haidi: welcome to daybreak australia. i am haidi stroud-watts. shery: i am shery ahn in new york. sophie: i am sophie kamaruddin in hong kong. we are counting down to asia's major market open. haidi: here are the top stories. -- reserve ratio in china amid the slowdown and worsening trade war. market focus is on china after the golden week break. japan closed on monday.

the kospi extending a five day decline. and the right-wing candidate is favoritehe first round . will be live in sao paulo. shery: we have the latest farlines, saying brazil's right candidate is leading the presidential race with 45% of the vote. was thectation so far far right candidate would lead. and the other would come in second and then we would have a runoff second round election vote on october 28. right now the latest headline on the bloomberg that he is leading the presidential race with 45% of the vote. and then fernando is in second place with 28% of the votes according to exit polls. election istial seen heading to a runoff october

28 as not one of the candidates got an outright victory. we are expecting a runoff vote october 28. the far right candidate is leading with 45% of the vote. exit polls showing fernando is in second place with 28% of the vote. the far right candidate is a former army captain. -- her right candidate would be the worker's party candidate. the most popular politician da silva is not running because lula da silva is in jail on a corruption scandal. this breaking news in brazil, 45% of the vote for one candidate. let's get you started with a quick check of the major averages on friday. we have the dow falling for a second session, down .7%.

u.s. stocks capped the worst week in a month. we saw the selloff in treasuries steepening, yields seven-year highs. s&p 500 led lower by tech and communication stocks and utilities rise. the nasdaq closing at the lowest level since august. let's see how it will shape the markets in asia. sophie: we are not a full house with japanese markets closed for another weekend. looking at more losses for the kospi. trading kicks off in australia with the changer of the clocks. court reserves data due out while the aussie dollar is near a two-year low. wellington trading underway for an hour. we see declines down .1% which could see the anz 50 fall.

traders may be bracing for pain after we saw hong kong stocks cap the worst week since february, and we are gauging reaction to the rrr cut and pmi data from last week. elections, welian are keeping an eye on the mexican peso which is a low 19 -- below against the dollar. the brazilian reality had its best week since march 2016. it has pretty much recovered the losses over the past few months. getting close to the 377 handle against the dollar. haidi: let's get to first word news with haslinda amin. arabia filled a pledge to offset oil losses due to u.s. sanctions on iran. the kingdom will produce more

crude to offset any shortages which washington's measures could affect. president trump continues to attack opec for high oil prices and has demanded action to bring the costs down. president trump hopes to meet kim jong-un soon after mike pompeo reported progress in talks in pyongyang. he said tim agreed to hold a second -- kim agreed to hold a second summit as soon as possible are they will establish formal negotiating groups for denuclearization. all sides have taken a step forward. the republican party goes to next month's midterm elections that the confirmation of brett kavanaugh will bolster efforts to stop the democrats. the partisan battle ended with a 30-48 vote in kavanaugh's favor, the narrowest in 130 years.

the supreme court is more conservative than at any time since the new deal. fish market has closed after eight decades. shop owners and workers questioning the safety of its replacement. the market will reopen thursday .t a new $5 billion site the move was delayed for years due to concerns of contamination. there were 500 wholesalers employing several thousand staff , 40,000 people visited each day. 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 haslinda amin. this is bloomberg. shery: another update on brazil's residential elections. authorities are saying brazil's far right candidate is leading the presidential race with 49%

of the vote, much higher than the exit poll that said 45%. election authorities saying unless the candidate has 26% with 52% of votes counted at the moment. we will bring you more. let's turn to china because the central bank has cut the rrr for the fourth time this year to support the economy amid a slow down and the worsening trade war. looking at how things have been going, it is not a surprise. ramy: no surprise because we have been seeing pmi getting weaker. the official and the caixin pmi. the new export orders got weaker. this is the latest attempt to prop up the economy, slowing economic growth of china. let me walk you through the numbers. the rrr getting dropped one percentage point for some

lenders. currently for the big banks, 16%. smaller banks 14%. this is likely to affect bigger banks. the cuts will release $175 billion or so and a third of that is going to repay medium-term funding facilities that are about to mature. also the pboc says it wants to continue prudence neutral policy or whether it is neutral is not a question because of things to pull down economic growth. in the bloomberg terminal i have one gtv leverage chart to show you. -- library chart to show you. looking at infrastructure investment, it has been rising since the end of last year. the gala line is chinese operative development investment, manufacturing in blue. this along with tax cuts still hasn't been able to trickle into any real life support for

china's economy. lendingges on banks money out there. they are pretty optimistic. they say liquidity will support bank lending and credit. the falling sentiment, this latest rrr cut might be able to lend a little bit of support. haidi: the pboc sounding unchanged with the yuan. this doesn't mean more appreciation? ramy: we will have to see what happens with the onshore yuan when it starts trading. it has not been trading because of the national holiday in china . in the bloomberg terminal and want to show you the difference between the offshore and onshore yuan. .he white is offshore yuan i will take this to the last of three days. you can get more difference.

the blue, we don't see this over the past five days because it hasn't been trading but the .ifference is 0.4% weaker now we are 6.9081 to the dollar. will this also depreciate? willie catch up to what is happening with the offshore yuan? we will have to see when the markets open up in china in a couple hours. ,e also got china's fx holdings and that number for september fell $23 billion. it is above the total $3 trillion market, but that is a hair's breadth lower. says fx looking ahead should fall because of the stronger dollar we are seeing in the united states and the pressures with the rmb happening closer to your neck of the woods. haidi: thank you very much for that big week ahead for chinese

traders. let's get to other top stories. brazil has been voting in an election that divided the nation. the right wing candidate is currently leading in the first round of voting with 45% of ballots. we have the more left candidate with 28% of the vote. let's bring in the bureau chief for the latest. . it looks like we will be going to a runoff vote later this month. >> that is what it looks like but the first official results came out with 50% of the ballot and showed them far right candidate with 59%. that included the spoiled him a blank and absentee votes, so it is too close to call now. we are expecting conclusive if not official results in the next few hours? julia: in brazil we have

electronic voting, so it is very quickly here the first official results came out and we had 50% counted. we should get a pretty conclusive number the end of tonight. shery: tell us -- haidi: investors -- the otherl us about candidates and what it means for economic reform in brazil if you see the one man triumph in the runoff. julia: we have these leading , the leftist and the right wing that are very different proposals for the economy. return,has a lot of goes back to a lot of policies the workers policy used in 13 years in power, using public banks to offer cheap credit, boosting government works to fuel employment and things like that which investors dislike. in the other man wants to privatize everything.

very liberal, move on with reforms. his 30 years in congress he has never voted for these things. so the proposals are very different from his voting history in congress, so we don't know how much of that would actually get done. riyal has brazilian seen volatility going into this. have investors made up their minds about the optimal outcome? -- it is difficult to trade in brazilian assets, but what about the domestic market? jessica: investors do not want bit workers party to return. it is really the only candidate that was pulling above 20% that looked like would go into a runoff with bulls and auto -- the far right candidate. we saw the rally in brazilian assets in the past week or so.

shery: thank you so much. terminal users, you can watch our coverage of the brazil results. go to tliv go. more on the brazilian elections and what the wind could mean for markets. we will have the outlook from citigroup they are in this hour. haidi: st. louis fed president james joins us from singapore to talk about global monetary policy. this is bloomberg. ♪ berg. ♪

haidi: welcome back to bloomberg television. welcome listeners on bloomberg radio around the world.

after the release of the jobs report, the new york fed chief tom williams said the u.s. economy is enjoying the goldilocks economy. the recent rise in bond yields affects the outlook instead of any allowed inflation. let's bring in another perspective. this is the president from st. louis fed bank. great to have you. do you agree with the recent rout in the bond market? i don't see very much inflation pressure for the u.s. economy. the u.s. is growing pretty rapidly now, but that is likely to slow down in 2019. bond market overall knows that and has that in mind. at this, almost existential conundrum of why wages are moving in the relationship we expect them to.

this is really painting the picture that despite the difficulty in providing quality labor for small businesses, this is an issue the fed wage growth tracker continues to look sluggish. suggested thel wage labor market relationship has flattened out. you think it has broken down? is that a fair characterization? james: it is something i have been emphasizing is the celebs curve is empirical relationship and that has not been reliable in the last 20 years compared to the earlier parts of the postwar era. i don't think you can take much signal from low unemployment like you can in the past. 2.9% years are about on year.

sense.kes a lot of labor productivity is about 1%. seems like wage growth is where it should be given productivity trends in the economy. shery: should be less concerned about the yield curve inverting and what that would mean? james: i have been talking a lot about the yield curve. steepened some last week. that is probably welcome for my perspective. i do think that a healthy 10 year, two year look would be 70 basis points. we are nowhere close to that today. he would like to see a steeper yield curve. shery: how much of the yield

story is about letting billions of dollars of bond portfolio just runoff? off?n james: it is a great issue, but it is not part of the story. the fed balance sheet has been shrinking. as is the background story today. qe and foreign economies that hasn't let up. and othersthe ecb around the world. i don't think it is a big part of the story now compared to what it was a three or four years ago. spoke,the last time we we spoke about the trade war. you said hopefully this is just a negotiating tactic. we don't see much of a circuit breaker between beijing and washington. and have toat this

think at some point you will need to adjust policy for inflation, the inflationary tariffs and longer-term inflationary effect, or do you think it will be so gradual it will not be significant? i agree we are not seeing much progress on china, u.s. to relations. relations. but i think the announcement of nafta 2.0 is a positive development because it shows if you carry on negotiations, you can modernize trade relationships and relations. but i think the announcement of get the deal done, and hopefully get trade off the front page and back to normal. i would see something like that being possible with china and the u.s., but now both sides are digging in, it appears. haidi: if the trade war continues and even if it doesn't and the fed continues along the what are thectory,

chances of the u.s. cycle entering recession over the next two years? james: i don't think recession probability models are saying there is any higher chance of recession now than unconditionally or any normal time. but we are late in the cycle. you have to be aware recessions do occur. -- be careful on that side and take that risk into account. but i don't see anything on the horizon now. the u.s. economy is growing rapidly. we will hit 3% for 2018. the effects of this fiscal stimulus wear off and the economy slows down, it will be a slower growth economy with less jobs growth as well. shery: this trade war with china put the lid on u.s. economic

growth. could it be a blessing in disguise if it allows the fed to do its job, continue with it plan gradually without having to worry about an overheating economy? james: i don't know if the trade war is ever a good idea. negotiationt it is situation that might come out to did,ion as the nafta thing there is reason for hope, and hopefully we can get these and get to aed out set of trade rules that make sense for china and the u.s., and from there we can recede. shery: how much is the fed factoring in the potential effects of tariffs and the trade war, and should the factory in more? -- factor it in more? james: if you look at the models

on trade effects, you tend to get small effects at the macroeconomic level. that is because these tariffs are on particular goods and industries, and while the billions that are cited sound like big numbers, they are not compared to the trillions which is the size of the overall economy. you see those directly through models, you tend to get small effects. if it was a blanket tariff on all goods coming into china or somethingand you did about third country effects, that could have a huge effect on the economy. that is a concern. i don't take we are there yet. there is plenty of prospect for negotiations going forward. fed chair powell also mentioned he is somewhere away

from reaching neutral. your view is somewhat different. what happens only get to neutral? my own view is we are close to neutral today. when i look at inflation expectations from the tips market, it looks like they are about that 2% on personal expenditures and inflation basis or somewhat below 2% even over the next five years or 10 years. really thinkesn't we will hit inflation target on our preferred measure over that kind of time horizon. we havegests to me that got about the right level of rates today, and we should react to incoming data. we had a long run.

we could get bad news and have to adjust the other way. the news isn't always going to be good. shery: it seems to have helped fomc members in line. consensus is, the about four rate hikes this year, but the problem is what happens when it comes to 20 19. -- 2019. what are your expectations? is, becausein point i am the low dots in this picture here, my main point is we are at a good level of rates for our environment today. we don't have to be projecting planned rate hikes. we can react to data as it comes in.

we can see what we want to go, but i don't think it is a situation where we need to get a lot higher with policy rate to contain inflation because there isn't much pressure in the u.s. economy. todayfects are very weak compared to the past. haidi: thank you for joining us, a pleasure as always. the federal reserve bank, st. louis fed president, joining us out of singapore. weighing the impact of brazil's residential elections, -- presidential elections. which candidates are considered more market friendly. this is bloomberg. ♪ ♪

is 8:30 a.m. in sydney. this is futures setting up. all these stocks were one of the few out performers. we have five days of gains for msci asia-pacific area we are looking at a soggy start to monday morning and it is rainy in sydney. it is forecast to stay wet the rest of the week. haidi stroud-watts in sydney. shery: we are getting some sun in new york. i am shery ahn in new york. 6:30, watching daybreak australia. let's get to first word news. the right wing

candidate is leading brazil's election with more than half the votes counted. he is not seen gaining an outright victory and will probably face a runoff election in three weeks. investors ignore it is authoritarian streak and bet on his pro-market start. allegations of corruption. investorsthe amount must hold for the fourth time this year. they lowered the ratio for some whichs by one percent, will release $175 billion into the financial system. china's foreign currency holdings fell last month as tensions fueled concern of capital outflows meant further depreciation.an he figures that highlight beijing's crackdown on trophy acquisitions and canberra's

property. investmentmercial peaked in 2016 at $14.9 billion australian before falling to $9 billion last year. out, the marvel movie remake of a star is born, grooving a superhero and lots of special effects will rule the day. is about an alien who bonds with a journalist. it opened at number one. a star is born starring at -- starring lady gaga pocket did -- pocketed $40 million in second. 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 haslinda amin. haidi: australia markets -- australian markets opening in half an hour.

we just saw five sessions of losses. japan still on holidays. health. celebrating how is everything shaping up? futures are signaling losses after a three-day rise for the asx 200 while the aussie dollar is trading near a two-year low. and the kiwi dollar with the worst week since october 2017. shares in wellington looking a little changed but they could be set for a sixth day of declines, the longest losing streak since november. we are keeping an eye on myob group. someone offered to buy the rest of the business in a $1.6 billion deal, offering $37 australian a share. bears watching after

flagging $492 million after-tax as costs are rising to clean up the reputation and restructuring. with chinese markets reopening, we are keeping an eye on the yuan's reaction to south pmi data. 62 .91.above we will see if the pboc can anticipate the bruising from markets. also the mexican peso, waiting on the brazilian electorate results. -- election results. it is a hedge for the brazilian riyal. haidi: u.s. stocks ended on a bearish note, falling to a three-week low. were rose to the highest in seven years. the jobs report cleared the way for more rate hikes with a fresh round of earnings. that could play into of big note

this week. su keenan has more. we have financial earnings, but take us through the reaction with the jobs report. we saw the biggest selloff in the s&p we have seen since may. also the biggest concerned selloff, haven't seen that since february. look at the snapshot. once yields rising -- bond yields rising to the 3% range. raises questions for many in the stock market. notice the russell 2000 drop the market down almost a percent, and you have the fix index. volatility of 4%. a lot of properties, including this billionaire stan druckenmiller. followedriffin, widely hedge fund manager. let's go into the bloomberg.

gtv is where you find these charts. you have is speculators net short treasury positions at record levels. you see extending shorting position on these treasuries. that is something to watch. those who will benefit here. let's go to the stoxx that are in the spotlight. asnes & noble being bid off it is anticipated. there will be buying interests, a lot of speculation how strong it could be. $10 a share, $12 a share. disney going higher on the strong box office of then am. all the studios interested in comic book characters. and this could be a one-time buying opportunity for a lot of the mining stocks. shery: i would like to watch it, but i thought the reviews were not good. i might check it out. think earnings. because off focus

the third quarter results. let's take a look at j.p. morgan chase, citigroup and wells fargo . those are big names, ending on a down note friday. loan growth, trading revenue will be among things to watch and profitability. the two through the stock charts volatileow the performance of these banks is issued through each of them. or jamie dimon said banks could be entering a golden age, and that is raising the question on the part of investors. is this as good as it gets? have we seen peak profitability? let's go through the other charts while we are talking. we will see the banks do ok. the real focus is the outlook. where did they see things happening from here.

tax cuts take a while to work through, so outlook will be key. there are renewed questions about what happens to the oil rally after what was a stellar week last week. the trading data shows hedge funds pulled back on their bull positions, that brent goes higher for the first time in six weeks. su: we are seeing a pullback in those positions. there are concerns for $100 oil. west texas, seeing questions about whether this sustained run-up, and we are at the height of the year going into friday, if that can be sustained. a couple of issues, or the cooler issues are shooting to prevail. anyone worried about what senior analysts said, that we were not adequately prepared, opec and others, to deal with iran oil being taken out of the marketplace, hasn't rethought

that. there is a concern those fears were overextended and president trump will be dealing with how much oil will be taken off. china is cutting back its intended imports. thank you so much. the polls have closed in the first round of the brazilian presidential elections with the right-wing candidate leading but falling short of outright victory may we will bring you results as soon as they crossed the bloomberg. let's see why brazil is a significant part of the global economy. it is the fifth-largest country in the world by the landmass and population. it has the second-largest reserves in iron ore and the second largest producer of and third-largest a

foreign. their economy will be affected by the election outcome. that is why we turn to the head of latin america economics at and third-largest a foreign. citigroup. great to have you, thank you for your time. investors look at him as the more market friendly, but how much do we know of his economic policies, and does it make much of a difference if you could see him coming to the center if you see a runoff october 28 door -- october 28? know much about his economic program, but we know he has economic advisers that are market friendly. chicago trained economists. they have an agenda of privatization. the long-term's inability of brazil's growth depends on the pension reform. shery: let me show our subscribers this chart showing the five years of credit risk on the rise. brazil would be your line in white and it doesn't compared to

the risk in argentina or in turkey. thel pretty elevated given year of the election. china-u.s.ok at the trade war, how much of a benefit could brazil get? the export so much soybeans, and china is veering towards brazil. >> economies will think trade wars are negative for emerging markets and less local growth, less growth in trade volumes, but it could be not as bad for latin america, brazil, because there will be trade diversions are in china could export more to latin america when it cannot to the u.s. and let in will do from china. regardless of who is

ultimately successful, and it looks like a runoff election is looking more likely, what should be at the top of their agenda in terms of getting the brazilian economy back on track and restoring investor confidence and the confidence of citizens? >> the homework is the pension reform. look at macroeconomic numbers, they look relatively well. it is going on a recovery, not a strong as we have expected but it is getting there. brazil will grow 1.4% maybe next year to 2.5%. is the fiscalnk deficit. is because of pension reform. all candidates have to close pension reform in one way or another but the difference a degree and ability they would have to pass.

we look at the more market friendly candidate and how that might move to the center if there is a second round which we are still waiting for the results. talking about $1 trillion at stake. in terms of how come -- fractured the congress is, can they make economic policy effectively? >> exactly. we know that the one guy won in the first round. the market will focus on the ability to pass a reform in congress. very divided. it is not pass that easy to pass any reform. especially pension reform which needs majority, both houses of congress and two rounds of votes in each house. he comes from a small party, doesn't have much experience maneuvering politics, significantly less than the

president which had a lot of difficulty passing reform. that will be the focus on the market as soon as we know the results of today. shery: we are hearing from an official that the far right candidate has 48% with 79% of votes counted. one of the reasons he has been so popular is the anti-establishment voters being very tired, exhausted of corruption scandals that have temernot only the administration but the others. how big is corruption? when a strongs push against corruption starts stopping economic activity and the evolution of public contracts. it is a big concern for the voter, same as security. the man is strong on security given his military background and the way he talks about security or basel's.

this has been true across latin america. antiestablishment. on ann in mexico won anticorruption platform. it will be interesting to see. buts market friendly, social policy is more uncertain. it is a polarizing discourse and election that we have today. thank you so much for joining us through the head of latin america there. you can watch our coverage of the results as they trickle in. thes our top life on bloomberg. looking at the disruption of one of the oldest food segments in an exclusive interview with a milk ceo. this is bloomberg. ♪ s bloomberg. ♪

shery: shery ahn in new york. haidi: haidi stroud-watts in sydney. you are watching daybreak australia. one company shrugging off milk.ns is a two they are extending their foray into the u.s. market. we are joined exclusively out of melbourne by the chief executive. great to have you. happy monday morning. you look at your strategy or your growth projections over the next two or three years, do you account for the trade war it all? woman think about our business, we are looking at consumers and mothers around the world, but mostly china and the and of course australia. we are passionate about providing nutritional products, particularly for babies as young infants. that seems to override trade

discussions in the background. haidi: you speak about china is a massive market for thea2. -- for a2 30 there is taxation on consumer goods. there is a new e-commerce law. are you concerned about the regulations having an impact on your business? >> we welcome the new regulations. it is part of growing healthy e-commerce sector for the long-term. this is an important channel to chinese consumers. we are welcoming increased sophistication. the channel manages itself. the new laws seek to add basic protocols for e-commerce businesses and protections for consumers which we think are important and the right thing to do. shery: what are your market

expectations in china, and how big a business will be the e-commerce factor? we have a multichannel strategy in china. we are providing product not only through e-commerce platforms but also through the mother and baby stores in china and we will be increasing physical and online, defining the network of opportunities for mothers to access our infant nutritional products. we think about market share, we think of possibilities and see a lot that is positive. we have a strong loyal consumer following. the biggest driver behind our brand is word-of-mouth. mothers talk to each other about the benefits they are seeing in their babies after consuming our products. hasy: is it a concern there been speculation chinese

authorities have been trying to crack down on some goods going forcingna, and sort of the customs, customs enforcement being strengthened? would this be an issue at all? so, haidi,on't think because what we have been doing since formula is working mostly with the personal shopper network which we know as time go. them toorking with improve their sophistication and get them ready for increased regulation and certainly. wherere in a position they are quite sophisticated, the import through free trade zones, they pay tax and go through customs procedures. our revenue go through sophisticated processes into market and the hands of mothers passionate about their babies. dive: the stock took a

when you sold off your entire stake. what kind of signaling were you trying to make doing that? jayne: the important thing i , i left anderstand previous employer and had quite a lot of shares tied up in my former employer. , shares ofransition bonuses to make it whole to the closest extent from one company to another. that is normal. you would expect with shares that have been afoot for three years of my former employer that funds forarked those investment and that had been a previous commitment made to 2.ining a what isn't clear to investors is i still have -- i have sold what was already committed for me a combination of tax in a previous

commitment, but i also have more sharesice that still in to invest and coming through in a combination of transition and performance-based shares. my personal motives are linked to the shareholders. shery: thank you for your time. 2 milk company ceo joining us from melbourne. how banks the -- thanksy -- a painting that sold for $1 million. this is bloomberg. ♪ berg. ♪

shery: welcome back. i am shery ahn. haidi: i am haidi stroud-watts. kkr has offered to buy an australian business management

software company for $1.6 billion u.s. it offers $.70 a share. it was 24% premium in the closing price friday. they previously bought 18% of the company from baincapital. shery: the airbus ordered will meet to name a new ceo. the head of commercial aircraft is to succeed the outgoing person, having long been seen as the heir apparent. the man will leave in december and step down next april. he held the position at the airbus helicopters division before joining preshow. -- peugeot. haidi: daimler leaving -- they told the board they are not looking to extend their current appointment but it is not clear why he is leaving. thateparture follows news

the veteran is stepping down in the biggest corporate overhaul in a decade. another story we are following, the most well-known prankster of the modern art world may have pulled off his biggest stunt yet. in a video posted to instagram, presumably by the artist, you can see his girl with a balloon fly through the bottom of the frame and getting shredded much to the amazement of the crowd seconds after the peace was sold at the sotheby's option for $1.2 million to a phone better. -- bidder. haidi: he revealed he built the shredder in to the painting, but speculation that the prank may not have been unexpected, given there is a power cord and a shredder built into the painting. it it is not clear what it means for the auction price but there

is an argument that after all this with the notoriety, it is actually worth a lot more now. shery: part of our history. ♪

haidi: australian markets have just opened for trade. >> from bloomberg's global headquarters in new york, i am shery ahn. sophie: and i am sophie kamaruddin in hong kong. welcome to "daybreak asia." haidi: china cutting the reserve ratio a fourth time this year to support the economy amid a worsening trade work. returning from the golden week break. a spat between asia and beijing. brazil votes in a divisive election. the right-winger is the first ro