welcome to daybreak australia. we are counting down to asia's major market open. here are the top stories we are covering. u.s. stocks edged lower. concerns about rate hikes to a toll on investor confidence.

washington stopped short of labeling china a currency manipulator. they are keeping a close eye on the yuan. >> let's get you started with a quick check of the markets. we had u.s. stocks down in the red. investors had a lot on their plate. we had a mixed bag of earnings but also the latest red minutes. dustw the dow way down by with ibm's down. minutes,ave the fed many of the participants thinking and anticipating that rates will move up of the neutral rate. that does not stow course for or deter the economy. gettinghe 10 year yield past 3.2%. also, the dollar gaining the most in three weeks. the nasdaq saw the pressure from

tech stocks. we also had the treasury report saying that china is not a currency manipulator. that came out after the market close. that will play into the markets in asia. >> we have been bracing for that report. even know we knew the technical criteria was not likely to cause china to be labeled as such it should still pray -- play out as a breath of relief. let's look at how markets in the region are shaping up given the absence of much of a lead from wall street. the kiwi dollar is holding steady. futures, the downside is three point 1%. we are expecting 15,000 jobs to be added to the economy in the month of september.

the aussie dollar is pretty flat. >> the u.k. is said to be to theg of staying tied eu. is considering an eu proposal to extend the transition. beyond the 21 month. -- ces say the trump administration is warning against putting u.s. saudi relations at risk because of the affair with the journalists. itsey will publish investigation into what writerly happened to the at the consulate istanbul. turkish police have searched the building and resident.

president is planning to withdraw the u.s. from a 192 nation treaty against chinese companies discounted shipping rates for packages sent to american buyers area officials say the administration tried to the union last month but was rebuffed. twitter has published millions of tweets images and videos and thousands of accounts it says based -- are based in russia and are malicious. thesite previously disposed activity but it is now making the data public to encourage independent inquiries. they have never criticized to a slow response to alleged meddling u.s. politics and elsewhere. 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. this is bloomberg. the treasury department has stopped short of declaring china a currency manipulator. furtherrting a escalation of the trade war. let's go to our washington reporter. to ease the potential tensions between the two countries. they did conclude that the criteria was in there. >> that is correct. to make the judgment under a legal framework. had they concluded that it was there, that certainly would have escalated tensions. this will not change it one way or the other. the report did warn china that

it would be watching the yuan carefully and watching currency transactions especially after a recent you want devaluation. the report also said that the people's bank of china interventions in the marker had not been -- market had not been significant. it did not spare china completely but it did not name china a currency manipulator which was somewhat expected. anythinghis tell us about the split between the those looking at a more pragmatic approach? which can't might be prevailing at the moment? secretary isry seen as someone who seeks a more conciliatory approach. tohad been under pressure

name china a currency manipulator but they did not meet the framework. the treasury is following procedure that it is in stark contrast to president trump who has accused china of manipulating the currency. he has said that china is manipulating their currency. the treasury says it does not meet the legal threshold. the administration is still looking for ways to rent up pressure on china. not signaling they are backing down from the economic confrontations, but at least on this front, china is getting a pass. front, wrapping up pressure, they are trying to withdraw from this 144-year-old treaty that gives chinese companies a better rate. what we know so far? know that the trump administration is submitting a

notice of withdrawal. treatye withdrawing a that gives china better rates on shipping for small packages including to america. the white house said they try to renegotiate the treaty were rebuffed by other countries. they plan to submit their notice of withdrawal. process is said to take a year. negotiations can continue. officials say rates should not change within the next six months. sarah sanders seemed to leave notice ifpen the further negotiations were to their liking. definitely another escalation towards china. business groups are praising it. >> that could benefit some other companies like amazon or fedex or ups even. thank you so much. we know dive back into the u.s.

close. stocks edged lower. treasury fell and the dollar gained in reaction to the latest fed and its. -- latest fed minutes. >> this is not entirely unexpected. we did see stocks recover from earlier losses. the minutes did not help and we closed close to unchanged. let's go to the bond picture. treasuries traded heavily before and after the september minutes. yields rose back. indicated their favoring the more eventual move in rates toward what they believe is the neutral rate. the dollar rose the most in two weeks. that was before the report on whether china was a currency manipulator. oil falling to $70 per barrel.

semiconductoria index, we saw weakness. take a look at some of the big movers. earnings were the key. all of the others positive, it was not enough to extend the rally we saw yesterday. let's take a look at the other big movers. that goresting stories with them. caesars entertainment is reportedly being approached by golden nugget. notice the chinese-based echo friendly building material company. investors are jumping in there. pot stocks are under pressure as canada legalizes recreational marijuana area campbell soup,

is family -- founding family helping push off. there has never been a more profitable time or u.s. investors to ditch u.s. treasuries. gtv is where you can find these charts. cork in theof a currency market, there is much more profit in investing in europe and japan credits been in the u.s.. the latest housing donna is showing a slowdown. -- housing data is showing a slowdown. behind this depressed sentiment? >> we saw weakness of home starts in september. the analysts came out and said a rough year for the homebuilders is about to get longer.

look at the big homebuilders down across the board. a lot of analysts warning that the revenue projections are going to be hurt by the decline in the activity. we are seeing mortgage rates higher. pressure.ing a lot of mortgage applications are lower. we have talked a lot about how president trump has been pressuring the fed not to raise. this shows the fed rates versus the 30 year mortgage rate versus mortgage applications. the drop in the blue line is mortgage application rate. president be behind trump's concerns about interest rates and how that may reflect on his administration. >> still ahead, candidate gives cannabis the green light.

>> up next, president trump insists tariffs have not harmed the u.s. economy. we will discuss the trade war. is bloomberg. ♪

you're watching daybreak australia. the u.s. treasury has refrained from naming china a currency manipulator. the report says it will continue to watch the yuan after its recent slide. our guest is your to discuss the implications of this. great to have you back. thank you for your time area at how positive is it that the treasury refrained from naming china a currency manipulator? >> i don't think there is any surprise.

given the strict criteria in the statute for naming any country a currency manipulator. in some ways, china dodged a bullet. the treasury made it clear they will closely monitor china's currency practices. there are a lot of other tensions in this relationship. point of other tensions in the relationship, the trump administration could be pulling out of the 144-year-old postal treaty that gives advantages to chinese businesses. strategy ofo be the the trump administration. ,ou let up pressure on one area then you keep being on the economic another front. how successful has this been? the trump administration has been successful with this approach to some degree.

it andaty if you look at you look at the concerns of the u.s. manufacturers, they are disadvantaged by the low rates given to china. it looks like a treated -- treaty that needs to be updated. arerates that china gets more in line with the size of the economy. what about not naming china as a currency manipulator? could have still used that as a political shot. >> once again, i am not surprised. been reports have undertaken for a few years. no one has ever been named under them. china will be monitored closely. they are not off the hook. >> what happens after the midterms? dramaticis a

democratic return, -- i don't think the midterm has that much to do with the u.s. is a relationship, there broad bipartisan concern about the unfair trading work -- practices of china. after the election, president trump is scheduled to meet with the chinese leader. all eyes will be looking at that meeting to see if somehow they can get things moving in a more constructive path. i don't expect any breakthroughs in that meeting. maybe the two sides can announce that they will get back to the table and try to work for some of these issues. maybe even agreed to a moratorium on further tariff increases. >> that was going to be my next question.

this chart is showing the 250 billion dollars of goods -- chinese goods that have been under new tariffs on trump administration. if he already -- if trump goes through with the tariffs that he has already threatened. will it be inevitable that we go to doubling tariffs on january 1? >> if there is not some kind of agreement during that meeting, there will not be another high-level opportunity before january 1 when the $200 billion for the tariffs are supposed to increase to 25%. 25%, moreriffs are to start toconsumers will

feel the tariff increases. up until now, many of the tariffs have affected businesses more because the tariffs have been put on inputs into products. the list of $200 billion starts heading many consumer products and that further list of $267 billion basically hits all of chinese imports. >> we have a trump administration having a deal with mexico and canada. thate getting to the point is the u.s. is closer to forming a united front against china? >> clearly, we are getting relations back on track with our friends and allies. i never thought we should have imposed aluminum and steel tariffs against our friends and allies. we are headed in a good direction with our friends and allies. the question will be, will they work with us closely and present

a united front vis-a-vis china to help move china off the unfair trade practices? thatencouraged by the work done and the u.s. has together and i would hope that other countries would join the coalition. ask seembitious is the consensus when it comes to the andtiations between the eu japan? difficult for be a conciliatory approach to be taken in such a short. of time? >> with respect to japan in the eu, it appears that the administration wants to approach those negotiations in a staged that they would have a first stage for the eu that would focus on regulatory matters for japan area it would focus on tariffs.

then they would go and deal with tougher issues. if they follow an approach along those lines, i am more things could go smoother than if they try to do everything all at once. tensionshen a lot of and differences start to focus -- surface. tensions and differences start to focus -- surface. >> we appreciate you. coming up next, wake and bake in canada. they legalize recreational marijuana. we will be live from calgary next. this is bloomberg. ♪

welcome back. you're watching daybreak australia. let's get you a quick check of the headlines. netflix shares soared.

is due to subscriber numbers confirming they are growing faster than predicted. a $9 billion loan has been lined up for the vision fund. the terms have been finalized. other banks are also working on the ipo. the first g7ame country to legalize recreational marijuana. stores began sales

run-up ahead of today's legalization. we are hearing from some buyers that the products were expensive . what was the mood like? >> i would say the mood was very canadian. people were civil and polite. not too passionate about the whole thing. a little bit of skepticism, enthusiasm, not too much of either. prices, summit shops here are trying to compete with the black market by offering promotions. we will see how that plays out. a lot of people are saying they can buy cheaper marijuana in the black market. then again, there are people who

told be willing to pay more do something that is now legal. what is the reception they have seen so far? it has been subdued. it would be the canadian equivalent of an apple store .pening people were very polite. they were not yelling or shouting. canadians tend to be more subdued. the numbers were also a little bit underwhelming. the lines had dozens of people, not hundreds of people. that doesn't mean there is not pent up demand. that's just how canadians are. if you look at black friday, in

the u.s. you see videos of people grabbing packages. >> very canadian and polite. ♪

markets open in 30 minutes here in sydney. we didn't have much of a lead off of wall street sessions. we are opening down 3/10 of 1%. jobs are expected to be added to the aussie economy in the month of september. the unemployment rate is also expected to hold steady. >> you are watching daybreak australia. let's get the news. >> the u.s. has stopped short of

declaring china a currency manipulator. the treasury said it will watch the yuan after a recent slide. steven mnuchin said he is concerned at china's lack of transparency over the yuan fall. the u.s. is disappointed that beijing doesn't disclose currency interventions area u.s. congress secretary -- commerce ofretary accused the eu dragging its the -- dragging its feet to open markets further. he wants the eu to act on product standards at the same time. president trump is asking every government department to make budget cuts saying he believes they can cut out ways to reduce spending by 5%. he told the cabinet he had not

asked for tighter budgets earlier because he was to go shooting with democrats in congress for more funds for the military. the budget is due early next year. it will cover the fiscal year that will start on october 1 2019. users toallowing download a copy of data via a single online portal. it introduced the service in europe. users can now download data such as contacts, appointments, streaming preferences and details about product repairs. previously, they can only access the data by contacting apple directly. we'll 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 area. this is bloomberg. >> investors and wall street had a lot to watch when it came to the market. we had a mixed bag of earnings.

also, the latest fed minutes. the treasury department came out after the close and said they are not labeling china currency manipulators. we will see how this plays into the asian markets. >> it looks like is going to be a next back right now. i can show you where we stand now in terms of major markets. the nikkei trading up by a 10th of a percent. the city futures are down. -- the sydney futures are down. moving on to currencies, you want to watch what is happening with the chinese yuan. china has been labeled not a currency manipulator. theyan see right now that

cross is at 6.92. it had been at 6.93. we are seeing a little bit of strength there. the aussie is it $.71. there is a question that it could maybe rebound more. finally, and commodities we saw the bloomberg commodities index fall just a little bit. oft is in large part because what happened with crude. earlier in the day, it fell to a half percent. interestingly even though the markets were down, we are seeing gold futures down. >> in terms of the stocks you are watching, how about earnings?

likes >> let me take you to taiwan. the semiconductor manufacturing company is the biggest want to watch. being one of the biggest semiconductor makers here. last month we saw strong sales. it was the second strongest number ever. fourth-quarter sales are estimated to rise 10 to 12% water over quarter. you consider last close up 6/10 of a percent. expecting revenue -- we will see what it did. one interesting thing moving along to new zealand, you can see the huge pop almost 14%. that is because the capital made it bid to acquire the company. finally, australian pharmaceuticals industry also looking into the.

those are the biggest earnings watchers that we will be needing to see on our radar. let's take a look at what would we should be watching. is it temporary or just a little bit over a breather? >> that is tricky. it has been one of the big semantics of this year. in january we were all trying to figure out whether 2018 would be the year. finally, you have a real uptick. that hasn't really happened. week and ines last late january and february. apart from that, you have this low volatility regime. after last week's spike that is what we are seeing. especially in bond markets.

this shows the picture pretty well in terms of the move index which tracks the treasury's market and volatility in the treasuries market. fxn the global market of volatility as well. from the bond market perspective, it says to us that the spike we have seen in yield is somewhat behind us. the market is not pricing expectations. equities after we saw a big europen the vix, also in the track equity, they have all come down now. most of below the average. that is speaking to an idea that maybe going into the back end of the year, we might be in for a little. ofcom. during the turmoil, we saw

the chinese equity markets being one of the worst hit. what happened? kong and onin hong the mainland in china have done some reporting on the way to the national team is responding. it is different than what has happened in the past. the national team is generally considered to be state backed funds that would come in and buy equities during times of stress. what has happened this time around seems to be more about regional teams rather than a national team. up in different places. it has been a lot more tailored and localized with officials helping the firms that operate in their areas. of this tactic and this approach is that it has

allowed less of the wasteful resources that were thrown up at the problem. if you look at 2015 when the national team spent a lot of money and leveraged on brokers to commit to a market rescue fund during these times of stress, whether or not this is work is slightly difficult question to answer. the shanghai composite and a number of other gauges the track the chinese equity market continue to suggest that the chinese stocks are still on shaky ground. there may be pockets were this has helped sentiment but across the board, the outlook for chinese stocks remains fragile. >> thank you so much. thecan find these charts on gtv library.

back to our top story. china managing to escape being labeled a currency manipulator by the u.s. washington says it will continue to keep a close eye on the yuan. our correspondent in beijing has the story. >> the clear message from the treasury was no slap on the wrist this time but we are watching you. steve mnuchin in his statement that accompanied the decision said he was concerned about recent yuan weakness and what he described as a lack of transparency in the currency regime here in china. they would continue to keep a close eye. they would coordinate and with thehe policy

counterpart of the central bank. he also said that intervention had been limited recently but the strength of the u.s. dollar coulde weakness exacerbate the trade imbalance. ifna would respond by saying you are going to initiate a tax cut stimulus and you have the fed taking the action it is taking, a stronger dollar is inevitable. with the pressures from the trade war, a weaker yuan is amicable. the yuan is still said to be overvalued by 6%. trump has accused china of manipulating -- manipulating their currency. can look at changing the criteria that uses to make this assessment whether or not to label companies currency manipulators.

>> the u.s. is also taking a name and postal rates. why is this such an issue? treaty between 192 different nations. the universal postal union which effectively allows countries including china to benefit from lower postal rates when they send small parcels into the u.s. market to be delivered to customers. the trump administration said they wanted to change and renegotiated treaty in september. they said they were rebuffed so they are going to pull out. there is a 12 month. of withdrawing from this treaty under which you can start renegotiations. they want to remain part of this treaty. you could get negotiations happening in the next 12 months.

manufacturers have welcomed the move. they said the agreement was outdated. a subsidy for was chinese manufacturers. you should expect to see this have an effect on alibaba and others. this will not be welcome news for them. there is a. where this treaty to be renegotiated. >> thank you. whatg up next, look at could be the next titanic of chinese debt. this is bloomberg. ♪

you're watching daybreak australia. let's get more on china now. there are problems piling up increasingly at home. local governments may have racked up debt. suggesting further defaults may be just around the corner. our guest joins us from hong kong. these are official numbers that we do know. this is in the gtv library. we talk a lot about the chinese debt gdp ratio. corporate debt makes up the lion's share. government debt is a small part. much ofook at this, how

balance sheet liabilities are we talking about? aboutsue we are talking is financing vehicles. >> the actual number is difficult to put a handle on. that is what the chinese government is trying to figure out is how much of the debt in various forms are at the local government anything vehicle levels. large ande number is the issue will be as the chinese thernment tries to address financial leverage within the corporate sector, how does it fair? giving the importance of developing the infrastructure in china at the city level and prefecture level. the fresh wave of a bond issuance we have seen, you are saying it has always in there in the background areas.

has it been leveraging as a clampdown and other forms of financing computing to exacerbating this again? >> it has. we've seen a four-year low in an infrastructure investment as part of the deleveraging cycle. it had a direct impact on economic growth as the chinese government tries to manage to a gdp number. there is no doubt it was exacerbated by the trade war other factors. the chinese government has done recently is pumped more money back into it to make sure the projects underway are continuing to be developed. it is a bit of a reverse course, but not because the priority for financial deleveraging is not a priority. they are saying we are trying to manage to a gdp number.

at this time, they felt it necessary to put some more money back into the system. we think it is a short-term reversal in the priority of deleveraging continues. such picking up in september. before the reversal, how much progress was made? fort is difficult to tell the same reasons that they are having difficulties telling how much debt is out there. a number of these chinese cities have lgf these of different sizes. we tried to understand what the scope is. they are trying to figure it out. it is difficult to know what that deleveraging number actually was. it had some impact on gdp. that ites you an idea was finding but we don't know the exact extent.

>> you say that despite the fact we don't have an exact size of the debt, given how big it could be, it could take a decade to address. >> correct. the projects underneath a lot of fund, they don't create enough cash flow to advertise the debt themselves. you have debt that is very short-term that will need to be refinanced quickly. as that happens, the government needs to make decisions about how to structure the debt in the projects underneath them so they can look at different ways of addressing the size of the corporate debt. numbersu look at the when it comes to payments ,ublicly issued bonds in china is this a part of the greater

willingness of beijing to allow some of these and at the end of the daegis is create any sort of systemic risk? acceptance that there is now a potentially need to balance a more reasonable capital structure within the government and that may lead to additional defaults and bankruptcies. there is so much debt out there, one way to potentially allow that to be taken care of is to allow some companies to default. the question about systemic risk isn't exactly what people are struggling with. we believe the ones who have defaulted are smaller. they are not as well managed by the governments. they are easier to let go. the question becomes as the size of these defaults get larger, what is that systemic risk?

what does the chinese government do to deal with it? >> how much of that can we see at the moment? >> we appreciate your time. coming up, u.s. private equities bustling and on australia's homeland business. we have that story just ahead. this is bloomberg. ♪

you're watching daybreak australia. let's get a check of the latest business flash headlines. united jumped the most since july. booming travel demand is letting the carrier raise ayers even as it beats up flights in major hubs. that validates an aggressive expansion plan.

united have the best performance of nine u.s. carriers. secured a piece of land in shanghai for his first entry outside the u.s. area. will use the land for 50 years. announced plans of the factory back in july. u.s. private equity giants are muscling in on australia's homeland business. our finance reporter is here to talk about it. >> the regulators have grown increasingly concerned. restrictions on what the

major banks can do. we are talking about reduction of the amount of interest only length -- loans. that created a pool of borrowers that would normally go to a domestic bank for lending. they are able to get financed anymore. callinghat people are near prime. they are not prime borrowers that they are not subprime borrowers. you have seen the nonbanks in australia expand in that area. giants. private equity have snapped up the smaller lenders. how dangerous is it to jump into the housing market when it is falling? this is a question of what you think the risks are. falling,loan market is there is no doubt about that.

will this be an orderly correction or something worse? that isis orderly supported by good levels of employment and economic growth, this might be a great opportunity. default won't rise and there is still a lot of money to be made. if things get worse, there are far more risks. >> thank you. that is it for daybreak australia. trading in new zealand is already underway. a check of what markets are doing. the kiwi dollar right now is flat. we are not getting that much direction from the u.s. which fluctuated without the session -- throughout the session. we will see what happens. get all of the action in

daybreak asia next. this is bloomberg. ♪

haidi: good morning, i'm haidi stroud-watts in sydney. shery: i'm shery ahn. welcome to "bloomberg daybreak: asia." haidi: our top stories this tuesday, asia-pacific markets, amid great concerns taking a toll on confidence. washington stopped short of labeling china a currency

manipulat