etwork?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. paul: good morning, i'm paul allen in sid fli where just lian markets have opened for trade. shery: good evening from bloomberg headquarters in new york, i'm shery ahn. kamaruddin m sophie "day hong kong, welcome to break asia." paul: our top stories this day with a bruising nikkei futures down almost 5%, concerns darkening the mood. may lost three brex "it"

divisions nservator are widening. yet to be confirmed, iran close down exports of gulf crude. shery: a quick check of the selloff across the u.s. the major indices falling more than 3% with trade ensitive stocks like caterpillar boeing falling the most on the dow. banks, 500 was lower by the financial stocks really taking a hit as we continue to yield curve flattening, 66 s&p 500 financial index, out of 67 stocks were all in the red. the u.s. futures holding steady right now. those are the only things you as we head to e the national day of mourning tomorrow here in the u.s. trading on the new new stock

york stock exchange. right now, futures holding steady, all of this, of course, will be affected by what happens in asia as well, sophie is there. sophie. coming online s falling .4 of 1% extending loss tuesday.t we saw on keeping an eye on copper miners in sydney as well as they may losses in the red metal as chinese concerns are back in focus as investors assess the spins coming from d.c. and beijing around the u.s. china trade truce. a selloff is expected to continue, head winds are piling brexit developments and unserment over opec output cuts. for pan, we are setting up a rough session indeed. japanese stocks having wiped out market value on tuesday after snapping a advance. risk appetite is crumbling, the more in star once currency markets after adding 11% overnight holding steady two rallying the most in weeks. it is a very busy day on the

calendar. australian gdp data in the third quarter in the wake f setting rates at its last policy meeting from 2018 in china. ore p.m.i. data which comes after the manufacturing survey pointed to more export pain ahead. thailand and the with a nes and malaysia slowdown in growth. paul, later today, we will get key rate to keep its at 6.5%. up, overall one looks at the asia markets, a very busy paul.day, paul: all right, sophie, thanks for that update. ow let's get to the first word news. here is jessica summers. jessica: president trump sent through the markets by admitting there is no official trade deal with china and even questioning whether one is possible. he described himself as tariff man and said that unless there progress in negotiations, he would be happy to maintain

imports.n chinese that raises in new questions about the extent of an agreement he president claimed he had struck at the g-20. china has yet to offer a former of a se to either claims deal or the possibility of more tariffs as president xi and out r officials are still of the country. sources in beijing say ministries are awaiting his they feel able to comment or take any action. in portugal today including a tour including g-20. panama and the the u.k.'s ruling conservative divisions after teresa may faced a string of on brexit.ry defeats they found the government in public for refusing to advice on the draft. to have it postponed defeated.ly was also the prime minister is fighting for her political life with her opposition on all sides. > i ask them to think -- i ask

them to think what it would say to the 52% who came out to vote, in many cases for the decades if their ignored. were what would it do to our politics? classified c.i.a. briefing convinced them the prisons of saudi arabia in the murder of jamal khasoggi. bob corker said if a jury were consider a case against the prince, it would convict of half-hour. riyadh must accept responsibility for the killing. >> whether he directed it or not, i think he did, he owns it because it was an agency that he that carried it out. so, you know, they have shown no ownership of this issue whatsoever. inappropriate. jessica: global news 24 hours a

powered by more than 2,700 journalists and analysts countries i'm 0 jessica summers, this is bloomberg. much, thanks very jessica, more on the sharp drop in u.s. stocks. he flattening of the yield curve and the rise and bearish sentiment, we are joined with su, walk usof this, through the reaction to the pile of bad news that hit the market lunchtime from brexit to renewed trade concerns. su: we go right before the opened, we saw a spike in futures, it was heavy selling throughout the day. it.'s go through you saw the dow drop more than close to peak and that at the close. the s&p was down more than 3%, erased all of monday's gains and then some. if you go into the bloomberg, moves back for the s&p, at the beginning of the year, january, february, we saw moves, well, guess

what, they are back as one between brexit, the hawkish comments and the ield curve acting like it got run over by a bus, it was a very bulls. for the shares rade sensitive are pretty much taking the brunt of this, but not much was mmune, was it, can you walk us through what got hit? su: if you go through some of charts, you'll see that the roller coaster ride between the let's go back , on the bloomberg real quick, our library of charlottes. the bulls tried to step up. look at the most recent sessions, it's just a losing game for the bulls. we go to the snapshot of the we saw the dollar slide just a bit, the bonds were the big story. up and down and all over the map and closed close to unchanged. and oil ing both gold lose ground after hours. if you look at the big sellers,

trade sensitive stocks from caterpillar down in and way down to boeing apple and all of its suppliers. ou look at the other big movers, some of the momentum stocks, u.p.s., by the way, a economy, thatr the was down big. advanced micro, one of the chips stock down big. thrown out with the bathwater. shery: thank you for that. discuss all of this with he is asset management c.e.o. to this our view led wave of risk diversion? scott: it's a continuation of a somewhat volatile market that began back in october. that this is a bear market beginning, i kind of believe that we might be probably closer to the end of

this move rather than the beginning of this move. don't have things out there, today we saw some fear in the market, but up until now, up until the last week or so, we really haven't seen the flight bid that we got for gold today. we haven't seen really treasury of ng until the last couple days and now we see that money flowing into the treasury market. i think that the yield curve has been on top of everybody's year as we've st watched it flatten out. he fact that three and five-year invested for two basis points, i don't think that is significant. i think history would show that eally it's the 10-year minus the two year which is significant. curve inversions are leading recessions.f they are not coincident indicators. you go back and look at every back to 1953, you have that time finding one began with a yield curve

inversion. come many, many months after. stick with the equity markets and see the discount that we have seen since october.ff in bloomberg,hart on the seeing 15 times handle since the october selloff. so just looking at valuations, would you say if you expect this to be sort of the end of the plunge that investors will go back in? so the answer is yes, i do believe that. first of all, we are at a time that tends toyear be a good time period for equity markets. not dly, once again, we're seeing the things that we normally would see in the start don't have any problems in the credit markets. we don't have problems with ompanies trying to fund themselves. we don't have a gap up in claims.yment we've had a slight drift-up the

last couple of weeks, but i'm 50,000 more unemployment claims on thursday. that would begin to bother us. any of e not seeing that. so i think what the market is for is it's readjusting maybe a lower growth rate than it had in the last year, we're to grow corporate earnings 26% a year indefinitely. paul: scott, a lot of what we saw today was the selling and going to be re closed in the u.s. on wednesday for the funeral of president bush. h.w. when it comes back thursday u.s. chances of a the rebound? scott: i'm not good at calling it day to day. knows what kind of news we'll have between now and then. suggest to you that a probably selling is encouraged by margin clerks as momentum market

participants that are simply followers, whether the trend is up or the trend is down. paul: yeah, you say, scott, at picking the day to day, that plays to what we're seeing in the v.i.x. v.i.x. is at an eight-week high. is that the new normal in this environment? in mind, ll, bearing we have been through two years volatility.ry low in fact, probably the lowest it's been in my 30 years of this. at the end of the day, the v.i.x. in the 20s is not would bother me. a v.i.x. in the 60's would other me, but actually these sharp spikes up in the v.i.x. really are indicating fear in you need a level f fear generally before a downward trend can exhaust itself. these we see all of moves and the divergence in the ary policy around world. does that mean that we are balance to get a bigger

in emerging markets where they capitol available? scott: emerging markets speaking are under levered. generally that's not the case. generally these markets have more leverage in them. that's why they tend to be a little bit more volatile. in this case, actually things are pretty good in markets. the growth is there, it's slowed a bit. it's certainly not turning down. looking at recessions. they have adequate access to capitol. dollars move has pretty much, probably pretty over from the standpoint f a rising dollar hurting emerging markets. the fed, i think, is closer to hikesdone with their rate than even they thought seeing what is going on in the market. i think you heard that with jay talking last week. i think they understand when they see curves lay down and

like s begin to gap down this, they understand that they probably need to be a little bit to patient as they try normize rates. shery: scott, stick around. next.ith scott we'll talk about what is driving flatter and ve whether he is worried about a recession. the latest on oil after saudi's minister cast more on output cuts, the swinging crude price just ahead. this is bloomberg. ♪ oomberg. ♪

shery: a picture across asia, new zealand and australia on the and futures japanese nikkei unchanged at the moment.

"day break asia." i'm shery ahn in new york. sidney.i'm paul allen in the treasuries rally has kicked into overdrive after a portion negative for the first time since 2007. is er maturity bonds rekindling concern that the u.s. could be headed toward recession. watchinghayes has been this. kathleen, what is driving these curves flatter and in some cases to inversion? kathleen: it has a lot to do sentiment and some slightly changing perceptions of the fed and how determined it is to least three times next year, but it's for sure, it's interesting, this is fed on itself, paul. yesterday on monday in the u.s., to five from three invested didn't cause too much of a stir, boy oh, boy today, t's one of the things that hit stocks and it kind of turned it around and then hit the whole treasury market. what you can see is something that is rather historic, right.

part of the this curve inverting very often. the last time here was in 2007. what was happening then? well, we were on the verge of heading into a recession. we were starting to see problems in many kind of package mortgage backed securities in banks in europe and spreading to the u.s., so that's why it's an interesting comparison. ifcourse, now, we say, well, the three to fives have invested, does that mean we're all to see this spreading the way along the curve. are we going to see the all important twos to 10s inverting. not there yet, shery, but with this big rally pushing down, it's gotten closer. shery: the u.s. president didn't seem worried about all of this. an interesting press conference from john williams, some opening remarks. t was a press conference to talk about the regional economy for the fed, the new york region broadly. part, ealthy for the most there is some disparities from one part of the area to another, versus new york city, et cetera, but he said

report rkets, they exceptionally tight. he came up with an upbeat view he was conomy and then asked by a reporter about the invested yield curve that we have seen and what did he think it. he didn't seem too worried. let's listen to what john said. to lose don't want track of the hard data which i think has been very strong and showing continued momentum well into the fourth quarter. important that's an kind of starting point. shery: the hard data, ecodata of course, e fact, that he thinks tax cuts, more government spending are going to fuel the economy in 2019. again, i think this concern is the twos to the 10s, trade concerns are hitting stocks. they're also fueling the bond rally, but something negative, boy, you got to buy bonds. at the chart.ook some history again, it isn't curve invested yield always signals recession, it doesn't always do it. but it frequently does. the variouswing you spreads, the most important one is the white line which you can

down to about what, 11 basis points that's not far to go to zero or negative. again, you're seeing the threes to 10s, at any rate, this is why are wondering. in fact, it's gotten so that ome traders are looking for rate hikes now in 2020 thinking we're going to be getting a recession. 'm kind of with john williams on this. it's a little too early to come to that conclusion. watch e fed, we got to the data. hayes, thank een scott.till with us, scott, you heard kathleen hayes nd you mentioned earlier that part of the curve that is invested right now, not as 10s, tant as the twos and we heard kathleen talk close to the zero level. my question would be, if the invert,rve does in fact what would that spell for risk assets? history doesn't always repeat, but oftentimes

look at the n we point that the yield curve inverts, it is correct that by a curve inversion has preceded every recession, but a urve inversion doesn't necessarily mean there will be a recession. sometimes we have curve inversions and there is no recession. generally speaking when a yield curve flattens down, that means will slow, when a curve steepens up, that means coincident in effect will be the economy generally is up.eding positive curves are healthy. flat curves, negative curves are really not healthy. will we invert? we probably will. habit of going one or two interest rate increases they understand, ops, we passed neutral, now we're slowing the economy faster than we should have and actually have to turn and cut rates. are we at that point, the answer is probably not. but are we at a point where risk

assets should begin to underperform, we're not there either. the point ls us from f the inversion on average, eight months of positive risk performance before we begin to slip off into slowing and recession. not, we're not even at inversion yet, so we're almost there. even if we're not there, just the fact that we're getting off bond yields to sell into stocks and also widening credit spreads, does this at that put a dent on narrative that fundamentals remain strong? would well, i think i agree with kathleen, what she no said is that we have reason to believe that growth in the united states will go to a egative which would be a recession if it were two quarters of negative gdp performance. we do believe is that the sugar how that we got off of

what that did for corporate earnings in 2018 itself inng to repeat 2019. so, therefore, we should expect of growth in the u.s. economy. we're just not seeing the signs rolling nomy that is over into recession yet. orporate spreads have widened, but remember that they had they ed to a point where were almost at a record level earlier this year. widening up back out to normal. ou can be out at that 300, 350 and you would still be -- widening out in the face of 800 or on would be like 1,000 basis points widening, seeing that.t credit markets begin to break down and not work when you're

to go in a y recession. we're not seeing that either. irms have access to funding at really reasonable level, reasonable pricing. sort ofcott, is there a psychological dimension for this as well? mentioning, too, these things tend to feed on themselves, this bull market is very, very old. there is a feeling we're past peak earnings and now yield inversion. there is a risk of a self-fulfilling prophesy in all of this? there can be, but generally, paul, stock prices ill follow earnings over the long term. now in the short term, if you're a mutual fund manager and you redemptions because the market dropped 800 points today, then you have no and you will sell sell what you can sell. you just don't have any choice. if you're somebody who is overlevered and they have some forced a margin call or liquidation, that's what happens in these types of markets.

t the end of the day, markets go up very slowly and go down fear is a muchse more powerful emotion than greed. always happens this way. you got to get to the paint sated and ellers are they will move out of the market and the long term investors will values that are level behind after the carnage. leave scott, we have to it there. that's advisors asset manager c.e.o. scott colyer. today's round-up in edition of day break. on mobile in the bloomberg anywhere app. you can customize your settings o you only get news on the industries and the assets that you care about. this is bloomberg. ♪ g. ♪

shery: markets trading in asia under pressure, falling 1.7%, in two weeks st while key we stocks are down for session. nikkei futures are pointing higher. this is bloomberg. ♪ i am a family man.

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paul: it is wednesday morning in sydney. benchmark the main taking a beating. we have 13 stocks in positive territory. all losing ground. shery: not surprising, even the selloff we have seen here in the u.s., the biggest since early october, the futures now pointing higher. we have also seen the nikkei futures turn positive, so we will see how markets trade across asia. i'm shery ahn. paul: and i'm a paul allen. you are watching "bloomberg daybreak: asia."

>> iran has threatened to close a strait if the u.s. shuts off oil exports. the president says no crude will leave if washington goes through with sanctions. almost a third of all oil passes through this strait. president trump said he is willing to negotiate, but iran make use -- rejected the offer of talks. the latest investigation into struggling investment funds is so many more witnesses, including the former president. the former government to secretary and auditor will also be questioned. publicirman of the accounts committee refused to roll out the possibility of the former prime minister being called in. and the french government bl inks first in the battle on fuel hikes and price of living. macron has long prided himself

on sticking to his guns, but he has now reversed course and is suspended a rise in fuel taxes for six months. the decision raises new questions about the president's list of reforms and plans for next year. >> we want, within the six-month timeframe, to implement fair measures on fuel. if we cannot agree, we will deal with the consequences. year space race has reached its target, with a nasa spacecraft arriving on an asteroid 120 million kilometers from earth. 20 kilometers is from the rock and will move closer by the end of the month. the spacecraft is the size of an suv. the asteroid is so remote it took about seven minutes for the message to reach mission control. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over

120 countries. summers.ca this is bloomberg. awaiting one third-quarter gdp numbers from australia, this after the reserve bank left the benchmark unchanged at 1.5%. take a look at what the markets are doing. a lot of pressure for aussie stocks. >> pressure coming through for aussie stocks. we do have tech and health care leading declines, along with communication companies here. we do have this set for the biggest drop since november of -- or mid-november. down by 1.5% here. but futures are going higher after the selloff of we saw on wall street. and looking at movers. linus: the most in four years, down over 22%, this as malaysia

sets preconditions for future waste storage licenses in the country. and nine entertainment sliding as well, the company confirmed it is in preliminary talks about the outstanding shares of media. and i want to highlight this stock under pressure, this is citigroup says the performance to just jobs are near a peak after sliding in december, the first year on year decline since 2014. citigroup noticing -- noting that the housing market is the reason for the decline. the aussie yield curve is flattening, as stock declines boost appetite. and a cautious outlook signaling concerns about the housing slump. markets putting in the central bank on hold until 2019. and barclays expect in the first rate hike to only come in the first quarter of 2019. paul: ok, thank you. ok, in the words of the band --

is tooor not to cut, it early to confirm whether opec will reduce output this week. that is despite increasing signs of an oversupplied market. >> the projections are that there will be one million barrels of oversupply. and that we will wait until we be moreienna and certain what that number is. and the next, i think, road to cross is whether all countries are willing to come on board and contribute to that cut. bloomberg's oil reporter is joining us now from houston. rachel, the saudis are being uncharacteristically vague. what can we expect to come out of the opec meeting? signl: i think that was a we do not know what to expect.

i think there has been a little bit of enthusiasm over the weekend, as we saw saudi arabia and russia agree to extend their agreement. but now it sounds like maybe that is not so much a sure thing. and we heard him say, let's wait and see, the one million barrels -- it is not so sure. paul: we have seen a tightening of the relationship between saudi and russia. you see vladimir putin and the crown prince there greeting each other like some old friends. what does that mean for the oil market more broadly? need toi think we remember that there are still, the two countries are trying to figure out who will bear the brunt of the cuts, nobody wants to be pulling the weight of the opec plus cuts. so i think it will kind of end up us paying attention to will win out -- who will win out in

those negotiations. shery: how is american crude going to play into the equation? we have heard that the piles rose more than 5 million barrels last week. are on i think all eyes how they will respond to the weaker crude prices toward the end of the year. that are already talks next year we'll have the spending cuts because of all the volatility in the market, so that will play out as we see these companies really look for guidance in the next year. shery: rachel, thank you so much. our oil reporter joining us from houston. let's discuss the outlook for base metals. copper retreated after the biggest gain in a month over u.s.'sism of china and truce it reignited. howt to have you with us --

much or how big will the challenges be for base metals, given that all of these trade tensions easing really do not seem to be going anywhere? the biggerthat picture is if i look at the metals of space, you had europe getting stronger, the u.s. getting stronger, but what you have right now is the u.s. is rolling over and china is having difficulties stimulating the economy. and for this space, it makes it very difficult. you see that across the various asset classes at the moment as well. i think that copper was probably the proxy trade for global trade wars. and you had it that rally after the summit. but reality is that there is a lot of uncertainty about how any traded deal that could play out. and the second point is you still have very subdued chinese data coming out.

that makes it more difficult for copper and to the base metals to rally on a sustained basis. shery: is china the sole driver in prices still? michael: it is one of the most important drivers. i would say that china is necessary to drive the prices. a sustained rally you can only get really if you have a synchronized global growth cycle, which is what you had in the past couple years. but based on the metrics, you cannot have a sustained rally if china is weak or slowing. paul: michael, -- shery: go ahead. paul: i was wanting to get michael's opinion on copper, it was among those that took a pounding today, off 1.4%. but does the outlook look reasonably good, keeping in mind electric vehicles and batteries? michael: if you are looking in the medium-term, the underlying

narrative still holds. the pickup was around 2012. and the pipeline has been emptying out. you have some projects in the pipeline that are contributing to growth, but that does not take away from kind of a little bit of headwinds from the global growth side. so if you are a long-term investor, i think that the ecb story says that china will not fall off the cliff. demand should hold up. but for now, you are facing a few obstacles, i think, for the prices to move higher. paul: i want to get your thoughts on another commodity, silver. it escaped much of been beating we saw in markets today, up about, it is just a shade under 1% for the past two days. what is your outlook for silver? michael: i think the chart you put up is quite telling in that

you have been moving lower on a sustained basis. what you have the silver market, you lost a lot of demand over the past decade or so and there was no other sector coming and picking up the slack. i think that is one reason that -- has not blown up as much. we are bullish on gold come a price target of -- and i think that could put silver up as well. but in a market that is, that the gains are capped because fundamentally you are having a big imbalance. shery: how will the dollar play into this? michael: the dollar is quite important now, i think, particularly for the precious metals, and for the base metals. the dollar strength we have seen over the last few quarters did add a lot to the headwinds.

we are expecting a little bit of a dollar weakening, and i think for gold and also for so over that really does -- silver that really does make a difference. if you see the dollar and euro moving above 1.20, that would certainly give support to the present -- . and you need to look at how the fed will behave in 2019. if you have a very hawkish fed, i think it will make it more difficult for the dollar, but the dollar weakness may not come through to the some extent, but if you have a dovish fed, i think that it would be positive. it would support kind of that potentially weaker u.s. dollar. i want to get your thoughts on the current trade environment. an enormous amount of uncertainty swirling around, but we know there will be a 90 day

truce. do you expect to see much buying and stockpiling, creating demand for the base metals? michael: i think i am more cautious on that front. we have a 90 day truce. it took about two days before the markets reassessed the initial announcements and prices are lower. you also have generally now a slightly weaker period for demand in the northern hemisphere. that probably does not help. and i think that you normally would not restock meaningfully in an environment where you have a little bit of uncertainty over how exactly trade is playing out. paul: ok, that was my go with bank of america merrill lynch -- michael with bank of america merrill lynch. plenty more to come on the show. this is bloomberg. ♪

paul: this is "daybreak asia." i'm paul allen. shery: i'm shery ahn. let's get a check of the latest headlines. ford downplaying a report that it is planning to cut as many as 25,000 jobs in its turnaround plan. the ceo says the company did not provide any numbers to morgan stanley. hackett says that ford will make an announcement about workforce plans later this week as part of an $11 billion restructuring. paul: tesla closed a fraction shy of $360, the highest since early august and a price that could draw concern on cash flow. they have debt due on march 1 into the conversion price is $360. if shares stay above that level,

tesla could meet its obligation with the stock instead of cash. the stock is firm since tesla posted its largest ever profit last quarter. shery: daimler has raised the prospect of boosting its stake in a chinese partner. the luxury carmaker expressed interest in increasing holdings to 65% from the current 49%. theanalyst says that 16%, addition, would be worth about up to $3.4 billion. both carmakers say that they are happy with the current arrangement. new: china has announced penalties for those companies involved in the theft of intellectual property, an issue central to the trade dispute with the u.s. a chinese correspondent -- a china correspondent has the story from beijing. tom, what do we know? tom: we know the national development reform commission, the state planning group here in beijing, announced the

punishments yesterday. these can be applied to those companies or firms that steal intellectual property. they will kick in this month. they include, for example, a ban on the companies if they are caught from issuing new bonds. it bans them from benefiting from government financing. it restricts them from foreign trade. they may also have their names, the names of the company or executives posted on a website. the timing of the announcement is interesting, given that it comes a few days after the g20 meeting between the two presidents, which of course intellectual property and u.s. concerns on intellectual property were a key discussion point. we heard from larry kudlow, saying he thought that there would be momentum on this issue. and of course it comes just a few weeks after the trade representative, light heiser, issued a stinging report into what he described as china's

state-sponsored theft of intellectual property and technology. china's pretty strong response, saying it was based on hearsay. nonetheless, we have these punishments. they say they will be implemented from now on. and nowit stands to -- we will see if there is an impact. such: tom, have we seen measures come out of beijing in the past? could this be the game changer that could really ease the trade tensions in the relationship between the u.s. and beijing? tom: well, certainly the context is intellectual property theft has been a major issue for companies, not just u.s. companies, companies operating in china from around the world, but the broad context is that gradually the issues have started to come off the boil slightly. even if they are a big focus for washington at the moment, if you

speak to the european chamber of commerce they will say that this is a lower ranking in terms of the list of concerns from their members. but we heard from scott kennedy, he says that the additional measures, the additional 38 punishments, are potentially significant, depending of course on how they are implemented and if they result in a reduction in property theft. we have heard from a chinese expert on this in beijing, and he says what the pressures do is give law enforcement here the tools they have needed to properly punish violators of intellectual property theft. and has been a problem up until this point, according to that expert. it is worth pointing out that these measures to dovetail with what is happening domestically. increasingly, chinese companies have been calling for greater intellectual property controls themselves and regulations themselves, because they are producing innovative products and those are at risk of being

stolen. so it is a domestic issue and an as far asfor china the pressure goes coming from washington. shery: so they have something to lose now as well. tom, thank you. asplenty more ahead, we will be ofking ahead to the opens japan and south korea as we continue to see pressure on the markets that are currently trading. this is bloomberg. ♪

shery: this is "daybreak asia." i'm shery ahn. paul: i'm paul allen. let's check in on markets with sophie in hong kong. sophie: as we await the open of cash trade in tokyo and seoul, we see declines in sydney and wellington. we have health care, tech among the laggards this morning. and we have this hangover from the post trade truce analysis.

we have this despite a white house correspondent saying it would be premature to be safe in trade talks. the yen trading near a two-week high after rallying the most into weeks. let's jump into the terminal to show you some activity around the young. options -- yen. options on the rise as a risk is being curtailed. we see some yen strength. higher for the second time in two weeks. and as the treasury yield curve is finding, we are seeing the case building for higher yen. this as traders anticipate a pause in the fed tightening cycle. shery: sophie with the latest on the markets, thank you. joining us for more is our managing editor, chris. we saw big declines in the u.s., more than 3% for the major benchmarks. now, we do see a little bit of a different picture, whether it is

nikkei gaining ground, other features down, with respect -- what do we expect to see in asia today? alreadye had a bad day in asian markets on tuesday, in particular japan with all of the indexes down more than 2%, so in a sense of the u.s. was kind of catching up to the wearing off of optimism about a trade truce that set in yesterday in the asian markets. you would be surprised after the big declines in the u.s. aernight if you saw particularly positive session. negatives have set in among investors at the moment. you have got no really clear indication of what the u.s. china trade talks will bring.

you have worrying signals from the bond market, the potential for an inversion in the two year, ten year part of the yield curve, which is barely upwardly sloping at this point. and some kind of late cycle best forthat the corporate earnings is behind us. so you have all of these factors here that are driving negative sentiment. and it would be, again it would be surprising if we saw a big turnaround today in asia. paul: uh, so the trade truce and fed pause not sparing the rally. what is left to turn things green? chris: well, at the end of the day you have to say valuations. at some point they will get to a level where investors say, you

know, the world is not fallen apart. after all, the u.s. economic indicators are still fairly robust. there was a strong manufacturing pmi number earlier this week. we may get a solid u.s. payrolls number on friday. china has moved decisively towards supporting economic growth. that in the view of most economists is going to start paying off in coming months. and with the chinese exchange rate appreciating after the trade truce, that potentially gives the central bank of china, the people's bank of china, even more scope for stimulus on the china side. shery: right. chris: so at some point you are likely to see people viewing valuations as fairly good. shery: we will have to leave it there. chris anstey.

a quick check of how markets are trading. new zealand trading up right now. futures down for the nikkei. this is bloomberg. ♪

>> good morning. i'm paul allen. major markets have just opened in sydney. >> good evening. i'm shery ahn. >> welcome to daybreak asia. paul: our top stories this wednesday, a bruising day ahead for asian stocks. traded truce questions and hawkish fed comments are the mood, a fifth straight session falling. . among divisions

rising shery: output curves yet to be confirmed and iran is threatening to close down exports of gulf crude. plenty of headwinds in asia this morning for the bulls. we take a look at what is happening across the markets. sophie? sophie: those headwinds are materializing for -- into losses for stocks. we are lower by 1.2% and the kospi is under pressure come off by 8/10 of 1%. -- pressure, off by a tense of 1%. -- off by eight to 10 sub 1%. --estors are ssab different regarding how trade talks will fare over the next 90 days. and when you take a look at what is going on in the aussie sharemarket, down by 1.3%. and we have health care and communications at stocks among the biggest laggards.

stocks in asia set for a second day of declines. while safe haven assets are fighting appetites there. we are checking in on the yen, trading near a two week high. and we are seeing gold holding onto recent gains. brent is holding on as well, this among the opec meeting in vienna. not much certainty when it comes to the potential cuts from the crude cartel. paul: uh, alright. sophie checking the markets for us there. our next guest says the rally in bonds is unlikely to continue, there is a good chance of reversal as the month plays out. lori fitzsimmons is joining us. thank you for joining us today. let's talk about the brief in version of the own curve. and the two-year, 10 years spread coming within 10 basis

points. is that pointing to a recession? >> history has shown us that this could be true, but we have to remember that curves have fund while economies are doing well and that is what we have seen over the last year. that makes sense because the fed keeps hiking when they are spurred by growth and inflation. overall, the market is clearly obsessed with this concept of inversion. and i think in terms of the late cycle anxieties we have at the moment, that makes sense. but at the same time we are trying not to read much into a this week. we think that the aversion we have seen with the 3-5-year part of the curve is important, but at the same time the bond moves have been puzzling the most investors, and i think that overall there is reason for that to be reversed for the remainder of the month. and december is often a weaker month in terms of treasuries. 8 out of the last 9 saw treasury prices weaken, so supply

really wanes toward the end of the year and we will probably get another rate hike, but there is a reason you could look to take advantage of the low yields here. paul: is there an element of confusion coming from the fed, we saw williams stomping on it overnight. i want to show you a chart from our library. it shows the number of debts on a rate cut in 2020. growing. so what are the chances we could see that? laura: it is not something we are expecting. we expect between now and in the end of 2019 you will get five more rate hikes from the fed, we know that in terms of hawkish expectations, but we also continue to expect that the hikes could continue into 2020, so we are not forecasting cuts yet. we think there is a risk towards the back end of next year that growth could start to slow. the fed will become more restrictive around that stage.

it is something we are aware of. shery: we are getting some comments out of the ministry of commerce in china, saying that the trade meeting there was a successful with the u.s. and trade talks will be done based on the timetable, that they will push forward with trade negotiations in 90 days. that they are confident to execute those traded talk results. so this seems to be the first time we are getting some confirmation of how they traded talks between president trump and xi weight at the g20. we have heard plenty coming from the u.s. aside, not much confirmation coming from china, but now we are hearing from the ministry of commerce saying they are confident to execute the straight talk results. do you see more certainty on the trade side, how will this play to the markets? because we have seen markets turn defensive. laura: i think that this will

help somewhat. i think that the comments from navarro this morning were more concerning than anything, because they seem to more reactive to the downward moving stocks overnight. so to hear this from the ministry of commerce in china is helpful because as you mentioned there has not been much constructive from them since the weekend. and there was a little bit of doubt. the concerns were because of the vague reports we were getting. i think that some of the analysts in china had been looking at the wording. and there was discrepancies between the u.s. and china and markets were focused on not to start the week, but at the moment when you look at china and the move we have had with the yuan to start, since the weekend, i think what is evident is that you are clearly getting a decent supply of u.s. dollars into the offshore market, leading to huge moves. and i think most people think

the back may have been broken in the market. we continue to see people receiving china rates. in this environment it could turn quickly, but at the same time i think that right now, certainly come any weakness in the yuan, it is a difficult trade from here. shery: the ministry saying china will implement those specific items that were agreed upon during that meeting as soon as possible. we see you as futures now jumping 4/10 of 1% on this news. china now confirming that those trade talks were very successful. um, how does this bode for china and what the pboc has been doing, while the policymakers have been trying to support the chinese economy? if we see some sort of resolution in these trade tensions with the u.s., would that change the path of the chinese policymakers? laura: yes, that is the interesting thing, because you

have the different dynamic in terms of what they are doing with stimulus, with the fiscal and in the monetary side, and in terms of regulation. i think that at any stage china can accelerate or break as it wishes those policies, but we think that in the environment where they get something better out of trade, or at least the trade truce becomes something more meaningful and the u.s. and china make headway, there is a chance china does not pullback that much on this to millis, even though it was -- on this the most, even though it was meant to offset the trade tensions. so they will provide more stable footing in 2019, which could lead to an upward forecast and revisions from those who expected currently much more negative scenarios and more on the tariff front. paul: laura fitzsimmons from jpmorgan. we will come back to you in a moment, but for now we will go to first word news with jessica

summers. jessica: president trump sends shockwaves through the markets, admitting there is no official trade deal with china and questioning whether one is possible. he described himself as "tariff man" and is that unless there is progress, he would be happy to maintain duties on chinese imports. that raises new questions about the extent of an agreement he claimed he had struck at the g20. and china has yet to offer a formal response to either claims of a deal or the possibility of more tariffs as officials are still out of the country. sources in beijing say that they are waiting on the president's return before they can comment or take action. xi is in portugal today wrapping up a tour that has included spain and the g20. ruling partys facing divisions after theresa may suffered parliamentarian defeat on brexit. the comments from the government

in contempt for refusing to publish advise on the draft board, and they want to have the motion postponed. the prime minister is fighting for her political life, facing opposition on all sides. >> i ask them to think. what item to think would say to the 52% who came out to vote leave, in many cases for the first time in decades. if their decision was ignored, what would it do to our politics? jessica: malaysia's is thegation into 1mdb sum and more witnesses, including the former president of the company. the former government chief secretary and auditor who worked on 1mdb's account will also be questioned. this is the committee refused to roll out the possibility of the former prime minister being called in.

global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm jessica summers. this is bloomberg. shery: thank you. we will have more with laura fitzsimmons coming up, including how the markets are reading president trump's habit of overstating success in trade negotiations before pulling back. paul: later, australia's third-quarter gdp growth. we will break down the numbers and get into analysis. shane all over -- oliver will join us. this is bloomberg. ♪

shery: this is "daybreak asia." i'm shery ahn. paul: i'm paul allen. jpmorgan's laura fitzsimmons is still with us in sydney. as we heard news from china by

the trade talks, we have seen a bump in the aussie and kiwi dollars. it would not surprise me to see some equities turning positive as well, but this plays into the broader narrative on how volatile things have been. laura: absolutely. this is not how investors would like it to be because it is so short-term and things change so quickly. and we have the u.s. and china, you have to pay attention to everything going on, it is impacting globally, as we all know. so at this stage, you mentioned the aussie dollar and kiwi dollar, they are the go to for risk. so it makes sense, it is reasonably constructive we have heard from the ministry of commerce in china, but i would probably highlight that liquidity is at a premium today in the sense we have the u.s. holiday, which means that the futures markets are closed for the u.s., so there will be a lot of people trading things they do not normally trade. you could get an outside move on

stock futures today in response to these headlines, more than you would normally get in any other asset classes. that is another factor to consider. obviously, the time of year. december is never a good month for liquidity and already we are starting to see some markets becoming very strained. paul: volumes in the u.s. today were very high. based on what we thought, when the markets -- saw, when the markets come back do you think we could see a bounce? i think -- laura: i think it could happen. we will get that from those who would have wanted to hedge in futures, but they will be playing in stocks because they want to be on the move in any way they can. so i think that could lead to a decent technical bounce in stocks tomorrow. and i guess in the markets. over all, at this stage what we saw yesterday clearly tech, the financials in the u.s. -- i

mean, leading the stock market lower. over all, as it is a got some negativity and concerns, a bit of a wobble, people were jumping on that because they were thinking, how long can the optimism last? people who are skeptical as it as they saw the headlines on the weekend -- the momentum for the first day or so of the markets this week kind of maybe sucked a few in, so that is where you saw people heading for the exit quickly as things turn to sour. shery: what is dictating the moves of the u.n. dollar, is it trade tensions, the fed, what is the biggest factor? laura: i think it is trade tensions. we went into the weekend fresh in our mind. we have to wait until, in asia the 20th of december, until we know where the dots are going to be. whether it is going to be two or three for next year, that is the question. fed commentary is being watched,

but we are about to go into a blackout period as well, so i think it will be trade tensions for now. but you know, markets have become used to this for some time. shery: we have seen pmi's across the world, really a bit of a surprise when it comes to manufacturing data. the chart on the bloomberg showing that europe underperformed. china has not been great. but the u.s., pretty strong. how long will this economic exceptionalism last? laura: yeah, it is a great question. it certainly has a surprised people of this year, and clearly the moves in the u.s. dollar throughout the year were reflective is this -- of this. the u.s. outperforming most of the world, when most people were hoping that the growth we were seeing throughout the world would continue into 2019. so we are thinking the u.s. exceptionalism will come to an end. this goes the most is rolling

off, there is clearly a discussion on whether the fed will turn restrictive, so there are a number of things which could mean the u.s. maybe takes more of a taxi in terms of growth next year. but then you have to question where it comes from. obviously, europe has its problems in terms of italy, still negotiating brexit, and clearly that is a big factor. china, if anything we hope stabilization at best, but if trade tensions are resolved in a more optimistic way than expected, and we were negative on what the outcome could be, clearly there will be upward risk to our china forecast for next year. that could be really for asia an important dynamic in where the growth could come from. paul: earlier this year, it was a perfect storm, but the weather is changing. a -- oneading toward em? laura: leverage was there are not market and i think that --

there in that market and i think that argentina and turkey had their own set of problems, which did weigh on the complex as a whole, but the leverage is part of the main components and in the back shop of a stronger u.s. dollar and the fed continuing to hike, that is where we started to see that maybe the withdrawal of liquidity from the fed in terms of tapering -- you know, you are starting to see now that essentially it is pockets of the market where we have leverage suffering the most. that is what we saw with e.m. this year. we have had valuations come back to better levels. and the supply chain dynamics are improving in terms of china shifting away from the u.s. and maybe benefiting some of the e.m. countries -- you could see how that could play out as well. but over all trade tensions have not been great. but still i think that is where it could be a game changer next year. paul: we have a reasonably interesting central-bank

decision coming out of the emerging markets today, expected to hold at 6.5%, so what are you looking for in terms of inflation? laura: clearly, they have been given a shield from the oil move. that is where going forward india has its own set of problems. and i think that a lot of investors are skeptical about getting back in, because of that. right now, this has been helping a huge importer of oil, it has helped, but we will see after opec. the more sort of deep-rooted issues might come home to roost. paul: laura fitzsimmons at jpmorgan australia, thank you for joining us. we have plenty more to come. this is bloomberg. ♪

paul: this is "daybreak asia." i'm paul allen. shery: i'm shery ahn.

let's get a check of the latest business flash headlines. the world's largest meat producer reveals -- has named a new ceo. he is the first person from outside the billionaire family to take control of the company. he takes over from the 85-year-old patriarch who stepped in last year after his sons were removed in a corruption scandal. they have completely erased their losses following their plea deal. downplaying the report is planning to cut as many as 25,000 jobs in its turnaround plan. the ceo says the company did not provide numbers to morgan stanley, who estimate is such a large losses at the start of the week. hackett says that ford will make an announcement about the workforce plans later this week as part of it $11 billion restructuring. shery: and bloomberg is told by nissan's external directors that they have delayed a decision on

a successor for the chairman position. they did discuss names on tuesday and the board may have to gather together this week. we are also told there was no request that the new chairman b from the french carmaker. say thatomberg sources daimler has raised the prospect of boosting their stake in a chinese partner. electric carmaker expressed interest in increasing its holding to six to 5% from the current 49%. one analyst says that the 16% addition would be worth up to $3.4 billion, but both carmakers say they are happy with their current arrangement. shery: china's ministry of commerce says it will push forward with the negotiations over the next 90 days with what it calls a very successful meeting with president trump. but investors are still skeptical about the prospects of a meaningful break. andmackenzie is joining us,

not surprising that investors are skeptical. they say they will implement specific items agreed upon at the meeting, but really they do not outline what they were. tom: that is exactly it, that was the key question -- what are the specific items? lines have dropped from the mistry of commerce here in beijing and they are painting an optimistic picture of what happened, saying they will implement some of these items asap, but what are these exact items? we do not have the details yet, real concrete details from the chinese side. and we are trying to cut through what is coming from washington, but it is proving difficult for investors. so there are key questions that remain. what exactly did china commit to buying? donald has talked about china commuting to immediately buying a significant amount of products, the u.s. side saying they would buy agricultural

products. but we have not had that detail from the chinese side, all they said is they will buy u.s. goods. we heard from the treasury secretary steve mnuchin yesterday, saying that it would be valued, the purchase from the chinese, at $1.2 trillion, but saying that needed to be kneeled down. and cybersecurity and it cyber theft, these are huge issues. and you have a 90 day time frame, apparently at the end of which both sides will come out with some concrete fixes to these issues, but that seems far-fetched to many investors. and there is the timeframe and exactly how the negotiations proceed from here. robert lighthizer has been named as the key man on these talks. and we know who will be on the other side of the table. but exactly when the negotiations start up again is a question. one positive is robert lighthizer is taking a tough

stance, but he has also shown to be pragmatic. just look at the deal they have with south korea and the second version of nafta. there was some pragmatism put into play. and donald trump talking about, or threatening again additional tariffs on chinese products. he says he thinks there can be a deal with the chinese, but saying his finger is on the tariff trigger. he has described himself as "tariff man" and he is ramming the point home, possibly to continue leverage on the chinese. paul: something coming out, china releasing new measures on tackling intellectual property theft. what do we know? tom: they are kicking in this month, 38 different punishments for companies that violate intellectual property, including those bans on issuing new bonds, on additional financial support from the government, and there

will even be a website in which the companies will be named and shamed. china saying this is an attempt to make sure that there is a proper system in place to mitigate some intellectual property concerns. even some domestic considerations, as well as international considerations. ♪

paul: it is 11:30 wednesday morning here in sydney. we are getting some breaking news. trade numbers for the third quarter. a big miss. gdp numbers increasing a third of 1%. the expectation had been for 1/6 of 1%. now 2.8% year on year. miss. the aussie dollar falling reasonably steeply. let's get some more on the markets now with sophie kamaruddin. sophie: as you pointed out we

are seeing that decline and the aussie dollar heading towards a 73 handle against the greenback. popping earlier your on chinese officials commenting on trade talks with the u.s. saying the trade meeting was successful and china will look to implement items agreed to. that support being wiped out in the wake of the australian gdp numbers coming in lower than forecast. aussie shares also on the back foot, extending the kleins. the lowest -- extending declines. today banks are among the biggest drags. this, as bonds are rallying. we have ahead of the aussie gdp we had more bull flattening of the aussie 310 year he curve. quite a bit of pessimism coming through when it comes to aussie assets. taking a look at what this means for the market, let's look at japanese stocks.

earlier we saw a brief pairing of losses. both losing more than 1%. this, after tokyo shares wiped out $133 billion market value tuesday. seeing declines of over 1% for stocks in seoul as well. the korean yuan hitting a two-month high earlier this week. also seeing move in the jgb markets. 1.5, theield falling lowest level since july 31. treasury yields ahead of the boj bond buying linda this morning. amid this selloff there might be a hint of optimism given the slight uptick we are seeing for u.s. futures. again, not much to hang your hat on today when it comes to asian markets. shery: let's not get the first word news with jessica summers. commercechina's

industry says it will implement specific items agreed upon this weekend between president xi and trump as soon as possible. it called the talks very successful and said negotiations will push forward over the next 90 days based on the timetable and roadmap. it is beijing's first special response and comes after president trump backtracked on claims of a cuts to chinese car tariffs. iran has again threatened to close a strait -- no crude to leave the gulf if washington goes through insensate. almost one third of oil passes through the narrow strait and the u.s. has several warships in the area. trump says he is willing to negotiate with tehran rejected him. classified cia briefing has convinced them the crown prince of saudi arabia played a role in the killing of journalists jamaal khashoggi. if a jury even said

were to consider a case against the prince, it would convict him of murder within a half hour. the senator said riyadh must accept responsibility for the killing. >> whether he directed it or it, i think he did, he owns because it was an agency he directs that carried out. they have shown no ownership of this issue whatsoever. it is just inappropriate. the french government blinked first in its battle protesters over fuel hikes and the cost of living. president macron has long price himself on sticking to his guns, even as his critics multiplied. he has now reversed course and suspended the rise in taxes for at least six months. it raises new questions about the president's planned social reforms for next year. >> within the six-month timeframe we want to implement thayer in official measures on fuel. if we cannot agree, we will deal

with the consequences. raceca: a two-year space has a nasa spacecraft arriving at an asteroid. it is not just 20 kilometers from the rock. it will move closer by the end of the month. the spacecraft is the size of an suv and will shadow the rock for 12 months. the asteroid is so remote it took seven minutes for the message to reach missing control. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. countinging up next, down to the r.b.i. decision. what we should be watching. this is bloomberg. ♪ ♪

paul: this is daybreak: asia. i am paul allen in sydney. shery: the reserve bank of india has a rate decision leader and analyst expects no change. the decision itself is likely to be merely an appetizer for governor patel's press conference, his first since a public feud between the banks and the government. our asia correspondent is watching this. let's get started with the rate decision. inflation seems to be flowing significantly in india. this will still not affect the monetary policy decision today. thet is interesting because slowdown in inflation could perhaps alter the rbi's thinking in the coming months. what is happening is the big slump in oil prices have an impact on india's inflation.

india is a big energy importer. it will flow through to consumers soon. on the other side of things we have seen -- indy is very vulnerable. if it is coming off at the pace it is expected, while the bank -- early next year some economists say they might have room to cut interest rates if needed. there is certainly a changing dynamic because of the impact of high inflation and slowdown in india. conferencehe press after will be closely watched. are we expecting to see any hawkishn the rbi's tone? enda: may have been hawkish. dob interesting to --

they have been hawkish. it will be interesting. one-off?e a think it will be a downside to inflation through much of early 2019. it will also be interesting to hear his commentary on food prices. indeed his first press conference with the government. given everything that has been going on, autonomy will be in focus here. enda: yeah. it has been a big focus. the r.b.i. has been caught in a significant argument with the government. both reached something of an awkward compromise. it is not just india. we are seeing political attacks on central banks increased

around the world. not just an emerging economies, but pressure on the fed in the u.s. with donald trump making clear his remarks and his views isards policy, which unorthodox compared to previous administrations. the pressure in india is real and it will be one to watch to see if relations breakdown between the government and the r.b.i. it is worth noting it is a broader trend. central banks are becoming increasingly under more scrutiny. shery: thank you so much. let's get a quick check of the latest business flash headlines. new york city has become the first place in the u.s. to set up minimum wage for lyft and ube r drivers, marking the first time lawmakers had imposed salary rules on ride-hailing companies.

it is slightly above the $15 minimum wage the city requires all employers to offer by the end of next year. paul: fedex and ups shares they faceter underappreciated threats from amazon air. estimates for revenue growth and cash flow was cut. an analyst expects domestic volume to shrink by 2% to 3% on amazon air's early rollout. tesla? - -closed-esla has $920 million of debt. level,es stay above that tesla could meet its obligation with stocks instead of cash.

the stock has been firm since tesla posted is largest profits last quarter. paul: qualcomm unveiled new chips that they say will run many new phones next year. it includes a process to link to wireless networks. upgrade to a product at the heart of most smartphones. they had a bitter legal fight with apple which is no longer using its chips. shery: you can get a roundup of the stories you need to know to get your day going. bloomberg subscribers go to your terminal. it so youso customize only get the news that you care about. this is bloomberg. ♪

shery: this is daybreak asia. the australian dollar reversed gains after third-quarter gdp came in below expectations. let's look at how the aussie is trading. an uptick out of the good news from china. not long after we had a steep decline. let's get some analysis on this chiefydney with a

economist joining us. shane, what do you make of those numbers? shane: it was a huge miss. the market was .6. was consumerng spending. people did not think it would be as weak. inventory was another drag. that may be related to the drought. it could be temporary. the underlying picture is very soft. around 3.4%wth of thereabouts. it came in well below that. we are now back around trend. well below that. these numbers are weak. paul: consumer spending, is that

symptomatic of what we have seen with a housing market? shane: that is very much what is driving and. -- it. forad one good quarter consumer spending and then one bad one. the reality is house prices are falling. city is heading down towards 10% on an annualized basis. that is a huge drag on consumer confidence. wereany years australians happy to run down their household savings. that is now going in reverse. that will be an ongoing drag, increasing drag on consumer spending through next year. paul: just before we came on you are talking about a downside surprise on gdp is probably better than an upside surprise. what does this mean for the rba? shane: i think it is bad news.

the rba has been painting a picture as glass half-full. yesterday i said the economy was doing well. these numbers would suggest that is slowing down. my take on it is it is a bit of a downer for the rba. us --k it heads i have beenime saying the next move is likely to be a hike. i thought it was 2020 before we get there. now i am thinking the next move will be a cut. i am looking to change my forecast. i do not think it will come quickly. i think it will take a little while. but sometime in the second half of next year i think the reserve bank will be cutting the cause of subpar growth, the housing, weak wages growth, all of that acting. shery: that is a big change.

really interesting to see you turnaround that way. how will the chinese trade tensions work into your equation? we are finally getting some positive sentiment coming from beijing. they are now saying they are ready to implement some of those agreements that came out of the g20. how much does that factor into your calculation? shane: it is a positive, although this story goes all around all over the place. monday we were happy. of course yesterday we became less and less happy. in fact, quite negative. this issue will continue to wax and wane. the fact they came up with a deal to delay implementation is a good sign. the trade war does seem to be putting on hold right now. it is a question as to whether it will ramp up again next year. yes, if the trade war is coming to an end, that is a good news

story for australia. i doubt it will be enough to change my view. the reality is there are some positives for australia. mining investment looks to be bottoming out. infrastructure spending is strong. and you have exports doing really well. hopefully that continues if china holds up. the big drag industrial it is on the housing side. --t is obviously importing affecting the consumer. news will have to get really good globally before i would change my view. today tipped me over the edge. it is too negative. it has forced me to evaluate and think the next one will be a cut, not a hike. shery: will china hold up? a lot will depend on china. we do not know what is happening on the trade side, but even if you factor out trade, just the

economy itself and other fundamentals of the chinese economy, do you expect it to hold up? shane: i think it will eventually hold up and it will probably hold up the 6% number but in the short term it will slow down further. it started this year on a solid note around 6.8%. then it slow to around 6.5%. currently it is probably close to around 6%. for the year as a whole it will probably come in around 6.5%. probably a bit more slowing in the first part of next year. then as we start to see more stimulus measures in china and fingers crossed, the trade war goes away, that should see china growth pick up. for the short-term i think it will get worse before it gets better. paul: of course another big piece of the macro picture is what happened with the yield curve.

coming within 10 basis points of the 10 year. it does not always mean a recession, but you can get into a self fulfilling prophecy. shane: you can. there are all sorts of debates around the yield curve. what is the best yield curve to look at. my preference is to look at the 10 year yield curve. that was the one i always looked at until this year. this year we are breaking it down into all different parts. one thing i would say is yes, it is starting to flash here. yields is still in positive territory. about 80 basis points. still a way to go. the fact that the other ones are flattening out and inverting is flashing a warning sign. what i would say is the get between the yield curve inverting or going negative and the u.s. going recession can become quite long. even if all the yield curves we

look at go negative or inverted, you probably would still be consistent with a recession around 2020, which i think is too premature. if you look at other indicators, the fed rate is around zero, the index is very strong, consumer confidence very strong. my feeling is i do not see a recession on the horizon for the u.s. next year, but it is certainly an issue to keep an eye out for in 2020. shery: quickly than, does that mean during that time until we see the version, we could see emerging markets, risk assets still getting a boost? shane: we certainly could. one of the factors here impacting yield curve is the view that maybe the fed is getting close to being done. that is pushing the longer end of the curve down halted to be shorter end because the market is not factoring in cuts.

you could argue that is good. if the fed is getting close to the peak in terms of short-term interest rates in the u.s., you could argue it actually reduces the risk of a hard landing for the u.s. economy down the track. it also takes potential pressure off the u.s. dollar. it was largely a function of the fed tightening. if the fed now is going to pause because of worries about future growth in the u.s., perhaps that takes away that upwards pressure. there are some positives in all this. the market might still talk about the yield curve being inverted, that is a potential warning sign. as long as u.s. growth stays positive, which i think it will, we could see a big bounce back in markets. and of course in were constrained u.s. dollar would take pressure off emerging markets. shery: great to talk to you. shane oliver of amp capital.

we are seeing pressure for markets across asia. all markets trading right now in the red. sophie: we are not seeing the positives this morning for asian stocks which are set for a second day of losses. the sending on the region. japanese shares losing $133 billion market value tuesday. offshore yuan on the back foot after the biggest two day gain in a decade. korean yuan -- in seoul, a second day of losses. 92 points from breaking 2000. tech shares the biggest drag. given that big missing gdp for australia we are seeing aussie assets taking a hit. aussie stocks headed for the worst close since 2017. the aussie dollar getting smacked down by that miss,

erasing earlier gains sparked by china talking about trade talks. aussie bonds rally. .2% on a curve to quarterly basis. you just heard from shane oliver saying he revised his outlook for the rba's policy given this latest data. we have quite a few revisions ahead of this data. a little more optimistic given the housing slump and other headwinds for the aussie. looking like that needs to be changed. also want to highlight this. yields slide. 10 year yield to the lowest since july, losing 1.5 basis points. a global stock route is sending investors. paul: sophie kamaruddin, thank you for that. now let's look at what is coming

up in the next few hours. david iglesias here. obviously this selloff we are seeing across markets looks like it will continue when things open up. lots of guests coming up. william will be joining us at the open in china. inare also still saying dubai. we are talking oil. fge.ounder of i am looking at futures right now. it is a close your eyes kind of session. the open is next. this is bloomberg. ♪ is bloomberg. ♪ ♪ there's no place like home ♪

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rishaad: this is bloomberg markets china open. yvonne: china breaks silence on tariffs saying the g20 talks were very successful. but there are still few details on where to go next. david: investors are searching for any optimism after the selloff on wall street. rishaad: oil slides. -- iran threatening to shut down exports of golf crude. -- gulf crude.