haidi: good morning, i am haidi stroud-watts. we are an hour away from the open. shery: i am shery ahn in new york. haslinda: i am sophie -- kamaruddin. sophie welcome to daybreak asia. haidi: our top stories, asia-pacific stocks for a 5th street decline after wall street fell to a three-week low, oil dropping the most in three weeks. sophie:: the sec the short

seller enrichment commission and a big hacked. china planted chips into service, creating a stealth doorway into u.s. check. shery: breaking news, south korea's inflation numbers coming in. we are seeing the cpi year on year for the month of september accelerated more than expected, growing 1.9% instead of 1.6%. much faster than the month of august. we saw a slowdown in inflation numbers. month-to-month also up 0.1%. cpi core year on year 1.2%, faster than estimates for the month of september of 1%, accelerating from august. -- they are still a ways off from the inflation targets. we heard the a-ok governors saying south korea should manage -- and the bok governor saying

south korea should manage, but there are signs there could be more rate hikes ahead. the rate in south korea is 1.5% and acceleration accelerating to be faster than expected for the month of september, growing 1.9%. before we get you a check on what to expect in asian markets, let's get a reminder of how u.s. stocks ended tuesday. we saw a stabilization in the selloff in treasuries, the 10-year yield one point topping 3%, the first time in seven years. we saw the equity selloff continued, the dow reversing five sessions of gains. the s&p 500 down .8%, sliding to a three-week low. the heavy yield or's like consumer shares were waiting on the s&p 500 -- yielders like consumer shares were weighing on

the s&p 500. bond rout iss triggering anxiety and could be a problem for stocks. jgb markets will be in focus after the gross to a 20 month high. japanese investors will round off the week with which and consumer growth -- wages and consumer growth spending. we will have the latest inflation numbers to digest. inflationary pressures are .atcheting up cpi numbers will be key to watch from the philippines. this as we have consumer prices rising on oil and food as well as the super typhoon which struck the island in september. we have the r.b.i. up with its policy decision. the never 25 basis points rate hike -- they have predicted 25 basis point rate hike.

we could see overnight losses on the bloomberg report on chinese cyber espionage. samsung will be key to watch today. luminary -- the preliminary third-quarter profits. will addot see if it to any shares which have fallen 12% over the past of the -- co-percent over the past year. -- 12% over the past year. the white house national security adviser saying chinese cyberattacks on the u.s. validation the trump administration's emphasis on cyber infrastructure. there were reports they hacked american computer networks using a microchip. we are joined from san francisco.

great to see you. it is a complex story from the technology side. the company at the crux of this report, what do they do and how do they go about their business? tom: supermicro is one of the leading providers of motherboards, a crucial component of computers and servers that populate data centers around the world. a leading provider of that. what we understand from our conversations with many sources is that operatives of the chinese military were able to find their way into getting chips onto motherboards that supermicro andby implanted in servers that made their way into data centers in some of the world's biggest companies like amazon and apple. that is according to many people with knowledge of the matter we spoke to. set ofa very complicated

steps to do this. bribing people in chinese facilities, using threats, basically having them implant these chips not in a way that was originally part of the design of the motherboard and of the servers. that was the way they used to get these into the supply chain. we should point out all three companies involved, --zon, google and microchip a supermicro have disputed this report. do we know what the chinese were aiming to do? tom: yeah. usually with the big hacks, and we have heard about so many -- sony, yahoo!, equifax -- a lot of those were aimed at helping

perpetrators get access to consumer information, credit card data, things along those lines, information about normal people. we understand the purpose was to -- a couplewas to of important things. about theselearn companies operating data servers? can we gain intellectual property, figure out trade secrets? the idea is can we learn sensitive information that will help us get ahead as a nation, as a technology provider? some of the users are government institutions, agencies. it is sensitive national security information we can get access to buy manipulating chips and getting inside data centers and using that as a launchpad for obtaining information. shery: do the intelligence

officials in the u.s. 70 idea this could happen? tom: they had been on the lookout, on high alert for a while. these events took place in 2014, 2015. it has been a few years to the in datay of these chips centers. some u.s. officials had been on the lookout, and there had been -- they picked up on intelligence supermicro might be used as a conduit, and those fears were realized. shery: sorry i called you joe, thank you so much. we will go to joe in a couple of minutes. hearing from china, urging the united states to stop accusing and slandering their country. they are saying vice president makesence's speech unwarranted accusations, this after he laid out allegations of chinese election interference in

a harshly worded speech. he accused china of working to sway voter opinion through various doors of measures. joe celtic has the latest from washington. background what is going on here between china and the u.s. this is an extension of the sort of cold conflict, or maybe , overbecoming hotter trade and other issues. this is, was first raised by president trump when he was at the u.n. saying china was interfering with elections. he did not provide evidence. mike pence went further. there was no specific citations of actions they have taken. there was a lot of pointing out the fact there were retaliatory tariffs that china has imposed on u.s. goods,

disproportionately hit states that have supported trump in the past. those are agricultural states, where china has the most leverage because of what they import from the u.s. impact thato the the administration is wanting to put more pressure on china. it works well for the group politically as they approach midterm elections in which republicans are in danger of losing the u.s. house. shery: we have seen military tensions between china and the u.s. in the south china sea, not to mention the report about china hacking. what sort of response have we gotten so far from the chinese? joe: we haven't seen much from the chinese other than what you have reported. they have dismissed this as unwarranted. i expect as we go along during the day in china that we will

get more of a response from site that mike pence did the tensions that are arising tensionshe --cite the in the south china sea and the u.s. want to back away or limit its range of ships going through. this continues to escalate. of the top story on capitol hill, all about brett kavanaugh, could be facing a senate vote on friday. we could see him confirmed as a supreme court justice over the weekend. what happens now? the senators are still filtering through a secure room in one of the office buildings, getting briefed on the fbi follow-up investigation on the nominee. they will be coming out tomorrow for a procedural vote that sets

the clock ticking to a confirmation vote saturday, late morning, early afternoon, which is likely. right now the republican leaders are expressing confidence they have the votes to get the confirmation through, although there are several senators, three republicans and one democrat, whose votes will be pivotal. they are publicly undecided and not discussing what they are planning to do. haidi: the fbi investigation found no additional corroborating evidence but it has come under heavy criticism for its scope. joe: democrats are saying it did not go far enough because neither kavanaugh nor his accuser were interviewed. lawyers for dr. ford the accuser have said names provided to the fbi for possible corroboration further,used to check

but several republicans say they felt it was euro. -- it was thorough. haidi: our congress editor, moving to the make or break just about friday morning. let's get you to first word news now. the international fund says abenomics needs a revamp. christine lagarde said japanese inflation remains subdued, household income is stagnant and monetary policies stretched. shinzo abe launched the program six years ago, saying he would launch arrows at the slumbering economy. it has achieved much, but more needs to be done. the reserve bank of india may raise its rate 25 basis points on friday. dollar-rupee fell with innomists expecting a hike the hold. the r.b.i. needs to step up bond

purchases to tackle liquidity deficit that could balloon as much as $7.3 billion. okinawa is bracing for a late-season storm that threatens south korea. the typhoon is approaching with heavy rain and wind gusting to 180 kilometers an hour. some parts of okinawa and other islands have felt the storm, and many flights were canceled at the main airport in the city. it will pass west and continue north to korea. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna dagenhart. this is bloomberg. shery: a positive outlook on asia. we will find out why the bank of singapore's chief economist upgraded aipac equities. haidi: our next guest believes most investors are overweight on

mega contact names. -- mega calm tech names. this is bloomberg. ♪

asia. this is daybreak i am shery ahn in new york. haidi: i am haidi stroud-watts in sydney. dominated by the decline we saw across tech, chief majors among the weakest with decline. treasury yields hitting multiyear highs again and gold seeing in advance. we saw a little more calm in the treasury market but up to the extent of the sentiment in equities. su: we saw the selloff study, but then the selloff at already reached a peak. let's take a look at the snapshot. what you see, bond yields close to 3.2.

there is one prediction we could see 3.5% by year's end. that has the markets concerned. chip stocks, taking a big hit irma down 2% on the sector. you have some major chip large declines, not only doing with the tech selloff but the china hacking incident which we have been reporting. let's take a look at the bloomberg. we go into the chart. you can see these at btv. shifts swings show the at more than 1% in the index. today was an example. towards the right hand side of the chart, those 1% swings are happening on an average of two or three times a week. look at the faang trade. look at the size of the declines. some of the other stocks that were in focus. thebig loss of the day,

super micro computer in the center of the storm. this was up as the alternative trading platform looks at buying another. wells fargo and others getting a lift. one of the fastest paying dividends getting a lift. that is significant because the stock has been under heavy selling pressure. costco is down after reporting i.t. problems. they said they will have more details to come, but going to start off the friday session under pressure. as the focusssure for a lot of investors shifted away from the squeeze in supply iran, to aela and big buildup in u.s. supply. look at the dramatic decline on thursday. west texas falling from the

four-year high. a hitit caught a bit of with the stock rebound, but a lot of gains were given away. but people say we are seeing technicals favor gold and a lot of the disruption and volatility in the market creating a safe haven't seen in recent weeks and months. shery: we have the wells fargo asset cio kirk here. , part the surge in yields of it is fed tightening. how much of it is because we are seeing the federal deficits soar and treasury trying to finance it? this is huge. there is a lot of supply. >> absolutely. we were projecting we would hit $1 trillion annual deficit, and $20total amount will hit

trillion, 20% of u.s. gdp. we have known this for a while and there is no question the overhang of debt in the market is having an effect along with inflation scares, especially the worry about wages going up and the expectation of a strong payroll tomorrow morning. we have seen the u.s. administrations say the fiscal spending will be ok because he was the tax cuts, help the economy grow or the fiscal situation. how much is true? >> you frontloaded the economy, so the tax cut is very stimulative, and it has resulted in a lot of money in the system and resulted in a lot of leverage. not aesult, it is surprise equities are doing well . one of the things i have been wondering about that is happening is when rates would back up as well. you are seeing both of those

effects and certainly be interesting to watch going forward. tech really taking the brunt of the selloff overnight. part of that was due to the report chinese spies have infiltrated a hardware and affected companies like amazon and apple. a few months ago even at the start of the year, talking about the rotation away from growth into value, have we started seeing that, and should we? are think technology stocks long-duration stocks like bonds. you are getting cash flows in the future. if interest rates are moving up, there is the infinite -- there is the expectation those will go down. a little bit is to be expected. [speaking simultaneously] yes, i do. i think that is happening to your point about value. there is a rotation of value.

i think the market is getting a little more defensive. you can see things like health care doing very well, the vhd index is up 18% year to date. financials could do well if the yield curve steepen's. it is logical to expect the value stocks and rotation you are referring to will happen. haidi: in terms of value, it is hard to get those valuations we have seen. emerging-market stocks fell the most in the overnight session. is it time to get back in, or is it high risk for investors? kirk: i would not recommend buying emerging market for the near term, but for the long-term, emerging markets are cheap. overhang is the potential of trade wars and where does this go. the other thing i am watching is

what is happening to the u.s. dollar because the u.s. is tightening. interest rates are backing up, but bund yields are 25 basis points. it is hard for me to come to the conclusion the dollar is going to weaken. but of the other concerned with a stronger dollar, what is the impact on the emerging markets, which is a mixed result. haidi: we will have to leave it, but appreciate you coming on, wells fargo asset management cio . you can get a roundup of stories you need to know to get your friday going in today's edition of daybreak. you can go to dayb on your terminal. it is also available on the mobile app. this is bloomberg. ♪ loomberg. ♪

asia. this is daybreak

i'm haidi stroud-watts. shery: let's get a quick check of the business flash headlines. senator bernie sanders calling on mcdonald's to set an example for the fast food industry and raise minimum wage, writing to the ceo. he said if the company boosts its pay and respects the rights of workers to form a union, it would be an example to others. the shares briefly turned negative before closing slightly up. jumped after their step -- there ceo stepped down. she had been on leave since june instituteank board examined the allegations. she was considered the most powerful woman in indian finance people to lose jobs as the regulator caused scrutiny. shery: minutes away from the pulmonary third-quarter earnings for samsung.

we will go through the numbers as they break. this is bloomberg. ♪ ♪

shery: it is 7:30 p.m. in new york. i am jenna dagenhart. these are first word headlines. an investigation set a unit of the chinese army implanted tiny microchips in servers that made their way into data centers of companies including amazon and apple. this cloud them to make a doorway to networks using servers. amazon and apple dispute the summaries of the reporting, so who assembledo the servers. beijing said mike has made unwarranted accusations about china interfering in elections. he alleged chinese meddling in

american democracy and said russia's actions pale in comparison. he also called on google to cancel the dragonfly project, which would censor results in line with government policy. in less than 24 hours the senate goes to a make or break procedural vote on brett kavanaugh. lawmakers digest an investigation into allegations of sexual assault. a report copy was made available but some senators grouped together to read it. it is hard to the value of the findings some say but others say it hasn't been corroborated. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna dagenhart. this is bloomberg. thank you for that. we are getting samsung's results

crossing the bloomberg. let's go to stephen engle. with all of these concerns the cycle has reached a peak, what are we seeing? overen: is the super cycle ? that is what we have been asking for a long time. but the storm clouds are looming. we see third quarter preliminary operating profit beating expectations at samsung at 17.5 trillion won with the estimate at 17.2. withng has beaten operating profit sales in line won.estimates, 55 trillion the years of consistent growth in semiconductors it is being predicted to slow down. samsung electronics was boosted rises inr sustained the third quarter, but since then we have seen them dip off

and even touching a one year low. macron, another competitor out of the united states, has warned ,f sales and profit decline because of slackening demand. for samsung, they had a weaker won in the corner here that held exports surged for south korean chips. that boosted kind of, -- time next, samsung. apple using oil, oed screens, boost the samsung's display. looking forward, chip division weakness expected, cyclical downturn. the super cycle expected to into theo the -- wane first quarter of the new year. the -- there was a

decline despite the earlier launch of the note 9. haidi: investors are making up their minds. stephen: looking up the stock, it is down 12% year to date. investors are worried about the impending end of the super cycle. nomura, shene from 4.3 off her entire stake of million samsung shares in her global equity fund. she said the cycle is no longer accelerating, and it is entering a moderate growth phase. she is bullish long-term for the semiconductor cycle. this is a cyclical downturn she is projecting with others and she has for now liquidated shares in samsung. , thank youhen engle so much for that. we have another alert crossing the bloomberg. we can expect toshiba tempe record losses in the full-year

results. toshiba saying the memory corporation has requested indemnification for $42 million in losses. this is related to the sale of the memory chip business stake to a consortium. they say the loss of $42 million was not really included in their full year 2018 consolidated business results that were forecast back in may. the company will try to quickly announce any items that require further disclosure. this could be that they pay a record loss in their full year results. let's turn now to a another company -- to another company, tesla. seeing more volatility. elon musk has returned to twitter with a stab at the u.s. securities regulator. ramy inocencio has the details. ramy: he is back to twitter. when you thought you were safe to get back in, you are not.

let's bring up the most recent tweet that just dropped. he is missing a verb but wanted to say, just want to say the short seller enrichment commission, sec, is doing incredible work and the name change is on point. he replied to someone saying's short-sellers are value destroyers and should be illegal. the war on shortselling continuing. there is a lot of replies on elon musk's twitter account. one person said amazingly elon musk, you seem to be working against us longs as well. what really happened with the settlement we were talking about ? a few days ago it seemed elon musk couldn't help himself and his throwing shade in their general direction. we are seeing the share price fall. last time it was down 2%, now it is 2.14%.

one interesting thing is he was supposed to give up his chairmanship in 45 days, less than that now. one interesting line is tesla board members have proposed 21st century fox's james murdoch might come in as the new chair. there has been pushed back. in terms of those two independent directors that are supposed to be named, those folks are supposed to be controlling or watching communications of you want to make sure he doesn't tweet out or email out interesting things -- of elon musk to ensure he doesn't tweet out where you know out interesting things. seci: he seems to think the stands for something else entirely. not sure whether that is, but go to the bloomberg terminal. i want to show you the shortselling.

, ina short interest is 27% your gtv terminal library. and to the other tweet's point , short-sellersgs got $1.2 billion in the two weeks after musk's funding secured tweet we know from august. muskrtners says when elon was caught smoking on the video, short-sellers gained another $510 billion. seems every time he tweets, it is negative for the price, and that actually only empowers the bears even further. haidi: thank you so much for that, the latest on the tesla drama ongoing. we are counting down to major market opens in the asia-pacific. let's get to sophie. plenty of headwinds this friday. what are you watching?

sophie: asian markets are facing a tricky start to friday. higher oil, on selloff and firmer dollar after the greenback saw it best run of gains for the year. it gained 1.5% over two weeks. payroll data is due out friday. we have more for emerging markets. we have em currency falling the most in two months and stocks the most since february. with the selloff we have strategists saying there could be a rebound in the making. j.p. morgan saying it could rally 15% in six months, but pressure is likely to continue, especially in the wake of the report on chinese cyber espionage. asian chip manufacturers may move. when you look at year to date stocks, they have had a punishing year. you have this one in japan's leading 44% over the year. they face concern demand is slowing.

12%.ng is down givennot quite clear yet what we are seeing in the numbers, although they did post record operating profit for the third quarter. india in the spotlight with the r.b.i. decision friday, no relief insight for indian stocks? no.ie: they are in correction territory after a record run. closed for a high average. the benchmark has been within 1% of a 10% correction from the record close in august, the top line on this chart. see more pain ahead. bank of america merrill lynch saying a form of 32,000 -- a fall of 32,000 by year end. 2.8% away from a full burn -- full-blown bear market.

the r.b.i. decision one of the top events in asia. let's get you to rochester, minnesota where donald trump is attending his fourth make again campaign. he is talking to the crowd. he has commented having democrats back in power would be a nightmare, rallying the crowds going into these key electoral midterms. we are getting an op-ed written by the supreme court nominee, who could be after a test vote on friday, he could be confirmed in the next couple of days. he was emotional last thursday when he gave his testimony but said he is an independent impartial judge who doesn't decide based on policy preferences. trying to give some of his critics who were concerned about protection of legal precedents, like roe v. wade. op-ed he is releasing an

on the wall street journal. we saw him talk on a fox news interview, saw that hearing where he was very rallied up. we now are hearing how he was senateal -- we have seen republicans receive that fbi report. andholdouts like jeff flake susan collins saying the investigation prompted by the sexual misconduct allegations appear to be thorough, so we could be seeing the vote on kavanaugh. we are hearing from the seven -- the senate that the vote is set for 10:30 a.m. eastern time friday. line: we are getting this from the cap at saying the supreme court justice must never be viewed as partisan. brett kavanaugh writing -- it is clear he has been viewed as partisan through the entire

process. that has been one of the main issues. president trump speaking in minnesota, saying china wants to make a deal he thinks that it is not ready. bloomberg subscribers can continue watching at life go. you can find -- live go. you can find any event you might have missed out on earlier as well. the bank of singapore chief economist joining us with a range of inflation data out today. is behind thebank curve. this is bloomberg. ♪ ♪

this is a break asia. i am haidi stroud-watts shery:. shery:i am shery ahn. a tough week for global markets and central banks is drawing to a close with potential drivers lying ahead. the u.s. jobs report and an interview with the new york fed

president. our policy editor kathleen hays is here with a preview. a lot that could move markets. expecting --are you are right, news that could make a big difference. even though the stronger economy is priced in and we have heard a lot of fed speak, but when you look at the bond market this week, it underscores after a big the bonda big move, market seemed to stabilize a bit today. maybe you are getting ready for another round. jump into this chart. you can see these are short record level at this point, showing how bearish and cautious and fearful people have become. 3.20 at the close of trading. that is a big move over the

course of the week. in terms of the bond market and jobs report, let's start with saying the private survey of jobs came in stronger than in the past. many say that is setting us up for stronger september jobs report on friday. payrolls are seen above 230cast, in fact above the gain. the jobless rate will move to 3.8%, the lowest since 1959. average hourly earnings, wages that feed into inflation rise, are seeing pulling back a bit. bloomberg economics says this could be a big surprise because of the hurricanes and statistical factors, it could jump, and that could hurt the response. speakingiams will be with bloomberg exclusively. he has been on board with rate hikes for some time. a lot of people associate him with the neutral rate. the fed using that to guide

policy. recently he has downplayed it. it is just one factor. that is important to keep in mind because we want to hear from him after the jobs report what he sees and how much tighter the fed will need to be. haidi: the bond investors and traders hanging on every word from john williams, also the jobs numbers and currencies, e.m. being hammered. they will be nervous. kathleen: there are so many factors driving em. there is one central thread, federal reserve rate hikes inping to kick off downturn em currencies, forcing central banks to raise he rates. a sweet spot.s in they were able to hold their key rate steady.

they are doing all right. the reserve bank of india will have their decision hours from now and are seen raising their key rate again. the deflation rate has continued to rise. are rising. they are seen acting against that. and to support their currency which has been beaten up, one of asia's worst performers if not the worst. bloomberg economics things we should see a dovish pause. they will see rate flows, which will exacerbate problems india already has. at the end of the day we will see no matter how right bloomberg economics is, r.b.i. possibly raises again in hopes of economy can withstand this because higher oil prices are hurting consumers and businesses. when the currency is weak, you have to do something. this is a big factor. haidi: kathleen hays, with the

preview of r.b.i., the decision out later today. our next guest says global growth looks good for now. joining us from singapore is the bank of singapore chief economist. let me start off we were talking about the r.b.i. when your currency is being punish, you have to do something about it. indonesia is in the same basket, but are the hands tied in terms of repercussions whether they hike or not and if it will be impactful shoring up confidence? >> i think they have to show the markets they can as indonesia has. show prudence, not really necessary for domestic reasons. you could argue with stress in the banking system may be unhelpful, but is not a big move. they need to show attention to divert pressure off the currency. seen pretty sanguine

with the outlook -- seem pretty sanguine with the outlook. are you not concerned with the flow on effects of what the trade war does in terms of interior doing -- of deteriorating trade conditions and inflation? richard: there are always things to worry about. i would agree the trade war is the most serious problem facing the region, but it is not as if american consumers. buying stuff. they will buy from someone else and either pay more to buy the same stuff from china or maybe by that from vietnam or malaysia. you will get trade diversion the same help china at time that damage is being offset by stimulus from the chinese economy. we don't really see a big hit to global output from these trade

wars. implausiblehas this forecast of inflation going couple ofhe next years. you get some pressure from tariffs, maybe a couple tenths of a percent. it will look more exposed and people will start asking whether the fed can really go slowly as the market seems to think. shery: have some central banks been too enthusiastic? -- map go a function is a function of rates. more are expected to go up the end of this year. too much emphasis on hiking for countries like south korea or thailand? that is a think spread. look at indonesia, india, looks

sensible. the philippines is behind the curve, then thailand, goodness knows why they want to raise rates. , and same withat korea. they are enthusiastic about putting the rate hike in the next three or four months. given the state of their economy, makes no sense to me. we have an interesting range of policies coming through in asia. shery: we are seeing the fed letting $50 billion a month go off with that placement. how concerned are you about liquidity? it is interesting nobody seems to be talking about this. a few years ago, qe was the solution to all the worlds problems. now the fed's unwind is bigger from purchases from the ecb and japan from this quarter going onwards. nobody seems to care. it is interesting sign of how

tension has shifted. now there is little focus about liquidity, but this could be one of the factors behind the stresses on the emerging markets. haidi: one of the factors when you see the reaction in the bond markets and treasury markets. i want to go back to your comment about rotation -- the potential inflationary effect. you look at tariffs and oil is theand commodities, fed inflation going to be so gradual that the fed and other policymakers may not need to adjust policy for it? richard: normally a central bank will not raise interest rates because of a short sell their that is a one-off change. when the economy is hot, the concern is to get second round affects. costs go up, then they raise

prices for consumers. consumers want higher wages and that forces employers to raise as well. especially with tariffs where it is quite rapid, the concern on hot economy leading to inflation rising, 2.5% to be by the second half next year -- maybe by the second half next year. and what chairman powell has focusing on, that goes out the window. the fed is behind the curve. haidi: in terms of the sentiment for asia-pacific equities, does chinese stimulus, in to save the day? is that something we are expecting? richard: we have been looking for this. the business bank of singapore, we upgraded asian equities a month ago thinking valuations were looking decent. china stimulus would come through as it has an boost demand, not just in china but

throughout the region and give a list of equities. it is hard to find compelling signs of that stimulus. you know it is coming, but it is not having a big effect yet. the equity market is struggling to find a path. shery: on inflation, we are seeing oil also rising. is this a real rally or fake one? it is dubious. it is not as if the sanctions .hould have come as a surprise they were telegraphed months in advance. at these levels you would expect to see supply response both from opec and u.s. shale producers great we think not left much in the oil rally if at all. shery: thank you so much, bank of singapore chief economist. president trump right now ,olding a rally in rochester

minnesota. he said china is seeking a deal and the u.s.-china -- the countries will talk later. the chinese do want a deal, but president trump said they are not ready. if you want a deal, you are not ready. we will talk later. that is trump commenting on trade tensions with china and talking about judge kavanaugh of course. op ed we have got this editorial written by judge kavanaugh in the wall street journal denying he is a partisan candidate, saying he doesn't need to make decisions that are biased. it has been a difficult time for him. he is trying to rally supporters as the procedural vote will go ahead friday morning. going back to what president trump was taking again this hardline stance on china, we had the vice president coming out in his speech accusing the chinese of election meddling. shery: the chinese saying the

vice president speechmaking -- speechmaking unwarranted accusations. this is bloomberg. ♪

haidi: good morning. asian markets have just opened portrayed. shery: good evening from new york. sophie: and i'm sophie kamaruddin and hong kong. welcome to "bloomberg daybreak: blue -- welcome to welcome to "bloomberg daybreak: asia." ♪ haidi: asia-pacific stocks look set for a fifth straight decline after wall street's three-week low. oil dropping the most in seven weeks. sales remain resilient.

there is meddling in the midterms. we saw that sway into u.s. markets weighing on the tech specter. the nasdaq seeing its worst season since june. the 10 year yield is hovering around 3.2%. see how all of this will be solved around asia. as we: not happy friday see asian stocks are continuing to fall after hitting a three-week low on thursday and the bomb fall certainly adding to anxiety. treasuries reached a seven-year high overnight. there will be closely watching yields at the tenure climb to a 20 month high. we have it hovering around 16 basis points. slight expectation for a change for superlong bonds at this friday's operations.

the yen is looking steady right now but set for a fourth weekly decline. we have the u.s. jobs data. we are seeing pressure for asian sucks -- asian stocks. onh that, let's check in samsung shares. these are the preliminary results for the third quarter. we are seeing a move higher for the stock at the start of the friday session but bear in mind we have seen samsung shares those about 12% over the cost -- over 2018. annual earnings rose to an all-time high. the national security adviser says chinese cyberattacks on the u.s. belichick the administration's emphasis on cyber operations of its own. that follows a business would report the beijing hacked american compete or networks using a microchip by peter

elstrom -- using a microchip. peter elstrom has the story. they have been able to weaponize are manufacturing supply chain. >> that is right. it is a very in-depth story and it is worth giving the entire thing a read. the story raises troubling questions about the security of the supply-chain that the tech industry is really taking for granted for many years now. they have their key components built into china through chinese factories. it was actually allegations that it was an american company that was involved but they were having their hardware built in china and shipped back to the u.s.. theselegations are that tiny microchips ended up on the of server computers that were then used to open the door to all sorts of spying

activities in this investigation found that the devices and that it -- ended up with components held -- built for apple and amazon in particular. it raises broader questions about whether the supply-chain and the technology industry has , if it hasy on security holes in it. shery: we imagine software-based attacks. how dangerous are these hardware hacks? it such a what makes blockbuster allegation. hardware attacks are much more fundamental to the operations of many of these devices so the software hacks that we hear about regularly can come in through particular vulnerabilities in the software with hardware particularly, this microchip would be able to open up doors that would allow you to see all sorts of operations on

these servers that are used on critical components of the entire tech infrastructure. hardware hacking compared to software hacking is so difficult and unusual it is almost like seeing black magic. they have done this, how they have done this, what were they trying to get out of installing these microchips on the server motherboards? >> the investigation according began in 2015, with the first discovery. it continues to go on. so far, with the suspicions are is that they were targeting corporations in particular and government agencies. it is not a pure that this was targeting consumers. it is more about intellectual property and other ends of information from the government agencies that could be of use to the china government. shery: think is a much for that.

peter elstrom joining us from tokyo. we must point out all three of the companies at the core of the story are amazon, apple, and supermicro. it is worth a read. the make back to america great again relic taking place at the moment in rochester, minnesota. this is the fourth campaign rally since saturday. shery: the democrats in power would be a nightmare. president trump also urging voters to defeat the democratic editor -- democratic senator. he is out there trying to campaign for his candidate. president trump also talking about china and the u.s. saying that the chinese have been trying to seek a deal and he told them that they are not ready. that they will talk later. also of course, we had vice president pence just laying out allegations of chinese election interference and china responding on the -- on that,

asking the u.s. to stop accusing and slandering china. haidi: has been very busy in this u.s.-china story. they said that china has also been a victim in this respect. believe that there but we will continue watching the president speak at life go -- live go on the bloomberg. let's get back to that speech in washington. mike pence accusing china of stealing american technology. >> chinese security agencies have masterminded the wholesale theft of american technology. including cutting-edge military blueprints. ,sing that stolen technology

the chinese communist party is towing -- turning plowshares on a massive scale. haidi: there also accusing beijing of meddling in the election, saying russia's actions two years ago pales in comparison. any evidence to back up the claims? >> this is kind of echo what the president had said a few weeks ago in making the accusations that china is meddling directly in the u.s. midterm election. this comes as there is concern among the republican party that the trade dispute with china could hurt some particular republicans in states like iowa in the midterms. it is tough on china -- this tough on china talk has been ratcheting up in recent weeks as

the midterms get closer. vice president pence talked about china meddling through using spies, coercive tactics, tariffs, and propaganda. the only thing that has been cited is a four-page supplement in iowa's largest newspaper that the chinese had put there talking about the real danger of tariffs and a trade war. china has denied of course, that accusations saying they are unfounded accusations and that they are -- they really amount to slander on china. in theare ratcheting up war of words as well as the tariff war. haidi: it feels like a lot has happened in the last 24 hours. those pictures of the new collusion between -- collision between u.s. and china warships.

the trade story as well, the tech hacking story as well, things are starting to unravel. >> that's right. it does feel like a ratcheting up of the rhetoric. a lot of things are coming together also. it was just about trade for a while, now we are having the south china sea, taiwan, the story and now the hacking that peter just talked about. i think there is a lot of things happening in this does give concern to analysts that we may be seeing, if this goes unchecked, another cold war perhaps with china given that there seems to be no backing down, certainly from president this, the base likes tough talk on china. i think we will see more of this before the midterm election on november 6. perhaps after them, the president as he said in his campaign rally might be willing

to talk to china at that point but we have seen no evidence that that will happen before the midterm election. haidi: president trump insisting that china is seeking a deal but that he is actually telling them that they are not ready to come back later. -- how havechinese the chinese been reacting so far on the harsh rhetoric coming from the president on trade or on the military confrontations in the city -- south sea? >> china is denying meddling in the elections saying these are unwarranted accusations. china has been using the trade war to its advantage as well in terms of rhetoric saying that the u.s. started this in china is just retaliating. china will protect its markets and buttocks and its consumers -- and products and its consumers. they are saying the u.s. has been the aggressive here. china is also saying it will not

talk to the u.s. or engage in further talks until the u.s. really goes away from the threat of further terrorist. president trump has said -- the u.s. really goes away from further terrorist -- further tariffs. china is saying it will not talk until the u.s. steps back and it is showing no signs of the. haidi: thank you, jodi schneider in hong kong. let's get the first world news from jenna dagenhart. jenna: samsung topped expectations as they remained resilient. net income was 15 and a half million dollars. that eases concerns about an immediate downturn in ship demands -- shift demand. shares are down about 12% in 2018 compared to a 41% gain last year when annual earnings hit an all-time high. in less than 24 hours the senate

heads to a vote on supreme court brett kavanaugh -- supreme court nominee brett kavanaugh looking into allegations of sexual assault. the report was made available with some senators grouping together to hear a staffer read its contents. toocrats say it is hard evaluate the findings while republicans say allegations have not been corroborated. reserve bank of india may raise its key rate 25 date basis points later on friday. with --ar rupee fell expecting a hike. bloomberg economics says the r.b.i. needs to step up on purchases to tackle a liquidity deficit that could balloon this month to $7.3 billion. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

dagenhart, this is bloomberg.. shery: still ahead, samsung delivers record profits. it will head to seoul to ask securities to breakdown the latest. -- we investments discussed where the latest opportunities are taking a look at the market at the moment. this is bloomberg. ♪

haidi: this is "bloomberg daybreak: asia." more than someone happy -- hays has the story on the persistent yield curve lightning. what a week -- yield curve flattening. what are we seeing now?

2.20, theup to highest yield since 2011. i think this yield curve steepening has been going on for a little while but it is getting a little more noticeable. one of our portfolio managers spoke to bloomberg and this buildup a little -- a bit of an interesting story around this. him saying eric -- making america great again means higher rates. read the yield curve signals with me. is if you looke at the five to 10 spreads, to the two to five your spreads -- year spreads, people are worried about inversions. they have nasty been debate. steepened a now bit.

mark sees a lot more yield curve steepening ahead. if you are still betting on a flat yield curve you can see how a lot of people are probably questioning it and shifting their positions. changing around, selling some bonds, which is why they are selling bonds and this is building on itself a bit. asia, buts evening in observe a bigger bond selloff. after that 80 people report, that survey showed a lot more strengthened people have focused -- then people have forecast. let's jump into another bloomberg chart now. these are average earnings year over year. it is the strongest in the expansion. just to give you some perspective here, i want to

widen out this chart so you can is that maybe the strongest in the expansion, but look at 2006, the beginning of the center. wages -- the beginning of the century. wages would rise faster. a has been in the camp for fourth rate hike stance in 2018, he got out front on that earlier in the year. and a shift towards a more dovish tone could impact the markets and i don't know how you can get more hawkish than that. very important interview. another reason why you have to keep your television tuned to bloomberg for at least a 24 -- four hours -- for at least the next 24 hours. haidi: thank you, kathleen. are showing numbers

the strength of the u.s. economy. where joint -- we are joined by colin graham. in the words of one sydney investor, we wish we were even shorter when it comes to u.s. treasury's. -- u.s. treasuries. are we going to see a repeat of the volatility which we did see jumping that we had back in barbaric? is this -- that we had back in february? is this a game changer? >> we are not in that camp. we saw a month ago some bond commentators will for -- were concerned about the flat yield curve. however, a steep yield curve, the reason it is steeper is that wages are stronger. for us, the u.s. economy continues to grow strongly and

will over the next few quarters. raising rates is good for equity markets. haidi: his inflation picking up -- is inflation picking up, does that change your view? >> i think it will. you look at the survey yesterday, that was very strong in terms of wage growth. i would not be surprised to see another strong wage growth number today in the u.s. through the payrolls report. however, i think the fed has set its course and i think more discussions will beat what is happening at the second half of next year rather than what will happen over the next nine months. the fed probably priced three rate hikes and they will probably positive think about have they done enough or not for the short-term. haidi: many analysts seem to agree with you when it comes to your expectations for stock market.

-- stock markets. take a look at this chart that we are showing you. analysts are pretty optimistic about the revenue forecast, especially the s&p 500 2019 sales forecast. we are also seeing the eps estimate for the s&p 500. pretty stable. are you auto concerned that that boost that we got in corporate earnings because of the tax cuts could start to feign -- fade? >> think it will fade -- i think it will fade. if you look at the underlying earnings growth this year, there may be 728 basis points -- seven to eight basis points. it is still very strong if you look at japanese earnings, they are growing 15%. wereean earnings, there

growing just under 10% which is actually very good for europe. earnings around the world are growing strongly despite all the worries about the trade tensions and the stronger dollar. shery: does that mean you're optimistic when it comes to emerging markets and how do you this as relative to u.s. markets? it is all about relativity even if you're optimistic about --.'s, that she's optimistic about em's. marketsve emerging hopefully helping to navigate the volatility with an emerging markets. in terms of our views, if we had to pick one market over the other, we would pick the u.s. over emerging markets. however, there are markets and currencies and bonds that have been cut in the crosswinds of the trade war. as all as a rising dollar. not all markets are the same.

we find pockets of value around the world and we want to be investing our clients money. clients' money. they are definitely beginning to find stocks that they want to buy. if you look at the enhanced value, the msci run on a factor basis, you are seeing those rise quite significantly over the last month. you're seeing a bit of intervention into value. shery: thank you so much. chief investment officer of eastspring investments. you can tag gtb go on the terminal. you can also save our charts for the future. this is bloomberg. ♪

>> social media reports that china is cracking down on travelers returning home with bags will of luxury goods. there are videos of border guards checking the duty-free allowance. jitters over the trade war. >> instagram is a reversibly reducing long-term investor expectations. they expect another quarter of declines after an unpopular redesign. forecast --t its

lowered its forecast. there is another record but what about the outlook that chip demand? we take a look at that next. this is bloomberg. ♪

haidi: it's 8:30 in the morning in hong kong. as are looking dire when it comes to the end of the week for asian stocks. stocks are falling the most in a month. treasury routes continue to prove to be contagious for equity sentiments. shery: and i am shery ahn in new york. you're watching "bloomberg daybreak: asia." here's to get -- jenna dagenhart with the personal views. sophie: mike pence has made -- jenna: mike pence has made unwarranted accusations. in americanling

saying the russians metal and compare -- the russians pale in comparison. the chinese invented tiny microchips into servers -- motherboard servers into companies including apple and amazon. report -- --ple report that supermicro assembled the servers. the least affordable housing market bloomberg data shows the kleins of that magnitude -- declines of the magnitude have proceeded the last four downturns in hong kong

home prices. general electric's new ceo will receive more than $21 million in annual compensation and could pick up shares worth more than 100 millions but only if you reverses the slump. he will get 2.5 million and for a and is eligible three and three quarter million dollar bonus. awards are dependent on performance. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. for a three and three>> global news 2n air and @tictoc on twitter powered by journalists and analysts in 120 countries. this is bloomberg. >> thank you. let's look at our asian markets. not a happy friday. >> not a happy friday. asian stocks extending losses. tech shares beginning to drop. samsung gaining ground.

1.5% after profit topped estimates. kospi. helping boost the checking in on the korean yuan, continued losses. we just switch it out and checked in. we haven't moving lower against the greenback. it has fallen 2% this month. we have the yen holding steady ahead of u.s. drops data -- jobs data. not much reaction to japanese data. real wages fell more than forecasted. we are keeping an ion jgb yields. buyinganese long and will be the focus of this friday. adding to inflationary pressures this morning. pickup andkorean cpi later on we will get consumer prices from the philippines. let's check on some early stock

numbers this friday. you have beach energy falling the most in weeks. over in tokyo, jumping to a 31 year high after reporting earnings forecast. it also could be finding support from a report that convenience store items are exempt from the consumption tax hike. toshiba is under pressure. tokyo electron extending losses for a fourth day s chipmakers face headwinds. >> thank you for that. samsung electronics posting another record operating profit. once again topping estimates. shares remain under pressure on concern over weakening demand for memory chips. asiahief north correspondent is here to break down the results we have seen. that chip super cycle is not over just yet. >> not yet. the signs are indicating the

coming months, it could be over. we are already seeing key fund managers rotate out of samsung shares. the stock is down 12% year to date. those pressures are building. in the third quarter they had another operating profit of 17.5 trillion yuan. that beat the estimates. the super cycle on top of -- on profitability still in full swing. helping all the south korean exporters of chips like samsung electronics boosts to a record in september. we are starting to see some iskness in demand, and that -- the prices are starting to weaken. look at these prices of the 32 gigabit falling. it does not sound like much.

that, however, was the first quarterly decline since 2016. memory chips fell about 6.9%. we have already gotten competitors like micron warns about slackening demand, beginning profit and sales in the current quarter. samsung electronics, while putting on a positive face with its chips division is seeing weakness going forward and memory chips as well as sluggish demand in the handset division and sluggish performance. >> stay with us. i want to bring into the conversation, the head of global strategy there. great to have you with us. do today's numbers give you any reassurance the super cycle is not yet over? and your assessment of how you feel about samsung. .> yes, definitely

the numbers are coming in better-than-expected, as the operating profits coming in at 17.5 trillion, well above expectations of 10.2. if you look at those numbers, most are coming from the semiconductors business. cycle, probably a longer so the fluctuation will be less than before. the super cycle, it is because there is a chain of dram and then demand. the earnings cycle is going to continue forward. if you look at our own estimations for the sales decline, in terms of the numbers, the price decline, it is going to be there going forward. but the level that drops is going to be less than what market is expecting and worried about.

>> how much of this, of the boost we saw, was due to seasonal factors and weaker yu an? is anhink the weaker yuan impact, but the lover is not that big -- the level is not that big. it is probably 3% to 5% impact. demand wise, if you look at the sales, the decrease is quite significant. two digit numbers. the semiconductor business outlook wise, the system computer demand is here to stay. because of that, the server d-ram and price will be going down in the future. in the past if you look at the fluctuations, it is very volatile. going forward because of the server demand, it will be less

volatile. that is why it is making this stock look very cheap. >> we know that memory chips contribute the biggest proportion of profits. it helps lift even sluggishness and other areas like displays and the handsets. a number of analysts are saying they expect if the prices are going to start weakening, going into the first quarter of next year, will samsung tighten supply and output? >> there is possibility of that. there has been an operational improvement happening to their supply chain. i do not think they will be adding in terms of new supply. expect,of that, as you the problem of price falling is not going to be as significant as people were expecting. our analyst is expecting 3%

also aboutuarter and 8% decline, much lower than what people are expecting. because of this, we think the earnings are probably peeking out of it. because it is very cheap valuation and it has continued to remain 20% with a four times value. the momentum is not there. nevertheless it is cheap. >> we have got to ask you about samsung versus apple. the lack of traction they are getting in handsets. this chart is samsung's market cap as a percentage of apples, which does keep falling. you have this structural slowdown when it comes to the cash cow. you still have the led screens.

there is a broader slowdown in this handset market. is this a problem for samsung that they cannot rely on this as a future revenue of strong future strong revenue growth, i should say. >> it is probable all the smartphone makers, if you look at the numbers coming through, the decline of the volume for the first quarter 2017 was 8.7%. to first quarter declined 3.4. the second quarter declined 2.8. the only reason why apple's earnings are not going down is because they jack -- jacked up iphone.f the the volume itself is only of 1%.

the new area you have to think about is what is going to happen to the smartphone. huawei arewell as trying to focus on this. if it goes well it will increase the era of the next smart phone business. that is coming in 2020. we have to wait to see what happens. >> we only have 20 seconds. kaganappens when tariffs -- kick in? doesn't samsung lose market share? >> yes. i think samsung will use somewhat of a market share. they are much more at an advantage because it business. and also because of the trade tension, we think china as well as the u.s. will invest even more in this business so the demand will be stronger.

yes, market share might go down, but profit is not going to go down as much. >> the head of global strategy asiaur chief north correspondent also join the conversation. next, leaders grapple with the need for infrastructure. this is bloomberg. ♪

>> bloomberg's series continues airing tonight. sector, we speak to kenya's leading business leaders about the growing concern about that -- debt. financedilway was 90% by china's import export bank.

it is the most obvious manifestation of the road in kenya, taking on east africa's biggest port with a five hour journey to the capital. >> containers end up here in nairobi. it is the start of a more profound story. opportunities for new markets stretch beyond kenya's capital. to tanzania, uganda, rwanda, or even europe. does it come at a price they can afford? >> china is pushing back against criticism it loads up her countries with debt. -- partner countries with debt. the chinese president maintains it is a tool for common prosperity. while roads are desperately needed, the debt pile is rising.

about $12 billion in chinese loans were given in 2015 compared with just over 100 million in 2000 according to the chinese african research initiative. short-term, painful long-term gain. in terms of taxes. we want to pay for the opportunity. >> the question is, are those loans used in the right manner for the right project that will generate the right type of revenues for the african country? leadingis africa's producer of edible oils. local companies can grab opportunities its leaders pull together. >> you wanted to be a two-way street. you want access to the chinese market, you think you will get that. i think this is where we are becoming more productive. adding more value to our

products. that is the great hope. will it happen? i think it is up to us as africans to make it happen. to make sure we do it in the right manner and become competitive. we are allowing china or europe to come in. i will to call the leadership in africa. you talked about the african union. it is still talk. it is nato. no action, talk only. we have got to make it happen. >> still coming up, chinese basketball fans are in for a two china games kicking off. we will discuss the nba's business in china. this is bloomberg. ♪

>> this is daybreak asia. the philadelphia 76ers and the dallas mavericks are set to entertain basketball fans in china later today. they're playing the first of two nba china games. the sport has never been more popular in china. we are joined from shanghai by

of a o'neill, the ceo sports entertainment group that manages the 76ers. very exciting to talk about this sport in china. you are playing in shanghai. tell us the reason behind why you are so committed to the chinese market. it may be raining in shanghai, but the future is bright for the nba and basketball. we are here on behalf of the nba and commissioner adam silver in the china games. we are the 78 nba team to play in china. we are playing the dallas mavericks and we are having fun. the city is filled with hope and optimism and the game of basketball is strong and growing. >> tell us about the commercial profit potential you see in china. sponsorship revenue potentials. >> i will tell you, under the

leadership of adam silver, our commissioner, and on behalf of seen nothingave but incredible business being built through nba china and partners like 10 sent on the distribution side. incredible partners across the country. the fan base here is somewhat incredibly 300 million people playing basketball in china. you have almost 700 million people watching nba games. , despite that,es only 1% of nba fans around the world will actually get to see a game live. opportunities through sponsorship, through content, is to go out and bring the players to the fans. that is one of the things we are doing here. >> how important is it or how big a part of the fandom you see in china is because of locally grown talent, the likes of jeremy lin, yao ming, of course?

>> you know, 25% of the nba players are from outside the united states. on our starting 5, 4 of our players are from different continents. it is kind of amazing. we have been simmons from cameroon, one from ,ne from croatia, and of course from the united states. you have this incredible influx of talent. you have a league and a commissioner that is completely focused on delivering the game around the world to the fans. it is clearly and truly the world's game. it puts us in a really unique position. it is incumbent on us at the philadelphia 76ers and the other teams to get out into the market.

>> you spend time in beijing before. i am wondering, president shooting ping has massive ambitions when it comes to foot -- football, china winning the world cup. what are your observations about the way sporting talent is nurtured and managed in china? do you think there are opportunities for exchanges of knowledge tween the likes of the u.s. and china? >> there is quite a bit of exchange going on now. we have coaches being exchanged to china and vice versa. we have the nba commissioner has set up here so we can bring the best and brightest training and development to the chinese program. while i cannot speak to football, i can be to basketball. -- speak to basketball and the training in china is first-rate. >> what about sports management? the business industry?

how mature is it in china? grow.has a ways to i think it has incredible building blocks in terms of audience and activity. i think what you will see over the next decade is incredibly strong growth in the infrastructure and sports marketing. it is more mature in north america, where we have been at this for 30 years in terms of developing content, sponsorship development, marketing activation. from what i have seen so far in china, there is an incredible opportunity ahead. >> how important is social media in the popularity of the sport in china? is -- social media is critical. not only in china, but around the world. we have two social

media darlings with incredibly large followings, not only in china, but around the world. i think what it has done, at least for the nba, which is a constellation of stars, it gets the fans close to these players, to know them off the court. it is the one-to-one marketing we talked about 20 years ago. it is actually here and happening. social media is the window to fans. >> scott o'neill, thank you so much for joining us from shanghai and, and good luck in your game. a quick check of how markets are trading right now. the japanese stock market falling for a third consecutive session. we have asian markets sinking to the lowest level in three weeks. we are seeing some headwinds from the u.s. market. the s&p 500 falling to the lowest since june. the kospi unchanged.

coming back from a holiday and falling more than 1.5%. x also unchanged. we see treasury yields continue to spike. >> treasury, tech, trade, the biggest headwinds in the asian session so far. this is how futures are shaping down in singapore. we are up by 1% there. taiwan looking lower by 0.25%. looking ahead of the open, we are anticipating the r.b.i. rates today. ♪

yvonne: it is almost 9:00 a.m. in hong kong. marketsur top stories, rounding out a tough week. u.s. equities fell today. yvonne: samsung on the rise. third quarter net income top forecasts as chip sales remain resilient. david: oil on the up after retreating from a high on growing surplus in american inventory. yvonne: china under fire from a stealth creating doorway into u.s. tech and a meddling in the midterms. ♪