haidi: i'm haidi stroud-watts in sydney. one hour away from the open. >> good evening from bloomberg global-- bloomberg's headquarters. >> welcome to "daybreak: asia." ♪ haidi: our top stories, the canadian dollar hits a four-month high with the new freeway. the deadline is midnight in washington. issue antitutions emergency call entree.

the wto, imf, and world right -- world bank. early indicators show china is being heard by u.s. tariffs. the survey is at its lowest since may of last year. let's see how things are shaping up for the market open a nation up for that, we turn to sophie. after asian stocks capped three straight quarters of losses, we are looking into the final stretch of 2018. we have china closed this monday. not in the way of reaction to the latest pmi numbers. we have it trading in australia. it will be in focus in sydney after the interesting report was less impactful than anticipated. japan's futures are not in higher ahead of a third quarter survey. it is considered a lagging indicator. that may be as, drag on corporate sentiment. investors will be watching for the first fall through of the boj on its plan to cut long

buying in october. canadian futures are nudging lower. september trade data deal -- adult within an hour. today, also marks the start of a process to clear line from the dmz with a gold through of november. also this monday, we will get pmi readings from across the region. inflation data from indonesia and thailand. it will be cute to watch as higher oil prices have ramped up inflationary pressures. checking in on how oil prices are faring. around $83top-ranked a barrel. this after rising for five straight quarters. trading closer to 83 handle. dollar trading around a two-week high. little change as it loses ground against the canadian loonie. this is a countdown to the nafta deadline which could nudge it to 127 level. the mexican peso make it a smaller boost than most -- that

most investors expect a bilateral agreement with the u.s. it helped push the peso away from the 19 handle. thank you very much for that. let's get you to first word news for rosalind chin in hong kong. rosalind: president trump has denied micromanaging a new fbi investigation into supreme court nominee brett kavanaugh. woman whoe is a third accuses him of sexual misconduct not be included in the inquiry. wantsesident tweeted he the investigation for everyone. a lawyer for one of kavanaugh's classmates says -- conducted in it is a professional matter and we give the fbi the ability to do their jobs instead of having it be micromanaged by the white house, we can at least get to the bottom of the evidence. elon musk has settled

withun-in with the fcc'-- the sec agreeing to step down as a ceo over his go private tweet in august. tesla will have to add two new and othert directors communications of its outspoken ceo. tesla has slumped since the funding secured tweet was sent. from the 7.5l magnitude earthquake in indonesia has topped 800 with casualties expected to reach into the thousands. the government has declared a state of emergency for 14 days, as many as the is found at the beach where a festival was being held. it triggered a tsunami three meters high. were no say there warning sirens. western japan is at a standstill ahead of that. they suspended all trading services for the first time. they are expected to resume monday morning. the metro line will shut down

and international airport closed two runways. the airport only recently reopened after being damaged by typhoon debbie. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm rosalind chin. this is bloomberg. haidi: thank you for that. the u.s. and canada are in negotiations to update nafta ahead of the deadline of midnight sunday. washington time white house says advisor peter navarro second -- several sticking points remain. joining us is rosecrans and. how likely is it we will get a nafta deal that also includes canada? we're hearing a deal is imminent. not much detail beyond that. : exactly. with nafta, it is never over until it is over. the canadiang from and u.s. side, then mexico has weighed in as well, that a deal is imminent. a deal is likely by the end of

the day. there are a few sticking points that have to be cleared. peter navarro, the white house trade advisor, he has been optimistic. there is momentum in the united states to get this deal done. worried about their supply chains, especially between the u.s. and canada as well as to mexico. they have made their thoughts known to the white house. i think canada really feels a lot of urgency to get a deal done. as always, and has been the case for over a year, a few things that neither side wants to give up on. haidi: what are the major hurdles and in terms of issues both sides are stubborn on at the moment? actually some of the ones on the canadian side would be they want to get a free pass from the net its mates -- from the united states to not subject steel and aluminum tariffs.

saying those tariffs is something the u.s. wants to put on in the name of national security and canada reasons that as a strong u.s. ally, it should not be subject to those tariffs. the u.s. wants to get access to the canadian dairy market, which has pretty high barriers, protective barriers. i think the u.s. negotiators the u.s. can threaten auto tariffs against canada, that they make it their way. really those tariffs will be so ruinous to the canadian economy, probably pushing canada into a recession that it is a last-minute thing the u.s. can hold out. president trump has talked about this. he talked about it being the mother load. that's come in the end, is probably what will push canada to get a deal done, hopefully tonight. haidi: -- kathleen: on sunday, the wto, and world bank, issued an emergency call for international trade reform. in. will all be meetings

the wto having a big meeting and then imf world bank and a couple weeks. is that what is behind this unusual joint call from all three of these bodies that once? ros: you know, i think a lot of it is about president trump. but it is not all about president trump. we have definitely had the u.s. -- or president trump, saying, more than once, including in a bloomberg interview that he is prepared to pull out of the wto. and basically the trump administration and its america first policy has been upending the world order in many ways. up to and including trade in the wto. i think these groups, the imf, world bank, are looking at modern economy, looking at e-commerce and wondering how they can best use it -- best be positioned to have meaningful regulations and a meaningful trade structure. they have talked about the slow pace of reform. predecessorber, the to the wto, we used to call it the general agreement to talk and talk, they just -- changes

very slow. changes glacial. i think the leaders of all the bodies where he that without responding to a rapidly changing becomingthey risked obsolete and maybe it will not just be trump threatening to pull out, it could be other countries as well. really, a need to look at those theements and look at how trade operates and maybe do a bit of a refresh on an agreement that has been around since the mid-1990's. kathleen: always lovely to talk about someone who has memory of how long these things have gone on. the global agreement on talk and talk, i love that. i want to thank roz krasny in washington. i went to get onto a story from this past weekend. gauges of china's manufacturer activity worsened under increasing pressure with washington. on top of slowing economic growth. factory gauge slow

to 50.8 while the kitchen manufacturing pmi fell to 50. its lowest in 16 months. -- a readingreason of 50 is a dividing line between expansion and manufacturing and contraction. the concern comes, particularly when we know that the whole business of emperor -- of imposing tariffs and having an impact on manufacturing has only begun. a couple of the things i would like to throw in, all of these purchasing manufacturer index have sub indexes. in the case of the official pmi for china, new export orders below 50.n there is 48 in the latest month. new orders are very important leading indicators of where things are going. the services, the nonmanufacturing pmi actually moved up. i wonder how long people who work and services are going to keep buying stuff if other people are losing their jobs in manufacturing because exports slow down. haidi: in a way, it shows a

rebalancing that beijing has been trying to structurally encourage over the past few years. on the other hand, you have to wonder, it does not make up for losses across the manufacturing sector. if you dig into those numbers a little deeper, it is worse than you think. the official pmi number, if you strip out the seasonal distortions we see around january, february, to the chinese new year, we don't pay attention to those months because of the volatility. it was the worse reading. the week's reading in two years. that number is really one that was particularly concerned, given it reflects of the mobility of the smaller, private and nonstate owned companies. they are the ones that suffer from an inefficiency when it comes to monetary policy, transmission as well. even if the pboc goes ahead and takes an easy start, they are still prudent at the moment. it may not actually be of much benefit to the company's within the gauge. kathleen: absolutely.

i am glad you mentioned the pboc. they did acknowledge "more severe global challenges." they said they will step up their policy fine-tuning. like we are ready to act. more on the trade wars impact up ahead. up next, we discuss the outlook for the one like we are ready t. with it falling with the 2008 lows. globallater this hour, trade tensions weighing on sentiment in japan. we will have the latest survey as that breaks across the bloomberg.

kathleen: this is "daybreak: asia." i'm kathleen hays in new york. haidi: i'm haidi stroud-watts in sydney. we are going into the final quarter with a trade war. nafta imminent. brexit continues to affect the markets. our next guest is expecting a

bumpy ride. joins us from singapore to let's start with the u.s. market and given the s&p 500 had its best quarter in five years, do you imagine anything going into the fourth quarter is going to derail that optimism? stephen: i think we have to be u.s.cognizant about the interest rate curve. by all accounts, the feds will be continuing to hike by the quarter, at least as the data supports. at some point in time, i think this will definitely weigh on equity markets. equity markets have been living off cheap money for so long that when rates go up at some point in time, they will have to wait a -- way negatively. considering that one of the principal headwinds and the s&p particularly. right. where would you be opportunistic, given it has been a rough quarter for emerging markets? really brights of

devaluations you see, but also slightly lower risk compared to what we saw in the last quarter? stephen: i mean, there are always pockets of value everywhere. obviously, we are seeing some of that play to local markets, the korean market that decided -- signed a trade agreement. a bilateral trade agreement with the u.s. we had a bullet -- a bullish momentum right where the end of last week. that was also reflective in the currency markets. the korean market stands really a strong chance of picking up a lot of pace. i don't think 2400 on the cosby is that far out of question. i think this is going to be built up as we move toward even a conversation around the peninsula and north korea, south korea, all the summits are paying -- playing out favorably. that is one of the brighter spots. kathleen: since you were mentioning asian stock markets, i would like to ask you about pennies stocks. we have at least one story over the past couple of days saying with this weaker yen, stronger

dollar, foreign investors make a japanese investors have been for a while. there are good prospects looking into 2019 for japan. stephen: we have really seen that start to come to the floor. i think the weaker yen really is neting driven by the higher cai and come in nation with the higher yields in the u.s., especially around the 10 year sector. i think that provides a feed back into japan. we are definitely seeing more spring in the nick i -- in the nikkei. when you look at it, there are a few things going on that are starting to show life. starting to set after many years of it not setting. we also have inclination that the banks may be moving off this yield curve control mechanism. off the not wildly mechanism, but a little bit. i think this place favorably into the financial sector in that the banks have been suffering for a decade during

this really low interest rate. once interest rates start to rise, i think that plays out favorably for the financial sector. accounts, the exporters are pretty much accustomed to a slightly stronger yen than what they have been dealing with over the past 10 years. i don't think that will be too much of a fallout if the bank of japan guides it correctly. i think there is definitely some interest in japan from international investors right now. kathleen: oil. last week, president trump complained about opec and opec nations ripping everybody off. he had a conversation with the saudi king over the weekend. where is oil going and how do you play that? obviously there are losers and there are -- winners and losers. this all started with the bullish narrative over the iran sanctions. obvious a, president trump can't have his cake and eat it. he really started this political started focusing on

iran. let's look at the markets right now. really, what i think is the next catalyst is whether or not saudi arabia can supply barrels to the market come even if they wanted to appease president trump. right now they are putting in 10.5 million barrels per day. there he is at the wells can put up close to 12 million per day care that would make up the shortfall from the iran kerfuffle. but that is yet to be seen. we will find that up quickly when november 4 runs around. i think the market right now is completely bullish. there is some suspicion that saudi arabia can't make up its shortfall. talk on at the rampant the street right now, the $100 per barrel, i think that is around a nice glitzy number that the market, failing saudi being able to step up production, i think that number is quite possible. i remain on the bullish camp now. have the likes of santos ceo saying they see $40 a barrel.

final to get your thoughts on the china pmi which was pretty horrible over the weekend. the shows essentially number was the weakest since may, 2017. the official numbers stripping at chinese number -- chinese new year numbers. about used to thinking china as being -- china sneezes, the rest of the world catches a cold. how bad does a good for asian it -- asian economies if of the downturn continues in china? it isn: yeah, i think quite negative. obvious a, i don't think this should have been taking anyone by surprise. although, the numbers came out below consensus. the downtrend is intact because of the escalation of tariffs. that should be factored in to a theer-term projection into china markets. china, thereing at is the demand side of the

equation and move away from brick and mortars. this is what we will keep an eye on it how big the demand side and the service industries will,. i am sure the pboc will turn up the liquidity taps to counter the downturn and manufacturing side. whether that is sufficiently provides a stimulus, we have to wait to see how the data is. definitely, i think it is negative on the surface. underneath, there might be positives coming out of it and we may start to see a more aggressive policy from the pboc to write this ship. this is what we will give our eye on on subsequent data prince going forward. stephen, thank you so much. stephen innes, head of trading for a pack in singapore. coming up next, a $20 million tweet that cost elon musk his chairmanship of tesla. what investors should be thinking at the moment. this is bloomberg. ♪

kathleen: this is "daybreak:

asia." i'm kathleen hays in new york. stroud-watts in sydney. a quick check of the latest business flash headlines. has won china's approval for a $45 billion approval with advancing a deal that combines two of the biggest names in the business of the companies have been a good shading the merger for two years and have agreed to upload assets to gain antitrust approval. it requires a green light from regulators in the u.s. and south korea. kathleen: husky energy is making a hostile $2.6 billion bid for canada's and e.g.. a battle with the chinese oil gel -- giant. has he is taking the offer to shareholders after neg's board refuse to discuss the idea. the deal would be huskies largest takeover and it says it is still ready to talk to directors. they own 12% of and e.g..

-- daysk and tesla after musk was charged with security fraud. that stems from his tweet alleging he had secured funding to take tesla private. remy and a sense you has the details on that are lots of details and one big thing for elon musk. keep your mouth shut. ramy: that is basically what the sec is saying. they want to pull back musk's dominance, because he has been, as we know, prolific on twitter, on youtube, with all these tweets, especially smoking marijuana, and calling someone a pedophile which he probably should not have. these are unforced errors. the payment that tesla and elon musk now have to do. $20 million each in terms of a fine for $40 million total. they have to appoint an independent chairman. that come in part, because musk has to step down from his chairmanship in the next 45 days. he can stay on as ceo, which

might be a kind of stall for investors, wondering if you will be able to guide this company. you can see that tesla has to add two new independent directors. his is to monitor communications and say, you have to go through procedures if you want to tweet, say anything, if you want to send in email. let's take a look at what the sec has set out of their statement. the phrase as i want to to focus on our tour the end corporate governance and oversight in order to protect investors. we know that if you have been a tesla investor, you have gone on a crazy let's flip this up and you can see where we have gone. over the past few months, ever shares have been down by 30%. 30.2 per first -- a 30.24%. haidi: the question is whether investors can put this behind them. what comes ahead? ramy: we will be watching shares

when they start trading in the u.s. this could be a return to fundamentals. that is what gene munster at loup ventures who has been following test effort -- tesla for a long time. these are things that should not be distractions for investors. also, for example, must consult saying when he looks at the numbers coming out for production for the model three, he is quite bullish. let's pull that up and show you what he is saying. this is an email that bloomberg obtained that he sent out to his employees. he said, we are close to achieving the p word, profitability. we have not seen efforts at tesla ever, but we might be close to that. if they execute well, if we go out -- if we go all out tomorrow, we will achieve an epic victory. this is. elon musk. pure elon- this is musk. we can see when birds model three tracker. 91,000, if we get to that, more

than double what it was in the second quarter. haidi: back to basics. thank you so much for that. the is according to commission. we will take a look at the fallout next. this is bloomberg. ♪ next. this is bloomberg. ♪

haidi: it is 9:30 a.m. in australia. in sydney, that is, 30 minutes away from the major market open. i'm haidi stroud-watts in sydney. kathleen: kathleen hays in new york. you are watching "daybreak: asia." let's get you to first word news with rosalind chin in house -- in hong kong. rosalind: thanks. the canadian dollar has a four-month high. the u.s. and canada are nearing a deal on after. we are told a trilateral a court thebe published at midnight u.s. and mexico reached an agreement in august putting pressure on canada to reach a agreement. accord has been held back to see if the u.s. and canada can agree.

the wto, imf, and world bank have issued a call to form a growth -- a global trading's issue. the urgent challenges to harness the wto's strength and accelerate the chick -- the pace of change. president trump has criticize globalism and questioned america's sophistication and multilateral agreements. china's manufacturing system weekend last month. the official pmi came in at 50.8 compared to its 51.3 in august. 50.survey slumped exactly its lowest since may of last year. the official services pmi rose, signaling domestic demand remains. the conservative party goes into its annual conference and plans to raise property taxes for foreign buyers. the government says it may company individual and

is not paying tax and the u.k. the sunday telegraph says the rates could be as high as 3%. the bank of england governor told ministers that a new deal brexit could be tarnished by more than one third. saudi arabia is to raise spending next year more than forecasted using reduce unemployment. public spending will be -- will reach almost $300 billion in 2019, about $26 billion more than the government had expected. it has pushed the unemployment rate higher in more than a decade. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. .'m rosalind chin this is bloomberg. haidi: thanks for that. discusses report australia's financial industry as driven by the pursuit of short-term profit at the expense of honest steel. the securities regulator sales.

let's bring up david ficklin he was arguing it is not all bad news for the bank. we saw that rally on friday. investors don't seem to think so. david: i think that's right. i think -- clearly there has been a great just bad behavior that has been laid out in this report. at the same time, i think there is a cyclical buying opportunity. if you look at the price book premium of australian banks to global banks index, there tends to be a long-running structural advantage there. they tend to trade at about .4 higher than the price book ratio of other global banks. that is down at .1 which is the level we saw during the 2008 financial crisis and during the tantrum. that indicates there is a strong structural advantage to australian banks over of the parts of the world. i think if you believe in the power of reversion, we can head back toward a better premium and future. haidi: the interim report stops

short of recommending penalty. is there a sense of damage? david: i think that's right. i think the key thing to understand is the commissioner rejected the idea that regulation is enough to deal with this. he strikes this point again and again. he says what is really needed is simple regulation and better enforcement. i think there is a problem at the heart of that. i think that explains why the bank shares were rallying so much. which is better enforcement depends on political will. of the commission in the first place was obliquely contested. idle the weeknd guarantee political will will be there, even if there is a change of government. the main lobby group for the bank is a former labor premier of insulin. -- of queensland. kathleen: the same thing happens all over the world. seems like a lot of banks have an influence on politicians.

so, you put that on the table. figure that this stranglehold of the big four on australia will ever be broken? david: i think there are two things. threat longer-term. with australian world commissions where there is something buried into the interim report that the final report comes -- becomes a bigger issue. he concentrates on distribution. i think this is an underestimated thing for banks that they have a stranglehold on distribution through their large branch networks. through the fact that a lot of products are sold by brokers. i think he is focusing heavily on that. i think that could be a real damage for the australian banks and sector because the big four higherend to have margins. they tend to have more expensive products them smaller competition. but they take market share.

distribution is at the heart of that. there is that focus on enforcement. i am skeptical whether that will be as strong as it is likely to be. we have seen the budget of the main regulator drafted in the most recent budget to its lowest since 2006. i am skeptical that that will happen. if it does happen, there is a real threat because i think what we have seen in the northern hemisphere is where we have seen these massive multibillion dollar fines handed out against banks where enforcement is stronger. that really does change things. if something like that happens in australia, we will see a structurally different picture going forward. haidi: is the problem structural with the way the financial industry commissions incentives? where does the customer come into? david: i think that is exactly right. i think one of the problems with this is that it depends on constant political attention. when you look at the things that

were outlined in the report, it is not like australia's biggest for banks sat down and said, we will structure a financial system that works to our advantage. it was a series of emergent processes that have happened over the last decade where there has been a movement toward more brokerage where regulation has created separate problems. i think that does adjust that there are deep structural factories -- factors. it would be hard to undermine. haidi: if nothing else, the problems with financial literacy. david: exactly. haidi: always great to have you with us. ared think luring good we counting down to the start of trading in asia. kathleen: absolutely. for more, let's go to sophie kamaruddin. i want to ask you, japanese stocks turned a corner last month to put in the best performance among developed markets. can and will this exuberance continue into october? sophie: when you take a look at stocks, that has helped see the uptrend for japanese stocks stay intact or

we have corporate earnings growth prospects looking the decent.looking consider what is going on for the yen. the fourth quarter tends to be a week. -- tends to be a week period. yes, there are concerns over trade risk. we could see optimism on expectations around u.s.-japan trade talks, especially after u.s. signed deals with korea. we are seeing whether that nafta deal will be quenched by midday today. checking in on the broader view of how the nikkei is faring, it is short of a 27 year high after a good month. from 1991 to the present day, we are looking toward the 27 year high. this as abenomics and the boj tapering favoring into that picture. on the boj front, traders will be focusing on long yields on the banks plan to trim its

buying in that sector for the month of october. haidi: we are waiting on the survey. what are we expecting? sophie: keeping in mind that it is a lagging indicator, have ate sentiment may drag from the recent string of natural disasters. the focus will be on whether or not corporate plans and outlet to get hit. typically, plans are more look or less unchanged. when it comes to expectations, they are penciling in the large factors index. the top panel on this chart to come in at 22 here at slightly better than the previous quarter as the young likely helped manufacturers. kathleen: sophie kamaruddin, thank you. the u.s.e to trade issues, economic data looming on wall street where investors have the chance to hear more from jay powell after the rate hike last week. also, it is a 3 -- it is the

end of the quarter. su keenan is back with all of this. trade wars don't matter when people want to buy stocks. to matter not seemed thus far are we probably have the jobs down later in the we talking the spotlight. we will hear from fed speakers. market direction will be key as we kick off the week. let's take a look at the known as, otherwise the market snapshot. note that the msci emerging market index, lower there. it has rebounded this month coming back from the weakness we saw. that is up above 73. it is at a's -- it has had a strong comeback. the big story, let's go into the bloomberg, the s&p 500 has surged ahead in the third quarter. one of the biggest gains we have seen since 2013. strong quarterly games. significant, given the fact we are seeing bond yields above 3%.

that is what we saw the s&p's selloff early in the year. let's take a look at oil. what is phenomenal here is how oil has come back up. it is at a four-month high. it has risen to the highest in four years. there is concern the market has lost barrels from iran and venezuela. there is concern the president is calling out the king of saudi arabia, getting in there to boost prices. no trading houses in europe are calling for $100 oil again. traders appear to be bracing for that. bank of america and jpmorgan, not as bullish. they are revising their forecast upward spirit you also have companies like bp and total, coming out and saying, a big rally would hurt demand, especially with u.s. and china dispute, if it ratchets up. j.p. morgan chase is saying count on it. can never get an episode of reserve could i have to ask you about that. jay powell will speak. onmentioned the jobs data friday. stocks will be hurt by a more

hawkish bid or because the economy is growing and that is good for stocks? su: the jobs data will be the big focus on the economic data. that it willon is be skewed because of the hurricanes. that typically does not give us a realistic picture of what jobs are pier 1 hundred 85,000 job gain is expected. them the prior month. let's take a look at auto sales. this is a big focus. all of the major u.s. auto makers will be reporting their numbers. analysts are warning a number of adverse factors from rising oil prices to rising interest rates, lower incentives, could show its weakness in these auto numbers provided as important going to the strength of the consumer. on tuesday, here in the u.s., we will be hearing from fed jay powell. he will be one of the key speakers at the national association of business alongies -- economist

with the boston fed chair. we will hear from the fed chair's in atlanta and missouri, out carry, all putting their views which will help the investors focus and create other headlines. issue.this is a very big will this latest data impact the. -- the slot? haidi: specific stocks to be watching, tesla in the wake of the sec. facebook, i'm sure a lot of people have doubt because of the security reach over the weekend. a major deal in the enters -- in the energy sector. su: they will be the first time for them to trade on tesla since the settlement. fromave musk stepping down the board but still ceo. -- focus,cused, those facebook announcing its biggest data breach since the cambridge fiasco earlier in the year. facebook will be in the spotlight as well. energy stocks, all of them, in

particular royal dutch shell which is finalizing a deal in canada, the stocks will be in focus as oil continues to rise. you have health care stocks, a possible deal. big bullish forecast. that stock could be in for a rise. you so much. su keenan in new york. coming up next, we are counting down to the bank of japan survey, expected to show corporate sentiment hitting it ceiling. this is bloomberg. ♪

coming -- counting down to asia's first major market opening this morning. japan futures looking higher. maybe taking a lead from the u.s. i would have to say the weaker yen has certainly created

optimism around where the index can go in the next quarter. we are also waiting for the survey from the bank of japan. large manufacturers, small manufacturers, what it tells us about where the japanese economy is now and where it may be heading. this is "daybreak: asia." i'm kathleen hays in new york. haidi: i'm haidi stroud-watts in sydney. we are moments away from the bank of japan's survey. the third quarter expected to show corporate sentiment broadly hitting something of a ceiling. and with the rising risk coming from trade and the fallout from the natural result -- from the natural disasters. another typhoon on tokyo. the focus is whether the outlook and prices will take a hit. japan strategists, nicholas smith. is that your view, that we have -- the fragility of these hard-won price gains and animal spirits in japan never fails to be very close to the surface when we're talking about this. that winscertainly,

in the mind of the foreign investors. of 2000 15, since when that sold 90% of their economic period buying. up 45%.t period, against 25% in the u.s. 27 timeshas owned earnings and we are on 13 times earning. it is difficult to explain the lack of enthusiasm amongst investors. one has to figure they don't need the money. [laughter] haidi: is it time to get back in because you have dollar-yen hitting a year today time -- hide, japanese equities banking outcome of the bank of japan will be more of the same until the end of time, or until they hit 2% which is pretty much the end of time. yeah, i do think foreign investors seem to focus

much too much on what the yen is doing, what the bank of japan is doing. you look at the correlation between topics on the end, it is 80%. if you are going to invested on the back of that, you might as well flick a coin and throw half your money away. it does not move with again. everyone insist on talking about nothing that. as far as budget -- as the bank of japan is concerned, they have printed $3.5 trillion over the last five years, real estate prices are down nationwide. 2.6%. you don't get a whole lot of respect for 3.5 trillion dollars is days. i would focus on what corporate japan is doing. they are doing well. year to date, the consensus is eps. the current year, that is up on most 3%. yet, people insist on saying, it cannot get any better. sure, it is getting better. it is going up this year and next year. kathleen: it seems to me that people put so much emphasis on the bank of japan's inflation

target that they do not been enough emphasis on what she bp has been doing. they don't put enough emphasis on what the labor market looks like. by those indicators, yes, the japanese economy is looking quite healthy and it does not seem a surprise from the point of view that we do see stocks moving higher. sure.as: but people spend a lot of time on gdp. in the stock market, you don't buy the gdp, you buy corporate profits. if you take the numbers from the ministry of finance, in 1993, corporate profits were 1% of gdp, and now they are for per -- 4.5%. corporate profits have been doing better than the economy has people worry about things deflation,aphics, and all the time they say the goal is a wrong way and profits keep going up. kathleen: i want to give you the

numbers on that. they have just come out. the large manufacturing index and that component looking like it came in at 19. it is down from 21 in the second quarter. much weaker than the survey. when we look at the outlook, also coming in at 19, down from 21. non-manufacturing, i like to call it services and construction, comes in at 22. down to 24. the outlook for large services me given stronger, let you one more. that is a small manufacturing outlook. 14, 14 the previous month, people thought i would get weaker. our corporations, large and small, doing well enough right theyhat the fact that stalled out is not a problem, particularly if they have a weaker yen to give them a little wind and the sales in the coming quarter? the sentiment and profits are two different thanks.

-- things. you say sentiments are people were -- making money. it is not and i am not a sentimental guy. i am not interested in that sentiment index when it is a lagging indicator. basically, last quarter's -- flagged with noise to know, conditions are continuing to improve for these companies. yes, they have a yen tailwind. but they are also continuing to open up their margins, corporate japan is doing well. they're worried about what will happen with trump taxes. it is intended by trump to improve the world garden of the u.s. auto industry behind that chicken tax of 25% protecting its seb's which is the majority of profits. does the fda between japan and the u.s. change anything for you? to --as: japan is going

obviously, what japan is focused on is the tpp. the much broader and higher-quality fda that have been working on with that in other countries. going to give not anything to a bilateral, but it was not going to give to her p -- her ttp in the first place. the aim is that in the future, it would draw the u.s. into tpp. [speaking a foreign language] [indiscernible] . you can get a roundup of the stories to get your monday going in today's edition of daybreak. bloomberg subscribers go to dayb . it is available on the mobile in the bloomberg anywhere app. you can see the nafta drama continuing to play out. a deal is imminent. very slim on the details. you can customize the settings

and get the news on the assets you care about. this is bloomberg. ♪

this is "daybreak: asia." i'm kathleen hays in new york. haidi: i'm haidi stroud-watts in sydney. a quick check of the latest business flash headlines. 1.2%reenlight capital lost last month taking its overall shot for the three quarters to 26%. it leaves it's on track for its year -- for its worst year on record. four out oflost five of its log -- of if -- of its largest positions. tencent is reorganizing, reducing the total number of business groups from seven to six. cloud toding up a new integrate digital solutions and

smart retailing, education, and health care. a new cloud form of content group will focus on news and content, the two units will join for others, corporate development, internet -- interactive entertainment, technology, and we chat. haidi: as the countdown to the market opening in asia, let's take a look at the stocks that will be key. with typhoon xiaomi moving across japan, we are keeping an i on construction, and travel related companies. most of tokyo's trains are running as normal. that is because of key players are looking at key electric. this is after power outages hit thousands of homes. insurers could be hit by weaker than anticipated natural per days claims couldn't shave off 10% to 20% off the shores net income. that is where net -- travel cancellations happen. airports were also delayed more than 1000 flights affected on

sunday. we have the market open in japan. this is bloomberg. ♪ xfinity mobile is a new wireless network

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good morning. i'm haidi stroud-watts in sydney where markets have opened. kathleen: good evening from new york, i'm kathleen hays. sophie: i'm sophie kamaruddin in hong kong. welcome to "daybreak: asia." ♪ haidi: our top stories is monday, the canadian dollar hits a four-month high with a new freeway deal set to be imminent. the deadline is midnight in washington. early indicators show china has been hurt by u.s. tariffs.

the pmi hitting its lowest since may last year. kathleen: boyle rising after president trump called saudi king solomon. they spoke days after the president openly criticized opec. let's get straight to breaking news crossing the bloomberg caret south korean trade numbers coming through. september falling year on year, largely to a holiday there. atving the trade surplus $9.75 billion. higher than the estimated $8.01 billion. year ondeclining 8.2% year in september. worse than the decline of 5.5 expected on economist -- by economists. are looking to we for a gain in imports year on year in september. once again, trade surplus a little wider than expected. $9.75 billion for the month of september. in terms of digesting that, they are saying it is due to the stock holiday. clearly, there are concerns

given south korea is such a hubble and it comes to the supply chain and a real canary in the coal mine if you will in -- with respect to the impact coming through of this china-u.s. trade war. let's get it -- get it over to sophie with a look on markets. thane: despite the weaker expected performance when it came to export growth for soft. , we are seeing the kospi gain ground. up for tense of 8%. we are seeing it more divergent in tokyo. back to wes on the will be digesting the survey for the third quarter, bearing in mind that is a lagging indicator. be had around may expectations for the u.s.-japan trade talks. we have the yen at 114 handle. that could provide enthusiasm for japanese equities. in australia, weakness coming through. it is going to be a light day of trade as a labor holiday is continuing this monday in australia.

banks will be in focus in sydney after shares rallied on friday, given the industry watch job report was less intimidating than anticipated. flag andeing stocks of wellington. off by 4/10 of 8%. keeping an i on oil, this after crude managed to cap a fifth quarterly gain. oil prices higher. adding to inflation or pressures when it comes to heavy fuel importers in the region. keeping an i on inflation -- an eye on inflation. kathleen: thanks so much. for more on markets, we have bloomberg live strategists mark in the singapore. turns intoism pessimism, then it turns into optimism. where are we with that now and what is equity mean for markets is trading opens up across the region? i think overall, we are heading into a. of morea period optimism. not look like reaching

any kind of resolution or major progress anytime soon. investors are prepared for that outcome. they know this is a long-running issue. they know it will not reach a resolution. there is less focus on that. what we are seeing is signs that there will be a nafta deal signed a soon. imminently by trump and trudeau. it is reported negotiators have agreed to the terms and it requires the two leaders to sign the terms. i think that will be a positive boost, showing trade deals and be done. u.s.olls on the back of agreeing to a deal. the trade narrative is changing more positive than it was probably even only a month ago. kathleen: how about the numbers we are seeing? we got south korea trade. we got the china pmi over the weekend. if you look at manufacturing which is most vulnerable, as quickly to trade exports, we did see more weakening there. how will that factor into traders? do you put it to the side or

will it have a negative impact potentially? of the koreanwith numbers coming you can put to one side because of the holiday effect. the china numbers are much more worrying. the back put people on today. those manufacturing numbers did fall sharply. the official number and private pension index. the fact is that it showing there are signs of -- for business owners that they are getting more pessimistic. those numbers will -- we're in expansionary territory. they are disappointing. thes important to remember component did beat expectations. overall, pmi's, it was pretty positive for china. the economy is becoming more domestic lead. i think negative manufacturing numbers will hedge broader sentiment in the short term. are you looking more at dollar-yen, particularly as we have the year today tie on friday? do we see that continuing in the fourth quarter?

taken numbers look to be appalling. they seem to be missed across the board. very supportive for dollar-yen. equity market is doing well. it has seasonality in its favor. this month the next month. overall, a good. -- a good period. we are getting a resurgence of my narrative. the idea that with they having won the leadership contest, he will try to do stimulus for his economy. that will boost equities, dollar-yen, and that is what people are focusing on. i think it will dominate any of the short-term data given that we know the japanese economy is not roaring anyway. it is not what the driver here is. the driver is stimulus and valuations that look attractive. haidi: mark, thank you so much. mark cudmore in singapore. let's get you to first word news with rosalind chin in hong kong. two gauges of activity in the sector weaken the last

month reflecting the slowdown and the followed from president trump's trade war. the official pmi came at 50.8 compared with 51.3 in august. the survey slumped exactly 50. it's lowest since may of last year. the official services pmi rose, marching a domestic remains strong to president trump has denied micromanaging a new fbi investigation into supreme court nominee brett kavanaugh. the white house as a third woman who accuses him of sexual misconduct will not be included in the inquiry. however, the president tweeted -- the democrats are calling on the white house and fbi to publicly release the scope of the investigation. from the 7.5l magnitude earthquake in indonesia has topped 800. it is expected to reach into the thousands. the government has declared a state of emergency for 14 days with many of the victims found on the beach were being

withheld. survivors say there was no warning sirens. of southern and western japan is at a standstill ahead of [indiscernible] they are expected to resume monday morning. the metro line will also shut and airports closed to bank runways. the airport only recently reopened after being damaged by typing debbie. -- by typing debbie. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm rosalind chin. this is bloomberg. thank you very stella had, commodities rumble. the most in three years. there are indications the worst may be over. we will dig deep. what can be done about it? this is bloomberg. ♪

kathleen: this is "daybreak: asia." i'm kathleen hays in new york. haidi: i'm haidi stroud-watts in hong kong. we were talking about the latest data from china showing the trade war is taking its toll, the official manufacturing pmi and the private gauge can be lower than expected. reflecting the slowdown and the follow-up from beijing standoff with washington. let's bring in our asset managing editor. is this part of the structural slowdown and can we really definitively say that this is the result of the standoff with washington? look atou know, if you for thethe sub indexes manufacturing pmi in particular, the new orders index which gives an indication of the order flow

that chinese producers are anting, it now indicates outright contraction. not even a slowdown. but an actual decline in the number of new orders. that suggests, and i think the thatmists are saying this, we are seeing an impact from the trade war. some ofot really hit the other gauges quite so much. but when you see something like new orders come down at a time when the global expansion remains intact, that suggests there is an impact from the tensions with the u.s. haidi: what policy response could we expect? most recently where we heard the pboc reiterating its prudent and neutral monetary policy stance, could more stimulus be on the way and would it even help? welcome the jpmorgan --

well, the jpmorgan economists have come out with a new baseline forecast. out now anticipate an all trade escalation between the u.s. and china. the comingine for year is that the u.s. imposes 25% tariff hikes across the board on all chinese imports. significantlyonds in return. but what is interesting about the jpmorgan forecast is that despite the escalation in the trade war, they say only a little bit of a hit to chinese gdp growth. the reason is because they think on both the monetary side and the fiscal side are going to come out with of the guns blazing. even though if you look at the impact on gdp from the trade war, they see about a one percentage point hint of growth

which is pretty big. but, they only have downgraded their forecast for gdp growth next year for china by .1 percentage point. the difference is the big monetary stimulus, tax cuts, all kinds of infrastructure spending pick up that they anticipate will help to cushion the blow. kathleen: it looks to me like ironically, whatever gods it is of economic forecasters, may be forcing china to move faster toward driving its economy more by domestic consumption than by externally with exports. chris: yeah, that will be key. one thing that should -- one thing that should help a little bit on the export side is that the yuan is anticipated to continue to -- continue depreciating. there is no doubt that in order ap,make up that major g

china will have to focus on boosting domestic incomes and e-commerce,domestic technology industry, innovation, all of those kinds of long-term things that could shift china significantly. kathleen: all right. they have been saying they want to do it. maybe now is the time. acrossnsley, our asia asset managing editor we want to get to our next guest. julian evans-pritchard. china economist back capital economics joining us from singapore. the chinesenew economy was already slowing down, right? this has been the story for the last year or two bank. in your view, is this latest the purchasing managing index looking at manufacturers, is it a symptom of a trade war or a trend that was already in place? julian: i think it is too early to say.

the new orders component has been weak for a few months. yet, we have not seen any signs in the trade data of significant impact from the u.s. tariffs. certainly exports to the u.s. have not been underperforming. the rest of china's exports. it seems for now, the slowdown in foreign demand we have seen probably has more to do with a broad slowdown in global growth than to do with the trade conflict with the u.s. that is likely to change over time. is imposingu.s. tariffs gradually with a rate increase, initially 10% on 200 billion this month, but that will rise to 25% in january. that actually encourages u.s. importers to frontload some of over imports from china the next couple of months before that 25% rate comes into force. actually, exports to the u.s. might hold out well in the short run. but obviously, as the higher rates come into force next year, we will start to see a larger

impact. although, we also share the view that a lot of that impact will be offset by domestic stimulus measures. kathleen: how far can domestic stimulus measures go? a lot of people are taking some theort in the fact that nonmanufacturing purchasing manager index in china actually rose a bit, and it is on healthier ground. but if services depend on all those people who work in the manufacturing and export industries to be making money to buy their services, can the government make up for that? julian: it is tough. i think a lot of those long run drivers to shift toward consumption, that were mentioned earlier, service sector, e-commerce, that is very hard to boost in the short run. the short levers of the stimulus are still infrastructure, property, and that is where the stimulus will have to come from.

i do think it will be effective. nonetheless that we have seen in the past, they still have the stimulate. people were worried that stimulus wasn't working in 2015, 2000 16. but it did drive a sharp rebound. foraw in the services pmi september, the construction component jumped sharply which seems to be to do with the sudden surge and local government bond issuance arently which suggests they meriting to kickstart infrastructure spending. the problem with the stimulus is that it comes at a cost. these are areas where they stimulate in the past where there has been built up in debt, where there is overcapacity. yes, it can help offset the impact of the trade ware. -- more. -- war. but it does come at a cost. terms of belgian road, other than it being a mess of soft power push, how much does it contribute to again, that

economic growth that could be upsetting the damage or pressure from the trade war? i don't think it will contribute a great deal. if you look at the amount that china is spending on belt and road, it pales in comparison to domestic investment could even those these investments can be a big deal for the recipient countries, countries like asianan for the central countries. for china itself, it is hard to see how these relatively small countries can compensate in terms of foreign demand, external demands, for the loss of u.s. demand. as being a see it big offsetting factor. i think it has more to do with china's long run geopolitical goals than anything to do with the economy for the next few years. we are seeing retaliation from beijing, even though by and large, the language probably started off fairly sanguine.

and has ratcheted up as the trade war has dragged on. once they run out of the runway to be able to match u.s. tariffs, what else can they do? julian: they could respond in the way they dealt with korea similarnese over disputes where they made it very hard for those fans operating within china. but it does seem like they are being cautious about that approach. were tough.hey but in practice, we have not seen any major measures against the u.s.gainst the reason for that is a are concerned about playing into the criticism that the u.s. has made of access state intervention. they know that developed economies share similar concerns to the u.s. they want to avoid being seen as the perpetrator in this trade conflict. they want to be seen as the victim avoid her. if this is going to be a

protracted trade conflict with the u.s., they want to avoid becoming a broader conflict with all developed economies. which is why they are taking a cautious approach and rather than retaliating against u.s. operations in china, it seems more likely they will cut tariffs which is what they have perhaps focusing on the goods where the u.s. does not export much. indirectly retaliating that way. but also being consistent with their stated goals of opening up their economies further. kathleen: quick final question. do you -- distill that down. are they going to start taking a few steps in the direction of opening up their economy, not just to the u.s., but other countries to selling all the things that people have been pushing on them for so long? i think they will take steps in terms of reducing restrictions on inbound fdi, reducing tariffs, i think where

they will draw the line, however, is in terms of dismantling their state sector and significantly changing the direction of their industrial policy. they have been playing down the made in china 2025 plan. in practice, i think that is a shift in how they message it to the rest of the world rather than a fundamental shift and where they want to go. if anything, the trade conflict has made them realize they need they more self-reliant and see the state sector as being a key part of that. i don't think we will see a the way the u.s. really wants chinese industrial policy to shift. kathleen: so interesting cap thank you so much. julian evans-pritchard. plenty more to come on "daybreak: asia." this is bloomberg. ♪

kathleen: it sees opportunities in the deepening trade war. both say rising tensions

mean more business as some -- millions of players in china's markets look for ways to lessen the pain. our china correspondent tom mackenzie asked about the plans and targets. >> this year, we are trying to achieve 10 billion revenue. to demand 200 billion. >> can terms of the numbers of cities you plan to operate in the end of the year, what is your target? >> the target is not to do many. it is 30, roughly. year, 82-100 next cities. >> you recently -- where are you in terms of funding? are you looking to raise additional capital this year? >> yes, we have that plan. somee looking for international investors.

>> how much are you hoping to raise? >> it will depend on what on what they are trying to offer. the key is not how much money they will invest. the key is how much share. i think it is within 10%. >> where are you targeting by capital? the moneys you have raised, what are you spending it on? digital for business, for systems, for cloud. and the rest is for the expansion of business, fiscally. could that potentially include acquisitions of some of these smaller players in this space at some point? have to plan for some partnership, acquisition.

and from my end. is relativelyss sheltered from the trade tensions between beijing and washington. more broadly, what is your sense of the impact of these trade frictions between the u.s. and china, how it is playing out on the ground here? our business is focused on dennis to market. oil.ntly, the price of oil increasing 10% in the past three months. as a platform, that means the market is getting worse. my path on oil [indiscernible]

the value of the platform will get better. of -- ofat is ceo speaking to tom mackenzie. plenty more to come on "daybreak: asia." this is bloomberg. ♪

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haidi: it is 8:30 a.m. here in hong kong. a pretty truncated session in the asia-pacific as we get underway. year.nal stretch of the day, chineseonal markets across the mainland will be close for the golden week holiday. a little bit of destructive trade. -- disruptive trade. kathleen: you're watching daybreak asia. now let's get right to the first word news with rosalind chin. dollard: the canadian

reached a four month high as sources in washington said the u.s. and canada are nearing a deal on nafta. an accord may be published before the deadline. the u.s. and mexico reached agreement in august putting pressure on canada to reach a deal as well. it has been held back to see if the u.s. and canada can agree. the latest health check on japan suggests a slight softening of the economy. outlooks look weaker for september and below estimates. confidence deteriorated for a third straight quarter for the first time in nearly a decade come indicating the escalating trade war is having an impact. bank areimf and world seeking emergency calls. the -- it ist says to harness the wto strength.

president trump has criticized globalism and questions america's participation in multilateral agreements. the conservative party goes to his annual conference with plans to raise property taxes for foreign buyers. the sunday telegraph says rates could be as high as 3%. the governor of the bank of england said a no deal brexit could see house prices plummet more than a third. saudi arabia is using oil prices to spur growth. further spending reached almost $300 billion in 2019, about $26 billion more than the government projected. measures to reduce a budget ,eficit it is the sentiment pushing unemployment to its highest in more than a decade.

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 rosalind chin. this is bloomberg. let's get a look at how asian markets are shaping up. let's get over to sophie in hong kong. we're kicking off the fourth quarter in muted fashion with hong kong and china offline this monday. the mood in tokyo is looking mixed. edging closer to the 27 year high as the yen eyes a high. changed, with heavyweights among the biggest drag. we got a survey coming in saw for -- softer. traders are waiting to see how the boj will follow up on its plans to trim its super long bond buying. we see a continued uptick in yields. let's check back on korean

stocks after the trade data we got this morning. 1%ses off by one third of while korean yuan is hovering. we saw exports falling more than expected in september. that, a holiday-shortened month. in sydney stocks are lowered by banks. investors are too optimistic the government the water down accommodations on the financial industry. we are seeing some fall over 1% this morning. also under pressure, off by 4/10 of a percent. let's check quickly on oil. brent around the $83 a barrel mark. rising for five straight quarters, adding to inflationary headaches for asians heavy fuel importers. whenll get a check on that indonesia reports on september inflation numbers along with thailand later today. dollar trading around a two-week high, losing some ground against

the canadian loonie. that could nudge it. we had the loonie trading around for multi-. also keep -- around a four-month high. sophie keeping track of markets around the world for us. moving to indian shadow bankers. shareholders backing plans to manage debt and equity. bloomberg intelligence joins us now from singapore. so, what is the way forward? a lot of issues foril&fs. what can they do to move ahead? million of repayment obligations in the next few months, $12.6 million of total debt. had $45 weekend they

billion of rupees. most shareholders are in. the sale of assets also. things a lot of legal that could be an impediment. at this point i think the most sensible thing for the government and the regulators to do would be to get this done soon. there is a liquidity adjustment that needs to happen. at this point they should just extinguish the fire. kathleen: extinguishing the fire. what will this mean for other lenders? will people say, well, il&fs screwed up so badly, of course they had a problem, we don't worry about the other ones. or will they say, look, there is just one more lender in trouble now? guest: i think a lot of people are associating this as an asset quality problem.

i think it is more of a liquidity issue. i would not take all the lenders with the same brush. but it does raise to the surface the bigger issue of how rising rates can get -- dent some of these issuers. the oilhike rate, prices follows. caught in others get the storm. there is a significant liquidity adjustment. that will likely keep markets choppy. shadow banks, is that one considered one that will come under pressure? guest: yeah. ones most of the markets are getting worried about. there is extreme reaction from the fear of the unknown and if

individual investors keep selling. mutual friends -- funds have to keep selling. the ones happen if that saw a huge jump in lending over the last five years, more than the banking sector. now that has to reverse. second, their margins will take a hit. they were getting access to cheap money through the bond market. now they have to return to the banks. the business models for the shadow lenders will get tested, and a very high multiples they were getting are being put into question now. haidi: in hindsight if you're looking at lessons learned, or pointing the finger at where the fault lies, is that credit rating agencies, is there a case that needs to be better regulation? guest: i would not put the blame on the regulators. there were warning signs from then.

-- them. the market seems to be annoyed that ratings agencies do not see this coming. there was not enough action from them early on. if you think about it, it could all shall -- also be a function of how liquid these are. fully rely on the ratings agencies for this issue. haidi: thank you so much for joining us. bloomberg intelligence banking analysts. is the worst over for commodities after a long losing streak? discussing the outlook for the fourth quarter next. this is bloomberg. ♪ mberg. ♪

haidi: this is daybreak asia. trump haspresident spoken by phone with saudi

arabia's king solomon discussing efforts to maintain stability in oil markets and grow the global economy. it came days after he criticized opec for high crude prices. our energy reporter joins us now from tokyo. the story caught a lot of attention over the weekend. and no wonder traders are paying close attention to this. they think it could potentially move the market even more. guest: that's exactly correct. right now the details are scant. we do not know what they talked about. there is a report they talked about stabilizing the oil market, then the white house said they talked with the king. what did those talks entail is really up in the air. as you mentioned over the last week, really the last few months, trump has been stiff on opec and how they are changing and howthe market works their lack of supply is pushing up prices.

he has called on opec to increase the amount of supply into the market and now maybe that the sanctions on iran will be coming into play, traders will be thinking the u.s. and saudi arabia come to an agreement that saudi will pick up their supplies as iran lowers their output. that could be a major bearish signal for the market, and lower prices. but of course, the details are still kind of vague. the traders are watching this very closely to see what details come out before the iran sanctions go into place in november. kathleen: everyone is wondering how high prices are going to go. bloomberg news has a story about what $100 barrel would mean. brent crude, $83. are we going to get higher from here? stephen: i need, $83 for brent is already really high. it is a four-year high. it is sitting -- hitting

multiyear highs. there are two schools of thoughts. with the iran sanctions we're seeing india, south korea, japan, lowering or cutting their imports of iranian crude. those don't have other markets to go to. those are very bullish for the market. maybe the price can continue to go up to $100, but other analysts are saying this will push up the prices, but it will not necessarily go to $100. there are two schools of thought. they think there might need to be one more event to push it over that $100 level. if you look back just two years ago, if you said $100 oil you might have been laughed at. effect they are talking about it now shows there's confidence in the market that it could go to that level. haidi: thank you so much for that. our bloomberg energy reporter in tokyo. they posted the longest losing streak in more than three years. analysts and investors disagree

over whether a revival is around the corner. our reporter is in melbourne for us. what are the competing views over what happens next for the commodities complex? it has beenu said, a bleak year so far for commodities. the bloomberg commodity index, a gauge of returns on 22 raw materials, it slumped to a third straight quarterly decline. that is the worst since early 2015. look, there's certainly competing views on what the outlook is from here. have they found a bottom? the likes of goldman sachs and jpmorgan, yes. they see pretty robust global being aligned with tightness in some commodities markets. they say that is a potential catalyst. of course we heard from stephen about the optimism around crude. contrary, there are some investors continue to be

cautious. hearde world -- we have from some being cautious on commodities out of the whole -- as a whole. they don't see china and emerging markets being strong enough. there's still some debate and uncertainty on the path ahead. assets thatof the has not behaved as we might expect has been gold. is that set to continue? difficult,s really isn't it, to see how gold moves higher from here. it's in something of a funk. gold has had six straight monthly declines, the worst run since 1997. better returns for their assets, rising u.s. interest rates, strong u.s. dollar, those are all factors it is difficult to see reversing.

it is hard to see any catalysts ahead that will pull gold out of this slumber. says they will need a geopolitical flashpoint to act as a catalyst. kathleen: thank you so much to david. joining us now is ubf's executive director for commodities, wayne gordon. wayne, when you sort out the forces, we see the u.s. stock market has done well, the u.s. economy is growing. obviously a big driver of commodities markets. but the trade war hangs over many countries, especially those heavily dependent on exports, and those are around the world. where do you come out broadly on this push pull for commodities in the next six months to a year? it is here to say that commodities have taken the onnt of what we have seen

the disagreement between the u.s. and china. not just as -- that disagreement. nafta also failed to reach a deal, albeit i think they are getting closer. the key sectors which have taken the biggest hits have been base metals, as well as agriculture. with agriculture though, we have to remember that crop yields have been very high in the u.s. so, invariably that has weighed down on prices, particularly soybeans and copper. they are some of the worst performers of the year. i guess when we think about what can get a bounce over the next few months, clearly there is some tightness forming in select commodities. it is not a wholesale buy on commodities, but certainly things like oil are going to be to support mechanisms for the broader complex, just because we

think oil markets are tightening up very quickly. oil prices set to go higher. to the upside, do you see $100 a barrel oil? what do you think of the iran sanctions? that is another place where the debate is raging. wayne: sure. $85our forecasts are around a barrel. in the short-term it is very upside, if wehe see a bent. on $100 barrel oil is based geopolitical tensions and libya, a further decline in security in places like nigeria, and production loss in venezuela. i would like to come back to your previous commentator. we had seen talks between the

u.s. and saudi arabia. but that does not matter. the market is locked and loaded. saudi arabians are unable to increase production at this stage above 11 million barrels a day. consequently, russia can deliver a little more. we are in a supply constraint market now for the least the next quarter into 2019. geopolitical any tensions we do not for see coming with such severe capacity globally is the thing that would push oil above $100 a barrel. haidi: what are your assumptions with regard to the trajectory of the u.s. dollar, that being clearly a key factor with what happens to oil and broader commodities? wayne: yeah, i think oil can dislocate itself from the u.s. dollar to some degree, largely because this is very much a

supply-side-driven story and global growth remains very robust. the demand side has actually improved a little. we have seen china pick up more loadings of oil over the last few weeks. dollar, we think it re-strengthen's into the end of the year. i guess there were some question marks around how the fed would start talking about the trade related issues and its impact on u.s. growth. what we saw from the fed was very comfortable on growth and very comfortable the u.s. economy continues to move forward. labor market continues to tighten. there will be some volatility, particularly around the labor markets, to whether in the southern part of the u.s.. nonetheless, the fed is very confident, which suggests to us it is likely they could raise rates again in december. next year is more of a mixed

bag. largely because of the tariffs on broader u.s. growth. the fed should start to talk about that over the next couple of months. certainly december looks likely, but the market has priced december pretty close already. so, we do think the u.s. dollar continues on a stronger path the next couple months. because also u.s. assets continue to perform very well, which also, i would go on to say is going to be a headwind for gold over the next couple months. kathleen: go ahead, haidi. haidi: i was just going to jump in and ask you to put another had on. -- hat on. what are your views on dollar-yen? you are seeing a reversal. just quickly. wayne: yeah, looking short-term,

the dollar-yen is likely to go a little higher, largely based on the stronger u.s. dollar. it's basically dollar dependent now. the dollar from japan on the macro front has been a bit mixed. by the unanimous victory p.m. abe took some of the risk of that election off the table, which we saw weakened the yen or strengthened the dollar-yen. it does not look like the boj are in a rush to move forward -- further on what they have seen regarding the 10 year. so, it is likely be getting weaker yen short-term, for a stronger dollar yen in the short-term, then we see the yen re-strengthening back to around 110. that is also largely predicated on the fact we have a weaker dollar view on a 12 month basis. haidi: thank you so much for

that. that was executive director for commodities wayne gordon. don't forget, our interactive tv function is at tv . you can catch up on previous conversations you might have missed. intoan also do a deep dive any of the functions we talk about. join the conversation. this is for bloomberg subscribers only. this is bloomberg. ♪ berg. ♪

haidi: this is daybreak asia. kathleen: some very important news coming across bloomberg now. prime minister trudeau is expected to give a cabinet meeting in just about one hour. eastern.. of course the suspense has been building that finally this weekend at this midnight deadline tonight in the u.s. and north america, i should say, midnight deadline, they have finally got together a deal that will allow the u.s. to make a deal with canada, put it together with the mexican deal, have a trilateral nafta agreement. we shall see. this looks very encouraging. haidi: very encouraging. scant on the details. we know there have been major hurdles that have the parties gary,ar apart, access to

autos. -- dairy, autos. certainly exuberance when it comes to the canadian dollar hitting a four-month high going into start of trading today and looking into the optimism that day with athe nafta deal. that is about it for daybreak asia. let's look ahead to the start of trading across most of asia. of course hong kong is closed today, china markets are closed the next few days for the golden week holiday as well as trading in sydney as well. bloomberg markets china open is next. this is bloomberg. ♪ berg. ♪

>> it is almost 9:00 a.m. here in hong kong. >> here are your top stories this monday. fairly muted trading day at this point. oil continues to go higher. >> indicators show china is being hurt by u.s. tariffs. a survey hit its lowest since may of last year. >> the latest check on japan -- there are fears of a trade war. >> canadian dollar hitting four-month highs with a new three-way trade deal said to be imminent. the deadline is midnight in washington.