haidi: a very good morning. i am haidi stroud-watts in sydney, where australian markets just opened for trade. shery: good evening. i am shery ahn. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." haidi: our top stories this tuesday, asia-pacific markets look set for a muted open after tech dragged wall street again. the dollar hit a two week low. theers are looking ahead to latest inflation numbers. that data should indicate fallout from the trade war. president trump floats the idea of "rogue killers," as mike

pompeo seeks answers from saudi arabia. shery: let's get a quick check of markets from the week in the u.s. markets under pressure. the dow fell .4%. the s&p 500 extended the biggest decline last week since march. falling .6%. utilities fences like and real estate gaining ground while tech lead the losses with the nasdaq falling .8%. the energy sector was one big on the s&p 500aw with the s&p gaining the last two sessions are now falling .2%. let's see how this will play into asia. sophie: we are facing a mixed start for asian stocks. this is japanese and korean futures hinting at losses. the yen below 112. it it's beating out the swiss franc.

the kiwi dollar jumped to a near two-week high. taking a look at the moon in sydney, we are seeing a gain of .1% after the loss we saw on monday. recent declines pushed the asx 200 to oversold territory for the first time since 2016. that brought valuation to a three-year low, hinting at the eventual rebound. it is going to be a bigger day for australian investors. we have the rba meeting minutes seriess morning plus a of quarterly production numbers for minors including rio tinto, whitehaven, and saracen. rio posting a drop for the third quarter. we're keeping an eye on virgin australia after the australian newspaper reported that chinese conglomerate hna rejected a bid of 17.5 on the sense -- aussie cents. taking an additional after-tax hit of 314 million aussie

dollars. this came after we saw anz and westech top about the higher financial cost as they clear up their bad reputations. haidi. haidi: sophie kamaruddin checking the markets in hong kong. let's get you first word news from new york. jessica summers. budget deficits. grew to a fraction under $780 billion, in donald trump's first full fiscal year as president. higher spending made at the biggest shortfall since 2012. the budget gap through september was 17% wider than the same period a year earlier. spending rose more than 3% while government revenue rose. citigroup believes china no yuan to the seven dollar as a psychological redline that must be defended. beijing has run to accept the currency may rise or fall and the threshold no longer applies.

they have been under increasing pressure. ae pboc said us -- made series of weaker fixes. italy's populist coalition managed to pull together a last-minute budget that will allow it to fulfill costly election pledges, but it may threaten confrontation with the european union. tuesday is deadline day for your resume shares to submit their budgets and brussels already raisingthem about the deficit. north and south korea continue the burgeoning friendship to connect and improve rail links. the accord comes as unease in washington growth over the speed of engagement between the two neighbors. observers say the u.s. effort to rid pyongyang off its nuclear weapons -- using decades of postwar arrival we. -- rivalry. allen, whod to paul

died at the age of 65. he established microsoft with inl gates in 1975, leaving 1983 over health concerns. he used his microsoft fortune to invest in pro sports teams, cable tv, and real estate. diednvestment firm said he in seattle of complications with montand kids lymphoma -- non-hodgkin's lymphoma. 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 jessica summers. this is bloomberg. haidi: president trump offered any theory of what happened to saudi critic jamal khashoggi, suggesting so-called rogue killers might be behind his disappearance in turkey. the president defending mike pompeo -- is defending mike pompeo to riyadh to find some answers. pres. trump: mike pompeo is leaving literally within an hour or so. he is heading to saudi arabia.

we are going to leave nothing uncovered. with that being said, the king firmly denies any knowledge of it. joining ussobczyk from washington. so the trump administration has built much of its middle east policy around saudi arabia. how important is mr. pompeo 's trip? to the is a clear signal saudi's and the u.s. public as well that this is a serious, potentially serious rupture in the u.s.-saudi relationship. there has been a lot of pressure from the administration , from congress, members of both parties, who are talking about cutting off arms sales, and other punitive measures against the saudi government, in reaction to this case. the administration, we are told, has come to believe that the saudi denials are untenable as they have been

presented so far, as they have nothing so far with what jamal khashoggi had done once he was in the industry or what happened to him afterwards, so this is going to be a very stern conversation, i suspect, and there are -- they are going to be figuring out what are the next steps. shery: president trump suggesting the killing could have been a rogue operation, but is there any evidence of that? joe: it is unclear what he was basing that on, but it did come shortly after he had a 20 minute phone conversation with the saudi king, which he said, according to trump, issued a very strong denial of having any knowledge of this. subsequent to that, there are reports on cnn and others that saudis werework -- perhaps suggesting this was an interrogation gone wrong, an accidental death. they were going to interrogate khashoggi, who had been a critic

of the kingdom, and something went awry. what a rogue operation is is open to into perdition, but those are the two approaches that we are seeing out there now. haidi: we also have some data showing the u.s. budget deficit swelled to almost $780 billion , atrump's first fiscal year a high since 2012. what is the likely reaction from the administration to that report? joe: pretty much all quiet. ,udget director mick mulvaney in connection with that report, called it a blunt warning to congress about cutting spending, but there has been no real outline for what sort of spending cuts would come out. there is not a lot of appetite in congress to make some of the health political decisions that would have to be made in order to cut the spending back far enough to shrink that deficit. the administration's contention

has been that the tax cuts that were passed at the end of last this yearook effect would prompt enough growth in the u.s. economy to make up the shortfall for revenue. so far, that is not happening, and the projection is for the deficit to grow next year. congress also passed some additional spending, so there's not a lot of political incentive for them to dial back at this point. >> thank you so much for that. joe sobczyk. still ahead, rio tinto says third quarter iron ore shipments slipped as prices climbed to the highest level since march. we will go through all the numbers. shery: up next, technology companies pulled the market down. a growing list of global concerns. we will wrap up the action and see what it means for asia. this is bloomberg. ♪

shery: this is "daybreak asia." i am shery ahn in new york.

stroud-wattsaidi in sydney. stocks failing to hold onto the brief respite we had. closing s&p, and nasdaq lower as weakness in tech stocks limited any rebound. su keenan with the latest. it was a brief moment for tech to recover. could not hold on to that momentum. su: this is a concern for tech analysts who watch the chart. -- the charts. it looks like a lot of investors were on the sidelines instead, the strategists say. is this the start of a longer-term correction or a healthy move lower? the weaknesses, the heavy concentration of tech stocks. russell 2000, broadest measure of the market. the small caps got a boost in this market. let's go into the bloomberg.

gtv is where you can find our library of stocks. this is the issue, the 200 day daily moving average, held in this market. it was broken through on thursday. held on friday, held again in this latest session. in terms of the tech weakness, are we finding a v bottom where it bounces off the low or is this a bearish cause before a greater move lower? that is the question as we travel through this week. strategists say it's going to take a lot of different factors to determine which it is. let's take a look at some of the big movers. a big merger in the industrial sector, those two companies off the top, big boost higher. sears, as expected, finally filed for bankruptcy, that took a lot of the retail market lower. lease and it lost a -- in qatar. all of these faang stocks are

being closely watched for evaluation questions. is netflix earnings going to turn it around? will that be the shot in the arm that this particular group means? that is a question hanging over the market this week. haidi: we were talking about the budget deficit that came through. we also had retail sales numbers, housing stats. any of that proving to be market moving? su: we definitely saw the retail sales as sort of a negative on the market. it undershot expectations. we did have a slight increase in retail sales for september, but clearly less than expected. and that could have a lot to do with the depression because of the hurricane florence, after big gains earlier in 2018. what you see is retailers across the board pretty much lower. we are going to get housing data out on wednesday. that is when we get the fed minutes from their most recent

meeting. we have already gotten forecasts from economists on both the existing home sales and new construction as being weaker, and you're seeing that already reflected in the housing stocks, the homebuilders, and even the suppliers, sort of preparing, anticipating a red flag for this sector. tensions are seeing which the u.s. and saudi arabia over missing journalist khashoggi. what has been the impact on the oil market? su: we saw oil take a move lower. 2% on the saudi-u.s. tensions. as towas the issue raised whether saudi arabia would remove oil. then when president trump came out and said that there is a possibility that it is a rogue action, that definitely eased concern about the tensions between the u.s. and saudi arabia, but they still exist. slightlyed to closed

higher. look at gold. there is a question about whether the hedge funds were shorting gold. short-term, gold remains in a good place. in the lastur times five sessions or so. thank you so much for that. joining us now, the founder and ceo of jewel financial. great to have you back. we know that october is one of the most volatile months of the year in terms of the number of daily moves of more than 1%, so is this normal to see in october? to we expect the market recoup some of the losses we have seen pretty soon? >> i think it depends on how far you go back to correlate that seasonality. october, tradition on a, as you mentioned, is certainly more volatile. i think that is here to stay, and i think that will continue regardless of what month we go into.

oddsregards to recoup in, favor in my opinion just watching the action that we are going to get about. i do not think today was all that disappointing. everybody felt like monday, we are going to get a relief rally. anybody that was sitting there going i got a little bit of greenback, now, they dump and get out of those stocks. i would look for more of a turnaround later on into this week, but the key level that i think everybody needs to keep an 2800 level in the s&p. we have got to see a decisive move above that, and that become ultimately support. right now, it is going to serve as some pretty stiff resistance. shery: what is happening with financials? they have been underperforming despite the fact that we have on yield higher. we have also got decent earnings. what is the story there? quint: that is a very good

question, and i really believe the biggest one that we are going to only learned about in hindsight. that is a problem, and i will tell you, i was on last time with you. some ofransitioned into the big banks using the etf. that is now under water. the financials have revisited february lows, which is potentially an indication that the general market is going to do the same. we have good news, tailwind for the financials. they are not catching a bit. we had jpmorgan, bank of america, coming out with great quarterly numbers, and then selling off considerably. action andrish something for us to keep an eye on. shery: also bearish when it comes to the performance of tech, right? just the brief respite this week . could not hang onto that momentum. take a look at this chart in our gtv library. it is not just in the u.s. it has been a horrible performance when it comes to the chinese listed tech names in terms of the 10% route we have

seen since september alone globally. is this truly the rotation from buying everything to starting to look at value, and does this kind of picture changes the trade war story fades into the background? quint: i do not think we can necessarily correlate the chinese tech market with the united states tech market. it has to do with the china market being in a bear market and tech being very data-driven. it is going to accentuate the move down. if it does enter a bear market, tech would lead us lower. they would have more data than the overall market. it could potentially lead us lower. what we want to see rather than this rotation out of growth and into value, we want to see another group lead, money come out of tech and find its way into something like financials and industrials, a sector that could lead, that could attract that money. it is tough to draw the

correlation that what is happening in china is necessarily going to happen in the u.s. haidi: if you are a longer-term or value investor, would you be adding to that right now? quint: if i was a long-term investor, which i am, the more attractive of those two would be the emerging markets. they have absolutely been ,emolished, and valuation-wise they are fairly attractive. i think tech can become more, you know, valued as they continue to go lower. i would be very careful there again, i think we can shoot both on the high side and the downside. shery: as we see these losses in equities, yields are starting to come under pressure. is this a repeat of what we saw just earlier this year? boy, i don't think it is. i think that earlier this year we had every sector, you know, fall in tandem.

it was very correlated. it was a broad market selloff. after the february and march rout, we had various groups lead us higher and other groups lagged. that was very concerning. i think it was closely related to the trade war and a tariff situation. -- the terror situation. that could continue to happen again. this time, groups like financials and industrials are not at the same levels of technology and so forth, so they have the potential to become very bearish very quickly, and again, that is what is concerning to me. i think people have to be a little careful to just assume this is just like february and march and we are going to go right back up to highs. shery: today, we heard the u.s. budget deficit grew to $780 billion in president trump's first fiscal year, so the highest since 2012. we are now hearing from the

treasury that he has to step up the pace of debt issuance. when you also have this playing and as a factor into the markets, what are the implications? quint: that is a very good question. again, we may see some inflationary issues come from that, and that may be why gold is catching a bid down here. it is obviously off significantly for the year, but it held the 1200 mark, and it is one of the few asset classes, if you have to put money to work, i think it is interesting and something that could go higher. but i think that headline creates, again, just some more pressure for the overall market, but it does bode well for us to continue on the sort of growth trajectory and trying to sort of grow our way out of these deficits and issues which have yet to be determined if that will work were not. -- will work or not. shery: there is a lot of competing stories that we are

seeing. how much does that inform or confuse the narrative when it comes to inflation? energy, and i like i think that, again, in the value discussion that we were having earlier, tech, emerging market, i would throw energy in an area that i think is attractive. many of the energy companies have not correlated with the move in oil or did oil could even come in a little bit. those companies are much better capitalized them they were in the past -- than they were in the past, and many have decent dividend yields. that is an area i like that i think could again attract money coming out of tech if we saw a healthy rotation as opposed to a massive bear market starting. haidi: always a pleasure to have you on for us, quint tatro, the founder of joule financial. it can get a roundup of the stories you need to know to get your day going in today's edition of "daybreak." bloomberg subscribers can go to dayb on their terminals and it's also available on mobile in

the bloomberg anywhere app. going rogue, the latest on that saudi arabia story, and these increasing tensions with washington. you can customize your settings so you only get the news on industries and assets you care about. this is limit. ♪ -- this is bloomberg. ♪

>> this is "daybreak asia." i am haidi stroud-watts in sydney. shery: i am getting way ahead of myself. i am shery ahn in new york. rio tinto says third quarter iron ore shipments slipped to 5% to 82 million pounds after maintenance and safety reviews following the death of a worker in western australia. however, rio sees full-year shipments meeting the upper end of previously issued guidance of 332 -- 340 million tons.

prices hit highs on signs of continuing strong demand from china. haidi: president trump said the demise of the iconic retailer that the"a shame," and company has obviously been mismanaged for years. part of the management was his own secretary. stephen mission notion -- steven mnuchin was on the sears board and has been a director at kmart. the company did not immediately respond to questions. shery: fidelity investments is jumping into the corridor currency arena with a new business to manage digital assets for hedge funds, family offices, and trading firms. the mutual funds will offer security and storage services and customer service for digital assets. other financial firms have shied away from cryptos after bitcoins plunge. coming up next, a big week for data in china, starting with september ppi.

we will see what affects the trade war is having. this is bloomberg. ♪

haidi: it is 10:30 a.m. and sydney. markets have been trading for 30 minutes now. we are seeing some upside after a down day when it comes to trading here in sydney. the asx trading higher by .6%. materials as well as minors are the performers today, up by .1 -- up by .6%. newy: it is 7:30 p.m. in york. markets continued the selloff, reversing friday's gains. the s&p 500 extending the sincet weekly retreat march. we did see pressure on the dollar as well as u.s. retail sales disappointed in september. i am shery ahn in new york. haidi: i am haidi stroud-watts

in sydney. you are watching "daybreak asia ." first word news out of new york with jessica summers. jessica: cnn says saudi arabia is preparing to admit the missing journalist, jamal khashoggi, was killed in an interrogation that went wrong. the operation did not have high-level clearance. president trump he was assured by king salman that saudi arabia had no official involvement in his disappearance. president floated the idea of "rogue killers." pres. trump: the king firmly denies any knowledge of it. he did not really know. maybe. i do not want to get into his mind. but it sounded to me like maybe they could have been rogue killers. who knows. jessica: softbank is becoming collateral damage in the khashoggi affair. the kingdom is a major investor theonthly or she some -- in

vision fun. softbank lost $20 billion in market cap since the tech route began two weeks ago. that is at the same time that the saudi writer disappeared. rose less thanes forecast in september. this as a broadbase increase was overshadowed by a drop in restaurant receipts. the value of overall sales rose .1% for a second month compared with the median forecast of 8.6% -- of a .6% gain. it fell 2%, the most since 2016. the rupiah pared losses. indonesia posted the first trade surplus in three months. southeast asia's biggest economy reported a surplus of $227 million in september. the medianstimate -- estimate in a bloomberg survey was for a shortfall of $.5 billion. this comes after official efforts to reverse widening current account deficit and

stabilize the currency. 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 jessica summers. this is bloomberg. shery: jessica, thank you. we just saw the asx 214 they rsi here is sophie kamaruddin. an rsi moving into oversold territory, that pushed valuation to three-year lows so this might be supporting the rebound we are seeing this tuesday. materials helping to lead gains along with financials, which did edge closer to bear market territory on monday, but we are seeing some relief for that space for now at least. weakness coming through in tech and health care shares. while we are seeing green shoots today, the market is expected to suffer more at least in the short-term according to some

strategists. tribeca investment partners expects sideways trades in the china'smarkets and economic slowdown, which will keep writing banks as well as minors. stocks under pressure. some health care names are -- of the stockn some movers in sydney, i want to highlight sims metal, after announcing a share buyback for up to 10% of issued capital likely to happen after the agm take place on november 8. gold minas harrison gaining ground after maintaining its full-year guidance. rio tinto adding 1.4% after its output report. rbc noting the weakness at its iron ore unit was partially offset by stronger volumes in both copper and aluminum. whitehaven slipping over 3% after posting a 32% drop in first-quarter. it did maintain its output forecast for fiscal year 2019. lastly, suncorp gaining ground

on an arf report. haidi. haidi: sophie kamaruddin in hong kong. michael bisping rate for the -- michael says the u.s.-china trade were could start easing after the g20 meeting in november. let's get more from our chief asia economics correspondent, and the current. -- enda curren. >> there is a view among some analysts that the g20 meeting next month could be something of a circuit breaker if china comes to the table with offers on buying more goods from the u.s., with hard promises on opening up those areas of the economy and services sector, for example, that the u.s. wants more access to, and making promises on ip protection and the like. it is a fairly optimistic view

because we know there is an argument over goods, the deficit, and access to china's economy. the u.s. has much broader structural concerns about china's ambitions to create one of the world's leading high-tech economies, and i think there is a view that those structural concerns will not be solved by any problems of them buying goods and the like. china pushes back against all of these views and make the point that their industrial strategy is not especially different to the industrial strategy followed by other great powers over the years, and of course, they make it clear that they will not tootiate with a knife their throat. it is certainly a benchmark that people are pointing to now that this g20 meeting in argentina next month -- if they do come together to see whether or not they can at the very least ease the trade tensions or whether we go full steam into the next phase of this trade war. haiti. be the trumpms to administration's calculation that the chinese economy will

slow and the u.s. will be able to outlast the beijing in the trade war, but we of course get some hints of where the economy is headed this week. a lot of data out of china. what are we expecting? enda: we are getting a lot of numbers out of china, shery ahn, and it will give us the latest check on with things are going. we have inflation, consumer inflation, expected to push higher. that is probably down mostly to food prices, linked to adverse weather, and the impact of the african swine fever. later in the week, we get numbers on industrial output, which are expected to slow a little bit. we are expecting to see retail sales probably flat. third-quarter gdp. third-quarter gdp is take it or leave it among analysts when it comes to the for a city of china's numbers. it is expected to have slowed. taken altogether, even though the trade war is only just beginning to impact, there is a

view that china's economy is definitely moderated now both for in him all reasons and for trade war impacts, but it is where it goes over the coming month that is critical. by all accounts, it is increasing pressure on china's manufacturing sector and a view that policymakers will add more stimulus, so that is why these numbers today and in the week ahead will probably .2 china over the coming months -- a theme and china. >> thank you so much. counting down to the opens in japan and south korea. that's get over to japan. we are seeing futures trading down .2%. the nikkei of course ended the session lower by more than 1.8%. nikkei wasr on the in the red. the japanese yen is holding steady at the 111 level after strengthening in the previous session, strengthening all of last week, so we could see that weighing on equity markets. this is bloomberg. ♪

shery: this is "daybreak asia." i am shery ahn in new york. haidi: i am haidi stroud-watts in sydney. rio tinto says there court iron ore shipments slipped 5%. it does see full-year output making the upper end. face operating cost pressures and volumes challenges in the months to come. joining us now is david. great to have you on. it feels like we have not seen you forever. what's going on in the iron ore space, particularly if you look at the premium higher-end grades. momentum for that price gains to continue in that space? david: we certainly do. if we have a look when steele was one of the first commodities that was going to be placed under tariffs going into the

u.s., and they were doing that across the global steel industry , the investors thought the steel industry was going to collapse, and what we have seen subsequently is it has not. we have seen chinese steel production growing over the course of this year. and that has really put somewhat of a support under the iron ore market, and especially the quality, because it is no super mills that require the better than 62% iron to go into their processes, and that is really what has been supporting the higher iron ore prices. we saw the steel tariff introduced, even though we have seen you ongoing uncertainties of tariffs being the iron industry has managed to keep abreast of that. your top conviction is gold. speaking of tariffs and the sort finally, we are seeing the in morse correlation in the safe havens. this is a gtv chart showing us

we are still seeing a pretty substantial short. so is this kind of a short-lived phenomenon/. -- phenomenon? david: this has been a reaction to the events we see going on. the u.s. dollar has been a little volatile and of course we have seen investors exiting the equity markets in droves over the last couple of trading periods, so when that happens, there is a move back to gold as that safe haven type investment. and we have really seen that pick up over the course of the last couple of trading days. gold back over $1200. it was looking a bit shaky when it was down in the sort of 11.90 region, and the u.s. dollar was not going up or going down. it was tending to want to go up, but now that we have seen the safe haven come back, we have seen investors take it up, and gold has risen up quite nicely on the back of that.

we do think that inflation is going to drive the gold price later in 2019, and we are also of their direction of the u.s. dollar. we would have bet that the dollar index was heading for 100. it struggled to get through 95, 96, and we think it may not reach 100. if that is the case, that will vote well for gold on the negative correlation between it, the u.s. dollar, and the gold price. shery: that is really interesting. this gtv chart on the bloomberg showing you dollar positioning. we are still seeing the most bullish bets on the dollar at the highest level since january. we have not seen this level since the beginning of this. are you implying the u.s. dollar is no longer the biggest risk when it comes to commodities prices? we are certainly starting to swing towards that direction, looking for the contrarian in that core, because if you have a look at the u.s. dollar, we will see rising interest rates and

perhaps escalating faster than the market has been anticipating pose inflation will rise -- because inflation will rise. perhaps repairing over the course of time through the tariffs.ion of but we think both of those factors were built into the gold price and the u.s. dollars price especially some time ago, and what we are seeing now is an actual unwinding of those positions as we start to see the fact that, yes, the u.s. trade position will improve, but not as fast as we thought, because the tariffs were not as high. yes, we do think that when you have a look at what is happening in terms of the markets broadly that inflation is going to start being the key, and that will drive the gold price higher. and the u.s. dollar is going to be locked into that 96 en, notd perhaps weak rise. shery: we have seen tensions between the u.s. and saudi arabia.

sort of implying they could play a bigger role in the global markets in the oil markets especially. prices -- this gtv chart on the bloomberg, just one more time on to the terminal. you can see the production from the u.s. side. that would be your line in yellow which has been boosted tonificantly really compared saudi output, compared to russian output, so i wonder -- how much can the saudis really control oil prices or affect oil prices when you have the u.s. being such a large player now? david: there is no doubt about it. the u.s. has added something like 1.7 million barrels of oil production compared to this time last year. had that production not been there, the oil price probably would have been sitting at $100 now, but you have got to be circumspect of what the saudi's can do because they are the biggest producer outside of opec. they have say in that

organization. they are producing that 32.7 million barrels a day, that's as an organization has a very big say in the direction of where the oil is going. the u.s. has no say on that table, and in fact, they have thatome enemies in organization that would like to see the u.s. perhaps get a black eye or nose. you see in do commodities demand and how bad this trade situation gets? david: we have seen some of the first numbers coming out of the ims where they suggested global growth is going to go from 3.9 to 3.7 in 2019, and that is primarily on the back of the tariffs we have seen implemented. we think that as we start to go through 2019, we are going to see the actual numbers and perhaps an acceleration in that decline because you have other events playing in there as well.

brexit, we are not sure how that is going to impact on the u.k. economy. and then on the other side of the channel, the eurozone. we think that we are going to see global growth being cut back. 2016-2017, it was primarily being lifted until the tariffs came along. if that is the case, then that is going to filter through to the demand for marty's in due course. you said that all of the big minors are going to face some pressure is from costs and operating issues as well. yes, no doubt about it. if you look at the half-year rio, it was suggested there would be cost pressures coming through. we have not seen the start of the inflationary drive at the moment. if that is the case and we see inflation starting to pick up, it is going to impact across a broader economic me in things -- buys,y in things that rio

buys. that bhp it's not going to be as easy as the last two or three years where they have been able to take billions of dollars out of their cost structures. it is just getting down to this. haidi: always appreciate your time, david lennox, here in sydney. shery: let's take a look at some of the stories trending across the bloomberg universe. counterculture investment firm, robin hood, gets half its revenues from controversial organs with high-speed traders, getting the hits on bloomberg.com. among the most read stories on the terminal, barclays says the days of a 10 year yield above 3% may already be numbered. watch the, -- tictoc, return to the smartphone market with a companion front. check out those stories trending on bloomberg online or on the bloomberg terminal. this is bloomberg. ♪

shery: this is "daybreak asia." i am shery ahn in new york. haidi: i am haidi stroud-watts in sydney. a quick check of latest business flash headlines. an internet communications company is buying a specialist in an all stock deal valued at $200 billion. they combined -- their combined businesses will offer a single platform. the boards of the two companies have approved the deal, which you see sendgrid provide for twilio. aidi: it is teaming up with startup backed by google cofounder larry page to make self flying travel a reality. the two companies did not announce any specific details of their plan or indicated timeframe for when electric

taxis might take to the skies above new zealand. shery: one of the most prominent investors in the crypto world sees a rally for bitcoin next year. he says he expects big moves in whenigital currency institutional investors jump in for custody and clearing. he gave us his outlook and an exclusive interview in new york. >> we say for a long time that one of the things we are getting investors involved in crypto is custody solutions. they are coming out with a world-class custody solution aimed at institutions, so that is just a box that gets checked. off yourake custody list. >> to those who do not immediately understand what custody is and why it is critical, what is custody for the rest of the wall street world? michael: what is unique is that they are bare instruments. people are given keys.

>> as opposed to the electronic record. stolen: your money gets out of jpmorgan, they know exactly how much was there, and you that money. there is a lot of nervousness about storing these cryptographic keys. >> so if fidelity successfully solved the custody problem, that means what for would be cut -- clients? michael: fidelity would allow clients to store the crypto keys and feel comfortable. my bet is that bitcoin is going up, it goes up, i win. if it goes down, i lose. i am not going to have someone call and say we lost your crypto. a trusted custody provider with insurance allows me to make the bet i want to make if i am an institution. case, if it ishe

what fidelity wants it to be and what you say it should be, what does that mean? what does that mean for the family office, for the hedge fund, the endowment, the pension plan? michael: it makes it easier. they are coming up with a custody solution. >> same firm that owns nyse. michael: indeed. goldman sachs has talked about going into it. what is good for the space is that you are getting multiple people involved in the place, all with credible names, and it is going to get that much closer for consultants to say this is a safe asset class. le, stanford,ve ya north carolina, making investments in funds. that is a big deal. slowly but surely, you are seeing institutions get more comfortable with the whole asset class. >> you have something of a vested interest to you.

some of it is going to flow the way of your firm. you have been a dialogue with -- in a dialogue with some of these investors, some of whom are taking baby steps, some of whom are on the sidelines. if they can get custody, if they can get a reliable agency trading partner infidelity, does that mean they are going to start? michael: 100%. it's not going to happen overnight, but fidelity announced-- fidelity their business today and probably will be up and running q1, and then you have to run some water through the pipes. my guess is you start seeing institutional flows into just to just crypto assets -- purely crypto as it. >> this does not deal with a regulatory problem, scams, frauds, or the compliance issue writ large, although it might solve some of the questions. michael: we had the fcc come out ,nd say bitcoin cash, ethereum

they are not really utilities. they got grandfathered. that is a big deal. it allows's electability. -- we can start selected -- it allows ability. most firms are operating under the rules that we would use if they were currencies or equity securities, right? anti-moneyustomer, laundering, same process i use that fortress or goldman sachs. >> michael mcgrath. -- mike novograd. australian stocks gaining ground, falling to over third territory for the first time since 2016. kiwi stocks .4%. we saw the kiwi dollar strength beatfter that cpi report estimates. japanese futures looking to the upside, up .5%, while kospi

futures are unchanged. coming up on the next hour of "daybreak asia," we are speaking with a representative of state street global. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers.

"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. just opened for trade. shery: good evening. sophie: welcome to "daybreak: asia." ♪ haidi: asia-pacific markets are set for a muted open. the dollar is hitting a two week low. we are looking to the latest chinese inflation data.

the numbers should indicate the fallout from the trade war. shery: mike pompeo seeks answers on the missing journalist in saudi arabia. extending its biggest decline since march. we are seeing positive sentiment extended asia in some markets. sentimentme positive is coming through. kiwi stock are slippings. the kiwi dollar is jumping. new zealand inflation are closer to the target poised by its central bank. it is in the rush to raise rates. -- no rush to raise rates. the yen losing a little bit of ground in japan. yen isup is saying the

the only standout save haven currency. -- safe haven currency. we have president moon on a four-day trip to europe. clinched $600as million worth of investment deals with european companies. s&p mini futures gaining ground. let's take a look at stocks we are keeping an eye on in seoul. we are keeping an eye on luxury makers. one stock is down half a percent in tokyo. tbank is reversing some of the losses we saw on monday,

the worst in over two years. miners.an eye on tinto's output for its iron ore was offset by stronger volumes from copper and aluminum. maintained it has its output forecast for the fiscal year 2019. haidi: let's get you the first word news. ssica: the budget deficit in the united states grew to a fraction under 780 billion dollars in his first fiscal year as president -- president trump's first fiscal year as president. it is the biggest shortfall since 2012. the budget gap was wider than a year earlier. revenue gained just 4/10 of 1%.

tona no longer views yuan as a psychological redline that must be defended. analysts say that threshold no longer applies. the united nations has been under increasing pressure in the escalating trade war. currencies have slid further. north and south korea continue their burgeoning friendship. they are planning to improve cross-border reeling. -- railing. chinese in washington grows over the speed of engagement between the two neighbors. ridorts to read pyongyang -- pyongyang of its nuclear program are lacking. bill gates is heartbroken at the death of paul allen at the age of 65.

his subsequent microsoft fortune to invest in sports teams, cable television, and real estate. he died of competitions from non-hodgkin's lymphoma. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am jessica summers. this is bloomberg. aidi: a team of investigators has entered the saudi consulate in istanbul for what is a joint wheretion of the building a saudi journalist was last seen to be pseudo-and is now missing -- last seen two weeks ago and his now missing. president trump proposed a theory as to what happened. know, maybe,really i don't want to get into

his mind. he could have been -- it could have been rogue killers. haidi: international editor jodi schneider joins us. cnn is now reporting the saudis were involved. what is happening with the mystery? jodi: there are several reports. the saudi's and turkish officials are investigating. the denials continue from the saudi's. claims there was a flat denial by the king of saudi arabia that they had involvement, which is where the rogue killers comment stems from. president trump is sending mike pompeo there to try to ease

tensions between the united states and the saudi's over this. aboutis a lot of debate this conference in riyadh that is going to go on. many companies have pulled out of it. saying thatump is steve mnuchin will decide whether he will attend by the end of the week. haidi: the signals how much of a crisis this is erupting into. how much is this potentially damaging the alliance between the u.s. and the saudi's, given how unconventional the leaders are? made president trump has the alliance with saudi arabia a cornerstone of his middle east policy. country he first visited in 2017 after he took office.

despite growing pressure from congress, he says he is reluctant to continue to say that he is reluctant to end the arms sales to the saudi's, saying that other countries like russia or china could step in. this is all ongoing. the investigations are happening. president trump is trying to maintain that relationship as much as he can. >> what is the role congress could play? it has other tools to sanction saudi arabia. jodi: congress is pressing the arms sales, but they could impose further sanctions, make some diplomatic moves to distance them from the saudi's. there are things that can happen. in the meantime they are pressing the arms sale that president trump is pushing back. haidi: we are hearing a dialing

back in brexit rhetoric from the prime minister and the french president. does this change anything for wednesday? to lowery are trying that rhetorical temperature after talks broke down over the weekend. one diplomat said it was more of a pause. but issues about ireland and the customs border still remain. to see how there will be any kind of resolution before that meeting on wednesday. theresa may is going without a deal to the meeting. she is scheduled to have a dinner with the diplomats there. they don't have the deal they need to finalize the agreement that would allow them 21 months of a transition. there is still work to be done and she has to get something through the parliament.

haidi: jodi schneider, thank you. bloomberg's number one forecaster of chinese inflation is joining us to preview the data from beijing. ahead of the sustainable business summit, this is bloomberg. ♪

haidi: this is "daybreak : asia." shery: the bloomberg sustainable business summit brings together top investors. we sat down with a ceo of a company that boasts nearly $1 trillion of assets.

he explains why sustainability is a part of the core strategy. >> the world has changed. people are looking for long-term returns and risk mitigation. today, as you look at the millennials, as they graduate from school and start 92%sting some of the money, of high net worth individuals invest with responsible investing is one of the key elements. globalin percentage of wealth institutions use one factor, sustainability, as an impact. >> there are two factors. passion and sustainability, and profit. what is catalyzing this these days?

>> the rich want to leave behind better.that is there is enough empirical evidence sustainability and responsible investing can generate a positive commercial return and too good for society. >> how do you try to beat the market? : we have had screens across all equity classes to look at sustainability for the long-term investment and generate a market return. >> what is the most profitable screen or screens you have seen? things i'dof the like to call out is our real estate business. it is highly energy inefficient.

committed to making all of our buildings we are invested in environmentally friendly. 2030, we will surpass the paris agreement recommendations. whether that is in china, europe, latin america, for the united states, all of our buildings are moving toward sustainability. >> how do you see this white house administration impacting investments? donald trump has pulled out of the paris climate accord. his administration rolled back obama-era policies. did your investors shake their heads? do they say, i am going to steer clear? vijay: in the u.s., you have state policies and companies

doing what is right for their shareholders. we are i look at it, definedwith the benefit plans in the u.s., states in the united states, that are not only trying to meet the paris accord, but surpassed some of the standards of the paris agreement. there are so many firms today, with shareholders, employees, and clients, demanding sustainability. >> what is interesting to your company and why? >> our strategy is very china and hong

kong. in china, we are working with the sovereign wealth funds that want exposure in timber, commodities, stocks and bonds, real estate, globally. in hong kong, it is the same. i have visited on behalf of clients here in the united states. i am looking to see how we can get exposure to some of the fastest growing economies of the world. >> we can't get away from trade war concerns. how is that weighing on your strategy when so many companies are saying, we are going to hold back in terms of our investment? some of this may impact short-term investments. we look at this as a good opportunity for investors who want to get into china and asia over the next five or 10 or 15 years.

for institutional clients in these countries that want to diversify their rest outside of china -- risk outside of china. haidi: don't forget our interactive tv function is there at tv on the bloomberg. into anyo a deep dive of the securities or bloomberg functions to talk about. you can send us messages during our show. this is for bloomberg subscribers only. this is bloomberg. ♪ ♪

"daybreak: is asia." shery: the japanese yen is holding steady in the nikkei is and thea boost --

nikkei is getting a boost after falling in the last session. hie: the nikkei 225 is recovering some of those losses we saw on monday. the communication sector is adding 1.8%. energy shares and real estate are also helping left the nikkei 225. lift the nikkei 225. industrials are feeling the pressure. financials are turning more positive after opening fairly lower at the start of this tuesday. colleagues are putting up the warning flag, saying we could see the end of to bull market for the two five as japanese stocks are being consumed by the negative is japanesekkei 225

stocks are being consumed by the negative impulses on wall street. effect seen a lagging when it comes to the nikkei 225 into the -- and the topix. we take a look at some of the movers. i want to highlight the 112 stocks gaining ground. 11 unchanged. oftbank is among the leaders, up 3.7% after the wipeout we saw on monday. it had its worst fall into years. about $22 declined to billion. when you take a look at other players, energy stocks are gaining ground. we have a communication player gaining ground. these are sectors helping to

left -- lift gains. shiseido.highlight this italian menswear company was cautioning on its outlook for china. we have been seeing different employing -- employer trends on the mainland for the past few months and that means they will have different recommendations for its china budget for the next year. we have other players on the backfoot. we have a delivery service ampany, and talk to show my 1.7%.ishemia up by softbank is and pull position --

is in pole position, haidi. haidi: softbank is one of the movers today. it is becoming collateral damage in the disappearance of the saudi journalist khashoggi. our bloomberg tech reporter weighs in. pavel, does this put softbank's grand plan in danger? we heard the saudi's were planning to double down on their vision funds. >> it would put a damper on those plans. the softbank vision funds had a $100 billion war chest. $45 million comes from saudi arabia.

what could replace this potential loss remains to be seen. one thing most troubling for these plans is that the leader of saudi arabia said he's operation under a condition of no capital restraints -- operating under a condition of notapital restraints, and affects regular horizons. softbank is responding after the selloff. -- will there be a chilly response from tech entreprenuers? details coming out will make

it difficult for companies to stomach. part of it has to do with the way individuals and employees are reacting, like google's plan search in china being attacked, as well as military project plans. even as this leadership is able to get over it, an internal backlash could make things more difficult for vision funds in the future. shery: bloomberg will no longer serve as a business partner for the vision investment initiative. what else have we heard on these latest allegations against saudi arabia? arabia.mment from saudi

it's not even clear as to whether it will create a dialogue. way to save face for all the companies is to simply cancel the event. haidi: thank you so much for that, our bloomberg tech reporter. we will take a look at how markets are trading in the asia-pacific. it is looking like a pretty mixed bag. wall street is failing to grasp rebounding momentum. the nikkei 225 is seeing gains of about 3/10 of a percent. in australia, we are seeing a to counter that we are seeing gold along with other commodities bouncing back overnight, with strong gains of

1.5% on it comes to materials and energies. -- when it comes to materials and energies. growth is seeing its fourth session of gains. materials are seeing an uptick as well. this is bloomberg. ♪ ♪

away fromare an hour the opening of trading in hong kong. we are seeing more of a rebound in this part of the world. asia-pacific seeing gains of about a quarter of 1% as we head to the opening of trading. shery: you are watching "daybreak: asia." haidi: breaking news from the r.b.a. these are the minutes from the october meeting.

said the next move in the cash trade is more than likely to be an increase. they are signaling gdp growth in the september quarter. they are saying the consumption outlook is under important consideration. they said there is no strong case for a near-term adjustment of policy. dollar the aussie depreciation, we are weaker, 11% off the january highs. currencyeakness of the will be likely helpful when it comes to economic growth, as well as export demand and pricing. shery: let's get the first word news. saudi arabia is preparing to admit the missing journalist khashoggi was killed in an interrogation that went

wrong. the operation did not have high-level clearance. president trump says he was that saudi arabia had no official involvement in his disappearance. the president is slow -- talks about the idea of rogue killers. pres. trump: the king denies any knowledge. it sounded to me like it could have been rogue killers. sales roses. retail less than forecasted in september as broad-based increases were overshadowed by a receipts,staurant possibly affected by the impact of hurricane florence. purchases of food and beverage outlets fell the most since 2016. italy's populist coalition has

pulled together a last-minute budget. it may threaten a confrontation with the european union. the deadline day for eurozone nations to submit their budgets for 2019. a selloff in italian bonds was sparked. posted a indonesia trade surplus. it is the biggest in three months. themedian estimate in bloomberg survey was for a shortfall of half a billion. comes after official efforts to reverse the widening account deficit and stabilize the currency. citigroup believes china no theer views the yuan to dollar as a psychological redline that must be defended.

analysts say the threshold may rise or fall, and that it no longer applies. says this will allow the currency to slide further. the gates is heartbroken at death of microsoft cofounder paul allen at the age of 65. he established microsoft with childhood friend bill gates in 1975 and left in 1983. invest ins fortune to sports teams, cable television, and real estate. he died in seattle of publications from non-hodgkin's lymphoma. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. haidi: we are seeing modest gains across the asia-pacific.

we are counting down the opening to trading. shery: modest gains indeed for asian stocks. low.falls to a three-year this moves to the oversell territory for the first time since 2016. president moon is on his european tour. 600 million dollars worth of investment deals have been secured with european firms. a e.u.-japan trade deal soon. there are gains for the nikkei t5, along with the topics --

opix. ground the yen losing but maintaining its stance below 112, trading near a one month h citigroup is saying the yen is aigh. -- trading near a one month high. citigroup is saying the yen is the only standout when it comes to a safe haven play. the central bank in new zealand is saying that there is no pressure to move on rates. and the aussie dollar is seeing a reaction to those r.b.a. minutes. theet's dive deeper into market action with mark cranfield in singapore. the nikkei is gaining ground, but only after the selloff in the last session.

could the nick a be getting out of the bull run we saw in 2016 ikkei be getting out of the bull run we saw in 2016? mark: we saw a nice bump when be spoke strongly about spending in japan to get the economy going. we saw a decent move in the nikkei and other japanese equities, but that's been re versed. japan seems to be reverting to the negative mood in global equities. -- disappointing that japan has not been able to outperform others in the world. you have the two year uptrend in pointkkei, close to the where it could snap. the yen is strengthening. we just had a story that said

the yen is still the biggest haven currency. it's a precarious situation and you need spark to get it going. if it doesn't shift quickly, we could be in for a downturn in japanese stocks. perhaps the selloff could lead to cheaper valuations and that could upset the latest headwinds. mark: earnings are positive. the profit margins in japan are pretty decent. it is quite troubling. dividend yields are healthy. it is hard to explain why more money doesn't go into the japanese equity markets. this might be puzzling for some investors. this need something to differentiate japan from other markets. -- japan need something to

differentiate itself from other markets. maybe japan will be a beneficiary of the u.s.-chinese trade war. maybe it can fill the gaps on the supply chain. but there is still no answer to why they cannot outperform other markets. idi: we will continue to watch whether there really is a line .n the sand wihth we are getting an indication of domestic activity. are we expecting much of a boost in sentiment? ark: i am much are the data is going to do a great deal. -- am not sure the data is going to do a great deal. probablygdp data will be as expected. bigger situation is the trade

dispute whether the -- with the u.s., and whether the chinese and u.s. president will come together at the g20 next month. even if the u.s. treasury goes china -- thats get around the fact that the u.s. and china need to remove this trade war. biggest obstacles. the best boost for markets will whether china nad the u.s. are close to solving their problems on trade. shery: bears could be outweighing bulls for the first time in a long time.

what is your call right now when it comes to these developing economies and the latest geopolitical tensions and differing monetary policies around the world? mark: it is simply the time of year, that is the biggest problem for emerging markets. a difficult quarter for investing and we are in the fourth quarter right now. a bold portfolio manager to commit money into fresh markets this time of year. if it was the first order of the year, we would be more optimistic. people are just trying to preserve what they have and be defensive to get through the end of this year. it has been a tough year for fund managers. they just want to start thinking about 2019. d funding demand

for emaar to market currencies as well. thank you so much. you can follow more on the story and all of the other trading on our blog on the bloomberg app. you can get a market run down in one click and commentary and outysis from mark and find what is affecting your investments right now. this is bloomberg. ♪ ♪ shery: this is "daybreak:

asia." haidi: consumer pricing data out of asia is likely up from september. inflation is expected to drop to 3.5%.

gd numbers out -- gdp numbers out of the end of the week will show increasing growth. joining us now for a preview is the head of greater china research. inflation numbers have been pretty benign for a long time. are you seeing concerns over food prices? prices are likely to remain benign. prices are going up, but below the 3% target. we don't have a big shock right now. could epxect inflation to stay below 3%. we are not going to see strength chinese policymakers for the

next few months. haidi: it is not likely to make a meaningful impact among monetary policy, is it? tommy: right. haidi: the u.s. suffers out of this tariff war. will we see the evidence filter through in the numbers? exports arers for ok. we are seeing a stable growth in china, depsite the trade war. see a significant impact

on chinese growth from this trade war. export taxes have been increased for two rounds. next few months, we are not expecting any significance on chinese growth. wanted tothe u.s. china to play fair in trade, doesn't the rebate tax do the opposite? wounded make matters worse? won't it make matters worse? tommy: this export tax is designed to incentivize people to export more.

you can also expect china to use their own physical power to compensate u.s. consumers. chinesee are seeing the yuan depreciating against the dollar. you can see the yuan is falling to its lowest point against the csets basket. we have not seen this level since may of last year. the pboc introduced a countercyclical factor. are you expecting it to react this time as well? tommy: currency will try to render the basket of the

regime. whenyear, we've had times we saw a rebound due to intervention. stabilization from here. going forward, it is hard to say -- we are starting to see a change in sentiment in the onshore markets. it seems like the currency is taking a backseat. flexibility more from the currency. there could be potential for interveneeo

aggressively. haidi: did it surprise you that beijing did not step into defend the equity markets when that selloff was going on? tommy: you need to make sure we have a solid fundamental outlook regarding sentiment. and that it's consistent. that's important for china. policy inconsistency is a key challenge regarding sentiment. a change in policy could be support inchange sentiment. shinzo abe is tradng abroad to address

e, next. this is bloomberg. ♪ sorry

daybreak: asia. is an unprecedented plan by japan to allow have a

million migrant workers into the country. the labor shortage is becoming pressing enough to potentially overcome with been a long-standing political hurdle to immigration. >> that is right. the shortage of labor in japan is very bad and getting worse. 40% leap in the first half of the financial year. a number of companies have been going under because of the lack of workers. we saw two thirds of companies complaining that they did not have enough workers. there is a huge pressure on a number of japanese industries at the moment. >> how significant are the numbers we are talking about? >> that is something the government has been very careful not to comment on in public.

half a million people coming in under this new system. the government has not said anything about numbers, but that there will be more than 10 industries chosen that will be particularly hard hit right the labor shortage. -- by the labor shortage. media andoned in the japan -- what is mentioned in the media and japan, senior care, labor shortage. we are waiting to see the full list. shery: what are the potential problems? this is there to improve things for foreign workers. they've also been treated as interns or trainees. because they are not treated as workers, they have been open to exploitation. to

there is a sense among people there has not been enough time to discuss this in parliament. and the money being spent on these programs could be spent on japanese workers, who are paid extremely badly and the health care industry. -- in the half your industry. shery: isabel, thank you so much. a quick check of the business flash headlines. australian banks are preparing for a gloomy earnings season. a new provision has been the goal ofth cleaning up years of bad behavior. three banks are putting more cash aside for amelioration, including opposite in customers charged for services they did not receive -- compensating

customers charge for services they did not receive. for services they did not receive. -- even though there was the death of a worker at a mine in western australia, rio tinto's prices have hit highs thanks to strong demand from china. haidi: yvonne mann is in hong kong. yvonne: we'll be speaking to whitney from cawse learning capital management. he is a well-known speaker and author in the united states. investors,an

you can buy stocks at a lower price, he says. he also says it is a good time for shortselling. and we will also talk to him about tech stocks. shery: thank you. that is it for "daybreak: asia." as we look to the start of trading, asian stocks are looking mostly positive. haidi: modest gains. japanese equities are giving up steeper gains. the china open is next. this is bloomberg. ♪

>> almost 9:00 a.m. in hong kong shanghai. yvonne: here are the top stories this morning. equities post modest gains with hong kong and china futures trading higher. traders await inflation data from the mainland. ramy: one of the most prominent crypto investors these a rally for bitcoin next year. we will hear exclusively from mike another graph. rishaad: seeking answers in saudi arabia. ♪