haidi: a very good morning. australia markets have just opened. shery: welcome to daybreak: asia. ♪ shery: our top stories this friday. asia-pacific equities set for losses. investors weigh in trade tensions. president trump says it looks as though the saudi journalist was murdered. he is now talking about severe consequences.

the fed is increasingly divided on rate hikes. politicians are taking sides. haidi: let's take a quick check of our markets on wall street. u.s. stocks were pressure today. we saw the dow falling 1.3%. not meetingirms expectations when it came to their earnings. that weighed on the index. the s&p 500 was down 1.25%. oil hittocks falling as a one-month low. settling around that 200 day moving average. the nasdaq falling 2%. tech stocksap large falling.book and apple apple planning to make a product announcement in brooklyn later this month. the markets today, it was mostly about yields getting pressured. the dollar gaining ground. all this playing into the asian markets. it asia will be

focused on china. china gdp as well as domestic activity indicated. production, all of this will alleviate the concerns over the impact of the trade war or worsen sentiment. more prospects of chinese stimulus could be the result of a bad reading for china. we are getting japanese inflation on tap as well. we have aussie stocks coming online. 1%.ness, a quarter of every sensitive to that data out of china today. new zealand seeing a downside of more than 1%. nikkei futures looking pretty paint as well. a jump in the yen despite again in the bloomberg dollar index. we're seeing safe havens seeing big there. let's get you to first word news now. >> u.k. prime minister theresa may is gambling on a go slow

brexit as she and the european union try to bridge their differences. ofir summit fell short the breakthrough it was touted as. may has to sell the idea to euro skeptics. eu leaders are saying the ball is in her court now. >> i wouldn't say there is no room to maneuver. dealey element of a final is on the british isle. is britishment political compromise. onitalian bonds plunged thursday as the eu's executive arm laid out its concerns about the populist governments spending plan. german debt at levels not seen since 2013. the euro weekend as eu

commissioners warned that the accessible.t prominent members of the wto are calling for an investigation into u.s. metal tariffs. china, the eu, russia, and norway say the duties violate wto rules and one in assessment of the situation. washington says the tariffs fall under an exemption for national security interests. two of president trump's senior aides are said to have had a profane argument outside of the oval office. andf of staff john kelly national security adviser john bolton turned the air blue, it is not sure what they were upset about. the clash is an indication of the writing tension in the administration less than three weeks before the midterm election. global news 24 hours a day on air and on tick tack on twitter. powered by more than 2700

journalists and analysts. this is bloomberg. shery: thank you. our top story this hour. assident trump says it looks though missing saudi arabia dead.list is he wouldn't say on what basis he had formed that conclusion but warned that consequentialist for any saudi arabia and involvement would be clear. >> we are waiting for investigation and the results. we will have them very soon. we will be making a very strong statement. we are waiting for the results. there are three different investigations. shery: our reporter greg. secretaryring that pompeo listened to audio recordings of the murder. can we expect the white house to take a tougher stance? that theyainly seems

are willing to come out with a bit tougher of a stance here. as we just heard from president trump, he said it does appear that the missing journalist was killed in turkey. a sharp departure from what we heard from him earlier. he has previously sought to balance this incident with the administration's stance that saudi arabia is a valid -- important ally. pompeo himself said we have a long history with them and they are an important strategic ally. seeking to tampa down the uproar over the incident. settinga trump -- trump a clear statement. shery: what measures can we expect from congress? >> congress has been a lot more frustrated by the situation. lawmakers have been more willing

to make statements saying that they think that saudi arabia killed this missing dissident. we knowtion becomes, that congress has a lot more distrust for saudi arabia than the white house does. what will congress do about this? there's a number of options in their hands, from seeking a u.n. security council resolution, from expelling saudi diplomats, sanctioning saudi officials or curtailing arms sales. will they do it? there's a couple of historical precedence to indicate that they might be more willing to act than the white house. two years ago, they passed a law that allowed u.s. citizens to sue saudi arabia over the september 11 attacks even though the saudi government was not found to be involved in those attacks. 15 of the 19 hijackers were from saudi arabia. that is a fact that lawmakers haven't forgotten. overwhelmingly to impose sanctions on russia despite president trump's

concerns. chris could act here. the outrages certainly there. the people who have canceled and pull out of attending dabbles in the desert, it could be retaliatory action. we spoke to a former u.s. ambassador to saudi arabia. he thinks these people could be blacklisted as well. >> there will be a time of vindictiveness with those that did not come to data loss in the desert. they will be penalized the cousin they were not true friends of saudi arabia. this will highlight to the business community the reality that there is no transparency in the government. that there is no written rule of law. the resin arbitrariness about the government that makes investing and doing business a real risk. there will be huge implications for the administration, how it deals

with saudi arabia. it falls to the middle of its middle east policy. has reallyt trump put this relationship with saudi arabia at the front and center of his foreign policy, especially in the middle east. hasnow that his advisor been very close with the saudis. there are reports that he is urging president trump to stick by prince mohammed. president trump sees this relationship is really strategic, especially in his dealings with the middle east. also in terms of arms sales. we heard president trump saying he didn't think it was necessary to curtail arms sales and warning it was not worth upsetting its relationship over one incident. there's a lot of pressure on the white house here. we saw steven mnuchin and pulling out of this investment forum. it's a week but definitely a signal to the saudi's that the administration is willing to send some kind of push back against them. possibilityve the

of really crimping the president's foreign policy here. in case tensions weren't already high enough, we have this bloomberg's group -- bloomberg scoop on a shouting match taking place in the white house. andpparently, john bolton john kelly, to ring -- high-ranking individuals, had it out in a shouting match. it was over issues of immigration and homeland security. bolton criticizing homeland security, john kelly coming to the agency and its chief's defense. she was a deputy to don kelly. he supported her as she replaced him at the head of that agency. president trump is trying to put the issue of immigration front and center. of a furious about reports migrant chain coming up from honduras towards the u.s. border.

shut down theto mexican border over it. at a time when tensions are already high, the president seeking to make immigration front and center, tensions are high at the white house. shery: 19 days and counting until that midterm vote. thank you so much for that. greg sullivan there with the latest. still ahead, are the bank of japan's attempts to kickstart inflation paying off? we will have the latest cpi numbers and immediate reaction from japan. >> up next, earnings billed as the market savior and now they are just an afterthought as volatility tightens its grip. more on that coming up. this is bloomberg. ♪

shery: this is daybreak: asia. let's take a deep dive

into the latest u.s. stocks slide, raising big questions over the friday session. the s&p sliding back to that average. the nasdaq 100 route exceeding 2%. details.he miserable we just saw a slide back and volatility. >> was strategists said this involved the usual culprits, concerns about global trade, disappointing earnings, and a lot of companies looking down the barrel of another round of possible tariffs. that put pressure across the board. we have the dollar rising, crude oil falling in the regular session. you see is bouncing up and extended hours. gold caught a bid in the regular session as did the yen. increase in the haven trade. take a look at the s&p 500.

the 200 daily moving average, we preached it last week. close right on the line. it held. can it do so friday? let's take a look at some of the pressures on the market. volatility spiked yet again. week, it was% last up close to 25% in this latest session. let's look at the individual stock moves. dr., those, taiwan; on disappointing earnings. , and equipment company that sells or services the construction industry. bank of america downgrade on holdovers. look at the thing trained -- faang trade. down across the board.

also disappointing. aig? >> this is after hours. another mixed bag of earnings. let's start with aig and take a look at how they moved after hours. you had american express and paypal, big shot in the arm for both. aig, disappointment. they warned that they see a third quarter pretax catastrophic loss related to the typhoons in japan's. let's look at aig year to. typhoons in japan, mudslides and hurricane -- in california, hurricane michael. they are already seeing half a billion of a loss. as take a look at pay paul. they exceeded analyst earning estimates. they are working on monetizing venmo.

they see a 45% increase in mobile apps. take a look again at american express. it is proving fruitful for both. shery: coming to the u.s., then venmo was a great thing. joining us now is a chief market strategist, all of her porsche. we are seeing earnings coming out for the past five years. they beat expectations. when you are taking a look at this quarter and this environment, when you are seeing more bonds and stocks moved together, how much more crucial have results become? >> we are comfortable saying that earnings will grow 20% year-over-year in the third quarter. what isoncerned about going to happen from here. earnings have grown from a more

rapid pace. the fed will continue to raise rates. eu is going to keep negative interest rates through another year or so. the u.s. dollar is going to continue to rise. when we listen to the conference calls on earnings right now, the sink is bital thing being complained about is the headwinds due to a depreciating dollar. tariffs add on top of it. to us, it is not about what has happened turning so far. but the forward-looking talk that is happening on the conference calls. the g tv library showing you that multinational large caps are faring better after that america first trade is dissipating now. is this the way forward? >> you want to be careful there. this is part of the flight to safety.

people don't know if this is a short-term correction or something more in long gated. there is a flight to safety. you see that in the u.s. dollar and the yen. you also see it going into the mega cap stocks. those tend to be large multinationals. there's a reason behind it. not to mention that the stronger and higher dividends are also favored by people seeking some safety. the prospect of policy paralysis should we see a democratic control of either house, does that phase you? >> it could. that thecase scenario, democrats will take the house but the senate will remain in republican hands. effectively providing some checks and balance against the trump administration the keeping the current policies going. a pretty bullish

scenario for stocks. he could see a late year rally after the midterms. most: one of the files -- fundamental issues, trade. putting aside the trade war with china, the overall sentiment leading into the withdrawal from tpp. that is not likely to change whether the political environment changes within the u.s.. >> that is a problem. i would say that one of the things that is positive in all of the trade talks is the renewed nafta agreement. u.s.-mexico-canada agreement. the usmca. alphabet soup. it shows that while donald trump's tactics are unconventional and harsh at times, they can be effective. earlier, everybody was describing this thing is dead.

all of a sudden, mexico happens. five days later, canada happens. i do think there is reason for optimism. europe will fall into place. the big question becomes how asia can handle it. when you look at chinese data right now, the big to was has always been, are they going to be able to manage a soft landing? it is looking less likely that that is happening in you look at what their internal numbers are doing. tot puts pressure on china come back to the negotiating table. they will not do so before the midterms. agendapresident trump's will be challenged if democrats take over the house, it seems more likely now. >> the issues that democrats are concerned about are not the trade war. they are much more concerned and vocal about immigration, some of the software issues. the two things that democrats and republicans do agree on are generally that they are having

unfair trade practices and intellectual property rights have to be observed by all sides. think there needs to be more regulation on social media companies. that's another hot button we will see in 2019. that is why you are seeing faang stocks come under greater pressure on down days. shery: does that mean you would be more cautious going forward on those tech stocks? >> i would be. it's always an evolving situation. if we look at 2019, there are better sectors to be in. haidi: great to have you. getting an update from elon musk's twitter account. he has released a lower cost tesla model three. it costs $35,000 after tax rebates in california.

he has linked it to an auto page that says it has 220 miles of range, deliveries beginning in the u.s. based on whether you are a tesla employee, if you own it already when the reservation is placed. it will continue by country. that is the latest lose on the new tesla villa. plenty more to come. this is bloomberg. ♪

haidi: this is daybreak: asia. quick check get a of the latest business flash headlines. general election -- electric and siemens are neck and neck in iran. that would contradict claims by two u.s. officials earlier this week who said intervention by the trump administration had tip the balance in favor of ge. warnedid a rack has been

that his relationship with the u.s. could be at risk if they don't go for season. the listing may provide a list of the gaming industry, which has been hit by increased official scrutiny. last month, the impact of typhoon mangkhut. an index of six macau gaming industries has fallen this year. shery: high flux has won a lifeline after stumbling by expanding into the energy sector. a consortium is taking a major stake with funding worth 385 million u.s. dollars. it has been racing against the clock to put together risky to reorganize its borrowing as a six-month debt moratorium expires around mid-december. haidi: the u.s. international

trade commission is to review a judge finding that fujifilm infringed to sony patents. the ruling said fujifilm had them lighted -- violated relating to magnetic tape cartridges. there has been a global struggle for the control of mass data storage. in just a moment, james bullard says the slide is not surprising. we will break down the latest for you next. this is bloomberg. ♪ japanese cpi data coming out soon. we are not expecting much of a change in japan. our futures looking pretty flat at the moment. downa look at the nikkei, by a tenths of 1%.

downside estimates coming through from that stronger yen situation as well. china also keeping an ion as we get those gdp numbers coming up today as well. this is bloomberg. ♪ . .

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haidi: you are watching day break asia. we are getting latest japanese numbers on the bloomberg, september core 1%, umer prices raising estimate was for 1% as well in terms of that national c.p.i. 1.2% with a slight miss on expectations of 1.3%. fresh food and energy, inflation number coming in at .4 of 11%. from the n unmoved previous month of august as well. an indication of really japanese very ion still remaining much sluggish, very, very far away from the bank of japan's 2%

inflation target and comes bon the back of export and import mark s that missed the pretty badly in yesterday's session. one, chinese a big gdp numbers and domestic activity indicator numbers out little bit. let's go to jenna. jenna: president trump is hreatening severe consequences if it's proved that saudi arabia murdered critical writer jamal khasoggi in turkey. first time, the president told reporters that it certainly looks as if khasoggi is dead." the kingdom has promised a swift investigation as to what allegedly happened to the writer after he entered its in istanbul. >> we're waiting for some investigation and waiting for them sults and we'll have very soon and i think we'll be making a statement, a very strong statement. waiting for the results of about three different investigations. secretary asury

to en mnuchin is the latest move out. goldman sachs has backed out as well. last of the big u.s. banks for davos in the desert. and business figures are going to riyad. no longer acting as a partner at the forum. has overtaken mexico as the buyer of natural gas 50 cargos from the u.s. this year, a jump of 70% on 2017. korea's demand has surged as it moved away from burning coal and to generate power. state owned korean gas is potential investments in alaska, louisiana, and texas. malaysia is pairing targets and drops plans to balance the decade,by the end of the the focus is on income equality and attempts to rein in debt.

they have expanse of 4 1/2 to 5 to 5 hrough 2020 compared to 6% growth forecasts by the administration, the prime minister says cost cutting could hurt the economy. global news 24 hours a day on tictoc, powered by more than 2,400 journalists and countries. 120 this is bloomberg. haidi: more as trading gets underway in asia. friday, not so happy. > happy friday if you're a stock fear. haidi: if you're a bull, you would take the day off. it.f you can manage japanese stocks have opened down and futures are indicating we're get more of that across the region. currencies are very much under dollars come roaring back, the bloomberg .4% ar spot index rose

yesterday after rising .5% the day before. traders k a lot of across asia are going to be potential ainst a panic here. haidi: in terms of the all flurrynt china gdp and a of other numbers, it's interesting because in the past news y bad news is good for chinese equities. arfield: yeah, the right mix of bad news could be good news. the major concern is is there in the gdp figures that says yes, the trade wars are severelily bite so that china can't really cope with it. f we see some strength caused by exports as they advance good signs potential from industrial production or retail or investment, it might as she goes, we can hold on and wait for the in the hopes ive that china will stimulate. of course, if we do see a really be number, that could also

taken as a bad sign because it would be like, ok, we don't need stimulus. so i think the one thing we perhaps can expect is an in volatility. haidi: so, garfield, what will it take to turn around sentiment asia? arfield: i think probably a week or two of just no more major declines. we have had a rally over the last couple of months, we have had things drop straight back down and part of the difficulty is that what's going n in the u.s. is hurting asia more than it's hurting the u.s. f we take a look at, we've got a chart for you in the library looking at financial conditions in the u.s. and financial emerging asia and ou can see that u.s. financial conditions have become less easy recently, but that's nothing and red to the long months months we had of tightening conditions in asia. so asia really is bearing the of the bad news out

there, so perhaps in order for asia to turn around, we need to to get just no more bad news. maybe just no news. shery: no news is good news. much, garfield reynolds. as fed officialsway in on to hike or pause supports said his ident trump biggest threat is the fed itself hiking rates too fast. a lot of he said people talking right now. we're seeing camp divisions among the troops here. randy saying that he thinks the conomy is good and that rates can continue to rise higher. with that said, james who is speaking at the economic club of memphis, he said, listen, based on the rules that we have out there, for example, the taylor folks are saying,

is he trying to push a new that we can't or shouldn't raise interest rates any higher. listen to mr. quarles first. >> i do think that we'll be able gradual increasing path for a period of time in out actually moving restrictive territory. what the practical implications we restrictive, are we not restrictive, that's one'sy a function again of optimism about the potential of the economy. randy quarles, he believes the u.s. economy is in here, but good spot r. bullard saying those rules show no reason to race rates further with recent adjustments. hey don't need to rise a lot from where we are today. looking at the neutral rate really, you don't need to raise higher. much hop on the bloomberg terminal. the neutral rate here in your line.ry is in the white

that's at 2 1/2%. of course, this is sort of heoretical, right, we don't really know where it actually is. ostensibly, we're 25bips away, one hike come december if that comes to pass. with that said, the most recent inutes that we got out of the fed, haidi, did talk about raising the rates even higher to restrictive possibly to put some ammunition into the roverbial gun that the fed has to combat any possible future recession. ramy, he has been very outspoken about what the fed is oing, perhaps even, you know, expressing a bit of regret that he appointed jay powell. oes the president have a point on the issue of inflation? lot of peoplere a who say he does have a point about inflation here. et's go back to the bloomberg terminal. i want to show you the headline inflation rate and the corps

p.c.p., it's fed's preferred gauge. both are hovering at or around 2%. this, donald trump is saying that if the fed continues raise and it becomes restrictive, they crush doesn't need to be crushed. it's not being overgrown as it were. here.at's one question another question, i'm going to flip the bloomberg terminal here, is more time that investors actually think that inflation isn't an issue as well. look at these white bars that have been falling ever since 10.tember this is inflation protection. tips e.t.f.,s, the it's been shrinking every single day since september 10, on the order of five or six weeks or so. it seems that investors really concerned right now. what is a concern though and what caught my eye before i send back to you is the possibility for a recession that i brought up earlier. at our most recent

bloomberg model that just came out today, we're thinking that a might happen in the next 12 to 24 months, that is in the orange line. dovetails well with j.p. morgan's most recent analysis 60% came out today, a chance in the next two years of recession. is o we see something that along the lines of the 2008 financial crisis, i hate the to wait and see, but 12 to 24 months, the most we've had so sis far. more to come on "day break asia." this is bloomberg.

shery: this is "daybreak: new " i'm shery ahn in york. i'm hayden panettiere.

-- i'm haidi stroud-watts. mean, yes, u will, i it's not just in japan, but everywhere that the inflation is up much more slowly than know, i ected, but, you think over time, at some point theremployment goes down, has to be a wage pressure. 2% inflation will happen if the economy keeps of japan d the bank keep the current aggressive policy. haidi: we talk about -- when it

investment numbers, maybe not quite so strong when inflation the wage and wage hikes in japan. we're talking about economics and? demographic challenges that they have. include eed to structural reform? yes, so i think that japanese company and corporation has been talked about. that kind of, it's a long term then it does give potential investor a pause in don'ting in japan if they see a positive long term outlook. that change.ake give investor something, some good reason to invest in japan term. i do think structural reform and also the appearance that the reform is happening is a necessary component of japan out of this two decade

long inflation. now on what focus room the b.o.j. has when it monitoring policy. speaking to bloomberg, when it comes to an exit strategy, he focusing on the yield curve instead of the amount of bonds that the bank is purchasing. does mean that the purchase of bonds each yen year has just become symbolic? yes, it has, well, let's look at the reality. bought japan has already japanese% of the whole market, they have to stop at some point. how muchs pointing out bank of japan can buy. to that.erously close it's no longer a feasible

bank of japan. shery: getting out of the q.e. now, if the governor focuses on the yield how much riskier is this strategy to slowly increase the yield gradually instead of cutting down on asset purchases? >> well, riskier is this you know, i don't want governor kuroda, it's too early to think about the exit strategy. as we talked about earlier, at the n is still 0.4% core. so i think b.o.j. -- many people that, but him saying then he is right in saying. saidving said that, having that, well, exit has to happen and i do think rather than the i think bank of japan the curve slightly,

slightly upward. is a sensible strategy rather than focusing on quantity. haidi: i want to get your views recovery in particular, the demand for japanese goods. want to offer this chart, it didn't bounce back following the tsunami. after 21 months in growth and export, the data yesterday, have reached a peak when it comes to how the trade picture is to look for japan? japan ink so, i think needs to become less and less competitive in manufacturing. auto industry is one of the remaining competitive point, es, but at some japanese will probably lose the ompetitive edge even in the auto industry. so i think rather than, i think japan needs to start to move on areas such as services.

thank you for your insights. now for a look at some of the trending across the is mberg universe, harvard in the midst of a lawsuit brought on by an activist group university's bias against asia american striking , that story a cord with terminal subscribers, bloomberg.com diverging fortunes of the two brothers at the helm of wealthiest dynasty. one is asia's richest man while other just lost half his fortune. over on twitter. khasoggi saying that may be dead and warning of severe consequences. ollow tictoc for all of the latest developments. check out those stories trending online or on the bloomberg. this is bloomberg.

shery: this is "daybreak: asia," i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. american express beats third expectations from strong gains from attempts to attract smaller businesses. they boosted the forecast for trimmed the fees to attract more retailers to its network. discount revenue as a measure of ees charged to her chants surged topping analysts estimates. blackstone continues to attract money, $24 billion in helpingtol last quarter it to beat profit expectations 11% to $911 e rose million compared with $822 year earlier. blackstone is bucking the private equity fundraising to reach halfopes a trillion dollars in assets early next year. haidi: a slowdown in smartphone

chipmaker urting the and reported the decline in forecast ter and fourth quarter revenues below estimates. billion this $9.5 quarter lagging the $9.55 billion average estimate. it foreseize a possible spending $12 next year to as much as billion. shery: facebook's new war room, of its effort r to fight interference and remove from its platforms. bloomberg technology host emily cybersecurity head and civic engagement team leader facebook is.ared emily: this is facebook's room, teams of engineers, cyber policy and data for alists are patrolling fake news, misinformation, and

meddling. in the war ening room right here right now? >> we have experts from across the company, data scientists are looking at dash boards and seeing, for example, if there is in things thatke ould be related to voter suppression to avoid it from going viral. emily: the war room did not 2016.in seemed to be in denial that it the election at all. >> personally i think the idea fake news on facebook of which it's a very small amount the e content influenced election in any way i think is a pretty crazy idea. last two years, it's abundantly clear that the facebook zed with the express purpose of sending u.s. elections into turmoil. acebook has apologized for not catching it and committed

massive tech and human resources to combat it. calls coordinated inauthentic behavior has tipped, iran.st from russia, but and with u.s. midterms just says away, facebook activity is ramping up and the majority of it coming from inside the united states. in order to manipulate public debate, first you have to understand the culture you're targeting. here are always going to be more people inside a country that understand it than outside. we're talking volume, right. interference that comes from overseas can be particularly pernicious. emily: how? a foreign u have state that is looking to influence or some nape lit or a country's public debate. part of what we have tried to do as we need to move in this industry is move uickly, we push as much decision-making to the teams as much as possible. here is an escalation chain so if we need to move something up, we can do it quickly it. this effort has 24 teams

around the world, law enforcement, government and agency talent that is monitoring facebook message and ahead of the st u.s. elections but a presidential election in brazil aren't e mere mortals alone. >> the investments in machine caused us to block bank accounts at the moment of creation. emily: there is a definite nuance when it comes to what kind of activity could breach policies. it would take down misinformation about how people can vote and whether their vote will account. other types of voter suppression like whether voting places are threat by an r active shooter would be "outsourced" to third parties ranked and potentially flagged if false. lawmakers are watching. >> i think that facebook and the other social media flat performs this.slow to react to they were woefully unprepared in the ast election as russians weaponized social

media. they are slowly coming to this e just what a threat is, what an attack it is on the democratic process. reforms as they come. in the final analysis, it's up o the american people to recognize this threat and be postsof anything like the seen before, divisive and unrealistic. emily: asking users to make that call is unrealistic. the real problem is the way itself operates keeping users in their own social silos divide.y further >> we can't fix 2016, that's not my goal. this whole thing is i believe that the advertising business model creates the wrong incentives for facebook and that ssentially it forces them to use highly addictive technology to to basically push people increasingly extreme positions is good for on their business.

anger and fear are good for their business. you at does it concern all that facebook could be hurting democracy more than it's helping? i think our goal and our responsibility is to insure that we are helping democracy more hurting it. we're ready. that doesn't mean that there aren't going to be challenges. malicious actors like this, there are always efforts. there are always going to be and ected threats challenges. emily: the question remains, be different. emily chang was reporting on the facebook war room. a check of the asia markets, room, an f a war uphill battle today for asian and ts given that decline the selloff since the rout in trading 1% and new zealand seeing losses to the a similar degree. worsening, 1.4 of

1%. inflation was really nothing to home about and kospi starting off on the back foot this friday as well. to come.re this is bloomberg.

heidi: a very good morning. asia's maker markets had to fill in for trade. she >>r -- shery: welcome to daybreak asia. haidi: asia pacific equities get set for losses. investors weigh mixed earnings and rising trade tensions. president trump says that it sha --like jamal

khashoggi was murdered. shery: we saw the s&p 500 barely finishing above the 200-day moving average. the nasdaq falling the most in a week. tech stocks were all under pressure today. we will see how that plays on the asian markets. the markets that are already open our falling mother 1%, for the nikkei and the kospi. which markets are you paying close attention to today? now, it is obviously japan, korea, and australia that are open. like you said, it is not looking good. it is looking like an ugly day. we have the dow moving 300 points overnight, the nasdaq plunging 2%, and the s&p 500 falling below its 200-year mean.

it looks like it will be across the entire region. china is the other one that we will be watching after a 3% plunge yesterday as well. shery what are we expecting next week:? it feels like this week has gone on for a very long time. just to take it back a little bit to this week, in particular, it has been insane in terms of the amount of news that has come out. and to wrap it up for the week. , today in particular, there have been concerns over interest rates. there have been concerns over the trade war and how that will impact economic growth, u.s. earnings as well. there's also, on a more localized level, tsmc earnings results fell shorter than estimated. looking forward to next week, you will see ecb coming out with rate decisions, the wto meeting

in ottawa, and a lot of that. in these, the davos desert event happening in riyadh, which is also clearly something people watch with a lot of companies pulling out of it. haidi: steve mnuchin says the trump administration comes increasingly under pressure. let's get to first word news. jenna: the u.k. prime minister is gambling on a go slow brexit as she and the european union bridge the differences. the summit in brussels fell hope. but there is still may has to sell the idea to eurosceptic conservative colleagues. the ball is in her court now. >> i didn't say there is no room

to maneuver. now the key element for a final deal is on the bridge point. the key element is a british political compromise. enna: the yield on the 10-year note shifted 13 basis point, widening the spread in german debt levels not seen since 2013. weakened.toxx members of the wto are calling for an investigation into u.s. metal terrace -- tariffs. russia, the eu, and always say the dues violate wto rules and they want an independent assessment of the situation. fallngton says the rules

under exemption. trump'stwo of president senior aides are said to have argument outside the oval office. it's not really clear why they were upset. the class is an indication of the rising tension in the -- the clash is an indication of the rising tensions in the administration mere weeks before the midterm elections. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. dagenhart. this is bloomberg. ♪ haidi: president trump says that it certainly looks like the missing saudi journalist is dead. he didn't say on what basis he formed the conclusion, but he did one that consequences for any saudi arabia and involvement will be severe. >> we are waiting for some

investigations and waiting for the results. we will have them very soon. i think we will be making a statement, a very strong statement. that we are waiting for the results, about three different investigations. president trump has been pretty reluctant to call that saudi arabia. does this mean we could see a shift from the white house? >> there has been increasing pressure on the administration to take some kind of stand on this issue and on what happened to mr. khashoggi and on saudi arabia. on capitol hill, they are being much tougher on saudi arabia than the white house has. of course, the president has in recent days has been coming along, that he is not say what action he would take. he is still getting the saudis more time. while he is being a bit tougher,

he is not being nearly a staff as even members of his own party on capitol hill. and again, we don't know what steps he would take. he is reluctant and has not changed that stand to give up those arms sales to the saudi the deal110 billion worked out. saudis have said that they would buy them from china or russia. shery: president trump saying, if he goes ahead and cancels those arms sales, it would be the u.s. who suffers. congress being a bit more vocal when it comes to the saudi situation. we heard from the likes of lindsey graham, calling mbs toxic, that he has to go. could capitol hill try to curtail the sales to the saudi government? what sort of sanctions could we also see? >> you are right.

on capitol hill, it is the drumbeat of the criticism getting louder and louder. as you said, we saw lindsey graham. lindsey graham, a republican from louisiana came out and said of course was killed, why is the white house not accepting that? i think congress will start taking some moves right now. there is not a lot of action on capitol hill because it is just a few weeks away from the midterm elections and lawmakers are out campaigning. there is talk of sanctions legislation being introduced and sent to capitol hill. in terms of what they could do beyond the arms sales, there are diplomatic steps they can take. there are sanctions. there's economic steps. takecould effectively steps to isolate saudi arabia more economically from the u.s. riyadh investment

conference, the guest list to still shrinking? >> it is. we have seen goldman sachs say they won't be attending. and stephen mnuchin, the u.s. treasury secretary just said he wouldn't. we have seen basically more and more people drop out of the conference. credit suisse is now not going come hsbc. it is really -- not going, hsbc. it is really becoming a place that executives do not want to be seen as this drumbeat of news out of saturday -- out of saudi arabia gets louder. there will not be trump administration officials attending. : switching to london, there is no deal on brexit this week, as largely expected. what are we looking to next? will december will be the -- will december be the make or

break moment? >> we keep wishing it forward, don't way? with no deal -- we keep pushing it forward, we? with no deal this week, could theresa may come up with something that could get through parliament that she could then take to brussels in a december meeting so they can start the period. that transition they deal she is china to come up with this to lengthen i period, to take longer rather than 21 months, to then be able to settle this irish border dispute, which is really what is the big contentious -- what is causing -- the contentious issue that is causing the impasse. we could be looking at more time. that is not entirely popular with the eurosceptics in her own party. she would have to get through a divided parliament, which will be easy either. haidi: that make or break moment gets down the road more.

lowered --ocks have for a second day. we see declines of over 1% when it comes to the -- as well as a topix. the selling really triggered by these concerns that china's anti-dumping program of machinery made in japan. an analyst report on their probe released wednesday, not the announcement itself the day before, was the culprit. why does it take to holidays to see a reaction here? week, today is a week for chinese it -- for chinese equities and tech shares. before this, we had a rebound in tech shares this week, with earnings -- with positive earnings reports from netflix and others.

this chinese report, when it was initially released, came unnoticed and people ignored it. but there was a local brokerage report that reminded investors that, hey, this could be a big deal. similar indications in the past have resulted in anti-dumping s.ties - companies named in this complaint from china have fallen steeply this week. shery: given the pressure in the sector, what is the outlook for today's session? already the nikkei losing 1.5%. >> right. it is another day for japanese equities. it is a lot of things. we have ongoing worries about how the ongoing tensions between u.s. and china will impact, plus the ongoing tensions between

u.s. and saudi arabia will impact. it will be another weekday. -- as far as the companies named in this report, we will have to see the long-term impact. it will take quite a bit of time before we see the results. shery: thank you so much for that. still ahead, we speak to europe's biggest tech company, sap, about results and a shifting focus to the cloud. haidi: and how much has the trade war enid the china's growth numbers? this is bloomberg. ♪

; the expectation of growth slowing 616%. it comes with just 6.6%. -- joining us now is raymond young. us.t to have you with we have seen some early signs that this could be a slow quarter. what are your expectations for the quarter? >> i think the third-quarter number will still be subject to some upside. 6.6% is the official target. for the full year, you will a slight slowdown in the fourth quarter. the full year's number could be more than 6%. 6.5%. from the headline number, china should be able to achieve this official target. but at the same time, the gdp

-- actual business sentiment in china. at the same time, i don't think that it is able to change the whole business sentiment immediately. shery: especially because you have all of these lingering trade tensions on the background. how much of today's numbers will be because of the tariffs and the u.s. actions? tradeon't think that the impact.so far has an if you look at the export number released last week, it was very strong last month because of the frontloading impact on some of the exporters who try to ship their goods as early as possible, before the actual tariff is executed. so the third-quarter number has been some sort of interrupted by

the trade impact in the tariff measure. we are expecting the fourth quarter numbers, in terms of trade, to slow significantly. at the same time, we saw the new pmi,t order numbers by the within the pmi was down to 48. last month's death was pretty bad. even though the gdp number can hold up because of the strength of the service sector, i think the external environment will start to bite probably at the end of this year and also early next year. haidi: we had a report earlier looking at the resurgence of local government financing vehicles to fund infrastructure projects. are we starting to see, in the absence of more wholesale stimulus, are we starting to see a return to the old school infrastructure driven, debt-driven message of propping up growth in china again?

>> interestingly, so far, the number we have seen in terms of approval of infrastructure lowects has been very compared with previous years. saw theexactly why we investment number downbeat in the past few months, even though we are expecting a more practice fiscal policy should translate into a strong infrastructure investment. though we have not seen it yet. i think the chinese government has already declared they want to stabilize growth when they released the document back in july. this sort of expediting the approvable seizure of infrastructure will come sooner or later. hopefully, the infrastructure projects will be approved as soon as possible so that growth can be stabilized in terms of the fx on the investment side.

at the same time -- the eff ects on the investment side. now is the time for the local government to execute some of the projects in the pipeline in order to actually execute the mandate from the central government. haidi: sentiment in china amongst the equity markets has been deteriorating. i want to draw your attention to this chart following the selloff we saw in shanghai yesterday. to shanghai, is now down 30% from the high we signed january now downanghai comp is 30% from the high we saw in january. at what point does this start weighing into the wealth effect, and broader social stability? retail sales, for example, and services to remain intact as the rest of the

economy slows, this will not be helpful. >> exactly. right now, the government realized, in order to secure the growth momentum -- sector could be the key to offset the impact of the trade environment. markets havesset not been performing very well. that could be easily translated into poor sentiment in terms of consumption. consumer sentiment has been down be so far. expecting retail sales number in october and probably up to speed. everybody is looking at the upcoming november, whether we see a more upbeat number, for example, the november 11 a platform promotion that may --

formcow form -- e-plat promotion. even though the government likes theyomote consumption, need to translate it into a natural policy to alleviate some of the expectations, deterioration that is happening in the markets. the wealth effect is something that the market -- the government needs to target, too. seen: we really haven't the national team as we have back in 20's -- 2015. we see the government apply more targeted, more channel the measures, trying to stop some companies from for selling their shares because of shares as collateral for loans. is this a better strategy in terms of the broader economy? now is time for the government to pick an option,

whether they still want to use a visible hand or an invisible hand behind the markets and to intervene in the stock market, or they should let the market to regulate itself. i believe it tells the government something, something more fundamental meets to be addressed. in terms of the government policy, they have rightly have -- thathat they have destabilized areas they need to stabilize. in terms of how the government needs to stabilize expectations, both household in the corporate side, that deserves more attention by the policymakers rather than the stock market. haidi: as we get to the start of next year, can china withstand the pressure?

it's got other avenues of growth gasquetstment, like to make of for the pressure that comes from the u.s. -- can it make a for the pressure that comes from the u.s.? >> right now, china will has time to boost domestic investment in order to support the impact from the trade or the tariff by the u.s.. i think the government really needs to address the fundamental issues, such as expectations, how the economy and reforms need to be pushed. in fact, this year is the 40th anniversary of the opening up and reform policy. turning point that the government needs to let the domestic economic agents know

where it needs to head to rather than focus on a sharp [indiscernible] pleasure.ays a plenty more to come. this is bloomberg. ♪

ishe japanesehery: yen holding at 1012. down .1%.s haidi: taking a look at how commodities are unfolding, that

-- oing through to crude is still under safety nine dollars a barrel. desk $69 -- $69 a barrel.

haidi: we are an hour from trading in hong kong. we are waiting china's gdp numbers. taking a look to see if chinese stocks could see a bit of a breather after the horrible day that was yesterday. shery: 3% slump in the shanghai composite is not good news. the asian markets not looking to positive. you are watching daybreak asia. let's get first word news. jenna: president trump is threatening severe consequences if it is proved the saudi arabia killed jamal khashoggi.

the kingdom has promised a swift but thorough investigation into what allegedly happened to the writer after he arrived at the consulate in istanbul. >> we are awaiting an investigation and waiting for the results. we will have them very soon. i think we will be making a statement, a very strong statement. that we are waiting for the results of about three different investigations. : steven mnuchin news the latest of a loud of saudi arabia's investment arm next week. rum nextnvestment fo week. finance business leaders are going to riyadh. bloomberg is no longer acting as the mediator of the saudi forum.

receiving more than 50 cargoes from the u.s., it is a jumbo more than 70% in 2017. has surgedand of lng as it moves away from coal. it is looking at potential investments in lng projects in alaska and texas. malaysia focuses on income inequality and attempts during in debt. the average gdp extension of 4.5% to 5% in jan -- in 2020. saysrime minister cost-cutting could hurt the economy. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm jenna dagenhart. this is bloomberg. ♪ y: we are seeing

asia-pacific stocks falling for a second consecutive second as early more -- consecutive session. that see what is happening in financial markets. talk about the risk off sentiment spreading after wall percentost more than a with the s&p 500 just above the 200 happen day moving -- 200-day moving average. is there hope? >> not right now. it looks like most of the stock markets that are open, japan, australia, they are all downing -- down quite a bit. the slump that happened in the u.s. is seeping into asia. there's quite a few reasons for that. one of it being fear over high interest rates.

u.s. missed earnings. that came out overnight. fear over trade war and concerns over economic growth. there's also not so great news coming out of japan as well. there are quite a few reasons for investors to stay bearish today. shery: we do have third-quarter gdp numbers and industrial production, retail sales. anything out of china that could turn around sentiment today? >> it would take a positive surprise out of the chinese data to turn around the negative tone of sentiment. months, theew surprises have mostly come on the downside. we have seen some of the industrial production and retail sales figures over the past several months miss everybody's forecast, in other words, coming

below even the lowest forecast in bloomberg surveys. i sure wouldn't bet on a positive surprise today. haidi: i remember when we would get a miss and the investors in markets would rally because it means you would get more stimulus. that has not really been playing out. team.is the national and where is the national team when it comes to currency as well? >> that is a good question. this is something we have been writing about this week. the chinese policymakers this time around, in what has been a pretty bloody few weeks for the chinese stock market, the shanghai composite is down about 30% from its january high. what is different this time around amid the carnage is that chinese policymakers will not be taking an across-the-board,.

broad stimulus approach. still of theful problems of excess leverage and risk in the financial system. so they have taken a more targeted approach. rigpboc has lowered the wired reserve ratios for banks, but it is focusing more on micro programs to help small and medium-size companies. local governments have been engaging in bailouts for liquidity-squeeze companies. that may help individual companies, but it is not helping the broad market. we are not seeing the broad, ok, here's the national team. we have to buy stocks across the board coming in to play this time around. haidi: that plunge protection team playing it more conservative. we still have to get through the rest of friday.

was we get into next week, what is that looking like? >> we will be waiting for ecb .ates to come in we have the wto meeting in ottawa. there is also the davos in the desert in event. those are the things we will be watching for next week. haidi: thank you to you both. coming up next, we speak to scott russell. exclusive.s live and this is bloomberg. ♪

haidi: europe's biggest technology company said it will be raising production on the back of accelerating growth from its cloud business. estimates -- third-quarter numbers missed analyst estimates. scott russell is here with this exclusive conversation on bloomberg tv. great to have you with us here in is the bulk of the company growth opportunities still coming from this region? >> yes. we are really proud of the performance. it is the 20th consecutive quarter of growth. if you look at the software and concerts fiction revenues, we grew 17%. what was more inspiring was the grew by 58%.ptions

shery: when an executive tells me it is 20 plus consecutive begs the question, how long is that sustainable? are there headwinds ahead? consecutive quarters were driven by customer demand. the customer landscape is changing. here in asia, the demand for --tom sanctuary city is more synchronicity is more. while the revenue growth is really strong, ultimately driven by the marketplace, that is not just in one market. that is across the entire

region. that is what gives us confidence that the continued consecutive growth will go into the future. shery: we have had aches scandals over cybersecurity. whether it is physical or software hacking. how big of a concern is this for your business? >> security is always paramount to sap. technology, over 70% of the world business transactions run through an sap platform someone the world. we are conscious that our platform does underpin the economy. is not just an outcome. it's a process. we have incredible you high standards and we are very proud of our track record in all forms of security, cybersecurity, physical, and ensuring that the as user of the technology is safe as possible in all jurisdictions around the world, including here in this region. hasy: how much progress

asian firms made in the intelligence enterprise model? isthe intelligent enterprise connecting the demand chain. what does the end consumer really want? the experience they want? and how they want to receive their goods and services in the way they demand? connecting that to the supply chain. are we able to fulfill the goods and services in the manner they expect and in such an automated way that it is a seamless experience? in asia, that is more apparent. we did an internal steady last year and we look at the market and asia, in terms of customer expectations, are the most demanding. consumers really do expect the goods and services in their hands at the time, how they wanted, when they wanted, and in a form that is the highest possible quality. that is where sap can really help. we are able to digitize the supply chains, and sure that the and and manufacturing process,

the logistics, all the way through to that truly incredible customer experience in all channels, in store, online, off-line, to be able to make sure that it is seamless. that is with consumers in asia want. they are the most demanding, but also the most exciting, given the growth in this region. like: you hear terms artificial intelligence and internet of things being bandied about. asyou see them realize actual investments that companies are making or are they more longer-term, moonshot type concepts? >> yeah. the good news is it is real. and in a variety of ways. when you're thinking about how to automate that supply chain that i talked about, one of the things you want to make sure is that your factory, smart manufacturing, is truly online and automated at all times. downtime means loss of productivity and loss of goods for consumers when they wanted.

machine learning, trying to be att which part will fault at which time in being able to identify will go wrong, predict it, have the service order, have the parts available on hand before the problem occurs. we see companies all across asia investing in these technologies. in's strategy is to build it the process, to orchestrate it into the process, which means you are not in the innovation outside. you're doing it in the core the business and you fulfill and delight your customers as a result. shery: you talk about growth in asia. why is the revenue only at 15% for the past 18 years or so? >> we are very diverse in that market. with markets like india, which has really strong economic

growth, but even markets like japan, which continues to show strong software growth and an xl limited cloud growth. we see a no acceleration to the cloud, to consume these technologies that are easy to use in the cloud as quickly as possible. that obviously changes our revenue mix. we don't try to manipulate the revenue. we try to ensure the we give our customers choice. in asia, that does vary by markets. but the revenue continues to be very strong. shery: thank you so much. scott russell joining us from a poor. key -- tom mackenzie visits business is in germany that are making the most of opportunities.

>> the network of rail and water industry. annexes for its history is firmly planted in coal and steel. with those sectors on the decline, the ceo of logistics do sport -- duisport is hitching to the belt and road. >> it started six or seven years ago. the first train was a dedicated train from hewlett-packard into duisport. then we saw the chance with respect to this turntable and positioning, acting from and vice versana as the distribution hub for europe. >> since then, goods to europe by rail has surged.

road being a and major driver. siemens isrt, carving out new house. the global shift to renewable energy sources means the powerplant equipment unit, what's a flagship emma has suffered a protected slowdown. >> we have a structural challenge to muster -- to master . that means finding new innovation. but that also means finding new ways of business. not havehem do sustainable and reliable and affordable energy. so there are opportunities. >> those concerned about the initiative say that the chinese companies you are potentially partnering with, they don't have the same corporate governance, the transparency, the system ability of these chinese companies to corruption. do you expose yourself to risks?

is it a price worth paying? >> we would it pay such a price at all. -- we wouldn't pay such a price at all. if china wants to play an international world, they need to adhere to international standards. i believe, if the rest of the world doesn't get up together how to design free trade and how in iraq's to solve -- interacts to solve problem's, maybe china countries, i have 90 with 70% of the world's population. it would be declare all right to build a new wto. so we have to be careful what to deal with here. most of the economic and political power shifts go with the amount of people in a country. and if you have an initiative, good or bad, right or wrong, well perceived or not, which cover 70% of the global

population, you better take that seriously. catch the rest atight at 7:00 p.m. and following times around the world. we are getting commentary from the chinese banking and insurance regulatory commission chairman, talking about the selloff we have seen in the financial markets, saying that the china market moves are not in line with a healthy status. china will push the financial market back to normal and that systemic financial risks are controllable. he says banks in china should reasonably manage their share risks. insurance companies should help ease the liquidity risk in china. china to help insurance investment listed companies.

yesterday.selloff topnow the country's regulator saying that they risks are controllable and beijing will push the financial markets back to normal. rig could see a rebound in the chinese market this friday, if this is the clearest signal yet, that we will get official support coming through. shery: we have to be a bit skeptical. we have heard about insurance playing into the markets. we have not seen the rebound we wanted. regulators have talked about providing support, about the insurers participating in the derivative markets. still, the shanghai composite plunging 3%. gdp numbers for the third missing the chinese market. so figures across her those equity bulls. plenty more to come.

we will be watching all of that. this is bloomberg. ♪

: this is daybreak asia. haidi: american international group sees losses of $1.5 billion to $1.7 billion from natural disasters around the

world. aig expects to lose up to half $1 billion from hurricane michael in the fourth quarter. aig shares fell 4% in after-hours trading in the u.s. after pre-announcing its global catastrophe losses. a lifeline after stumbling by expanding into one energy sector. stake inmajor funding-- it has been racing against of the clock to reorganize bowring -- bauer -- borrowing. luxury stocks are down more than 10% this month amid the level selloff. chinese customs offices are enforcing import rules more strictly on travelers bringing in high-end goods. let's look at the implications.

hard to say when we see the rest of the markets broadly in flux. but why were luxury stocks down as much as $150 billion from the start of october? >> it's exactly like you just said. the catalyst seems to be a couple of viral social media posts that suggest that authorities are clamping down on travelers coming back with lots of luxury purchases. there's always been a limit to what travelers can bring back, but this policy was ready much not strictly enforced. and the concern that it would be more strict we force now spread into this overall concern. encouraging purchases in europe. how much of this is because regulators want to control and rein in all of those purchases made abroad, and then

they bring it in and sell it at a premium? it is cheaper to buy these luxury goods outside of china. >> right. there's been no actual policy change on the chinese authorities. they are kind of clamping down and checking the purchases more strict the because there was this thriving trade in bringing back those luxury goods and reselling them in china. but that incentive is fading away as well. the effort that luxury brands is howt into that important the chinese consumer is important to them. shery:. thank you so much for that. . for i look at what is coming up in the next few hours, david is joining us -- david ingles is joining us now.

obviously, third-quarter gdp numbers, i am assuming come out of china. david: oh, is that out today? shery: was it? [laughter] we weren't aware, right? david: i didn't know until you told me. in that case, thank you. we will put that on the agenda today. we will debrief whether the data out of china will be important. 6.6%, 6.7%, he says is basically noise. shery: that is it from daybreak asia. our market coverage continues as we look at the start of trade in hong kong and shenzhen. this is bloomberg. ♪

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rishaad: 9:00 a.m. in hong kong and shanghai. this is "bloomberg markets: china open." yvonne: steve declines in tokyo's -- steep declines in tokyo. rising geopolitical tensions. benchmark regional facing its worst three-week slide since january 2016. futures pointing to steeper losses in hong kong. saying: president trump of "severe consequences."