Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240714

Selassie. Gretasamberg tells says the future has been stolen by greed and arrogance. It is the monday trading which has concluded in the u. S. Lets get a quick reminder of how stocks ended the session. It was a welcome conclusion to see the stocks pretty much flat after a bit of a slump on friday. You can see the s p 500. 0. 1 , butu call down pretty much flat across the board. 2 gain, six points. Lets get things going. This market was a lot about numbers. U. S. , the services indexed stayed pretty good. It was in europe where germanys manufacturing purchasing inagers index went to 41 september, way below 50, in contraction territory. A lot of economists saying that is a recession signal. Indexro Bloomberg Euro is at its lowest since 2017. If you have been watching that as well, what about helping asian markets as they get underway . Sophie we will be hearing from a lot of policymakers across the region. Ahead of that, futures are looking mixed. Kiwi stocks swung to losses and hinting at gains with japan reopening after the long weekend. Eyeeoul, we are keeping an on a conference for key credit issues. We are getting an update from chinas Economic Development from the pboc governor, finance minister, and other officials. We will be hearing from hong kongs chief executive, carrie meeting. Of the this as the situation darkens in the trade Development Council which slashed its export growth. We will be hearing from the governors of the doj and the rba this tuesday. I want to check in on oil futures flipping attached. Holding about 58 a barrel. Traders are weighing reports that saudi can restore output. Analysts indicate a delay in other factors. The data we got from germany and france, that is adding to worries over oil demand, paul. Issues at aramco are continuing to cast a long shadow over the oil price. For more on that and the rest of the days news, lets get the first word news with ritika gupta. Ritika britain, france, and germany have joined in the United States blaming iran for attacks on two key aramco plans. The issue will be discussed on the sidelines of the u. N. General assembly in new york. The Iranian Foreign minister 22 claims of responsibility from rebels in yemen, saying that if iran were behind the attacks, there would be nothing left of the refinery. President trump asked Steven Mnuchin to explain why the u. S. Requested china cancel a planned tour of midwest farms. The visits were called off on friday, causing markets to tumble amid fears trade talks stumbled. Minasian said the timing did not work so the tour was halted. President trump asked why, indicating he was not happy with the decision. I did not want there to be any confusion. They are going to reset that at a different time, but that was pres. Trump just out of curiosity . We did not want confusion. Pres. Trump farm products. [indiscernible] they committed to buy a lot of agriculture. They have started, and we should get them over there as soon as possible. Ritika Boris Johnson has told e. U. President donald tusk that he still wants a deal but that brexit will happen at the end of next month. The pair lets head of the General Assembly in new york. Increasing doubt. This deal can be struck. The u. K. Opposition is promising a second referendum, saying voters can change their mind. Too much has happened in the last three years to be decided without the consent of the public. We need to ask them a basic and vital question. Withou prepared to leave the best deal that can be secured or wouldnt you rather remain in the e. U. . Ritika nissan and its former chairman, carlos ghosn, 16 million by the fcc to settle he waslegations slated to receive on retirement. Nissan will pay 15 million and carlos ghosn, the remaining 1 million. The claims stem from a 2004 decision that 11 silly allegedly gave him global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritter calypso. This is bloomberg. Kriti gupta. This is bloomberg. Kathleen thank you so much. World leaders and diplomats are gathering in new york for the uns General Assembly with plenty of intrigue in play. Tensions will likely overshadow this weeks meeting. The meeting between President Trump and the iranian delegation are fading fast. He is scheduled to meet nearly a dozen state leaders for some sideline diplomacy. Josh wingrove has been following the president. I have to let everyone know, that was your question about the farm visit by china. You really stirred the pot, man. We had about halfdozen of these bilaterals. It was an ongoing press conference. We talked that out. The delegation was planning on going to a couple of states, touring the u. S. Farm community, and that was called off, the u. S. Saying that was on our call. Happened and left the impression that trump was not, shall we say, totally aware of how that played out. Minasian also said china talks with the Vice President or vice premier of china are now next week and that is a surprise, sooner than some people would have thought. There have been no further comments. I do not know how much people should read into that, but we are getting snippets on the sidelines of what our otherwise, you would imagine, more focused bilateral talks. Kathleen what is the most important one you expect to see happen . Theres a lot of signals President Trump is not going to meet with the iranians. But if that does not happen, what is the most important thing . Siew the french are trying to play intermediary with the iranians. One that just concluded was one with south koreas president , moon. Andsked president moon President Trump, listen, what about these north korean shortrange missile tests . Trump brushed them off. President trump took the answer, kept talking, and ended the event. President moon could have piped up and said something, but either way, we did not hear from him. President trump made a surprise appearance today at the Climate Summit on the sidelines of the uns General Assembly, but he did not stick around terribly long, did he . Josh it was about 14 minutes. He got there is the president of the Marshall Islands was speaking and, you know, this is one of the countries on the front lines of Climate Change. He stayed through the end of that and the end of the next two speeches around modi of india and merkel of germany, and then he was gone. He wanted to touch base for 14 minutes or so that he was there. Hosted his ownhe event on religious freedom. He was more keen to talk about it. He, his Vice President , his secretary of state, on gave remarks at that event and called for more religious freedom globally, and they happened to single out countries they have other beefs with, people like china, iran, venezuela. He was asked a couple times after why did you show up . Why did you go to a Climate Change summit . This administration has not put emphasis on Climate Change. He said i want clean air and water and nations should work to do that together and on their own. Paul we could always pray for it. Muchwingrove, thanks very for joining us. Market enthusiasm for planned trade negotiations between the u. S. And china ran headfirst into disappointing European Data overnight. Germanys economy is suffering its worst downturn in seven years with its manufacturing pmi. Our lowest of Major Companies adds to growing concerns about a global slowdown, pressuring Central Banks around the world tes further to ease further. Kathleen joining us now is theresa. It is great to have you on the show. In a few minutes, we want to dive deeply into the asian bond markets but when you look globally at the forces that are driving yields right now, south korean sports are so weak. Exports are so weak. U. S. Holding steady. What does this mean for bond markets . I think right now, it is going to be very difficult to call, so for example, if you look more closely at the u. S. Data, u. S. Economics surprises are better than you expect, so u. S. Continues to be the one area of potential solid ground for the whole world economy. However, for the rest of the world, as i have spoken before, many of these countries already are in a manufacturing contraction as shown by pmis being below 50 and falling pmis. Make of what do you the growing number of executive bond yields around the world . Not as high as it was. People are blaming european Central Banks, blaming the bank of japan for having negative rates. The pan with yield curve control. We heard mario draghi saying today that put a much what he has already said, the ecb will remain accommodative as long as they need to. Teresa it is a really interesting question. Negative yields continue to be one of these, you know, new phenomenons that we really do not know what the longterm implications are. The point about japan versus europe, i think one of the things that always, you know, is interesting about japan is that even though they had very low most of japans last seven years, we are in a net cash position. Even though yields were very low low,ost of capital is very japan corporates did not go out and take advantage of these lower yields, so on the governments side, the government used these very low yields to step on the gas pedal with regards to fiscal stimulus. We are not seeing that at all in the euro zone. If anything, the feeling on euro zone fiscal deficits have really prevented a lot of these governments to do what is really necessary to provide the fiscal stimulus that is necessary to offset the lack of investment on the corporate side. That point about negative yields, lets bring up one of our favorite charts on the bloomberg at the moment. This shows the negative debt around the world pulled back a bit. It was around 17 trillion for a while. It is 14 trillion but appears to be rising again. I saw a line from Bloomberg Intelligence saying there is something vaguely troubling when the unthinkable becomes routine. When you look at that line, do you find it vaguely troubling . It veryi find troubling. Albert einstein once said the most powerful force in the universe is actually one of compound interest and we have negative yields. I am not sure what you do when you have a compounding negative interest. What this really means is that it is important for asset owners and investors, you know, who are still looking income and positive yields to really look at places where you are going to find positive yields and we know that these negative this phenomenon has gone into bonds in many parts of the world. We still see, you know, asian debts, positive yields. The backdrop of the current trade dispute between the u. S. And china, we are seeing some great opportunities in asia, specifically in china. Paul we want to get to that in a moment, when you rejoin us after the break. I want to get your thoughts are little bit more on this idea of fiscal stimulus. It is not as if cheap money is a problem, really. Why do Central Banks continue to push rates lower and nothing really changes . It is the definition of insanity, isnt it, to keep doing the same thing over and over again and expect a different result . Teresa i think the u. S. , the if you listen to what jay powell said, he was quite clear that the u. S. Would stay clear of negative Interest Rates, so yes, while japan and europe had gone on the path and it is not clear how they could pull back from that path, i thek the u. S. Have seen negative implications, especially in the Banking Sector and the inability of banks to be profitable when your net interest margins are low and the negative yield environment, so the u. S. Has really taken a step back. We will do whatever we need to do in terms of asset purchases and signaling to not go down the path of negative rates. Stays with us,ng and we will talk some more about opportunities in china treasuries. Still ahead, Deutsche Banks top shareholders are taking the search for a new chairman into their hands paired we will have more on this scoop, later in the hour. Kathleen we will be joined by the brazilian environment minister to discuss the burning controversy over the amazon fires. This is bloomberg. Kathleen this is daybreak asia and i am Kathleen Hays in new york. Paul still with us is our guest, teresa kong. Lets return to our topic that we promised, chinese bonds, and take a look at this chart. It shows the chinese yield advantage over other sovereign debt. To my earlier point about bizarre parallel universes, that bottom line is japan. You say there is some pretty attractive riskadjusted returns in china bonds. The white line at the top. I have to say, you have a point. Teresa thats right. You know, if you look at chinese yields, especially compared to its g7 peers, it is offering positive yields. People tend to forget that china can actually be very much compared to emerging markets as ratess compared to developed peers. You might remember that just a couple weeks ago, jp morgans gbi index included china into its basket. Recognition that the barriers to entry into the china onshore bond market has been lifted. There is one barrier to entry that remains. The fact that this area is rather underresearched. Does this put off investors . Teresa definitely. For many years now, many firms have been quite reluctant to invest in china. Difficultt, it can be to have a Research Capability that has been built around china. Specifically in the case of the u. S. , even with the inclusion of china into the barclays ag index, on the side, barclays ag x china global ag exversion to minimize their tracking error relative to the index. So theres definitely some reluctance, especially on the part of u. S. Managers to go into chinese markets. I think it is not a question of if but when. I think theres no doubt that over time, as more and more indexes include china we have both the barclays ag as well as we will bean gbi seeing much more interest and research that will be done the into the onshore bond market which will ultimately lead to greater inclusion and much more ubiquitous on the part of the owners around the world. Kathleen the Government Bond chinesell be including bonds. The peoples bank of china, the chinese government, they are thrilled because this is a big deal for them to open up their bond market and get the money in and really kind of relieve some of the financing pressures on banks. Theres another sort of financing. Do you think part of it, quite apart from research, are Global Investors nervous about a market that is not more open . The currency is managed. What do you think about that part of it . Teresa all of these are very good points, kathleen. I think if you look at the Chinese Capital markets, very simply, as having two superhighways, one that is inbound and the other one that is outbound, within the context of the current trade war, it is more important than ever for china to widen the lanes within the highway that allows capital flow in. If you think about that as one additional tool for china to manage a currency, it becomes that much more necessary in todays environment, but to your point about Foreign Investors and their reluctance to maybe invest in china, we think that there is a lot of education that still need to be done and i think that will happen over time. Kathleen i hope you will join us as that development continues. I appreciate you taking your time very much. Teresa kong. There is plenty more to calm on daybreak asia, come on daybreak asia, so keep it here. Kathleen this is daybreak asia. I am Kathleen Hays in new york. Paul and i am paul allen in sydney. Britain, france, and germany have joined the United States and blaming iran for attacks on two key aramco plants last week. The issue will be discussed on the sidelines of the u. N. General assembly in new york. Derek wallbank joins us now. Seems to be a bit more unity building as regards to who was responsible for this attack on the aramco facility. Know, there certainly is. And it is actually a little bit of a diplomatic who for the United States because britain, france, and germany came out with a joint statement saying they believe iran was responsible and there was no other way this could happen. Such a precision strike, multiple holes being struck into multiple different facilities at this aramco center. In a way that suggested you had to have some knowledge of how the oil business is done at a mechanical level. , once saudi arabia was trying to get this Coalition Pressure the kind of iran over the attack, which they u. S. Says iran is responsible for, ultimately, and which iran denies responsibility for, and they come away looking like they have done exactly that. Kathleen it is interesting to me, when you look at our bloomberg story, they point out our reporting team that the europeans did not criticize donald trump withdrawing from a deal as they have in the past. They said instead the moment has come for iran to accept negotiations on a longterm framework on its Nuclear Program as well as regional security, and eating its ballistic missiles. Are we starting to see more unity coalescing around trumps pushback, and what does that mean for investors . Derek i think you picked out the really key part of that article and the really key part of the statement there. They u. S. Has been trying for a long time, since trump got in, to try and link irans other activity in the region to the nuclear deal. This is a think europe resisted in the past. They said they want the nuclear deal to be held up for sale but the idea of getting something together that links all of the other stuff in the region is a key u. S. Priority so it is interesting that the europeans are backing that. Kathleen derek wallbank, thank you so much, one of our bloomberg senior editors. Taking a look at what is up next, Deutsche Bank stop shareholders are taking matters into their own hands as the vendors search for a new chairman. It will be a bit of a surprising story, something we have been looking at very closely. It is a genuine bloomberg scoop and it is coming up next. We will be taking a look at the brazilsnt with environment minister in this half hour as well, so keep it right here. This is bloomberg. Ritika this is daybreak asia. I am ritika gupta with the first word headlines. President trump made a short an unexpected appearance at the u. N. Climate change summit in new york, listening to the debate but declining to speak. World leaders and business figures are scheduled to discuss how to tackle Climate Change amid growing anger at the lack of action so far. Retta thunberg told the summit they ignored the issue for too long. You have stolen my dreams, my childhood, with your empty words. Yes, i am one of the lucky ones. People are suffering. People are dying. Entire ecosystems are collapsing. A are in the beginning of mass extinction. And all you can talk about is the money and fairytales of eternal economic growth. How dare you . The trade deal that President Trump says he has agreed with japan may be in trouble. Forces close to the talks have told the New York Times and Washington Post that tokyo remains concerned the president may still impose tariffs on vehicles shipped to the u. S. They say they must be allowed to abandon the deal if that happens. It is the last major obstacle to a trade agreement. The white house wanted it signed a during the uns General Assembly. Boris johnson has told donald tusk he still wants a deal but that brexit will happen at the end of next month. The pair met at the uns General Assembly in new york with the split six weeks away and increasing down a deal can be struck. Back in the u. K. , the labour opposition is promising a second referendum, saying voters can change their mind. Too much has happened in the last three years for this to be decided without the consent of the public. We need to ask them a basic and vital question. Are you prepared to leave with the best deal that can be secured or wouldnt you rather remain in the e. U. . Ritika embattled utility pg e is cutting power to more than 20,000 customers in Northern California to stop Electrical Equipment from sparking wildfires during the current dry and windy weather. Warned 120,000y customers in counties that may be affected. It filed for bankruptcy in january. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Paul. Paul thanks. I want to get you across some breaking news on the bloomberg terminal. Facebook is said to be paying 500 million to 1 billion to acquire labs. This is an interesting company. It is a hightech startup Building Software that lets you control a digital avatar using only your thoughts. It uses bracelet and it can determine what youre thinking about even if you are not actually moving. Rllabs. Ct facebook has acquired that company according to people familiar with the matter and we will have more on that very interesting story for you, coming up later this half hour. We are halfanhour away from the open in tokyo, sydney, and seoul. Lets get over to Sophie Kamaruddin in hong kong. What is on your . Radar today we on your radar today . Sophie domestic flights were canceled due to a typhoon. For korean carriers, which are expected to post worse than expected earnings this year due to the ongoing dispute with japan. We are watching mitsubishi with them expecting the company to cut its forecast due to that 320 million loss by a rogue oil trader. Keeping an eye on autos. The u. S. Will maintain tariffs on the sector. They settled with u. S. Regulators over failing to disclose the exchairmans retirement allowance. Kathleen thanks so much. To another bloomberg scoop now, Deutsche Banks top shareholders are taking the unusual step of making their own search for candidates to replace the chairman. It is another sign that they are running out amid the longrunning trouble so lets bring in our Investment Banking reporter. Congratulations on a great story. What is happening . Another sign of frustration. Hisas very low support for chairmanship in the last Shareholder Meeting and now, you see the qatari royals who have a very significant stake in Deutsche Bank, seek potentially a faster change in chairman before 2022, when his term runs out, so we will see how that comes to play. Kathleen in the Deutsche Bank saga, you talk about this a lot on Bloomberg Television, does this give you any confidence that they are really moving ahead . Sonali i want to definitely differentiate the ceo and the chairman. The chairman has been there through subsequent ceos and restructuring. We had him on through january, through the john cryan area. The stock has declined 70 so there has been a lot of loss. The ceo who is currently there has only been there a little bit over a year with their new Restructuring Plan that has been drastic. Shareholders want to give him time to pursue it so there is a difference between the two. This search by the qataris seems to be running in parallel to Deutsche Banks own search, so was there a bit of a division here . Sonali there certainly is. We are seeing the chairman, given that he will step down in 2022, they are already looking for somebody to be taking that. But with that said, the qataris are doing their own search potentially, asking International Recruiting firms to look for executives, which means this could go fairly broad in terms of who they might see at the helm of this company. They tend to prefer people who are of german dissent so they stay true to what the nation wants. It is germanys bank. Paul Investment Banking reporter sonali basak, thanks very much for joining us. Federal prosecutors in california were reported to be conducting a criminal probe into ecigarette maker juul. It is another major setback for the Company Whose sales were recently halted in china. Our Technology Reporter coversjuul labs. The latestjust development in a string of regulatory obstacles and setbacks that juul, the major maker of ecigarettes, has been facing in the last year, and that has escalated in the last couple months, so theres these new reports of a probe from the u. S. Attorneys. There have been probes from the ftc, the fda, there are concerns from the cdc, and this is coming on the back of some reports of hundreds of cases of vaping illness as well as handfuls of death. Even though vaping related illnesses may be related to products that are not juul, that instead involved thc and marijuana, and maybe products from overseas, it is nevertheless having a big effect on the way that people are viewing juul, and concerns they have about safety and also about regulatory setbacks that might affect their ability to do business. s online paul juul sales were halted in china last week. What was the reason for that . Ellen we dont actually know. This has been a big change for juul. Just last week, they launched to sell in china, which is a major market, the biggest market for Tobacco Products in the world, and this has been something they have been looking forward to a long time. They thought that their product, an alternativeas to combustible cigarettes, would have a lot of sales potential in china. A few days later, all of a sudden, those products were nowhere to be found and our reporting have shown that juul was not informed of the reason the products were polled. Theres a bit of a question mark around the opportunity of sales in china, which is something that juul had been looking to lean on for growth as well as in other overseas markets. They had issues with sales regulation in india. Kathleen vaping as a cool fun thing to do to increase regulations, scrutiny, how will this affect juul in its potential valuation . Ellen we only get the occasional glimpse into what juuls valuation might be. The biggest and a recent glimpse most recent gloves we got is the all tria stake altria state. This was a big dop or they bought a big chunk of juul at that price,. You have to imagine that price is in question because their ability to make sales around the world, their ability to grow, their ability to continue getting revenue is going to be greatly affected by regulation if some of the things that are possible, some of these limitations that are possible, come into effect. Makeve already seen juul some voluntary decisions to pull back on flavored ecigarette products in the u. S. As an anticipatory move against the fda may be limiting those sales, and we already heard President Trump talk about wanting to make changes to limiting flavored ecigarette Product Sales in the u. S. , so you have to imagine people are looking at juuls and getting nervous that there could be a regulation that could drastically affect their ability to make money. Kathleen thank you. Ellen huet in san francisco. Coming up, we will turn to facebooks latest acquisition and what it means for the tech giants broader game plan. Theres plenty more to tom on daybreak asia two, on to come on daybreak asia. This is bloomberg. Paul we are counting down to asias first major market opens at the top of the hour. This morning, japan futures looking a little weaker at the moment. You have the yen dollar cross rate there. Apanese futures a tad weaker a similar story in australia as well after a sideways dam u. S. Equity markets, struggling for direction or any catalyst or break out in any particular direction, so we have the open just over 16 minutes time. This is daybreak asia. I am paul allen in sydney. Kathleen i am Kathleen Hays in new york. As for our breaking story, facebook has agreed to buy ctrl nabs. People can control computers with their minds. Kurt wagoner joins us from san francisco. This is blowing my mind. What exactly is ctrllabs, what does it do, and how much did facebook pay . It sounds futuristic candidates. You wear this bracelet on your wrist and then actually, you know, detects the neurons in your body, which are, you know, some from your brain to tell your body to move, your muscles to move, your hand to open. When it detects that, it translates that onto a computer screen, so if you are thinking about opening your hand, the digital version of your hand on the screen might actually open even if you are not physically doing it in real life. Facebook, we are reporting they paid more than 500 Million Dollars for this company, less than one billion, but more than 500 million. A significant amount of money for them to be going after this pit as they build the future of computing, can you do so in a way that does not even require you to hold a controller . Kathleen are you aware of other startups and companies in this space that could challenge this . Other Companies Might want to acquire it . Kurt i dont know of any startups off the top of my head but i know facebook is wanting to do this with other technology that they are building inhouse. They announced some brain computer interface. In this case, you might be able to think about moving your body and that translates to the screen, but what they talked about before was thinking about text and words and that translating to the screen. Could you type by just thinking about the words you want to say . We have seen a bunch of Larger Tech Companies get into ar as well. The idea of snapchat and microsoft, this is a fertile kind of technology, this Artificial Intelligence and augmented reality, so it is no surprise that facebook is investing pretty heavily here. Paul timing is pretty interesting, isnt it . Facebook is already under two antitrust investigations commander and i can already hear the questions, facebook can read your mind. Kurt it is an interesting acquisition at an interesting time. You mentioned the antitrust investigations. Facebook said they will cooperate with regular leaders to answer any questions they have about this deal. Their argument to me is that this is not something that facebook is currently competing with, so it is not as if they are buying a competitor or someone who even contributes to their main bottom line. This is not an advertising acquisition or business, for example. Their argument is that they are getting into a new form of computing. This is a new area they are not super familiar with, so as a result, it should not be a problem for them. I am sure regulators will have many questions nonetheless. Kurt wagner in san francisco, thank you so much. Our next, we speak to brazils environment minister as the u. N. Climate action summit kicks off in new york. We will ask him how brazil is dealing with the International Backlash over the fires in the amazon rain forest. Reminder that on friday, Bloomberg Television takes a look inside the hong kong protests in a special onehour program. Stephen engle investigates the causes of the unrest and looks for possible solutions with Prominent Players from all sides. That is hong kong on edge, this friday, and a Day Hong Kong time, 2 00 p. M. In sydney. This is bloomberg. Kathleen this is daybreak asia. I am Kathleen Hays in new york. Paul i am paul allen in sydney. Lets get a quick check of the latest business flash headlines. Nissan and carlos ghosn has been fined a combined 16 million by the fcc to settle u. S. Allegations they failed to disclose 140 million in compensation. He was slated to receive it on retirement. Nissan will pay 15 million and carlos ghosn, the remaining 1 million. It stems from a decision that he overpaid on himself and other offices. Kathleen a 4 billion dollar operation to develop Autonomous Vehicles with u. K. Based the project will be split 5050 and aims to have a production ready selfdriving platform by 2022. Hyundai said it plans to invest more than 12 billion in autonomous and electric cars. Shares have risen 12 . Surged more than 40 . Paul apple says the next version of its mac pro desktop will be assembled in texas after received waivers on key components. The u. S. Government approved apples request on exemption on 25 tariffs on 10 key components. Apple says the new version of the mac pro will have 2. 5 times more americanmade parts than the previous model. Over the past week, the Federal Reserve has had to work unusually hard to reign in a key policy rate after overnight repo lending dried up. Bill dudley spoke exclusively to bloomberg earlier. It has shrunk its Balance Sheet over time. Currency is growing. The treasury is cash balance. The treasury is growing. As a consequence, the number of reserves in the Banking System has been shrinking and this is tricky because the Federal Reserve does not really know how much Bank Reserves banks might need to satisfy the new liquidity coverage ratio requirements and liquidity requirements and how much demand will be generated by the fact that interest is paid on reserve. The fed, for years, there was plenty of reserves in the system, but now, they are getting to the point where reserves demand supply so if there is a little bit of a shock to the system, they can put up you said the heart of the matter. You worked for years in the trenches of this with your Goldman Sachs Market Experience over to the new york fed, and you just said it. The fed does not really know. That the fed does not really know, does that potentially affect trust in this . I think we always knew that there was some desire to demand for reserves, but we could not there was more than sufficient reserves in the system. Theres always going to be a point where it shrank to the point where we would see upward pressure on shortterm rates. When we reached that point, the fed would know they need to add more reserves to the system and that is what we saw over the past week. One complaint we have had is that they were late. What is your response to that . In the scheme of things, maybe one day. It would be nice if they responded more quickly. In the scheme of things, this is an event for markets. It is not an event for the economy at all. You know the narrative emerging over the past couple of weeks, the past 12 months, is you left, they were squeezed out, and this new york fed is different under Williams Senate was to you. The new york fed is not as sensitive as what it what is happening in markets as you were. We knew there was going to be some point where reserves had shrunk to the point where demand for reserves was going to equal supply, and when that happened, we were going to see some upward pressure on rates. That is what happens last week. No surprise. The other thing people i think do not really appreciate is it is not one person at the top of the Federal Reserve that does one thing. Theres hundreds and hundreds of really qualified people that execute Monetary Policy on behalf of the Federal Reserve, and where are we today . We are in a good place. Repo rates are back down to where they should be. The federal funds rate is well within its range, so mission accomplished. Kathleen terrific interview with bill dudley, with our own tom keene. You can check it out at bloomberg. Com or on the bloomberg terminals. Lets get onto the big question now. Markets opening in tokyo, sydney, seoul at the top of the hour. What are you watching . Sophie a potentially mixed start to the session with confidence in corporate earnings and growth remaining mired in pessimism. Nikkei futures unchanged. The yen looking steady with markets reopening after japans long weekend. After that weekend, jgb traders will be seeking cues from kurodas speech and the boj bond buying in the one year to five years own after the central bank trimmed purchases on friday which signaled that the yield curve could continue steepening, although some strategists remain bullish on longer dated debt. Morgan stanley recommending buying 40 year jgbs outright with this weeks options seen as a dipbuying opportunity. Australian assets and bonds not to hire while the dollar is little changed before the rba governor delivers a speech that may signal an imminent rate cut. The markets are pricing in an 80 chance for easing next week. Paul. Paul thanks very much. Lets get some more on what we should be watching as trading gets underway in asia. Bloomberg cross asset editor joins us. There was some pretty bad manufacturing numbers out of germany overnight. Could these concerns about Global Growth weigh on the open here in asia . Look, they were particularly bad and they are definitely going to be a focus for the market. They confirm germanys economy is suffering its worst downturn in almost seven years. Look, investors knew that the Manufacturing Sector is in a trench action contraction. The numbers are crystallizing the extent that trade tensions are having an impact. Germany has its own challenges with the auto industry, but also brexit, which is definitely a concern for the market. We had euro and the european stocks declining. You sound less of an impact on the u. S. Market. That is because u. S. Manufacturing is Still Holding up relatively well, so it is concerning that the u. S. Economy continues to be the global leader, but look, theres also hopes on trade talks that are coming up next month. Concerns about Global Growth are starting to play out here in asia. You know, we have seen value stocks, which jumped at the beginning of september. They are taking a breather. That rally is stalling. Theres definitely skepticism aldara made this lack skepticism amid this lack of growth. You have some tracks starting to crack startings to appear in the u. S. Economy and that is keeping investors on the sidelines. They are definitely going to come a you know, to assess the implications of these very poor numbers out of germany and france yesterday. Kathleen why so much confidence in the thai bond . It is asias best performing right now. Andreea hi, kathleen. Look, that is right. It has emerged as this page against the global trade winds had we saw the korean won and the chinese yuan, export dependent economies, very sensitive to any news on trade, but the thai one is benefiting from current account surplus, solids currency reserves, as well as less of an expectation that the Thai Central Bank is going to cut Interest Rates. The bank of thailand is meeting tomorrow and it is going to look at its policy again but traders have brought back the expectations of a cut. They did surprise us last time with an unexpected Interest Rate cut. There is a chance they will pause. The danger they are for the thai bhat is if we do see some resolution to the trade talks, there is optimism out there of some sort of a positive outcome. But it is one of the bestperforming currencies. Paul andreea papuc. To see any of those charts again, you can go to our library on the bloomberg terminal at gtv. Coming up on the next hour of daybreak asia, we will talk markets strategy with john moore. Stay with us. This is bloomberg. I am paul paul allen in sydney. Asian markets are about to open for trade. Kathleen i am Kathleen Hays in new york. Sophie i am Sophie Kamaruddin in hong kong. Welcome to daybreak asia. Paul our top stories this tuesday, World Leaders gather for the u. N. General assembly. Tension in the middle each middle east and Climate Change of the top of the agenda. The third debate the Balance Sheets. We hear exclusively from former newark boss bill dudley. Kathleen markets return at 31 daybreak. Investors hearing policy comments from governor kuroda. Lets get to the Market Action with sophie. Sophie we will be watching reaction with germanys pmi dropping to a decade low. Japan is back online. The nikkei 225 adding. 1 . The topics also going higher. Topix also going higher. Maintain auto tariffs on japan. 10 year yields are nudging toward 24 basis points this morning. Governor kuroda is set to speak today. Lets check in on the mood in seoul. The kospi flat. Had another, we soft ego data point from korea with Producer Prices falling in august. Investors will be looking at policymakers to step up 30 fans of the economy after todays dismal numbers. Lets check in on aussie shares. The rba governor is in a handsy to provide support for the economy. Government set to return to a fiscal surplus surplus. Aussie dollar below that 68 handle. Paul . Paul lets check in on the first word news. Minister boris has told eu president donald the eu present that he wants a deal but the brexit will happen at the end of the month. There is increasing doubt that a deal can be struck in six weeks. The labour opposition is promising a second referendum, saying voters can change their minds. Too much has happened in the last three years for this to be decided without the consent of the public. We need to ask them a basic and vital question. Leave withpared to the best deal that can be secured or would you not rather remain in the eu . President trump has asked Steven Mnuchin to explain why the u. S. Requested china cancel a planned tour of midwest bonds. The visits were abruptly called off on friday, causing markets to tumble amid fears that trade talks had stumbled. Mnuchin said the timing did not work, so it was halted. President trump asked why, indicating he wasnt happy with the decision. The it in what them to have any confusion. They will schedule that is a different time. At our request. Why was that out of our request. We didnt want confusion. Yeah, but i want them to buy farm products. There was no can confusion about buying agriculture. They have committed to buying a lot of agriculture. They have started. We should get them over here as soon as possible. Iran is being blamed on the two aramco attacks last month. It will be discussed at the u. N. General assembly in new york. Yemen rebels in yemen claim responsibility for the attack. Indiasd utility pg cutting power to more than 20,000 customers in Northern California to stop illogical come equipment from sparking wildfires during the dry and windy weather. Power is being cut in three counties. Pg nd has warned 120,000 customers in nine counties that may be affected. Wildfire liabilities were in the billions of dollars in january. Global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. World leaders and diplomats are gathering for the u. N. Political the yuan General Assembly. As a meeting between President Trump and the iranian delegation are fading fast. He is scheduled to meet more than a dozen state leaders for some of policy. Diplomacy. We are joined by josh. You asked a question about the canceled farm visit by the delegation, this was after we asked when the chinese trade talks with cap and. Mnuchin said they were next week, the week of september 30. That is sooner than we thought. He said it is the week after, october 7. Things are more as we expected. Less to read into their more than an hour ago. October 7 is when those talks will happen. Kathleen is it as you expected that there has been a joint statement on monday. France and germany joined the u. K. In saying that iran was behind the attacks on the saudi whileties, and also, repeating their support for the previous the Iran Nuclear Core in 2015, donald has withdrawn, the nations did not repeat their past criticism of the decision. They said the moment has come for them to accept negotiations on a longterm framework on the Nuclear Program and on regional security, including ballistic missiles. Is this a big step . I think this is opening the door to a bigger step. These dont tend to happen in big steps. First johnson opened the door by saying, we think they should be open to a new deal. Boris johnson is closer with President Trump. He was the first to straight to the u. S. Side. Two stray to the u. S. Side. Stray to the u. S. Side. There is no sign of a rouhani meeting. He says the iranians are not willing to talk. He is committed to his maximum pressure campaign. I dont think we can expect that to end. We have two sides who believe the other needs to bring first. Paul we did have one of the surprising moves from President Trump today. He made an appearance at the Climate Summit. What caused the change of heart . We dont know. He stopped in for 14 minutes or so. Climate has been a touchy subject for him. He avoids talking about it regularly. He was asked, why did you show up, and this is a moment where of course Greta Thunberg gave a moving speech and is getting a lot of headlines. Trump said, im a just it in clean air and water. He says all countries should be interested in it. That is why he went. He did not speak at the moment the summit. He stayed for speeches by modi and merkel. Then he went to the Freedom Summit he was hosting. The same building. You can see where the priorities lie. Kathleen our White House Reporter in new york, covering the u. N. Meetings. Lets move onto a big story. Jair bolsonaro was the first leader to address the yuan General Assembly on tuesday. He expected to use his time to defend his countrys handling of the amazon while asserting the right to develop the rain forest as it sees fit. Joining bolsonaros is environment minister. , thank us now in studio you. Its tough to get around new york during these meetings. We are happy you are able to make it here. We just admit talking but Greta Thunberg again the speech she made. What do you make of what she has said, particularly saying in essence to World Leaders, your fiddling while rome burns. Youre getting worse. You . This ring true with does it motivate you . It is an important issue. The feelings we have about this subject. She also said the time for empty words has passed. We think this is true. We think the times for these discussions that never and or reach a definitive or materialize consequence has passed. Job so far but this commitments under the paris agreements, which is exactly what she said about Climate Change. We change our renewable sources of energy, which is renewable by 45 . We have a lot of things that are going very well and that are concrete. As opposed to some other countries who have criticized, including today, brazil was criticized by one country, one later. This countries not fulfilling their agreements, as opposed to presale. One of the things people are concerned about is the fires in the amazon. As i was reading about this, you have blamed it on hot weather. I grew up in a place where people log a lot. The scientists, including those at the Environment Research institute say it would be worse if it was just that. It has so much to do with deforestation. In the last year, the deforestation has accelerated dramatically. Is that not the key problem that the brazilian government has to address . Its one of the problems we have to address. We have to deal with deforestation problems. Causes, ae of the cart apart from being dry and hot this year. Problem isstation something that we have to address, especially because it is going higher by the year. We need to focus on the reasons why deforestation is getting higher. It was it has tripled this year in 2004, and a decreased in 2012 and is going up again. One of the reasons we have addressed it, is that we need to find another way to have an appropriate Economic Development of the region. There are more than 20 million brazilians who live there who need some sort of alternative for jobs and income. They need to have a Sustainable Way with Economic Development. Its the combination of these two aspects that we are looking for. Paul the reasons why there are deforestation is pretty clear, its literally on fire. There were 76,000 fires burning at this moment. Your own Space Institute says there has been a 278 increase in deforestation in july. The reasons are pretty clear. What are you going to do about it . What we are doing is two things. On one side, we are fighting against the criminal activities that are happening in brazil. From that sense, the president has signed an unprecedented degree declaring law order for environmental purposes. It has more than 40,000 military troops. We have cars and structures to fight against the criminal activities, deforestation and the fires we are facing. We understand this is an important problem that we are addressing. Towill look into the future not only fight the fires, but how to manage this problem of illegal crimes and deforestation in the origin of such pressure to deforestation. Paul youve also sacked 21 of 24 state positions in the bimetal industry. Theres been a 22 decrease in surveillance. You haventalists say dismantled governments that have been in place since 1992. Were doing a lot and other direction as well. Some of the former environment of ministers were those who were responsible for not allowing the country to have the development in terms of economic sense. Once you dont have the prosperity to find the resources to create this prosperity, jobs, its instant tentative for going its an incentive for going against the environment. Being reasonable and not observing the economic aspects is important in terms of protecting the environment. The government is suffering a lot of budget restrictions due to the fact we have previous governments who have not delivered well the management of the state. They broke the country. We have problems to face and we are doing it and we are downsizing the government. We are passing tax reform. All of these things will generate prosperity we need to give the people a better life and more resources to take care of the environment. Kathleen you have called illegal loggers hardworking citizens who are bullied by environmental agencies. sgrew up as a logger daughter. There are a lot of rules you have to follow unforced land. If you want to combat illegality and illegal deforestation, how can you defend people who are breaking the law . We are certainly not offending people who are breaking the law. There are aspects that are important to understand. Brazil has the strictest law in terms of occupying territory. The National Forestry code is the most restrictive piece of legislation, along with our group with other legislation for the environment. Some of them are so complicated that people have problems complying with them. Two different things. We are enforcing the law strongly. On the other hand, we are bringing some reasonableness to understand which are the necessary steps needed to undertake in order to have development and combat illegal activities in that field. The southern parts , we have 20 of the property that cannot be touched. At 35 in havana. In the amazon, it is 80 . The law imposes a restriction. About 80 of the property debt cannot be touched. Its a huge restriction over the property rights. What brazil is doing is recognizing that these people need to have this or some sort of development and Economic Development within protection. Its important. Paul brazil ispaul environment minister. Is onto come, south korea alert as highly contagious african swine fever spreads. On the get the lowdown diseases longterm impact on oil prices. Laus john conviction call, just ahead. This is bloomberg. This is is daybreak this asia. Kathleen asian equities are on a slow start after equities hit the pause button over stop law admit trade talks. Sei head of asian equities, john lau, is joining us now with his outlook. A point whereo markets have held up reasonably well. Whereonomy, depending on you are looking, is mixed. Even germanys manufacturing problems and services are Holding Income a pretty much. Two investors have a reason to move in this direction right now . John thanks for having me on the show. Theres a lot going on. I am based in hong kong, covering asian equities. We have it chinese trade war continuing. With the protests in hong kong and the trade spat between u. S. And korea. I would say the biggest risk that investors are seeing is the u. S. China trade war. There,we see progress the market is not going to move that much. All eyes are on early october. There is not a lot of expectation that anything material will come from this. Deal,get some kind of that would move markets. Biasedyour ballast toward the valuation part, and were looking at autos, industrials and financials. How much risk and how much john i would preface it by saying, we actually have a diversified portfolio. Weve exposure for all the sectors and countries. That is the best way to ride through volatile times. To the extent that we can biased toward something more attractive, we are currently focusing more on valuation as opposed to topline growth or quality. We think that offers more opportunities in autos, industrials, and to countries like korea and thailand as well. I paul paul just want to bring up the chart on the bloomberg terminal. This is asia value stocks. They rallied for a little while. Now they are pulling back. This as a pause in the rally in asia stocks or does it have more room to run . For if you look at, example, spreads with a low valuation versus topline growth companies, or growth companies, those with low value growth pes and price to books have been dragging, have been lagging the market for a couple of years in asia. Longer in other developed countries. We think that spread will come back at some point. Its tough to call when it will happen, but for investors, with a longer time horizon, you want to go in areas that are more attractive in their valuation. We have multiple strategies. To that extent, you want to tilt toward something more attractive, as an area that you want to tilt toward. Paul im wondering if your theory changes at all. If you look at easing, you think the u. S. Dollar has a bit of weakness coming. Dxy,u have a look at the the opposite is proving true. Even of the fed is easing, the dollar keeps getting stronger. Does that affect the usual theory for investing in e. M. E. M. E. M. John it does. It seems like all Central Banks are dropping rates or holding. Here in asia, we have seen most Central Banks are dropping rates. A few are holding onto it. If there is any kind of Currency Movement with the u. S. Dollar, attends to help emerging markets and also countries in this region as well. Investors investors should focus on valuation. Those are the ones that will generate more attractive returns going forward. Is a big region. There are lots of different economies. One thing that seems to be true is the extent to which it exports which exports have suffered. We can see that is directly linked to the trade war. Tothat something you can put one side and focus on individual companies, or is it a big an air force that it is one of those things that gives you caution. John certainly, the matteroffact macro factors are a key. The u. S. China trade war is a big cloud hanging over the markets. You can just take a look at, lets say, korea, for instance. Korea is a big supplier to china and the u. S. So when there is a war going on, they are negatively of tech affected. Also, with a were against japan on trade, they are in the strike zone for a number of these issues. You can see the sentiment is down. Consumer spending is down. There is high expectation that the be ok would have to cut further. Even other cut to 1. 5 . All these things play income other people should focus on individual spots and not buying a broad market. There were certain opportunities that are more attractive than others. Prognosiswhat is your of chinas economy and markets. You think the yuan may depreciate further and yet you are still on the base of looking at utilities in other sectors. Couldre a bold move i take to make some money . John that is a large uncertainty. It depends on these macro trade deals changed by the day that changed by the day. We are not in the game of predicting the direction of it. It can change in the next hour. Having said that, china has a number of levers to deal with it. You can see that in terms of currency, it is depreciated by 15 since the beginning of the trade war in the Second Quarter of 2018. Theyve influenced a number of monetary policies and including rrr cuts and employing systems with lower prime rates. They still have room to grow. They can still deal without a little bit more. Dontoes not mean they face a lot of problems. This is a major problem they have. Sei head of asian equities, john lau. Lets get a quick check of the latest headlines. Facebook is taking Online Productivity to a higher level. A startup is controlling allows people to control a digital avatar using their thoughts. Almost 1s worth billion. The startup has raised tens of millions of capital. Kathleen there is a growing investigation into 800 million Money Laundering scandal after in estonia. Sing paul qatar and Deutsche Bank are looking for people to succeed the banks chairman. Representatives of the royal family has spoken to International Recruiting firms as they review potential executives entered debating are debating before his term ends in 2022. You can get around about the stories you need to know in todays edition of daybreak. Bloomberg subscribers go to dayb on their terminals. Or the mobile on the bloomberg go anywhere app. This is bloomberg. My family and i did a fundraiser walk in honor of my dad, willy davis, who has alzheimers. I decided to make shirts for the walk with custom ink. The shirts were so easy to design on the site. The custom ink team was super helpful and they just came out perfect. Seeing my family wearing my shirts was such an amazing reminder of all the love and support that everyone has for my dad. [narrator] check out our huge selection of custom tshirts and more, for teams, businesses, and every occasion. Youll even get free shipping. Get started today at customink. Com. This is daybreak asia. President trump has made a short and expected appearance of the u. N. Climate change summit. Debate, butto the declined to speak. Leaders are figuring out how to tackle Climate Change after widespread anger over lack of action from leaders. Dreams and stolen my my childhood, with your empty word. I am one of the lucky ones. People are suffering, people are dying. Entire ecosystems are collapsing. Of ae in the beginning mass extinction event. All you can talk about is the money and your fairytales of eternal economic growth. How dare you. Britain, france and germany have joined the u. S. In blaming iran for tax on two key aramco tankers. Ministeran foreign points to claims of responsibility from rebels in yemen, saying that if iran were behind the attacks, there would be nothing left of the refinery. Boris johnson has told eu wants a deal, he but that brexit will happen at the end of next month. They met ahead of the yuan General Assembly in new york, away,is just six weeks and there is increasing doubt a deal can be struck. Are promised the labour party is promising a second referendum, saying voters can change their minds. Too much has happened in the last three years that for this to happen without the consent of the public. We need to answer basic and vital question. To leave withed the best deal that can be secured or would you not rather raving remain in the eu . Nissans former chairman, carlos ghosn, has been fined 60 million by the sec. They say he failed to discover 100 disclose 140 million in compensation he was slated to receive a retirement. The claim stemmed from a 2004 decision that allegedly gave him full authority over pay decisions of himself and other offices. Global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Kathleen we have some breaking news on the japanese economy. Index, thatanagers index went down to 48 point down for september, the initial reading of 49. 3 had already dipped below 50. Services, pmi for that has also weekend. 52. 8. When you put them together, the composite at 515 51. 5. Not anyone nearly as bad as the german pmi and australias pmi, which had dipped below 50. It seems to be a global trend in many countries and economies. Now lets get a market check. Sophie that bank reading has fallen to the lowest since 2019. Seeing little reaction in the yen. Sinking below the 108 handle against the dollar. We do have asian stocks looking a little changed. To the upside, we have the cost be sliding after a 12 day gain. Catchup after that long weekend with the nikkei 225. Jgbs are on the rise. They are set to buy across the front end this tuesday. Aussie bonds on are on the earth. Investors looking to the rba governors speech for hint about an imminent easing. Investors are pricing in the impact of earnings with the price target being cut at ubs and morgan financial. Gains from extending dragon quest. Defense talks are to be held with the u. S. Starting tuesday today. Paul . Paul paul over the past week, the Federal Reserve has had to work unusually hard to bring in key rates at repo lending dried up. The new york fed president spoke to bloomberg earlier. Shrunk its Balance Sheet over time. The currency is growing. As a consequence, the number of reserves in the Banking System has been shrinking. This is tricky because the Federal Reserve does not know how much Bank Reserves banks need to satisfy the new liquidity coverage ratio much demand and how is going to be generated by the fact that interest is now paid on reserve. For years, there were plenty of reserves in the state. Now they are getting to the point where reserves demand is not indicating reserve supply. There is a shock to the system that competitor. You said this is a trust market and a short term paper. You have worked for years in the trenches of this. Over to the new york fed with geithner. You just said the fed it not really know. If the fed is not really know, does that potentially affect trust . I dont think so. I think we always knew there was a desire for reserves, but we cannot observe how much those demands worse. Were. We knew that there would be a point where it could put pressure on shortterm rates. Then the fed would know what they would need to do. They needed to add more reserves to the system. One complaint we have had is that they were late. They were not quick enough. What is your response to that in the scheme of things, maybe one day . This is an event for markets. Its not an event for the economy. It has been emerging for the last few months. Differentork fed is under williams than it was to you. Was it as sensitive . I dont accept that. Defendant John Williams in the fed. We knew there would be a point where they would be the demand for reserves would equal supply. We knew we we see we would see some upward pressure on rates. Thats what happened last week. No surprise there. The other thing that people dont appreciate, its not one person that does this. There were hundreds and hundreds of qualified people that execute Monetary Policy on behalf of the Federal Reserve. Where are we today . We are in a good place. Repo rates are where they should be. The federal funds rate is where it should be. To citigroup. Thats a small bank. They said the same thing. Everything is fine. There is a kerfuffle. There is a sizable part of our audience that are worried, or they dont agree with the idea that the Balance Sheet of the ecb, the boj and the fed has moved from x to 14 trillion. They want a reassurance that that is a good place to be, rather than the nostalgia of moving back to a previous Balance Sheet regime. If we move back to the previous Balance Sheet regime, the Federal Reserve would have to intervene massively on markets on a daily basis. In the current regime, if you have enough reserves in the system, you dont have to do anything day today. You pay on excess reserves, it eventually sets the level of money market rates. The federal funds rate trades within this. Its a much simpler regime. Is that right . People dont know exactly how many reserves you need. But i think they just need to build up a bigger buffer. They are doing it by doing repo operations. There is a prospect of two things happening. Number one, they will increase their size of the Balance Sheet. There will start to buy treasury securities again. Chair powell talked about that. He talked about our organic Balance Sheet growth. The second thing they will consider is introducing a standing repo facility. That was bill dudley, former new york fed president. Soar in as port prices china, we look at how the nation can get a grip on the deadly african swine fever. This is bloomberg. Kathleen this is daybreak asia. Im kathleen in new york. Paul im paul allen in sydney. The scourge of african swine fever is still on the march in asia, with south korea reporting the fourth case in a week. Thought guest has a that its the most serious Animal Health disease in a long time, if not ever. Pfieffer is an expert on animal sickness. Just wondering if you can explain for us the difficulties in controlling african swine fever. The spread has been unstoppable, really. Dirk dirk there are number of factors that play a role here. One of them is the characteristics of the environment of the virus. It survives very well in the environment of a product. It will hide in the trades we are conducting. We have a very high concentration of pigs in this part of the world. Makes it very easy for the virus to spread within those populations. On top of that, we dont have any way of treating this disease and we have no vaccine. That turns it into an enormous challenge inputs every country in the world that has any amount of pork consumption or production at risk. Paul what have the difficulties been in creating a vaccine and how long might it be until we can expect to see one . Dirk its difficult to say. I have been involved with colleagues who are much more expert in vaccine development. Since 2005. Working we have not really made any progress to the extent that we could say we have a vaccine. I think there will still be 510 years time until we have something else. With any situation like developing a vaccine, you have to consider what risks you are taking when you are releasing the vaccine and using it in the field. That wee, the view is have to be risk adverse. We have to test the vaccine in the field. That means it takes longer. Of thehe severity situation in asia, i am wondering, will we see the use of the vaccine earlier . Its always hard to say whether that is an appropriate or not. It would be inappropriate if that means that vaccine would also result in chronic disease amongst pigs. Then it would be much harder to control. What is it about this virus that makes it so hard to cure the peg, and to develop any kind of . Reatment or vaccine dirk compared to influenza, its very large. The flu virus is a single strand. These are dna viruses, doublestranded. They are much more robust and stable. Its difficult to understand what all the other double with all the other proteins are doing. Its also why it is so resilient. Thats it. The resilience of the virus is what makes it so hard. Paul i want to interact with breaking news on the ab inbev of ipo. Set to be pricing at the bottom of the range, 27 hong kong dollars per share. To some news on the pricing of ipo. B inbev we will have more on that story later. Want to return now to dirk pfeiffer. Had the bird fluke, i believe it was about 12 years ago now, the efforts to contain that for an enormous amount of call around asia, the tinyfor pigs has been a fraction of that bird fluke, is that something that is that needs to be looked at more seriously . Dirk not really. We shouldnt compare those two. Keep in mind the chicken is much smaller. Much more than a pig. Anything about the numbers of pigs that have been killed, if you were to convert them into units that make it comparable, we have seen a lot of pigs being killed in this part of the world because of that. Stopnot what is going to the disease, in reality, we will still have disease in the background that will continue to mind, and also keep in and the end, what matters is port prices. Consumers in the in this part of the world want to continue to eat pork and do it at a price that is affordable. So culling a lot of the pigs, without being able to stop it is not the answer to this problem. So what is the answer . In china, a huge demand for port. I love pork myself. You dont have a cure or vaccine. Culling will not work. Rid ple just just get do people just get rid of every sick pendant pegula can and hope that the pigot you cant pig you can and start over . Dirk we need a change in the industry. We have way too many farms that are smallscale with no security. They are not in a position to keep the virus out of the farm. They have not get the money to have proper facilities and proper disinfection and to prevent introduction of the virus. The same is true for the trade. Very complex traded networks for port, four live pigs and pork products in this part of the world. Its very difficult to clean or remove the virus on that system. In securityange behaviors in those industries. That is not something that will happen overnight. It will take a couple of years. Aware say that is also the large companies, the large pigot companies, five of them are from china. They will be in a position to do that. We know that is probably not the ideal scenario that we want to work towards from a socioeconomics perspective. But if you want to control these and eradicate the disease, the main aim needs to be a change of the industry, less smallscale farms, more medium and large scale farms. Paul we are getting a good feel for how difficult this is. The structural change that is needed could take years to bring about. In the meantime, what is the worst Case Scenario for how far african swine fever could spread . Dirk i think every country is at risk. The difference between countries is the capacity of the Veterinary Services in these countries to deal with it. South korea has demonstrated the veterinary system that has the resources and a strong linkage with the peg pig industryl will slow down or eradicate the disease. It depends a lot on the will of the industry. If the government wants to control the disease. We dont wanted to make it out of the story. Theyre the ones that can make a difference. Across the world, and the United States, and australia and new zealand, a country that realizes how important it is to keep the virus out of the country. And eradicate it as quickly as possible. The government authorities can deal with it. With the low to middle income countries, that is not the case. Thatarmers are concerned they might not get compensated. They might recognize the disease and that is when it gets dangerous. That means those parts of the world that will continue to present a threat for the rest of the world. Kathleen it looks like a big task, but you have hit it on the head. On a hopeful note, maybe that is where we are headed. Dont forget, our interactive tv function called tv , there you can watch us live and catch up on past interviews. You can dive into any functions we talk about. Its for bloomberg subscribers only. Check it out at tv. This is bloomberg. Paul you are watching daybreak asia. As we near the 70th anniversary of the peoples republic of china, the ruling party is juggling multiple threats. An economic slowdown, trade war, and swine fever all weighing on the celebration. Selina wang joins us from beijing with more. Can you talk about some of these challenges and how the sentiment is on the ground in beijing . If you walk around the streets, everything looks fine on the surface. Streets are clean, increased security and there are these red lanterns. If you talk to people, the sentiment is less than celebratory. Many of you this time as the in history. Lt time the first few decades of the founding of the prc, the focus was around the economic miracle, the lifting of millions of people out of poverty. The next few decades moving forward, the question is, can china escape the middle income trap . Can their Citizens Club . He high income that is challenged by the u. S. China trade war which is having a toll on both economies. Even though negotiations have begun, there is an expectation that this will be a long, drawnout conflict. She has taken a dramatic approach, being very clear that there are tough external and internal challenges. K certainly the slowdown in growth is a big domestic challenge. What else is a big challenge that xi faces . Selina bloomberg conducted more than 50 interviews with people across chinas Southern Industrial belt. People are really starting to feel the pressure from issues like the slowing economy, the rising pork prices. We spoke to vendors who said they are losing money keeping their market open because of some of the price curbs on the port prices. The party recognizes that one of the biggest issues is public discontent. They are trying to do everything they can to keep people ok with rising pork prices. Trying to release some pork at the reserve and release pork patrols. Do see tighter internet controls and propaganda. Xi jinping wants to make sure that these thing with the hong kong protests, arent going to overshadow the celebratory news, patriotic feeling run the 70th anniversary. Its important to remember that over the course of his leadership, the internet and controls in china have ramped up. Kathleen selina wang, thank you. Remember, on friday, Bloomberg Television is taking a look inside the hong kong protests in a special onehour pro tem program. Stephen engle investigates the causes and looks for a solution with Prominent Players from all sides. That is hong kong on age, this friday, at midDay Hong Kong time, 2 00 p. M. In sydney. Give your preview of what to watch in markets. Sophie . Sophie going into the tuesday session, we have a string of pmi data from developed economies. The pmi data from japan came in its lowest since 2019. January 2019. For readings from germany and france. Well get a pulse check from china. When hong kong opens, we will get the latest reactions from ab inbev as china ipo. They are said to price a listing at the bottom of its market rage again. Range again. This will make a big dent in the 100 million debt burden. Thats it for daybreak asia. Stick around. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Is 9 00 a. M. In beijing, shanghai and singapore. Welcome to bloomberg market china open. We are counting down to the open of trade. Lets get to our top stories today. Asia ipo atcing in 27 hong kong dollars a pop at the very bottom of the marketed range. Increasing drag on the global economy, it concerned Central Banks may not have the tools needed to boost growth. The trade war is adding to the pressure for more reforms in china. We are joined by the e. U. Chamber of commerce