haidi: i'm haidi stroud-watts in sydney. asia's major markets are an hour away from the open. shery: from bloomberg's global headquarters in new york i'm shery ahn. >> in hong kong, welcome to "daybreak asia." haidi: our top stories this wednesday, president trump sparks derision and denunciation as he addresses the uts, iran says he's committing economic terrorism. asia pacific features point to a mixed session ahead. japan is on track to extend the rally that's taken the topics to near an eight-month high.

and u.s. equities slipping as the fed opened its latest policy meeting. a rate hike this week does look like a done deal. shery: a quick check on markets ended the tuesday session. we saw the s&p 500 fall for a third consecutive session. being pulled down by rate sensitive stocks like utilities and financials. we also saw the dwow fall .3%. energy producers were one of the few sectors that were gaining ground. oil at the highest level in four years. and the naz up .2%. although we saw facebook fall in this session as instagram founders said they were leaving the company. but 10-year yields topping 3.11% into the session. and of course we are seeing now the fed headed toward their second meeting in their policy -- monetary policy meeting. 25 basis point hike expected. widely expected to see how all of this is translating in asia here is sophie. sophie: as on wall street and asia we are anticipating a mixed session with futures indicating gains for tokyo and

squid they but chinese stocks look to remain subdued and the hong kong reopen will be in focus today as well with the low. g debut of hetie south korea holly until thursday. wellington shares are treading water after new zealand posted its widest monthly trade deficit on record which is pushing the kiwi dollar lower. below that 67 cents a handle. on the data tocchet singapore, factory output and japanese machine tool orders which could continue to reflect the structural impact of u.s.-china trade tensions after overseas orders contracted in august. but even with the latest bout of trade worries, japanese shares are set to extend gains after a seven-day rally. but that aside, investigators cautious ahead of the fed decision with the focus on what jay powell might have to say about the outlook for policy normalization. the yen we do have it holding steady here. but hovering below that 113

handle amid speculation the fed may strike a hawkish tone. before traders do push the yen to levels back that we saw in january, they will once learn about the details of a second round of trade talks between the u.s. and japan. we've already learned this morning that japan's economy minister motake has agreed to some trade strategy basics with the u.s. counterpart light hires. -- litehize refment. haidi: jessica summers in new york. jess. jessica: thanks, haidi. he trump aid -- t administration wanted to make international institutions irrelevant and is approaching diplomacy with "a nazi disposition." rue hane invited the u.s. for more talks on the 2015 nuclear deal. he said dialogue starts with ending threats. the central bank governor of

argentina has quit just three months into the job. luis kaputo resigned after a new deal with the imf would require a new approach to monetary policy. caputo cited personal issues as the reason for his departure. he was immediately replaced by the deputy economy minister, hedo sinlares. the peso fell further on the news. india has bowed to u.s. pressure and will not buy any iranian oil in november. that's when president trump's new sanctions come into effect. oil and petroleum, they have not ordered any crude for november loading and other big refiners said they have no plans to do so, either. file decisions on prsms aren't due until early october so the refiners could still change their minds. and japan says it's agreed basic trade strategy with u.s. counterparts, but that series negotiations can only move forward if the trump administration lifts threatened auto tariffs.

the economic minister spoke to u.s. trade representative ghthieser as they talk about 20% duties on autos. japanese automakers employ 92,000 auto workers in the u.s. in 2017. and the ftse rursal will announce inclusion of chinese a shares into its indexes this week. sources tell bloomberg the news could come on thursday and that beijing has been informed. it's not known when the shares will be included. nor at what weighting. the shanghai stock exchange said ftse will hold a news conference with mainland bourses on thursday to give more details. global news 24 hours a day on air and on twitter. powered by more than 2,700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. shery: haidi: stocks edged lower the u.s. treasury yield falling as

the fomc, our reporter joins us now for more. markets are contending with a lot. there's a trade story and the two-day fed meeting. >> ander in trying to take it all in, haidi and investors are saying that they're waiting and seeing what the decision actually is. when we get it from the fed. you take a look at the s&p and the dow. they were really fluctuating between gains and losses. yes, we did see a bit of a hit to both of those indices as president trump was speaking at the u.s. but it didn't last very long. came back higher only to fade lower throughout the day. the nasdaq is where we did see some gains. however, led higher by some of the larger tech names like amazon, like google, like appear many. but that is one side of the story. we're really going to have to wait to see what the fed says tomorrow in their statement. and what powell says in the press conference. because if you take a look at 10-year treasury yields they are climbing higher into that decision. and because of that, we are also seeing utilities lower.

they are rate sensitive that were the worst performing sector today. financials interesting lower as well today. not as low as utilities. specifically a lot of people have been calling for financials to outperform as we enter a rising rate interest environment. haidi: yeah. and we did see tech kind of flying the flag a little bit higher. but semis are continuing to come under pressure. and there are still concerns about the demand side of the story? >> right. this concern is not going away. we have heard plenty of concern over the past couple of months. morgan stanley sounding the alarm. well, today, we had another downgrade. this time out of raymond james. another analyst traveled to asia to meet with some of the companies. and he said that we could be entering a cyclical downturn in the semi space. so you take a look at stofment individual names like cypress and x.p., microchip technology, they were all down more than 4% today. if you look at the philadelphia squct -- semi conductor stock index so a concern that the not going to go away.

a lot of people are paying attention to the semi space. >> and nike fell post market. after results. despite the fact that they have some bright spots in the results. so what was the problem? >> they did have some bright spots and they were revenue. north american revenues strong. overall sales really strong. where the issue was in gross marningens. -- margins. that's what's driving the prices down but a lot of hype surrounding this. because of their recent announcement to team up with colin kaepernick for the just do it campaign and the c.e.o. came out on the call and said that nike feels very good. they feel very happy about how this is going. and it's actually been driving some demand. so -- for the product. that was before this quarter. but we'll see how that plays out going forward. haidi: sarah, thank you so much. the latest on the u.s. market. president trump struck a more reserved tone at the u.n. general assembly this year. maring iran the headline of this addresses and defending his decision to pull out of the 2015 nuclear agreement. president trump: they do not

respect their neighbors or borders. or the sovereign rights of nations. instead, iran's leaders plunder the nation's resources to enrich themselves and to spread mayhem across the middle east and far beyond. haidi: president rouhani hit back saying u.s. sanctions against his country amount to economic terrorism but won't succeed. let's discuss this with bloomberg's greg viskuzi. great to have in you the studio. so it seems president trump may have replaced north korea with iran as the main villain in his u.n. speech. greg: that was one of the strange things that north korea was one. few countries he had anything good to say in this speech and didn't have anything good to say about america's traditional allies but north korea got my rankings for taking brave steps and yes, iran is definitely the big bad boy at the moment for him. shery: right now also it seems china because president trump

not liking what he sees on the trade front. >> very hard on trade and not just china and seemed to blame everyone for the u.s.'s gaping trade deficits. and saying we'll -- we won't be taken care of and we've had terrible deals. it was this strange thing you always have with trump. on the one hand he's always boasting about how strong america is and then there's this sort of -- shery: at one point getting laughter. >> getting laughed at it. and the self-pity we're being taken care of by all these big meanies around the world and that was his view on trade. shery: and it was interesting. as he aired these grievances to the body that essentially embodies multilateralism telling everyone to reject globalism. greg: yes. and the people say that it was more measured speech than it was a year ago. i'm not sure about that. the delivery was very calm. because he was reading. but actually, in some ways it was a much tougher speech than it was a year ago. he really had nothing good to say about any international institutions at all. a year ago, at least he held out some hope for the u.n. said it's a body that could

reform itself. and wasn't any of that talk this time. the international court is an aberration. it takes our sovereignty away. and the -- america does badly with trade and said we don't believe in globalism and we believe in patriotism. so i think that despite the calm delivery and in some ways this was a much tougher, harder speech than what he gave a year ago. haidi: and when he went through the list of achievements in saying that the trump administration had achieved more than any other u.s. administration in history, it was met with laughter. he kind of brushed it off. there was also a separate moment where justin trudeau came up to him and tapped him on the shoulder and he didn't even get up. so is there a sense that the -- sort of traditional alliances that perhaps the u.s. is finding itself with fewer friends than before? greg: well, we've seen that for a while. the way he ripped up the agreement at the g-7 in canada. the recent -- his behavior at the nato summit. and he's definitely -- he feels america's hard done by by its

traditional allies. and then he has wonderful things to say about the north koreans. it's been -- it's been that way for quite some -- been that way for quite some time. haidi: not only about north korea or iran within the confines of the u.n. general assembly and there have been some events targeting iran specifically. this whole week. outside of the u.n. as well. greg: well, i mean, certainly he's not been the only one. but the secretary of state pompeo was here. and his -- his national security advisor bolton is here. and they've been holding -- they've been holding a series of meetings around -- around new york at the same time and not just threatening iran but threatening any countries that do any trading with iran. so there's a full-court press from the administration on iran at the moment. that's for sure. haidi: thank you so much for your time. greg viscusi joining in us new york and gofment and business leaders gathered today for the one planet summit in new york. french president emanuel mack

ron joins us from the event for an exclusive interview. that's at 4:00 p.m. this wednesday local time in new york. shery: still ahead the u.s. threatens further tariffs on china. but beijing is barrel barely acknowledging trump's complaints. we'll look at the risk of escalation. haidi: plus treasuries fall and the dollar weakens as the fed may be asking mainstay capital management about the tightening path ahead. this is bloomberg.

shery: this is "daybreak asia." i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. u.s. stocks edged lower ahead of the latest u.s. fed meeting and our next guest says the expected rate hike is priced in by now. joining us from naples, florida, is david kudla, founder and c.e.o. and chief investment strategist with mainstay capital management. great to see you again. this week's move is priced in and we're looking at another by december. maybe a couple more next year. i mean, this is a fed that wants to grow but how do things

like tariffs play into the murkiness of the outlook? david: we know we have a rate hike later today. in asia or tomorrow for us here in the u.s. and a rate hike later this year. and we think that doesn't change based on tariffs. in the near term, we see a further escalation in tariffs and longer term that will affect u.s. growth certainly and we think growth in china and around the world. but for the longer range outlook for rate hikes, we're still looking at again, rate hikes at the end of this year. and we're forecasting three rate hikes for next year. we don't think that's priced in the market yet. we think two rate hikes are priced in. tariffs could change our outlook but right now we think we would get three rate hikes in 2019. shery: could oil at $100 change

the outlook as well and inflation break even? david: if we have oil at $100 a barrel that will certainly change our outlook. we've got brent crude has come up into the $80 range. and w.t.i. in the 70's and multimonth highs for oil now. and one of the cures for higher oil prices is higher oil prices. we know what happens just the supply-demand equation when we get to these levels. and we think that we're probably at a high point. we don't see $100 oil in the offing. we think that we're probably at the highs here. but yes. if oil continued to climb from here, that certainly affects u.s. growth and global growth. haidi: this morning, we showed u.s. consumer confidence unexpectedly jumped to the highest level in 18 years in september. is all of this optimism justified given that trade

tensions are still looming? david: well, you know, we look at that, and when we wlook at the hard data that's continued to do quite well, whether we're talking about earnings or g.d.p. and the outlook thereof, or the soft data, whether consumer sentiment or business sentiment, those numbers that come and go. and that was a fantastic number that we got today for consumer sentiment. and we think that it's -- the markets and consumers, investors, businesses, looking through the tariffs to the other side may be in the near term not seeing that much impact. when we work through the numbers, we look at in terms of u.s. g.d.p. what we currently factor in based on what we know and maybe .1% or .3% impact to g.d.p. for consumers, they haven't felt it yet. and they -- they won't for a while. and we need to see where we go

from here. how much further does the trade war really escalate? haidi: what about the fed risk, whether the fed could choke off growth or it could invert the yield curve and as we've seen in the past, lead to a recession? david: yeah. that's one of our concerns. we -- about exactly a month ago, we saw the spread on the two-year treasury to 10-year treasury at the narrowest we've seen this cycle. we got down to about 18 basis points so closing in on a flattening yield curve getting close to that point of inversion. and wooze we get to an inversion in the yield curve that's predicted seven out of the last seven u.s. recessions. and so that along with some other factors would be very worrisome for the u.s. economy. since we -- we've seen a steepening we're back up to about 27 basis points on twos to 10's. but that is a concern. we think that as we move along

further and we're talking about tariffs and we're talking about higher oil, that could slow growth, that could affect the long end of the curve and we could see that narrowing or flattening of the curve again. if we look toward -- get closer to an inversion again and move toward an inversion, typically recession follows. and that would be problematic:right now, we've seen that steve:ening come back. so we're not as concerned at this point. and some of the other factors, some of the other leading economic indicators give us less concern about a recession in the offing. haidi: david, do you highlight tech as being a sector that's relatively sheltered from cyclical as well as trade downward forces? is that -- or smaller tech names that tour talking about? david: really across the board. certainly the fang stocks have had had a tremendous rally. and we've seen, you know, some problems here lately and some

of the fang stocks but we look across the spectrum for the entire technology sector, and technology has done so well. over the past several months and really several years a lot of people think that there's just too much price to tech stocks. valuations are too high but price to earnings multiples and the tech sector based on historical norms we're still undervalued. technology we think has further to run. we like secular growth stories, especially at this phase in the economic cycle. we like secular growth over cyclical growth. so first and foremost, in that, is the technology sector. so technology is still our leading sector. our most overweight sector in our portfolios. e think we continue with that.

>> we can certainly say we have some fundamental concerns about elon musk and the lack of decorum lately and the c.e.o. of a major company. but that aside, when we look at the fundamentals for the company, and we're -- the most recent story that we don't understand is the -- just the deliveries of tesla, most recently the problem in delivering teslas. a recent story that elon musk was going to start making car carriers because of a shortage of car carriers to deliver teslas. when we look at public companies and one of the criticisms is that they live from quarter to quarter. they're measured quarter to quarter. and tesla just seems to move from headline to headline.

they work so hard to make 5,000 cars in the last week of the second quarter. and arbitrary benchmark and now they can't get e-get the cars delivered. it's just one thing after another. the insolventcy of the company, the problems with sustained profitability, the service center issues and quality issues. we just really struggle with things adding up. haidi: we get you, david. thank you shoach. david kudla, founder and c.e.o. and chief strategist of mainstay capital management. plenty more coming up. this is bloomberg. ♪ ♪

haidi: this is "daybreak asia." i'm haidi stroud-watts. in sydney. shery: i'm shery ahn in new york. american retailer j. crew will unveil a new brand as it seeks a broader base for its recovery. but it also faces head winds from the trade war with some of its products subject to new u.s. tariffs. c.e.o. jim brett says the

company won't pass on the additional costs to consumers at least for now. >> it impacts us. part of our products are -- our accessories and handbags are impacted by the recent tariff. but you know, it's our job to make sure that we have a highly diversified sourcing strategy. we've experienced changes in the way that we do business before, when we had quota and we didn't have quota. and it's -- it's important to make sure that you're not overly dependent on one country. shery: would you consider yourself to be well positioned say if apparel gets included in the next round of tariffs should there be another round? >> i believe that we are a highly diversified company when it comes to our sourcing. >> -- shery: how much of your product comes from china? >> i would rather not say the exact amount but it's less thap a third. -- than a third. >> moving things away from them do you feel you're diversified enough? >> we're always looking at

opportunities to strengthen our position and given what's happening, i think we will probably become more aggressive on that front. >> and at the moment, do you feel you're going to have to pass on costs to the consumer? >> not at the moment. >> would that change in january if the tariffs rise to 25%? >> i think that we can't pass these increases on to the consumer. we have to figure out a way to manage our internal costs to absorb it. shery: that was j. crew c.e.o. jim brett speaking exclusively to bloomberg's emma chandra. coming up the u.s.-china trade war tushes cutthroat. a look at how it's putting equities to the test next. particularly as china says we can't talk given that the u.s. has put a knife to our threats. we are counting down to the market open when it comes to japan. nd we have the harvest festival holiday taking that market out of action. japanese futures looking pretty

positive. we had japanese stocks rising to the highest since january. the yen has been just shy of that 113 handle and some positive news handle on a u.s.-japan trade deal could lift stocks further. ♪

haidi: it is 9:30 a.m. here in sydney. we are 30 minutes away from asia's first major market open. looking like a pretty flat session. could be another late high when it comes to trading in tokyo with the japanese equities rising to the highest since the start of this year on the back of the yen, which is at its weakest since the start of this year. holiday still in session as asia gets underway. shery: we will see how the session in the u.s. translated to the asian markets. markets closed down. the s&p 500 was down for the third consecutive session. utilities fall. 10 year yield at one point

reaching the 311 level. haidi: you're watching daybreak asia. let's get you the first word news with jessica summers. jessica: thanks. president trump reasserted his america first perspective in his address to the united nations general assembly. he criticized iran and venezuela and offered a blunt rejection of the world's multilateral approach. prompted delays as he open laughter as he lauded his success. >> in less than two years my administration has accomplished more than almost any administration in the history of our country. [laughter] so true. didn't expect that reaction, but that's ok. has bowed to u.s.

pressure and will not buy any iranian oil in november. that is as president trump's new sanctions come into effect. they said they have not ordered any crude for november. other big refiners say they have no plans to do so. final decisions on purchases are not due until early october, so they could still change the mind. the trump administration says it is moving ahead on a trade deal with mexico and will not wait for canada. a trade representative says the u.s. has not been able to bridge the gap with candid on dairy. -- canada on dairy. google, facebook, twitter and

others will present an new code of conduct to the european commission later wednesday. it follows months of pressure from the u.s. and europe over whether russia spread disinformation on social media to influence the u.s. presidential election and brexit votes. 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. counting down to some of the major market opens in the asia-pacific. south korea still out on holiday. for more, here is sophie kamaruddin. we are in for a cautious session. geopoliticsde and are top of mind. what else could drive sentiments? sophie: oil, as prices are losing steam. the could potentially cap upside with wti set for the first drop in four sessions. this after a report showed a

surprise increase in stockpiles. that would be the first such rises since early august. oil prices are still trading around 2014 highs. storing -- pouring cold water on top of hundred dollar oil, saying another supply catalyst beyond iran would be needed to see a meaningful upside and production from other opec producers and russia could see losses offset. they see a return is stabilization of oil prices between $70 to $80. they said the u.s. would ensure the oil market -- that could put more downward pressure on prices as well. haidi: a nine-month high for japanese equities after a seven day rally. are we in for a breather or could we build on that? sophie: we do have trading at

highs we saw since last february. you can find this chart on the gtv library. investors are focusing more on the prospects for earnings growth. japanese shares could finally be playing catch-up to increase turning rejections, those are the turquoise lines. they have been steadily declining in recent years. automakers have been part of this turnabout in the positive sentiment of late, especially if japan can avoid u.s. auto tariffs. that could mean investors could buckle up tight because it could go up higher. research says there is a low chance japanese stocks will head back into a downward direction. a word of caution. advisors in singapore say do not chase the rally until the end of the month because that will mark the end of the japanese fiscal calendar.

there will be a lot of windowdressing ahead of that. haidi: thank you so much for that, sophie. markets could be mixed. watching japan keenly. also watching china, which came out with a robust response to the latest tariffs. a chance of further escalation in the trade war. their reaction included that ip laws are lax. i want to bring in our chinese correspondent tom mackenzie and our chief asia analyst as well. tom, very severe language, it's you -- if you will. the vice minister saying they cannot negotiate. there is no sense we will see any movement at this point. tom: i think you point to a couple key takeaways from what we heard yesterday from this press conference from five different ministries trying to present this united front. what they outlined was what they said was an intellectual

property regime they said was not problematic. also when asked about forced tech transfers, they said joint transfers are valid under the current rules and suggested they are not written into law, this forced tech transfers. these issues are at the heart of the concerns coming out of the trump administration. effect china is not even a knowledge and they are a problem suggests they are far away from drawing a proposals or solutions to adjust those concerns. in terms of intellectual property, there is evidence to suggest the regime is robust. it is still disingenuous to suggest it is at the same level of the european union or the u.s. and of the law often does not match with reality in china. even if it is not written into law, many executives say forced tech transfers still continues. the other thing we heard

yesterday was a fleshing out of these proposals to shore up chinese economy in the eventual audi this trade war continues around boosting consumption, infrastructure, spending, cutting taxes and fees. so suddenly the sense you have got from the paper published over the weekend and from this press conference, china cement in its possession and becoming less flexible, not more. shery: do they have a point, given the made in china 2025 policy? how important is this for the long-term chinese economy? >> from the chinese inspector they point to industrial strategy. germany is a case in point. other economic historians would point you towards japan and south korea. nonetheless, it is not just america. third parties are concerned with china. about a lack of market access. they complain that they do have to make these joint venture

arrangements, they have to share technology and ip and they do not get the protection they need in response. more broadly speaking, the u.s. is certainly leading this trade dispute with china. it is also tangled up with other trade disputes around the world. but there is a much broader undercurrent of support mounting towards china, even though china's is not agree with those -- does not agree with those. what are chinese executives on the ground telling you about how they are positioning themselves for the next few years? tom: that is really interesting. increasingly we are hearing from executives we talked to they are shifting focus away from investments in the united states and towards the southeast asian region, and to some extent europe as well. a key concern for them is the --tooling of sify us

it will give them greater oversights in america. they are deeply concerned about that and that is changing how they look at potential opportunity. southeast asia and europe could benefit in terms of chinese investments as they shift away from the u.s. one of the interesting things to come out of the press conference yesterday was they pointed out despite total trade and gdp numbers, that china's gdp per capita was still relatively low. is there a sense they are still trying to play the developing economy card? they think this effect of subsidy has been in place the last 20 years should stay in place? enda: this is a key line of defense china uses. they are still developing country. they are on the path to being a rich nation. the counterpoint other nations make is china has reached a position of scale in the world economy where those no rules can

no longer be applied to it. it needs to adjust and upgrade to levels with the rest of the world. that is why there is a feeling that if donald trump could sort of reach an agreement with trade disputes with key allies such as canada, trade tensions with europe, he just pulled off a trade deal with korea. if you could get japan on board as well, there is if you there work alliance that could with china. make clear the wto no longer applies to them. what china does not take that viewpoint. they continue to affirm they are a poor country on the path to being a rich one. shery: how would trade negotiations with china have an impact on how the u.s. deals with other trade negotiations such as with japan? of course the u.s. case pushing for bilateral trade, something japan doesn't want. enda: difficult to say.

i think china is probably separate from the rest of them. ultimately the u.s. concerns with china are about the structural design of china's economy. and the role of state sponsorship. with japan, europe, agenda and mexico -- canada and mexico, ultimately it is about trade, cutting a deal about the buying and selling of goods. that is why china is separate. that is why there is a view it will be a much more protracted trade dispute, even if in the interim the u.s. can cut deal with other nations like japan, like the deal they agreed to this week with south korea. shery: thank you both for joining us. coming up next, we are searching for the hidden drama in the meeting with a rate hike this week all but certain. this is bloomberg. ♪

shery: this is daybreak: asia.

the federal reserve has begun its two day meeting with investors in -- convinced it will raise the key rate. could anything surprise the markets at this point? kathleen hays is here with a preview. where do we find the drama in this meeting? certainly it is probably not in the rate hike. the third one of 2018. of course there is still some question. even know the consensus in the markets has come in line with the fed that it will probably be a rate hike in december as well, why, because the economy is growing, i can go on. people are on board. where it gets more interesting is 2019. jump into the bloomberg and you will see why. these two lines show the expected number of fate rate --

fed rate hikes in 2018 and 2019. 2018, you can see now people are looking for just about four hikes total. how it isyou can see a different picture. just two. why is this interesting? the fed, the consensus is pretty much looking for three next year. i will point out to you, compared to a year ago, look at this upturn in what the market is looking for, again, for all the reasons i just mentioned. with a trade war slow down the fed? what trade war? consumer confidence hitting an 18 year high. people are confident. tax cuts, that is what the fed keeps emphasizing. who will win this debate over how many rate hikes in 2019? let's look at the fed spectrometer. you can see there is only one from atlanta fed, then three

plus one, very hawkish fed bank presidents in the hawkish range. in the middle we have jay powell. he carries a lot of weight when it comes to the vote. will he be a moderating factor? the voter survey shows concern. it is not the main concern, but probably one on people's radar. the fed led by this hawkish contingent will hike too much. maybe in 2020. jay powell asked questions about that. we're is the neutral rate? towill be an important place see what he is thinking and what he expects for the rest of the fed. shery: let me turn to argentina. the federal bank chief resigning abruptly. we had heard a deal could be coming this week. has this anything to do with that? kathleen: i think what it has to do with is, for example,

yesterday he said the revised imf deal will need a new monetary policy report -- approach. i think many people are wondering if he is taking the fall. very importantly he helped all those creditors get on board with renegotiating the default to debt from 2001. he brought 100 year bonds to argentina. he did so much. the economy minister said now it is possible if the imf is on board they could sign the deal. i met him briefly. good look to you in your next venture. perhaps stitching -- stepping down to clear the way for this deal. shery: kathleen, thank you so much for that. eisen.now joined by ob -- by bob eisen. bob, great to have you with us. ushleen was explaining to

how the board members stand. bloombergnction for subscribers who can see the division between the hawks and doves and where jerome powell lies. we are expecting a 25 basis hike this week. the next fed actions are still in doubt. how will this dynamic between the hawkish and dovish camps play two more close decisions later in december and next year? bob: i personally do not think there is as much difference right now among all the people that some of this hawk and dove kind of talk may suggest. wholeof all, there is a new group of people now coming on the board of governors as more and more people are being confirmed. and most of those people are pretty centerist. i think the really dynamic here that is going to play out is, first of all, we're going to get

a rate hike tomorrow. i think that is baked in the cake. and probably december as well. and two or three next year. but this group i think has been so cautious, particularly given the newness of so many of the people, that they are not just going to rush on and be data dependent. that is the word we are going to hear tomorrow and the press conference, and that will be the mantra through next year as well. i don't think there is any question about that. shery: what about policy be accommodative? do you expect that to be dropped, and what would that imply? bob: i think that's a really interesting question. by dropping that policy statement about being accommodative, that is signaling that they are near the end. so, if we see that word and phrase come out of the statement, then those people who were thinking about two rate

hikes at most next year may actually be on the high side. bob, i am watching out for two things when it comes to the statement and trajectory. one is obviously the inflationary impact of tariffs. is this rising concern of oil prices pushing up treasury rates. i want to look at essentially the way wti prices have been tracking developments when it comes to the 10 year treasury rate, moving in the same direction. do you think $100 a barrel as well as tariffs will be a risk for the fed to make them completely rethink when it comes to what their plot for next year is? bob: i make two comments on that. first, given the production of oil in the united states right now and the fact that we are a is onnt producer, $100

the high side of what it comes to being all the fracking back online and everything else. so, even if it gets to $100 it will not stay there for very long because more suppliers will come on the market. to me, the real risk here is the deficit and a lot of people did not realize that since the fed started to shrink its downseat, the treasury issued $1 trillion more in debt into the marketplace, which is about three times more than what the fed's balance sheet has shrunk. and we know there will be another $1 trillion issued next year. that puts a lot of supply in the market, and that puts upward pressure on interest rates. so, that's another reason why you see the fed being cautious. i think it will be treasury policy and treasury issue that will be the dominant force playing out, both in terms of where the turn structure is, where the level of interest

rates are, as well as able to a lot of the fed's job for it. so there will be less of a need for policy moves. i want to get your views on geopolitics, whether it is just noise or -- president trump a ring his grievances to the u.n. general assembly overnight, kind of alienating traditional alliances and praising traditional enemies like north korea. do you think the risk flowing through to growth and market sentiment, or is that just something the market has conveniently separated itself out from? bob: if you look at sort of the pattern, you have got to be concerned about it from a political perspective. but in fact it is not really had much of an impact at all, at least from what i can see, on what has been happening domestically. and i think it is really telling . there's an excerpt from a speech

and everyone is laughing at him. that is not comforting from an american's perspective, but clearly it has not translated into problems in the economy so far. betrayed issue is something we have to be concerned about. how that is going to play out, i don't know. trade is a lot more significant for other countries than it is for us. shery: the economy seems pretty solid, yet when we saw the latest edition of the fed book, it was not as bullish. what is that telling you? bob: i find that very interesting, because the fed minutes from the last meeting talk about the economy being strong. well, if you look at the second quarter gdp number, yes, it was strong. but history shows that there have been very few instances, if any, where you have had a four number followed by a five number or another four number in terms of gdp. it will not be until december where they get a reading on

third-quarter gdp. i think that will set the stage not only for what they do in december, but how aggressive they will be going out into the other part of the year. the page book used the word like moderate. that is not strong. moderate talks about 2.3% gdp growth. there is a disconnect there, no question. shery: bob, thank you so much for your time. of course plenty more coming up. this is bloomberg. ♪

sophie: we're counting down to the major market opens in asia. keep an eye on japanese auto stocks. also seeing deals from japan anchor -- inc. also worth watching, this after

nike's mixed earnings. haidi: market open in japan and sydney coming up just ahead. looking a little mixed. this is bloomberg. ♪ s is bloomberg. ♪

haidi: good morning. asia's major market open has just started trading. welcome to daybreak asia. haidi: our top stories, asia futures point to a mixed session. japan is on track to extend a rally to an eight-month high. u.s. equities as the fed opens its meeting, a rate hike looks like a done deal. shery: president trump starks --

sparks derision at the united nations. mixed picture in markets here in the u.s. s&p 500 falling for a third session. let's see how things are doing in the asian markets. a quick look at how stocks fared on tuesday. we had japanese stocks capping a seven-day rally. this morning it is off by 4/10 of a percent. aussie shares are getting ground, now up a 10th of a percent. this is just a look at how they fared yesterday at the close. new zealand stocks are treading water after we got data this morning. when it comes to what is ahead, chinese us could be in for a subdued session. hong kong will be closely watched, with a trading debut in the spotlight. we could be facing overall a

cautious session this wednesday with the fed decision looming. let's check on the kiwi dollar. it is not budging my much when you consider new zealand posted its widest trading deficit on record. this, as exports fell. the kiwi trading around a 56 handle when it comes to trades. aheadhave this happening of the meeting on thursday. that is not expected to be hawkish. thursday we also have a few other central banks at-bat. the ones in focus will be indonesia and the philippines. it last check on oil prices. crude set for the first drop in four days. brent also under pressure, although prices are staying at 2014 levels. this, after u.s. industry reports signaled arriving stockpiles weekly increases since early august. the market is considering the

impact of iran sanctions as well. watern now throwing cold on talk of $100 oil, saying another supplier beyond iran would be needed. oil prices under pressure. haidi: sophie, thank you so much for that. let's get you the first word news in the meantime with jessica summers. jessica: president trump reasserted his america first perspective in his address to the un's general assembly. venezuelaed iran and and rejected the world body's multilateral approach. he arrived late, forcing delays and scheduled a reshuffle. and he prompted open laughter as he lauded the success of his administration. myin less than two years, administration has accomplished more than almost any

administration in the history of our country. america -- so true. [laughter] except that reaction, but that's ok. jessica: we will have more on the u.n. general assembly in a moment. iran has denounced u.s. sanctions as unlawful and amounting to economic terrorism. president hassan rouhani said trump administration wants to make international institutions irrelevant and is approaching diplomacy with quote, a nazi disposition. he said dialogue starts with ending threats. bowed to u.s. pressure and will not buy any iranian oil in november. that is from president trump's new sanctions. they say they have not ordered

any crude for november loading. other big refiners say they have no plans to do so, either. final decisions on purchases are not doing too early october, so the refiners could still change the minds. the president of south korea says north korean leader kim jong own once a second summit with president trump as soon as possible. moon jae-in has pushed back against widespread skepticism about these got the schism of -- he told fox news it is still possible for the korean peninsula to become nuclear-free within trump's first term. >> he said he is willing to permanently dismantle the nuclear facilities in a verifiable way. i believe i have ascertained chairman kim's commitment to complete denuclearization. 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. trade tensions are taking something of a backseat for now as investors await the impending fed rate decision. let's bring in garfield reynolds in hong kong today. u.s. stocks struggled for direction today. they took some cues from president trump's address, but really nothing huge. so what can we expect out of trading in asia? garfield: it is hard to know quite what to expect out of trading in asia, given the last week and a bit has seen tariffs announced, then tariffs went into effect, then hong kong fell, which might have just been internal stuff. the one constant over the last seven trading days in japan has been the topics. that will be a key market to watch. we have a chart i can show you

from the gtv library. h ofing at the way -- muc this year has been a downtrend for all of asia and japan has been part of that. you can see at the end, how the topics has broken above its downtrend. the same time the asia-pacific has yet to break that downtrend. i would argue we definitely will not see japan continue that winning streak if we are going to have any hope of asian shares breaking their own. shery: that is really interesting. how much of that is because of a weaker yen and how much because of really positive corporate profits? garfield: well, the weaker yen has helped. so has abe's confirmation. but those profits were there building and building and building, and now investors are finally starting to wake up to it all, to take heed of that. i did a pace -- piece the other inationfore abe's re-nom

showing how gains in earnings in japan have been truly spectacular, much better than what is going on with the s&p. it over the past five years, the gains in the topix are only slightly better than the s&p. if you get the earnings love that america has been generating, taking place in japan, the topix can go a lot further than where it is now. haidi: what about where you are in terms of taking a look at the chinese and hong kong markets? will the focus be on trade or more towards the fed? kongeld: i think in hong you are definitely looking at the fed and how that is playing into the liquidity tangle markets here have gotten themselves into. you have the increase into overnight banking rates on monday. i had to get the days right. dollaro heavy hong kong

going all over the place at the end of last week. a lot of interest in what is going on there. expectations for the fed for today and the future, that will play a role in that. for china, trade is still the issue. there, the issue is will the chinese government reveal any more details about what they will do to help the economy cope with whatever trade fallout there will be. haidi: garfield, great to have you. usually you are here in sydney, but today from hong kong. president trump reasserted his america first perspective in his address to the united nations, rejecting the multilateral nature of the very organization he was speaking at. he also drew laughter from the audience after boasting about his domestic achievements. our senior international analyst joins us now. he was rather subdued. he was reading from his speech, but the themes, narratives and

grievances were all pretty familiar. jodi: that's right. it really was like a campaign rally for him. , sort ofut right away trying to make points about what he had done for the u.s. and it did not play well. it was not a campaign rally. this is a very different audience. and from the beginning as a candidate he has not been in favor of the u.n. as a body, as international bodies of strong participation in u.s. in general. this, to him, he was a little surprised, but the reaction should not have been surprising given that he was speaking to a body that he has contempt for. he was tough on the same targets he has been tough on in the past. but interestingly, very different from one year ago, he came out with praise for north korea's kim, rather than last year when he derided him as rocket man.

shery: what a difference a year makes. some of the same old targets, calling on the world on isolating iran. china, the trade war, all made it in on his list of grievances. jodi: some of the same ones. very tough on iran. indicated there will be more sanctions, and of course that will continue to affect the price of oil. took on opec. really took on foreign aid in general. hinted that the u.s. is going to have some revamp of foreign aid. did not say much about russia, interestingly. venezuela came in for criticism. again, a very kind of tough speech about u.s. in terms of what it wants from bodies like the you when -- the u.n. also coming back to this kind of

america first policy, we have to take care of our own. also suggesting that for other countries as well. that is what you should do, that should be your response. shery: of course president trump taking the chance this week in new york to meet with other heads of state. we are expecting japan's prime minister shinzo abbe to meet with president trump again tomorrow. we of course had trade talks again today. what else is on the agenda? going to beare sideline meetings with allies like prime minister abe. trump have obviously met a lot the past few years. not really seeing japan get a lot from those meetings. but they will continue to have those meetings. we are also seeing people like john bolton, the national security adviser also being involved, giving speeches, being almost as tough as the president on iran.

we do not expect a lot to come from the sideline meetings. we expect continued talks about principled realism, and hint, again, about changing the way the u.s. distributes foreign aid. i think that will be a big topic at the sideline meetings as well as in the coming months from president trump. shery: trump was complaining that some allies are freeloaders. how much was there a disconnect at the u.n. general assembly in you look at the whole of the meeting taking place this week? jodi: it is a bit odd. you have president trump coming out like he is at a campaign first, and thes people assembled there are there to hear a speech about geopolitical trends. none of this was surprising, but the tone, again, we saw the laughter and the president was a little surprised he was hearing that laughter. again, he is taking on this

world body where he is there to speak. the optics are odd. he continues to grapple with his role as a world leader and how he portrays america on the world stage. it is different than a campaign rally, and that is where he is much more comfortable. shery: jodi, thank you. still ahead, bp is expecting more pressure than ever from the latest iran oil sanctions. our exclusive with the ceo data this hour. -- later this hour. our political interests in the u.s. simply a sideshow? this is bloomberg. ♪

shery: this is daybreak: asia. haidi: our next guest says asian equities can push higher and

u.s. treasuries are starting to offer value. head of research joins us now from melbourne. in your morning note today you said a lot of the political and geopolitical events going on and devouring the headlines at the moment is really just a sideshow. what should we actually be focusing on? next 24bviously in the hours it will be how the fed marked everything they are seeing. data in the u.s. has been pretty strong. has been pretty good. consumer confidence was very strong. what will happen in long-term projections as well. that is obviously an immediate issue and people are focused on the backend of the u.s. yield curve, driven by the european bond market at the moment. people are sort of sensing a potential change in guidance going forward.

what is happening in the rates market, the fixed income market is bigger. let's bring it back to the real economy. 30 year fixed mortgages in the u.s., the highest since 2013. i think the housing affordability engle is very much -- angle is very much on the radar. haidi: do you see the 10 year yield moves above 3.1%, around those levels, we talked about 3.5% being a threshold for more volatility. we saw that happen in february. are you suggesting we will not see a repeat of that because maybe this time around it is slower? much good news is in the price now. we have had a slight repricing in the european bond market which has caused u.s. yields to move higher. up.aw the curve move oil prices have moved up strong

as well, very excited about those. we have seen a number of oil research prices talking about $100 oil. that is probably the inflation expectation price. i think 312 is the level we are looking at. that was the high we saw back in may. a break at that level and you could see things moving aggressively higher. there is a lot being discounted in the treasury market at these levels. if you look in the euro dollar or short-term, a lot is being priced in here. in terms of rates and treasuries, we are pricing in a lot of good news, which of course is selling oil prices as well. i think if we start seeing implied volatility kicking up, which is a big if, then u.s. treasuries will benefit from that. shery: given what we are seeing in europe and key changes in officials, what they are saying, how do you position in the euro?

chris: we like the euro at the moment. specifically,llar probably hold out against that for get clarity from the fed. it is better to react than prophesies. -- prophesize. ucb will probably start talking more about the margin. we liked obviously they have a current account surplus. we like hurry -- hearing germans are potentially going to try and boost the currency counts. but we are seeing the start of forward -- forward guidance. they are in the backend of the situation now. there is a clear repricing coming through in europe. you have seen the difference between the two as a way of pricing, moving from 50 basis

points to about 63 basis points at the moment. market is and europe really the center of the fixed income universe right now. shery: we continue to see the latest negotiations on brexit. this chart showing implied volatility on the right. given all the geopolitical tensions, how tradable is the british pound when it moves so strongly on political headlines? timeframe, anything outside of four hour chart i think it is pretty much untradable. that is why you have seen a lot of institutional money steer clear of the pound. it is pretty much untradable. are, it is a we political currency beholden to headlines. to me, not an algorithm, it is difficult to react to that.

we know theresa may will be speaking on the third of may. she will not be looking to have another election. that will make a lot of sense. then we go into the october 2018 we push forward as we go into a crescendo into the november summit. there will leave you more -- there will be more headline risk around that. so, it is pretty much untradable outside of four hours. one thing is certain. through october, we are looking at buying steady volatility structures. aidi: i want to throw up chart to get into a conversation about your assumptions about china's ability to withstand the trade war and the natural structural slowdown they were having to deal with before all this. this is looking at copper prices.

this might suggest economic growth in china is holding up pretty well. we saw a bounce about 5% last week. the broader bloomberg commodities index as a gauge had its best week since april. if you look at this demand side of the story, is there a suggestion there is still plenty of demand in china? chris: yes. i think the demand is still robust. there are some signs of vulnerabilities in chinese data, and the slowdown is real. but it is not slowing down at a pace where we need to be wholly concerned. the economic gauge i think is at the epicenter for me, it's money supply numbers. that has come down to 8%. a lot is bouncing around off those money supply numbers. that is the one you want to be looking at. if you see deterioration in that than economics in china slowdown. the thing we are looking at closely is the renminbi.

they said they will not use that as a weapon. maybe as we go into the back end of the year when tariffs go up to 25% there will be another chance for leg lowering. two gauges we're looking at closely in china are trading mechanisms, money supply numbers, and cnh into the latter stages of the year. shery: chris, thank you so much for your time. happening right now here in new york, japanese prime minister shinzo abe speaking at the u.n. general assembly. we will keep an eye on that and bring you the latest headlines when we get them. bloomberg subscribers can continue watching at live go. this is bloomberg. ♪ is is bloomberg. ♪

haidi: this is daybreak asia.

check let's get a quick of the latest business flash headlines. cbs has named the former time warner ceo the interim chairman, succeeding les moonves who left facing allegations of sexual harassment. the board unanimously approved the move, which was represented by a committee. cbs shook up its board earlier this month, adding six new members. it also brought in three female directors to improve gender equality. the head of coffee trading at starbucks is said to have quit as the chain struggles. leftberg is being told he at the end of july, although starbucks declined to comment. it follows the requirement of the cfo, leaving investors worrying about where starbucks is going. this is happening right

now in new york. prime minister shinzo abe speaking at the u.n. general assembly. we are monitoring that speech, whether he talks about the trade relationship between the u.s. and japan. this is bloomberg. ♪ is bloomberg. ♪

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>> and our away from the open of their to read expecting a rate hike to come through with uncertainty for expectations for the rest of the year and next year. you are watching daybreak asia. >> trumpet immigration is moving ahead on a trade deal and won't

wait for canada. trade representatives said the u.s. hasn't been able to bridge the gap and this is a result the skewed. and the dayina seven new deal and requires a new approach for monetary policy. >> the top social media companies have admitted to new technology despite big news in europe. it follows months of pressure from the u.s. and europe before the russians spread disinformation on social media.

they are set to announce the inclusions this week. sources tell bloomberg the news could come on thursday. it is not known whether the sheriffs will be included. they will hold a news conference to get more details. >> they will give a statement and later on wednesday. charged with defenses, including more than half a $1 billion.

>> let's take a look at the markets of our this morning. >> taking a look at what is happening, taking a breather and a seven-dayfter rally. theait on the details of trade talks. dollar steady and post the widest trade deficit. they are snapping a two-day decline. with that, let's check in on commodities. pricesave some commodity just holding overnight gains.

overnight trade is just treasuries are keeping steady. elevated oil prices signaling steam.ng crude losing crude down by half a percent. suzuki continues to plummet. based on a template also a focus and it could sue investors for uncertainty. about 3.4%.pping

falling nearly 10%. >> we are now hearing it has stopped all of the flights. they are impacting some of our systems. delta has issued the groundstop's. is.ave seen some tech which we will give more details as we get them.

the ceo spoke to bloomberg . is that oil going to come off the market? down overall, go the levels are low. what happened the last time? market oil come off the question mark >> i think there is more on the market this time. such, you willre .ave a hard time

everyone is being cautious. >> order the longer-term implications for you and the the oiluestion mark >> and wehave come back up will be really careful. industry must invest in not lose the credibility again. >> has it shifted from saudi arabia over to the united states? you have three countries out there, the united states russia, saudi arabia. saudi can probably flex more in canu.s. -- and the u.s.

market led. >> talking about opportunities come at you guys are putting a lot of effort. it feels like you are relate the -- really distributing your focus. built and shareholders just made another one. about 700,000 barrels per day. it is a really important place for us. there is more availability. do you rank? >> right now, interesting

production is the highest in the world for us. we have a big shale gas business. liquidscan put it on and that will be more important >> how do you account for vehicles. what do you anticipate question mark -- anticipate? have what they call their around london. interface is 13 million customers a day. in terms of solving climate change.

people forget you cannot move it with a coal fire put >> with the issues between the u.s. and china, have you seen any direct impact on where your oil is going to question mark >> it continues to move. it is really a global market. we see some impact of sanctions. be see steel going on in the u.s.. for now, the impacts are not there. that is where the volatility goes in.

>> oil is moving further following a surprise rise in u.s. inventory. tokyo.ins us live >> it has taken a little bit of a chunk out of the market. i think the consensus is while there is a lot of volatility, it is still a bullish market on the moment. bit of a despair. isy don't think $100 barrel going to last long.

>> a lot of people are quite surprised on how much of the iranian exports are going down. that they arerd likely going to hit harder this time around, so what does this mean question mark >> last time obama issued -- what does this mean? >> last time, obama issued waivers. we are seeing countries like south korea, japan and india, they will stop iranian oil which means a much bigger decline than what the market initially expected. secondly to a supply crunch. >> thank you so much.

the moment, during when it is good for the emerging-market. the time is now. this is bloomberg.

asia.s is daybreak wondering whenn would be the right time for the markets. our next guest says now is the best time to get out of debt. the type youat is are looking at when you're thinking about how attractive they are right now russian mark >> at think it is important. a current time is to get into emerging markets.

do you parts of asia find them to be attractive? bills lineng dollar for $.80. i have a high conviction this company is not going to default. let me give you an example. issuesseeing quite a few being sold by equity buyers being into capitalize. for a bond investor, i'm happy to lock in rate. these opportunities are actually

everywhere at this point. >> how challenging is it to get a different view for local currencies and how do you compare to what it is making now? has intrinsic by. you can actually realize the deal. ultimately, is the country able to create value. is the current account positive? and, are they going to be able to pay that back? from a perspective, there are countries that are better off and ones that are more vulnerable. i would say even the ones more

asia,able in the case of even if those countries have since -- seen a substantial selloff, they are raising interest rates and it is important to have a long-term investment, but we do think even local currencies might actually present an opportunity. >> i want to give us how much was an incentive in the space. we have seen that come down. aen you say you need to have slightly longer-term outlook, a littleests you need

bit more volatility short-term and momentum really gets going to. there is very little you can do except buckling and wait for it to pass. >> that is right. one of my managers mentioned investing emerging markets is military,n the boredom and then moments of terror. you do it if you have a short-term. going back and having a dollar bond, it is set point possible that it as long as there is no default, i realize you gain a really great opportunity over the long run. chinese assets, i can look at

and talk about where we are seeing value and i can talk about it. , we think themost selloff since the middle of june has a substantial amount of risk. i think where the currency goes will be incumbent on the supply howdemand, specifically wide the channels are. just today, we saw a news article highlighting that they theconsidering accelerating onshore equities market and accelerating those shares. that would be very positive. in terms of the currency, also has to do with the first order

of affects. what are the second round affects? then't underestimate chinese authorities to step on the gas pedal. as long as you take at three your perspective, we think currency is quite attractive. ,n terms of interest rates being in a monetary regime is quite the couple for the rest of the world. most other parts of the world where you talk about the u.s., europe or japan, we are talking the case of china, we believe in traits will be bonds and government actually to down a little bit.

think the need for the government to lower interest rates. least, there are interesting opportunities, specifically in some of the rail -- well-run enterprises and we think they are more than compensating you. >> when you're trying to gauge how much exposure you want, how much is based on trade tensions it china opening up the markets. >> what we try to do is ask ourselves what is temporary and what isn't.

view can take a long-term china stillwithin has an account surplus. we think the demand for chinese goods outweighs for goods. we think it is wall anchored. the short-term is where it is much harder to call and that is why we tend to have a long-term and be able to take it vantage. >> coming up later, government and business leaders continue to converge. the french president joins us from the event for exclusive conversation taking place.

>> this is daybreak asia. check ofget a quick the latest business flash headlines. after ites fell narrowly missed estimates. american sales outpace

expectations. nike did miss estimates for greater china. the quarter closed just before the headlines and features nfl star colin kaepernick. a real uptick traffic as well asent socially and commercially. it is a decision that reshapes two of europe's biggest lender's from investment banking. they have promoted a longtime let's say to look at

what is coming up. >> we had a very exciting hot pot. >> still trying to get a reservation here in hong kong. debutre making their today. also, we have been talking about growth. they're going to talk about their outlook. that actually comes out. aheadg us now for what is given the concerns. >> that is it from daybreak asia. this is bloomberg.

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kirk ferentz must 9:00 a.m. in hong kong and shanghai. welcome to "bloomberg markets: china open." rishaad: traders await the fed. the topix retreating. yvonne: treasuries are steady with yields near seven-year highs. rishaad: oil on the slide on reports of an increase in u.s. stockpiles. yvonne: president trump sparks derision and denunciation at the united nations. iran says he is committing economic terrorism. ♪