Monetary policy but says more can be done. A year after listing in hong kong, a Logistics Company discusses real estate, fund management, and the impact of covid19. We speak with the chairman later this hour. Haidi breaking news crossing the bloomberg when it comes to the pmi indicators out of australia. For augustumber still in contractionary territory at 49, better than the previous reading of 48. 1. The pmi composite number, a little bit of an uptick but still in contraction territory. It will be a while before we see a meaningful recovery given we are hearing in domestic media that the state for restriction law down in victoria, melbourne, and surrounding areas could be extended by another two weeks as we continue to get these numbers out of victoria. We have seen a jump about 100 new virus cases for the first time in three days. Another exuberant session for the u. S. Tech underperformed. The s p jumping the most in almost two months to another alltime high but interestingly, the russell 1000 value index outpacing its growth counterparts. Interesting that utilities and the three, two out of worstperforming sectors actually outperformed. We are setting up for a mixed to positive session. A mild level of positivity when it comes to the future session as we get greater certainty that the chief cabinet secretary will be the man to replace shinzo abe in that leadership role. Dollar yen holding at 106. 20. We had a rebound in the dollar, rising the most in a fortnight overnight and new york crude is. 65. Ring at 41 sophie at a time when we are seeing governments ramp up their bond issuance, thailand not doing so. Debt Management Office likely to sell fewer bonds this fiscal year, looking to borrow potentially 450 sale ofbhat through the securities and term loads. The debt Management Office says they want to make sure that borrowing will not disrupt the bond market. Haidi. On finding value in a high valuation market, lets turn to the chief global economist and global head of microstrategy. Always great to have you. Its interesting that we saw a slight hint of rotation in the overnight session but by and large, it has been a common refrain that valuations are a nosebleed but you have to stay invested. Where else in the market are you looking for yields at the moment . Key question, where do we find yields . Government bonds are giving us nothing and in some currencies, actually negative returns, so we are absolutely going to see continued rotation of portfolios towards other Asset Classes. For a lot of investors, that will continue to be equities and risk but in my view, it will be a move towards under owns Asset Classes which includes asia, emerging market debt. I would not be surprised if we begin to see the alternative assets like infrastructure funds actually become the opposite of alternative but a lot more common. This is going to be the biggest investment challenge for Pension Funds and large Asset Allocation investors. What do you do when government bonds are giving you zero or less than . Haidi if you are a longerterm investor, is it not just a biased market when you take a look at some of the beatendown sectors and names that will eventually emerge out of this crisis as we get to some kind of normal and perhaps even do better because they have been forced to cut costs and get leaner during this time . Isthat is the key theme which companies two years from now, on the others of covid, still look strong. This is a market that has spent a lot of time thinking about what we look like on the other cited covid. On the other set of covid, when these economies recover, when the virus hopefully disappears, we are still going to have extraordinarily low Interest Rates. On the others of covid, so many of these companies have higher pricing power, less competition, and extraordinarily low Interest Rates. When you talk to portfolio managers, they will tell you i can very comfortably have an extremely very attractive discount rate even at these high levels of the game has changed not just because Interest Rates fell to zero but because the messages are going to be zero for an extended period of time. Where do we go towards under owned Asset Classes that can perform well in that economy . They include nonus alternatives. To get morent specific on the em Debt Opportunities you are seeing. We have divergent recovery across the em space investors seeing the riskreward given these low rate conditions. Where specifically are you positioning . As an economist, a strategist, when i speak to the portfolio managers, the big theme for us has been Pay Attention to the manufacturingbased economies. This recovery is very unique. When we see larger sessions or depressions its the supply and demand side and you end up in this inflationary demand cycle but now, what we are seeing is the supply side looks like it has been cut more aggressively so we are expecting more inflationary pressures to come back and we are expecting manufacturing and production to come back online more quickly. We see this in the pmi data that is showing a strong recovery even if Consumer Confidence remains low. Look towards those economies most capable of recovering quickly. They are manufacturing based. There are more of them in asia. That makes sense to me from a macro perspective. Sophie overnight, we saw a reversal in popular trades. Trades coming back into the fray. Persist . Steepening i am a believer. I believe we have a paradigm shift when it comes to u. S. Inflation in particular and not because of Monetary Policy but because we are seeing extraordinary levels of fiscal stimulus, stimulus we have seen almost never before and in some cases, never before in many of these large economies. Be fundamentally inflationary. We are seeing globalization trends push up prices and inflation has come back online much bigger quicker in this recession than in past ones. We have seen breakevens with quite a bit. You will always have a backup in that trade. Things dont go up in a straight line. Economists dont have a good track record at predicting inflation and my sense is we are entering a new environment where a lot of the determinants of inflation will shift leadership. That is something we need to watch closely. Real rates can go further down. Breakevens can move higher in my view. Frances, with market stability seen after the u. S. Election, how is that feeding into your strategy . I cannot predict an election outcome. We tried in past events internationally. Our view is to focus on the trades that make sense no matter what, no matter who wins the election and thats large infrastructure spend, ongoing deglobalization, ongoing regulation of the tech sectors. Theres a lot of trades that make sense no matter what. We dont try to make big calls on election outcomes. Focus on what is true regardless. Theres a lot of great themes including inflationary pressures that come out. Even if you dont ignore the outcome from this election. Sophie thank you. Annces donald from Investment Management company. First word headlines. Sources in washington say the Trump Administration is debating the scope and date of threatened action against chinese social media app tiktok and wechat and will make an announcement later this month. The Commerce Department is drafting clarifications on specific transactions that will be banned between the two companies and u. S. Businesses. The decision may come around september 20. Global Coronavirus Infections are approaching 26 million with President Trumps top disease expert warning the coming long weekend may lead to a surge in cases in the u. S. At the same time, the centers for Disease Control have told state officials to prepare for a vaccine to be ready by the start of november. Cases are rising in france at the fastest pace yet while inspections in spain are at a four month high. Singapores Prime Ministers has his country cannot sustain emergency virus support forever. He was giving his first parliamentary address since julys general election. He says singapore must make the best use of its Financial Resources in a targeted manner to stem the economic fallout from the coronavirus pandemic. Singapore spent 100 billion popping up its economy. Germany says tests carried out in a berlin hospital show unequivocally that russian Opposition Leader was poisoned by a military grade nerve agent. Merkel said he is the victim of a crime intended to silence him and that early in will be taking berlin will be taking answers from moscow. They are demanding a response from the kremlin. Haidi still ahead on daybreak chairman. Speak with a we will ask him how the pandemic is affecting business and how or if they are changing strategy. Race tost from japans replace shinzo abe. As ahide suga is emerging leading candidate. That could mean the stimulus will keep on rolling on. This is bloomberg. Sophie japans next likely Prime Minister is vowing to continue with shinzo abes signature alter easing policy, a abenomics. Kickstart the economy . We are joined by stephen engle. Abes righthand man looking like a shooin for Prime Minister. Much a foregone conclusion that Yoshihide Suga will be the next Prime Minister of japan barring some unforeseen calamity because of the way they set up this internal vote. It gives a lot of weight to the fivepowerful factions and of the seven factions have come out publicly stating they are supporting suga. He has 10 lawmaker votes more than needed to become the next Prime Minister so if you are abetting person, the odds are high he will become the Prime Minister with the internal vote coming up in less than two weeks, to be confirmed a couple days later, likely by parliament. He has a lot on his plate. Aboutke at length continuing the policies of shinzo abe he was a righthand man of shinzo abe, mr. Fixit, the back room enforcer for abes policy. Policiesthose backwards and forwards. He will continue with abenomics and the alter easing policies with some changes as needed. He has been a bit more populist in that those tweaks to policy could come to protect jobs and the economy of course as the number one priority, he says, will be combating the coronavirus. Economic andn the financial front and fiscal front will be and monetary front when will he pull the trigger to switch from, you know, the lifesaver mode for business and households into again trying to stimulate growth . The economy has been decimated by the lockdowns and the coronavirus outbreaks, so again, it will be a delicate tight rope for the new Prime Minister. Of analysts are pointing out the risk lies in a potential destabilization when it comes to foreign relationships. What do we know about how suga might approach relations with china . He says it takes time to build relationships with washington. With the United States is the cornerstone of japanese diplomacy. Back to fastow puts him at a bit of odds with china right now. He is going to probably remain with a steady, proactive relationship with china. However, xi jinping was supposed to visit in april. All travel has been put on the shelf for now. It will be interesting to see whether china affords them that with a trip sometime in the next year, before the ldp has a vote next autumn and the general election by the end of next year or whether they wait that out. Hes not been as hawkish as others in the abe, current abe administration. He has not visited the shrine which indicates he is less likely to push for chains to changes to the pacifist constitution. Japan has had issues with china, with south korea, with border disputes with russia. Theres a lot on the geopolitical front including the possibility of a change in the white house to navigate for mr. Suga if he becomes Prime Minister. Our chiefphen engle, north asia correspondent with the latest on japan had we will get more perspective just ahead with a university professor. Callss shinzo abe is for accountability. Unique opportunities in the covid induced recess. From our exclusive interview, next. This is bloomberg. Bloomberg. Haidi as the economy slowly emerges from the pandemic, Apollo Global management says there will be a reset in consumer behavior. The copresident spoke exclusively to bloomberg about the opportunities and the challenges of investing in a low rate environment. We are in a low rate world. Last weeks actions will continue that for a while. We have parts of our business that are trying to get double digit plus. A mid single digit yield on longduration assets, that works very well for us. From our perspective, its getting more challenging. You have to navigate a pretty tricky environment right now, but again, you are trying to make 7 . You can find places to do that that are appropriate. Manus we caught up with pimco. They are prepared to have secured bonds. Some would say that is a big risk play. It is not the kind of risk you are prepared to take at the moment . Travel, energy, hotels. Could you have that level of risk . When you run a 400 billion plus portfolio, you have your fingers in a lot of pots. It has been well noted that we have been participating in some of the really unique opportunities, whether in the Airline Space or in the travel space. In and around the Airline Space. We have been active in a couple of the restructurings around latin america. While we are a somatic investor, its a bit too early to call the end or the bottom of this pandemic. I think you need to really think about structure and where you are in a capital structure so we are not afraid of investing in Challenging Industries but it really gets down to structure, security, and making sure the skills we have honed over 30 plus years, that we are bringing it to the table. We have been able to do that. Manus i look at spreads. Pretty much back to where we were precovid. Continueink that they to compress given what you heard from jackson hole last week . Going toink the fed is continue to be a very active player on highquality assets and theres going to be dispersions in the market between lowquality assets and highquality assets. What is unique about this transaction is duration. Its hard to get longduration and we were able to do that in this transaction. In terms is positive of spreads, notwithstanding any kind of dislocation from a global event. Us, we reinvested a lot in march and april when they widened out. We continue to have a focus in our business. Manus what is the biggest risk, that a vaccine comes to early and the big opportunities pass you by . Jim you have to be patient. This pandemic came out of the blue, and the impact on consumer behavior, consumer activity, especially in the u. S. , where the consumers 70 plus percent of the market. Unknowns in the next 12 to 24 months. I think we are fortunate that we have a broad platform between private equity, credit, and assets. We have our fingers in a lot of opportunities. At these kind of levels, one needs to be measured and thoughtful about how they are putting money to work. We think about asia broadly speaking and japan in particular. There are opportunities consistent with how we invest in that country per se. We say the same thing about opportunities in india and australia. Our spotsing to pick in that region that fit how we invest in our value and structuring. Em resistterms of diem what the fed did last week was an ignition torch to buy em and we cannot treat the whole church the same. Jim but concerns about em in march and april have certainly subsided and theres been a nice compression between em. How much one has to tighten is an open question. If you look at our portfolios, we are probably a majority of dm around the globe and we have overlay which we are excited by. Are right spreads now, a more balanced approach is probably the way and that is key how we invest from a value breet. Manus what is the biggest opportunity at the moment . Jim early days on commercial real estate, early days on aviation, broadly speaking. Two big ecosystems that you really need to be involved from front to back, and aviation is from manufacturing to airlines and everything in between. Certainly in commercial real estate. A slower moving train but it will have an impact. A lot of capital has been raised, a lot of money has been put in the ground, and it is the consumer as the consumer, we adjust to this new world. There will no doubt be opportunities in commercial real estate that are probably, again, a bit slower moving just because of the nature of the assets. Jim zelter speaking exclusively to manus cranny. Lets get a quick check of the latest business flash headlines. United airlines will cut more than 16,000 jobs next month as it shrinks operations amid the coronavirus pandemic. The furloughs announced wednesday will begin taking effect at the start of october when a six month restriction on job cuts impose as part of the federal aid package expires. Around 7. 5 thousand that have leftunited staff have united. Virgin atlantics 1. 6 billion rescue deal is set for completion this week after a london judge gave the goahead for the airlines restructuring plan. The airline said it would run out of cash by the end of september. Virgin atlantic is owned by virgin group and 49 owned by delta and has more than 3000 jobs. A snapshot of airbus plane usage shows a fragile recovery propped up by china and continued challenges for widebody aircraft. Almost two thirds have flown at least one in the past five days. 3600 have not flown at all, a stark reminder of the oversupply airbus and boeing are struggling with. Not, the fed says the u. S. Economy is showing signs of progress but it is still a long road ahead towards recovery. We will see what the survey and jobs report are saying. Lets get a check on do not miss a big interview later this morni