>> welcome to sydney were australian markets have just opened for trade. >> welcome to "daybreak: asia asia." - "daybreak: >> our top stories this wednesday -- asia-pacific markets see a flat open after volatile markets in new york. steve mnuchin signals trade talks in the u.s. -- in the new and chinag the u.s.

are determined to resolve trade differences. and the fed opens its final policy meeting of the year with president trump once again tweeting for reports. >> let's get you started with how markets closed the tuesday session in the u.s., a mixed picture with a lot of volatility in equity markets from the days low. to lows, about 82% almost 1%.ed we had consumer discretionary stocks, real estate, but energy producers really led the declines as crude tumbled past $46 a barrel. we have a lot of uncertainty not only on growth outlook for trade concerns and geopolitics but also because investors right now are pricing in a more dovish turn from the fed for the fomc meeting where the fed is

expected to raise rates for the fourth time this year. what happens if we do not see that dovish turn? are setting upe for the asian markets. good news to hang your hat on. .ooking at a tepid start japan and sydney, we are seeing a loss of .1%. we do have energy producers among the laggards so far, early .tart of the session oil prices falling the most in weeks.an three crude not -- crude lost nearly 8% overnight. just ticking higher above that level, but crude is on track for the worst quarter since 2014 and that drop in oil has lowered import sales for japan, so this

morning on the day's agenda, weeks. crude notthat will likely feed a narrower trade deficit for japan in november, and lower oil keeping price pressures at bay for the likes of malaysia, so inflation will likely looks a .ude -- look subdued of course, we are watching for beijing'sof leadership three-day summit that will set the economic agenda for next year. this after beijing held its ground when it came to how china advanced itself on its reform agenda and also a big highlight today, the debut of softbank corp. after the ipo raised over $25 billion. softbank will start trading under the ticker 9434. >> we are live in tokyo throughout the course of the day for that. let's get to new york for the first word news. thanks, heidi. the european union stepping up

the pressure on brexit, ruling out any peaceful negotiations on aspects of the deal hammered out with theresa may. officials in brussels tell us if parliament fails to ratify the bill next month, the eu will not seek what it calls and management of deal, but it will take unilateral steps to prepare for a hard divorce. they are in london say taking a similar hardline. >> we are setting a clear message this needs to be much more clarity for business. to recognize with 14 weeks to go the responsible government is preparing for the eventuality that we leave .ithout a deal >> italy says it struck an informal deal with the eu to avoid sanctions for its 2019 budget. the treasury says it has the technical agreement which will brusselsfication by wednesday. a populist government cut its deficit tiger for the coming year to a fraction over 2%, and it also shaved more than 4

billion euros off its spending plan to win eu approval. saudi arabia's spending will hit an all-time high in the coming year if the government extends handouts to cushion the rising costs. the budget includes a cost-of-living allowance that will total almost $11 billion. the kingdom is struggling with falling oil prices and anger over the murder of dissident journalist jamal khashoggi. >> this is the largest budget in the history of saudi arabia, aiming to support economic growth in the kingdom and raise the efficiency of spending and achieving sustainability and financial stability as per the goals of vision 2030. >> as asian nations are being warned to expect further downgrades from the fallout of rising interest rates next year, s&p global ratings has already trimmed its 2019 growth forecast for asia across the board, but it now says there could be further cuts.

the agency's chief aipac says local nations remain the most vulnerable. >> thank you. let's dive back into the latest volatile session in u.s. trading. stocks managed to hang on the .ains new york traded crude futures fell more than 8% intraday and are now on track for the worst quarter since the 2014 track. su keenan has more. we were talking about supply concerns, but also you were telling us it's because of liquidation pressures. >> that is what many veterans will tell you when we see this kind of sharp drop. it could mean that major funds are getting margin calls and are forced to sell into it.

oiled to work on the exchange and we would say days like this you go home in an ambulance or a limousine. it's a very rough day. in the stock market, the energy index, those energy type stocks to commodities, biggest exciting group. let's going into the stocks themselves. i said oil stocks got cracked and we're not kidding you look at the size of these declines. this reflect also some of the reasons the commodity was down, the fact this questions about the opec plus cut, that is now nowerns concerns about supply, demand, shale production, and look at this -- oil spiraling below 47, now 46 as we get into extended trading, and as we also look at the bigger picture, you can see how dramatic the decline has been. again, the worst, as mentioned, oil decline for december in almost four years. >> in terms of the historic

trend of december where we are at with stock trading, it is not a pretty picture. >> horrible december for oil, equally bad for stocks. let's just go into the bloomberg real quick and you get a dramatic picture here. worst december since 1931, so you have to go back 90 years to for stocks isr that is we are seeing thus far. could the fed turn it around apple that's the question asked at the top of the show -- what if they do not? let's go to some of the big movers today, and big is an understatement. blue apron gets the title of worst ipo of the decade. it has lost 90% of its value since it debuted in the summer of 2017. and marijuana company, getting a farmer deal, big pharma getting involved in distribution. boeing having a good day, and

fromn getting a knock off .wo analysts let's take a look after hours. mentioned fedex. this is a proxy again for shipping, global economy, down more than 6%. this slashes its profit outlook on that. let's take a concern that the international trade outlook, this trade dispute is weighing on fedex, that actually could on the s&ph wednesday. we have the fed decision weighing on the s&p, also have profit/citing trade that's a heavy negative. >> no santa claus rally insight as of yet. the u.s. and says china will meet in january to negotiate a broader trade truce following a series of phone conversations that have taken

place in recent weeks. the treasury secretary says both sides are determined to resolve their differences. realizes like mnuchin they want to get something better down that is verifiable or enforceable, some more details than just this broad trade truce that we've been going by. >> right. for the first time, they have set something of a timeline for a planned for face-to-face meetings. right now, they are still working on the logistics. the treasury secretary said the main goal is for the u.s. to put on paper something of an that was loosely hammered out at the g20 summit between president trump and president she -- president xi. there are some skeptics in the white house that say the u.s. should not trust any commitments that china would make on economic reforms given the experience with past administration, but the treasury secretary said that any

agreement they do forge will be -- have enforceable measures. it will be verifiable, and it will have some deadlines for action. the big goal is to reduce the trade deficit with china. mnuchin said this would take time and that he recognizes it would also take time for some of the structural reforms that the u.s. is seeking. the march 1 deadline is not going to be the be-all/end all china goingks with forward, so we will see more of this, but what he said the u.s. wants is the same access for u.s. firms in china that chinese companies get in the u.s. >> another deadline domestically -- is government funding running out on friday. there have been talks about a potential temporary funding measure, but with that just make it more complicated for next when democrats take over the house? >> right, this would just kicked

the can down the road and it could come in january or february. democrats take control of the house on january 3, and they are holding firm on denying trump the money that he wants to build the border wall, contending that it is not useful, not efficient use of money. there will probably be some compromise along the way on border security, things of that nature, but the big demand that the president wants, which was $5 billion for the wall construction, does not seem likely to happen, so we could be facing the shutdown again. in this case, the administration has backed down, and they have taken a retreat just trump last week said he would be proud to shutdown the government over border wall funding. look look like it is going to happen right now. they are moving toward getting something done before friday's

will see but again, we this battle fought in the new year. >> another headline today was after a lot of controversy over the president's charity, we are now seeing the trump foundation breaking up. .ell us the story behind it >> this has been an investigation that has been going on in new york by the attorney general, and it has come under scrutiny since the campaign about how it spend its money. there were allegations money was spent to help trump's campaign, that he used it for paying fines and other personal uses and it was not ever really a big foundation to begin with, but there was enough evidence that the ag in new york managed to negotiate this deal that will result in essentially the foundation being dissolved, and that will be the end of it, and they will be supervising where whatever money is in that will beon still

distributed under the supervision of the attorney general's office. >> i think at its peak, it only had about three point $2 million in the bank, really a small sum for a billionaire. thank you. still ahead, staying the course. chinese president's speech to party faithful signals more tension ahead. >> also, what to expect from the fomc's final decision of the year. this is bloomberg ♪

>> this is daybreak asia. >> to hike or not to hike -- that is the fed's big question. argumentsook at both of the debate, bloomberg's

global policy editor, kathleen hays. let's start with the president's latest tweet. >> we know he is wholly opposed to rate hikes. he has made that crystal clear its the fed is unwinding portfolio, and he says that is making the stock market illiquid . this was echoed in a wall street .ournal editorial trump seems to be painting the fed into a corner because if they hike -- partly because they want to show they are not bowing it causedtrump, but again, people could say they buckled. let's look at more of the facts on the table as the fed has this

important debate. why should they hike? you have low unemployment, 3.7 percent, wages rising slowly but rising. interest rates at these levels still accommodative. consumer spending looking good. confidence still high. gdp growth will be slower next year but still well above potential. why should they cause? global stock markets, not just the u.s., under big pressure lately. strong dollar could hurt manufacturing. one of the big focus is, of course, let's say they hike the key rate. the summary of economic rejection will be updated at this meeting. what is important is that second row of dots in from the left-hand side of the screen. there is a near consensus for three rate hikes of next year,

plenty below that consensus, but you need at least a couple of .hose people that will be the focus, even though the fed will also talk in whicha dependency, case maybe you do not put too much emphasis on it because the data could change. >> thank you so much. now by the founder of sgh macro advisors. great to see you again. as kathleen pointed out, we have seen this market turmoil. in the past historically, the fed has rarely hike rates in such an environment. even if we do see them go ahead and hike rates, could we also any cause inthat tightening could be coming up? >> first of all, to the question of if they will hike or not, there has been a lot of pressure not just from the white house

and policy investors saying it would be a and policy investors saying it would be a mistake to hike in this kind of economic turmoil, tremendousere's no urgency for them to hike, but we think they will. the reason is it has been telegraphed for a long time and a think we know the reasons -- kathleen went through the great economic reasons for them to hike, though i think that is important, and you were asking about the balance sheet -- -- signal >> of course. that is the important part. kathleen also mentioned the projections. we think that will come down

from three to two. my deal, even though it's coming down, it will still be above market expectations. have taken up pretty much anything except for half a rate hike, but markets will havk at it as a signal of validation as far as direction. thehen you mentioned balance sheet, a chart on the bloomberg shows financial conditions have really tightened, given the fed rate hikes right there. continue to see the balance sheet runoff. will we see change in that policy? >> absolutely not. the feds took a long time to get consensus on this balance sheet runoff. said this was something we should look at, but the issue with the balance sheet is not just it took a lot of consensus and this was part of the normalization process, and the toolkit they will use to adjust is rates, not the balance sheet -- eventually, maybe the balance sheet, but if you're

looking at moral hazard and the thing that caused a lot of those problems as far as pushing people out into risk assets, that was the original intent of expanding the balance sheet and all that. if you're going to do that at this point and reverse it, you will raise all those questions again of pushing people back out into risk assets unnecessarily. >> i want to show this great chart that goes to the essence shery was talking about, that it is exceedingly rare that we have these periods. sixave seen them raised times under similar conditions. theou look at this from perspective of a healthy correction and a reassessment been a tremendous cycle growth and a bull run in equity markets, or do you put a the perspective of a healthy correction and a little

credibility and what the president is saying, which is animal spirits at the moment telling us that something is not quite right here? >> i think it is a little bit of be careful what you wish for. the fed has not been displeased that there was some correction and two-way movement in the stock market. this degree of volatility is extremely severe, but if i'm jay powell and i think this is an important fact, there is a little bit of the careful what you wish for from the white house as well -- a lot of people saying this is the last policy variable we have with the year after china and everything, so please, read, come out dovish -- come out dovish, but the worst case, far worse than of hiking, is if they did not hike and the stock market went down anyway. it's not just about credibility and the fact that they are kowtowing to the white house and all these other issues, which is

a problem, but it really is at a point where the fed has its forecast, has said what it is going to do, and it will be seen as doing a last-minute tibbett because of the stock market, and imagine if the stock market collapsed. this is where the white house needs to tread very carefully. yes, you can pressure the fed, but you don't want to, excuse my language, cash trade them -- cas trate them. >> great to have you. of course, bloomberg television will have full coverage of the fed's final policy decision beginning at 6:00 a.m. that's 2:00 p.m. wednesday for our new york viewers. this is bloomberg. ♪

>> a quick check of the latest business headlines this hour. apple has been want to take seriously and iphone been in china and stop trying to circumvent it after qualcomm argued its patents were being infringed and the company wants the ban to extend to cover the latest iphones. >> fedex slumped after lowering full-year forecast and announcing a range of cost cuts. adjusted earnings per share .uidance missed estimates fedex says it's china business has slowed in part due to the trade tensions, and it sees slower global trade growth in the near term. up, 2019, the outlook for the chinese yuan. next. the view

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argh! i'm trying... ♪ yippiekiyay. ♪ mom. ♪ >> marketeer have been trading

for about 30 minutes. we are trading more threat the moment. s&p flat at the moment. strong games -- games for financials. 2.5% at thisy point after oil prices continue to plummet, hitting that 16 month low overnight as the surging supplies create a headache everywhere from the u.s. to russia. we are treading water, expecting fed overhang to be removed in the next hours for the final ped -- fed policy meeting.

york 6:30 p.m. here in new . however futures setting up? >> really reversing earlier declines. unchanged at the moment. they were slightly higher earlier. that's interesting given we are seeing this risk off sentiment fading with the yen weakening after strength we have seen because of haven buying. you are watching daybreak asia. let's now that the first word news with jessica summers. treasury secretary steven mnuchin and says the u.s. and china will meet in january to negotiate a broader trade trees. the follows a string of phone conversations in recent weeks. he said the two sides are confirming logistics and are determined to resolve their differences. mnuchin added they already agreed that any deal will be enforceable and verifiable.

the white house is backing away from a government shutdown, signaling it may tap existing sources of money to fund the border wall. as a republican leaders propose transferring $1 billion for immigration. last week, the president said he would be proud to close down federal agencies if he doesn't get what he wants. president trump has agreed to close his embattled charity that has been accused of rampant wrongdoing. foundation will dissolve and give away its remaining money. the stars ultimately failed to align for a record number of rocket launches. alliance became

the last of four potential missions to postpone lift off. spacex scrubbed its mission on technical concerns. global news 24 hours a day on air and on tictoc on twitter. powered by more than 2700 journalists in more than 120 countries. this is bloomberg. >> thank you. market looking mixed at the moment in asia. australia falling for a second session. here is sophie with the details. on tuesday,ll 1.2% energy the biggest drag. oil prices hold losses. bonds are tracking that rally in treasuries. 10 year yields taking a two day decline to seven basis points as far. mineral rising to the

highest level on record as oil prices grew gain momentum. the airlines will benefit from robust travel this holiday season was higher ticket prices. a companies saying that the farming sector is being affected by drought. drop ineading to a 5% the milk supply in australia. aussie banks are a bright spot. the only sector firmly on the green. markets -- markets leveraging. checking in on the trading diary. we will get a sense on how japan's exports fed last month ninee wake of week import -- numbers out of china. the central bank roll call continues.

the bank of thailand has been hinting at a rate hike. we may see the first increase since 2011 since the economy seems to be humming along. second-biggest ipo in history with a listing of softbank's mobile unit, worth $63 billion. >> thank you. the president of china mark 40 years of reform and opening up in china by striking a defiant tone. his warning that no one has the right to tell beijing what to do signals that tensions with the u.s. remain. our china correspondent joins us now. some people had hoped that the president would take this opportunity in his speech to ease u.s. concerns. we did not see much on that front. >> we did not indeed. there was a slim hope from some that the president would use this speech marking the 40th

anniversary of reform by announcing more steps to open up the market. he did not do that. the resolve that there would be new policies to address the andstic economic policies trade war issues. instead, this was a backward looking speech recapping for decades of progress. of thesignificant focus car minas party -- communist party. you would get a sense of where the priorities lie. no sense from china's leader that you are going to get any major structural changes. continueeforms would but in line with china's longer-term strategy. that suggests that the changes we have seen put in place by chinese policymakers over the are tacticals shifts rather than strategic

shifts. a crisis for china is a crisis delayed. the huawei chairman has spoken out for the first time since her arrest. issuere they sang on that -- saying on that issue? >> they are facing multiple track -- pressures. have the cfo being detained over allegations. you have the company coming under attack under a multiple of france. new zealand, australia, the u.s. have banned the purchase of their equipment. you have telecom industries saying that there's a concern around huawei technology. they were answering questions from reporters for the first time since the arrest of the

cfo. he really pushed back against some of the views that have been expressed in the u.s. and american allies that huawei could pose a cybersecurity risk, could allow the chinese government to hack or spy on other countries huawei using huawei -- countries using huawei technology. we have gotten pushback from the assistant attorney general speaking to our colleagues in new york. he says this wasn't a cooked up case around the cfo. they haveomething been investigating for a long time. take a listen. >> law enforcement is what we do at the justice department. the cases we are announcing and have announced recently our cases based on year's worth of investigations, not something that we just thought of in the last year or so. these cases take a long time to develop and investigate. we are just following the facts as we see them, either brought

to us by u.s. companies or that we gain some intelligence into. >> the case of the pushback against the purchasing of huawei technology comes at a critical moment for this technology which is trying to dominate in the 5g face. they say revenues are at 100 billion revenues -- u.s. dollars this year. >> our china correspondent there in beijing. we have steven mnuchin telling us that when the cfo was arrested, neither he nor president trump had any idea that that was happening. really reiterating this is two separate issues on two different tracks. let's get more in terms of what to expect from china going into this new round of trade talks in january.

becky, before we get into the macro side of things, let's look at the speech we had yesterday commemorating the 40 years since the opening up and reform strategy. it focused on the strength of china, recitation of party achievements on wealth and strength and power. there was very little indication of conciliation or reform or opening up, was there? were you optimistic after hearing that? , wehe speech in our view feel that china might be holding back some of the reform discussions until its own conclusion with the u.s. negotiation. firstl be looking for the quarter of 2019. for the hope for likely more announcements on reform plans. >> what about expectations

coming out? they are kicking off the party meeting to discuss economic policy, right? it's a rubberstamp situation. are you expecting anymore initiatives or policies that might crop up the lagging growth we are starting to see? not just because of the trade war but of the structural slowdown we are expecting from the chinese economy. >> we not -- are not expecting a lot of reforms or initiatives. we are expecting further details in terms of the direction of the major economic policies for 2019. it's very difficult to expect anything that would deviate from the meeting which outlined the recent frameworks and parodies. this meeting will be used to discuss the major direction of monetary policy, the major economic targets will also be discussed. the actual release of those

will need to wait until the final endorsement next march. >> they are quite bullish on the chinese yuan. 665are expecting it to be by the end of 2019. could it still appreciate without a trade traders? -- truce? >> all expectation is under the expectation that there will be a continued truce between the u.s. and china. we do see an increasing probability that both parties have the incentive and willingness to reach a deal. we would rather think more about a matter of terms. we do feel there will be an intimate deal by the end of the 90 day deadline or at an extended deadline. when we look at two components

cap a fundamental component and a technical component. on the back of the technical component, the chinese technologies ability to defend remains extremely strong. after the g20, china is increasing its incentive to keep it under seven. we feel there's very little chance for the pair to go beyond a seven ahead of the 90 day negotiation deal. once we see a continued cease-fire between the two countries, we may see it appreciating from here. >> policymakers have an incentive to boost economic growth to support it. our chart showing the rrr cuts we have seen so far. the lending rate steady. if we continue to see easing measures in order to support the economy, wouldn't that put more pressure on the chinese yuan? >> the fundamental story is largely different.

the outflow has been very much contained. we look it assets purchased in china, this is way lower than the peak during 2015. this is on the back of the fundamental reasons. at the same time, we also fear that the market sentiment is changing. instead of having people putting in huge officials, we don't see that kind of flow. we don't see that from the mystic players. >> thank you so much for your time. the head of china microstrategy. still ahead, d-day for cell bank. live at the stock exchange, next. this is bloomberg. ♪

a look in some of

the stories trending across the bloomberg universe. terminal subscribers reading about where the highest earners in the united states are living. it's not where you might expect. tictoc has a story on how children's program sesame street is introducing a homeless puppet to raise awareness of family homelessness. wealth and howm, the richest in japan are benefiting on -- under economics. check those stories on the terminal. >> the big news of the day. softbank's wireless unit begins trading in tokyo later on after an initial public offering. ¥1500. the grey market is trading just below that figure. what's the feeling about this ipo? that depends who you ask.

how the markett it's lookingthis, fairly tepid. it comes down to market conditions. it's freezing here in tokyo. perhaps that is also adding to some of the lackluster reception that we are getting here as far as the ipo was concerned. the ipo was fully subscribed. 90% went to retail investors. the story was about the dividend yield of 5%. if you consider the risk to the business, this is where the institutional part comes into play. its three basic things. highly competitive market. it will get more competitive. if we get into a price war, that 85% gross dividend ratio doesn't really matter. that something to consider as well. as far as the dividend play is

concerned, if you compare what softbank's offering, you compare that to what you get with giacomo and ddi. it offers you much better returns if you bought at the ipo price. that might be academic. it looks like we might open lower. a bid to cover when it comes to the big foreign investors. a bit less for domestic investors. where is the disconnect going on? several facets to that. when you ask people here in japan, it's a national champion, it's a good band -- brand. if you ask international investors, they look at the risk. it's not a growing business. you have the potential for a price war. you consider the huawei angle and how that might mix -- mess

with the company. you were just talking about the massive outlays that some of these companies have. they are shutting huawei equipment. when it comes to the stock itself, there might be some demand for institutional money because some of these funds will need to track the index. haidi: we will get more from you throughout the course of this day. you can also get more on your bloomberg on this. blog,our live commentary analysis coming through from bloomberg's expert editors. sherry: we have breaking numbers on the bloomberg. japan's trade data. the trade of almonds adjusted seasonally falling more than

expected. wider than the expected 274 billion. much wider than in the previous month of october. the trade balance seasonally adjusted, the deficit widening to ¥737.3 billion. that is much higher than the deficit we saw for the month of october as well. we are getting mixed signals when it comes to trade. we have lower oil prices, reducing the import bill but because of these export concerns on trade tensions, they have been hitting these numbers. export growth on your only rising .1%. the expectation was for growth of 1.2%. would've been a remarkable slow down for the previous month when exports grew more than 8%. the import numbers much higher on growing 12.5% year on year.

all of this having an impact on the japanese yen and how they affect exports as well. it's really a combination of oil prices as well as trade tensions. we have already seen weak numbers when it comes to export growth in china. this is not going to go far. concerns over whether the asian supply chain are going to do well out of the surviving of the trade war. particularly on the export front. let's take a look at the market open in japan and south korea. japan ours facing further losses after topix closed at an 18 month low. of the details coming through as well, exports to the u.s. rose 1.6% some -- on the

yearly basis. seoul, marginally extending tuesday's decline. this as the trade war is the biggest risk. the boj has called on the government private companies and individuals to work together. hynix, thehing sk chipmaker is considering plans to build a new plant in south korea to create jobs and boost the regional economy. the government likely to support the project through deregulation. tokyo electron on the radar after micron says it plans to cut estimate weekends. government --he decatur says it will list its eight american monetary stairs -- stakes. more ahead on daybreak asia.

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>> let's get a quick check of the latest business flash headlines. has attackedlogy the u.s. for fear mongering. the company's chairman has spoken publicly for the first time since the arrest of the cfo in think hoover. impliesuver area he that they follow proper lot. civic group faces losses of as much as $180 million on loans made towards an asian hedge funds. andtwo sides are talking board level discussions are considering an internal shakeup for global hedge funds that have been under pressure this year with the three tall and all your industry now on track for its worst annual performance since

2011. >> more intense scrutiny in india after a ruling on the disputed refund. they claims it is old almost $700 million from 2014 to this year. the high court says authorities are right to withhold the monday as they investigate the company's tax returns. they are already struggling with a price war in india that has caused immense financial stress. up, we are minutes away from that softbank ipo. ourill get the views of guests. the market open is coming up next. a lackluster session so far when it comes to asian stocks. session justu.s. managing to stay in positive territory. counting down to the fed as well.

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haidi: a very good morning. asia's major markets have just open for trade. sherry: good evening. >> welcome to daybreak asia. ♪ haidi: our top stories this wednesday. asian markets after a volatile session in new york. after outlook for growth fears of a new glut. traders are fearful that the opec outlook curve won't work.

sherry: the fed opens its final policymaking on the year. the president again tweeting for a pause. pricing in ato be dovish turn from the fed. what happens if the fed disappoints the dovish market expectations? let's see how asia is trading into this decision. sophie: investors facing that conundrum as to what the fed may decide. stocks looking tepid. japanese shares up by 2/10 of 1%. that disappointing trade day from japan will likely feed into that risk off mood as well. keeping and tech players in particular. this is micron's planned cuts to the capex. sk hynix is considering building a new chip plant in south korea. aussie shares edging lower here.

oil prices gaining on haven demand. aussie banks are bright spot as the regulator drops. let's quickly check in on some assets across the board. the yen holding gains ahead of the fed decision. treasuries looking steady here after rallying overnight. u.s. futures picking up 2/10 of 1%. oil keeping steady after falling the most in six weeks. crude hovering around $46 per barrel. overnight it lost nearly 8%. a big highlight is the second biggest ipo in history, the listing of softbank's mobile unit which is worth $63 billion. softbank sliding at the start of the session in tokyo, down 6.4%. this after we saw the biggest offer coming in at 2.5% below the ipo price. we will get a lot more on

the softbank ipo. you can turn to your bloomberg for the very latest on this. includinglog commentary and analysis from our expert editors. let's get you are first word news. discussingpean union pressure on brexit. ruling out any peaceful negotiations on aspects of a deal hammered out with theresa may. officials tell us if parliament fails to ratify the bill next month, the eu will not seek a managed no deal. it will take unilateral steps to prepare for a hard divorce. ministers in london admit they are taking a seminar -- similar line. >> this needs to be a priority for businesses up and down the country. the government priority remains to secure a deal. we need to recognize that responsible government is preparing for the eventuality that we leave without a deal. says it struck an

informal deal with the eu to avoid sanctions for its 2019 budget. the treasury has a technical agreement which will face ratification by brussels wednesday. the populist government cut its deficit target to a fraction over 2%. it also shaved more than 4 billion euros off of it spending plan to win eu approval. saudi arabia spending will hit an all-time high in the coming year. the government extends handouts to cushion the impact of rising costs and keep the vision 2030 program on track. it includes the cost of living allowance that will total $11 billion. the kingdom is struggling with falling oil prices and anger over the murder of jamal khashoggi. this is the largest budget is -- in the history of saudi arabia. aiming to raise the efficiency of spending and achieving sustainability and financial

stability as per the goals of vision 2030. >> asian nations are being warned to expect further downgrades in the fallout from rising u.s. interest rates next year. ratings -- s&p global has trimmed its forecast across the board. there could be further cuts. the agency's chief economist says trade reliant nation such as thailand, korea and malaysia remain the most vulnerable. news 24 hours a day on air and at tictoc on twitter. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. sherry: thank you. breaking news right now. softbank corporation trading in tokyo. falling 6.4% at the open. this is after pricing its epo at ¥1500. trading at 1404.

that is below the range that we saw in the gray market. many people questioning whether this was really an ambitious lifting from softbank group. one of the major reasons we saw this could be attractive for investors was the promise of very fat dividends which attracted retail investors. as well,he star power attracting those traditionally conservative japanese investors. corp. open, softbank trading 6.6% to the downside. haidi: all right. asare watching the story softbank begins training to the downside. opening below that 5000 flat expectation. we are in tokyo covering the debut. a bit underwhelming. >> [laughter]

you can come up with better times to hit the market with something this big. conditions for near christmas, massive lifting. you need some depth in the market at this point in time. there are issues and risks can sitting -- considering the domestic business. they will tell you, you might have a price war which puts at risk the dividend yield. the ratio might stay the same. if the income starts to shrink, it doesn't matter where the ratio is. issue has cropped up in recent weeks. softbank shunning their equipment. it messes with the math as well in terms of where the is at. it's understanding why we are not trading above 1400. there have been deader debuts --

better debuts in the past. haidi: they have a disconnect with domestic investors. and the demand we have seen from foreign investors. >> yes. that mainly comes back to my earlier point on the dividend yield and the risks surrounding the business. mention, it is also an aging population here in japan. u.s. several analysts, they will tell you they are bullish on the paris softbank. -- parent softbank. that takes on a fairly more competent at issue. when you look at the discount that softbank parents have been trading at compared to the net alibaba and assets, stakes in yahoo!, now this. it begs the question, when you

look at a massive amount of debt on that parent company, how does that drive? part of why we are seeing this they were aiming to narrow that gap. if we get a pop in the shares listing today might eventually get bought up, the value of that holding also goes up. there's also the issue of what you do with the money. it's a massive ipo. over $23 billion. you have the green show option. a lot of that money goes into the subsequent versions of the vision plan. that's fairly hard to value. kind of opaque. it comes back to valuation. the discount that the market attaches to the parent because of the risks associated with something. still not too tangible, at least. haidi: no wonder that we saw the parent really underperform here

leading up to this ipo. if you check this g tv chart, you can see that underperforming k.d. di as well. some of the challenges you have already mentioned. outagesame time, we saw for their services that softbank. not to mention challenges coming from the government pressuring them to really lower the phone bills. >> yes. you bring up a very good point. it's the third biggest in a market that is very competitive. if you look at the lower, let's take the dividend yield issue again. three, if youe bought at the ipo price, you get 5% dividend yield. if you buy now, that goes higher. 3% or 4%,e that with

that's a very good proposition for you. forget,e people seem to dividend yields start to shrink when you bring up things like competition, price wars, the government pushing these telecoms to lower their tariffs on their services here domestically. haidi: thank you so much for that. this following the listing of softbank corp.. you can follow the latest developments on your bloomberg tliv . you can find our expert editors commenting on this huge move to the downside coming from softbank. lenny more to come. this is bloomberg. ♪

sherry: this is daybreak asia. even before its

underwhelming debut, there were many analysts who are pessimistic about softbank group's prospects. one is keeping softbank group on his sort -- short list. he joins us now from singapore. given the underwhelming debut, do you blame this on the work market -- lukewarm market conditions this time of year? it's clearly farm -- far from ideal. thesisd firm by your that this was overpriced to begin with? there are troubling aspects about this ipo. >> it's overpriced. does, wethe market call that trend -- 10 trillion yen value of the business was quite high relative to docomo. the earnings relative were spot

-- significantly higher at those levels for the ipo. we are short softbank group. problemsthere are more than the overvalued ipo. studio, wed in the wouldn't be surprised if the ipo and's up being 30% lower in price over the next couple of months. we are seeing that fairly quickly, to my surprise. we were expecting the brokers to underwrite this to support the share price. i guess the selling price is quite big. it's not a surprise. softbank remains in our shorts. exposes softbank to some extent. guys were saying earlier, the earnings next year are bound to be weaker given the tariff cuts we're going to see. while interestingly, they are

going to offset the tariff cuts and their revenue declines by automation. that doesn't even make sense. the business of wireless carriers are fully automated, generally. a dubious that was claim that they would be able to bring the cost down from that. said, it is a be down market that has commenced trading. so far this year. they had an 18 month low yesterday. not the best, a baptism of fire. your concern is really fundamentally with the structure of the business in japan. the competition is going to

be very tough. we know that docomo's already looking to cut their general fees by 40%. yield is very nice as long as you can maintain those earnings. we don't think they can. more interesting, softbank group itself, we're worried about the share prices of the holdings of they have like alibaba. in video is hot since october. they have been posting these on their quarterly results. what we don't fully understand is, how can division fund continue to benefit from the rewriting of the technology sector? it has turned down quite aggressively. we think softbank is pretty exposed to the current market environment. sherry: are you saying the risk is there?

that their ground vision of looking up with tech stocks might not work out? >> it is not working out. technology stocks are coming off. at least the listed ones. they have a big list of names that they want to take ipo. we have uber. the valuations on those have been indicated up, just as overvalued in our view. uber needs three work. of ahole grand vision softbank fund is unraveling. seeill be interesting to the performance of the fund which they have been touting as a very strong performing fund going forward. i can't see them eating those expectations. with this huge stock drop

at its debut, does that mean that this could draw some regulators written d as well -- scrutiny as well? >> i was hoping they would. i was hoping the regulators would step in before end -- hand and guide the initial price down. blitz,he advertising what we have been expecting is that the market is going to debut at much lower levels. we will see some regulatory scrutiny of why softbank was allowed to ipo at such high levels. sherry: i'm wondering how big a factor this is now, it's a fairly awkward connection in relationship with saudi arabia. the ipo has nothing to do with that. situation is

something far more relevant in that case. we have seen that the senate and the congress are putting a lot of pressure on the white house to take a tougher stance against the saudi's in the yemen war. if there's a risk of any sort of sanction on saudi money, division funds very exposed. of the 100 billion, $45 billion of the fund is seated by the saudi's. anything like that could jeopardize saudi's investment and is going to directly impact the vision fund. there's no doubt about that. haidi: really were -- appreciate your reports. you can also turn to your bloomberg for more on this story. bank withis our live commentary and analysis coming through from our expert editors. much more to come.

this is bloomberg. ♪

haidi: this is daybreak asia. steve mnuchin says the u.s. and china plan to hold meetings in january two negotiate a broader truce and their trade war. our china correspondent joins us now. secretary mnuchin talking about trying to document an agreement. does that mean we could see something more concrete than what we saw come out of the g20 meeting? that's certainly what investors are looking for. steve mnuchin saying that something they are aiming for on the u.s. side. that comes outal on the back of this was specific timetables. this was the first time we heard details about a planned face-to-face meeting between the u.s. and chinese side on the

back of this g20 meeting. they have been having telephone conversations. steve mnuchin indicating that they are planning on having a face-to-face meeting of the two sides in january. he talked about the fact that the trade deficit was still a concern, but that will be a longer running issue. he was also asked about the case thate huawei cfo and said both he and president trump were aware that she was going to be detained in canada as they met the chinese president and his team at the g20 meeting. the verifiable elements of this agreement that steve mnuchin was stressing in this, on the chinese side we have had steps to address some of the concerns on the back of that g20 meeting. whether it's increasing imports of agricultural products from reducing those auto tariffs on the u.s.. sources telling us that china is considering amending its industrial policy and 2025.

it will be all about the verifiable aspects. the speech yesterday, an 80 minute recitation of what the past has accomplished. was there anything that would suggest there's a strategy forward for these trade tensions and how to address them? speech wouldg, the give ammunition to the skeptics in washington, the hawks who that the chinese are looking at making tactical changes with no subset -- substantial structural changes. was was a speech that focused very much on the role of the communist party, the role of the state. he talked about marxism and socialism. he mention the private sector twice. that gives you a sense of the presidents priorities. disappointments from

investors that the president did not take this opportunity to announce deeper reforms and measures to open up the markets. that would address the economic challenges that china is facing and pushback against those pressures from washington. the chairman of huawei seems to be pushing back as well. speaking for the first time since the arrest in canada. what exactly did he say? was him speaking specifically, he's a rotating chairman, about the pressures the company is under in terms of the concerns coming out of washington and other countries. the european union as well. about the threat that huawei poses as they see it. but they could be used as a backdoor for chinese spies or the chinese government to hack or steel on other countries. he pushback from leon that. huawei has consistently denied

that their equipment could be used in that way. he said that the actions they are facing in these different jurisdictions could result in a slow down for the industry in terms of innovation, particularly around five g technology. there's a case of the cfo being in relationcanada to allegations of violations around the iranian sanctions. we heard from the assistant these bookseral, were colleagues and said this wasn't the case that was cooked up overnight. it was a long-running investigation. take a listen. >> law enforcement is what we do. announcinghat we are our cases based on year's worth of investigations. they are not something we just thought of in the last year or so. these cases take a long time to develop. they have a long time to investigate. we are following the facts as we

see them when they are brought to us by u.s. companies or that we gain some intelligence into. sherry: thank you so much. plenty more to come. this is bloomberg. ♪

>> it is 8:30 in hong kong. i am haidi stroud-watts here in sydney. shery: you're watching daybreak asia. let's get the first word news with jessica summers. jessica: treasury secretary steven mnuchin since the u.s. and china will meet in january to negotiate a broader tree truce following a string of phone conversations in recent weeks. he said the two sides are confirming logistics and determined. besaid any deal will enforceable and verifiable.

the white house is backing away from a government shutdown, signaling it may tap existing sources of money to fund the border wall. this comes as republican leaders oppose transferring $1 billion to immigration. last week the president said he would be proud to close down federal agencies if he does not get what he wants. president trump has agreed to close his embattled charity that has been queued -- been accused of rampant wrongdoing. agreed to dissolve the charity and get away its remaining $1.7 million. the foundation was quote, little more than a check mark to serve trump's political interests. became a damp quid -- squid. a joint venture of boeing and lockheed martin became the last

of four potential missions to postpone liftoff. there were technical concerns. blue origin did the same on infrastructure issue. another was hit by bad weather. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. at howlet's take a look asian markets are faring this wednesday morning. we are in wait and see mode with asian stocks mixed. led higher while shares extending losses in japan and australia. we have the yen headed for a fourth day of gains. this, as the dollar slides. we are waiting for the fed decision. checking in on bonds, we have that rally in treasuries continuing. that has seen the 10 year yield

dipped below 2.8% earlier in the session for the first time since may as trump calls for a cause -- a cause for fed tightening. $46 ark crude higher, barrel of holding the overnight slump we saw when the contract felt almost 8% in the near exception. energy players are falling across the board. when it comes to stock movers of note, keep an eye on softbank corporation. 10%.s falling as much as softbank group is the biggest drag on the benchmark. investors likely questioning why this ipo was allowed to go ahead under such market conditions. and chipmakers are also under pressure as micron plans to cut on softer sales. pharma falling on a nikkei --ort that profit from we

probably fell 13% on a yearly basis. movers of note in sydney, cheese falling the most in years. reduced milk supply. they expect the airline to benefit from a robust holiday season on higher ticker prices. aussie banks are climbing as a regulator in australia loses lending restrictions. theyng ground even as received the first right from shareholders today. sophie kamaruddin in, thank you so much. the federal reserve meeting is not the only one this week. kathleen hays is here with what is driving the fed debate and what the decision means for asian central banks. markets and the

president's continued criticism. kathleen: they should be thankful or wishing that leaders of asian nations would be batching the central banks. it is certainly a big feature as the fed gets ready to wrap up its meeting. donald trump a right hike would be a mistake. -- saying a right hike would be a mistake -- rate hike would be a mistake. it is taking liquidity out of the stock market. a lot of people saying you are painting us into a corner. if they hike, which may be could hurt growth, then that is a problem that possibly they are doing it to show you cannot control them. with this in mind let's look at some reasons why the fed should maybe pause. global stock markets under pressure. look at china in particular. geopolitics like a trade war, brexit.

strong dollars thread manufacturing in the u.s. u.s. housing market continues to get weaker. how about reasons to hike. unemployment being low at the top of the risk because that is pushing up wages. interest rates. consumers are spending. confidence strong. gdp growth next year will remain above potential. let's jump into the bloomberg chart. interest rate projections. what you will see over here is about two thirds, 55%, the chance traders see of a rate hike. down here you can see how it haseased a bit over the past couple months. the odds of no change has come up. but that is still the predominant conclusion. 2019 is another big question. will be fed cut the number of dots next year? in september it stood narrowly at a 3% -- at three rate hike

consensus. could that go lower in light of all that is happening? haidi: we are to be scrutinizing that tomorrow. president trump is hoping the federal slowdown. asian central banks would breathe a collective sigh as well. kathleen: the bank of korea holding a year-end press conference. what did he talk about? the two biggest risk cc right now. one, the pace of fed normalization. the other is the u.s. trade war -- china trade war, i should say. very important to the country. he noted the bank of korea hiked their key rate in november 2 prevent financial imbalances. bank of thailand meeting today. they might hike their key rate, that is the consensus. this other chart shows u.s.

rates may be contributing to this weakening we are seeing. it is not as bad as bank indonesia which is meeting on thursday. but you can see how this rate for thailand has come down. presumably they want to narrow that gap. bank of japan also meeting this week. holding steady. inflation slowing. though, peopleia are saying hike the key rate one more time. that has been a constant struggle for them this year. we will see. really a big week for central banks. hays. kathleen bloomberg will have full coverage of the fed's final policy decision of the year beginning at 6:00 a.m. sydney time and thursday, 3:00 in hong kong and 2:00 p.m. wednesday for viewers in new york.

in the ongoing war between qualcomm and apple, the chipmaker says the iphone maker needs to face china's ban on its products seriously. last night it was ruled apple infringed on two patents. ramy inocencio has more on this. apple thinks it can get around this and qualcomm is sending out a warning. don rosenberg was saying we are going to call you out. you have not seated to the ruling from the chinese port saying you will have to ban the sales of iphones from the success through the 10. is little reason for apple to do that because they make a lot of money but let's listen to don rosenberg in his own words. somethingis clearly that was subsequently ruled on and the order is something that needs to be taken very seriously, unlike apple seems to

be. company, iere my would have immediately indicated that i would be abiding by this court order and following to the letter. ramy: so basically he is saying do it now. appleme, we also had an lawyer on this week saying the chinese court ruling about that sales ban is quote, not a blow, and qualcomm is just using this as a distraction technique from its own three lawsuits in the u.s. that actually gets to its core business. as to the core business of china and the iphone success, that does regard the iphone 6 through the x, it does not include the most recent models, the xs, xr, and x max, because when the filing was done those did not exist. as you might expect, qualcomm is

saying we are going to try to get those included as well. it has requested china to do that. this goes to the heart of the matter with how important the iphone is. with regards to the whole entire revenue that apple makes from around the world, it actually makes up about one third of all the regions you are seeing on the screen. 18%. nearly one out of five is made out of china. number one would be the americas, two would be your. .op into the -- would be europe hop into the bloomberg terminal. with apple in blue and qualcomm in white, these are the share prices. ever since late 2016 we can see which has been taking the pain, qualcomm. because apple has been withholding billions of dollars in licensing fees.

the fact that has not been contributing to the bottom line can be seen in investor sentiment. year to date you can see apple share prices down by about 2%. qualcomm year to is down by nearly 10%. you so much for the latest on that ongoing patent battle between qualcomm and apple. next it is a choppy time for markets as we round out 2018. rough waters into the new year. this is bloomberg. ♪ his is bloomberg. ♪

haidi: this is daybreak asia. shery: our next guest says tightening dollar liquidity and higher interest rates remain case -- remain key hurdles. joining us is head of economics and strategy. always great to have you with us. of course the key question is what happens tomorrow.

expectations of a fourth rate hike this year coming from the fed. , thatthe volatile markets is again being questioned. this chart showing with the s&p 500 falling, the rate hike expectations have fallen with the s&p 500. is there a hike, is there a pause? i wonder, are we assessing too much overfed rate hikes instead of paying attention to the risk balance sheet runoff? guest: i think that is the central point. is consensus in the market even if it is a hike tomorrow, and most people think it is, the suspicion is it will be a dovish hike. really what the fed will do is create more contingency and say look, further rate hikes are contingent on how the economy does and in all likelihood they will slow down to perhaps just two in 2019.

the big risk is the autopilot balance sheet reduction coming to about $600 billion in 2019. rather than fussing about the neutral rate -- neutral policy rate, let's just say that we are about there. somewhere near 3% is when the fed might stop, or not. but how much liquidity they will draw out of the system is far more pertinent. in most correlations we do, interest rates negatively correlate without equities do. liquidity is far more tightly correlated. it is really liquidity withdrawal that matters. shery: are you expecting a change on forward guidance? it seems like the fed itself does not know where the economy will be next year, there are so many uncertainties out there. vishnu: that is absolutely right.

rst, they have to get runoff for the u.s. the suspicion is by second half, the u.s. slowdown will converge downwards with the rest of the global economic cyclical slowdown as well. i think theyed, want to gauge how much they want to make out of tightening financial conditions, or rather the selloff and collection in the selloffs -- in the stock market. i do not think the fed wants to pre-commit too much. there will be further gradual tightening but dependent on the data that comes out of the u.s., because as you pointed out, there could be an inspection point in some activity data in we could see a more discernible downturn. alongside the financial conditions that tightening the fed also has to consider whether households will be better off because of oil prices. they may not have

to worry too much about energy-driven inflation. haidi: i'm wondering whether president trump has a point about feeling the market. i'm guessing what he is talking about is gauging animal spirits. i want to throw up this chart to think is interesting showing that since 1980 it has been very rare for the fed to raise rates when we have seen markets slump the way they have. the s&p has been tracking lower. two out of 76 hikes since 1980 have taken place under such circumstances. does he have a point that we should not just be looking at the economic data, but trying to get a feel for the markets and how investors in market participants are feeling? i think even the fed would agree with him.

has conceded financial conditions have tightened. in other words, they are alluding to the fact that equity markets selling off means financial conditions have tightened which means they may not tighten monetary conditions too much. a point.p may have the fed is not already cut and center. really the issue is whether financial market conditions tightening overrides us some of the catch-up hikes we are doing. places we are hiking from far higher rates whereas the fed is starting from a low bottom. we have come some ways, which is probably why they will start shifting gears in a more dovish way. at the same time they will not what to signal markets they are dancing to the tune of equity markets. that would be risky.

in many cases equity markets follow the fed rather than the other way around. the fed will probably want to preserve that. haidi: i want to get your views on emerging markets next year. we have bank of indonesia tomorrow and thailand later today. if the fed kohl's off this dovish hike this week and pauses for much of next year is it going to be a much better year for e.m., particularly if we see come -- some kind of trade deal at the start of next year? vishnu: yes. it would certainly by time. my suspicion is it would provide some reprieve, especially if it is a dovish hike and we have to follow through with some sort of trade deal. i think what markets will continue to struggle with is perceived any of the trade friction, we are already on a slowdown.

near-term, as long as dollar funding conditions are tight, the other big risk for us is the funding cost in asia, especially debt, debtolls over may have a similar effect. trade deals are really going to provide a lot of relief. i don't think that is an out of the woods situation for asia. central banks will have to be on their guard. i think keep macro protection measures in place to ensure capital volatility is not excessive. always appreciate your time. remember, bloomberg users can interact with all the charts we brought up using gtv go on the bloomberg. to browse recent charts, catch up on key analysis, and save them for future reference if you wish. this is bloomberg. ♪

haidi: this is daybreak asia. shery: that's get a quick check of the latest business flash headlines. they are to make their debut next week. they will list on the near stock exchange monday under the ticker takus, continuing as a depository bank. the abs currently trade over the

counter. it will maintain its headquarters in japan, its primary listing, and other listings on local exchanges. haidi: micron slumped after hours after expectations. revenue will be $6.3 billion at best, $1 billion shy of projections and represents a sales decline of 18%. a two-year surge in demand for chips has now come to an end. they announced a range of cost cuts. they missed the lowest estimate 16.60 compared with expectations of $18.78. they say china business has slowed because of trade tensions and it sees slower global growth in the near term. haidi: let's get the latest on

the markets with sophie in hong kong. sophie: when it comes to what we are watching in the next hour we're going to keep and i on chip players. micro suppliers on the spite like -- spotlight. micron suggested weaker sales. chip will be the one to watch this morning. this morning from micron comes alongside morgan stanley forecasting a gloomy outlook for semi conductor demand in 2019. more pain is likely for tech players. overall tech shares have been under siege, sinking more than any other group in the hong kong index. down nearly 29% this year. tencent has for the worst year on record.

that hasboom in 2018, not provided much. tencent securities out. that may signal a down cycle ahead as tech companies fear a downtown will worsen if they do not go public. that is something to chew on. some investors are questioning if this is the right time to go public. shery: talking about softbank, coming up we will continue tracking softbank's debut on the tokyo stock exchange. this chart right now showing really the underwhelming debut we have seen for its first day of trading. right now falling more than 7% after pricing the ipo at ¥1500. very underwhelming. some people saying it was pretty much expected. market sentiment not great right now, not to mention a big chunk

of the people who are buying softbank shares were retail investors and you know how fickle they can be. this $23.6 billion ipo in softbank group's telco unit really underwhelming. haidi: yeah. flipping on retail investors on this first day of trading as can be expected. it is also a down market. down about 15% this year. not the greatest environment to go public. certainly look for fundamental problems about whether they can it maintain earnings, competition in this next year. we have a live blog on the softbank ipo. this is bloomberg. ♪ is bloomberg. ♪

rishaad: this is bloomberg markets china open. yvonne: asia-pacific markets experience angst after a wild ride on wall street. japanese stocks are paring early losses. rishaad: fears of a new glut sending oil tumbling. traders feel the opec output occurs will not work. the fed opens its final policy meeting of 2018 with president trump again tweeting. softbank dialing the wrong number in its trading debut today. shares were down as much as 10% at one point.