limited time get 150 dollars off and free shipping too. sale prices are available right now. go to buyleesa.com today. you need this bed. some a clock a.m. here in hong kong. i am yvonne man. asia." to "daybreak and just recession. the rupiah at an all-time low and pretty close to it. msci closing its lowest in a year. the rand led declines. fears theell on central bank will disappoint. ramy: from bloomberg's global headquarters, i am inocencio in new york. said canada will stick to its trade demands. president trump says a deal is

happening with or without ottawa. ford is the standout as u.s. auto sales disappoint. pickups and suv's save the day as buyers fall out of love with the sedan again. good morning. right now, of course, the fact that we are back into session in the united states, we saw the markets fall a little bit as we are looking ahead to canada and talks with china and the tariffs with china. the s&p 500 down about .2%. starting the new month of september on the back foot, but there was one bright spot and that was amazon briefly becoming the u.s.'s second $1 trillion market cap company. we will get more from su keenan

on that. let's flip up the boards. aside from trade, it's also about em, and em contagion is the word spreading to more countries. we can see the south african rand, 15.3 to the dollar. hitting the surprise recession, the country noticing it can downgrade it to junk status. as for the argentinian peso, that's a record low. falling.sh lira we were talking about hopes that the central bank could hike. now we are talking about fears that the central bank might not. yvonne: as you mentioned, the u.s. finally catching this em cold. a wild start.ng equities pretty much flat on the nzx 50, but we are seeing equity futures heading lower. asx futures down .3% right now. flip up the boards and take a

look at currencies, 20 year lows on the indonesian rupiah. 111,r-yen holding around . 55 u.s. cents for the kiwi at the moment. the bond market, no flight to safety and treasuries. we did see selloff across the board. the u.s. 10-year note ticking up overnight. jgb yield at 12 basis points after the boj insted its bond buying september. coldwater out there about faster tapering after it cut the frequency of it purchases. get a fullime, let's rundown on the wall street close because the dollar advanced again. was on strong factory data and looking at companies, specifically facebook and nike, helped push major stock indexes

lower. su keenan has the action here. theeight out of 11 of sectors were lower. we had investors come back from a long three-day holiday weekend. backs down, trade war is on the forefront, and the fed said to hike rates in september. late september. the dollar is stronger. bonds in focus. a lot of auctions coming up. gold glover, and crude briefly above the $71 mark. let's go into the big movers because they were big moves indeed. advanced micro devices getting a big upgrade by one analyst who points out the stock is up more than 170% year-to-date. one of the pop stocks continuing to show they have room to run. this particular stock being -- getting a lot of attention from short-sellers who say the gains just cannot continue. facebook getting a downgrade. we welcome come back to that. seagate also under pressure.

it is a tech stock. that's going to the bloomberg because the big story of course, amazon, hitting the $20 mark. it briefly fell below that mark after hitting it. let's go into the bloomberg said,e facebook, as we getting a downgrade. notice you can find these charts in our library at gtv. stalling out in terms of facebook activity. the analysts that downgraded the stock noticed the revenue slowdown and the height regulatory scrutiny -- a toxic brew for the stocks going forward. wednesday, facebook was one of several media stocks -- social media stocks -- facing congress on some tough testimony on social media in general. thank you, su keenan,

joining us from new york. first word news with jessica summers. police in minnesota say jd.com's billionaire founder is under investigation for rape.ted he was arrested on friday in minneapolis but released around 16 hours later with no restrictions on travel. he is now back at work in china. police say the case is being investigated as a rape and they are confident they could reach him if necessary but may decide not to charge them at all. of u.s. factories unexpectedly jumped to the highest since may 2004 as orders , production, and employment ticked up last month. the index rose to 61.3, far in a of the 57.6 estimate bloomberg survey. the measure of new orders smashed forecasts. the rising unemployment gauges suggests friday's payroll numbers will be strong. aftern japan is reeling the strongest cyclone to hit the country and 25 years.

the typhoon killed at least one person, caused widespread power outages, and flooded the osaka area's main airport. to 160 kilometers per hour. up to one million people were forced to seek shelter. train services were disrupted. hold talksouth korea later wednesday. president moon' delegation iss hoping to revive talks on ridding the peninsula of nuclear weapons. seoul's five mender team -- member team -- towardse denuclearization but has not defined what that actually means. global news 24 hours a day on air and on tictoc. i am jessica summers. this is bloomberg. ramy: thank you very much. justin trudeau says his government will hold firm on its demand that any new nafta deal

include a dispute resolution mechanism. earlier, president trump tweeted that a deal is happening with or without canada, and then warning congress to not interfere. bloomberg, senator joe sobczyk joins us from washington. joe, what is the latest? joe: the president will be coming under heavy pressure on this deal with canada. we are not talking this agriculture but also manufacturing. the president has been counting on having some support from labor, so that he can get this deal eventually through congress with support from some democrats. there were not aspects of the deal with mexico that labor groups deal favorably, but -- he said he could not imagine any sort of trade deal that does not include canada. much all of the major

constituencies in american trade politics are lining up against the president on this holding out against any sort of deal with canada. these: you are seeing divides right now between not just the trump administration but also congress. is that going to be welcome news for china when it comes to their negotiations with the u.s.? tim: china will be watching these very carefully. the president's is increasing both in the u.s. and elsewhere with trading partners, canada, the european union. him inuld presumably put a more difficult position as he tries to negotiate a deal with china. they are also probably watching the canadian prime minister, justin trudeau, because he is holding tough in these talks, so how that plays out will give china something of a guideline for how they will proceed also. they are continuing to hold the hartline as well

against trump and there will be no really fresh negotiations with china to resolve those differences. sobczyk,hank you, joe joining us from d.c. we have been talking about these new tariffs. 200 billion dollars of chinese exports to the u.s.. there is a yawning traded imbalance.trade options are limited. let's bring in stephen engle. factions being brought out from these nafta talks. how should china proceed from here on forward? stephen: they cannot really retaliate in kind on the trade front. the u.s. of course importing the bulk of that $505 billion, exporting just -- bloomberg intelligence crunched members. it leaves china $45 billion short of offsets if the u.s.

goes ahead friday, is a time, to impose new tariffs on the full $200 billion. originally, china, if you look at the way it is structured, had but quicklyrude oil reversed course because of the tight physical oil market with the lack of supply and fewer barrels on the international market from iran and venezuela. sinopec has recently resumed u.s. crude purchases for october, so you can probably scratch crude oil, u.s. crude oil, off that tariff list. there's probably fewer options for china on the trade front to actually imposed tariffs on u.s. goods and products and services. of the numbersms game, we know that we have been discussing this ad nauseam, but in terms of other things, what can china do? we have already talked about

regulatory. we have already talked about making it difficult to operate in the country. stephen: that will never be an official stance, by the way. [laughter] stephen: that plays right into what the u.s. and others have been saying, that china is artificially putting up barriers to entry, but that actually china coulday retaliate, but they will never say that officially in its tariff risk. we have also talked ad nauseam about the weaponization of the indicationsr, all are they are not doing that. they have stabilized the yuan, and they want to protect their ethics reserves at 3.1 2 3.12ion -- fx reserves at trillion. rare earth is used in smartphones, cars, u.s. missiles and defense products, and they could limit treasury purchases and sell them, but that would be counterproductive as well. is alikely, and this

long-term strategy, they will continue to incentivize overseas chinese and overseas businesses really drivee and forward the made in china 2025 initiatives for high technology and also hours the belt and road initiative. not sonteresting, so muc much a brain drain but a brain gain headed back home. always.engle, thanks let's look ahead to what we have later on as our because we will lead ise trade with the autonomous from oxford economics whose as tariffs are likely to hit u.s. growth next year. yvonne: but up next, the deputy cio tells us why she likes valuations in em right now. this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. ramy: i am ramy inocencio in new

york. president trump is saying a new north american trade deal will happen with or without canada. talks between the two countries do resume later on wednesday in the u.s. as the white house also prepares to roll out new tariffs on products from china. a lot going on. joining us from minneapolis is the deputy cio, carol. good to see you. twin trade events. one with canada, one with china. investors are probably wondering how do i figure this out? where do i put my money? i think investors actually are sidelining a lot of the trade issues and focusing on fundamentals, which have , and so weite strong have seen it, because with news announcements as they come out on the tariffs, the markets andcally shrug them off when you watch the way it performs with any hint of good news on tariffs, it levitates higher, if you will, the

domestic markets are attracting a lot of capital from around the low. ramy: it is more of a short-term pop or drop. the in a verbal moves are continuing to hit records. companies are revising their estimates by year's end. what is your base case scenario? is good to canada first -- let us go to canada first. is a key partner and you have a lot of different people from business leaders to labor to congress, lining up against the president on wanting canada to be part of the s with the north american free trade agreement. that is the title it ends up with. ds willly, saner hea prove it -- prevail. they will be back at it tomorrow. china, is that

something that coming in no, when it comes to managing headlines, how should we position ourselves? carol: i think the issue with china or the issues with china are a bit thornier in that the strategy seems to be isolate country by country. we have deals that don't need to be struck with that -- the e.u. and other developed markets. china, i'm assuming we will try line. a tough the rhetoric has been used. as you were talking about earlier, it does have a lot of other retaliatory measures that do not relate to the putar-for-dollar -- we will $200 billion on and they will put $200 billion on. yvonne: what we saw in the wall street session is it seems like the u.s. is finally getting dragged down by the woes that we see in emerging markets right now.

do you think we have reached an inflection point, getting a resolution in this divergence? we could see further volatility for u.s. stocks? it would belly, almost welcome to see some asatility in stocks because so many commentators mentioned, 2017 was a period of historic low volatility. we saw some volatility in february. there is a lot of complacency that has crept back into the markets. today, you know, you had light volume in august then drove the markets up, so today really is and this week will be about people trying to reassess where things are at. congress is back in town. this is the end of the fiscal year. there is a lot of things going on with trade, so i think there is a wait and see attitude. i do not necessarily think this is the start of a major pullback. ramy: i want to hop and the bloomberg terminal because the

trump trade is something i want to ask you about here. hop into the library. you can see the trump trade energy banks and health care sectors, we note this has been happening ever since. this divergence we are seeing here with the s&p not doing as well here won't last another year. what do you think about this? do you think this can continue? we never didup, call it a trump trade because the markets have started to turn, and many of the industry's started to turn -- industries started to turn. the growth rate accelerated. we think there is enough momentum in the system to continue the economic growth on three within -- at least for another year or more. , it's toughse because valuations are being squeezed by lack of supply. there are fewer shares out ending, but overall, the

economic fundamentals remain solid, as you saw in the report today, for example. ramy: jumping to the 14 year high as orders were picking up. markets are getting more expensive and rates of growth slowing. tell me what investors need to know here. carol: the one thing to keep in mind is a lot of the growth rate we have seen in corporate earnings this year relates to the reduction in taxes. companies are seeing, as a report the numbers and try to pass price increases through, that they have more pricing in 1.5han they have had decades, so that's on the positive side. risingl start anyone those big number -- annualizing those numbers. the growth itself on an absolute basis does not necessarily flatten. the rate of growth, because of

base you're dealing with from 2018 numbers, will necessarily slow. growth in long as the the u.s. and china holds up quite a bit, i guess that can actually contain things when it comes to em volatility, so what is the next move? are you looking elsewhere? carol: we actually have money around the globe. we are global money managers in all of our asset classes, looking to rebalance. from valuation standpoint, the issue is the valuations have been pressured in the u.s. somewhat. agree just like they have been in prior market tops, but they are more expensive than they were and more expensive than they are certainly than in many of the emerging and developed markets. our next move will be to go continue to rebalance into those developed and emerging markets

and perhaps, once you see stabilization of capital flows, perhaps to go to more of an overweight position in some of those. right now -- ramy: sorry about that -- sorry about that. it's interesting you talk about emerging markets. we are talking about south africa being the latest year domino tofall -- e.m. fall. often to fall. hop into the terminal. we can see the contagion risk, at least what we are terming it here, is growing to its most since the financial crisis. do you think we are at a point where it is not idiosyncratic in that it is the baby in the bathwater? some you still take countries, currencies, markets out? carol: i think we have to watch really carefully. much like we were with domestic stocks back in the fall of 2008, when we bought them the first time, and into the spring

of 2009, when we finally bought them for good. you know you wanted to be there, you just did not know how long you want to do be there in the long run. we have got a lot of different analytical tools and a lot of lots of analytical power looking around the globe, trying to figure out when is the right time to pull that trigger? at a minimum, rebalancing, because even if you had a 60/40 in a domestic/international split, you are out of balance given the market movements. ramy: carol schleifer, always great to have you. coming to us from minneapolis, minnesota. you get a roundup of the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers can go to dayb on their terminals. this is available on mobile in the bloomberg anywhere app. you can customize your settings so you only get news on the industries and assets that you

care about. this is bloomberg. ♪

yvonne: just some lines coming through from the imf, christine lagarde talking about argentina. we did hear about officials meeting with the imf to talk more about what to do with this currency crisis, of course, and the economic outlook has the tier your related. christine lagarde saying the objective is to reach the rapid conclusion. looks like those talks are still going underway here, but they have made some progress meeting with argentina. ramy: right, and this could give -- "could" being the operative us an idea what's happening with the peso. 38.95 right now against the dollar. let's see if that actually has a

reaction once that starts trading again. coming up, china explores a merger between two of the top wireless carriers to speed up five g -- 5g. we will discuss all that at stake, next. this is bloomberg. ♪

a.m. wednesday on a sunny hong kong morning. asia potentially facing some morning as wes saw u.s. markets coming back from the labor day holiday. ramy: definitely being seen here coming back from that holiday. the s&p fell, not super bad. a lot of uncertainty and volatility looking ahead. nikesome corporate news, and facebook ring in the s&p 500 down. you're looking at a dusky evening here to stay over manhattan.

iranian essential in new york. -- yvonne: let's get to the first word news. merging markets continue to side with south africa entering a recession joining currencies from turkey and argentina tumbling to new lows. .he lira fell it hit its lowest level in two decades despite central-bank efforts to protect it. ministeran finance discussed assess -- it came as the argentinian central-bank more debate deeper recession. the pseo collapsed. they see the currency markedly worse than levels seen in july. oil climbs recently in new york

as a powerful weather system threatens platforms in the gulf of mexico. tropical storm gordon forced the evacuation of two operations, temporarily shutting down production. gordon has winds gusting 100 kilometers per hour. new orleans has declared a state of emergency, 13 years after being devastated by hurricane katrina. says he is open to extending his tenure for a second time to help them transition out of the eu. he is stepping down just three months after brexit. he is now said to be staying on until 2020. a spokesman for prime minister theresa may says there will be news shortly and the governor is doing a very good job. u.k. wouldy says the reject brexit if a second referendum were to be held. voters are more skeptical goal -- than ever.

they say remount or's now -- prime minister theresa may has already ruled out a second vote. supreme court nominee brett kavanaugh said the institution must never be viewed as partisan during an unruly senate hearing that has bitterly divided lawmakers and the public. republican john cornyn accused opponents of trying to impose mob rule. more than 20 -- more than two dozen protesters were rejected. >> my philosophy is straightforward. a judge must be independent and must interpret the law, not make the law. a judge must interpret statutes as written. a judge must interpret the constitution as written, informed by history and tradition and president. -- and precedent.

jessica:global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. . i'm jessica summers. . this is bloomberg. ramy: we have a few more lines dropping on the bloomberg terminal. let me give you an alert from the imf and argentina. the minister has declined to discuss any amounts they are currently talking about. but we do know the overall amount is at $50 billion. discussings we are monetary as well as fiscal policy. for sure, investors will be wondering what those amounts are and on what timeline they might be coming out. yvonne: the expectation is hopefully it can reach some kind of early release of that credit line approved earlier this year. he said discussions were continuing at a technical level at the common objective moment is for a rapid conclusion.

hopefully we get more clarity and will bring you those once they come in. of course where counting down to major market opens in the asia-pacific. take a look at what we saw overnight. safed not see a lot of havens like treasuries and gold. looks like those contagion fears will continue. it has taken hold despite fundamentals. u.s. stocks catching it. emerging slipping to a may 2017 low. amid the selloff that are signs asia -- pacechart demonstrates the is trading at a 2016 high relative to a similar measure. arelso highlights there signs of strength but less

demand for dollars relative to last year, which indicates no panic. that said, the risk of a contagion is not being discounted. indonesia at a 20 year low. that prompted the government to announce a defense. the energy minister and nothing $25 billion of power projects will be delayed to reign in their deficit. ramy: it seems as if investors are not taking any positivity out of that. uglylooks to be facing an open. what else could drive sentiment in the region? sophie: let's pull up the futures board. we may have a lower open ahead. slow.owth is expected to aussie dollar is trading near a two-year low. should the currency's weakness be sustained, the governor said

could improve the outlook for inflation and growth. so, some silver lining in the downtrend. the latest from the central bank is forecast to hold on overnight policy makes. -- rates. fiscal worries are increasing. we are waiting on inflation figures for the philippines and taiwan. there are concerns over rising inflation in the philippines. in the first half of the year that knocked down stocks about 15%. yvonne: we will watch that one in the philippines. sophie, thank you, on what to expect on the markets today. a potential big merger. they are said to be reviewing a proposal to merge the country's second and third -- third largest carriers. dave has more on the possible china unicom and china telecom merger. i understand the rationale behind this is to try to fight

this lingering trade or. -- war. how does a merger like this boost china's ambitions when it comes to 5g? dave: investing in 5g is incredibly expensive. companies these two you basically create economies of scale. this would create a carrier with about 600 million subscribers, that is massive. china mobile would still be a bit larger. having that scale simply increases the amount of investment money that is available to put into 5g. it allows them to roll it out more quickly. they can share bandwidth, and to develop this technology at the cutting edge. right now if you look at what happened with 4g when they ruled that out the two smaller chinese carriers were behind china mobile, and it took them years to carry up. it slow down the development of

4g in general. this is taking place at the same time that the chinese government has introduced state-owned company reform, where they are having mixed ownership of these countries -- companies. it is a very interesting development and could dramatically affect these company's abilities to roll out 5g quickly. yvonne: it seems like a merger like this has been under consideration for years now, and we have not had much progress until now. wide easing that is? does the trade -- why do you think that is? dave: analysts certainly have seen the logic for that. it is clear that by increasing economies of scale you enable the company to develop 5g. there is a lot of attention on the trade war of course. equipment maker huawei has been in the crosshairs, along with another equipment maker.

both of them are key to the development of5g -- of 5g. both were involved across the world to develop 5g technology. getting a bigger capital pool behind those companies does enable them to develop that technology and to take the lead in it. these companies sell their goods worldwide. so it is a trade issue from that perspective. if they have the best cutting-edge equipment, it will certainly give them an edge, certainly in emerging markets in the emerging world. ramy: if this merger actually did happen, how would it affect the entire communications landscape in china? a prettyl, it would be dramatic change. already the chinese government through mixed ownership reform has been able to offer packages

that include data through its investors. a third of the company is now owned by tencent, baidu and alibaba, the big three e-commerce companies in the country. so they are already offering tieups to deliver not only services, but only entertainment content and that sort of thing. but by giving them a scale on the order of 600 million subscribers, that would create a powerhouse for delivering not just mobile services, but also entertainment content, all kinds of streaming video and that sort of thing. so what would be a pretty dramatic change for the communications market in china. ramy: dave in tokyo, thank you very much. we head back to the macro world of u.s. tariffs and trade because another $200 billion worth of tariffs is said to be levied on china this week.

with concerns growing over potential collateral damage in both nations. kathleen hays is here with some early signs of how this is auto-parts producers across china and what it could mean for the u.s. it is clear from our bloomberg reporting this really affects china. the u.s. is probably the most important markets for them in the entire world. let's remember we had steel and aluminum tariffs, we had $34 billion worth of tariffs in july. very important if you are manufacturing a car. potentially $200 billion more including things like car lights. our bloomberg news story focused on electrical lighting company in eastern china. that is what they make. they are looking at the fact

that the steel and aluminum tariffs raise the prices for auto manufacturers in the u.s. already. now the prices of their goods are going to go up. they cannot really cut prices, it is hard for them to offset the tariffs. they are wondering if these go away, will it return? very important, this is looking at a car parts supplier. by far and away the biggest as mexico, but china is next in line. finduestion is if u.s. can others to replace with they might buy from the small companies in china. maybe they could, although china is known for high quality cheap parts. the supply chain is there for many companies like autozone. another supplier quoted in the story was talking about the fact that the u.s. is the biggest aftermarket for auto parts in the world. he said it is irreplaceable. one more number can think about,

five years, 2012 to 2017, china exports of auto-parts to the u.s. rose nearly $18 billion. the first part of this year nearly $10 billion. you can see this growing industry to face some big hurdles. they are certainly on the front line here. yvonne: in the u.s. so far we are seeing this hit some chinese data, but it is showing up on the u.s. side. kathleen: if you talk to fed officials they will say in our district a lot of people are concerned how it will affect them, but demand is still strong and businesses are doing well. the big purchasing managers looking at manufacturing in the u.s., hit a 14-year high. let's look at this chart. you can see this red line is 50. when you are above the signal growth. look at the growth being signaled now. people are talking about the fiscal stimulus, tax cuts,

confidence rising after donald trump made these steps. in fact, the overall number is 61.3. that is the 14 year high. look at this move from just over 60. to 65 in one month. . there.s a lot of oopmh manufacturing demand for now will overshadow trade concerns. i would add that if donald trump is looking at the economic landscape, and there are lots of constituency has to worry about, but he can point to numbers like this and say for now the economy is strong. it is a good time to press the chinese when they are for notable. -- are vulnerable. yvonne: kathleen, thank you. just ahead we are talking about e.m. contingency with currency meltdowns in argentina and turkey. should we be worried about trade tensions and dollar strength? this is bloomberg. ♪

yvonne: this is daybreak: asia. we have another alert for you coming out of washington dc with the imf as well. it is with the treasury minister saying that the imf board is now likely to vote in the next coming days on changes to any deal. of course we have been waiting for a timeline to figure out if will speed up disbursements from its $50 billion credit line that will be potentially helping argentina get out of its mess here. it looks like this is a positive step for the country. we will also look to see how markets as well as the argentinian peso, react especially with the peso seeing record weakness. emerging markets from turkey to argentina and south africa and

indonesia right now are asking -- making investors ask whether contagion is now too big to ignore. let's bring in the lead asia economist. because we just saw some lines come out out of argentina, what are your thoughts about the imf or likely to vote in days on a possible deal here? the argentinian peso has obviously come under a lot of pressure. we think the imf will vote to continue with this deal. as you mentioned, there has been contagion. under the latest come pressure. they haven't quite concerning looking at macro fundamentals across different currency. currencies, most have proved quite resilient. ramy: that list does get longer, though.

in the bloomberg terminal i want to show you this terminal chart on contagion in developing nation currencies versus e.m. the gap is at its higher since 2008, 2009. the implication from that chart is we are trying to say contagion is growing. are we at a point where we cannot say that issues are idiosyncratic? sian: i think we are at the point where i think at the moment at least markets -- they may have been overdone and the currencies, but markets are still being quite discerning. currencies that have weaker fundamentals such as current account deficits, markets are punishing those more than they are for those countries like thailand or the singapore dollar, countries with still strong current accounts. sian, indonesia seems to be joining in on this e.m. route right now, sinking to the lowest in two decades despite all these

efforts from the central bank, pulling all these levers to stem this repeal weakness in the form of hedging tools. do you think that's an effective approach or are they just exacerbating the selloff? sian: you're absolutely right. indonesia is one of the asian currencies that has come under quite a lot of pressure. one reason is it has twin deficits and a large current account deficit. indonesia is doing quite a lot. they are taking steps of raising interest rates, they have raised them three times this year. is, and whyconcern they are still going to come under some pressure, is the current account deficit will remain large. also that indonesia is one of the companies -- countries that has a share of foreign holdings of debt that is quite large. they will remain quite vulnerable. think right now it reads -- reflects the

fundamentals in the country? sian: probably not. the current account deficit, yes, it's large but it is still under the 3% gdp. so it is probably being sold off a little more than what we think fundamentals are. given the foreign holdings of debt is still quite high it will remain in this kind of environment quite vulnerable to these things. yvonne: i just want to ask about inflation in general. i have a chart that shows what we have been seeing, which is this divergence of the likes of turkey against the rest of the world. we have seen turkish inflation as a unique story. emerging economies inflation is still at or around these record lows. we look at the em space probably speaking. how concerned should we be of a breakout in inflation given some currency weakness we have seen in some of these asian economies

already? sian: we actually think inflation will remain quite contained. there will obviously be exceptions. think welining, we still have negative output gaps. prices have risen but they are not expected to see inflation escalate. so, monetary policy can remain fairly accommodated in the majority of countries. there are some exceptions, the philippines being one. we have inflationary concerns with them being above the central bank's target. we think they will have to raise rates are straits more -- raise interest rates more. but the majority of asian countries should not lead to inflationary concerns. yvonne: sian, everyone seems to think of cholla can hold up, e.m. can be relatively contained. for china the trade war is happening at a time when current surplus has essentially collapsed. do you think of trade tensions get prolonged further we could slip into a deficit?

sian: we are not looking for it. i mean, the narrowing of the current accounts has been underway for more than this year, for more than the trade tensions escalated. we think it is going to continue to narrow, but it should not lead to any significant deficit. that would suggest large capital outflow. we do not think we are in a situation where china will be experiencing these large capital outflows. yvonne: we will leave it there. sian joining us from singapore. this is bloomberg. ♪

ramy: welcome back. let's do a quick check of the latest business flash headlines. medias rented on social with the #what got -- boycott nike.

but nike actually received more than $40 million of free media exposure in the past 24 hours. nike shares did fall. they had climbed 31% this year through friday's close. oops. yvonne: sorry, go ahead. -- amazone joined joined apple in the $1 trillion lounge. founder jeff bezos has pocketed $67 billion, giving him a net worth of $167 billion on the bloomberg billionaires index. is gain this year is more than fedex's market cap and increase alone will make him the seventh richest person on earth. yvonne: we're counting down to the market open. could be an ugly open here after u.s. markets returned from the labor day holiday following declines we saw in em.

we are seeing equity futures decline across the board. perhaps more pronounced selloff in tokyo today. more on the, coming up. this is bloomberg. ♪

yvonne: we live from bloomberg's asian headquarters. welcome to daybreak asia. the top story this wednesday, emerging markets continue to's -- selloff, sparking fears of contagion. an all-time low. lira falling on fears policymakers will disappoint. ramy: and i'm remy inocencio in new york where it is just past 8:00 p.m. on tuesday. seoul wants to address the nuclear issue with the north is not so keen. and google continues its attempt

to reenter china. a former senior executive tells bloomberg it is facing an uphill path. yvonne: another shaky day for asia, it seems. we see the u.s. catching up to the woes after returning from the labor day holiday. we are watching indonesia particularly. ramy: if e.m. were in one hand, definitely trade wars were on the other. when theda in focus foreign minister back to washington dc to try to figure out what the relationship of the u.s. canada trade deal is. in addition we have september 6 on the docket. beating the drum to possible tariffs on $200 billion of chinese goods into the u.s. yvonne: thursday is the big day.

let's look at how the market open is shaping up so far. sophie: we are shipping down with lots of market set for a fourth day of the klein. -- of decline. taking a look at some risk barometers. the yen set for a fourth day of losses as markets await the u.s. canada trade talks later wednesday. when it comes to the yuan we could be in for a lively session. options low on tuesday suggesting decent demand. we are.tralia, on second-quarter gdp growth. . that is expected to slow. aussie dollar trading near a two-year low ahead of that. futures are nudging lower. we are seeing them continue given what we are anticipating with developments in argentina, talks ongoing with the imf.

we are waiting for in indonesia, that the retail will break 15,000. for themonth contact rupee hit a record high on tuesday. you can see this journey for one month using this chart on the gg the library. volatility has picked up. they have joined the central bank in mounting it offense of the currency. yesterday the energy minister of indonesia announced $25 billion up our projects will be delayed. that has been a concern for investors. the question is if that will he -- be enough to stem the decline. ramy: thank you very much. now let's get the first word news. argentinian finance minister has met the imf boss to discuss access to fester credit. the meeting -- faster credit. a deepeningning of

recession as the peso collapsed. the bank sees the currency at almost 42 to the dollar by year-end, markedly worse than levels seen in july. police say in minnesota, jd.com billionaire founder is under since -- investigation for suspected rape. friday butsted released later with no restrictions on travel. he is now back in china. he is being investigated as a rape and they are confident they can reach him if necessary, although they may not charge them at all. north and south korea hold talks later wednesday. issident moon's delegation hoping to revive talks on ridding the peninsula of nuclear weapons. is team includes the head of national security and's chief who helped broker the singapore summit in june. kim pledged to move towards denuclearization is not defined what that actually means.

western japan is reeling after the strongest cyclone to hit the country in 25 years. killed at least one person and caused widespread power outages and flooded a main airport. jebi there lies the region with winds of do 160 kilometers per hour. up to one million people were forced to seek shelter. train services were disrupted. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. asian markets are facing an ugly open with hopes dashed of the long weekend would be kind to emerging assets. that definitely was not the case. joining us now is garfield reynolds. got a smattering of bad news across different emerging

markets and that is coupled with king dollar strength. are there key themes that wraps these together, or as we had been saying, are they still idiosyncratic? idiosyncratic, yes. the key thing is the dollar strength. and what is behind that dollar strength. and this is a rising tide that is overwhelming all boats. if we look at a terminal chart with data that came out overnight showing very strong features for the u.s. manufacturing industry. and at the same time, the global pmi has been slightly going down. the divergence between the two is holding at the strongest on record. so, that is your key. the u.s. a strong, emerging markets are weak. that is driving money out of emerging markets and into the

dollar into the u.s. ramy: a simple way to look at it. in terms of contagion, is there any support for this concept? mean, again,l, i we can take another look at a chart emphasizing u.s. exceptionalism, which is looking at the way u.s. stocks are diverging from global stocks, again, by the most in a very long time. your contagion is u.s. assets are looking more attractive. and the more you get volatility in emerging markets and elsewhere, that has investors saying, well, i need to take a look at where i am invested. is the reward worth the risk? at the moment they are saying it is not. i think we will get a turnaround in some areas soon and some people will say ok, the reward is now worth the risk in selected markets.

for the moment that selectivity is not really playing much of a role. yvonne: garfield, it seems like this list of e.m. vulnerable countries seem to be growing. indonesia now in the fray as well. what are the key markets we should be looking for that could make a difference in the markets? garfield: i think the three you named are going to be basket cases for a while. especially in asia, i see two key markets. one is china, of course. it's such a big market. we have this battle going on as to whether the pboc can keep theyuan strong. buying saw strong interest strong from chinese mainland. a lot of eyes will be on that. the other market is indonesia. indonesia, the currency there has been making fresh 20 year lows.

it may will crack the 15,000 barrier on the rupiah. thethat's a country where current account deficit is reasonable, growth is strong, inflation is under control. that would be a key market. if that turns around then you could say there is selectivity coming in, because on normal valuation it looks like it should not be subject to contagion. but at the moment, it is. yvonne: garfield, thank you. garfield joining us from sydney. you can join us on our markets live blog online. you can get a market run down in just one click as well as analysis from bloomberg editor's. china and indonesia the key markets to watch. over to singapore, our next guest is -- the you thinkus

this em crisis is at the moment? could we see more stress and contagion, or can it be contained? i think it has to get a lot worse before it gets better. garfield just had some good points. better starting to see fundamentally inclined em markets starting to turn a little bit more. i still feel that the pain has not been symmetrical enough. the case that comes to point is mexico and the peso and how well it has held. it is up year to date right over 8% in total returns. when you get kind of full contagion, basically everything gets thrown out and i do not think we are there yet. we need to come in a week where on yen does -3% or -5% risks and concerns and we have not seen that. the key thing here could really be turkey. yvonne: turkey? ok. i mean, is it more about the

fundamentals, then? more of aave to look bigger picture and focus on what happens to the fed and whether we see any kind of clarity in this trade war? kay: very much the latter. i mean, what we are basically seeing is a market that has underpriced expectations of the fed, as well as the commitment of -- the basic key and most important theme in global macro this year has been this u.s. dominant theme, where heads the u.s. wins, tails the u.s. wins. the genius of trump and waiting trade wars on multiple fronts is the tariffs obviously end up hurting everybody, but they heard em more than the u.s. at the end of the day it is a relative world, so it ends up with the u.s. again spiraling towards the upside versus the rest of the world. they arel think

talking about structurally buying the em. at need to get more comfort u.s. dollar strength and the end of the fed tensioning -- tightening. i still think that plays out a lot longer. ramy: in terms of that a lot longer, in september we pretty much know what will happen and we expect the fed to raise rates. december seems like it is more than a 50% chance. where does the dollar go into 2019 looking at the timeframe? viewi think the consensus is the dollar is lower in 2019 and the fed is going to take a pause. i respectively take the other side, and i may have some inconsistency bias because i have had that view for a while. but you have this other factor it is not just now rate differentials, growth differentials, outperformance of u.s. with blowout numbers yesterday. you also have now this contagion and liquidity.

what happens in an area like that? capital flows to the u.s. dollar, u.s. bond market and equity market, and it still has that going for it for at least three months, potentially six months, especially if we see a breakdown and europe. ramy: interesting. yesterday we had the east spring cio on the show, and she said quite positive things about emerging markets. sure, there were negative ripples a red dots across the world, but she said the entire universe of em was actually improved. do you agree with that on the whole? kay: you know, the kind of goes to what you are focusing on. i have been in line to price action. if you structurally look at em from medium to long-term, the demographics, the way they are in the development lifecycle of the economy, they are not falling off a cliff, right?

in the long to medium term value investor, i am not saying they are not opportunities there to look at other things. a lot of em has been indiscriminately sold. a lot of focused, domestic-driven companies per se. i still think we need to see more pain before we are out of the woods yet, which is my main point, at least from a price action perspective. yvonne: you mentioned a little but about europe as well. does it released a concern you at the moment? -- does italych still concern you at the moment? kay: it is a variety of things. is italy the big one? weot of people here in asia, look at it as just another european crisis. you know, it is not $400 billion, it is $2.2 trillion in debt. liquidity has a bigger probability.

they are definitely gearing up for a fight from a strategic point of view. i think the bigger risk is really turkey. wantwas trump and i really to get concessions out of the eu on trade, then i would really hammer and doubled down on turkey from a pressure tospective, forcing erdogan use refugees as a lever point to get more concessions. and that should drive a lower euro, lower yields and higher peripheral yields, and more pressure on european assets. it also puts -- this is something that is mind-boggling the people are not talking about. people are focused on argentina, but i think turkey, given its location, being a member of nafta, and erdogan, has a lot more risk. it could easily get into the eight to 10 range. exposurespecially with

some european banks to have with turkey. kay, stay with us. don't forget our tv function tv . watch us live and catch up on past interviews as well as any bloomberg functions we talk about. any questions for kay? send them our way right now. this is bloomberg. ♪

ramy: welcome back. this is daybreak: asia. still with us is kay. down toe we're counting what could be a pretty interesting thursday when it comes to the u.s. potentially slapping tariffs on $200 billion

worth of chinese goods. know you are viewing this as a contrarian trade at the moment, which is chinese equities. walk us through the rationale of this at the moment? kay: so, i have to give credit where it is due. this was inspired by our chief economist, an extreme contrarian himself. the idea is the kind of classic, you sell te rumor by the fact. trump has indicated he will smack down an additional $200 billion worth of tariffs when the review period comes through, in the next 48 hours. so the idea it could be thinking, ok, what else can they really do after this, and maybe that is really the opportunity to be going along chinese equities. so it is very much an idea that makes me uncomfortable and is very different from the overall

view i have on u.s. global macro dominance. but sometimes those are kind of the ideas you have to entertain as a good trader and see. so i think technically there could be some use for bounds, and maybe for the medium to long-term value players are could definitely be something else in their. as a final caveat i think chinese equities will move when there is strong policy response rather than fundamentals. i think we will still be seeing quite a bit of policy response from china for a while. yvonne: right. the sentiment has not quite soured because of the retail investors, but we do see more foreign blows coming into the chinese market. a bit of rebalancing. is it psychology more so than if we do get tariffs, then this is already been priced into the chinese equities? or if we don't, there is still that kind of pboc support that

will put a floor on equities? is that how we should think about that, too? kay: yeah, exactly. it is a little bit of a layer cake. the pboc, china government policy support, social stability, the fact that is contrarian, positioning is not soundsthe fact that it uncomfortable to be going out there. you never buy these dips in hindsight. you position into the dips. china has obviously sold off quite a bit this year. there is no one out there betting on investment going long and china and that is always worth looking into. how is kind of the idea, the portfolio looking, maybe add a long china element and express that. ramy: what do you think about the r&b? 6.8-ish or so.

the specter hanging over all this is the fear of capital control and inflows,, outflows moving out of the country. where do you think the r&b is headed? there are no all, lines and global macro, irregardless of what everyone says. last time i was on ice at the line in the sand is probably between xi and trump, so that is something to bear in mind. i get the feeling that if they can't they can try -- they can they will try to more control it rather than aggressively and down the currency. tother it is 67680 -- 670 680 is seen as the floor. it depends on the chinese regulatory side of things. it will be if you get a huge em meltdown globally. and i think that is kind of the situation, where it would be very, very hard to hold back the tide, so to speak.

range-bound for little bit but structurally speaking it is still more upside than lower. don't forget, it is measuring social stability. knowing the home versus combating these tariffs coming through on their exporting goods. ramy: let's leave it there. kay, always good to speak with you. a look at some stories trending across the entire bloomberg universe. on bloomberg.com you can check out the story of how amazon joined apple in the trillion dollar club. the company cover the final $200 billion stretch in just two months. that is a feat that took apple over one year. of the mostnal, one read stories is about gary cohn taking papers from president trump's desk in order to stop him from actually pulling out of nafta. that is according to a new book

i legendary journalist bob woodward. over on journalist -- on twitter, sales of a yogurt drink are soaring thanks to a cameo in to popular net flicks comedy all the boys i have loved before. this is bloomberg. ♪

yvonne: this is daybreak asia. check of's do a quick the latest business flash headlines. ford remains optimistic after a month where it saw underwhelming sales from other automakers. they delivered a surprise gain of 4.1%, where analysts were expecting a slight decline. honda extended a bleak stretch for one of its bestsellers in the u.s. deliveries of the accord slumped

11% last month. that, as demand for sedans approach a record low share of the market. yvonne: are cities bans is increasing electric with its first battery-powered car in a direct threat to electric -- to tesla. the country is going all in. daimler had intended to invest $12 billion in the program, but the ceo said spending has already gone beyond that. tesla hit a three month low on the news. ramy: suzuki is backing out of china has car buyers increasingly prefer larger sedans and suvs. stairsagreed to transfer -- china after aom quarter of a century does follow execs it from the u.s. back in 2012. it was there after three

decades. next, the two koreas resume talks later wednesday with the north's nuclear weapon program the elephant in the room. this is bloomberg. ♪ retail.

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this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. >> we are half hour away on the open of trading, markets still dealing with the woes at the moment. you are watching daybreak asia. let's get the first was news with jessica summers. the european joining currencies from turkey, argentina are tumbling to new lows. the european -- the european hit

its lowest lover -- lowest level in two decades. the institute for supply aheadment was 61.3, far of the bloomberg survey. meanwhile, new orders/forecast. supreme court nominee brett kavanaugh says the institution must never be partisan during a senate will it hearing -- senate ruling. a calls it a charade and mockery and accuse opponents of trying to impose mob rule. -- my judicialal philosophy is straightforward.

a judge must interpret the law, not make the law. he must interpret statutes as , informative history, tradition and presidents -- precedents. he is due to step down next and three months after brexit, but the -- there being reported until 2020.n global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. >> let's get update with sophia. >> it looks like the strong

shadow casting their long shadow .n wonave seen the korean along with the turkish lira. highlight what is going on following ahead of trade day. they are expected to hold onto interest rates at a time of growing concern. let's get a quick check on commodities. u.s.s losing ground and as stockpiles depreciate, they are rising for a fourth straight week. let's check in with stocks early on. in japan, we are seeing the line

five years of convertible bonds. we are seeing construction falling. and ithe biggest laggard is rising after sales rose nearly 9% due to warmer weather. >> south korean envoy was are in pyongyang -- envoys are in pyongyang. southwest -- lay the south for us -- lay this out for us. >> it is far more crucial than

that because of their nuclearization. these two are the national intelligence advisers. brokered the summit back in june. the hope is a can do the same again, smooth out the relations. wrongre carrying a letter the south korean leader moon. it would probably lead to a smoothing out of relations because it is what trump wanted. because he his trip

felt there was no progress there. last week, hew mentioned how he still has patience with kim jong-un lack ofthe denuclearization. what was discussed? >> it was unusually long. onlyially, they said they talked about special envoys, with a hoped to accomplish. they were strategizing about what they would need to do. -- they agreed to have atummit for sideline talk the human national assembly, but

i think they want to have some concrete execution plan ahead of that. >> it seems officials are working ahead later this month. the last time this happened, was over a decade ago, right? >> yes. this would be significant. again, the last sunshine policy affect, nothing really came of it. theyelp this time is improve relations and there will .e some landmark statement moonsk that administration is hoping for an

actual declaration to the end of korean war. reactions,tions face but all under pressure to take reinsurer investors. let's start in indonesia. >> a lot of the reason is they have been an emerging market nation at a time when so many people are fleeing emergency markets for the dollar and so much so that the bank of toonesia is getting ready introduce half a dozen new tools

that will help people hedge hopes ofition in keeping more stability under that currency and keeping more dollars in the country. see that this was the latest level and the highest since 1998. happening is the asian .urrency crisis many people say they are in much better shape to withstand the storm. itman brothers, you can see is more dire now. what analysts are saying is they basically have more companies in

malaysia that are holding havelities than people who the ability to hedge those. they are used billions of dollars of financial services. they raise their rates four times. these are very important steps. i think they have launched a new one on august 1. they are taking all kinds of this will certainly be a model for other countries. technical but innovative to say the least. >> they seem to be a little better shape. we are expecting a policy

decision today, but no change expected. >> i guess in some sense, you can say they are lucky and inflation is low. 2.3%.only down now, the question is can malaysia's finance minister take steps to bring a budget deficit back under control? he found recently there is in tax$34 billion refunds. how do you make that up? revenue are facing a crunch because they are not bringing as many. it looks like they could exceed their deficit target and the replacement tax falls short of

what they were taking in, so they have a lot of things that in the next year. low.nflation is running 4.5% is nothing to sneeze at. maybe that will give them some consolation or hope. all eyes on the finance minister. he has a big job. >> coming up, the effects tariffs are heading on china's auto sector.

>> this is daybreak asia. in our venture china segment, we focus on google which is continuing to reenter china. how hard it is for big tex on both sides. like to have his products everywhere and not having china with the ms. don't said that, we really see any examples of successful companies in china. apple is probably the single example. similarly, we don't see the chinese companies have much

success. i think we have developed to a point where the -- were china and the u.s. are in parallel universes. if this is an easy -- >> i think for an american company to out do we chat and social network and personalize news that is going to be very tough, but there might be an american product that doesn't exist in china that could be brought in. that would probably be the best approach. i would also suggest it is possible that american giants partner with the chinese company . one could imagine a search powered by google or a baidu

socialpartner with the chinese . then, you have a local partner who knows how to succeed in the market and follow the regulations more precisely. >> did you imagine having those discussions? >> i would speculate that they are. even when i was at google, google powered search. >> we are getting to a point where the development in ai can be quickly monetize. what are the potential opportunities of that shift? days are still at an early . where ai canr area be monetize is the internet

.pace the next set of industries will be roughly in order financial, health, education and transportation. i think over time, those will yield profits. i think it is a long sales cycle. one thing for sure is the traditional company is basically the -- basically going to be out of luck and out of business. >> let's look at a few key sectors, particularly when it

comes to tech. well set to get hit by new tariffs. by -- joined the car sales numbers were pretty disappointing. is a marketave seen , so for theles first time, car sales actually dipped below 30%. it is telling of the market. part of the problem is automakers are trying to sell higher-margin cars, trucks and suvs, so the average transaction -- however, that is all that is available, they are backed by other incentives and other packages that also incentivize

them to buy trucks. tariffs havet, the ,enerally -- imports are down broadly everyone is being cautious. nissan has made a point that it wants to make china it is market. is less of a focus. throughave been looking the trade deal between u.s. and mexico. >> the biggest part is that china is one of the biggest suppliers.

however, the dynamic between the u.s., mexico and canada is different. it was not necessarily trying to shut out china because they have factories. i don't think it was really blocking china to the effect that it may be part of the agenda. likely?hink it is still the way the concessions were made were to offset auto tariffs. the detroitly for three. they really struggled to read

before g.m., china has not been an easy markets. for in gm have pretty good sales. part of it is protecting your industry. that is what it comes down to. to that extent, it does not affect many of the cars. there are very few cars that get affected. it was just three models. >> in terms of technology, one of your opinion pieces talking about competition from china trying to give tesla a run for its money. are you saying if they want to compete, they also have to bring the quality?

>> absolutely. neil has done a very good job marketing itself as a tech company. they don't make their own cars. it has a partnership in china that only makes cars and so because they don't make their they are trying to make their own facilities, but there is a number of challenges they will face as they try to go into manufacturing and production. theas big dreams of being car of the future like tesla and elon musk has sold his brand. investors need to watch why they are burning cash and whether they will be able to break even soon.n at some point

stuff there. forget, tv , you can watch us live, as well as any securities we are talking about. plus, you can become part of the conversation yourself. check it out at tv . this is bloomberg.

asia.s is daybreak a quick check on the latest business flash headlines. we are told talks involving china unicom and telecom, but no decision has been made. tuesday.s surged on the biggest gains while telecom close at its highest gains. cabineted after naming,

the face of its new just do it campaign. not the shares saw the biggest in inside -- biggest slide five months. >> a quick look at how markets are trading right now. this.re all looking like dayot going to be a pretty when it comes to all of the wobbles. singapore looking a little better. this is bloomberg. xfinity mobile is a new wireless network

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9:00 a.m.t is 9:00 p.m. on the eastern seaboard of the u.s. i am rishaad salamat. haidi: this is "bloomberg markets: asia." ♪ rishaad: asia pacific stocks selloff emerging market sparks fear of wider contagion. haidi: emerging market currencies on the slide. the rand slumps, the rupiah close to an all-time low. rishaad: