paul: good morning. us trillion markets have just opened for trade. >> good evening from bloomberg global headquarters in new york. >> welcome to daybreak asia. >> our top stories this friday, asia faces mixed starts. futures edge higher in japan and china but point lower in hong kong. .arkets remain volatile .nd oil slumps

>> let's get you started with a quick check of the markets close in the u.s. session. what a dramatic day it was for u.s. markets. at one point, stocks falling to an eight-month low. the nasdaq ending in the green. rally inis late day large tech stocks. the dow and s&p 500 ended in the red but recouped most of the losses after wiping out this year's gains. the s&p 500 was led lower by energy stocks. we mentioned no clear signs of an agreement out of the opec meeting, but still, we saw them the s&post of losses in 500 down only .2%. s&p futures, though, right now looking down, under pressure, .4%.

we have a lot of headlines, a little bit more dovish sentiment when it comes to news coming from the fed but also plenty more that needs to be digested as we head toward the asian open . >> with so many forces weighing on markets, we could be in for a choppy session. banks continue to be under pressure given ongoing bond rallies. energy pressures likely to track their u.s. peers lower. text may be a saving grace. we're also watching broadcom asian suppliers after the company reported better results for the fourth quarter and raised its 2019 sales forecast. in sydney, we are seeing pressure. mover of note, the country's biggest cement player, cut its full-year earnings guidance reflecting ongoing

concerns around the australian property market. on the eco-agenda today, we have a string of data. this comes ahead of monday's final third-quarter gdp report with growth expected to slow more than initially forecast for that period and with overall concerns over rising economic risk, quick check on japanese cds, cost to ensure corporate debt despite the most since september the kind to a 20-16 hi, and a last look at aussie bond yields, set for the steepest weekly decline in four months -- that's august -- on weakening economic data and the overall mayhem and -- in markets. >> thank you. back to that wild ride for u.s. stocks and the final hour surge in tech. the s&p closed lower for a second day, but all three benchmarks bounced back from sharp losses. su keenan more on this. we saw that really volatile

session. toward the end, a late day rally. what were the drivers in today's action? >> a lot of people do not know if it was trade, if it was tariffs. there was a volatility. nasdaq and tech investors saw a 3% swing that ended in a positive. most are happy to take that. take a look at the dow. intraday, down close to 700 points. those final in hours, particularly in the last hour. if you find our library of charts, you are seeing these .wings intraday in the s&p 500 this was the 57th swing of greater than 1% so far this year, and if we go into the snapshot, again, we talked about but thes were in focus, banking index took the brunt of this.

the s&p 500 banking index down almost 4%, cut losses in half. the kbw index fell into a bear market. there were some losses here, and some who say it is going to get uglier from here. >> what is interesting is when we had this broader trend of the downside towards the early session and we saw most stocks falling, it was interesting to see some of the faang stocks outperform, and they led the late day rally, and at the same time because of financials and yields falling, you had been weighing on the index. tell us about the individual stocks we have to be watching. >> bank stocks led the selloff along with energy. of apple,xception which was down more than 3% at one point along with all its suppliers, they ended in the green and then some.

let's look at some of the other stocks that were big movers. banks again, heavy losses. citigroup at one point down more than 5%. one of the financial stocks down 11%. they came off their lows, but still, it shows the concern about interest rates and yield curves, potential calls for recession. there was a report out of brazil boeing merger is probably going to be halted. square and fin tech stocks, double-digit losses on tuesday. came back in a big way and a very strong rebound for cloud-based stocks. there were some winners on the day, clearly some tech winners. again, those looking at the chart see very bearish signals and a concern that this win, if you will, for stock. will only prolong some of the

pain ahead -- this win, if you will, for stock bulls will only prolong some of the pain ahead. >> with oil futures falling hard, what is the story? >> a lot of traders say opec not ready to make their cuts. this is the first time in almost five years you have had opec meet and not come away with a firm output deal. russia clearly flexing its muscle, not ready to commit. concerned this is going to be further pressure on oil. you did see the chart dramatically represent early in october. oil, especially west texas intermediate, coming down dramatically from its high. >> thanks very much for that. let's check out what is going on now with the first word news. >> global private equity firms have told the prime minister that the prospect of a new deal

brexit makes them more likely to boost investment in the u.k. sources say the trade secretary met investors at downing street and urged them to support the deal. it's under fire from all sides as critics demand she go back to the negotiating table, but brussels says that is not possible. agreement,a balanced which is, and i must say this once again calmly and seriously, the only best possible one. >> america has become a next -- a net exporter of oil for the first time in seven decades, ending 75 years of dependence on foreign oil. the shift is thanks to an unprecedented boom in supplies in the permian basin along with higher production in north dakota and pennsylvania. reports from tokyo say prosecutors may charles the former nissan chairman a soon as monday three weeks after his

arrest for misstating compensation and sources say he blew up a lucrative incentive plan for himself well before he was detained and forced out. with told the deal was about 89 million u.s. dollars, of which 80 million would go into his pocket. renault is said to be about a from its conclusion. sources say the ongoing internal investigation focuses on salaries and benefits. gohn remains renault's chairman .nd ceo were told the french carmaker is suspicious of nissan's motives. the french government aims to deploy about 89,000 police officers across the country this weekend with more potentially violent protest anticipated. the prime minister says many people are headed to paris to confront the forces of law and order and snagged iconic french

symbols. protesters are angry at the high cost of living and an increasing feeling of being ignored by the elite. global news 24 hours a day and on tictoc on twitter. this is bloomberg. >> thanks, janet. also helping the late turnaround in u.s. stocks come the white house saying president trump was not aware the u.s. had requested extradition of a huawei executive. earlier, trump said -- trump john boltonisor said the president did not, but it's not clear that was before in singapore dined with executives. >> so far, the reaction from china has been outrage in the

media. there were star and warnings from the foreign ministry, but at the same time, they say the talks between the u.s. and china are going on. they are in the middle of what is supposed to be a 90-day truce in order to straighten out issues regarding tariffs on and other issues in the relationship. a lot of these also are tied in with this case in terms of intellectual property and security. right now, they are going on, but this is going to be an irritant for some time, and it has the potential to get further public in china starts to express upset over the arrest. >> what are the next steps in the case? it's kind of complicated with extradition and other issues as well. >> right. there is a hearing scheduled for

friday in canada before a judge who will decide if she should continue to be detained while -- or released while suspending -- or released while surrendering her passport. we will also at some point in the near future -- the u.s. will have to reveal at least some of the so far secret evidence of that justified her detention and the request for extradition. that has not yet been seen, so we've got that, and from that, will become the extradition hearing. this could go on for months or even as long as a year before she could be transferred to the u.s. for charging and trial. >> we've been focusing on if president trump new about the arrest before he dined with presidents xi jinping, but i wonder if we should happen of missing more on it to chinese new. it seems that despite the fact

ont she was arrested december 1, the chinese came out and signaled that the talks were a success, that they do really want to cooperate with the u.s. is this a positive signal toward trade talks going forward? >> it is interesting that it took several days before the arrest became public and before there was any reaction from the chinese. both on , particularly theinese came sis chinese, have an incentive to try to keep talks going. there's no way this could not have some complication for that the daughter of the founder of huawei, which is a major component of the chinese president's push to bring china to the forefront of technology, it is a real pressure point between the u.s. and china involving sanctions on other countries and also involves a

security issue for the u.s., which has accused huawei of using its devices to be able to u.s.tially surveil citizens and installations. there's a lot that goes into ons, and it will be moving two tracks, both legal and diplomatic. >> thank you so much. will take a we closer look at the potential fallout from the huawei arrest alreadyimpact on strained ties between the u.s. and china. plus, we will find out what barry knapp says about the shape of the yield curve. this is bloomberg. ♪

>> this is daybreak asia. major u.s. indices pared

their losses today, and the nasdaq even finished in the green. some say it could have been a lot worse, but i & -- iron sides ' macroeconomic researcher barry knapp thinks the market overreacted. wasselloff we saw this week not just fine. >> i don't think so. more broadly, we are going monetarynconventional policy normalization-related correction. we had one that began in january when real rates moved higher as defense started contracting their balance sheet. it is similarys, to the end of qe1 in 2010 or qe2 in 2011 and so on. they take six to eight weeks to work through and the market is on its way unless, of course,

policy truly is tight. there's obviously peripheral concerns -- is the economy really slowing all that much next year? is trade policy threatening to derail global growth and cause a deeper contraction, and my answer to almost all the questions is no. growth will slow marginally, but the underlying fundamental story is positive, and this is just a reverberation of yet another attempt for the fed to extricate themselves from the most aggressive monetary policy since after world war ii in the 40's and -- the 1940's and 1950's. >> we are seeing bond yields falling. financials taking the brunt of that. how important is the yield curve here and trying to figure out financials? >> the example i have always

cited to investors about what yield curves do not matter as 1995. a number of people have drawn parallels because the fed tightened aggressively in 1994. the yield curve went from plus 180 basis points to zero and the second-best performing group of wereig bull rally of 1995 financials and that was because loan growth was excel or rating. that same dynamic is taking place today, notwithstanding the narrative about this. what you have happening is a big transformation. this is a chart you send us. walk us through it. >> coming out of the great recession, we were in a period called financial repression. programs that were set up incentivize banks to hold government securities. when the fed started shrinking their balance sheets and the deregulatory policy of the trump administration kicked in, you could see the blue line was holding government securities on growth basis.

they are now contracting. commercial and industrial lending which funds capital investment has gone from plus plus 9%.plus for up to in small banks, it is up 13%. banks are changing their asset mix from government security to without adding leverage and this is, to me, a similar dynamic as in 1995 when we had a flat curve. >> when we talk about the yield curve inverted, we always explain it does not always mean a recession. you have given us a pretty compelling case, but there are other factors. give you 1 -- liquidity

seems to be tightening toward the end of the year. >> i think that is a really interesting point, and in a lot of ways, similar to what happened give you 1 -- liquidity seems to be tightening toward the end of the year. in 2015. 2015 was the end of asset -- qe ended in the fall of 2014. the fed has been buying $1 trillion a year. we also had the drop in oil prices. that the erased another 600 billion dollars in demand in u.s. fixed income and china in d to $400 of $200 billion billion, so you had a $2 trillion loss in demand in 2015, but that was part of the struggle of the markets, but in 2016, it stabilized and markets took off and the drawdown was similar, not even as large. my expectation is this is a major contributor of where we story in 2019he gets a little better. the liquidity starts to stabilize somewhat, particularly if the fed does decide to pause the first half of the year and see what happens to the economy

when we see the effect of the tax bills, which seems to be based on every fed speaker we have seen the path they are headed down. >> let's look at financials. that has been bear market .erritory jpmorgan not looking too optimistic on 2019. that is a factor weighing things down as well. forecasts of the ceo's of any companies, you should be using those as a macro indicator with some degree of carroll, but when i'm describing about the change in asset mix is a cleaner way to take advantage of that and large regional banks as opposed to money centers. they have no idea what trading volumes will be like. i worked at a combination of lehman and barclays for 20 years

and we did not know what the next day was going to be like. i think the change of asset mix will be a driver for banks, so any particular near-term commentary does not really dissuade me from that point of view. >> given we have seen this unprecedented move by the fed, these companies have increased leverage, bond on in the day .ending -- binging spree is this going to be a problem for corporate credit? >> yes is the answer. what i believe large-scale asset purchases did was impaired creative destruction,what i bele companies alive that probably should kept have gone under and allowed other companies to come up and take their place. $2 trillion of leverage loans is a manifestation of that, but the corporateamount of sector debt is that that level

really needs to rise to roughly 90% of gdp to really be systemic and impair growth, and it's about half that level. the aggregate level of debt should not be enough to two the economy over, but, surely, there's going to be sectors were there could be serious problems. example, to get downgraded, that would be wildly disruptive to the high-yield and investment-grade indices like what happened to autos in spring of 2005. it was a transitory event for the markets, but a pretty big event nonetheless, so i would expect to see those sort of events as the fed balance sheet continues to contract in 2019. >> thank you so much for your time today. roundupe, you can get a of the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers can go to the terminal, also available on the bloomberg app. you can customize your settings

to get views of the assets you care about. this is bloomberg.

>> let's get a quick check of the latest business flash headlines. singapore saying the commodity trader could not reenlist, blocking the restructuring plan. singapore authorities [indiscernible] with its net asset value potentially as much as 45% less than it has declared. >> softbank is said to have inced all the shares offered his units. were told it's fully subscribed with underwriters able to complete the entire book by wednesday. the offer has seen strong demand from investors in japan and overseas. it may push the stock above its

preliminary trading value. cfohe arrest of huawei's setting the stage for increased tensions between the u.s. and china. ♪

>> i am on a lovely friday morning here in sydney. markets have been trading for and lookingutes pretty positive. right now, the main benchmark two-thirds of 1%. >> and it's 6:30 p.m. here in new york. slightly higher, gaining 2/10 of 1%, reversing in theses that we saw early trading session. >> and i'm paul allen in sydney. you're watching "daybreak: asia." the first word news. of huaweihe arrest cfo, wanzhou meng, is said to be of the investigation on whether the company tried to --

the wall street journal says the dealings were flagged as suspicious, although huawei itself is not under investigation. the trump administration says it arrestre of meng's before trade talks with china but the president himself did not know. as opec meeting ended in vienna with no curves.t on production two days of talks wrapped up russia showed, as its growing influence. the proposed cut of about a barrels a day failed to win acceptance and the saudi energy minister admits he doesn't expect to reach a deal. >> not yet. we have a full day tomorrow. target,u have roughly a close to one million barrels a day? >> probably. but we're still debating. >> you have an -- are you confident you have an agreement tomorrow? >> no, i'm not confident.

>> boeing has won the backing of despite a dispute over the safety of the 737. indonesian flag carrier will maintain its orders even as air, threatens to cancel a deal. that boeingppy seems to question its safety standards after october's fatal crash. the initial 737 is performing well, they say. the simmering power struggle the reserve bank of india and the modi government in aee the economy caught crossfire. the agency says higher financing costs and reduced credit contributed to the lower forecast. global news, 24 hours a day, on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 127 countries.

bloomberg. >> a bit of a mixed picture in asia.trading in let's see what's moving across markets. by 33%pany, sinking, but this morning. what's the story there? holdings inoof sydney, plunging the most on record. this as australia's banking toulator is seeking disqualify five executives for alleged misconduct in a court jeopardize itsld purchase. the shares tanking on the back of that news. i also want to highlight dropping thehton, most in four years, falling to a february 2016 low, after cutting earnings amid a slowdown and demand. the is a ramp-up in infrastructure progress has been slower than expected. but aside from those drags in aussie we are seeing shares sit to snap a three-day

decline, led higher by health and real estate stocks. adding half a percent this morning. seeing hints at gains in tokyo as well. this may be lifting a touch optic we are now seeing in futures. and they could do with some support, after a three-day decline that wiped out 256 the top,ollars from down about 4.6% after a seven-day rally through monday. electronics, they were the biggest drags on thursday, with groups underry pressure. so the top is down about 16% edgings january high, close tore a bear -- to a bear market once again, as market remains weak with investors reacting easily to bad news like the latest huawei.ents around paul? >> all right. thanks for that update of the there. let's get back to our top story of huawei, the arrest

cfo, wanzhou meng, and what it means for china's relationship with the west. let's start with the significance of meng's arrest. >> sure. a lot of folks are saying if this were facebook, for example, be equivalent to the arrest of sheryl sandberg, the c.e.o. there. it into context into how major this is. a little bit more about meng. huawei for the past 20 years , the daughter, oe siblings, under the c.e.o. who founded huawei back in 1987. she has been rurmed to be the -- thered to be the heir of business dynasty. but a lot of folks still aren't sure, because the c.e.o., her dad, actually rebuked her a few years ago, saying that she, nor had anyger brother, qualities that they needed to possess in terms of vision, character and industry-specific knowledge. that, she still has risen through the ranks over the decades. moving along to the greater

relationship with canada, this big setback for stronger ties with canada. justin trudeau, over the past to years, has been trying strengthen those. you might remember that his father also established with beijing back in the 1970's. but mr. trudeau, justin, is himself. distance now, in fact, in a statement to the press in montreal, he said country of an independent. judiciary. there, and the appropriate authorities took the case without any political involvement or interference, clearly trying to step back. you probably couldn't say no to this. ordero have a treaty in to extradite. but looking at the business oneings, huawei as well as of canada's big ones, have had a relationship pretty much over the past 10 years when huawei first landed in the country. with telis, they have had this partnership to establish a 5g the country. huawei is also one of the top

suppliers to telis. partnered on a pilot project back in 2017. it expands beyond canada, is one of five countries under the so-called five i's alliance. not have heard of this, but it's actually continued on ever since the war ii era. this is an intelligence sharing agreement. andunited states, the u.k. australia and new zealand have all already raised doubts with regards to national security huawei and other giants.telecom canada appears fob the outlie -- appears to be the outlier, at least most open to dealings with huawei. it remains to be seen if that's going to change soon. >> thank you so much. we have an alert on bloomberg right now. chair jerome powell coming out in a remark in a text for conference,housing saying that job creation remains areng and that wages gradually rising, that the u.s. labor market is very strong by

measures, also saying that the expansion benefits are still not reaching some communities. also saying that the economy is currently performing very well overall. this job creation comment coming lady of the -- ahead of the employment report tomorrow. that's coming up. now chair powell saying that the u.s. labor market is very strong, by many majors, that job creation is strong. wages are gradually rising. >> let's continue our discussion us nowei and joining analystul is a senior from financial group. great to have you with us. huawei came out with a theement, saying that pressure coming from the u.s. ties to affect its suppliers. yet are you expecting any complication to its supply chains? really. i think over the past three to

six months, we have been hearing of anxiety over the adverse or tariffthe tariff war between the u.s. and china. but in reality, what's been going on since early spring, slowing down the overall economy. if you look at memory industry, which could be looked at as an indicator, there has been a pressurent pricing that started to happen early this year. indication of a broader slowdown in the economy. china slowed down because of economic cycle. tariff and yesterday's news on huawei, it creates more noise. but in reality, i think there is slowdown that is actually and perhaps bye early next year, i think some of enterprises, like players in

the u.s., could slow down some the investment. so i understand the question. i think there is a lot of noise. lot of geopolitics played in the media. but in reality, there is actually a slowdown in the broader economy. >> and yet we saw that the previous time when the u.s. banned it. close to theame brink of collapse. how do you compare what happened zte and what could happen to huawei? >> sure. at huawei,n you look which could become one of the in 5gablers infrastructure, perhaps if there escalation in geopolitics, huawei could be ability to beir able to offer equipment that is infrastructure. but, again, i think 5g is more of later in

2020. if this -- if the fight between were to and china sustain into spring or summer of think it would have a material impact for huawei. it as of right now, perhaps -- perhaps it may have limited impact. look at the biggest share of revenue, it comes from the smartphone. smartphone is weak. as a matter of fact, the weakerone is going to be in 2019 as we transition from 4g to 5g. overall economy is slowing. perhaps if this fight between the u.s. and china were to sustain into spring, summer of 2019, that's when huawei would impacted, specifically for 5g cellulared for communication. terms of wanzhou meng,

she's been picked up on sanctions violations, but that's what this is all about, is it? >> i'm not knowledgeable to comment on it. look aty if i were to government u.s. sanctioned one of the china-based manufacturers, this happened about a month ago. china has been trying to create their own manufacturing, specifically on the memory side. and u.s. brought sanctions against one of these up and coming chinese manufacturers. and equipment vendors that are based in the u.s. can no longer sell leading-edge equipment to entity. so perhaps there are some maneuvering going on. as i said earlier, memory industries is slowing down anyway. smartphone market is slowing down anyway.

so you see a lot of drama the media. in but the fact of the matter remains, demand for semiconductors is slowing. i think that could give both sides some maneuvering time until they sort out the differences. >> what i was really getting at interesting kind of that it is australia, new zealand and the rest of the members that have pushed for a ban on huawei technologies in the 5g roll-out. likee seeing more broadly a silicon curtain coming down? really. not really. i think there are some countries banned the key sells.nts that huawei of i think those are some the political decisions made. equipmentare other vendors, european or u.s.-based,

that could benefit. i'm not knowledgeable about specifics of these actions taken australia and new zealand. if, again, i would say that this fight were to sustain into 2019, that'smer of when it would start to have huawei andpact for the likes of huawei. i think we're still a little bit early. overall, demand is slowing down. i think they have a bigger problem with their smartphone than the 5g equipment. >> all right. senior analyst, thanks for today. us coming up next, oil under pressure. fails to reach a deal for the first time in nearly five years. into that next. this is bloomberg. ♪

>> this is "daybreak: asia." i'm paul allen in sydney. new york. in opec ministers will meet aftertel again on friday talks broke up with no agreement on reducing output. reporter's oil and gas rachel is joining us now from houston. it seems that the real decision maker wasn't there in vienna. really back in russia. >> that's right. you had the russian minister go back to saint petersburg to much they'rew willing to take off the market. that's being seen as a bear sign won't get a deal announced tomorrow or it won't be quite as big as people are expecting. >> it's really not been a great week for opec. we saw qatar leaving and shake,er the big hand we're still not getting anywhere.

>> no. and the market really expected today'sg to come out of meeting. so definitely a little bit of a those that had counted on something of around ae million-plus barrels of production cut. >> yeah. and that goes on in the got the u.s.e've now becoming an oil exporter for the first time in 75 years. how did we get here and what's the significance for the oil markets? really the story right now. shale and west texas and new mexico is taking off. and largely people think that's going to continue to be the case with increasing amounts of u.s. crude going back to port. >> okay. oil and gas reporter, rachel, in houston. thanks for updating us. let's get to singapore and speak. thanks for joining us today. first off, i just want to get your reaction to what has not

been happening in vienna. opec has hadised such trouble coming to an agreement? paul.d morning, my first reaction was surprise. i think the reaction for a lot of market participants was also a bit of disappointment, because been livinget has with so much uncertainty, not just this week but over the past several weeks. we've seen quite a departure from the past. when i mean the past, the past we have seen this opec, non-opec alliance rather well and efficiently. but if you take a step back, i not soay now i'm surprised, because the day after day after analysis, if you will, with a little bit that whatht, is you're seeing is a completely new structure emerge here. power, balances being redrawn. now we see that two years ago russia was a participant from

outside opec. changing.w it's russia is planning to do a deal withcooperation opec. and that means the power between arabiaand saudi especially will need to be redefined. that's why it's taking longer looking moree difficult this time. >> on the short term, meanwhile, saw the graphs of what the crude price is doing. everything is sinking at the moment. how much longer can that be allowed to persist? the pressure really is on to do something. when will we see something? think most market participants are hoping for a in then today, sometime afternoon, vienna time, when the russian energy minister is back in town. and basically, what stalled or held up things yesterday was the saudi minister. to me, my characterization, putting his

foot down, that russia needed to its fair share. the last time around, russia cut than saudi arabia did, even though russia was a bigger producer. so i think that's what is taking time. we do hope to see some decision. and it looks like it's going to be a cut. but i think the bulls are market, in the wings of the oil market, might be a bit disappointed, because like they're zeroing in about one million barrels a day but some were hoping it could be as high as 1.4 or 1.5. is showingrt production numbers for not only the u.s. but also russia and that the paceing of production from the u.s. has really increased dramatically. course, we've heard from the u.s. government that it turned into a net exporter of oil for in 75 years.e so how is this shale boom marketsplayed into the when it comes to pricing as

well? what exactly -- opec, non-opec decision even more difficult. only the internal power structure that's being redefined the entire external environment around them is also changing. apart from the huge uncertainty, then you have the u.s. the u.s., you have donald trump and his tweets and his constant pressure on the saudis. u.s.ou also have the production, which is rocketing. we heard aboutt the u.s. becoming a net oil exporter is -- you know, it's a small number. not sustain in the immediate future but i think it's very symbolic. it is a sign of things to come. the uses has been -- the u.s. has been growing as an exporter refined products, something that doesn't always get as much

attention as u.s. crude exports. but it's also exporting a lot of refined products. gasoline your diesel, and so on. it was just a matter of time basis, on a sustained the u.s. becomes a net exporter of oil. refined crude but products included. >> all right. thanks for joining us with your views on what we're seeing the oil market right now and the lack of an agreement from opec. an alertnt to give you at the moment. this is news coming from the japan.er in japan planning to exclude huawei from government use. so the pressure continuing to the up on huawei in following -- following the arrest of its c.f.o. in canada. japan planning to exclude huawei and zte from government use. just crossing now.

still to come here on "daybreak: more" we'll be getting you on that story, as markets in continue to point higher after what was a pretty volatile day in the u.s. is bloomberg. ♪

>> we're moments away from the open in japan in south korea. what are you watching? >> well, we are in for a choppy session. swinging this are morning, after a three-day decline that has wiped out $256 billion from japanese stocks. a relief would certainly be welcome. but weaker than forecast household spending in october head wind, compared to the expected 1% gain for japan. news reporting that japan plans to exclude huawei and zte from government use. that may add to mounting risks. as investors are getting their

head around these challenges, the yen is holding steady. but the first weakly gain in three. return to 113 levels in the u.s. job data comes out strong on friday. we're keeping on eye on broadcom's asian suppliers, companyy move after the reported better results for the fourth quarter and raised its 2019 forecast. this generates almost 13% of its broadcom.om of course, nissan will be in focus. this as the nikkei news reports tokyo prosecutors may indict ghosn as well as nissan as monday. >> thanks very much for that. an update of the markets. to come, on the next hour of "daybreak: asia," we'll dig into global central bank policy. going to have the bank of joining ugh. also, we're going to look at the released fromame nintendo, expected to be a boon

for their share price. of the hour, we will have the open of the nikkei. stay with us. this is bloomberg. ♪ i am a family man.

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paul: good morning. asia's major markets have just opened for trade. sophie: welcome to daybreak asia. ♪ paul: our top stories, asia faces a mixed start after equities pared losses on wall street feature the hiring of japan and china pointing lower in hong kong. investors are worried the u.s. china trade trees will not survive.

-- trade truce will not survive. bery: a late rally might spreading across asia. sophie: a route turning to recovery. that is the case across asian markets. the nikkei 225 adding 8/10 of 1%. support be providing given some of the tailwind we are seeing from the wall street session. we also have broadcom's results. forecasting stronger sales for 2019. that may help. in sydney, shares rise for the first day for u.s. futures continuing to kick higher this morning. the yen is holding steady. it is set for the first weekly gain in three.

stocks and oil and bond yields have taken a hit. fore bond yields are set the steepest weekly decline in four months. the 10 year yield is down for the week in australia. thank you for that. let's get to the first word news with jenna. opec plusmped as meeting ended in vienna with no agreement on production curves. two days of talks wrapped up inconclusively after russia showed growing influence by refusing to commit. the proposed cut of one million barrels a day fails to win acceptance and the russian set -- do you have roughly a target? >> probably.

still debating the minutia. you have anonfident agreement set for tomorrow? >> i am not comfortable. >> opec struggled to manage prices. a neta has become exporter of crude for the first time in 70 years, ending 75 years of dependence on foreign oil. the shift is seeing an unprecedented boom from supply in texas and new mexico, along with higher production in north dakota and pennsylvania. theresa may has been told the prospect of a node deal brexit could boost investment in the u.k. they met executives in downing street and urge them to make a deal. it is on fire -- it is seeing fire from all sides.

tokyo sayom prosecutors may charge carlos ghosn as soon as monday. the carmaker itself might be indicted. a apparently drew up lucrative incentive plan for himself and his board well before he was detained and forced out. we are told the proposal was worth 89 million u.s. dollars. $80 million would go into his own pocket. the french government is to deploy 89,000 police officers across the country this weekend with more potentially violent protests anticipated. the prime minister says many people are heading to paris to confront the forces of law and order and attack iconic french symbols. protesters are angry at the high cost of living and feeling they are being ignored by the elite. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

paul: reports from japan say their government plans to ban the use of equipment from chinese company huawei and cte. this follows the arrest of huawei cfo in canada. the white house says the trump administration knew about the arrest before trade talks with china, but that the president was not aware of her detention. let's get over to jodi schneider for more. how significant is it that the president did not know? that is significant, given this was on the eve of the trade ofks between the presidents the u.s. and china. these were significant trade topics. -- trade talks. a lot has been made of the fact that they now have a truce for 90 days. if he knew and went ahead with

the trade talks, that would have been significant. but what is significant now is what this means, how it theliments -- complicates whole relationship in terms of trade and the larger geopolitical stuff. they are concerned china could retaliate. timing is very interesting, whether the president knew or did not know at this point is beside the point. it is really about what it means that this arrest is coming as the u.s. is trying to move forward on trade with china. have in the past hour, we had news from japan, they are planning to exclude while and cte from trade. areu.k. and australia considering banning huawei

involvement in the 5g rollout. how significant is that in japan? >> it is significant. it shows other countries besides the u.s. are very worried about national security implications possible involvement in their countries. the question is what this means going forward and what it means in terms of what we will see from other countries come and whether they take action. and we are hearing from people on capitol hill, there is bipartisan support for being tough on huawei. , marco rubio from she shoulds saying be extradited to the u.s. the some senators are saying they are worried about possible replications from china and what it means -- repercussions from china and what it means for the

relationship going forward. so a mixed reaction from capitol hill. shery: and the extradition could take a long time. what is next? >> they will be a hearing in vancouver. but you are right, it could be a very long process. and it is unprecedented. at ave not really seen citizen -- a citizen of a third country to be extradited from the second country to another country for sanction violations. this is extremely rare. so that further complicates the extradition process. the u.s. is moving forward in that process and we will see what happens. but it will not be something that will happen easily or quickly. and the question is whether the u.s. decides to change its mind in terms of having her be extradited, given the larger trade talks and implications.

at this point, it looks like the u.s. is moving forward, but it is not an easy process. schneider, thank you. let's look at how the markets are adjusting to the folly -- fallout of huawei's fall of the cfo. eli lee joins us. we saw the repercussions in the last trading session when the markets were hit. and today we are seeing a good bounceback in early trading. what is driving the market? >> i think the fact that the after the trade truce was announced did not surprise us much. the magnitude of the decline was puzzling. there were conflicting messages on both sides, the u.s. and china, about exactly what the terms of the trade truce were.

and then there was the highway -- while way cfo arrest. huawei cfo arrest. the magnitude of the decline seems a little overblown in my view. in terms of trade, we are where we were a few months ago where the u.s. it -- versus where we were a few months ago with the standoff, this is a step in the right direction. chinese national arrested in canada on violating u.s. laws. so the chinese will certainly be unhappy about that. at the same time, there are positive signs coming out of china. the recent rules regarding ip protection in china bodes well for the director -- election of the trade talks. the chinese are very incentivized to have a

successful conclusion to trade negotiations. shery: would that provides support for mainland stocks? >> sure. i think we have seen a lot of signs that the chinese government are increasingly shifting their focus from deleveraging the credit bubble to really supporting the economy. over the next few months, we expect them to come up with more measures to support the chinese economy. they have done a bit so far in terms of fiscal and monetary easing. went through a time of neglect which they let the renminbi decline. i think more should be done. we expect them to implement a series of tax cuts next year, more fiscal spending as well.

this will boost confidence in the chinese economy. paul: i want to get your thoughts on the chinese tech sector in the context of comments from john bolton. he was saying while way is one uwei and is ett -- and cte are concerned. to put this in a cold war context, where both countries are in the technology race and they will start doing a fair bit in terms of clamping down the technology sector of their respective countries. incident isz te worrying. if we see this repeat going we are thinking there could be a more benign angle to

this part. -- angle to this. could be a- huwei unique issue. lee, please stay with us. there are some other topics we want to get into with you. about thel talking record-breaking day in u.s. short-term treasuries. boss hasd x nissan been detained without charge longer than the u.k. allows for a suspected terrorist. his detention could last longer. this is bloomberg. ♪

kathleen hays has been

watching the news for us. etn nowe check out the action, let's look at the latest fed speak. you see a support for a pause. kathleen: federal reserve officials see a strong economy, but after hiking rates for so long, i think they are wondering when the endpoint will come. what are we hearing from jay powell? powell? u.s. economyll the is currently performing very well overall. but one of the things in the market today was the question, could the market be peaking? let's look at the data people have accumulated.

up private tally of jobs 179,000. bottoming and is moving higher. meanwhile, president dow is confident in the economy. the fed is within shouting distance of neutral. this was such an impressive rally today. joining ten-year note in with the 30 year, which is rallying. we have a chart to illustrate what has happened. this year you can see how the rising yield really picked up, got to almost 3%. but today the two-year treasury note, which is defying

expectations of where the fed is going. it only pulled back a bit. i one point it was down 10 basis points. at one point it was down 10 basis points. is the labor market peaking? people expects the height a key rate in december. -- hike the key rate in december. it was up to 90%, but it is heading in that direction. all the more focus on the jobs report tomorrow. we are supposed to get a strong gain in payroll. even john williams, who is speaking this evening, said he is watching the data at of the december meeting, especially the employment report. it is really hard to see them

not hiking the right now. maybe they are worried about the trade war impact. a lot of questions and we will get more answers. shery: let's go back to eli lee, who is still with us. given what is happening in the bond market and the yield curve, does all of this signal we are headed toward a peak in equities soon? >> know, i do not think so. i do not think so. we are seeing an inversion in part of the bond year market and it is a reaction to what has been perceived as a dovish tilt to the fed in the last month or so. believe there is still healthy growth in the u.s. economy and it will not be a

strong euros it was this year, it will still drive some appreciation in the equities market. shery: which part of the curve are you watching? market has been disturbed by the five-year, two-year part of the curve inverting over the last few weeks. the largest signal is the 10 year to year. inversioneen driving is the perceived dovish tilt over the last few weeks. year come down. the five-year was an attractive place to be. and now we are seeing inversion in that part of the yield curve. while every recession in the

last 50 years has been preceded by yield curve inversion, not every yield curve inversion has led to a recession. there are false positives and it is more important to look at what is happening to the yield curve together with the performance as well. last few come up the weeks, but nowhere near the and 2016.saw in 2015 paul: the idea of not every yield curve inversion leading to a recession, that is something we explored with a guest. he did not seem to think that would be a recession this time if the yield curve inverted, but there are other risks at play. liquidity tightening, concerns of a brexit over trade. is there a risk that fear could take over and we could begin

circling the psychological drain? >> there is always a risk. , it is hard to see a best case recession in 2019. because it is plausible we are advanced in the cycle, especially for the u.s.. but that seems dubious to me. wellession in 2020 is signal, we would expect the fed to pause or reduce rates next year to forestall recession. so the forecast gets hazy or as we go further out -- gets h azier. for 2019, it is hard to see recession from the numbers we are seeing coming in. the jobs data is likely to show that.

we expect the job market to be extremely strong in the u.s. and unemployment rate will continue to go down. i think the market now, pricing in somewhere between one to two, it is likely overly optimistic. we are looking for three rate hikes next year. shery: i want to ask about what happens in the u.k., the brexit -- u.k.ls december 11 if the brexit vote fails december 11. thee expect the vote on 11th to not go through. forhink it is a coin toss when they reconvene in january of next year. he has stated his you is the u.k. can unilaterally stop brexit if they wish.

this dramatically reduces the likelihood of a hard brexit. we are looking for sterling to appreciate. shery: eli lee, bank of singapore, thank you so much. if you missed part of that interview, you can rewatch it on tv . it is your function on the bloomberg. you can also watch us live and look at the security and bloomberg functions we talk to be. tv . this is bloomberg. ♪

shery: this is daybreak asia. paul: i am paul allen in sydney. let's get a check with the business headlines. mobile has been dealt a major blow. singapore says it cannot treat as a new entity.

singapore authorities see significant uncertainty about the new mobile span hl position. the asset value. bery: chrysler is set to bringing detroit engine plants out of storage to build a new gymnasium. update -- tog to build a new jeep. they could add 400 new jobs. paul: tesla is about to hit the road in europe with drivers soon able to buy the new mobile three. reservations opened in march, 2016 at 1000 euros. tesla fans in the u.k. will have to wait as the company is concentrating on the european

market that drives on the right, as they do in the u.s. shery: carlos ghosn could be charged as soon as monday. this is bloomberg. ♪

8:30 and hong kong and we are one hour away from the open of trading. shery: let's get the first word news with jenna. seoa: dear rest of huawei is said to be part of the u.s. investigation into whether the company tried to avoid sanctions transactions.ting the dealings were flagged as suspicious. the trump administration says it was aware of ming's arrest before trade talks happened but the president himself did not know. jay powell has a bullish assessment of the u.s. economy

and labor market ahead of the latest payroll numbers. in a speech, he said the economy is performing well overall, with risingjob creation and wages. economists are expecting a moderate rise in payroll later today, despite some data indicated -- indicating cooling. the power struggle between the reserve bank of india and the modi government could see the economy caught in the crossfire. the agency says higher financing costs and reduce credit availability contributed to the lower forecast. boeing has one at the backing in .ndonesia, despite the dispute the indonesian flag carrier will name orders as rival air threatens to cancel a $22 billion deal. they are unhappy that boeing

seems to question safety standards after october's fatal crash. ae initial 37 -- the initial 737 is performing well and they expect to receive several more by 2030. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. shery: we have breaking news. we are hearing president trump is set to take heather downward as the next ambassador to the u.n. nikki haley is leaving at the end of the year and we are now hearing president trump is set oward as theher n next abbasid or. anchor. former fox news ambassador.xt asian markets are looking

positive, mostly in the green at the moment. sophie: modest gains for asian stocks. the entech 50, little change. they gained ground early in the session that has eased. treasuries are looking steady. i want to take a look at what has been going on elsewhere. asian stocks are heading for a weekly decline. equity movers are insight. let's check on some of the christoph weber says the company aims to fix their balance sheet within five years. adelaide brights

dropping the most in four years after cutting earnings died in's slowdown in demand. us jelly's banking regulator seeks to disqualify five for alleged misconduct's. that could put the purchase in jeopardy. origin energy gained 4% this morning after reaffirming orden -- guidance. paul: opec ministers will meet non-cartel producers on friday. this is after talks in vienna broke up with no agreements. brent crude and west texas fallen on that news. aaron clark joins us. were you surprised we did not get an agreement?

is always the devil in the details. opec failed to reach an agreement for production cut. the discussion was centered around cuts of one million barrels a day. what saudi arabian energy minister said is not all nations were willing to cut equally. sticking point seems to be russia, which is not an official member of opec but they were part of this group that implemented the previous cuts. what bloomberg has reported is that saudi arabia wanted russia to cut by 300,000 barrels a day. russia came back and said they only want to cut 150,000 barrels a day. so as they get into the nitty-gritty, this is where the real negotiations begin. there are additional talks scheduled today with the non-opec producers, russian energy minister is scheduled to fly back to vienna today. so we will see how the talks

continue. so far, no deal. paul: i remember before the it was optimistic. perform markets now without the prospect of higher crude prices? >> they reacted yesterday. brent fell as much as 5% after the announcement of no deal. they are around $60 a barrel today. wti is around 51. picture a very bearish if there are no cuts. that is what people will look for, any sort of announcement. prices are definitely in a isrish outlook unless there some sort of announcement. shery: we just heard from the u.s. that the country has now

become a net exporter of oil for the first time in 75 years last week. what will be the long-term impact of the shift? >> it is really interesting. this is just in weekly data. the c-note could flip-flop and there could be a net importer next week. but if you step back and look at this, it is about the rise of u.s. shale producers. they have been boosting production for the last several years, taking market share away from other producers, including opec producers, and they are really responding to market demand. it is changing the balance of power in the oil market. it will be interesting to see if opec does implement cuts, one would expect prices to rise and you would actually see u.s. producers boost production and export even more. so they are responding to demand and gaining mobile market share. shery: aaron clark, our

bloomberg asia energy editor, thank you. prosecutorsporting are expected to indict carlos ghosn as soon as monday. prosecutors also plan to indict breachinga company by and acts by making misstatements on security reports. we are joined in tokyo by sophie. what options are therefore prosecutors on monday -- are there for prosecutors on monday? sophie: they plan to indict carlos ghosn on monday. they also had the option of not indicting him, and re-arresting him on a different charge. monday is the deadline. if they rearrest him, the clock starts again and that is another 22 days.

they apparently have enough evidence and they think it is safe to indict him. the nikkei reports they will also indict greg kelly, as well. shery: what has been the reaction so far about japan's treatment of carlos ghosn? intention -- detention can go on indefinitely if they add more charges. he has not been indicted yet and is being questioned everyday. the system in japan has been criticized by particularly french media at around the world in light of this very high-profile arrest. historically, it has been condemned by amnesty international. they say a could -- they say torture could cause false confessions. as far as we know, he has not convinced anything and it looks like he will fight it. so he is very likely to be granted bail. paul: there is also the nissan beingf

indicted as a company. what are the chances of that happening? sophie: we have not confirmed that yet. nikkei was relatively light on details. under this potential breach of japan's financial exchange, called juror thing light ability. -- liability. they can indict nissan as a company. reporters suggest that could happen as soon as monday. sophie jackman in tokyo, thank you for the update. up next, nintendo finally long-awaitedr game. can it save the console? this is bloomberg. ♪

paul: this is daybreak asia.

i am paul allen in sydney. shery: let's get a check of the business headlines. softbank is said to have placed all shares offers in the ipo telecom unit. we are told the 23 billion dollar offer is fully subscribed with underwriters able to complete the entire book by wednesday. the author has seen strong demand from retail investors in japan and overseas. the interest may push the stock above their preliminary price of -- preliminary price when trading begins in december. has filed for an ipo, pulling ahead of uber in the race to go public. they have yet to decide how many shares will be offered where the potential price. next year will test the markets appetite. uber is aiming for an ipo in the first half.

russia's leading service is looking to list in 2019. carmakerinese electric is raising funds for expansion. their listing is expected in 2022 as they strengthen their business in the auto industry shift away from the combustion and in. we are told the company -- combustion engine. has notold the company yet listed parts of the operation. paul: one of the most anticipated nintendo games of the year was released today. super smash brothers ultimate is being hailed as the savior of the switch console, a platform that has been struggling to gain traction. the marketest says is not connecting the dots on nintendo. thank you for joining us. give us a sense of how important the release of this game is for

nintendo and the switch. so far, all of the console platforms are extremely important and this is first party, so nintendo's games are exclusive on switch. this is one of the most awaited games this year. , it is one ofse the most important games because it has the biggest roster of characters with which to play. all exclusive games are important. paul: what has been the problem for the switch? there is a price. for a handheld console, it is not cheap. know why you say inre is a problem, because they are onear,

track to do 18 billion units. far are follow -- they are out selling playstation 4 back in the day. they are in line with what we have been telling. but it is market perception. at the beginning of the year, the company guided 20 million units. last year was 15. that leads to exclusive games in the first half. on a year and year basis, it was still going up 1%. are selling 5% to 10% more, that is a very good trend. you do not have to sell 20 million units to make it look good. the earnings are not driven by the console sales only. other factors go into it. , onlyas able to deliver

slightly every year, the prophet has gone up six times in the last four years for sony. that is phenomenal. so there is no problem with switch. shery: do console sales equal profits? >> no. let's say you sell the console. let's say you sell a printer. next year, you sell more cartridges. so you have 100% year on year growth for contras -- cartridges. selling more. -- the annual console sales are important but steady growth is more important than

big jobs. that is where the market is getting it wrong. shery: what should investors understand about the game console cycle? sony'sou look at numbers, for example, it tells you what happened in the last five years. not just sony. the game companies that console, sony the and microsoft xbox. companies were up five to 10 times. earnings were up massively. as the happens is platform grows, so does profit. it is the number of games that sell where the companies will not make money selling ps4, xbox, or switch. let's look at cell phones. we are expecting the ipo. what should investors be watching out for as we head toward the historic day?

tricky.is there is retail interest. the most in part is the comparison versus the other two companies. the concerns in the market are about pricing in general. the profits and revenue, if you look at the telco companies, the three of them are pretty stable and producing stable profits. these are non-growth stocks but they attract dividend yields in a market like japan. government bonds yield effectively 0%. these stocks are 4% to 5%. that is very attractive for income investors.

wery: does it worry you that have seen some government pressures to raise fees for japan's telco? >> that should always worry investors in general. if you look at the track record of the companies, this is not new. recently, three years back, the prime minister highlighted this and asking for pricing to be adjusting -- adjusted. revenue and prices are still stable. the prices alower little, they can lower the cost and overall the process -- profit is stable. kddi, in the last 18 years, softbank taking up shares, they have not seen a single year of earnings decline. take a look at that chart.

sinceperating profits 2000. the: you asked me what problem with switch was. i do not have a problem, but if you look at the when your chart from nintendo, it looks like the market does. -- the one year chart from nintendo, it looks like the market does. what is the problem? >> i am saying there is no problem in switch sales as such. it is market perceiving. the market cannot connect the dots. the stock market is up two years. if you look for years, it is up massively. were advising people not to make that assumption. the steady sales growth is key and we look at earnings. we look at earnings for the company, it does not matter with the switch sales are. switch is not driving profits directly. you have to focus on the earnings. sony provides a beautiful

trajectory to see where it goes. sony's earnings from year to yearsix -- year two to six, it went up six times. this is a really powerful earnings trajectory on which earnings -- on which nintendo is going. they are outselling what sony sold. no other consoles sold as much in the second year as nintendo is about to sell. put at the beginning of the year when expectations went past, peoples expectations for switch sales were well ahead what they could've been. it looks like it has fallen short. that is the only spot. every thing else is fantastic. there is no problem. thank you for joining us. we are out of time.

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paul: this is daybreak asia. i am paul allen in sydney. shery: let's get a check of the market this friday. sophie is in hong kong looking at some of the stocks we should be watching. onhie: we are keeping an eye suppliers across the region. japan is planning to exclude huawei from government use. the attack sank 6%. we saw suppliers for huawei slide in hong kong and shanghai. down nearly 6%. china saw a tumble of 13% in hong kong. we are keeping an ion chinese drugmakers. drugs cut prices by 45%.

saying see no biofarma will be one of the most impacted. biofarma has said two of its products have fallen 16%. we have taiwanese november trade do out and a slew of data throughout the region, including china. get a look at what is coming up in the next few hours on bloomberg tv. rishaad is in hong kong. rishaad: we are looking at the latest on huawei and the rest of disruptionsing between beijing and washington. on in 10nell will be minutes, looking at what this

means for the company and the wider picture. lack of agreement out of opec had j.p. morgan joins us in one hour to look at how -- to look at where oil goes next. that is what we have on the way on bloomberg markets. paul: thank you. before we hand over, let's look at the markets. all is back on after and voluntary day and wall street. the nikkei is up one third of 1%. day on wallolatile street. the nikkei is up one third of 1%.

rishaad: this is bloomberg markets china open. yvonne: the huawei drama continues. there are calls for the companies to be heavily punished. david: opec talks break up with no agreement. saudi arabia says it is not confident that producers will agree to a cut. nissan may also be indicted. ♪