Shery you are watching daybreak asia live from new york, sydney, and hong kong. Annabelle we are counting down to asias major market opens. Haidi risk off mood in asia. Treasury yields higher along with the dollar. U. S. Crude prices hitting a fresh one year high with shrinking stockpiles in the larger storage hub spilling demand for physical barrels. In battled Country Gardens takes a step towards restructuring its debt after narrowly avoiding default. Shery how u. S. Futures are trading early in the asian session, marginally higher at the moment after stocks finished mixed in the new york session. We have the s p 500 fluctuating throughout the session, just to finish where it started the day. At least, it ended up erasing some losses we saw earlier in the session after President Biden counted Artificial Intelligence. We have the vix declining a little, still at the highest levels since the end of may. We have the nasdaq 100 outperforming today. We saw treasuries slumping again today. It yields rising to multiyear highs. The 10 year yield past the 460 level at the highest in about 16 years. We have the dollar continuing to gain ground. At the highest level this year. That is pressure in oil. We saw u. S. Stockpiles drop to the lowest level since 2022. Wti now jumping to the levels we have not seen in about one year or so. I did afterwards session it was about mike rounds ms. Microns miss dampening tech optimism. We are talking about their forecast being painful. Sales improved but we are talking about what we are expecting for the fiscal forced First Quarter a loss of as much as 1. 14 per share. We have seen the likes of samsung, sk hynix, really seeing a brutal 2023. That lackluster demand for personal computers and smartphones is hitting all these companies. Perhaps it is worth putting micron at least into a little perspective. You can see their yeartodate gains still above 30 and sk hynix gaining more than 50 . Of course there is a lot of ai optimism as well. Haidi you have to wonder how much of that pullback is really taking profits off the table given the huge runup. When we spoke to Wedbush Securities earlier it really was this idea of micron management being both quite conservative in its guidance and maybe there is managing expectations there. But certainly, china continues to be a concern. Part of what they said is really that the rules when it comes to the borrowing of micron chips and the escalation of the u. S. China Technology class continues to impact their revenue. We saw that move back in, what was it . May a couple years ago really talking about the fact this will be a market that continues to prove to be a source of volatility and an issue for their bottom line. We will continue to watch that and of course some of that passthrough will be seen perhaps in taiwan markets. In japan. With south korea, arguably its a little bit of a sigh of relief for broader markets given there are already quite a lot of factors driving sentiment lower. Annabelle right area of course, asian chick stocks we watch those in japan and taiwan. They could dip. Weaker sentiment across the board here. Yes there are other factors at play in the session that we will get in a moment. More macroeconomic issues. What bond markets are signaling and the farmer dollar. In terms of what could be the counterweight to what is going on it is interesting to see china futures are one of the few ones pointing higher today given yesterday we saw stronger industrial profits coming through. We are seeing as well analysts have a graver earnings forecast. That tells us perhaps we are finally starting to see a bottom for chinese stocks. First, we have said that a couple times in the past. Lets change. I mentioned bonds. The aussie 10 year yield at a level we have not seen since 2011. Similar in the kiwi 10 year. Likewise, tracking around a 2011 high. Big moves when you see the farmer dollar. It really does play quite heavily into the japanese yen story. We are still seeing is very close to the 150 level. Likewise, the outlook the chinese currency reflects the macroeconomic issues in the country specifically around the property sector and the woes there. At the same time, very much really it weighs also on what is happening with the fed and the rate differential at play as well. Haidi our next guest is, given all of these risks, stay neutral on equities but more favorable on fixed income in light of what we are seeing. Carrie craig is the Global Market strategist at jp morgan asset management. Lets start with moves across treasuries ended the view potentially the dollar would come sooner if there is another u. S. Government shutdown. Is it too early to call the peak when it comes to yield . Kerry the move upwards in yield has been surprising. We did not express expected to reach this level. We are very close to the point in our mind where maybe we get another rate hike come the end of the year. But that is a really finely balanced position given we expect progress outlook to slow fourthquarter and disinflationary pressures are still there when you look at the outlook for core inflation. So as those peak end of the rate hiking cycle comes through we think it will be reflected in a peak in yields. With is the yields today that is a Good Opportunity thinking about the return potential from that as we see inflation comes down. So far investors are being rewarded for that in the fixed income market. Haidi or else do you see opportunities . With micron numbers today and reaction across partner markets you think its another step back for the ai and big tech related trade given we already think there will perhaps be greater pressures coming from a further leg of the tightening cycle . Kerry there is a delayed impact from the sensitivity from the u. S. Economy for the rates. The market is different to the economy in thinking about a more goods oriented market, a more Services Oriented economy. For less i think the u. S. Market when it comes to growth stocks, they will be supported as yields come down and you look to duration in the equity market. We also believe that the ai theme is one that will be quite circular when it comes to the outlook. A lot of people make this comparison to what we have seen today to back in the tech bubble of 2000. I mean, these companies are actually profitable now. Valuations have gone up a long way. But as a come down i think there will be a lot of interest from investors is not perhaps have missed out on the rally so far. Again, this is one of the reasons we have been more neutral on the equity market rather than thinking about an underweight position. We do see the risks of recession being about what they would be in any normal year. But, they have faded greatly. I think investors need to be mindful of the upside potential that could come through even if they do have an eye on some risks that are building in the background. Shery lets talk about those risks. It seems the u. S. Government shutdown is just around the corner. When i ask market analysts about this, most people seem to dismiss it because it usually does not lead to longterm effects for stocks or bonds. At the same time, we are seeing so many other challenges. Oil prices are rallying. Student Debt Repayments are coming due. Not to mention of course labor strikes as well. Is this time different . Should we put recession back on the table . Kerry i think the market narrative has moved away from thinking about the Recession Risk towards a soft landing at what is really dropping the markets is the cost that comes with the soft landing is more growth slower Inflation Higher rates. When it comes to the outlook for the growth, those are banana skins you have the verily you have a very clearly outlined there and attribute the cumulative effect is worrying the market to a degree. When it comes to Government Shutdown historically it is short in duration. A few days of the week. They dont Significant Impact the economy, even the last one in 2019 it was over a month but the economy rebounded when the government restarted again. It also depends on which parts of the government actually do end up going into shutdown. If its the whole thing or only a select number of sectors actually impacted. So, we would not be dismissive of the shutdown we just think that Material Impact given what else is out there in terms of risk for markets. I think the bigger issue when we u. S. And around the situation billions around the level of debt, the deficit, and the sustainability of higher rates. I think that is what the markets are thinking about longterm when they are honda plating were bond yields in the u. S. May be. Contemplating were bond yields in the u. S. May be. Shery heidi just alluded to a potential peak given the Government Shutdown. Kerry i think the dollar is really driven by the fact you have more of u. S. Exceptionalism coming through. Obviously looking at the rate outlook in the u. S. We are thinking about the strength in the u. S. Economy relative to what we are seeing in europe. So movement i think in the u. S. Dollar will be more a factor of seeing perhaps the u. S. Economy started come back when the euro is such a big white. A similar situation with the british pound. Again as we started to think about the potential for rate cuts through 2024 that will really be what determines how far the u. S. Dollar false. For now, it seems the u. S. Dollar is supported by the rate and Growth Outlook in the u. S. Haidi if you wanted a d correlations i do you look to china . Be it the sovereign bonds or equity markets for valuations looking quite compelling at this stage . Kerry is hard to look past china on a valuation basis even theo even though the economy does not look strong. We think eventually there will be positive growth from incremental measures that have come through but there is not much there that will spark the Market Reaction or even spark the economy shortterm. When we look for its other markets, we think japan is a strong structural story that has been playing out throughout the course of this year. You could look to the u. K. And the ftse 100. Thats been one of the bestperforming markets over the last month benefiting from the improvement in the Energy Prices and the fact that the currency has been weak. Or more broadly, look outside china in terms of e. M. Whether india or some parts of southeast asia. Globally when we look at equity exposure it is still the case of thinking about the opportunity. To have that more diversified outlook rather than thinking about one particular market. For em china is obviously a big white andy dick sentiment effect. I think more and more investors are looking for opportunities inside and outside china when it comes to the investment world. Shery always great have you. Coming up, we discussed the cascading economic effect of a likely u. S. Government shutdown. We discuss the impact with robertson sealants chief economist later in the hour. Country gardens said to be in talks with advisors to put together an offshore debt Restructuring Plan. The details ahead. This is bloomberg. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates, exemption certificates or filing returns. AvalarAhhh Ahhh Ahhh ahhh is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Shery chinese Property DeveloperCountry Gardens said to be in talks with potential clients to put together debt restructuring. Corresponded Stephen Engle joins us from hong kong. It seems things are moving along. What we know . Stephen things are moving along of course and it is widely expected. Look what happened was evergrande. We will get to that in a little bit. Of course, their debt Restructuring Plan has been thrown into a bit of disarray with chairmans detention, obviously. Also, the revelation that perhaps they need to be think there Restructuring Plan. Now, two Different Companies but similar issues of liquidity obviously. China evergrande, the biggest it is the worlds biggest indebted Property Developer, Country Garden, it was once the biggest developer in china it is the new poster child for the quiddity issues in the sector. Country garden according to sources has engaged in initial talks for Financial Advice as well as preliminary plans for debt restructuring with the likes of China International capital corp. , chinas biggest investment bank, as well as debt restructuring specialist houlihan lowkey. All three parties, cicc, houlihan lowkey, and Country Gardens, have declined to comment with when contacted by bloomberg news. Discussions are set according to sources to be at a preliminary stage and there is no guarantee come as i just prefaced, no guarantee a debt plan would actually emerge from these initial talks. Country garden has about 11 billion of offshore bonds outstanding. It recently did when investor approval to extend payments on nearly 15 billion you want, to billion u. S. Dollars of on short notice but had two onshore bond payments due yesterday. On 40 million of the bond as well as a 40 million Coupon Payment due yesterday on the u. S. Dollar bond as well as another 1. 6 6 million u. S. Dollars in a ring get bond that has interestingly only a five day grace period. Technically Country Garden has not defaulted yet. There is another bond in there. Its own payment on the u. S. Dollar bond in the current 30 day graceperiod. It has not officially defaulted. It was only a five day grace period on this Coupon Payment of 1. 66 million it runs the risk there could be imminent default as well as on the dollar Coupon Payment that reportedly or might have been missed yesterday, we have not gotten confirmation yet whether they missed those payments. Again we are coming up to the weeklong holiday next week, usually a huge time when people are not working. They go a look at flats to possibly buy. Its traditionally a time when a spike in sales is seen. But, it is really a gloomy scenario right now with investors confidence in the sector really low. Nobody wants to catch a falling knife. Contracted sales for Country Garden alone plunging 72 in august. Yearoveryear after it warned of major uncertainties about its ability to repay its debt. Yeah. Its an ongoing story obviously. Haidi given what we learned this week about evergrande pickup in its Restructuring Plan, theres really not much certainty Country Garden can pull this off, right . Stephen absolutely. That is why we have to caution and say these talks for Country Garden are in the preliminary stage. Albeit, that is expected given their Debt Repayment woes. The potential Debt Repayment woes. They have not defaulted, as i said. But, it will be a complex thing to restructure right now. With the outstanding liabilities of about 11 billion no doubt. Keep in mind, China Evergrande with the detention of its chairman, and also, these latest surveys we have gotten from various think tanks indicating that people really do not want to go into the property sector right now. They are holding off on to the sidelines. So, Investor Sentiment is extremely low right now. Again, as i mentioned, this weeklong holiday coming up this week, thats usually a good litmus test on investor demand for the actual physical property. But, right now, with bonds, you know, chinese developer junk bonds trading at 610 cents on the dollar right now there is so little appetite as well from the Investment Community to go into the sector right now. Garfield bloombergs chief north asia correspondent Stephen Engles with the latest. Lets look at some top corporate stories. Lululemon agreed to a fiveyear partnership with peloton involving tapping its online workouts and teaming up on apparel. Lululemon will make branded closing peloton will sell on its website and retail stores. Peloton fitness content will be offered to users of the lululemon studio mirror. Elon musks spacex won its first contract from the u. S. Space force to provide customized satellite communication for the military. The socalled star shield service will be provided over the existing spacex constellation of starting satellites. The contract adds to the growing spacex defense portfolio. The pga tour is considering highprofile u. S. Investors to help finance its deal with the saudi back to liv golf to ease political opposition. The pga has had unsolicited interest from investors and is evaluating opportunities. U. S. Lawmakers have been vocal about opposition to liv golf despite pga assurances that the saudis would only be minority investors in the combined entity. And, get a roundup of the stories you need to know to get your day going today on todays edition of daybreak. Terminal subscribers can buy that that dayb and its available on the mobile in the bloomberg anywhere app. You can customize settings to get news on just the industries and assets you care about. This is bloomberg. Shery the United Auto Workers union is putting more pressure on the big three u. S. Carmakers