minister said his arrival was timely, and as norththe importance koreas provocations have reached a new level. President trump has a tax meeting again. He drafted up a pursuit that is the bedrock of europeanu. S. Relations. Twee, helymorning criticized the trade deficit with germany and says they pay far less for defense. He added, this will change. Admittedrkel Transatlantic Relations are strained. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am nina melendez, this is bloomberg. President trump preparing for a first meeting with the Southeast Asian leader, welcoming vietnams nguy . N xuan phuc to the white house. He is keen to talk bilateral trade. Washington abandoned the tpp. Lets cross over to washington and bring in alisa parenti. Good to see you. This might be a welcome relief for the president , with the russian inquiry going on. That crisis only growing while he was abroad. What is the latest on them . Alisa he is looking to shift the focus away from the investigation. But we continue to have developments. In the last hour we learned that Michael Flynn will provide documents to the Senate Intelligence committee. Sources close to flynn say the documents involved two of his businesses, as well as personal documents they have requested it last month. The person said flynn plans to produce these documents by the end of the week. On thete in the day, house side, the House Intelligence Committee has requested and is looking to subpoena trumps personal attorney, Michael Michael cohen. A lot of developments. Yvonne it seems it has been overshadowed, when it comes to the comey firing. What about the search for a new fbi chief . Alisa that does continue. Trump has interviewed two people he is considering, including the number two at the fbi, and at one point ran at the tsa. The other person we are told in the running is chris ray. He was a former assistant attorney general. Betty we have been following the pariscision on climate accord, which he seems to be stepping back from. That trumprts are told those closest to him, including scott pruitt, that he will not support the accord. Supportlone and did not the communicate with the european leaders. It would appear he is stepping back from it. Press secretary, sean spicer, says troublemaking decision known shortly. Reports indicate we should know by the end of this week. Betty alisa parenti, with the latest from washington. Something investors are watching, as well. Stocks holding that sevenday ed advance. A wider selloff then we saw in commodities. Give us a break down on today. We have a lot of asset class classes down. Ruptures, dusting it up. It shows there are turns to the market. Lets go to the close again. Almost unchanged. We cannot call it a major pullback. If we go to the movers, there were bigger very big moves. Thatas to do with the fact at least one of the companies is doing well, in terms of earnings and outlooks and patent law. If we can get to the big movers there, take a look at those stocks. Well. Oing tesla, the momentum continues with that stock. Bloomberg,into that if the dow is hitting records, this is really how the economy moves things around. Guess what . It is probably the weakest of the four components. That is a caution flag that any rally can be dragged by the fact you do not have that transportation index. That weakness is perhaps worrying commodities investors, right . We have been seeing these declines in commodities. Su a lot of it has to do with Economic Data. We had better than expected economic spending data out. The numbers are indicating fed is all but certain to raise rates. That is bearish for gold. The gold bulls have a lot going for them in terms of uncertainty. We look at oil, a bit of a pullback there, after two days running higher, post opec. There was talk of it may be new members would come to join in. We are looking, to extend it to 2018. But for now, it is on a positive track. Yvonne we have the first set of a loaded data out from the u. S. When it came to consumer spending, the latest report is on the rise. Supporting the case we could see a possible rebound in the second quarter. That is the expectation. Spending is very important in 70 of the economy. We had the strongest pace in about four months. The gain was at a brisk pace. You consider how week that quarter was, that is important. We also have reports from Credit Suisse that we will see a lot of these malls, 25 of them, close down over the pat over the next five years. It is a bleak picture. It has to do with spending patterns and people moving online. The equation. If we go in the bloomberg to look at computer Consumer Confidence versus actual spending, the white line is the confidence. Thecan see in moves with actual spending. It is higher right now than the blue line. You can see them both pointing lower. Some. S of concern for yvonne also, inflation remaining tame with that as well. Su, thank you. We saw the miss in korea. Japan is up next in a couple minutes. Expected to rise the most in three years. Betty a big leak for Economic Data in the u. S. , much jobs report friday. We will preview that with a fund manager. This is bloomberg. Yvonne a live look outside the imperial palace in tokyo. Cloudy out there. We are counting down to asias first major market open. Japan futures heading lower. The yen Holding Onto Gains in the last three days. We continue to watch the weakness of the dollar after it was soft. Consumer confidence numbers, as we talked about earlier. I am yvonne man in hong kong. In newi am betty liu york. Watching Economic Data ahead of the said review. The fed suggested policymakers want more evidence of the slow slowdown being transitory before taking action or nonaction. It is due this friday. I want to bring in the head of emerging markets at western asset management. He joins us from pasadena, california. I know you focus on emerging markets. But we watched the u. S. Very closely. Em stocksffects on and that. How is how important is this jobs report friday in determining how investors view the outlook . Usit is really important for. Our base case for the u. S. Ofnomy is an extended period moderate growth. Sure, the recent data has been soft. Report durable goods have been disappointing. But other data continues to point to study momentum in the economy. Total gdp we had ised upward from 0. 7 to it suggests a strong momentum on the labor market. We do expect a payroll number to 200. 175 we do think the fed is on track to hike 25 basis points in the june meeting. Betty it has been such a , why it has been more supportive of treasury yields and not the dollar . Chialiang sure. When we think about the feds move, it has been quite interesting to note, there has been, why it has been more supportive of treasury yields and not the dollar . A decent renovation between esynchronization. They have not followed and tracked the last rate hikes. That is why asian local bonds continue to attract continue to be an attractive investment opportunity. Betty i want to talk about this issue we just heard kathleen reporter, talk about. It is the whole idea of the fed Balance Sheet. How are they going to unwind this Balance Sheet . She was saying in this speech it was top of mind for these investors and economists and audience. How top of mind is that for you . Chialiang it is important. The fed has been in communication with the investment community. For emerging markets, in terms of bond opportunities, we want have safe ant to further bonds are not based on the feds positioning. Our sense is that emerging stabilizing, and a more stable base of investors. Those three key points are critical in terms of underpinning demand for emergingmarket bonds. Closely, inng very terms of those factors. Yvonne this is yvonne in hong kong. We are seeing in china i want to get your view on that. It is leveraging campaign out of the mainland is severe when it comes to the bond market. I want to throw a chart to our viewers. We see this trend of Chinese Companies scrapping sales, not issuing more debt. Given this headwind we see and corporate notes in china, it is now above chinas benchmark lending rate. We have not seen that since 2008. Do you expect the squeeze in liquidities to get worse in china right now . As a foreign investor, how do you view that at the moment . Chialiang insofar as china is concerned, it is the second largest economy. As global investors, we are mindful of the direction of china with the rest of the world. Last year, china contributed 40 . If china sneezes, the World Economy will likely catch a cold. In all senses, most of the challenges in china are mediumterm. We do see the policymakers in china have sufficient policy tools to navigate structural challenges that are highlighted. We do think shortterm risks are under control. Downgradeddys struck a blow at an awkward time, when china is trying to open its bond markets. Does this sour the sentiment further, in attracting investors to this bond connect said to launch this year . Chialiang to take a recap on the impact of the moodys downgraded, impact has been muted. A lot of factors cited by moodys are not necessarily new. That is not to say we want to be complacent about the risks and china. We do believe china has the necessary tools to navigate these challenges. Insofar as demand for chinese securities, that is something they are watching very closely. To the extent the chinese authorities are progressively liberalizing Capital Accounts and encouraging foreign influence, but keeping a close watch, because the technical inflows into china could be substantial, should china be included in these indices. This is a possibility within the next one to two years. Yvonne thank you, the head of emergingmarket at western asset management, joining us live from pasadena. Uber hide it hired a lead. This is bloomberg. Betty this is daybreak asia, i am betty lou in new york. Yvonne i am yvonne man in hong kong. Cooper has fired the engineer that leads its self driving car efforts. There is a legal dispute over also that. Ogy with lets get to our legal reporter, joining us now from San Francisco. What an amazing development. Tell us what the rationale is behind this firing. In midmay, San Francisco federal judge gave uber an ultimatum. They were told, either pony up these 14,000 files love and ask andowskiles lex allegedly stole, or fire the guy. They decided to fire him. The judge will have to decide if they complied with this preliminary injunction by firing him, and what happens next. Is an interesting situation, by firing him, does that a dissolve uber does that absolve uber . Chialiang that is the question, that is the question, to see if it is enough. I doubt it. There will be questions raised, arguments made. But this will probably go toward , perhapsnt injunction a triallike situation where a jury will decide whether they complied or not. Betty i suppose for investors in uber, the big question is, what is it mean for the self driving Program Within uber . Does that put it in tatters . Kartikay is this their only tool toward getting to Self Driving Technology . Our colleagues would probably say no. There are likely other methods for getting to what they want to accomplish. Bys was a fasttrack method, getting one of the top minds in self driving tech. Cant uber leapfrog competitors and get ahead of the technology . Perhaps they do not have that advantage now. But there are likely to be other ways for them to get where they want to go. That talents,buy you buy the knowledge base. Now they do not have it anymore. Thank you so much, our u. S. Legal reporter on this uber case. We will get a first look at how chinas economy fared in may, when manufacturing numbers are released later this morning. This is bloomberg. Yvonne 7 30 a. M. Wednesday morning in hong kong. The end of the dragon festival. Minutes away from asias first market open. Betty fun times. Tuesday evening in new york, where markets closed of touch softer. Kind of gloomy, ominous in new york. 0. 1 , where it closed. I am betty liu in new york. Yvonne i am yvonne man in hong kong. Youre watching daybreak asia. Good morning. President clinton has ridiculed claims that russia has been interfering in elections in the west. President putin has ridiculed claims that russia has been interfering in elections in the west. Says threats to the system are receding because the Global Industry is recovering. The governor governor released the report, saying risks have fallen in the past month. He noticed global uncertainty, saying new zealand could be vulnerable. Security officials will continue talks to extend laptop bands on airlines. Largertions on devices than smartphones remains on the table. Although the e. U. Is pushing back on the plan. From 10 introduced it middle eastern and some north african airports in march. Investigation into how components of the u. S. Missile Defense System arrived in the country without his knowledge. President moon stepped in after learning launchers had been deployed. That joining the election, and called for a review. More evidence the korean economy is slowing. Data in the last hour showing Industrial Production missing expectations by a wide margin. Manufacturing fell 2. 2 in april, against forecasts of a small rise. The year on year figure was equally wide after the mark. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mean melendez, this is bloomberg. Betty the fed governor has raised doubts about the rates of rate hikes. Policy makers may need to rethink their strategy. Policy editor Kathleen Hays was listening in on the speech. Lots of topics were top of mind. Tell us what she said about inflation. Spoke to thehe cornell club here in new york, the first chunk of her speech the economyabout, is looking better, the Global Economy is brighter, the u. S. Economy is in a rebound, things are evolving the way they should, except inflation. Inflation has been softening lately. She said, if it continues to do that, it may cause her to rethink the outlook, rethink said policies. Here is what she said. See some tension between signs the economy is in the neighborhood of full employment, and assigns the tentative progress on inflation may be slowing. It is that tension between the progress on employment and the lack of progress instant persists, i may reassess policy in the future. Although it is premature to make that call today. Kathleen the fed governor lael said the other half is very important. All of a sudden, it is not heading toward target. At this. K you will see the results of the latest report where the feds main gauge is in turquoise. It went from 1. 9 to 1. 7. It has only been above the 2 target once. Energy slipped to 1. 5 from a 1. 6. This leads to her focusing on the big focus for the fed. If the labor market is so strong, why do we not the wages rising . Followingnot see this through to higher inflation . Lets illustrate this conundrum with another wonderful bloomberg chart. A simple one, but it speaks loudly. As you can see, the Unemployment Rate, the yellow line, has fallen and fallen. On the left side you can see 4. 4 , where it is now. It is the lowest in 10 years. The white line is average hourly earnings, basically, paychecks. They have risen from the worst part since 2012, when they hit the low. Just over 2. 5 , they are stagnating. Why . Why is the phillips curve broken . For years they said it labor market is down, forms have to raise wages. We are not seeing this sufficiently yet. Mobile phone prices and renewing contracts, that is inevitable. Bottom line is coming you need to see wages take off to get a sense that is ready to accelerate. Betty is there any chance the said it could hold off on a june rate hike . Kathleen when they advertise it so much being ready to hike, it seems hard. She is echoing what James Bullard said, the falling inflation. There is the fact the fed is getting further and further away from its price target, with the level it should be. Is not opposing a june rate hike. If the economy is as expected, the rate hikes can continue. The question is, what happens in september, if inflation remains of software gets softer . Productionsstrate projections, the probability of a hike in june now at 90. 6 . Odds are only seen a 26 . Certainlyarkets are not in step with there being another rate hike after the june hike. The fed is watching the numbers. Much more in the debate. Mainstream fed watchers are saying they will keep hiking rates. The bond market says, no, week Inflation Numbers out of june, we need more of a debate. Yvonne what became of the Balance Sheet . There was not too much to debate on. Brainard echoed williams and bullard on reduction. Kathleen she says we are heading in that direction, it has to do with details, timing, and the path of normalization. The does the fed get to point where the fund rate is highest and they can bring in a fund reduction, as well . Indeterminate, early next year. It depends on the economy evolving as expected, right . Getting stronger, inflation not weakening. She says there is no preset level. The fed does not know if it will bring the Balance Sheet to 2. 5 trillion. All the things said watchers want to know, they cannot know yet. Lets watch this chart now. It is a big job. The big recession, Balance Sheet was half a billion. If you add the mortgagebacked securities, 1. 8 trillion, roughly. Was asked about reducing treasuries. Treasuries are straightforward. Mortgagebacked securities they are more wary of. It janet yellen said she wants to get Mortgage Backed securities off the Balance Sheet entirely. Treasuries wanted to get back to that, to the path of normalization. Kathleen, thank you. Were looking ahead to the latest data out of china. The economic recovery there has indeed paid. Were expecting manufacturing pmi to slow down to an eight month low as they work on containing risks and over leveraging. Stephen engles will be breaking those numbers for us. In the previous month, this route in commodities was expected this month. There are indicator showing the reflation story may come to premature end in china. Early indicators are indicating that, whether it is satellite imagery index, Commodity Prices, Metals Prices. What we are expecting is the readings for the manufacturing pmi later this morning, 51. ,till expansion, but it is off 51. 2. April, 51. 2 was the low expectation. 51. 7. Recast was for in april, output, new orders, export orders, all slowed. The sub indices within the pmi and employment at a moderate contraction. This is what we are expecting. It would be the lowest reading. Remember in the depths of the it wn we were at 49. 4s 48. 48. We are getting close to september numbers, 50. 4. Leverage campaign is getting closer. Small and medium index heading for the second consecutive month of lower readings. Tougher,cess is according to analysts at the Standard Chartered bank. Arey we know that the pboc speaking about the daily reference rate mechanism. What about fixing the repo rate as well . This is part of the ongoing effort to liberalize Interest Rate mechanisms in china. You are right about the yuan. They will be working on different models for setting the daily rate to take of volatility. Also in the interbank market they are looking at launching they are launching as of today, there fixing for the repo, interbank rates for the sevenday. For overnight, sevenday, and 14 day repurchase agreements. Beenentral bank has looking at repurchasing agreements to add or take away liquidity. More so than the benchmark, which they have not touched for a year and a half. They will be making a National Transaction gauge, to improve interbank Interest Rates and hopefully, the idea is to improve the efficiency of monetary policy. Betty thank you so much. Up next, despite criticism at hedge funds, a former Hedge Fund Manager says some firms still deserve the model. This is bloomberg. Yvonne this is daybreak asia, i am yvonne man in hong kong. Betty i am betty liu in new york. Many underperformed of the stock markets in recent years. Investors going straight into index funds. Falcone says managers still deserve high commissions. Fundke to the former fed manager in a rare interview. Business has become more institutionalized. The Fee Structure may have to change a bit. There is always going to be the need for highquality investors, no question about it. Betty what do you mean . A fund that matches what is happening in the s p. Should any fund beat charging it . Philip there has to be some flexibility, Going Forward in that Fee Structure. It is very tough for investors to look at it and say, im going but youro and 20, barely beating the s p. Is it worth it . I do not think so, but there are people out there, funds out there, quality, talented people who deserve this two and 20. Betty speaking of the hedge fund world, we got news this morning about steve cohen, he is about 10 billion or so. In this day and age you just mentioned all the cash out there is this too much . Philip i do not know from the steves abilities and capabilities, there is no question he can handle that money. Forstructure probably work that type of capital. I do not know exactly of the Details Behind it. Betty i know i asked this before, would you if you are in that position and wanted to be managing that much money . I very happy doing what i doing. I look at it as our market cap will hopefully get at or close to that. That is my ultimate goal. Betty i am sure a lot of people watching this want to know personally, what have you learned . How do you feel . Theare near five years from ban, and it is about to be lifted. Difficult was a very time. I would not wish that on my worst enemy. Anything, it is putting it passed me and moving forward, probably the best thing i could have done. I which i had done it sooner rather than later. Different period back then, so it was challenging. It was tough, no question about it. Betty would you have done anything differently . Philip i would have looked to move on sooner rather than later. Betty that was my exclusive meeting interview with hc2 leader, philip falcone. I think it is a question on a lot of investors minds. If two and 20 does not fit in a lot of cases, wire investors making a stand on breaking this model . I think they are, that is what you are seeing right now. There simply are not enough managers who deserve the two and 20. You are seeing tensions, institutions, Family Offices going to managers and saying, i amsurg. If youre going to start this conversation with two and 20, we will not have it. You see this from the largest institutions. Want ear, what they maybe they thought they can get 30 per year. But in reality, what they want is not that. Want reasonably good, riskadjusted return. Somewhat matching the market, in a way. Willing to pay for that is not anywhere close to two and 20. You are seeing them come out with products that offer lower fees to satisfy these investors with enormous pools of capital. Yvonne should investors expect cohens new hedge fund to look like the old capital . Simone is an interesting question. The pitch is, you should come capitalause we are scc and we made approximately 30 per year for decades. Andver, what happens to sac the new Investment Firm is, there have been losses of talents. A refurbishment of culture and expectations. Honchoseve and his head have tried to blend in more into the investment process. It remains to be seen whether that will make money. Particularly when there is more money in the pot. Said i dolip falcone not want to go back to managing funds after my run in with them and that tough episode in his life. What have they been saying about steve cohen . Simone steve has a something to prove here. He feels, according to people who knows people who know his thinking, he felt a they went after him. They could not get anything because there was nothing to get. He feels like this whole ordeal has been a blow to his ego. Now he has something to prove. Be 61. Bout to he feels he needs to top his career with a something excellent. This would be more money than he has ever managed, 20 billion. To 10ds raised, close billion. That is an enormous launch, an enormous amount of money to be managing. The question is, we have seen a lot of managers struggle to deploy that kind of capital. Big namesk across the in hedge funds, they struggle when they get to a certain point because they start moving markets and it is harder to have things changed enough in the past three years that he is not going to be as successful doing what he was able to do a couple years back . Yvonne great to hear your perspective on this. Our hedge funds reporter. Breaking news from japan at this hour, Industrial Production was a slight miss from estimates, but rebounding strongly for the month of april. These are preliminary numbers, month on month, rising 4 . 2. 4 . Timate was for the year on your numbers slightly shy of what we saw economists were thinking, 5. 7 . A robust upward trend we are continuing on. A boost from fiscal stimulus has helped propel industrial profits for a fifth straight quarter. These numbers should be marking the threeyear highs. Manufacturers trying to meet up with that demand we see externally, trying to boost output. Also amid raising Capital Expenditures and export growth we see in china, as well. Slightly off, but much better numbers were seeing out of japan. You can get a roundup of stories to get your day going with todays edition of daybreak. For bloomberg supports subscribers go to dayb on your terminal or go to the bloomberg mobile anywhere app. Get the news and industries he you care about. This is bloomberg. Betty this is daybreak asia, i am betty liu in new york. Yvonne i am yvonne man in hong kong. Wells fargo has a new warning with fewer subprime borrowers paying off auto loans earlier. An indication consumers with weaker Credit Scores are struggling. They are making fewer payments on loans that were bundled into bonds in 2015 and 2016, compared to 2013 and 2014. Borrowers are consulting on a growing amount of auto debt. Betty the First Company to list in the u. S. , Goldman Sachs backed signed a memorandum of understanding to join nasdaq. Prospects could pick up after two years. In 2004 in hod chi minh city. It has risen from last year. Budget the enemies airline is looking to spread its wings abroad. It is looking to steal multibilliondollar deals as they try to become the first Vietnamese Company to list its shares abroad. In a rare, exclusive interview with bloomberg, the founder discussed the American Companies she wants to tie up with. We will sign contracts and important deals with a total value of 4. 7 billion. Is a deal worth 3. 6 billion. Engines,enture to buy plus training and maintaining services. We will sign an agreement to finance about 1 billion for orders. We will find a deal for supporting engines worth 118 million. Betty more big deals for bloomberg. We will hear from the bank of singapore, midday if youre watching in sydney. 10 00 p. M. In new york. Yvonne the betty asiapacific markets set for a mixed open after wall street snapped a sevenday streak. Oil ways on energy stocks. Doubts are raised about the pace of rate hikes, saying weak u. S. Inflation may force the fed to change its plans. Yvonne manufacturing in china may have rdp for the year. The pmi expectation is for the weakest reading since september. Fory amazon has delivered jeff bezos, share stopping 1000 in another sign of the power of the cloud and ecommerce. Yvonne remarkable. This is the second hour of daybreak asia, coming to you live from bloombergs u. S. And asian headquarters. Im yvonne man in hong kong, just after 8 00 a. M. Inty just after 8 00 p. M. New york. Jeff bezos is on his way to becoming the richest man in the world. That helps the overall market stock. Still overall lower in the u. S. Session. We just had some data come out in south korea and japan, Industrial Production numbers a little softer than what economists had estimated. Likely going to be some impact, or at least watched by investors as markets are opening. Yvonne the one that is going to move the dow is the china pmi numbers. We are expecting it to go back to the eightmonth lows. We are Still Holding above expansion territory at 51 with the forecast, but a signal to come that we have reached the peak, as we have been talking about. How markets are trading with tokyo, seoul, and sydney opening up. Sophie the weaker handoff from wall street give us the premonition of a softer from asia. Seoulrge miss out of could give some encouragement for dollar balls against the one. Check out the reaction from the kospi, down about. 3 . Japanese stocks down for the fourth day about. 33 after a slight miss and factory output. Aussie shares a softer start after rising. 2 on tuesday. Tech shares could be something to watch, given the rally we saw for the nasdaq and later today, we are watching for china pmi as well as india gdp. Chinese markets have a lot of catching up to do. Taking a look at the bonds and commodities markets, asian bonds tracking the rally in treasuries for the 10 year yield to 2. 21 . We do have gold extending declines as well as oil continuing to slip. Lets move on to our next part. I want to show you this chart on the terminal as we round off may , taking a look at the nikkei 225. This chart shows that while returns for the nikkei have been soso this year that is the line in white when you deploy dollars, the line in blue shows you it is triple the performance for the benchmark as compared to its young return. This as the dollar has fallen more than 5 against the japanese currency, so buying japanese stocks and dollars certainly reduced returns right here. Betty just continuing on that, the dollar this ending for a Third Straight month. Seeingdman Fund Managers there is a rally ahead, even up to 10 . That is philip moffitt, seeing a 10 gain for the dollar against both the yen and euro amid expectations the fed will hike the rate this year. He also said the u. S. Is still in very good shape, but for now, the dollar is at november lows. Checking in on other currency majors, this is fxc on your terminal, the looking steady after a threeday advance. Theeuro at about 1. 11 to dollar after touching 1. 12 overnight on a report the ecb will issue a more balanced outlook. The pound moving early in asia trade. This falling for the first time this week as polls integrate that the tories may miss out on a majority. Yvonne thanks so much, sophie. Lets get to the first world news with haidi lun. Idi the fed governor says softer inflation may force a rethink in the face in the pace of rate hikes, even if the Global Outlook is brightening and the Global Economy shows strength area her remarks outlined the feds problem employment is at a low and can my confidence is strong, yet inflation has slowed, making policy decisions mark obligated. Reynard says it is too early to call. Even so, i see some tension between signs the economy is in the neighborhood of full employment and assigns the tentative progress we have seen on inflation may be slowing. If that tension between the progress on employment and lack of progress on inflation versus, inflation persists, it may lead me to reexamine the path of policy in the future, although it is premature today. Haidi President Trump has attacked germany again, ratcheting up a dispute becoming personal and undermining a transatlantic bond that is the bedrock of europeanu. S. Relations. Trump issued an Early Morning tweet criticizing the u. S. Trade deficit with her many nsaids berlin pays criticizing the u. S. Trade deficit with germany and saying berlin pays less for defensemen it should. Angelakel mns merkel admits relations are strained. The u. S. Hit a plan to target seven meters wide in the ec. The pentagon said it successfully intercepted a mock missile in the skies above california. It says a groundbased interceptor was destroyed midair by the rockets. Japan and north koreas ally, china, discussed the launch at rare talks in tokyo. Someone began a threeday visit, saying the situation on the divided peninsula can only be resolved through negotiation. The Japanese Foreign says his arrival was timely and stressed the importance of their talk says north koreas provocation has reached a new level. Global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. I am haidi lun. This is bloomberg. Data out ofatest china, as we have been talking about, likely to show the economic recovery there has peaked. Manufacturing and pmi may slow to an eight month low. China focuses on containing risks and deleveraging the economy. That is the dominant theme in china these days. Stephen engle is here with more on all of this. First give us a preview on what to expect for the china pmi we are stephen expecting still expansion above 50, but it 51. 0, the lowest reading for the official manufacturing pmi since about september, so we are seeing moderation of confidence in growth in the early indicators as well, as we head out of the First Quarter, which was likely the peak in this recovery as the reflation story was going on. But that is starting to peter out, according to satellite imagery index, also a number of early indicators, and Metals Prices and commodities coming off the boil a bit. Not bad, but it follows on the heels of aprils 51. 2, below expectations. We are expecting 51. 7, we got 51. 2. Also in april, the sub indices within the pmi like output, new orders, export orders, all slowed. Employment had a moderate contraction. I want to take you into the bloomberg terminal and bring up 6904. This is comparing manufacturing versus nonmanufacturing pmi. Sometimes we call it nonmanufacturing services, but it is also banking and construction. Construction is what has been propping up the nonmanufacturing pmi. We are expecting a slight moderation for the nonmanufacturing pmi at 54, still robust, but coming off the boil of it. What we are watching beyond the headline number for nonmanufacturing pmis the construction index, because construction is what has really been powering this side of the economy. The construction seven index rose to 61. 6 in april, while Services Part fell to 52. 6, so whether construction can continue propping up the nonmanufacturing pmi is something we need to watch, as authorities go after the over leverage and problems in this economy, oftentimes associated as well with construction companies. Yvonne especially what is going on with the helping sector. We know about this tweaking when it comes to the yen, what is it called, the countercyclical adjustment factor. We are trying to wrap our heads around that right now. Stephen there are number of different changes. The pboc Governor Haslam been trying to push forward Interest Rate reform. That is what this is as well. They have been using reverse repos as a way of adding or taking away liquidity in the market rather than the benchmark, which they have not moved, the benchmark Interest Rate, and a couple years. What they are doing is further tweaking the fixing. As of today, they have changed the new interbank sing sing for there mechanisms overnight, the sevenday, the 14 day repurchase agreements, the new fixing to be derived from repo rates among depositing institutions that include policy banks, commercial banks. The fix will be published at 11 30 a. M. Each morning based on how the morning trade is going. Basically, this is what some are calling a National Transaction gauge to improve interbank benchmark rate system and throughout all these reforms, the goal is to improve the efficiency of monetary policy, which has had rough interpretations over the last couple of years, especially the august 2015 devaluation that sense the markets into a tizzy. Yvonne thank you, great context as we look ahead to be china manufacturing numbers. We are going to talk more about that next. Joining us will be the top forecaster of chinas pmi from commerzbank. Betty we will also be looking at what the data means for the nations currency, the end, with mcquarries head. All of that coming up. This is bloomberg. Betty this is daybreak asia. I am betty liu in new york. Yvonne yvonne man in hong kong. Less than an hour until the latest china pmi data crosses the terminal. Who better to give us a steer on the way things are going then the top pmi forecaster. He is a senior emerging markets economist at commerzbank and joins us live from singapore. How great to have you. We continue to see the trend, pti prices cooling down, iron ore in a bear market. Chinas deleveraging seems to be taking a bite into the economy at the moment. Is the china reflation story over . I think it looks like the alreadyas ticked in q1 in chinas growth profile. If you look at the pmi, i think this morning we are going to see a moderation as well. I think we have to look at at least three factors at this moment. One is the indicators in april have already showed relatively , and as weentum mentioned, the Commodity Prices have jumped so much from fixed chinaswhich Means Investment is likely to slow further in the next few quarters. Some other indicators like exports from south korea and export orders from taiwan also show that export growth is likely to moderate in the next few quarters as well. I think the growth has already peaked in china. You mentioned there is a constant battle among chinese policymakers. We see a little deceleration, then the focus is lifted from deregulation to back to stimulus. How much weaker to pmis have to go for us to see policymakers switch back to growth . Is the window for tightening coming to a close . At this moment, maybe it is too early to say that deleveraging and monetary tightening has come to an end. I think maybe we have to wait for more signals, especially a significant slowdown in the proxy market as well as the risks that the growth is dropping below 6. 5 . At this moment, i think the market still says that chinas growth will be around 6. 7 . I dont think that is the ending point of chinas deleveraging story at this moment. See the nominal gdp growth still catching up with loan growth. The moodys downgraded, was that a potential Inflection Point for china, a warning that they need to the leverage further . Leasthink that china, at they need to find a balance between growth and leveraging. That is kind of the biggest challenge for chinas authority at the moment. Has a very big leadership reshuffle in q3 this year. So basically political stability and growth is still key, important for Chinese Government and authorities in the next few quarters. Betty the devils are always in the details when you look at economic numbers. I want to get back to pmi and what we might expect. As we have been talking about, we are expecting this decline to basically affirm the deleveraging process in china, but i want to follow up this chart of 8223. Im not sure you can see this, but it basically differentiates the pmi numbers for large, medium, and small companies. As you expect, largecompany pmi numbers are on a decline. They mirror the overall index. But Small Company pmi is rising precipitously, quite strongly. Why do we find that . That is because the physical stimulus, because the sle, they received physical stimulus from the government. We see the impact from the upstream to downstream firms in china. The large firms, they already show slowing momentum, but relatively small firms have just started to see this kind of impact. It is quite natural. Betty it is not any type of indicator at all, right . Is a kind ofink it leading indicator for pmi to see the market sentiment. Maybe you have to look at the private pmi to look at the kind of sentiment, the actual sentiment in the small firms. I think we should look at the different indicators to come up with a more comprehensive story of chinas economy. Moving on from the pmi and how these numbers affect overall sentiment and flows into china, where his Business Confidence right now in china . I think if you look at chinas economy, it is right now, the booming part is domestic consumption and also the i. T. End Technology Story in china. We are seeing there is a split in chinas economy. The Manufacturing Sector is still under pressure, but it looks like still relatively resident at this moment. I think this is kind of a part of chinas economy at this moment. If we do see another disappointment on these numbers again, we saw what happened the previous month and what seemed to spark this route and commodities. Do you think there is still not much of an end in sight in terms of iron ore and copper prices . See that the Commodity Prices, especially copper and iron or prices, have peaked already. If you see that the commodity look at the overall chinas investment momentum, it looks like the momentum has slowed and the new projects have dropped a lot from the big levels. Dont think hand, i it is a bad thing, because we know that chinas debt is at relatively high levels, so china needs to find a balance between all the indicators. Investment should slowdown in the future and consumption should pick up a little bit. On the other hand, we do see that the impact of the physical stimulus is fading as well. At the end of the day, china definitely still needs to rely on its domestic economy to grow and to find a kind of a new Growth Engine for economy for the next few decades or so. Yvonne thank you, hao zhou senior emerging economist at commerzbank, to preview the pmi numbers out. Another big interview to tell you about on bloomberg tomorrow. The Morgan Stanley chairman ceo joining us exclusively at 8 10 a. M. Hong kong, eight 10 00 p. M. Out of new york. Make sure to check out the interview. Betty indeed, a big one. More ahead, amazon breakthrough the 1000 a share barrier. We will see how that compares with chinese rivals, next. This is bloomberg. Yvonne lets do a quick check of the latest business flash headlines. Fired anthony lewandowski, in a legal spat with his femur employer alphabet. He was hired to lead the self driving program after spending several years at googles department. They file charges, claiming he stole trade secrets and patterns. He was replaced as head of ubers self driving program in april. Three bond traders at the head of a fraud case have called no witnesses at their trial. They are betting that the prosecutions evidence will be too weak to convict them. The three men did not take the stand. They are accused of lying to customers about the price of mortgage bonds. A verdict is expected within a week. Manchester uniteds from your League Season has not stopped the club topping the list of soccers wealthiest clubs. And hasinished sixth not won it since 2013, but they say the value rose to 3. 5 billion. The survey surveyed 32 leading clubs, the combined value of 33 billion. A guard comes from three teams united, real madrid, and barcelona. Chinas Sovereign Wealth Fund cic is reportedly the front runner to acquire a european logistics form firm for more than 13 billion. Ramy inocencio has been following the headlines. Ramy this is really interesting. When i first saw this, i was not sure where was going, but looking at the stream from china to europe here, it all centers on the fact that people are just buying more stuff online. I buy my groceries online, i buy dog food online. We buy clothes online. That is set to grow into the future. We were also talking earlier about amazon share prices going past the 1000 mark. To house all of that stuff going around the world, you need a place to put it. Logicor comes in, based in london. They already rent the space to companies, including amazon, dhl worldwide express. In terms of the growth for revenue, what you are seeing on the screen is a comparison between annual growth for forecast for warehouse is over the next five years, 7. 6 . Look how that compares with the middle bar, malls, 6. 4 growth per year over the next five years, and offices, still growth, 5. 2 , but you are going to want to put your money where it grows the most, the warehouses. This is by Deutsche Bank in a report from this past march. That is where we are right now. Be theic appears to front runner, according to what we are hearing now, there still are a couple competitors. That includes singapores tomasek holdings, as well as maple tree, still in the bidding process according to a person who wants to be anonymous. As we see it for now, it looks and the is on top reported front runner. Yvonne speaking of growing ecommerce, we have to talk about amazon, you mentioned the share price pushing past 1000 in u. S. Trading. Can i go higher . Ramy the short answer is if you believe analyst recommendations, it probably will go higher. I want to show you what is happening on my screen. This is the analyst recommendation function. Do you see any rights . You dont, because the reds are sell. The greens are by. 39 buy, seven hold, and zero sell. The white line is the price target, 1100. Right now, just the 1000 mark. There is a lot of room to grow. Yvonne we will keep watching, thank you. Coming up next, a done deal for a june rate hike maybe not according to fed governor Lael Brainard. She is raising doubts. We will hear from her next. This is bloomberg. Yvonne it is 8 30 in the lions city, half an hour away from the open of trading in singapore. Im yvonne man in hong kong. Betty i am betty liu in new york. You are watching daybreak asia. Lets get to the first word news with haidi lun. Haidi threats to this system are receding because inflation is slowing and the global dairy industry is recovering. Bankovernor released the semiannual stability report, saying risks have fallen over the past six months. He knows there is elevated global uncertainty, saying new zealand could be vulnerable if risk sentiment drives of borrowing costs. If you look at inflation in the last eight months, it has come off a series very significantly, and we are pleased about that. The fact is, we dont know if house prices inflation will increase again. We are watching a very closely, as you would expect. Haidi the japanese economy is showing signs of life. Grows 4 l production month on month in april, slightly below expectations, but a big improvement on the previous month. There is more evidence that career is slowing. Industrial production missed expectations by a wide margin in april. Month on month, manufacturing fell 2. 2 , again after forecasts of a small rise. President putin has recouped claims that russia has been interfering elections in the west. And harrahs, he said there is no need to fabricate imaginary threats. He said people scare themselves andbased policy upon that. He called for cooperation on all sides against terrorism and fighting in the middle east. South koreas new president has ordered an investigation into how components of the controversial u. S. Missile Defense System arrived in a country without his knowledge. President moon stepped in after learning that six launchers have been deployed, well Previous Defense Ministry statements referred to only two. He criticized during the election and has called for a review. Officialsu security say they will continue talks on whether to expand a ban on laptops and aircraft cabins in europe. The department of Homeland Security says the proposed restrictions remain on the table, although the eu is pushing back against the plan. In the u. S. Introduced restrictions on flights from 10 middle eastern and north african airports back in march. Global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. I am haidi lun. This is bloomberg. Yvonne thank you. Time to see how the asian markets are shaping up. Sophie, seems like the weakness is most of all in japan, despite the strong rebound in industrial output. Sophie the nikkei 225 set for a fourth day lower. As you take a look at the sectors, most in the red, barring telcos that gained primarily coming from nippon, rising to the highest level in at least a year. Goldman recently upgraded that stock to a buy. As heidi mentioned, we did have factory output data while missing estimates, the data did indicate a rebound in april on exports, growth, and yellow japans and although japans industrial output is forecasted to fall in may, production is expected to increase through june. A large miss for factory output numbers and seal. Factory output numbers in seoul. Manufacturers registered a slight uptick in confidence. Pessimists outweigh optimists. You are seeing swings for the cosby so far this morning seeing swings for the kospi. They are offsetting gains elsewhere. Samsung securities are predicting a rosier outlook for south korean banks as they see interest margins improving. For now, financials down about. 33 . Betty thank you so much, Sophie Kamaruddin on the markets. We are getting headlines from the vietnamese Prime Minister, who is on his tour in united states, has been here in new york and off to washington tomorrow to meet the president. According to the washington post, there is a headline that the Prime Minister is set to announce 15 billion to 17 billion in deals with the united states. This looks to be an announcement going to be made ahead of possibly possibly ahead of his meeting or at the meeting with President Trump. The vietnamese Prime Minister is going to be the first Southeast Asian to meet the u. S. President. Again, the headline there, 15 billion to 17 billion in deals will be announced with the u. S. By the vietnamese Prime Minister. Back on the markets and monetary policy. Said governor Lael Brainard raising doubts about the pace of rate hikes. She said week inflation may mean policymakers need to rethink the strategy. Bloombergs Global Economics and policy editor Kathleen Hays listening to her speech today. Not putting to rest those two hikes or one hike debate, right . Kathleen kind of go backandforth. One week, you feel like three hikes for sure, maybe four. Then you get word, you hear speeches from three fed Bank President s two said brent president s and the governor. We spoke to the st. Louis fed president 24 hours ago. We did not speak to charlie evans, but they are raising the question about why Inflation Numbers are softening so much. They are getting farther from the target. If they continue, that is what Lael Brainard said. She may have to rethink her view on where the fed is heading. For she said the economy looks stronger, Global Economy picking up, but here is what the issues are. Tensionso, i see some between signs the economy is in the neighborhood of full employment, and assigns the tentative progress we have seen on inflation may be slowing. Is that tension between the progress on employment and lack of progress on inflation persists, it may lead me to reassess the expected path of policy in the future, although it is premature to make that call today. Kathleen she devoted a very large portion of her speech that is what she jumped into right out of the gate to looking at the pce deflator that is the feds main gauge of inflation. At the core deflator, which takes out food and energy. It happens today that both of them fell. The latest report for april value over year. Lets look at btb 2985. You see that trend. You see how weak actually the overall number got in 2014, but it got above 2. 1. Now it is down to 1. 7. The past three months have been weaker. The core is down to 1. 5. This leaves theyll bring art and others this leaves by l bernard and others with a puzzle for the fed. When on of limit, inflation to rise, right, and vice versa . Looking at btb 189 and see what is happening. The Unemployment Rate is the airline. It is at 4. 4 . Its axis is the left axis. The average hourly earnings, the white axis, right above 2. 5 yearoveryear. It has been worse, but it is not really going anywhere. It is stuck in a range. Why, we dont know. There is a lot of questions. To people worried about inflation are saying, wait, you cant reveal the law of economics, it is right around the corner, you will see wages shooting up. But maybe something is different now, maybe something about technology, we dont know. Betty it is a huge mystery, kathleen. What about the mystery of the june meeting . Is this rate hike going to happen . What are the bets on this . Kathleen if i am betting, im saying yes, because the fed has talked about it. Could say ball, we you are worried about falling behind the curve. The president of boston fed, interviewed him a couple months ago. He said, the cost inflation. We are moving in the right direction. It has softened, but those are temporary factors, mobile phone contract and stuff. You are getting too close to that point. Will bring art is on board bernard is on board. For five years, the chicago fed talking about conservative central bankers preventing their policies getting the inflation boost you need. I think the real question is, after the june hike, what happens in september . World interestrate projections. We are going to see what the odds are of rate hikes. Jim, 90 . June, 90 . You will see the odds of a september hike are only 26 . You have got a long ways to go to have better odds and people betting heavily on that. People t seems like bond markets, why do you have treasury yields at 2. 2 if you think the fed is on a path that will take it higher . The jobs report on friday is a big deal. It will be strong, then everyone will say hundred percent odds of the rate hike. Now, butate increases they also have the second option, unwinding the Balance Sheet. Williamslike brainard, were online with this. Kathleen it is going to happen, the question is the details. Where do we set the caps, how many bonds are we going to stop buying back to keep the Balance Sheet at 4. 5 billion. Brainard says it depends on the economy. She is still expecting the economy is going to grow in this direction. Before too long, she said, depends on the economy involving as expected. No preset level for how long this goes. Doesnt get to two point true trillion dollars or doesnt get to 2. 2 trillion . Lets take a look at the Balance Sheet. Far left, . 5 billion. Where are we now . In the treasuries, nearly 1. 8 billion of Mortgage Backed securities. Right now, people are trying to get the fed to tell them, where are you going to set the caps . 5 billion a month, 12 billion, one billion . People are concerned about wanting the fed to be gradual and not upsetting the bond market, looking at something really small, see how it goes. Will they start in september . The fed has not given us any definite indication of when, but they do think they are. That is the bottom line, and i guess that is what matters. Yvonne when will it start, how will it end are the key questions. Kathleen hays, thank you with the wrap up of the fed comments out of brainard. Plenty more to come. You are watching daybreak asia. Betty this is daybreak asia. I am betty lou in new york. Yvonne and im yvonne man in hong kong. The former fed fund manager was barred from the sec, but he has made quite a comeback. He is the single biggest foreign investor in vietnam, and he just wrapped up a roundtable with the Prime Minister of vietnam. You saw some headlines moments ago, going to announce 15 billion to 17 billion worth of deals with the u. S. I spoke with falcone about what was discussed in the meeting with the vietnamese Prime Minister. We have been involved in vietnam for 10 years, building out this real estate project. This is completely separate from ihc to venture. At this is something from a legacy perspective betty a harbinger . Yes. They are interested in seeing more and opening up the markets a bit more. They wanted an introduction to some prominent investors that were here, including some different corporate corporations, so we hosted this event, this roundtable event this morning, with the Prime Minister. Betty because he is headed to washington to meet with the resident. What were the questions . There were a number of questions about what their plan was from a telecommunications perspective are they going to open up the marketplace, are they planning on privatizing some of the sle is, the stateowned enterprises, that exist today. Betty i think the answer is yes. Correct. It was a discussion this morning, and i think they came across as very willing and able to accommodate the investor base. Betty whenever there is an opportunity to make money, of course people are going to be interested. What gets them over the hurdle from saying this looks like an interesting opportunity to, im going to do what you have done, which is put some money to work . It is important that people see that our project, we have been over there since 2006, that people see they are accommodative and cooperated with foreign investment. Betty but what does that mean exactly . That means working with the government and really, right now, we have been focused on getting a local pilot. That is very key and important for the project to move forward in a successful manner, and i think people are really focused on that. I think if we do get that, people will see there is really a level Playing Field and the markets are opening up. Betty is your investment in vietnam only in this resort, or do you have others . Only in this resort. Betty have you made money on it . That would be an enticement. Not yet. But it is a marathon, not a sprint. Betty originally, when you say 10 years ago, why vietnam . It is a frontier market. From an investment perspective, i try to be creative and generate alpha. That is how i have always thought about my investing abilities and where i am looking at happen to be an opportunity that i thought was very unique from a Pilot Project and getting a gaming license in vietnam. Comingulation there is on 100 Million People right now, and there is a definite interest in gaming, so we looked at it years ago is one of these Frontier Markets to really build , hopefully, another macau. Betty it seems that way. I know you have partnered with Different Companies through this resort. Vietjet is one such airline. Tell me, when you put your money in here, what is the endgame . Or is there an endgame . What would you like to see as a benchmark for success . I dont think there is an endgame, per se. They are allowing us to build out and continue building out the operation. Right now, we have one tower, 500 rooms, building out another tower, a worldclass golf course. We are trying to make it a family oriented, integrated resort, and potentially build out along the entire beachfront that they have allocated to our property. I wouldnt say there is an endgame. The stop of locals gaming could be a big step to bringing in partners, foreign partners, and continuing to build out the entire property. Betty just covering asia, everyone is looking for the next macau, whether it is in vietnam, singapore, japan, wherever else. Are you looking at other areas in asia outside vietnam . We are not. We are very vietnamcentric. We feel like we have a very Quality Asset there and a tremendous opportunity, and i think it has taken a lot longer than i expected, but we are very excited about the prospects there. ,etty just on a lighter note one of the Lifesciences Company he has invested in actually whitens the skin. Is managing director had said to me, i see that as a big potential in asia. That is a product i think a lot of consumers in asia would want. He has a variety of investments right now. Arene the whitening creams on a long list of many shoppers in asia. You mentioned about vietnam. What a call, because he is not the only one who sees so much optimism in that market. You can talk about how stock inflows have been at the highest level in at least seven years for vietnam, and expected to theyfurther because reclassified and upgraded pakistan indices to emerging Market Status this month. Potentially, a lot of that allocation has to pakistan in the yellow and could flow into vietnam, 10 to 13 allocation. We couldn indication see shares and stocks in vietnam rise further. Betty . Indeed this usually happens, where the stock market of that home country whose status change , rises and you see that happening. The question always is, what happens afterwards . We have got some breaking news right now. We have the numbers out. Chinaufacturing nonmanufacturing pmi numbers 54. 5 for the month of april, 54 pmi atnonmanufacturing 54. 5 for the month of may. That continues to underscore the deleveraging process in china and the impact on the economy there. Slightly,umber, just in terms of nonmanufacturing pmi , services pmi just slightly above fried prior slightly above prior. Yvonne to marginal gain, but there is a lot that entails the nonmanufacturing pmi services industry, construction. That propelled it in the previous month. We will have to see what the breakdown entails. We are waiting for the manufacturing pmis, should be any minute. Meantime, you can get a roundup of the stories you need to know with todays edition of daybreak. Bloomberg subscribers, go to dayb on your terminal and on your smart phone in the bloomberg anywhere app. You can customize your settings, get the news, industries, and assets that you care about. Of course, just for bloomberg subscribers. Make sure to check it out. This is bloomberg. Yvonne this is daybreak asia. Im yvonne man in hong kong. Betty china due to add a countercyclical factor to the yens daily fixing rate in hopes of stabilizing the currency, creeping higher and higher. This is the head of fixed income strategy at macquarries. There is some stabilization in the shortterm, but the fundamental levels you say they remain the same. What you mean by that . Justr me, i think this is an artificial way of stabilizing the market. You put in place another unpredictable variable into fixing, without any clarity whatsoever, calling it a countercyclical factor. What does that mean, nobody really knows. You need to understand that fully. Int it does is, when you put an unpredictable variable into the market, speculators do not like that. The market does not like that in general. What does it mean . People stay away from the market for a little bit. You probably get some stability in the currency. Betty how long is that going to last, though . I guess that is the big question. At the end of the day, currencies do move [indiscernible] acrobatics to maintain stability, it doesnt mean the fundamentals have changed. When the fundamentals continue to change in the direction the market expects, which is arguing for weakness in the currency, then i think you get stability, stability, stability, then all of a sudden a shift with the perceived fair value, and that is probably the bigger risk. You make changes to the fixing ensure stability, but you might get longerterm volatility every now and then. Betty hold on a second. You mentioned about stability. I have got to break some numbers about the manufacturing pmi. Numbers coming in a 51. 2, the same level we saw in the month of april, so a slight marginal beat from what the economists were expecting for may. We were expecting things to get farther away from the peak, but seems like we are seeing a little bit of stability. We will get the latest a little later on. Am, speaking on to fair value for the yen. What in your mind is fair value . What is it going to look like in six to nine months . As far as stability is concerned, it is a tricky exercise. For me, the best ways to look at the fundamentals. In the case of china, what we have seen in the First Quarter ,as a very strong gdp, 6. 9 aided by massive increases in credit numbers. I think those have to change. I believe over the next few months, we may have seen some of this already, tightening in the monetary conditions allowing some deleveraging to happen in a controlled manner such that growth will slow down. Offme, i think gdp coming to 6. 5 or lower by the end of this year is likely. If you put that into perspective for the currency, it should be closer to 7 . We have seen a little bit of a fall in the currency, but i think it could still rise from here. Yvonne great to have you. We have got to leave it there. Nizam idris, head of income and fixed assets strategy. China manufacturing pmi coming in at 51. 2, better than estimates. This is bloomberg. I am haidi lun. I am Rishaad Salamat coming to you from bloombergs headquarters in hong kong. This is Bloomberg Markets asia. Haidi signs of stabilization on the factory floor in china, manufacturing defying expectations of a weaker reading. Flat start at best for markets in the asiapacific