>> welcome to "bloomberg daybreak: australia." sophie: we are counting down to asia's major market openings. haidi: these are the top stories recovering over the next hour. treasury yields retreating from a seven-year peak. tencent is one to watch in hong , $200 billion is more than

any other company in the world. in path gather over the global economy. we are live at the imf world bank meeting. we saw some downside pressure with the s&p 500 and the dow, the dow reversing yesterday's gains. the s&p 500 down .1%, the lowest level in a month. some downside pressure for material stocks, ppg warning of its profit outlook. , butnergy sector did gain not enough to put the benchmark in the green. thatrices rising as we see storm michael is strengthening. flat, techended rebounding from three days of selloff, but not enough to lead the market higher. and yields were down today, we

had some negative sentiment coming from rising trade tensions, not to mention that the imf just cut its global growth forecast. let's see how all of this will play into asia. sophie: with that backdrop we could see little confidence inspired with the imap move. we take a look at the futures board after seven-day drop, japan could halt afford a decline. numbers are due out later this morning. from australia we will get another read on consumer confidence. a deal potentially going down and $1.4 billion bid for an education service provider. green markets are back online today. playing catch up in the tech sector and in wellington, kiwi shares could be flirting with an eighth day of losses, the worst

run since 2013. haidi: is get you the first word news with jessica summers in new york. jessica: a major u.s. telco is said to have found manipulator hardware from supermicro in its network in august. fresh evidence of alleged chinese tampering in key tech components bound for america. evidence was provided after a bloomberg businessweek report said malicious chips were planted in motherboards. deny that and amazon chips were implanted. the head of germany's industrial theration is warning that brexit deal would be a disaster for broke britain and the european union. should negotiations focus on finding a compromise as

soon as possible. a deal needs to be agreed within a week if european and british parliaments would have time to approve it before the split. >> europe must prevent a worst-case scenario, separation of the united kingdom from the european union without an agreement on exit and transition and without clarification of the future relations is still possible. situation, arying few days ahead of the actual crucial summit. a new report says banks in hong kong are cutting property valuations as the housing market weakens and that threatens to trigger a downward spiral of prices. saying it's a self-fulfilling prophecy. a hong kong chief executive is to amounts new measures later wednesday and at countering seen as the least of for

what in the world. hurricane michael is intensifying as it barrels toward florida with wind gusting about 175 kilometers per hour in what is described as life-threatening see surge. residence in the storm's path seek shelter.d to gulf oil production has been cut by 30%. hurricane florence hit north carolina last month, killing at least 39 people and causing about $45 billion worth of damage. 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'm jessica summers. this is bloomberg. stocks fall from a three-day selloff. retreatedto neurons while the dollar drifted lower. su keenan has more.

>> we saw some bargain-hunting, but that did not last. su: we did see tech rebounding with the exception of tech stocks, a pattern late in the afternoon, bars do commit, but yes, it was elusive for the dow and s&p. let's go to the snapshot and noticed that treasury yields toward the seven-year high. interesting to note the materials sector, the worst-performing sector this year and it dropped even further. you can see the dramatic drop of the s&p 500, down almost 3.5%, and the nasdaq, the heavy only slightly. movers,ok at the big the tesla one of the basin china getting a big boost. mixed reviews from analysts who started looking at the stock on

monday but because news came out --t one of tesla's investors noticed the paint makers and other material makers also very much lower. we did see oil resuming opec to after call for boost output ahead of the last quarter of the year. what is the reasoning behind that? su: let's talk about the hurricane, we also saw the pictures. let's go to the closing numbers in the open trading for a lot of the fuels, we not only saw oil move higher but we saw gasoline. you can see it coming up before to coast. oil we saw to gasoline moving lower. president trump in his efforts to try to control fuel prices is talking about releasing ethanol

reserves which could put pressure on gasoline. take a look also at some of the headlines that have come out from the iea in what they are urging opec tos boost its output, saying we are in the red zone in terms of supply because of the reduced .utput from venezuela and iran this echoes some of the concerns of president trump, so there you have it. back to you. thank you so much, su keenan and there in new york. indonesia has a message for the fed and other policymakers, gathering in bali this week. kathleen hays is covering the annual world bank meeting for us. this is a familiar refrain from emerging-market policymakers. what to do conversation with the indonesian finance minister yield?

kathleen: it was a fascinating , she is an iconic the finance economic ministers and leaders here in asia, certainly one of the few women who has done so much to steer the economy through some pretty important points, which obviously she and her country face again. fromas finance minister 2005-2010. she passed important reforms and cap the economy on track. she left in 2010 to become managing editor at the world group. localf downgraded its that's global forecast yesterday, echoing two main concerns. one is how interest rate hikes are affecting emerging markets. that investors are

looking past the fact that indonesia has done so much to keep its economy on track, and that's why the economy is -- the currencies suffering. she basically said people like the fed of the -- the head of the federal reserve have to take note. mindful of the spillover effect of their policy. hope chairman powell, mnuchin, be aware thatwill your in a country that's doing all the right things, and we have to be very vigilant. another thing she noted is that borrowing costs

are rising, making it even more difficult for indonesia to waters, butse rough they are certainly keep in that on the radar screen as well. she was outspoken on the damage being inflicted on the rest of the world because of the trade war. what exactly did she say? kathleen: she certainly made it very clear that indonesia luckily goes into all of this on a very strong footing, economically the economy is growing well above 5%. just under that level for the next couple of years. she noted that the trade war impacts, the impact on confidence in global governance and the global trade mechanism is potentially huge, saying the u.s. and china, it's not just about them, it's about the rest of the world. that's what they have to be mindful low. this is what she said. >> the dominant discussion now is focused on the u.s. versus

china. it's the first largest and .econd-largest economy thatn the g20, we do hope were going to be ever to that it's a matter of 189 countries, not just two countries. her, is it tooed optimistic to look at these policymakers getting together, that maybe there's a way to find common ground and maybe cause a truce? she said maybe so, but when politics enter in, that's when he gets more difficult. i thought that was an interesting observation because so many have experienced that in the past. bedi: you're also going to attending a symposium. what is on the agenda? kathleen: the title of the

conference is the central bank symposium. andnew york fed president bank of indonesia are the cosponsors. in the afternoon we will hear from many emerging-market leaders of central bank on emerging markets and the recent policy development, the response to that. certainly talking about rate hikes and the emerging markets a lot. i will see to the deputy and the governor of south africa central-bank. i will be attending the symposium and we will bring more that to you later. a very action-packed day with a lot going on at the imf world bank annual meeting. haidi: looking forward to that, kathleen hays, live from beautiful bali, indonesia.

we will have a number of interviews from the site later today including the imf director of fiscal affairs and the governor of the south africa reserve bank and the wto director general. head, a caffeine rush. find out for striving confidence in coffee, later. and why china is becoming more interesting amid the emerging-market turmoil. this is bloomberg. ♪

haidi: that rebound in tech stocks after a three-day decline could not lead the broader u.s. markets higher. our next guest says u.s. fundamentals remain strong, but expectations may be too high as we approach earnings season.

grady, great to have you with us. the look at the surgeon volatility that we had at the start of the week. does it suggest that their questions on where we're at toward the end of the cycle and perhaps we should look more into value finally? think of it as rotation necessarily. we build our poor olio's business by business. were trying to model out cash flows over a longer time. we are seeing businesses that are more sensitive to the economic cycle that now start to look more attractive on a normalized basis. so we are seeing some opportunities in some of the more economically sensitive companies right now. haidi: how do you position given all the uncertainty set of yet to be resolved in relation to trade? is that something the market is capable of pricing in, given

that we don't know how the story will unfold? grady: it's hard to say how trade will impact earnings for the various companies in the portfolio. why or 10res out, -- years out, we would expect them areavigate any tariffs trade issues. certainly in areas where you see direct impact from trade, we've seen some potential valuation opportunities. part of what we are seeing in ofna is a reflection questions around the economic growth rate going forward for china but we're finding some potentially more attractive values in china. >> what about the tech sector in china? china techshowing valuations are pretty close to the u.s.. asian tech has been getting hammered along with other asian equities.

you can see the spread has continued to fall. chinese say that the tech sector has bottomed out? grady: we don't know where the it looks a be, but little cheaper than google, for instance. if you're comparing u.s. to china tech, baidu looks attractive right now. i would say extending past china, in global fund, we whole samsung electronics. that's a situation where the company is clearly economically sensitive. were editing profit cycle for memory chips printed if you look past the cyclical downturn, the valuation is extremely attractive. we're seeing some of this in check -- in tech. attention to more some of the other chinese technology firms recently because of the selloff.

>> there's a question as to whether china tech is being punished. ate's another chart looking the correlation between china and the u.s., starting to pick up a little bit. the u.s. is only down about 4%. when you look at some of the battered stocks like tencent, now it's down 38%. do you look at that and say it is really looking cheap at the moment, it's a pretty good entry point? grady: we have looked closely at it and tried to value it. the potential to monetize users through social media services, video games and payment services as well as all their global investments, it is a fantastic business.

--tainly i think investors that's a type of business we would want to own if we had the right valuation to buy into it. we continue to seek analyst boosting their forecast for earnings. forecast and revenue estimates, if this in line with what you're seeing, or our expectations overblown? question,t's the key profit growth is 20% less this year and the expectation for another 10% profit growth on the s&p 500 next year, and we have a pretty full multiple on those forward earnings estimates. we are still seeing some value in the u.s., but it does seem to areome divergence so we looking for value in regional banks.

i heard about the basic material stocks coming under pressure in some of those look more attractive as well. is,way i think about this we are fully invested, but we are mindful of where relations and expectations are. haidi: thank you so much for your time, grady. you can get a roundup of all the stories you need to know to get your day going in today's edition of "bloomberg daybreak: australia." and more in the china hacking story as well. that's our top story today. you can customize the settings and just get the news on the industries and assets that you care about. this is bloomberg. ♪

back. welcome

nikki haley has denied planning a presidential run in 2020, after announcing her resignation as u.s. ambassador to the united nations. she will step down at year-end. that's cost to washington and bring in mike. she has been pretty vocal, leading the trump administration's efforts on israel and north korea. will her departure have a significant impact on the u.s. foreign-policy front? >> it will have some impact. she has been working behind donald trump's foreign-policy but is perceived to be something versusderating influence john bolton. this will clear the way for john bolton and mike pompeo to be the strongest voices in the president's ear, but a lot will depend on who succeeds her. sophie: and of course we had

president trump speaking about the fed, giving his thought on rate hikes. let's listen in. >> i don't like what they are because we have inflation in check and we have a lot of good things happening. sophie: we couldn't make that out clearly, but he was saying we don't have a problem with inflation, he doesn't think the fed should be going that fast. he really can't help himself, can he, mike? those helicopter takeoffs are incredibly hard to hear, i've been there many times. he has come in in criticizing the fed. they've been raising interest rates at a very modest, slow-paced, three times this year. the president's background is as a real estate developer who has

wanted to borrow money and almost any income of president would rather have the economy heating up and delivering bigger wage and income gains. inflation has not really been a problem for the u.s. president, in the u.s. stages, as it is for chairman, andrve he wants those rates as low as possible. a giant, he's running deficit for the u.s. that is rapidly expanding. keeping the rates down to keep that deficit from getting too bad. >> thank you so much for that, mike. president trump speaking to reporters regarding the replacement for nikki haley, saying he's considering five people to replace nikki haley. he's on his way to another make america great again rally. up, starbucks shares

doubling in more than -- for the most in three years. more on that, next. ♪

a.m. here in:30 sydney. we had that recovery in tech overnight in the u.s. session, snapping the three days of declines. it wasn't really enough to lift the broader markets. looking at downside of about 0.1%. i'm haidi stroud-watts in sydney. in newi'm shery ahn york. let's get the first word news with jessica. president trump has renewed criticism of the fed, saying policymakers are moving too fast on rate hikes. he repeated his liking for low rates.

remainsrman jay powell on course for tightening in the foreseeable future. they are expecting another hike in december. president trump greeted septembers increase by saying he wasn't happy. indonesia has a blunt message for global financial chiefs, warning they must be more mindful about the spillover effects. the indonesian currency weekend as u.s. currency rates rise. bloomberg was told that indonesia is being punished despite doing the right thing in reforming its economy. thee hope, with environment, that policymakers in china, u.s., europe, japan, other emerging countries, will agree in restoring confidence in .he market, the global economy

and do not forget the changing of the global environment. pakistan devalue to ruby as it looks to secure its 13th imf bailout since the 1980's. dollar-denominated bonds climbed to most since late july. the evaluation is seen as a response to the imf's calls for a weaker exchange rate. lvma confirms that china's demand for high-end goods remains strong. investors have sold shares in lvmh and rivals in recent weeks. that is amid a possible trade war and speculation about crackdowns on imports. commentator says

the world is a long way from seeing self driving vehicles on the street. the chairman of the national automobile chairman association says -- automobile dealers association says there is no way to tell if they are safer. he said, "we have reached peak absurdity on the subject." global news, 24 hours a day, on air and at tictoc on twitter, andred by 2700 journalists analysts in more than 100 countries. looking mixed after stocks fell for several consecutive sessions. regained someve of what they lost in the selloff , but the s&p 500 fell for the most in a month.

>> after that seven-day decline for asian stocks, they may be considering these attractive valuations. tepid price action on the back of the imf cutting its global growth outlook. in japan, we could see stocks halting a four-day decline. we are anticipating losses over in sydney. materials could be a weak point. some stories in australia -- a made a bid foras vitas.toss -- bid for na today, theme to watch possible reaction in semiconductor-related shares with a u.s. telco finding evidence of hacked micro hardware. tsmc will be sitting this one out. haidi: let's get more on what we

should be watching us trading gets underway in asia as we talk with bloomberg editor adam haigh. playinga case of catch-up or more doom and gloom ahead? they are focusing on something else rather than the macro developments in the past two weeks. the fact that we had earnings in the u.s. on friday brings us back to some of the fundamentals. these downgrades have been building. there's a great chart here that shows the city index of earnings. it shows these downgrades now down to 2016 levels. the magnitude of those kind of revisions kind of speaks to the -- kind of a global feeling that there is some concern around the growth in earnings coming down a little bit going into 2019.

some of the other headwinds hitting particular sectors, of course tech being one that continues to recur. earnings -- one of the things that has propped up this bull market for a long time -- looking very tested going into this earnings season. haidi: the great debate over emerging markets rages on. it is so cheap, a lot were saying. fidelity's argument centers around some of the repricing. they say hard currency, -- equities is a slightly different story for them. this common refrain we are now hearing from the likes of black rock and others, the way you get

back in. the crucial thing for fidelity is what has been behind it this year has not been the idiosyncratic reasons this year about what has happened in turkey and argentina, it has been the dollar or liquidity crunch and the fact that you continue to have geopolitical implications. that is the premise for why emerging-market currencies continue to face downward pressure. haidi: thank you very much. don't forget, you can check out for some of the things he mentioned there. shery: turning to one of the most shorted stocks in the u.s., tesla. a fund is betting on a dramatic drop in the shares. nothing new with people shorting tesla, but the founder of this

fund is the same person who -- at itset against peak in 2015. >> if you are a fan of next links, a duck -- of netflix, a documentary series called "dirty aney," he was kind of starring role opposite bill ackman. ackman was long valiant. company wasinst the .ery profitable for her she is taking a short position in tesla, a small position. she doesn't categorize it as a high confidence short. she still is critical of the company and its balance sheet. she talked about the amount payable, which is more than the balancef cash on the

sheet. this is a company that is having trouble paying its bills, essentially. it doesn't help matters that they had that settlement with the fcc which is not finalized, by the way. of famous short has opined on that recently, with david einhorn at greenlight capital. is theory is that elon musk trying to get himself fired. he has already agreed to step down as chairman. of course, he may have bungled his settlement by calling the sec the "short-sellers enrichment commission."

he certainly, after that settlement, has shown his frustration on twitter. haidi: elon musk hasn't responded to this latest development. he has been saying we are on the brink of things improving. >> that is important. this is a common theme for the short-sellers, they look at the balance sheet, the problems they have been having with production, and they are making those problems are going to continue. what has really frustrated him is, once we get our issues sorted out with the model three, this is a car that has a -- that there is a ton of demand for -- he said repeatedly that tesla is going to be both generating cash in the third-quarter and profitable in the third and fourth quarter. he has definitely grown frustrated with the shorts in

addition to attacking the sec last week. he got into a long back and forth with people about whether or not shortselling should be banned or maybe illegal. it is definitely something that he spends a lot of time thinking about, obviously. there's a real sense that maybe he feel -- haidi: there's a real sense that maybe he feels like a misunderstood genius at this point. investor activism is also giving starbucks shares its own caffeine rush. announced a major stake in the global coffee chain at an event in new york today. ramy inocencio has the details. starbucks itself has said it is opening one new store every 15 hours, which is pretty amazing when you think about that. off of this, off of this crazy growth that is happening, and

off the same store sales that are slowing in the united states, bill ackman says there is great runway for growth in that country. in terms of the numbers, you mentioned the $900 million stake. that equals about 15 million shares. that is 1.1% total in starbucks. this also confirms something that bill ackman said. in august, there was a hint that they took i not 800 -- they took million stake in some company. downplaying the fact that all of the competition is happening in china doesn't hold any flame to what china can do their because a lot of the other ones are lower cost chains. they have about 500 stores --

starbucks is where it's at. looking at the share price quickly, in terms of where we are coming you can see that come on the inter-day chart, it has almost hit $60. it closed up by about 2%. ackman says that their shares, right now, over the next three years could be a double. inry: when i was living tokyo, i had a game with friends, when you are walking, how many starbucks you would find. talking about bill ackman, his performance in the past hasn't been great. we were talking about valeant just now. it is better now. been doing better this year. up until spring or summer of this year, it actually has been in the ire of a lot of investors.

fund wasing square down through late march. through the third quarter of this year, it is up about 60%. you can see that bill ackman has been very busy. lowe's, henologies, supports the new ceo. he sold his position in nike for $100 million. he sold his position in chipotle but he still holds stake. up, formerng export-import bank chief joining us to discuss the worsening trade war and concerned there is no clear exit. this is bloomberg. ♪

haidi: i'm haidi stroud-watts in

sydney. shery: i'm shery ahn in new york. china has once again confirmed it will not bow to the u.s. in an escalating trade war. the commerce minister says there is a view in the u.s. that so long as the u.s. keeps increasing tariffs, china will back down. the u.s. should not underestimate china's resolve. let's discuss with the former .xport import bank chairman theirant china to change system, their government-directed industrial policy, but is this a feasible goal? fred: it is a legitimate complaint. that is that there is a lot of subsidy. in the past two years, there was hope that china would be more of a market economy, more entrepreneurship and less

engagement, and i think we have seen the opposite under xi jinping. i think it is a legitimate concern. the question is, can you unwind this? what we have seen also is that, because of this pressure to make china a global economic player, the commerce department has had to take more measures to control the economy. we have seen them subsidizing more exporters because of the tariffs. in july, they said they would cut import tariffs. at the trade war heated up, they said for u.s. automakers, they would hike tariffs. is a productive? fred: global growth rates are a big concern. the imf has reduced its forecast for this year's growth by 0.2%. not enormous but we would rather see it go in the other direction rather than down. the problem with trade wars is

it is hard to do you escalate. you have two very large countries, the two largest economies in the world. it's like mom and dad are fighting and arguing. we are also somewhat at war. it is different than the u.s. and the ussr where we were not allies in any way and we didn't have much trade engagement. had issues with japan in the 80's but we were also allies. here, it is a little more complicated. we have to remember, president xi jinping has his own politics to work out -- worry about, not just our own. mom and dadels like are not just fighting about the finances but about bigger fundamental issues. mike pompeo coming away from his saying say it -- meeting

there are disagreements with chinese presence in the south china sea, warships, the u.s. navy proposing a show of force to kind of send a signal to beijing. has the risk of that side of things really kind of ratcheted up? fred: it certainly has. what is unclear is, president trump is focused on two things comedy bilateral trade deficit things, the bilateral trade deficit and north korea. others have an idea of looking at geostrategic issues, military issues. president trump is duly focused on north korea and the trade deficit. it is not clear it is a meeting of the minds within the administration. there seems to be great to virgins there. if this is a war of attrition, if you are an

historian, you would look back and say china has managed to come through tougher times than this. is washington underestimating how much xi jinping can be resilient to the pressure? fred: perhaps. china is not a democracy. our presidents have to face the voters. tell -- donald trump has made the midterms a mandate on his administration. having a fight with germany or britain, the voters are concerned. less so with china. therefore, this is a much more tricky situation to try to decipher. shery: we are now seeing the u.s. having a trade deal with mexico and canada, the new usmca. we are seeing ongoing talks with the eu. they have started trade negotiations with japan. are we getting closer to a point where we have a united front against china? the transpacific

partnership was the perfect united front. we had 11 other countries, many of them in the backyard of china . we may move forward with japan. that remains to be seen. the u.s.-mexico-canadian agreement makes some steps forward. it is somewhat of a replica on a smaller scale. what is not clear is what is the real agenda. it is still not clear even who is leading the trade negotiations with china. 2.0, theeen nafta ambassador burnished his reputation. china,akes the lead with

we know that he's a china hawk. fred: we know he is a china hawk, but he has had some success now. wilbur ross seems to be more in the background. it is not always easy to tell who really is going to be speaking for the president. pence expense -- ken mike speak for the president 10 days ago when he delivered that speech? shery: we won't be able to tell for a while, it seems. thanks for that. you can get a roundup of the stories you need to know with this edition of daybreak. on your terminal and also available in mobile. this is bloomberg. ♪

ahn in newshery

york. haidi: i'm haidi stroud-watts in sydney. you are watching "daybreak: australia." has joined the of 5.5 fund -- the offer aussie dollars per share is a 50% premium. formedrd says it hasn't a view on the deal that has named goldman sachs as an advisor. shery: investors criticize the piecemeal approach to cost cuts. they are moving their ad business away from longtime partners wtp to save $150 million per year, a long way from the $11 billion the restructuring is expected cost.

haidi: number two u.s. ride t is targeting a share sell in march or april and evaluating underwriters is the next step. yft, being the first to move, may help. one dealat underwrite cannot work for a direct competitor. that is it for daybreak australia. we are just minutes away from the open in australia. let's get an update that how we are tracking asian markets. downside, with kiwi stocks trading pretty much flat. a little bit of an upside when it comes to games seen in the aussie dollar and the kiwi. expectations of more china stimulus to come. a little bit of downside as we head into the open. shery: in the next hour, we will

be speaking to stephen of pine bridge investment. he thinks bond risks are elevated right now. the risks of higher yields and elevated market cycles. this is bloomberg. ♪

australian markets have just opened to trade. shery: good evening from bloomberg's global headquarters in new york. inhie: i'm sophie kamaruddin kuala lumpur. welcome to "daybreak: asia." our top story this wednesday, asia-pacific's stocks off to a -- tencent is one to watch in hong