haidi: australian markets have just opened for trading. shery: -- sophie: welcome to "daybreak: asia." haidi: our top stories this friday. extending that rebound from a rough october thanks to earnings optimism and hopes of using trade tension. a fourth day of gains. apple's underwhelming forecast may cast an overwhelming shadow.

things are moving ahead nicely. one factor that helped sentiment in the u.s. let's get through. one percent.ained let higher by industrials. those chipmakers higher. the nasdaq gained one .8%, gaining ground for a third session. treasury yields as well, slipping with a more positive move here in the u.s. this would translate to what happened in asia. sophie: we could see a cautious attempt to eat out a fourth --eke out a fourth day of gains. on the earnings front, you have

apple. futures nudging lower. in korea, the earnings season is wrapping up. earnings in japan. theirill not follow rivals price cuts. posted a surprise gain in auto sales, but we did see honda missing. is as consumer confidence hit a wall, falling to a three-year low. outhe agenda, sales are due 8:30 hong kong time. get government tabling. this as it faces a possible credit rating downgrade with its wider fiscal deficit targets. barometer ofus the

how trading consumers are faring. and to a busy week end to a busy week. jenna: a long and very good conversation with his chinese counterpart. he added that discussions are moving along nicely ahead of the planned meeting at the end of the month. the media says resident she -- president xi is open. despite that, the u.s. is keeping up pressure. charging a state owned company of conspiring to steal secrets from a chipmaker. they were indicted in california. u.s. says it is stepping up

measures to respond to alleged chinese theft. a scandal has landed one of the first blows. pleading guilty to u.s. bribery and money laundering charges. his former deputy has been arrested in malaysia. another has been put on leave. the alleged mastermind of the investment scheme was charged. indonesian investigators have been searching the reporter -- recorder in hopes of finding what caused the plane to come down after take off on monday. it plunged into the java see after the pilot asked to return. 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 jenna dagenhart. this is bloomberg. haidi: apple is taking a beating in late trading after posting an underwhelming forecast for the holiday period. the company will stop providing unit sales numbers. -- discussedgust the decision. >> we will no longer be providing unit sales data. as we have stated many times, our objective is to make great products and services that enrich people's lives and provide a good customer experience so that they are loyal and engaged. haidi: let's talk about this with mark. let's start off with the numbers in terms of that iphone unit number barely budging from last

year. last year, we did not get new iphones and this year, we did. >> that is why it is a disappointing number. year, the iphone x had not come out yet. it was coming out two days from now. x wentt that the iphone on sale for a week and a half, almost two weeks and the numbers are flat. it is concerning. revenue numbers are up 29%. you can see exactly why they will stop reporting unit sales. haidi: some investors will say that you need more trip to the -- more transparency. was there anything else concerning? tim cook spoke in an interview about emerging markets.

that will be a key concern. >> absolutely. that takes us to the other factor. they are guiding between 89 and $93 billion. that $89w end point, billion is below the mid-level point of $92.7 billion that analysts were expecting. why the stock is down after hours and why people are not that sold on these numbers. shery: thank you so much. joining us now is daniel, managing director. great to have you with us. how wise is it for apple to stop reporting unit numbers for iphones, ipads and macs. >> it definitely came out of left field. as they are going through this massive product cycle, it is a surprise in terms of investors. transparency is key.

it is a tale of two cities. ultimately, unit sales would like this quarter. it will be a pretty controversial issue as investors digest this. focus lesse wants to on the iphones and more on the overall business. however he doing on everything else that is not devices? >> they continue to be a robust technology player. 50 billion in 2020. for investors, it is all about the iphone growth on this cycle, as well as china growth. what that looks like going into next year. the trillion dollar mark cap. more of a position of strength for a breakout perspective. it will be tough for investors to swallow.

haidi: you were talking earlier that tims interview cook gave about volatility and some of the uncertainty in meeting demand. inalso spoke about weakness certain emerging markets. that has been a big question mark over how apple has been doing in a highly competitive market in china. would that be of bigger concern going forward? >> china is the linchpin for apple in the coming year. we think about 60 million to 70 million iphones in china over the next 18 months. big is key in terms of how china plays a role here. it will continue to be underwhelming. for investors, it is china, china, china. haidi: the other thing we are looking at is the performance in the share price. that 4% decline in trading.

the stock is up 31% this year. does this guidance change your view on it? >> we saw over the last week. the last the you needed was to fan the flames of the negative. you look at guidance and the quarter, stocks down 2% to 4%. not breakingsue is out the units. that throws another variable into it. that is something the investor look at. you can't just dismiss what they did here. understanding conspiracy theories and why they did not break that out. that will be a big thing for investors tomorrow. we know that their

guidance was lower than expectations. what does this mean for all of those asian suppliers out there? >> definitely not good for that whole food chain. i think you have to look at the actual quarter. the big focus is attendees. it is conservatism. you will see a ripple effect across the come whole food chain from this report. they: when will we see backed off trade tensions or tariffs. -- tariffs? right now, i think the big focus is something we have not seen.

for investors, that will be right and center. shery: still ahead, threatening to dent the lady -- the latest earnings results. haidi: we will take a look at the november ballots. this is bloomberg. ♪

haidi: this is "daybreak: asia." the u.s.ck into market. a risk for appetite and stock -- in stocks. we saw the dollar slide and oil tumbled. su keenan joins us with the latest. su: it looks like investors are welcome to any reason to go

positive. willuestion is, how much apple results weigh on the open? chip stocks are way up. homebuilders are badly beaten. let's go into some of the big movers. earnings were the key. just killing it there. -- semi conductor just killing it there. the mixed after earnings. you know the apple story. the question is, how does apple impact trading? that will be a key question. you can find our charts in the library. the issue here is that value and growth has been the story. we did see a big value close.

it confirms that story. had new york trade falling to a low. concerns around sanctions and the effectiveness there. su: you have traders getting the most bearish in almost a year. a lot of it has to do with the fact that because we are seeing -- supplies rise, it is taking off concerned that sanctions would reduce. look at some of the headlines that have come out. to theing production highest level since 2016. russia was said to raise output. being offset by u.s. supplies. gold had the biggest spike in three weeks.

such as jpmorgan warning that this could be limited. it seems to be that old bulls are in the driver's seat. haidi: thank you so much. talking aboutp the u.s. border despite the caravan being a thousand miles from the border. reporter in our washington. greg, what did president trump threaten? >> he was speaking at an event at the white house and made a number of comments about the migrants taking their way to the u.s. when he urged the migrants not to approach the border. he said anybody crossing the border would be held at the tents in massive city of that the government was

building. he also indicated that migrants could experience gunfire if they turned violent. that if they threw rocks at the u.s. military at the border, he told the military, they could -- consider it rifle fire. morning the migrants to turn back. they are still hundreds of miles away. toing to change asylum rules make it more difficult for them to do so. this in a wide-ranging press conference about immigration. haidi: it is playing out as a key theme. >> it will likely do so again in a series of rallies coming up. sought totrump has focus attention among republican immigrationsuch as

and the migrant caravan in particular. president trump supporters largely put him in the white house over his valves of immigration. here he is trying to turn attention back to the migrant caravan. he made those comments saying he the rules of immigrant birth citizenship. with: what is happening the replacement of nikki haley at the u.n.? >> president trump did comment on that. he was asked whether his replacement for nikki haley -- we remember she said she would be stepping down at the end of the year. theaid he is considering state department spokeswoman. the top spokeswoman at the

department. she joined rex tillerson but continued on when he was replaced. she is a former fox news anchor and while she never broke into tillerson's inner circle, she gained the trust of mike pompeo. she would be an unorthodox choice. there are others that president trump has been entered. she is considered the front runner. he said he would probably make a decision sometime next week. coming up, a confession under arrest. the u.s. investigation of the scandal. the latest, just ahead. this is bloomberg. ♪

haidi: this is "daybreak: asia." shery: let's get a check of the latest business flash headlines. a mass protest against how the company has handled claimed sexual misconduct by some top executives. starting in asia and running through europe and the u.s. by mass action was sparked google paying millions of dollars to an executive in secret in severance packages. haidi: some shareholders say a deal requires the company to replace elon musk with the new chairman and add two independent directors. in with security fraud has added urgency to changes that investors say are long overdue. fourth-quarter revenue

forecast fell short of projections. the company expects to make 1.5 to $1.7 million come at the bottom of analyst expectations. investors are looking for a podcasts,cluding to reduce its reliance on music. snagging at least three senior bankers. an indictment filed in the last hours marks the first charges to the alleged pillaging of the funds. this is high drama and it continues. what are the details of this indictment? this will be an interesting case as it plays out. they are cooperating with this investigation.

case of abe the couple bad apples that got around the very strict compliance on such malfeasance? justice hasnt of implicated three senior bankers in relation to this one. criminal charges have been filed against two of them. others the next as this widens? one of the senior executives in asia, a former cochair of investment banking, headquartered in this building here. he has been placed on leave i goldman sachs, pending the heiew of these allegations has not been charged with wrongdoing.

stripped him of his denim -- management duties. he has pleaded guilty in a plea deal with the department of justice. he has confessed. confessed to paying bribes. he has admitted in his plea to bribing officials in malaysia and the united arab emirates and .bu dhabi to get on deals he is also admitting to profiting or having money transferred up to 200 million comedollars into account his own account or accounts tied

to him and his family. shery: prosecutors say there are a number of employees who were aware of this bribery team. what could be the defense of goldman sachs? >> that will be the key. goldman will have differences. they can point to their strict compliance. there were compliance measures in place, aimed at vetting the people this deals with and preventing malfeasance. orumber of employees knew took part in efforts to thwart those controls. goldman sachs may pursue the bad apple approach, the rogue agent in implicating him as the ringleader. andrea, who is the wildcard right now. coming up next, moving

along nicely. the latest. more on the phone call with xi jinping, straight ahead. this is bloomberg. ♪

haidi: here in sydney, markets have been trading for about 30 minutes. we are seeing a buoyant mood. rally that we have seen in just two years. sydney stocks seeing a little bit of a downside. happy friday. new york.in markets closed higher. the future down. the best three-day gains in two years. we have disappointing numbers out of apple missing on the

iphone sales. haidi: you are watching "daybreak: asia." let's get to first word news with jenna dagenhart. jenna: the sterling continues to strengthen. eu officials with reports that a deal has been reached after brexit. ready to conclude talks and has dismissed claims about access to the market after the split. saying the times report was unsubstantiated. jamie dimon warns that the strain may trigger a crisis in the european union. he is not making a firm prediction, but several recent problems have not been handled well, and issues in italy are one of them. -- new manufacturing.

with a six-month low with orders in hiring crippling as tensions with china escalate. to 57.7 lastpped month. measure of new orders also fell sharply after a two-month decline. the u.s. and opec are raising supplies and renewed sanctions against iran will not cut exports to zero. climbing to the highest in two years. the supply offset a loss. a bloomberg survey says the cartel boosted by 430,000 million. day to 43.3 the highest since november 2016. saudi arabia has revised its

overall of government in the -- overhaul ofng government in the economy. the skill that program was posted online and does not affect major energy reform. the original plan was overly optimistic. weakened byas been the killing of that u.s. journalist. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jenna dagenhart. this is bloomberg. shery: markets rally in the u.s.. s&p 500 futures are looking down at the moment. we had disappointing numbers out of apple. let's see how this will be felt in asian markets. ie markets are open now. four-game -- a four-day gain.

energy producers are heading lower. headed for a bear market. all the banks are also dragging. ie banks are also dragging. forecasting a boom. jumping over 7%. gaining ground. valuing myob -- most in three months on weaker earnings from the building product, aluminum and property units. let's get a check on currency markets, checking in on the aussie dollar. acorn 30 a.m. hong kong time. --sumer confidence slipped

8:30 a.m. hong kong time. consumer confidence slipped the most in three years. sophie kamaruddin in hong kong for us. discussions are moving along quite nicely ahead of the planned meeting at the g20. is setmp administration to enforce tariffs if the talks fail. enda, it has felt like managing expectations. is this a real breakthrough that might be a circuit breaker? a: a positive comment from president trump. he remarked somewhat positively earlier this week as well. from the outside, it seems like

oris warming up some kind laying the groundwork for some kind of agreement. this was a scheduled call. we had some reality check remarks from mr. kudlow. be aid there would have to deal going on around intellectual property protection. we also know that this goes well good deficit. i do not think anybody realistically thinks that a deal that the u.s. has could be fully developed or thought through in time for the g20 later this month. what i would say is it is positive mood music. it could indicate that talks are moving to a better place a have been, but most people would say it remains some way from a deal on a broader trade that the u.s.

has. shery: you also have the doj indicting all. the chinese state owned companies in terms of intellectual property theft. even if you have the top leaders trying to show a friendly face, what happens when everywhere else around the u.s., you have more tightening or more tensions against china? clearly, on the left side of things, the political debate has shifted. skepticismcreased towards china and u.s. relations with china. it seems to cross the party aisles, which could be in important watermark moment. if they were to agree on the trade story or at towards negotiations,

that would mean china is coming to the table in good faith. the u.s. would have to accept that. as i said, i would caution -- a say this willrs not easily be resolved. they are not going to give that up easily. thank you so much. the pound enjoyed its biggest rally since 2017. the bank of england hinted at rate hikes ahead. policy editor kathleen hays is here with more. expectations for tightening have been pushed out to 2020. now they are thinking 2019 could be possible. why? kathleen: they took that pretty

seriously. the pound having it best rally since april 2017. it really hit the market. the bank of england saying it sees faster wage growth and the mustek cost rising. , even though they left their rate unchanged, they surprised people a little and added fuel when he said a hard brexit could cause inflation to jump. u.k. companies are now understandably postponing investment until they have greater clarity over future trading relationships with the eu. their hedging their bets against downside. kathleen: movement in the pound

has been so important to inflation rate. it shows a where inflation is above the target pretty firmly. it has had some progress made. seeing inflation staying above target for the next few years. thoughwards hiking, even depending on brexit, we could move in either direction. right now, betting on a smooth brexit and this idea out there that a rate hike to come sooner than expected. shery: what does the fed want to see? what do they want to see? more of the same? what they are hoping to see is wages rising. right now, kind ofright now, kio

wages. you expect to see wages rising. charts thatof our shows you where wages have been. getting close to that 3% threshold. validating what the fed has been waiting for. see inflation rise. that is what they are hoping to see. ofwing clear signs weakening. it looks like the trade war is happening -- is having an impact. haidi: renting it out -- let me start again. it has been a tough week. this battle over policy

independence. is there any kind of breakthrough? kathleen: don't you love it when you see a central banks the opera unfolding before your eyes? very well respected. a quiet guy finds himself in battle over adding liquidity. byhas been criticized bloomberg intelligence. a push for the government to shore up and changing their ways. jumping into the fray, a member of the party was one of the people responsible for getting him to leave. he shouldng that remain in the post. he said it would be a great .onsequence he essentially blamed the central bank for bad loan.

he should be persuaded to stay. we will see how this plays out. support is building. though they want to go back and forth, they have to make sure that he stands. haidi: coming up, we will look at alibaba earnings. we will take a look at what to expect from the e-commerce numbers just ahead. this is bloomberg. ♪

shery: this is "daybreak: asia." alibaba reports second-quarter earnings after markets closed in new york on ride a. concerns about the effect of trade tensions could weigh on that result.

he thinks the stock is oversold. that is a pretty brave approach. you have seen how badly beaten the tech sector has been. we do not have any indication that it is improving. i think this sentiment has kened alibaba. let's keep in mind that most of the revenue comes from domestic consumption. it is not necessarily a cross border change. if china does decide to retaliate strongly, that would weakening ofmption

the consumer confidence and thereby lower generation for alibaba as well. haidi: i guess my question is why are you more consciously opt in his stake? -- cautiously optimistic? become awill consumption story. alibaba is one of the best platforms to take advantage of that. , it is alld out about domestic consumption, which will be less affected by ta global trade and global riff war as well. though we have trade tensions, look at alibaba delivery. we expect them to deliver it to 5% of revenue growth, which is very strong.

last quarter, they delivered 61%. growth,e outstanding nonetheless. we are seeing some analysts becoming scared by the potential in china. we have seen their retail growth sales slowing. a consumption downgrade sentiment. if you are betting on alibaba, are you betting on chinese consumption? that, yes. you do have to bet on chinese consumption. lookther part is, if you at the valuation of alibaba -- if he told me alibaba trading at 200 at this point. what is the downside? the stock scheme of 30% on the -- from the peak earlier this year.

it reflected price in the stock. we know there is pressure, not just on top. there are pressures on margins as well. also in ai, video. these are all the ecosystem parts that are needed to drive on longer, sustainable growth. how much -- ideas --w much of your , made in china 2025 is an important part. alibaba -- at platform is so much

more robust already. they are taking the platform transaction,tional but also they are going into aia. ai.oing into using all his other parts to grab all of the consumption. if you look at online consumption, it is still only close to 20% of the total consumption. there is a lot more room for online consumption to grab market share away from traditional retail spending. they are pushing into everything from finance, logistics come cloud computing, entertainment. spending. how much margin pressure are you expecting to see? businesses that alibaba is investing in will not generate

profit. it does not generate profit right now. the only one generating profit is the china retail platform. those newxpect segments to generate profit. isause the core of commerce still highly profitable, generating over 60% margins, that will sustain profitability of alibaba. financial -- international expansion. is that still a proposition? >> alibaba has made a careful, asia first.nsion in depending on which part of the business -- right now, alibaba is focused on making sure logistics are in place, as well as payments.

ofse are two key components e-commerce. alibaba is trying to expand in terms of their cloud business. i think alibaba will be a strong player in that. expansions global regions as well. thank you for joining us. you can get a roundup of the stories you need to know to get your friday going in this edition of daybreak. it is available on your torment metal and on your mobile. -- on your terminal and on your mobile. to --through those disappointing apple numbers. you can get the news on the industries and assets that you care about. this is bloomberg. ♪

shery: this is "daybreak: asia." is towing aalia fine line. two of the largest trading partners square off on trade. ministerith prime about his relationship with the u.s. and china. >> relationship with the countries are different. he's the speak about the relationship with the values that i spoke of. that is true. our relationship with china is different. it is strategic and important. the prosperity and stability of our region are things that we hold very much in a consensus. what will be -- haidi: what will be your

priority in the coming months? to assure and provide a to assure and provide a confidence that australia and china can get on with business as usual. that the way we run our show is that we have rules. we welcome investment. there is no country in this part of the world that has a more liberal and open investment environment in australia. you cannot invest as an australian and the rest of our region, like the rest of our region can invest in australia. we do not not just because we are charming and welcoming, but because it is in our interest. nation an open trading -- we have been in open trading nation for years. that has always been our way. we want that to continue.

managing that relationship, we need to be clear about where the lines are, where the rules are and how we make decisions. haidi: there is not a great deal of consensus when it comes to finding a regional arm to deal with china. sporadic.have been why do you think it is so difficult to get a regional, collective sense of how to approach this to mark -- how to approach this? >> it is complicated. you have nations coming out this with different interests and stakes. what you will end up getting is the amalgam of all their results. i think that is excellent. these are important and we participate in them, but they andnot a pass to engage

work out your own answers as individual nations. haidi: lots more coming up on "daybreak: asia." this is bloomberg. ♪

the market just opened for trade. ahn.y: i'm shery sophie: i'm sophie kamaruddin. welcome to daybreak asia. ♪ features suggesting a lackluster day when it comes to asia-pacific, apple's underwhelming forecast may cast a long shadow. president trump says things are moving along nicely. >> the illustration is keeping

up the pressure on chinese companies accused of stealing chip secrets from macron. >> we saw wall street rally for a third session, the biggest gain since 2016. right now, u.s. futures down a little bit. we'll see how this translates into asia markets. sophie: gains coming through for tokyo and seoul, some of the losses up .4% and the kospi jumping 1.4% this morning. the governor noting recent governor moves are different from that past with volatility this time around. we have a slew of earnings to consider clean investors with disappointing results from korea inc. to chew on. in sydney, they did rise often forecast but shares could snap a four-day game with oil players and aussie dollar holding onto overnight gains ahead of ppi

data due at the bottom of the hour. as we count down to the jobs report, the yen edging higher. u.s. futures slipping, apple disappointing sales outlook adding to the drag. we keep an eye on apple suppliers. that stocks leading over 4%. toyota in focus after surprise gain in auto sales and hyundai motors losing ground after they cut the ratings outlook to negative. haidi: sophie kamaruddin in hong kong. let's get more on what we should be watching, bloomberg's mliv here,eader mark reynolds obviously watching apple supplies and that disappointment in the after-hours trading action. but the trade story, has it improved significantly? ll, i'd say it's improved and let's face it, said earnings driving stocks down, that's last month.

we want to leave that behind. certainly in asia where markets have been so beaten down, let alone corrections or bear markets. on koreanks. 30% down and taiwan had horrible months. a lot of really bad news got priced in. when you get ahead of good news with your trump in g apparently getting along, that can do a lot to empathize the positive. there are positives out there, there are stocks that are going to look cheap on a long-term basis. i was chatting with an investor who was worried about what was happening in china when there is a global recession. in the short-term, china looks very attractive and so do some other emerging markets. sherry; how do energy stocks look, because we are seeing oil decline all week and we're hearing from opec that their crude production has climbed to

the highest level since 2016, despite the fact we thought we were going to get a bit of pressure because of sanctions on iran. markets aree oil another market that probably went too far in one direction, in this case to the upside. there's always, with a market like oil, where supply gets together to work out how much they come about and try to guide prices, be sure on the using the correct term here. once prices get high enough, there becomes an incentive to pump more crude. we've seen that a lot in the last decade or so with opec trying to control where things are going. then it gets too attractive or unattractive and you get a shift. that's part of what has gone on here. the saudi's said they would pump more and some people weren't so

certain it would happen. we're at a key point for oil where it's come done quite a bit. it's still up a lot over the last year. if it stabilizes, the energy sector and oil services sector will be happy, and would have to go down another five dollars or $10 a barrel before you start to get some pain and people fretting about shell burning in the u.s. haidi: thank you so much, garfield runnels. now, it was this tweet that sent you one and risk assets rounding in the yuan sessions, president trump saying he had a productive conversation with president xi ahead of their planned meeting this month. the u.s. isn't letting up on a key issue, laying espionage conspiringforms for to steal trade secrets from macron. >> they've returned an

indictment alleging economic espionage on the part of a chinese, state owned government owned company. a taiwan company and three taiwan individuals for an alleged scheme to steal trade secrets from macron. shery: let's bring in jodi schneider. we're seeing a friendlier stance from president trump himself, but when it comes to the rest of his administration, they are still going after china's ip theft. e're seeing a back-and-forth with china on trade, president trump saying he had that good conversation. we don't have a lot of details but he did say we had details and the stoxx had connection to chinese companies soaring. there's that on the one hand. that's in advance of this; station they are expected to have at the g20 next month. at the same time, we're seeing

the justice department move forward on this case, basically charging chinese companies conspiring to steal secrets from technology company and larger than that, starting a new initiative at the justice department. we saw jeff sessions saying basically the initiative would be to go after these chinese companies that the u.s. views as potentially stealing trade secrets from u.s. companies, so a little bit of give-and-take on the trade front. we'll have to see that makes the sideline conversation at the g20 that much more important. shery: exactly, at least to know that the leadership is speaking, that could signal we could see a breakthrough at the g20. jodi: potentially, although the trump administration had been lowering expectations for that

meeting. and at the same time, we had president trump telling bloomberg that they could, there could be another round of tariffs that threaten tariffs on all chinese products could go into effect if the conversations don't go well. there's a threat out there, as well. haidi: this has reset expectations. does it tell us the circuit breaker is still possible? yeah, potentially and anything is possible. this is part of the donald trump say we aretalk talk, making progress and then try to make progress. at this point, it will be after the midterm elections, so a political element will be taken out of it. it's certainly possible ground could be made, that they could make up ground on these talks, but we'll really have to see.

as expectations are being raised a little bit. we're still seeing a threat out there on the tariffs on all the chinese products that were made clear by the trump administration. shery: yeah, we'll get through midterms first. jodi, thanks so much. whiskey the first word news with jenna dagenhart. jenna: sterling continued to strengthen despite officials laying down reports a deal had been reached for financial services after brexit. michel barnier tweeted brussels is ready to have those talks and they claim they would have access to the single market after the split. u.k. officials played down the issue, saying the times report was unsubstantiated. the one scandal has landed direct blows on goldman sachs. former senior banker has pleaded guilty to u.s. bribery and money laundering charges and his former deputy has been arrested in malaysia. another senior banker in asia

has been put on leave and missing malaysian financier is the alleged mastermind of the embezzlement scheme. indonesian investigators have begun searching the first data recorder from that crash line air jet in the hopes of finding out what caused the plane to come down soon after takeoff on monday. max plunged after the pilot asked for permission to return to jakarta. the plane suffered problems previously, but had been checked and cleared to fly. saudi arabia has quietly revised its overhaul of the economy, lowering some targets as the crown prince's ambitions meet reality. the program was posted unannounced online and doesn't affect major reforms. but the original plan was overly optimistic.

the prince has been weakened by the killing of jamal khashoggi. global news, 24 hours a day on air and at tic-toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. i'm jenna dagenhart. this is bloomberg. shery? shery: thank you. still ahead, a confession, and a fugitive. the investigation of the scandal lends its first lows at goldman sachs. details later this hour. but first, our next guest delivers a 20% gain over the next year. alex trees joins us with his views just ahead. this is bloomberg. ♪

sheryhaidi: this is daybreak as. i'm haidi stroud. shery: i'm shery on.

history suggest buying now to deliver a 20% gain in 12 months time. joining us from hong kong is asset strategist at jpmorgan. what sectors and regions do you like? guest: you've hit the nail on the head that asia looks cheap, with the price 1.5 times over the next history tells us we can get 20% plus returns. some of the areas we like include financials and growth markets such as certain private sector banks in india. in china.od -- the other area which is very interesting would be consumer names catering to the domestic trend. -- [no audio]

-- i can't tell you when the deficits will reassert themselves, but the dollar will weaken and that's a positive thing for asian equities. >> are you looking for sectors or geographies or particular stocks that would be shielded by potential worsening of the trade war? guest: well, we look at everything from a bottom-up basis. a key part of our portfolio is for the longer-term structural trends in the region. as mentioned, part of that is around a growing middle class and increasing demand of

consumers here in the region, stronger brands, and these are stocks which aren't typically affected in the first instance by the trade war. let's take chinese health care as an example. chinese needs to build up its to mystic health care industry. these are companies or businesses that cater to that domestic business markets in china. shery: this doesn't mean you're calling bottom, right? the longer-term fundamentals -- some of these more consumer stories around the region very much intact. in the short-term, you could see more declines before things get better. guest: i can't tell you what will happen in the next month, that's not what we try to do. what is significant is that we are living through the asian century, an exciting thing. longer-term picture looks great. if you have the right valuations and the right franchises and the

right companies, you can let the short-term look after itself and focus on the long-term. haidi: let's talk about china because we are seeing the chinese you wan weakening a lot, the most in a decade or so. this gtv on the bloomberg library is showing economic or china's economic policy uncertainty index now gaining as the line in white. you see the you wan weakness. just wondering if the authorities are going to halt this around china with the various policy measures they're implementing right now or is hitting that level inevitable at this point? guest: well, let's remember the you one isn't the only weak asian currency against the u.s. dollar. this is partly a story of u.s. dollar strength rather than asian currency weakness. with of the aggravation around trade and various tensions, of

course it's causing -- within china. with the authorities will be focused with what they are doing. they will be using targeted fiscal measures, targeting real estate and steel and materials to try to improve profitability's and forced money towards the winning sectors. this is going to take work and it will cause uncertainty, but they will find their way through this. shery: a lot of people look at the opening up of china's asian market, looking at opportunities there. i wonder if the trade tensions continue, could china be forced to tighten controls over the markets? and is this a risk? guest: i think this is a wonderful point. one of the more exciting stories is the opening up of the asian market. the liquid stock market, which contains many companies that aren't available to investors in the offshore chinese markets. and we think also that the

authorities want to use sophisticated foreign investors as a way to carry on pushing reform in the domestic market driven by retail. they want a bigger presence overtime. there may be speed comes along the way, but the longer-term trajectory is clear. this is why we govern so many resources to the area -- and diverse so many resources to the area. shery: does this surprise you the way retail in china has reacted? usually they behave counterintuitively to what global markets and regional markets are doing. guest: i don't think i've been surprised. a bear market in the u.s. and bear market in china are two different things and the asian market has been characterized volatility and large swings in prices. that's ok. we can find the right prices. it's always a pleasure to invest in a company you want to invest in a better price. the volatility will even out and

we will be able to pick up good opportunities there. much, thank you so jpmorgan asset management and investment specialist. let's take you to live pictures of president trump speaking at a rally as he campaigns for his make american great again rally. he's been around yesterday. we saw him at fort myers, florida, trying to shore up support for his party, the gop. ae gop agenda is mainstream, mainstream agenda of the american people. he's also talking about having a great talk with president xi. we have seen him tweet about the conversation. he's now saying he talked about north korea. of course, we have been talking about president trump potentially having another meeting with kim jong-un soon, although we haven't seen any

details on that. the president trump speaking in columbia, missouri, also talking about china. haidi: sounds like a wide-ranging discussion he had with president xi. we've all been looking ahead to the start of summit season. president trump won't be attending, but they will be meeting at the g20 leaders meeting in bonus areas. president trump also saying in his conversation, he discovered china doesn't want to make a fair trade deal. president trump does want to make a deal but "we have to make the right deal, and he will be trying to do that when it comes to the right deal in china." that's what we have so far. president trump attending another make america great again rally. he's currently in columbia, missouri, speaking. lots more to come. this is bloomberg. ♪

shery: i'm shery ahn in new york. haidi: i'm haidi stroud in sydney. the whole world reacts as we watch asian supplies after the u.s. counterparts took a hit from apple's disappointing first-quarter forecasts. joining us from taipei is bloomberg's opinion columnists, 10 kaufman. -- 10 kaufman. who is looking the most wonderful at the moment? tim: well, basically everyone's horrible at the moment. the witness seems to be the iphone for the quarter that has just finished, it does look vulnerable. going to the next quarter, we're looking at that, too. one of the issues was that it's at the end of the outlook for apple in terms of revenue. they are giving shipment

forecasts, so there may be more shipments of units but less of the lower-priced ones. it's a function of two things, asp plus shipments. one thing i'll say is the supply chain doesn't get off as badly as it might look. because apple's gross margin outlook is weaker than expected, the flipside is that more of what is being spent does go back into the supply chain. on a relative basis, it's weakness at the growth process in the fiscal quarter. but for the supply chain, it's not quite as bad. people crunched the numbers find itsthey'll muted compared to what apple will be saying. shery: pretty controversial, the announcement they won't be reporting unit shipments anymore. most of the analysts have said given the time for apple, they

need more information and more transparency? tim: i'm also an advocate of more transparency. i totally agree with that view. i understand why apple doesn't want to provide the information. it's all about the revenue. we can either -- understand why they're staying that. why do they have to give one and not the other? there's no one stopping them from doing both, but they really don't want people to focus on shipments. that really turns around and says we're going to focus as much as possible on whatever it takes to get more revenue. if that means shipping fewer devices but at a higher price, and that's been the trend in the last couple of cycles, that's what they are going to do. they are going to focus on selling accessories, getting more out of services revenue.

they really don't want people to spend time looking at shipments because the writing is on the wall. shipping is not what it used to be as it was in the past. there will be periods where it will fall year on year and they don't want to see that. shery: accessories, is that where people will find solace? apple is telling you don't focus shipments on new devices, what else to focus on? tim: exactly. my thesis is, air pods, the watch, home pods will do better. it's a much smaller revenue area, but there may be that are margins for the device suppliers and the supply chain. it's not going to be as good as an iphone supplier but they may be better profitability if they get into it. haidi: tim, thank you. alibaba and tencent leading the charge to transform china's

retailers. that as chinese shoppers are among the world's most sophisticated. more details next. this is bloomberg. ♪

an hourin hong kong, from trade opening their. hong kong one of the gainers. we are seeing msci asia-pacific up .7% in the final session of the week after u.s. stocks, the s&p seeing its best three-day turnaround in about two years. some expectations that could be a circuit breaker after all when president xi and trump meet at g20, president trump sounding optimistic a deal, a fair deal, is what they are working on. shery: i'm shery on in new york and you are watching daybreak asia.

let's get first word news with jenna dagenhart. jenna: a rally in missouri that president trump wants to make the fair trade deal, but it has to be right for the u.s. he tweeted he had a good conversation with president xi and discussions are moving nicely ahead of the meeting at the g20. the u.s. is set to slap tariffs on all chinese imports if talks fail. president trump's assertion that talks are going nicely, the u.s. is keeping up the pressure. the justice department charged a state owned company of accusing to steal secrets from macron. along with taiwan's electronics were indicted in california. the u.s. said it's stepping up measures against chinese theft. manufacturing fell to a six-month low with orders

cooling as trade tensions with china escalate. the factory index dropped to 57.7 last month from 59.8 in september. the measure of new orders fell sharply, a two-month decline of almost 8%, steepest since january of 2015. jpmorgan boss jamie dimon warns italylitical streams in major a financial crisis in the european union. he is not making a firm prediction, but several recent global problems have not been handled well and the issues in italy are one of them. the new populist government is under fire from investors, the european union, and its own central-bank. raising --d opec are and they won't cut exports to zero. opec production climbed its highest in two years as saudi

and libyan output offset the loss of crude. the bloomberg survey said it boosted out what by 40,000 barrels a day to more than 33.3 million a day, the highest since november of 2016. global news, 24 hours a day on air and at tic-toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. dagenhart. this is bloomberg. haidi? haidi: thank you. let's go to sophie kamaruddin and hong kong with a look at early movers this friday. sophie: we have asia stocks gaining ground as the nikkei 225 and the kospi climbing over 1%. i want to highlight the equity movers. suzuki motor's sliding 7% after second-quarter sales group will see a slowdown. lg innotech getting knocked down after the holiday sales forecast. in tokyo, kddi rising after it

won't follow price cuts. they have agreed on payments and stocks getting upgraded at deutsche bank. and highlighting keyence pharma player sumitomo denny, surging the most in two years. shery: thank you for that. chinese shoppers among the world's most sophisticated. the explosion of smart retail, which integrates online and off-line shopping, is the next wave of the growth of e-commerce. bloomberg's chen meet joining us from hong kong. talk us through the innovations in china. guest: i think there's probably three points to highlight. firstly, there's been a lot of m&a activity occurring in the space over the last grocery and convenience stores, were smart retail is the new battlefield.

and all the big internet giants like tencent and alibaba have taken strategic stakes in all the large chinese grocery chains in the last 20-24 months. secondly, there's a lot of innovation in terms of format integration. alibaba launched a fresh format a couple years ago, and that's been growing significantly and the last couple years. there's a lot of things like unmanned convenience stores, robotics in restaurants, format innovations. the other thing to highlight is that there's a lot of new store openings. there's been aggressive plans to open new stores, particularly convenience stores, of the coming years. all this means chinese consumers will be increasingly sophisticated. it will get increasingly more demanding. and it's good for the consumer. shery: is it? is a good for every consumer?

i hear these stories and wonder if some people in china will be less behind -- left behind like the older generation. shen: well maybe, but generally speaking, the adoption rates are really rabid at the moment. and at the same time, i think although there is stories of the older generations falling behind, overall the consumer is actually winning from this. there's a lot of discounting, as well, so they're benefiting from low prices. haidi: is there opportunity for tech to be exported globally? shen: absolutely. all these internet giants generally have international plans. alibaba has invested and made acquisitions in southeast asia. putting that to one side, i think there's significant opportunity to tap into the

intellectual -- international markets through chinese tourists. chinese tourists are growing and as they get richer, they will trevor more. -- travel more. they are a large share of total retail sales. and as these consumers get more sophisticated, they're going to demand more better services, and it's more likely that the international retailers will actually adopt the chinese developed tools that service the consumer. in particular, the chinese tourists. sorry. [laughter] shery: sorry to cut you off. shen li, senior analyst joining us. just ahead, high-stakes budget from malaysia as a possible rating downgrade after less than six months in office. we get a preview next. this is bloomberg. ♪

haidi: this is daybreak asia. i'm haidi strout. shery: i'm shery ahn. unveils budget friday. markets are embracing for targets. sophie kamaruddin has more on this, nerves put to the test. sophie: there certainly has been an anxious buildup to today's reveal. the prime minister has spoken of this budget being our sacrifice and are under no plans to balance the books soon, the government forecasting a shortfall of 3% gdp in 2020. there remains a lingering an important question about how that will be narrowed. that's going to be crucial for investors as nervousness plays out in markets. you have credit default swaps climbing since the may election. stocks are down 7% and it's at a one year low. to pull up this chart on the

terminal to show how the ringgit has fared, we've also seen a selloff in vis as they head for the exit. that's the line in blue. should malaysia's health deteriorate further, they have warned of downgrades. when it comes to forecasts, last year malaysia was paying outperform or. we are seeing -- an outperform er. haidi: i want to bring into the conversation the chief economist john hannah joining us. great to have you with us. just picking up from what sophie was warning about, do you believe the ratings agencies are likely to downgrade malaysia? would such an action be justified? john: the second answer i think is no and the first answer i also,to downgrade no,

unless they take a dim view of the budget, which i doubt they will, it would be to change to an outlet not to downgrade. they have already been here to malaysia and looked at the conditions and affirmed is rating. one is already saying malaysia looks like the same rating it had prior to the changing government. sounds like you have positive or reasonable expectations what the budget deficit is going to look like. donald: well, we are he know thathing about the past, it's not as much of contraction as was planned before hand. and that we know from the review of the malaysia plan announced a couple weeks ago. the market's unlikely to get surprised by a higher deficit. there are other factors that have a lot to do with the way in which numbers were accounted for by the older ministration, which

essentially means some of the budget deficits, the overall year aboutwere each deficits too low, the not larger each year. in some sense, the numbers we'll see today will be a higher headline number than what the old guard was planning. in terms of the actual macro economic consequences or what it means for credit worthiness, that's far less consequential than the change in the number per se. shery: the malaysian government, there's a contention here that has taken populist measures, the scrapping of the gsp, for example. there's question of what can be done to narrow that fiscal deficit. what are you hoping to see from the government in the years to come? donald: well, i think there's a

couple of things that matter. first in the way of taxes, i think the most important -- [no audio] we seem to have lost our economist right there, don hanna of cmi be. we'll try to come back to the conversation if we can. coming up next, confession, arrest, and a fugitive. the one scandal lands its first lows at goldman sachs. the latest just ahead. this is bloomberg. ♪

haidi: i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. the scandal involving a wealth fund has snagged three senior bankers a goldman sachs and a fugitive malaysian financier. an indictment filed in the last hour marked the first charges in relation to the alleged pillaging of the fund. stephen engle has the latest. what is in this indictment? stephen: this has been the smoldering scandal. what was goldman sachs environment were allegedly involvement? now it's becoming more clear with indictments coming from the department of justice. the question going forward everyone on wall street will want to know, are these just a

few rogue agents, if you will, some bad apples among goldman sachs? or is this going to be widened out? is the testimony and plea bargain from tim leistner going to expose others? that's the big question right now. goldman is sticking to their same line they have throughout this investigation from the department of justice, that the firm continues to cooperate with all authorities investigating this matter. as far as what we know, three bankers have been implicated by the department of justice. criminal charges have been fired against two of them. will others be next? one of the most senior execs in asia, former cochair in hong kong, has been placed on leave pending review of allegations. he has not been charged with wrongdoing. ceo, solomon, fairly new stripped him of his management duties. pleading guilty in a plea deal with the department of justice

was the former chairman of southeast asia, tim leistner. you see him here with his family. he's confessed he conspired to launder money and confessed to paying bribes, both in malaysia and the united arab emirates. he could undercut goldman's take on what potentially happens. he has admitted to bribing officials, both in malaysia and in the uae to get bond deals tied to the 1mdb fiasco. pocketingadmitted to $200 million into his personal account and the account of his family. prosecutors claim leistner and other employees knew about the bribery scheme and either helped facilitate it or helped cover it up. >> i think he could refer to it as a fiasco just fine. what has been the response from goldman and look at the

essentially be a defense they use? they've come out with a statement that's been used all week long, but questions, what will be goldman's defense? they will have a defense as far as claims they have the compliance measures aimed at vetting the people given with people in place. also the complaints measures in place to prevent malfeasance. a number of the employees knew about or took part in efforts to thwart those controls. one question to goldman sachs may pursue the bad apple approach that leistner was a rogue executive, along with a couple others, including financier joe low. acetate and's or assertions he misled the bank could undercut his credibility. wall street and goldman sachs will be watching this closely. shery: thank you so much,

stephen engle in hong kong. let's go back to don hanna. great to have you back. thanks for sticking around. we're talking about malaysia's 2019 budget. how will the focus on fiscal consolidation affect growth in malaysia? again, that's a question of how much fiscal consolidation there is. and that's likely to be relatively small, only a few tenths perhaps, a 15% gdp at most. it's unlikely to be fiscal consolidation. it's much more likely to be the general path of global growth and the relation between china and the u.s. and trade in asia. shery: there have been talks about raising the minimum wage. can we expect to see that next year? if so, would be the economic impact of that? donald: i think the broader

issue malaysia is looking at is trying to have a more inclusive society and one in which income distribution is not quite as skewed. in that sense, a move towards higher minimum wage makes sense. and something we're likely to see later today is changes in the tax structure, which have higher taxes on wealth or the wealthy, with a more focused spending on poor malaysians. those things combined together, the consequences of that overall for growth may be slightly lower the more equitable and with greater social cohesion, which in the long-term is good for growth. shery: which taxes does the government have leeway to increase? donald: well, the government can pass tax increases that the parliament agrees to, but i think the focus that they are likely to move on is some issues

associated therewith social bad. taxes associated with sugar, associated with health care issues, or syntax is more generally. the other thing there is prospects for, if not later today but in the future, are taxes on carbon. malaysia taxes carbon when it comes out of the ground in the form of petroleum. what they are likely to do in the future is tax carbon when it goes into the air, iea carbon tax, that would allow for a more sustainable growth in malaysia and still create revenues from that important source, which still makes up, depends on the year, anywhere from 10-50% of government revenue -- 10-15% of government revenue. haidi: how are these impacting business sentiment in the country? donald: i think the announcement will be beneficial because of the moment, businesses have been waiting to see what the new

profile of policies will be with the announcements. they can make an assessment and move forward. regardless to some degree, given the reasonable statements coming from government, that the clarity that will come from the budget itself ought to allow for some pickup in investments that have been on hold, waiting for that greater clarity. shery: thank you for joining us, economist.hief haidi: let's get a check on the business flash headlines. the global trading unit continues to be a headache. businesses have been a drag throughout the ceo's tenure and posted unexpected loss in the third quarter. that forced the bank to abandon the unit $6 billion revenue targets this year. it adds to disappointment to miss revenue and income. >> it was too ambitious given

the market conditions. year confident that next we'll get into the high single digits, which is where we would like to go, it's really booming and doing very well. the hedge fund plunged in october, the worst month in its history. they have fallen 8.5% as global markets sold off. the route hurt the $3 trillion hedge fund industry, wiping out most of the gains for the year. its firstfered blackout. it was pulled from dish network failing to reach a new distribution agreement. it's the first time in its four decade history programming has been blocked as distribution partner over a contract dispute. they were a part of at&t time

warner acquisition, due to concerns about access program leverage. >> tesla investors are calling on the board to grow up. a deal with the sec that require the company to replace it on mosque with a new chairman -- replace elon musk with a new chairman. it has added urgency to the changes that the investors say are long overdue. >> global staff have walked out around the world in a protest against how the company handled claims of sexual misconduct by investigators. starting in asia and through your and the u.s., they posted photos with the #globalwalkout. google paid millions of dollars to some in secret packages. >> yvonne is giving us a

preview. happy friday. yvonne: seems like we've been focused on this. special phone call president xi and president trump getting on the line, talking about trade. president trump saying those have been going nicely. what does this mean, the head of the g20 meeting to leaders after the midterms? we speak to the vice chairman about what is to come. she says at the end of the day, cooler heads will prevail. both countries will work out a deal. it's going to happen one day. more on that coming up. haidi? haidi: looking forward to yvonne taking over on bloomberg markets asia. let's get a look at our markets, so far trading at the moment. we had the best three-day recovery rally for u.s. stocks in two years. a little more sanguine in asia, strong gains to the kospi and

.1%.i 225, australia off shery: of course, take a look at futures right now. we are seeing everything positive at the moment. pay attention to taiwan. we have apple missing on those iphone sales, so we could see suppliers reacting today. futures in singapore also higher. that's it from daybreak asia. our market coverage continues as we look ahead to the start of trade in hong kong, shanghai, and shenzhen. haidi: standby for bloomberg markets coming up next. this is bloomberg. ♪

kong.d: 9:00 a.m. in hong welcome to "bloomberg markets: china open." yvonne: renewed trade optimism. david: president trump lifting the mood, kong. saying things are moving ahead nicely with china. rishaad: washington under pressure. chinese companies accused of stealing chip secrets from macron. m