>> welcome to "daybreak: australia." >> i'm in bloomberg world headquarters in new york. >> and i'm in hong kong. we're counting down to asia's major market opens. >> here are the top stories we are covering over the next hour. u.s. stocks ending mixed with multinationals rising. domestic: the most since july. -- domestic, falling the most since july.

back on the gas after elon musk's drama. shares soared, recovering all of friday's losses. >> let's get a quick check of how mondays session ended here in the u.s. the dow gained for a third consecutive session. the s&p 500 led higher by commodities, also utilities, as well as industrials. it was all about that trade the 11thwe saw after hour agreement between the u.s., canada, and mexico. we saw the nasdaq move -- lose 0.1%. oil gaining ground on just concerns over a slowdown in u.s. drilling. as heidi mentioned, it was also about small-caps. the russell 2000 falling by the most since july, domestically focused stocks taking a it as we see -- a hit as we see better

prospects on trade. hery, we could be in for a mixed session in asia as well. what's happening for japanese futures. they could be nudging lower well the nikkei 225 is trading at a 27-year high and the yen is at an 11-month low. plenty of strategist are bullish -- strategists are bullish on japan. abere waiting to see shinzo 's announcement when it comes to his reshuffle. more losses could be in the cards. we are waiting for industrial production data due out at 7:00 a.m. hong kong time. hyundai, kia, and other players reported slower september sales. in australia, we are seeing some indication of -- the policy decision is on the docket today. no change expected beyond 2019. 50 looking to clock a

day of gains. india is closed to celebrate mahatma gandhi's birthday. hong kong is opening today. there could be some reprieve as we start the fourth quarter, which tends to be kind for the hang seng. >> thank you so much for that, sophie kamaruddin, setting up the trading day for us. let's get to jess. jess: the international monetary fund has cut its forecast for global growth on signs of trade wars darkening the outlook. three months after discussing near 4% expansion, christine lagarde says she is no longer so optimistic. the fund will update its world economic outlook next week ahead of its annual meeting. she says her warnings earlier this year are coming true. christine lagarde: six months ago, i pointed to clouds of risk on the horizon. it is not pouring, but there is

a bit of a drizzle, because today some of the risks have begun to materialize, and, in deed, there are signs that growth has plateaued. italy's attempt to sell a new budget to the eurozone ended in failure in brussels. the finance minister hoped to win acceptance for a substantial increase in the budget deficit, but one -- won little backing from his peers. the economic commissioner, p or moscovici,- pierre says the plans break regulations. an important new brexit concession. sources inside the government tell us it covers the so-called backstop and ensures an open irish border. the u.k. would back down on goods moving between the british

mainland and northern ireland. >> some people say that no deal is unthinkable. wrong. is that thisnkable government or any other british government could be bullied by the threat of some kind of economic embargo into signing a one-sided deal against our country's interests. [applause] jess: at least we talk to people were killed and hundreds injured as the typhoon swept across southwestern japan. services wereain disrupted, and power was cut to more than one million homes and businesses. to benefitoping from the golden week holiday in china may suffer as the typhoon plays havoc with travel plans. it is set to visit parts of japan battered by a typhoon last month. global news, 24 hours a day,

powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. nafta in town. the freshly named u.s.-mexico-canada agreement was reached after more than a year of negotiations, although it still needs approval from congress. the new deal will revive the u.s. auto industry. >> we have lost a couple of a quarter million jobs or more in the auto parts sector. you will see a vast majority of those coming back. is sheryl us now wudunn. thank you so much for joining us. aboutatest book is transforming lives and creating opportunity. you saw the market reaction overnight. it felt more like relief than

rejoicing. is that a fairrejoicing. is that a fair characterization? sheryl: i certainly think the trump administration is riding high that they have actually got a trade agreement. are going to they take all this optimism about getting their way to china, and the trade is -- is, i think they are mistaken. that relationship is just filled with possible flashpoints. >> that's been the common narrative. we have had winds when it comes to this rehashing or tweaking of the korean trade agreement. progress being made with japan. now the new nafta. china is a completely different kettle of fish. do you think the trump administration will be more conciliatory, or will trump be vindicated by this? you have toeryl:

look at the broader scheme. china's economy is slowing. consumers are spending less. infrastructure spending is down. the u.s. economy is doing so well, bouncing along. there is no reason for the trump administration to get anything, because they are almost invincible, it seems -- to give anything, because they are almost invincible, it seems. we built this relationship with the chinese over many years. there have been lots of tense points. the chinese have lots of ways of getting back at us, of sticking to us -- it to us. the problem with these kind of trade tensions is not only the risk of escalating, but also the risk of being unpredictable. something might happen that is unintended with negative consequences. >> when you talk about punishing america, we know that world -- china is the world's major minor of reverse metals. what are some of the tools that the chinese could use now -- of rare earth metals.

what are some of the tools that the chinese could use now? sheryl: they had a collision of fishing vessels. china decided to halt all exports of rare metals to japan, which was really critical for the japanese. they could do that to the u.s., too. there are a number of other things they can do. think about -- we are talking importrade, export and of goods, but there is a lot of american businesses in china that has nothing to do with trade. what if they decide, let's be patriotic, and let's not by america -- buy america. don't go to kentucky fried chicken, mcdonald's, buy boe ing planes. >> we've seen that happen with south korean goods. i remember when they tried to halt rare earth metal exports. that's a very good point. how about the fact that this new deal -- how does the fact that

this new deal between canada, barring members from having any trade relationship with a nonmarket economy? will it be effective in pushing back against china? sheryl: i think that the u.s. is going about this not very well. if you want to get something from china, it would have helped to actually work with your allies to actually corner china a little bit more. you can put pressure on everybody, europe, canada, australia, and work together , event china, but now with this trade agreement, the trump administration, u.s. is basically isolated from all of the friendships that it has built over the years, so they are not going to work together to put pressure on china. we have to go it alone, and i think that is very difficult. >> it sort of is this argument that not only should there be .efenses, but offensive

most people say the u.s. should be part of tpp. sheryl: that was a missed opportunity. there are a lot of things china is doing right now that the u.s. is just not in on. for instance, the belt and road initiative is a huge initiative that obviously not all of it will be implemented, but china is going all out on that and american companies are just not a big way.e in ge is one of the companies that is there, but how much can they really do against all of the chinese companies that are involved? we are missing out on a big economic development push that potentially can have a huge impact on global growth. >> it's interesting how this agreement brings parts of that back into play. you are sticking around with us, sheryl wudunn. still ahead, after a roller coaster for tesla, shares recouped losses.

questions remain about model three output. nikkei surges to a 27-year high, more on the outlook for markets. this is bloomberg. ♪

>> i'm haidi stroud-watts in sydney. >> i'm shery ahn in new york. you are watching "daybreak: australia." japan's nikkei 225 has soared to its highest level in almost 27 years, but it is who is leading the charge that is surprising. retailers and other stocks have been driving the gains. still with us, pulitzer prize winning writer, sheryl wudunn. we have the gtb charts for our bloomberg -- gtv charts for our bloomberg.

the second panel shows us the 14-day relative strength index is now past the level that analysts would consider overbought, around 71. take a look at these developed markets against emerging-market economies. where do you see the opportunities going forward? japan, with regards to there will always be overshooting there. it is interesting that the exporters were not really in there. partly because of a fear over possible trade tensions. when they start reporting earnings, they might actually have a lift there, too. there might be a little bit more room to grow. we have seen japanese corporate's doing well on the earnings front. righters were not at play now, which is rare for the japanese market. given that we have only to rely on political headlines going

forward for trade, is this the right play? let's focus to mystically. domestically. sheryl: this is a really good question. it is very hard to anticipate. with regard to trade, we don't know what the trump administration's endgame is. what are they trying to get, especially with china? are they trying to go for zero trade deficit with china? it would still mean a trade deficit with the rest of the world. we are not going to solve america's trade deficit problem. a lot of it depends on the expected endgame for the u.s. but having looked at that, i still think that emerging markets, while it's a really tough time for them, they have done very poorly this year, they still can grow. there is underlying growth there, although it is slowing. that really can power the region.

that, i'm going to bring up this chart, looking at the divergent path that u.s. equities and emerging-market equities have taken. clearly part of this has been the dollar strength. part of this has been central-bank divergence as well. we have seen them cut some of their losses, but you are not seeing a real recovery rally in the em space. if you are a longer-term, value-oriented investor, you have to be wanting to look at some of the opportunities, even looking at sheer demographics in selective emerging markets, right? sheryl: the elements are there. the components are there. the problem is how long do you want to wait. are you willing to stomach a further downturn in the emerging markets? it is not clear if china is going to take another downturn, if the trade tensions get even worse, if tariffs are slapped on again because they can't get an agreement.

that really will hurt china. china's economy is definitely being hurt by these tariffs. in the u.s., we hear who gets hurt. soybean farmers get hurt. in china, there are no voices. the government suppresses a lot only the press, but also people's voices. we don't know who is suffering in china. controlsically people's voices and also suppresses -- gives us very little insight into where the pain is in parts of china. >> you've talked about it being a lopsided trade war at the moment in terms of the chinese economy, already suffering its own structural slowdown as had been anticipated before the trade war started. having said that, they are essentially a top-down economy. stimulus would be to their detriment further on down the track.

you spoke about belt and road earlier. would that help generate some growth? sheryl: also -- yes. also, china made in 2025. they do want to rival the u.s., which is also something that scares, i think, the trump america,ation, or just that china wants to compete aggressively on some of the strategic industries that the u.s. is doing so well in. it is true that they have, the chinese, a number of tools they can use. again, i think that a lot of it hinges on how the u.s. and china negotiate forward their relationship. china can really do a lot of things beyond what i mentioned earlier, do a lot of things that can hurt american companies, regardless of trade tariffs. they can actually walk into american companies and ask for the blueprints. they have had investigators tramping into dupont, for

instance. they demand the blueprints for the technology on the spot. if you are a chinese citizen working in an american company, what are you going to do when a chinese official asks for blueprints? you're going to turn them over, because you risk possibly going to jail. >> hold that thought. you will stick around with us. sheryl wudunn will be staying with us. just ahead, we will take a look at the other top market story, tesla shares surging after a roller coaster few days for the company. we will be previewing the production numbers up next. this is bloomberg. ♪

>> i'm haidi stroud-watts in sydney. >> i'm shery ahn in new york. you are watching "daybreak: australia." let's get a look at the latest business flash headlines. general electric rose after a shakeup at the top. shares soared as much as 16% on

the news that the ceo would be replaced, an attempt to drive a much-needed turnaround. adding insult to injury, flannery may not pick up a golden parachute on his way out as ge bosses don't have such benefits clearly defined in their contract. standard chartered is said to be bracing for a new penalty from the u.s. over historical breaches of sanctions on iran. we are told the fine could be as much as $1.5 billion, although final negotiations on the some -- sum are yet to begin. the allegations relate to breaches eating from at least five years ago. instagram has a new boss. he takes over following the departure of two others. his title will be head of instagram. the founders responded by saying the act will remain committed to its values -- the app will remain committed to its

values. we are staying with tech. tesla shares in racing friday's big losses, soaring as much as 18% after elon musk's -- over elon musk's privatization tweets. they are working to boost model 3 deliveries. let's bring in bob o'donnell. are you confident that these production numbers will meet expectations? have we moved beyond with this sec settlement the questionable behavior, if you will, of elon musk? bob: the production numbers will be interesting. this is only one quarter. they are like cramming for a test. he sends out this email, we can crush it if you work hard on the last day. how do they sustain that, that's

the big question. maybe they show some profitability for a quarter or two, but there are still these long-term questions of how they maintain that. it is not entirely clear how they do that. above and beyond that, of course, are these questions around the way musk is handling himself. clearly the stock and the valuation, i still think is pretty crazy, but clearly, people are relieved by the slap on the wrist that musk got overall. he still can be the ceo. he is the vision behind this company, and it is so critical that he still be there. clearly he needs adult leadership. that's what they are trying to force on the company by bringing in an outside director and all the things that are going to be required. it did not stop him from tweeting yet again this morning. we will see what happens. certainly an interesting situation to watch. superdid not seem

apologetic. quite cheeky again on twitter in response to the sec news. it's fascinating the response you saw in the share prices. it seemed like this sec settlement or the agreement and him taking more of a backseat is really bad news whether your long or short on tesla. bob: short, the reason why things pop back up is people thought perhaps it could have been worse. because it wasn't, things immediately popped back. it's a crazy looking stock chart, as you can see. longer-term, there are these questions. if they truly bring in an independent director that becomes chairman of the board and really changes the fundamental nature of that board , that's going to be interesting to watch. there are a lot of people who have said that's what needs to happen. we will see. it really is going to depend on who they bring in, the personality of that individual, how they interact with musk, how

he is able to deal with that, and share the duties of running the overall organization. those are all big questions. >> showing the cars tesla has produced, they have to meet targets. ?ill they get there also, the $20 million fine -- how much of an impact does that have on the already weak balance sheet? bob: it's not -- it's pretty much a drop in the bucket. it does seem as if they are close. nearly he would not have sent out that tweet -- that internal email if they didn't think they were pretty close to making that number, but how many times can they do that? how long can they maintain it? that's the question a lot of people still have. >> we will be looking forward to those tweets from elon musk. o'donnell. plenty more coming up on "daybreak: australia." this is bloomberg. ♪

>> it is 8:30 a.m. in sydney. markets open in just 90 minutes. the futures session looking a little bit cautious,. economistsns there, expecting the key rate to stay on hold. looking for any of guidance as to when and what the next move might be. i'm haidi stroud-watts here in sydney. >> i'm shery ahn in new york where it is 6:30 p.m. you are watching "daybreak: australia." let's get to first word news with jessica summers. jessica: a measure of confidence returned to the market as the u.s. and canada agreed to a trade deal.

there are modest revisions to the existing nafta framework. attention now moves to president trump's deal on aluminum tariffs . mexico hopes this can be resolved before the new agreement is signed. higher lastduction month as the growing losses from iran were offset by other nations. 32 million barrels per day in september, according to a bloomberg survey. iranian output fell to 3.3 million barrels, the lowest since early 2016, yet that was countered by saudi arabia and others. kuwait has all but stopped shipping oil to the u.s. for the first time since the aftermath of the first gulf war. it is the latest sign of the eroding economic link between the two, as well as booming demand from asia. u.s. imports of kuwaiti crude fell to zero in late september,

the first time that has happened since weekly data became available in june, 2010. australian government says china's steel market is about to go into reverse. the world's top iron ore toorter says china will fall 2020,llion metric tons by because of tougher environment regulations, capacity cuts and beijing,'s deleveraging push. prices fall accordingly into the $50 range by next year. global news, 24 hours a day, on their and @ -- on air and powered bytwitter, more than 2700 journalists and analysts in more than 120 countries. >> we had a cautious trading session in the u.s. on this monday. we had some trade optimism for the latest u.s.-canada-mexico deal, but domestically focused stocks took a hit.

let's see how this is going to play out in the asian market. sophie kamaruddin? sophie: caution could be the name of the game for asia as we are facing a mixed start. 114,en has reached 1:14 -- but defensive stocks have been driving gains this year in tokyo. retailers, drugmakers, and the like -- futures pointing higher for stocks in japan. the kospi could be off to a softer footing this morning. we did get a read on business confidence rising to 78 in september, but staying below the 100 reading, which indicates estimates outweighed the optimism. over in new zealand, we do have stocks extending gains for a second day, potentially. you look at the kiwi dollar, it is under pressure this morning, , afterlow 66 u.s.

business confidence fell to a nine-year low. kiwi traders will take heed of the annual report that came out this morning, which follows the treasury, saying the outlook for third-quarter growth remains solid. i want to take a look under the hood of your recent japanese stock rally, the nikkei 225 to a 27-year high. you can find this chart in the gtb library. nomura is warning that gains are due to fade, especially in light of how fast qantas traders have been piling -- quant traders have been piling in. that could be the achilles heel for this rally in japan. >> thank you so much for that. let's get more on what we should be watching as australia gets underway wit. oil surging to its highest in about four years, predictions of

100 dollars per barrel. where are we at? >> we are in a situation where the upside is a bit more alluring. we have these supply concerns in venezuela, iran. some noise about tension with russia and how the u.s. would like to avoid rush of becoming too dominant. along with all that, one of the big constants had been the expectation that shale oil in the u.s. would be the supply factor that kept prices under control. however, as you can see, we have a chart coming up from the gtb library -- the oil rigs in the u.s., that's the white line, they have been plateauing. they are not falling crude up. -- following crude up. that's creating concern there won't be enough supply coming out of america, driving up wti, and brent is staying high because of the venezuela and iran situations.

you are concerns further down the track that demand isn't really strong enough to support $100 oil. 40t's why people are saying dollars and so on. for the next two or three weeks, for the least, i think the pressure is to the upside. rba.t's bring in the they've been at a record low for more than two years. how much longer is this limbo going to last? >> it's likely to last at least a year. that's what the futures are pricing in. last month, the rba was sounding a little bit optimistic, a little bit more optimistic because the aussie dollar had been falling. it has plateaued. meanwhile, there is another thing going on, which is that house prices here are falling. they have been falling for about a year. we have a chart that shows that. as long as house prices are doing that, it's very hard to see the rba seriously contemplating a rate rise.

at the same time, they can't really lower rates because the banks were already bumping up their differential to the central bank rate. they really are stuck. australia will be stuck at 1.5% probably till the end of next year. >> thank you so much, garfield reynolds. you can find his charts that we gtv onyou at the bloomberg. this week, fed leaders are talking about height rates. we heard from a number of fed leaders ahead of chairman powell's remarks tomorrow. kathleen hays is here. with more.me out >> you have two fed bank president's talking about yellow warning lights, but they have very different kind of yellow warning lights they are watching. eric rosengren speaking in boston today, president of the boston fed, said, i don't think

there is an alarm going off, but i see a bunch of yellow lights. eric rosengren has been warning for some time about the possibility of overbuilding, even a bubble that could collapse in commercial real estate. he said this could contribute to this next recession. he thinks there's a lot of old people moving out of big houses, etc. you could have excess demand on your hands. he is concerned about chinese growth slowing. we saw that in the purchasing managers index. eric rosengren, who is a bit of now,k now, -- hawk contrasted with neel kashkari. his flashing lights are about, hey, it may not be all roses ahead. he said long-term interest rates are not moving up that much. this chart showing you that benchmark 10 year yield is up 3.08, but the move

over the past three months has not been some skyrocketing higher. with that, i would like to look at the yield curve. there are triggers, expectations, concerns about the economy where it is heading. we are in our bloomberg library. jay powell, fed chair, has been downplaying the fact that the yield curve has flattened. you can see that starting at the end of 2016, getting flatter and flatter, a little bit of steepening in here, but not that much. it just really has not moved up that much. neel kashkari is saying, i don't see any reason yet why we should be moving interest rates up and tapping the brakes. the national associates for business economics came out with their big conference today and tomorrow where jay powell will speak with their latest survey. they see 2.9% growth this year.

inflation will stay around target. a are getting a little more concerned about tariffs. -- they are getting a little more concerned about tariffs. if it continues to stay flat, that will make it a little bit tougher for them to move toward that december rate hike, which they signaled so clearly at the last meeting. >> as we wait to hear from jay neutralhe is ranked as on the bloomberg. are we expecting him to say anything that is groundbreaking? >> no. i don't think he will say anything groundbreaking. i don't think he has changed his mind over the last several days. .e have a good economy inflation is right around target. there is more financial stability in the system. he seems to feel that what they are doing is an appropriate gradual move toward higher rates. i still think it begs the question of what happens, particularly if the yield curve

continues going towards inversion. i do want to hearken to one more bloomberg chart, one of my favorites. just to remind ourselves how clearly convinced the fed consensus is, voters and .onvoters, this is 2018 12 out of 16 are saying four rate hikes. that means they have to hike in december. any note of caution from jay powell, if he is concerned about tariffs, i think that would be a plus for the bond bears right now. a lot of questions. we will see. jay powell is a straight shooter and a plain speaker, which so many people like. whatever he says, we will clearly understand what he means. >> thank you so much for that, kathleen hays. plenty more to come here on "daybreak: australia." this is bloomberg. ♪

>> i'm haidi stroud-watts in

sydney. >> i'm shery ahn in new york. you are watching "daybreak: australia." let's get back to one of the big stories of the day, the new three-way trade deal for the u.s., mexico, and canada. president trump celebrated the usmca. isning us now to discuss council of america's vice president eric farnsworth. great to have you with us. we have a new name for this trade deal. does it go any further than the old nafta or parts of the transpacific partnership? eric it does go further: in some ways. you could paint the picture that there are some clear wins here, not the least of which is that canada has agreed to stay in the agreement. i think that's huge. there was bipartisan agreement in the u.s. congress and between the business community and labor that, without canada, there was not a lot there.

it was really important to get canada in. it's also very important that the u.s. has access to canadian dairy markets in a way that we have not before. the digital economy and trade provisions seem to be very good. there are some clear wins here. to your point, i think it's really important that the name has changed. nafta itself was a symbol for many years of people's dislocation in the global economy. their discomfort, their fear about losing their jobs and the need perhaps to blame an outside force. to have nafta now off the table and replaced by the u.s. -- usmca with some new provisions, that gives us the opportunity for a fresh start. as superficial as that may seem, i think it is quite important in a political context. we will have to see how that plays out. >> we have president trump moving forward with this new trade deal with mexico and canada. we have a new agreement with south korea. they are talking with the eu.

can we say that president trump's trade strategy is working? if that's the case, will this make the administration more hardline and tougher on china question mark -- china? eric: we should not put the cart before the horse just yet >> the announcement -- just yet. the announcement was just yesterday. it still has to go through the u.s. congress, not to say the canadian parliament and the mexican legislature as well. we have a long way to go before we see the endgame on this particular phase. they ares as though looking ahead toward the ultimate showdown, if you want to put it that way, with china, which is perceived, in washington, as the primary threat in terms of the global economy. these pieces are being put together as a puzzle. i think you are quite right that china is the ultimate target in the end. >> i want you to take a listen to what president trump had to say about this success -- the

success of his hard-line strategy on trade. president trump: i'm using them to negotiate, and hopefully we can make a great deal with china, a fair deal and a reciprocal deal. >> and the treasury secretary mnuchin has come out saying the same sentiment, that tariffs are a great negotiating tactic. are you in the camp that you see these incremental steps to renegotiating trade deals -- korea, japan, this renewed nafta deal. does this mean we have a more conciliatory trump administration, or does this indicate them to take it even harder -- take an even harder position when it comes to dealing with beijing? eric: it is something unlike we have ever seen before in the context of u.s. negotiation strategy. president trump did say he was going to do things differently, and he has been true to his word. it does seem as if this of ministration is willing to take on higher risks in the context

of trade negotiations and actually threatened to end existing trade agreements or to play trade partners off against each other, and it doesn't really matter if they are so-called friends or foes. they have clearly taken a different approach. the lessons they draw from that are going to be, just as you are implying, that this strategy works. but i think there is also a question that we have to look at in terms of the long-term costs. we are talking about coming to agreements on one specific negotiation with two of our closest friends, canada and mexico. but at what cost? there is -- canada and mexico both have politics, leaders who have to play to their own political bases domestically. over the long-term, we will have to see how this plays out. i think we have a short-term win here in the context of concluding an actual agreement, but longer term, it is quite conceivable that even some of our closest friends are going to start to think the united states will be less of an ally and more of a transactional partner.

that is something i think we have to be a little bit careful about. >> you could easily argue the trade war with china is very different. traditionally, there have been .ore foes than friends good talk about the difference in the nature of governance in beijing, the scale of the trade relationship and what needs to be achieved. fundamentally, is this a war of ideology? is this more about china's ascendance in global power than it is about trade balance? eric: i think it's both. in the u.s. political context, clearly the trade balance is a political issue, set apart from any ideology. you remember the 1980's, 1990's, we had a similar issue with japan, which is clearly a market economy. these are politically sensitive issues in the united states, but when you couple that with the ascendancy of china and clearly china's own ambitions, willing to take a hard profile globally, these issues do come together and create quite a challenge.

it is really interesting that in the negotiations that were just concluded with canada and mexico there is a -- usmca, provision in there now that none of the parties to the agreement, canada, the united states, mexico, will enter into a trade agreement with a nonmarket economy. what that means is that the countries have agreed not to do a free-trade agreement with china. china is not mentioned in the text, but they are clearly the target. the question is, are we now -- is the united states now going to be using this trade negotiation to try to freeze out even third-party free trade agreements withthe question is,. the questions you are raising our absolutely relevant. it is both an economic issue, but also a global strategic -- global geostrategic issue. >> they cannot strike a trade agreement with china. how effective will this be in pushing back against china as a

coalition? also given the fact that they do strengthen iep rules. eric: that's exactly right. each country will have to make their own determination. prime minister trudeau has been in china. the leader of china has been in canada. they have been discussing the prospects of a free-trade agreement. presumably those discussions will have to come to a halt or go in a different or action. within the context of the usmc a local content rules for production in the auto sector and others -- these are clearly designed to keep countries who are not party to the agreement from obtaining the benefits of the agreement. when it is put in the context of market versus nonmarket economies and the largest nonmarket economy in the world is china, i think we can see where the target truly is. >> you're talking about the usmca as if it is a given. at this point, how easily will it pass congress?

even president trump had his doubts, saying he is not that confident that it will pass congress because the democrats could take over the house. eric: absolutely. i was a trade negotiator for the original nafta back in 1992. i was quite junior at the time. even without all of the politics and what we have seen going on here in washington recently, it was a very difficult vote to take. the boat hasn't gotten any easier -- the vote hasn't gotten any easier. if you take the circumstances today and the politics surrounding washington, the very real possibility that democrats could take the house of representatives, if not both house and senate, that will be not just a difficult trade vote to take, but you have to ask the question, are there democrats who will want to face their own voters in 2020 having taken a vote in favor of the nafta successor in order to give president trump victory. that's a raw political copulation, but it could be a very -- political calculation

be there heit could difficult. they are designed to try to attract labor support and democratic legislator support, but some of the provisions are the ones that will soft and the support on the republican side. you have to get 218 votes in the u.s. house anyway you can. that's what the next step is going to have to be for the white house. how do you get to 218? it's not at all certain that is going to happen. if the business community is lukewarm about the provisions in the agreement itself, then you can anticipate that their support may not be as strong as it has been in the past, too. this is all speculation on my part. we have to see how it develops. clearly it is not a vote that can be taken for granted. that's one thing we can be sure about. >> thank you so much for giving us your views. eric farnsworth, council of the americas vice president. >> you can get a roundup of the

stories you need to know in today's edition of "daybreak." positive market reaction. get it on the mobile and the bloomberg anywhere app. get news on the industries and assets you care about. this is bloomberg. ♪

>> welcome back. let's get a quick check of the latest business flash headlines. vision say softbank's fund is seeking to invest about $500 million in china as it seeks a stake in the country's last online education market. the company was founded by baidu and has a reported 300 million registered users. it has already raised $500 million in funding from investors, including goldman sachs. india is seizing control of

struggling shadow banker -- of a struggling shadow banker, whose missed payments have caused widespread disruption. india has sought to take control of the company only twice and done so just once without -- once in 2009. >> that's just about it for "daybreak: australia." trading in new zealand is underway. just a few minutes out from the open in australia after a long weekend. thin trade yesterday. new zealand, flat session. business confidence falling to the lowest in just about a ofade, over concerns declining earnings. little bit of upside after 50 stocks finished the day out lower on monday. in the next hour, we will be theking to ben, who says

expectations are holding firm in the u.s. markets and evaluations are now below average. we will take his views. this is bloomberg. ♪

>> good morning. asia's major markets are just one hour away from the open. sophie: welcome to daybreak asia. haidi: our top stories, asia-pacific markets faces in mixed open after a mixed open in new york. set to extend its advance to the 1991 high. president trump hailed his new trade pact.