>> u.s. equities fall amid as a lot of in tech, the nasdaq declines on flagging demand for chips. stocks slumparket as fear of contagion spreads throughout the developing world. waiting on the latest in a trade drama, president trump expected to slap massive tariffs on china. >> jack ma goes from english teacher to asia's richest man.

we follow his rise. >> this is "bloomberg daybreak: australia." we are two hours from the open. >> i am kathleen hays. we will look at how wall street will play into the asian trading day. one of the things catching my giving a williams speech and saying that an inverted yield curve would not necessarily be worrisome. he says the fed has to do what it needs to do according to its dual mandate, control inflation and keep employment growing. premium on term 10-year paper is lower, so maybe he can tolerate an inverted curve. i think that is significant. haidi: particularly when you look at the boj.

we are in uncharted territory. maybe some of these economic indicators may or may not be as accurate or as important. kathleen: we shall see how the markets react. let's jump into the u.s. stock market. ,ll the fear about trade wars the $200 billion of tariffs on ,hina, and the dow jones higher the s&p 500 and nasdaq the biggest losers. led by semiconductor chips, people worried about waning demand. we want to show you a chart of the s&p 500 year to date. big position,t a saying the s&p 500 could drop 5% if the u.s. were to levy 25% tariffs on the extra $200 billion in goods. he says any selloff will be short-lived once earnings season

gets underway. haidi: taking a look at the set up on friday, trade war friday in asia. the u.s. is when we are expecting announcement on 25% of tariffs on chinese goods. that will be driving sentiment. pretty flat when it comes to the kiwi session. on thet decline bloomberg dollar index, .2%. the aussie dollar front and center, just under that 72 sent level. -- cent level. it is usually the first to go as we get this renewed trade tensions story playing out. let's look at emerging markets. a dominant seen, emerging markets, it is hard to see how it will prevent from falling in fair territory. since july.19.9%

a recovery when it comes to currencies. wrubel falling on concerns of more sanctions. watching dollar yuan in light of that trade story. let's get first word news in new york. key key democrats are threateng to oppose a nafta deal if they get control of the house and may reject any rewrite if it does not include canada and involves raising wages for american workers. talks are continuing between the u.s. and canada, but trump has threatened to push ahead with mexico only. the south korean envoy who met kim jong-un says he wants to remove nuclear weapons during president trump's first term from the peninsula. he said that measures to curtail the nuclear program and wants to

bring the korean war to an end. president trump responded with an optimistic tweet, but the state department said that much remains to be done. reopened friday for domestic flights only. japan's third-largest airport was flooded earlier in the week after a near direct hit from a storm. to make matters worse, a tanker bridge that is the link to the mainland. it is not clear when full operations and international flights will resume. nike shares recovered more of what they lost. billboards for the controversial campaign went up in new york and san francisco. nike has more than $3 billion in cap cap since it launched. 40% of that publicity is positive. global news 24 hours a day on

air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. kathleen: thank you so much. president trump negotiating nafta and may about to escalate a trade for with china, but appears to have his sights set on the next rate fight. reports that japan may be next. joining us now is our washington reporter. say?did the president white target japan? writerll street journal said the president called him after the opinion writer , crediting fox news trump's policies with the current state of the economy. the writer was critical of the focus on trade deficits. this is the crux of why trump brought up japan.

he said he has a good relationship with japanese leadership am a but -- leadership, but these common should not surprise anyone. president trump moving forward with steel and aluminum tariffs on the country. japan did not receive an exemption to those tariffs. president trump has threatened automobile tariffs that would hit at the heart of the japanese economy, so clearly focused on the trade deficit with the country, as with others. japan has sought a good relationship with president trump, and the two leaders were together on issues such as north korea, but strain on the trade issue. kathleen: nafta negotiations have begun again in washington was so what are the chances we finally get a deal? the negotiations today between canadian and american officials are stock over a couple of key issues. the canadians are seeking to

mechanism panels, however, the u.s. wants to do away with those. there are also issues over dairy. were they to get past those come up other hurdles could remain. moves forward with canada, democratic lawmakers threatened they would reject looking at any such a deal. there is pushback from the business community, democrats, key lawmakers on the republican side as well, squaring off against president trump's threats to move forward without canada if no agreement is reached, but both sides are talking, potentially moving forward and so it remains to be seen if they can get past this key remaining issue. haidi: today is the day when it comes to the tariffs on china. how our business groups viewing the situation? >> business groups are trying to push back moving forward with tariffs. eyeingnt trump is

another tranche of tariffs on $200 billion of chinese imports. the public comment for those , so he couldoday move for with all of them or some of them or in stages as soon as tomorrow. business groups have written the u.s. trade representative, including cisco and hewlett-packard, saying those tariffs could affect their ability to manufacture quickly and could raise costs for consumers, so business group stephanie not keen on such tariffs, push back there. all will be revealed presumably in the coming hours. thank you for that. isning us now from boston making green. great to see you. -- megan green. great to see you. the cusp of this next substantial step in the trade war rhetoric, do you see

in a possibility of a circuit breaker at this point? >> no, i don't really. potential circuit breaker probably would not come from the u.s.. it might come from china in the form of massive stimulus to take off of pressure on the u.s. dollar, which is providing a big squeeze in emerging markets and exacerbating balances there. i don't think we will see that before the late october plenary. the next month and a half or two months, this will continue. in terms of trade, the u.s. trade policy is playing well amongst the traditional republican base, so unless you get a significant economic or financial pressure in the u.s., i don't think the white house upl go about-face on trade all. i think this trade war will get worse. get youram keen to

views on when we start seeing the impact of the trade war in the data. we started to see a loss of 's, but in terms of what the fed might do him a do you see that playing out as short-term inflation and longer-term stagflation? >> the impact on prices is probably not as significant as everyone is worrying. you get some slight upward pressure on prices, but not as much as you expect because they are components. right now they don't have the pricing power to pass through the final costs to the end-user, so i don't think inflation is what we need to be worried about. the more pernicious these is growth. there are drugs on competitiveness coming from the imposition of tariffs. they don't come through in the models at all. there are a lot of models, they shouldgest the trade war

not have huge implications for growth. i don't trust that. i don't think this model can in compass disruptions to global supply chains, and it should have a big impact on competitiveness and growth. we should see that come through in the data. we might start to see that in tomorrow's jobs data. we see inklings of it in some of data.m it should be coming, potentially if we escalate further with china. kathleen: we have seen that china's economy has lost steam. when you look at the lopsided nature of china's exports to the u.s. versus u.s. exports to china, the knee-jerk argument is they have more to lose. what are you seeing in their economy at this point and what is the risk to them? is important to point out that china's economy started slowing down at the end of last

year. i don't think it is related to trade. it was already slowing down. maybe trade is starting to bite. china just doesn't import and a from the u.s. to go ahead and retaliate in kind as it has been doing so far in this escalation. andink what we have seen what we will continue to see is china retaliating in other ways. notought that reserves did truck for china in their last report, suggesting they are not buying as many treasuries. we have seen the currency move significantly. the pboc has stepped in, but if there is an escalation, we will ,ee the renminbi weaken further licensing, compliance for u.s. companies trying to get goods on ships, that has gone through the roof. --cdotally, i have a conduct contact part of an international delegation in beijing.

they were all put up at a five star hotel, and he was the last one moved to a two star hotel. it is symbolic of where these tensions are going. i would not argue china has more to lose, although the fact it was slowing down suggests momentum is not in china's favor. kathleen: i know you are watching emerging markets closely. at possiblek spillover, people are saying the concern over the trade war is one of the broad forces that have helped to push emerging-market countries and their markets lower. if this gets worse, what do you see happening there? >> it could be a piece of some of the volatility in emerging markets. a much bigger piece is the withdrawal of global liquidity by central banks. --t is the tide to coming in going out and figuring out who is left swimming naked. a lot of these countries have

borrowed huge amounts and dollar-denominated debt. , i dod say for china expect a significant fiscal stimulus package later this year. that should help emerging asia quite a lot am a but probably won't trickle through to the rest of the emerging markets. trying to play emerging markets, emerging a jim might look more attractive because the pboc and central government can push through stimulus easier than other economies. haidi: i want to throw up a quick chart that shows the negative correlation between dollar strength and emerging-market weakness. is it your base case we will see continued u.s. dollar strength? is that a reason because of the strength in the u.s. economy, or this return to a safe haven

played during this time of volatility? >> over the past couple of months, the dollar moves have been driven by moves in the renminbi than anything else. you could argue because it is the u.s. growing so much above its potential given the fiscal stimulus, the fed his hiking cause ist the biggest actually moves in the chinese currency, which has abated recently. the renminbi might weaken further if we impose more tariffs on china. if we get a fiscal stimulus in isna, particularly if it $2.5 trillion, that should put upward pressure on the renminbi and could take pressure off the dollar and emerging markets. most of the move in the u.s. dollar has probably happened. over the medium to long-term, there are reasons to expect the dollar to depreciate, one being

the withdrawal of monetary accommodation. also, you have to look at our budget deficit come at which is burgeoning, and our current account deficit them and that should put downward pressure on the dollar as well. haidi: stay with us. we will continue digging deeper into the em side of things. we will look ahead to friday's jobs report aired -- report. kathleen: growing concerns over oil supply and the u.s. deadline to sanction iranian exports. we get the outlook later in the hour as well. this is bloomberg. ♪ this is bloomberg. ♪

haidi: we are getting some lines from the rbnz governor. the dollar is supportive for growth and low interest rates.

the economic outlook for new season it's not that bad. , saying coming through the long-term focus for the bank is key to promoting growth and a healthy financial ecosystem, talking about the maintenance of flow and stable inflation as a necessary condition to economic stability. the bet on the rate cut actually jumped to 30% by next february from virtually zero a month ago, given the business and investment confidence falling to lows in new zealand. kathleen: when we spoke in jackson hole, he did seem to open the door to concern about the things going on. let's get back to the u.s. investors and economists expect during a hiring rebound in august. paving the way for september rate hikes. still with us now is make in eagan greens.

how much is this steady path playing out for emerging markets? the head of the reserve bank of india in april wrote an op-ed saying he was concerned about balance sheet reduction and the issuance of debt. is the fed making a mistake in that regard, putting too much focus on jobs and inflation? >> the fed's mandate is domestically based. in emergingtility markets will spill into the u.s. , the fed does not need to be paying attention to it. only one person on the fomc who is focusing on brainard. beyond that, no one seems to be talking about it. the theme might be picked up a

bit more, but in addition to rate hikes, it is the shrinking of the balance sheet. if you look at the currencies in which emerging-markets have been issuing debt, euro and yen has flattened out, but u.s. dollar issuance has skyrocketed. that makes sense given how incredibly low rates have in in the u.s. it has been cheap to borrow for a while. kathleen: let's look at that jobs report, 194,000. wages have been stagnant. most people consider that september rate hike a slamdunk. even with stagnant wages come the fomc is willing to go ahead. what do you see? >> september is probably a slamdunk. that is because the strong inflation data we saw coming down the line is driven by

things dropping out of the year on year comparison come and that should state allies in august. the best is behind us. unemployment is below what the fed expects full employment to be, so the fed can justify a rate hike in september. in december, i'm not expecting significant wage growth or hourly earnings growth. it has been range bound for the past 3.5 years. i don't see we will break out of that. that means real wages will continue to contract. the fed has to worry about that. more importantly, the yield curve continues to flattened. despite comments recently, i think the fed needs to worry about the yield curve in hurting here it -- inverting. haidi: i want to end with your thoughts on central-bank efficacy in this world of

volatility. i'm thinking that decision for the turkish central bank. when investor confidence is rock-bottom and your fighting sentiment,f negative are central banks limited by what their policymaking can do? >> it depends. credibility is the currency of central banks. the turkish central bank has lost a lot of credibility. are right expecting to be completely underwhelmed by any rate hike we see. for other central banks, they don't have as many obvious tools. if are going into another downturn in the next couple of years, that being said, they do have tools at their disposal. they have not gotten rates up, so they can't cut them, but they can provide qt again. haidi: appreciate your time. there is more to come.

this is bloomberg. ♪

kathleen: now for a check of the business flash headlines. packageis negotiating a for les moonves. the board is in talks in a legal fight with its controlling shareholder of a national amusement. it would dilute the redstone voting stake and postpone any merger with viacom. haidi: asking big banks to cut cash -- put cash down, masayoshi son. shareholders are being asked to prepare loans. sources say banks offering anancing are likely to win slice of the softbank mobile ipo. jack ma ponders life alley bob life after alibaba.

he how he plans to make a global impact through philanthropy. this is bloomberg. ♪ this is bloomberg. ♪ xfinity mobile is a new wireless network

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also purchase content from the right-winger last month. can -- campaigning begins today for the leadership of japan's ruling party, with shin so i may -- with shinzo abe set to win. only a fraction -- former defense minister -- september 20 e on course to becoming japan's longest-serving prime minister. good news, following years of -- some areas are showing what they call substantial signs of recovery. win irst ecosystem to -- to win unesco world status.

>> lets give you a quick update on these markets, a torrid session in asia. this is how we are setting up. new zealand, i've got the ozzy dollar just under that $.72 consolidation level, could be more downward pressure in the global trade story. cindy futures negative going into that open. ve going into that open.

third straight loss. their use the micron and kla? sizable losses. testimony, the remarks after the justice department afterwards, underscores that regulation in this industry is highly likely. let's take a look at some of the other movers. wynn resorts, the lowest in 13 months. leading indicators for business activity and macau, below expectation. banks brokers performing in recent months, causing the whole group to think. -- the bottom stock is one that is exposed to international sales and therefore slightly impacted by the tariff. ater hours gamestop,

videogame retailer. it is disappointed with its profit. perhaps to look at a sale option. let's look at the warnings and red flashing. gtv is where you can find our library. this is called market warnings. goldman sachs has joined citi bull marketng the indicator is flashing red. they are also adding on to ubs, saying we are in a delicate period for the correction of the market. >> markets on the cusp. 19.9% down from the january peak. issues? -- what are the key issues? >> one of the key issues was a crisis of confidence. emerging market currencies

continue to tumble. a look at straight downward, we are on the cusp of the bear market. the em selloff is in its 155th day. a -- thendex taking stock index taking a big drop on the right. look at the size of the loss. it gives you an idea why we are seeing such a drag on the tech index today. di: let's go back to one of our top stories today. looming escalation of the -- the u.s.-china trade war. beijing says it will be forced u.s. -- noe if the signs of a circuit breaker at this point. >> no. again, the response from china

so far, it is a wait and see from beijing. i will push my button as soon as you push your button on a trade armageddon. let's look at what is more interesting, the last-minute push from u.s. businesses. they are coming out in force, sending letters, not only to donald trump but to the u.s. trade representative office, companies like cisco, hp, others have sent a last-minute letter to donald trump, pushing him to change his mind on these new billion on the $250 worth of goods. everything from selfie sticks, semiconductors, baseball gloves, telecom equipment. we are hearing from that letter from cisco and hp and others, i quote -- "by increasing duties on equipment, the administration would increase the cost of

accessing the internet and slow the rollout of next generation wireless technology." not surprisingly, retailers in the united states also sending a letter, appealing to the u.s. trade representative's office, robert light heiser in particular. they say they cannot quickly adjust and the tariffs so far imposed have not led to any meaningful concessions from the chinese. tariffs are counterproductive says this coalition led by the national retail federation. that is where they stand right now. keep in mind, the amount of billion in00 ofition, that is about half all the imports from china to the united states. >> we know the chinese have said they will retaliate. what can they do and what about

their domestic push back, if any? heard from thee commerce ministry spokesperson in his weekly briefing, keeping it short, saying they will be forced to retaliate. they that trade imbalance, will not necessarily be able to retaliate tariffs on trade in kind. there are other measures that could be done, such as curbing rare earth. also market access issues. they could stop or halt or delay purchases of u.s. treasuries. that would be counterproductive. let me refresh what the spokesperson in beijing is saying. china will take necessary measures based on the u.s. action. he did offer a little bit of a silver lining saying, despite those breakdown in talks between august 22 and august 24, working level communications and

negotiations have continued. no breakthroughs at all. main just 20 years, jack went from a young english teacher to one of the most recognized corporate leaders and china's richest man. chairman is spending more time on philanthropy. -- mackenzie astin how he tom mackenzie asked him how he plans to make an impact? jack: i think education is so critical -- so critical for the future. education and the environment are two things i focus on a lot. the most important is that everybody do something. tom: how much do you think your identity as an entrepreneur has been shaped by your first love, first job, as an english teacher? tok: people don't like me talk a lot.

the only thing i can do is share. i learned so much from alibaba. i learned so much from the alibaba in the past 19 years. i think it is my responsibility to share. whether people like it or don't like it, that's ok. you have to share. society gives you so much resources, so much experience, you should not waste it. share with others. maybe it is a professional disease i have. tom: do you miss teaching? when you like to be back in the classroom? jack: i miss him very much. i came to business by accident. i came in, started to do it. i think someday very soon i will go back to education. this is something i have more confidence -- i think i can do much better than the -- than being the alibaba ceo.

this is why i prepared a jack ma foundation. all these things i have been preparing for 10 years. this is something that i want to devote most of my time when i retire. tom: when could that be, that transition? jack: very soon. tom: this would be used stepping away from your executive chairman role, focusing solely on the jack ma foundation, with a focus on education. when you book it -- would you look at a bill gates model? jack: i think there is a lot i can learn from bill gates. many years ago, people said, jack, i can never be as rich as bill gates. one thing i can do better than him, i can retire earlier than him. something unique, different, and something in my jack ma's mind.

i will learn from bill gates, warren buffett, a lot of great philanthropists, but i want to do something using my own way. >> i wish he had been my teacher. that was our exclusive conversation with alibaba founder and executive chairman jack ma. >> coming up, venezuela in meltdown. we'll be joined by an energy researcher, next.

hays in new york. haidi: you are watching "daybreak: australia." a potential drop in demand for trade tensions. crude supplies are expected to fall significantly after the beginning of u.s. sanctions on iran in early november. all of these often conflicting factors.

the founding of energy markets research firm joins us from singapore. good morning. what is the most powerful, most compelling element of all of this, conflicting factors driving the market at the moment? >> good morning. so, as you just mentioned, the weekly u.s. stocks have always been a major influence on market sentiment. they were, to some extent, this week as well. if you are asking me to take a step back and, on the big picture, what the oil market is looking at, it is essentially two big things. both pulling in opposite directions. as we just alluded to, u.s. sanctions against iran, which start on november 5, and the potential loss of many barrels per day in iranian supply, a

market that is relatively tight. it is a bullish factor for the market right now. for the past few weeks, essentially since the start of the tariffs between the u.s. and china in july, the market has ing what impact this might have on demand. we have seen a lot of emerging-market turmoil. right now for the markets, that andar more difficult to try quantify. there are a lot of dots that need to be connected. a result, what impact potentially on demand. those are the two main forces icy going into the end of this year. brent aten it comes to the moment, longer-term contracts are higher than

short-term, typically indicating a tighter market. is this something you expect to continue given that there are some worries over the demand side, heightened tensions over trade between china and the u.s.? >> that is typically when markets are tight, when demand is equal to or a little more than supply. contractshe forward priced higher than further out in time. that a bit anomalous even when that was the case not terribly- i'm surprised. i think it will stay that way. huge anothere a influx of supply, but i don't think it is going to be to an extent that the market is going to feel very comfortable about

supplies and push crude futures back. i want underscore this point with another chart from our bloomberg library. iran's crude output tumbled under previous sanctions. 2012, they go down more. , then you see the supplies going up markedly. that was a period when we had -- what factors are you put on the importance of this issue for the oil market? iran is absolutely a major factor. just to put things into context, it pops a little more than 3.5 million barrels per day and experts a significant part of

that. nearly 2.2 to 2.3 million barrels per day exported by iran . as you show your chart, iran lost more than a million barrels per day of exports under the 2012-2015 sanctions. remember, those were multilateral sanctions under europe as well. countries were trying to reduce that intake from iran. at sanctions were left -- were lifted, iran tried to move up to its potential. the u.s. says they would like to reduce iran exports to zero, which, in my view, is impractical and inadvisable. the market is factoring in potentially another million barrels per day, so about a half of crude exports which would be

quite worrying for the markets. haidi: thank you for your time in singapore. remember, bloomberg users can interact with the chart using gtv . catch up with feature analysis and save them.

i'm kathleen hays in new york. haidi: you are watching "daybreak: australia." bloomberg global markets editor ague is here with us. there is a lot of confusion as to when this row in emerging markets will emd -- will end. adam: it is a tough call, all of this about catching a falling with, difficulties

valuations. of multi-strategy advisors, it is worth listening to him in one sense because he called the top of the market in january when that two-year bull market in emerging equities had run its course. he felt there were a number of factors working against. that was obviously pressing, bull markets have sold off this year on the back of a number of different factors. call. been a prescient he thinks that, now, a lot hinges on the fed. of speed and tightening monetary policy in the u.s., he could see some relief in emerging markets at this point. i think there are a lot of people that are still struggling with this kind of valuation

discount argument, how you price emerging-market stocks given how far we have fallen. some are willing to sit on the fence a little bit more and see how this washes out in the next few weeks. perhaps --ricing japanese yen just now notching up gains for the year. adam: these are obviously currencies you would normally think of as traditional safe haven assets. the swiss franc and japanese yen have struggled for a couple of reasons. one, the kind of strength of the u.s. economy has been working against those as the fed has been hiking. chart, it in this shows you that they are starting to reassert the nature of their

safe haven value. clearly, people are starting to use those again as we would have seen historically, typically. an eventful you, friday. that is it, but rish will be joining kathleen for the next couple of hours of "daybreak: asia." a lot going on and a lot of prisms to look at the trade story through as well. kathleen: we have ahead of global economic research for bank of america-merrill lynch. $200 billion will be imposed, another $60 billion in retaliation. he said this will be like a cold war with periodic flashpoints come as something that will continue indefinitely. this is something that will continue to weigh on the markets and the economy. we will be asking him about the jobs report.

haidi: taking a look at asia credit. course, lots more coming up including the major market open here in asia. ♪

>> 7:00 in hong kong. welcome to daybreak asia. having a look at the top stories on friday. markets are set for a seventh straight decline. chip demand maybe dropping. emerging market stocks slumping to the edge of bad territories as fear of contagion spreads. i'm kathleen hays in new york where it is just past 7:00 p.m. on thursday. investors over the latest act in the trade drama. president trump expected to slap massive tariffs on china and jack