alix: welcome to daybreak australiaalix: haidi:. -- haidi: welcome to daybreak australia. ramy: we are counting down to asia's major market opens. haidi: here are the top stories we are covering in the next hour. saudi accounts of the killing of the journalist spark widespread skepticism. pace will bee tested this week as the strength of the sass cap -- tax cut economy will be released.

and losing an election along with parliamentary majority in sydney. ramy: let's get a quick reminder of how stocks ended the close. you can see mixed definitely is the word. s&p 500 a hair's breadth in the negative. dow jones raising a quarter of a percentage. nasdaq was the worst down half a percent. looking at these, the s&p and the dow, they ended the week in the positive, ever so slightly, breaking three weeks of false. the nasdaq was down three weeks in a row. a couple headaches i have been marking. concern about profit margins possibly taking a hit because of u.s.-china trade war, and then there are headaches with regard to the fed rate hikes, what they will do in december. what they will do looking ahead to 2019. theng ahead, looking at

tech sector, a slew of earnings, the biggest week in terms of the united states and marking that in a few minutes. haidi: massive week for earnings, not just the tech sector. although that, twitter, some of the trade war sensitive names -- alphabet, twitter, some of the trade war sensitive names like caterpillar. looking narrowly mixed. it is a holiday session. we don't have the lead from new zealand. it is close because of labor day. the yen is weakening over the last couple of days. down .2% when it comes to trading in australia. looking a bit of a narrow decline, .2%. commodities after that slight miss on china gdp, various chinese authorities coming out to support the economy in the flurry of rhetoric friday. look at the aussie futures into this monday morning, trading.

the kiwi rebounding off the china gdp miss on the comments from chinese authorities. china is australia's largest trading partner. .25%.aland futures down the kiwi dollar trading at 107 107.78. -- let's get to first word news. saudi arabia admits the writer jamal khashoggi did die in a simple consulate in what the government says was a mistake perpetrated by rogue elements. he has skepticism. france months more clarity and germany suspended arms sales. president trump said the explanation was credible, but lawmakers say the killing came from the highest levels of the saudi regime. president trump planning to pull the u.s. out of a major arms treaty with russia, claiming

moscow has violated the terms. the intermediate range treaty was signed in 1987 and is considered a landmark of cold war data. the white house said russia is developing a seat -- a medium-range missile system in defiance of the agreement. mr. trump: we will not let them violate a nuclear agreement and do weapons and we are not allowed to. we have honored the agreement. russia has not. we will terminate the agreement. u.s. is ramping up pressure on china and may change the way it determines if a country is manipulating its currency. the treasury secretary said in 1988 act with a wider definition of manipulation could override the test in a new law. china avoided the labor basket

because it doesn't me all three stipulations for currency -- meet all three stability for currency manipulation. that could change. but this a budget, government will continue to discuss this with the european union. they see the spending plan was taken by all members of the coalition government and warn of a potential ratings downgrade. a higher than expected deficit. italy must respond. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda amin. this is bloomberg. liberaln australia the coalition government said it will fight despite the few million defeat. the loss of the seat held by the former prime minister markle -- malcolm turnbull also marks a

loss of parliamentary majority. it was an engaging day of voting. paul: we have to look at just the weekend. there is a long backstory to it. karen phelps, the independent candidate, winning an incredible victory, 20% of swing away from the liberal party and ends the grip. it has held for 117 years since australia was federated, so that is rested on support for the liberal party -- rusted on support for the liberal party. the independent has won. haidi: this is turnbull's old seat, a very popular candidate. paul: popular prime minister and candidate, torn down in august by a party room time that many are still struggling to understand. it is widely viewed it was a referendum on that.

scott morrison said he understood people were angry but cautioned against them doing , but they did not listen. haidi: what happens now? paul: it is a honk parliament. -- hung parliament. karen phillips would not -- the government has to support much of the cross bench as well. it will hang on, but there will be plenty of blame spread around. malcolm neighbor -- malcolm turnbull endorsed his replacement, but he blamed ultimately the two architects who were -- coup architects who are trying to appeal to the base. there is no base. haidi: there was a lack of engagement with climate change in the government. paul: they have said the government, the liberal party needs to re-examine their position on climate change. , theye coup architects

are well-known climate skeptics. that was one of the reasons they pulled malcolm turnbull down in august. haidi: the votes continue to be counted, but it does look like the independent candidate has still maintained her lead very let's take a look at what the markets have in store this week. if we have as much drama as what you are seeing in australia. the week ahead on wall street will be a peak week for earnings. 155 companies in the s&p 500 posting results. that includes names like amazon, google, ubs and microsoft. that is together with geopolitical tensions. likely have an impact on u.s. stocks after friday's close. su keenan has more. su: a lot of anticipation. we have seen 20% of the s&p 500 stocks report, so it is a big raft of reports that could set

direction. let's look at the market scorecard as we ended friday. the vix closed down from the prior week. of $133a huge inflow million into etf's rejecting against volatility. in crude could go higher this week because of strains with the u.s. and saudi arabia. let's get to the flood of earnings. it was expected that there should be a demonstration of strong fundamentals in order to help restore the uptrend in the market. caterpillar, boeing in the bullseye of these tariffs. we have big tech reporting around midweek, and a lot of the amazon,ocks, alphabet, netflix gave a little bit of a to release theh concern over momentum. we have another group with ford,

mcdonald's, ubs. all of these could restore stability or not. take a look at the bloomberg. gtv is where you can find our library. you see the bumpy months we have had. october the bumpy is to, especially -- is usually the bumpy is. -- bumpiest. ramy: and there could be an impact on the economy. su: putting out a note on friday, it speaks to what we are looking at this week. if we continue to see these gyrations in the stock market, it could hurt the economy. they are saying it is likely to turn from a significant contributor to strong growth to a modest lag next year. the boost we saw, a half percent to gdp growth from equity earlier in the year, has disappeared. looking at further risk to their

forecast. ramy: i am trying to batten down the hatches in my head. looking ahead. now the cumberland advisors chair and chief investment officer david to talk. always good to have you. let's dive further into what she was saying in terms of earnings. i want to show you that ea function. this is the earnings analysis of function. you can see a lot of green on the screen. things are good, but are there concerns about the u.s. and china -- honeywell, boeing and caterpillar saying they are nervous. the ratcheting up of the u.s.-china trade war has been going on for nine months. started at the beginning of the year, seems like it has been forever. each time there was a stage where the market said this is

temporary, it is going to be over soon, there will be a truce . that is changing. the news today, bloomberg had a great report on the details of mnuchin's comments about the threat of currency manipulation. you pile that on and invoke a 1988 law and say we will interpret this with the 1988 law, not the recent statute. you look at the trade war, the tariff wars which are invoking law which was designed to protect national security and written half a century ago or something like that. you say, what's happening here? the prediction from peter navarro in the beginning of this was we will settle this. it will be quick. if you remember the interview, and there was a column in the wall street journal of march

this year, look what has happened. the forecast are wrong. all sides are digging in deeper, and that is a dangerous thing. we will see earnings that may start to reflect it. ramy: when do you think we start to see the trickle in earnings? now we see the sugar rush from tax reports. david: you are right, sugar rush is the right word. you are seeing companies warning. they are warning for good reason. these coming out, they will be dissected to see if we actually .ee the evidence from trade war this is the first quarter where it might become visible in some of these companies. haidi: you look at the violet -- volatility and wildness, is there any indication we are getting closer

cycle,ot the end of the a down segment? david: it is unsure, so i admit my deficiencies. we needed a correction and haven't had one. is this in october? up.ould have another leg the gdp report could be three more or less. it will not be four, but it will still be positive. we could be going through another leg upward to 3000 or higher on the s&p, and that would not be a surprise. we have got to go through rocky time here first. haidi: it sounds like the fear of missing out trade is prevalent. do you think investors are still invested because what is the other option, right?

david: i can't speak for other investors. we have a cash reserve in portfolios, most of them. we have one aggressive trading strategy, and it had -- it is mathematically driven and had a buy signal and was deployed. the basic theme, we have cash reserves right now. in terms of sectors, let's say you didn't want to keep your strategy in cash. where do you see it? david: we have an overweight position in defense. it is going through the russia renegotiation, the saudi, what we do about the arms deal? uglyink the headlines are was --news about what well, it wasn't obvious, allegedly a murder or fistfight. but it doesn't derail the arms sale. the alliances between the united states, saudi arabia, that important from a

u.s. policy decision. on the other side. we think the defense establishment and defense stocks in the united states are solid for a protracted barrier, and we are overweight the sector. ramy: it makes sense but doesn't give me a good feeling in my stomach. david: you don't feel good about this. investing it sometimes is not a feel-good enterprise. for: we have still got you the rest of the hour. cumberland advisors chair and chief investment officer david is sticking with us. the australian government vows to fight on despite a election humiliation. we will speak to a former party leader. haidi: we are on fed watch with policymakers talking about implications for rate hike expectations. this is bloomberg.

♪ his is bloomberg. ♪

ramy: the federal reserve's commitment to a rate hike will be tested this week as third-quarter growth numbers show if the economy is maintaining a tax cut fueled momentum. kathleen hays is here with a preview. the atlanta fed president spoke friday. how does the -- kathleen: he is in line with the fed consensus. let's look at the key things he said on friday. them perform in a very positive way. not worried about the economy obviously. they tried to keep the recovery going as long as possible. he sees the key rate 2.2%.

it could understatement -- there is still a couple moves left. presumably that includes a rate hike in december and we will see about 2019. the new vice chair of the federal reserve will make his first official remarks this week, but also we will hear from neel kashkari, bostick speaks again. cleveland fed, he speaks twice this week. third-quarter gdp report friday is expected to cool off a bit or remain above 3% year-over-year, speaking to supply-side economists saying more corporate investment. i would like to add raphael bostick answered questions after his speech on friday and said the fed is monitoring the jamal khashoggi situation, the apparent murder of the saudi journalist as -- and the turkish

embassy becoming a big deal, and the effect it might have on oil prices. this is a lot of bostick's plate. i will be interested to see if others are asked about this this week. haidi: thank you so much. so what does is the cumberland chairman david. talking about this potential market fallout from the saudi arabia situation, we have been wondering what happens when the custard tariffs and trade. our investors pricing in the impact of policy, fed policy on these geopolitical issues? david: there is an issue about what governments do if they stopped funding themselves or adding to their portfolios of u.s. treasury obligations. at the same time the fed is discouraging or reducing its

holdings, are we going to see some effect in interest rates? that is an unspoken to session. just listed the speakers that are coming. i suspect there will be very little conversation coming from that except in the queue and day sessions about that issue. a sessions about that issue. it we know china has gone to a flat line, started to reduce. flatlined, not increasing. we need to finance an $800 billion deficit heading for $1 trillion. there are issues. the federal reserve is reducing its holdings. they are essentially joining the treasury in putting more treasury debt into the market. that is the kind of conversations we need to have

and hear from the fed how they plan to manage it. haidi: these conversations about uncharted territory. this place to the same theme. the fed minutes from last week, the biggest thing was the idea of the new drill rates, being an existential concept, not a number of how far away we are from reaching that neutral level. what happens beyond that? what is your best case scenario? david: if we don't get an upward trend that accelerates in inflation, then you can argue we are close to whatever the neutral rate is. no one can observe a neutral rate. we all have to guess at it. when you look backwards and say, now we have this, so we can figure out what the neutral rate was, it has got a wideband, so it is not easily -- we are guessing.

it is not predictable. to get a trajectory that accelerates in inflation, i think that could happen. then the fed has a different it gets awayse from the 2% number and has to be looking higher. there is where collision course can come. we don't know if that will happen, but it is a worry. ramy: what team are you on when it comes to hiking or holding? we have bostick saying gradual. one said yes, bullard said maybe no. david: can you imagine trying to conduct this orchestra if you are jay powell, and you point to the violins and the oboe, then you say the french horns. it is impossible to know. we are in such difficult unchartered waters. we have never in history had a major central bank let alone the major central bank raised

interest rates and shrink the balance sheet at the same time and have all this other stuff going on in the world. ramy: a lot to orchestrate. david: a lot. ramy: we will leave it there for the moment. cumberland advisors german david kotok sticking with us. this is bloomberg. ♪

you are watching daybreak australia. let's look at how asian stocks are kicking off. not much will lead from wall street, u.s. stocks edging lower, slight finish down on friday. one of those wild sessions we have seen. .2%ey futures looking lower at the open. the aussie and the kiwi kitching -- catching a bid. what marketsabout have in store coming up next. cumberland advisor chairman

david speaking with us. we are talking about the u.s. and china, becoming more dangerous as well. more on the risks. this is bloomberg. ♪ this is bloomberg. ♪

haidi: half past 9:00 in sydney. a great sunny day but looking gray in that shot. sydney futures looking gray as well. we have political uncertainty in the fray after a shocking by election result. we are still waiting to see the definitive outcome of that, but this is a market that is used to trading on political uncertainty. i am haidi stroud-watts. inocencio.ramy it is 6:00 p.m. here. let's get to first word news with haslinda amin. haslinda: good morning.

the u.k. government is hinting flexibility in so far one of the unbreakable designs. they want a hard border in ireland after the split if there is no deal. the sides are edging to an agreement about a so-called stop that would keep britain in the union for the for seeable future. >> the one big issue remains this bridge between the end of the implementation and the future, so if you listen to the mood music out of brazil -- out of brussels, there is good indication. we need to see it through. haslinda: the australian government intends to see out a full term despite looking set to lose sydney elections. liberals can win but winless seat as they narrow the result. it could be several days before

the final tally is known. but government was paying the price for internal strife. -- known toe now in have died in a plane crash in taiwan. it was traveling to a southeastern city when it was off the rails. 170 passengers were injured. the train was one of the new improved and faster models. an investigation is underway into what caused it to come off the rails. xi jinping has vowed unwavering support for the private sector. in their latest attempt to counter fears about the slowing economy. they said anything that negates the economy is wrong, and primarythe consistent policy. the president will continue to support the private sector. exchange willtock

say it was to blame for an october 9 trading glitch but will not pay compensation. they will submit a report on the incident on tuesday, and the president will accept a pay cut. the transmission of a large amount of data through merrill lynch japan securities cause a secure -- severe lynch -- severe glitch. 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. amin.as haslinda this is bloomberg. ramy: let's go to washington, dc and get more out of saudi arabia . the country is calling the death of tomoko fujii dashed them jamarcus so gi -- speaking on fox news this weekend. obviously was a tremendous mistake made, and what compounded this was the attempt

to cover it up. these things happen. we want to make sure those responsible are punished and make sure we have procedures to present just prevent it from happening again. in washington,r dc now. has president trump signaled any specific moves he might make? and his: he has not, views on the saudi situation could be evolving. he is coming under pressure from congress, seeing what other governments are doing and saying. expects to get more information on the situation in the next 48 hours. according to turkish authorities, trump and president erdogan had a call this afternoon. we have not had a readout on that, but we could get one on the white house. speak on erdogan will

what the government there knows tuesday. given all the leaks from turkey happened tohey say mr. khashoggi, there could be political dynamite for trump and the saudis. --phen mnuchin the surgery the treasury secretary was in jerusalem and talked about the continued relations between the u.s. and saudi. even do you have france, u.k. and germany calling for tough measures, still unclear trump will do what some lawmakers have suggested which is to throughout the saudi ambassador to the u.s. or take harsher measures. haidi: the president plans to pull out of a nuclear weapons pact with russia in the meantime. what has happened there? ros: it is interesting.

the criticismen raining down for two years on the trump administration about being soft on russia, is this some way to show being tough? ahead of aring national security advisor's trip ? he arrived in moscow this afternoon and will be there for meetings over the next few days. it certainly created a lot of jitters in europe and nato allies who feel this missile treaty has been responsible for decades of peace in europe, and it is a dangerous move to pull out. we did have an interesting take from bob corker, the head of the senate foreign relations committee, senator from tennessee. he said he thinks this is a little bit like the way president trump approached nafta

, to kind of announced he would pull out or may, then change. rebrandinga exercise. at the same time you have foreign-policy hawks like lindsey graham saying trump is doing the right thing, russia has been cheating on this for a long time. more will be set over the next few days. keep an eye out for what they may say moscow. very quickly, president trump has said he is considering ahead of theut upcoming midterms. is this an attempt to get out the vote? ros: a lot of people think that. seems like president trump came up with this on the fly. ahead of the upcoming midterms. ishe ran it out for reporters covering his rally in nevada

yesterday. we covered up -- followed up with congressional leaders and staff of the past 24 hours, and they don't know anything about it. is it possible the white house could pressure congressional leaders to come up with some kind of framework or bullet points ahead of the midterm elections? it is possible and not unknown for politicians in any country or party to put out something they hope will win them some votes. haidi: ros krasny for us. on whatt you to more you should be watching. adam haigh is in sydney. we spent all of last week wondering what the national league's message was. they have signaled their report. adam: more a signaling of intention and what we saw in the equity market on friday was the pronounced rally in the afternoon. we had been waiting for it. we had the coordinated response

from regulators and started to buyingt was a state tax in the afternoon. the ground has been laid for some kind of sustainable rebound in china. it would be very brave to call that, but you got a very public of coordination across all corners of the authority. facthare pledging and the it is really specific, this and companies back using, being able to borrow in ,he market and using their runs to say don't call in those loans. it is a key issue. it could become problematic.

it does help sentiment somewhat. massive earnings week this week. our expectations too high? adam: they always are. we did see numbers dialed back into the early reporting time with the banks, and now it is over to industrials. the big heavy weights in industry this week. something earlier this season, industrials are getting hit hard. this chart shows you how industrial shares have had a rough october, probably the worst month of the have had. it is one of those underlying stories within the market that is starting to show a number of companies that have all kind of either fx problems

and the way that is hurting profits or the way to do with the trade war and how that is playing out in the market. a lot of that is priced in. the folks at bank of america are saying there is so much news -- you want to go either fx proble, industrials relative to the broader market. earnings season rolling on, we look at the latest hours and sentiment. haidi: alphabet, twitter some of the whole lot. they do so much for that. ourt forget to check out libraries there. you can see it at the gtv on bloomberg. ramy: we still have cumberland with us.chairman david we turn to china. after gdp grew 6.5%, ubs said in 2019, you might he 6%. 6%.ou might be this is the blue line we can see the slowest pace of growth since the financial crisis and what concern do you have?

markets have been expecting china's growth rate to slow, so i don't see this as a crisis. it is something to watch, but it was expected in the markets. you just had reinforcement from xi that says we stand by the private sector. what is he saying? don't sell the stocks of the companies because the government is behind them. you had a report on the lending, pledging, and what was the message? don't call the loans, don't pressure the markets. intervention in the chinese government in the markets essentially saying don't sell your stocks because we will make sure everything will be all right. flip that around to the united states where you have the president bashing the central

bank twice a day with words like loco and crazy. look at this comparison around the world. it adds to the differences instability in attempting to do international transactions. we will see if it has any affects in the earnings we talked about. maybe it is too soon. the answer to the question on china is expected gradual slowing of growth rates. the issues in the globe are much bigger. we can use the word prescribed, taking your time, patience. looking at the pboc and what they are doing, do you think they are doing enough for china? we don't have enough to evaluate the into reality -- the

internal reality of the central bank. it is not independent. it faces a separate problem because china does not want to be declared a currency manipulator because the united states can then invoke a series of harsher nlt's as part of this whole dispute. the action of the currency -- harsher penalties as part of this whole dispute. the action of currency, it is central -- very difficult to do it in china. haidi: difficult to be a policy maker of any kind in china. up now they are giving buffer to keep things under control, the likes of president trump and his administration would be saying with the whole narrative of china hurting more than the u.s. out of this trade war? david: there is a real question

here, can i get the other side to feel more fear and come to a table and negotiate a deal? game we have a been playing for nine months or 10 months. so far it has worked in reverse. political stability, you described your own clinical stability on the other side of the world where summer is coming, not this cold game we he been playing for nine weather in new york. look at the way the world is tied together. positive things that can come from it. when you don't have these disputes or attempt to resolve them. that is a message from this show and to every investor in political force everywhere. there can be a positive outcome if you resolve disputes and not exacerbate them. haidi: perhaps you should be a

diplomat, a second career. cumberland advisors chairman and chief investment officer. australian politics and prospects of the liberal government after the by elections humiliation. we talk about that with the former party leader. this is bloomberg. ♪

governmentaustralian is determined to go out a full term despite the by election over the weekend. win, phillips is set to which would remove the one seat majority in parliament. >> a great moment for australians. [applause] >> this win tonight should signal a return of decency,

integrity and humanity. haidi: i want to bring in john houston, former liberal party leader. dr. houston, great to have you on. 117 years is a long time to be holding this blue ribbon seat. what happened? >> he was a perfect storm of circumstances. the removal of malcolm turnbull, who is close to the opposition in the polls, falling short of expectations, but he hadn't done any wrong. so they replaced him in a fairly unceremonious way. other issues like climate and refugees and so on dominated the, so policy issues and unjustified level of a power -- prime minister.

we haven't had one serve a full term since 2007. total dissatisfaction with the government and the political process more broadly. haidi: thistotal dissatisfactioe government and the political 20% less suing to an independent has never been seen before, a female candidate who has views on climate change, refugee resettlement. these are issues the government -- refused to encourage engage with. they are not engaging now. deafness? el of tone john: they have a tuned ear, there is no doubt about that. climate change, every survey and in many yearsen says there was a clear majority and increasing majority of the electorate generally want government to lead action on climate change. it is a significant shift from

coal to renewables. the government ignores those sort of electoral messages. not surprising with that reaction. dr. houston, looking at implications for policy and audiences here, does it mean gridlock until the next election? john: probably because the government start to consolidate by denying any messages in this campaign. they are trying to pin it on the fact it was a vote of reaction, negative reaction to the fact malcolm turnbull was removed as prime minister. they are not going to look at the policy challenges. you don't get much improvement on this. they are not prepared to look at their policyhat positions in so many years, climate and refugees but more broadly in terms of the cost of

living, housing, affordability, electricity and gas prices, they have failed to address these issues. they are building momentum to be thrown out of government whenever the election is held. it could be held at the end of next year with stable elections in between. i suspect they will batten down the hatches and lay politics even more -- play politics even more with soundbites and stunts. ramy: if this happens, whose election is this toulouse? lose?s to john: the government has done almost irreparable damage. it will be difficult to reverse between now and may. the electorate doesn't like the opposition either but they have had an easy run. they haven't had as much focus or attention. you couldn't say it is

definitely going to be lost, but the probabilities are weighted against the government and could do a complete reset. meetare resisting to alyssa concerns. you will pay a big price in the australian system. anecdotally i have never seen local voters been so strategically engaged how they will vote on preferences. be verynbull said progressive, learn to vote strategically. is this a swing away from major parties? john: it is. last election, one in three people didn't vote for either one of the major parties. it is a dissatisfaction, disenchantment with political parties and traditional

politics. politics has become short-term and opportunistic and populous and not what matters to people in daily lives. there is a drift away from both parties, and it will continue. so much for you your time. dr. john houston, former liberal party leader, joining us out of new south wales. this is bloomberg. ♪

stroud-wattsaidi in sydney. ramy: i'm ramy inocencioramy:. let's do a quick check of business flash headlines. bombard ea is suing former employees and a unit of the to be she. .- mitsubishi they handed over secrets to help mitsubishi's jet project.

they say the leaked info is related to aircraft certification in canada and the u.s. mitsubishi has been struggling to win for certification. -- full certification. haidi: high-speed trains between london and rails -- wales. this could raise close to $800 million u.s. the trains run on the great western line and ensure access -- the john lang group. ramy: coronado resources raised half $1 billion in australia's against coal ipo. startg is scheduled to october 23. coronado is the biggest producer of u.s. metallurgical coal and decided to list in australia after a string of bankruptcies in u.s. haidi: that is it for daybreak australia. treating in new zealand would

usually be underway, but it is labor day. the kiwi looking flat as we get into the start of trading, asian futures looking very mixed. this is bloomberg. ♪ ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast.

heidi: australian markets have just open for trade yourra -- trade. y: welcome to daybreak asia. ♪ haidi: asia pacific stocks are set for a muted mixed start for the week. the focus on china after friday's rally. the fed rate pace will be tested.