paul: welcome to daybreak australia. i'm paul allen in sydney. kathleen: and i'm kathleen hays. ♪ paul: here are the top stories we are covering in the next hour. moving the markets? that jay convince powell is safe at the fed, but general mattis is moving out

early, and the trade war may see a christmas breakthrough. kathleen: paul, we opened the show with breaking news. the bloomberg news team in washington reporting a couple things. steve mnuchin talking to representatives from the biggest banks, wanting to calm them before the open. he is telling them that trump fed chairested firing jay powell. that story -- broken by bloomberg news, i might add -- on friday afternoon. this is important for the here as they are getting ready to open. let's get to a quick reminder of how the markets did. let's start the bottom. entered into a

bear market. sincenow down about 21% its peak in august, august 29. down 16%o the doubt, since its peak in early october, 17%.&p losing 2%, now down the nasdaq in a bear market, the dow and the s&p 500 flirting with a bear market. you can blame any number of things. concerns about jay powell -- in fact, selling picked up steam when the fed decided to raise their key rate one more time and to signal further rate hikes. that is putting more fuel in a fire for the cell up, also fuel for the president, talking about getting rid of jay powell if he can. it looks like legally, that may not he cut.

n markets that's a big key for them as well. paul: futures are already pointing lower. normally they are pretty low this time of year. and we do have an early close here in australia, 2 p.m. local time today, but it could be different given the events we saw in the u.s. on friday. new zealand not doing too badly concerning the selloff we saw. it's a little off of. of 1%. one of only two markets in the asia-pacific to close higher. all right. that's a look at first word news. people nower of known killed in the indonesian 220 two,as risen to

with dozens more unaccounted for. most of the victims were tourists killed by two giant waves on saturday, thought to beach goodbye interruption by a nearby for cano. their concerns it will hurt the furtherindustry and hurt the rupee. india managed to push a bill through the senate. senators have approved the spending plan that curtails under pressure from the european union -- opposition parties accuse them of using a confidence vote to force the budget through with figures being fixed on the fly. may be released on bail after the new year. the tokyo district court has ruled he can be held in detention until january 1, but is still not being allowed visitors.

n challenges the allegations. gps satellites for the u.s. airport. it was commissioned for the 21st in 2017. it was delayed several times anduse of technical issues bad weather. the spacex trade valuation has risen with its lunch record. it is now rated the most --uable venture caixabank venture-backed stock up since uber. global news trey flowers hour. i'm haslinda amin. this is bloomberg. hours a day.s 24 kathleen: a firestone for investors. on top of the government

shutdown, steve mnuchin has had to assure markets that jay job is safe. it's a whirlwind of things going on. i cannot remember recently a choice for-36-our time when so much has come out of the white house affecting the markets. reporter: it's absolutely right. anyone who thought we were going is flat out holiday wrong. and as you say, we had secretary steve mnuchin the incoming chief of staff mick mulvaney, trying to assure the markets basically about the bloomberg scope we had on friday night the president what the fedt with is up to, that he has talked about firing jerome powell. they try to tempt this down with the statement attributed to trump. it did not say from trump himself, saying he does not think that he has the power to do that and he has not consider

doing it. whether that columns the markets , i think, is an open debate and the markets will tell us whether they believe it or not. but it's so interesting because president trump has job owned the fed so many times in the last three or four months. wonder, the next time he says something, will people just jump to assume that jay on the bubble? it's a really difficult time markets to know what is going on at the white house. , the power situation aside, how about the shutdown? any negotiations, or is this on hold until christmas is over? the it's funny that government shutdown has become the number two story at washington, but that's the way it is. at this point, the two sides are pretty far apart and it's very

likely nothing will happen through christmas, possibly even until the new year. of course, the new congress starts on january 3 with democrats in control of the house. nancy pelosi has said they will take it up again in the new year. mick mulvaney said the same thing today, that it could last through the new year. but anything is possible. i think talks are ongoing. at least talks will continue. even this afternoon, it seems that there may be some closing of the gap between the white house and democrats on the size of funding for the border wall or in the democrat's case, they would call it border security. i don't think the two sides are will at this point, so we just have to wait and see, but possibly after christmas before we see anything. from the ros, quickly,

government budget to foreign policy, people are feeling quite on the easy now on both sides of the all after president trump secretary mattis two months early after he resigned. why? what is next? what we are hearing within the white house, president trump was not very happy with the terms of mattis' resignation and the very sharply-worded letter that general mattis sent, and he just wanted him out. that deprives the secretary of defense of going on a farewell tour and meeting with the troops and what he had hoped to do, having a smooth transition. i think once again, president trump wanted to be in control of the situation. he's not happy about the way the resignation went down and the responsey negative

from lawmakers on both sides of the aisle, as well of course in the media. he has certainly been focused on negative press attention, but i think the pushback from republicans may have gotten under president trump's skin in this case. ny in all right, ros kras washington. joining us now, another of our columnistsel. li, let'sstart -- e start with jay powell. bloomberg with a four separate resources in the white house that trump was considering firing powell, and nugent comes out and says it's not the case. would be out of practice since presidents have acted and there's a very good reason why you do not want to have that much political control and the president himself, with the decision-making for interest

rates. it's too tempting to prime the pump economically and then you end up with a medium to long-term disaster. i think steve mnuchin and others are doing everything they can to walk trump off this ledge, and so far, it seems to be working, but as we have seen with many other things, such as the way we got out of syria, sometimes you think you have a decision and then he reverses it. yeah, and in terms of the mattis resignation as well. cgurk gone, too. torica has written a letter the australian ambassador, giving assurances about the australian alliance, but it seems rather extraordinary that it has gone to this. we do not know who the next secretary of defense could be. if there was any silver lining there is theink

reputation of the conspiracy theory called the deep state. you had a secretary of defense resigning, not only because he disagreed with the policy in syria and afghanistan. he disagreed -- he said they had a fundamental difference in terms of values. i deem those values to be uncontroversial. i am certainly on the size -- on the side of mattis. however the president is the commander-in-chief and he deserves not to be undermined. to a certain extent, trump wantigned that he did not to be in the middle east. he is following his campaign promise and i think it's honorable that james mattis has resigned rather than trying to undermine that policy from within. i hope that this undermines the argument that there's a conspiracy that there is a deep

spate and that the president is in charge. of the story part is the president announced he is withdrawing troops syria. he is withdrawing troops from afghanistan. they are being withdrawn from afghanistan on the eve of a thedown the 20 taliban and afghanistan government. none of this seems to of been talked about with just about anybody. ,hen you read the tea leaves the mood in washington, is this something that shows, yes, the president is making good on his campaign promises, or does it make him look like a president who moves without thinking through what he is doing a really following procedures? could this undermine him on some level? listen, i think the president was clearly frustrated with the advice he was getting and, to aabinet certain extent, he feels like he

has been round and round. himself on trump syria -- i reported in 2017 that he was quite skeptical about plans to stay and afghanistan at this point. i think there are serious long-term implications. the commitment the u.s. is making in syria right now is a very modest one. 2000 special operators largely in a training mission and assisting our kurdish allies fighting isis. never enough troops under obama or trump to be a serious push back against iran or russia. but just the fact their presence was there, i think, did have a psychological and political effect, and i think restrained the behavior of our adversaries in the region. as for afghanistan, i think it's a terrible betrayal of the elected government in kabul, has succeeded. it does not mean that you will get a clean victory, but it does

still maintains a presence. if the u.s. were to fully pull out of afghanistan, i think that will lead immediately to the collapse of the afghan army that the u.s. has been training for almost two decades. again, these are very significant decisions with real consequences. the president is asserting himself. he can argue he was elected to do this in his in charge. the vast majority of the foreign policy and national security establishment in would see another way out on this. kathleen: these are just getting started. thank you very much for joining us from washington from our bloomberg news came. now we are covering a headline from "the wall street journal." aides are setting up a

trump-powell meeting. it was believed that he was getting ready to fire the fed chair. subsequently, steve mnuchin, mick mulvaney, seemed to be chief of staff said, no, no, no, he knows he cannot fire jay powell. will have plenty more discussion -- we will have plenty more discussion. ahead, cryptocurrency -- can this rule just be growing pains? us why hewill tell sees good times ahead for digital currency and 2019. plus, our next guest sees mobile interest-rate policy becoming less predictable in the coming year. we will discuss the impact on markets around the world. this is bloomberg. ♪

paul: ok, let's take a look at

prospects -- were drawing to the close. what an exhausting 2018 it has been. our next guest says that u.s. stocks are likely to underperform in 2019. let's discuss all of that. stephen glass. thank you for joining us this morning on what is going to be a very eventful christmas eve. what has been driving the u.s. markets and to their market territory, which of these is top of mind for you? >> the key factors in the u.s. -- we're watching evaluations. you compare that to the rest of the world and there's a clearer valuation disparity, but that does not tell the whole story. has an roi uplly 16%, which is very high. the rest of the world is 9%.

our concern is we have the valuation question but there's also whether the companies in the u.s. are over earning. if their profitability declines, that equals a market that will probably underperform over the next year. what about these political considerations? is jay powell going to get fired, there is the lingering question of the trade war. >> i think it is unlikely howl will get fired. i think that would be unprecedented. nothing is off the table with trump, but it would be unprecedented and it would have because implications one would always question the independence of the fed. you have a real moment where the real economy is doing very well, but you have these other factors that will negatively impact investor confidence.

the trade war, we really think that that impacts business confidence. we think the political rumblings impact confidence and we think a lot of the stock market impacts confidence. not everyone has wealth in the share market, but that in and of itself does not result in the market declining with a negative wealth effect. but we think that that could impact the real economy and i think the fed are aware of this and i would expect them to not increase the interest rates twice this year. kathleen: i think there are others who join you. kathleen hays in new york. analysts, investors in the united states are looking for a steep drop in u.s. stocks. it does not necessarily show a

decline, but i rebound. what does it mean for asia and stocks? asian stocks? for u.s. stocks, we have qt. the era of qe is over and we have qt. we will tighten monetary policy and you have all of these trade war issues and so on and so forth. in order for it to bounce, we think that there will have to be some resolution for the headline news, that there will have to be some resolution of the chinese-u.n. trade conflict. it's far more than a trade conflict. it's a strategic conflict. it will not be resolved easily. more dovish fed. i think we will have that next year in the have indicated it would by having a lower neutral rate, and i think they are

taking note of the volatility and are unlikely to increase it twice next year and that could result in a market rally. but nonetheless we think the u.s. will underperform because i'm more dovish fed -- a more dovish fed is more beneficial to the emerging markets than the u.s. the u.s. if underperforms, someone else will over perform. give us ideas where to make money next year? >> we are looking at asia. we are looking at china. emerging markets are at about 11 times pe. china is 10 times pe. at 14 times pe. those look interesting. another interesting sector, european bonds, which are very cheap. there are very -- there are political issues in europe that we have to work through, but they are easier to work through

than the u.s.-china strategic conflict. we think that these areas are well priced and well-placed from a more dovish fed. paul: we are unfortunately out of time. glass. steven thank you for joining us on bloomberg daybreak australia. we have more of the issues you need to know. on the subscribe terminal. it is also available on mobile. you can use our at. get the news that only you care about. this is bloomberg. ♪

paul: i'm paul allen in sydney. hays in: i'm kathleen new york. you're watching daybreak australia. let's get a quick check of the bloomberg business flash headlines. investing.com and reuters say and tesla's new model three

also the exit and the s costs were reduced. they are now 499,000 yuan, or 70,000 u.s. dollars. drivingngapore is goldman sachs into his investigation. they haven't been examining the firm since light last year. until recently it was not the focus of an investigation for goldman units have been charged in malaysia. reports from germany see volkswagen could have introduced software to address emissions cheating. it does back exhaust filtering after a certain amount of feel consumption, which would keep

emissions -- fuel consumption, which will keep emissions low. paul: coming up next, we will have the latest from washington on the government shutdown. that's coming up next. this is bloomberg. ♪

paul: it is 9:30 a.m., christmas sydney. we have futures currently pointing lower, three quarters of 1%. i'm paul allen in sydney. hays in: i'm kathleen new york where it is 5:30 p.m. you are watching daybreak australia. let's go to first word news with haslinda amin. the shutdown in washington is expected to drag into the new year with republicans and democrats at odds. mulvaney says the administration is awaiting a counter offer to the president's

bid for $5 billion. top democrat say they have no intention of paying a. >> $5 billion is a lot of money. that is 650,000 children attending have start. century it on a fourth strategy rather than something that improves border security, it's just not something were going to do. outgoing out galang -- defense secretary jim mattis will leave the job two months early. the abrupt move to cut his we,re was announced in h leaving a sense of turmoil in the national security team. has announced that it in its allies will cut production by one .2 billion barrels a day for the next month.

the opec members will lower output by 800,000 barrels well independents, including russia, will cut prices by 100,000. exempt. libya are chinese state media say lawmakers will consider -- ofation preventing the technology. they will protect the international property rights of overseas investors by encouraging only voluntary tech sharing. newmplemented the proposed law could address a concern at the heart of u.s. concerns and the trade war. but what is four hours a day on on tictoc on twitter. i'm haslinda amin. let's return to washington where the shutdown is

showing no signs of ending anytime soon. , theng us with the latest bloomberg white house correspondent. touchdownstart -- the -- the shutdown of course, it could last until after christmas. we know president trump may be backing away from in system he get the $5 billion. maybe he will go back to the $1.3 billion. what are you hearing? quietas not been a weekend, has a? >> not at all. president trump was supposed to go to florida and have a quiet weekend at his mar-a-lago resort. instead he is trying to hammer out a deal to keep the government from being shut for the foreseeable future. right now it looks like the statesent in the united will be shut down at least through christmas. lawmakers are not scheduled to come back until december 27, which means this will be a multi-day ever met shutdown and there are no indications we are closer to a deal that we were yesterday or the day before.

the two sides are going back and forth with different deals and options for how to keep the government open. toocrats are not looking provide the president with the .5 billion amount he wants there are various types of offers the white house is made to congress, but they have not picked up any sort of traction. the two sides are still very still very far apart and democrats take over in a matter of days. it does not look like the two sides are getting closer to a deal. instead, it looks like they are bracing for a long-term shutdown the could last until 2019. we hear a lot about the desire of president trump for a wall. democrats putting forward as a better approach to border security? toluse: democrats have said that they have already approved more than $1.3 billion for border

security, which is a pretty significant amount, especially after $1.6 billion got into the budget last year or border security. that includes money to repair previous than sizzle long be border. democrats are not completely against border security or some the southerner on border, but they do not like ofsident trump's idea building a concrete wall, or now the president has switched to buildings steel slats on the border. democrats have said they are willing to put some money toward border security, increasing the of personnel and technology on the border, but not doing it the old-fashioned way that president trump has campaigned on, to build a wall that would make it more difficult for immigrants to come through from the southern border. democrats have said they have already provided the money that is necessary for the border. president trump is asking for

more money because this was a signature part of his 2016 campaign and he believes his supporters are counting on him to dig in and fight for the maximum amount of funding for the border wall, even if it means shutting down the government. kathleen: that is the game of chicken. democrats are going to take over the house in days now, it seems. another big question, where does it go? president trump -- bloomberg breaking a very important story on friday, they had learned that he was talking to advisors about maybe firing jay powell, the fed chair. now there is backtracking. what are you hearing? are people just talking? does -- our people just talking him out of question mark as the president realize it's not possible? what's going on? toluse: we heard from top officials, the treasury secretary, mick mulvaney, saying the president is not going to

fire jay powell. mick mulvaney says that the president realizes he does not have the authority to fire jay powell. this was an effort by top officials in the president's orbit to calm investors and let them know he would not take this action which would encroach on the long-held history of an independent federal reserve and the president will not try to trample on that. they try to very publicly back notion because they do not want the markets that are already jittery and concerned about the things going on in washington to be even further concerned. this is a pretty clear, on the record denial from the president's advisers saying he's not going to do this, but we have not seen directly from the president himself. we know the president is unhappy with the rate hikes we have seen over the last year. the president has said publicly he regrets his choice of jerome powell for fed chairman, and

whether or not he will act on that remains to be seen. bloomberg'sght, white house correspondent, thank you for joining us. we have bloomberg reporting and the administration response and we still have questions. i do wonder, kathleen, the fed has been's ignoring its intentions on rates for a very, very long time. that rate hike we had, i feel like we've been talking about that in the pipeline forever. hadnder if jerome powell held, that would have raised other conversations. talked about him being coerced by the president. that's equally dangerous, right? kathleen: it's dammed if they do, dammed if they don't. i talked to bill dudley. he said the thing was, this was not a close call. it was easy for the fed. i said, did politics into her

into this? he said it was not have to think hard about it. the question i dismissed completely at first -- know everyone is taking it seriously. the president cannot legally fired the head of the federal reserve. the fed was created by congress. the constitutional power to coin must -- coin money and regulate its value -- if you want to take it to his endless level and gave protections,e senate confirmation and six terms. this is interpreted as the courts as eliminating the president's authority to dismiss appointees, to give them greater independence. there was a ruled by president roosevelt, and sec commissioner who is forced to step down, and ultimately rejected. it seems like luckily, there's not too much ground to maybe that is why president trump appears to be backing down now. paul: yeah, and we get news on

the bloomberg today there's a possible powell-trump meeting in the pipeline. you've got to wonder. that's probably going to be a bit more productive than conducting his conversation via twitter, isn't yet go -- isn't it? kathleen: i think so. look at jay powell. he did a lot of time working on regulation of banking, capital markets, a story we have run a couple times recently, the number of times jay powell has been to capitol hill, visiting people on both sides of the isle. helped create a relationship to get support. richard selby, one of the leading republican senators, warned trump, you should be careful about this. that is another reason why it fire jayhard to powell. the markets are court as well. if he tried to do that, just trying would probably put another big weight on this stock market and cause it to selloff. a good day to have you

here kathleen. coming up next, we are going to wrap up the year in cryptocurrencies. what's the outlook for 2019? this is bloomberg. ♪

paul: i'm paul allen in sydney. kathleen haysi'm in new york. you're watching daybreak australia. at what weet's look should be watching us trading gets underway in asia with our global markets editor, adam haigh. we've got a lot to chat about, jay powell, how that will affect things. the thing. we are coming off the bat, of this tumultuous time in the markets, and then we have this indication of the real

consideration of the fact that powell may not be in the job for too much longer and that leaves investors in a pretty tricky position when they come into what is going to be a very volatile trading week anyway. you've got christmas holidays and public holidays and auctions all over the world. it's a very tricky time off the back of last week where we have seen huge movements and markets feared and remember, it started wednesday with the press conference that powell gave. it left a lot of people feeling very shaken, especially equities investors who were holding out hope. of course, we did not get that. we are in a general time of tightening financial conditions globally, and in the u.s., and now we have this kind of issue of the tensions between powell and trump, really feeling like it will reach a new level. and we have not discussed the

trade war and the escalation and the trade tension between china and the u.s.. it's really difficult to change the tone of what it will be like. the nextve a look in 30 minutes to see how the futures on the s&p 500 open. of course, -- paul: of course the nikkei is closed. outhere are still bulls there, paul. there are people who say, we are in a time of elevated volatility. we got to understand that. 2019 will look very similar from a picture of heightened rolet. but there are bowls -- bob dole -- there are bulls. dahl.

there's he is saying not a lot of data or anything to hang your hat on for the next few weeks. prevail,latility will he certainly things, and then january we will have more data coming out, with fourth-quarter .arnings it's enough to give people a bit of hope again. you could see signs of a rally. but it's very fragile for the moment. thank you. it has been a really rough year for cryptocurrencies. advocates will say it is because cryptocurrencies are still in their infancy. it has grown from a baby and is now a toddler.

pricewaterhousecoopers's crypto leader. ofot of good things, a lot things went badly in 2018. for crypto, is it over or is there more to come in 2019? >> paul, i think there's a lot of exciting things the crypto echo system is looking for. in 2018, i expect more, in different ways. other companies may partner with another ledger and others may didto invest like goldman with cisco. this is very good because it will bring expertise to the center, which is something the crypto industry needs, especially at a time like today.

had aen: all right, we story on bloomberg about how goldman and others say they are ready to launch, but the time has not been right. that's a fairly optimistic view that the toddlers are growing up, but the toddler has not been ready to take a step. why will 2019 be different? a lot of things are changing at the global level. if you look at 29th team, there are a lot of jurisdictions with 2019,tory authority -- there are a lot of jurisdictions with regulatory authority. that will give more comfort to institutional investors and institutional players as well. there are the traditional less areas. this can make the u.s. more competitive broadly. if the bitcoin bubble

collapsed viciously, was that good premarket? >> any industry has booms and busts. fall, if yourypto like, is it clear to a lot of noise in the sector. it may change the world in ways we cannot imagine today. but there's definitely a lot of cryptocurrencies. there's the treasury management perspective. and obviously, it has fallen over 90% the last couple of months. if they build what they promise to build, especially in cases where they have not hedge. paul: in terms of crypto emerging from baby to toddler,

the potential blockchain arrivals and overcoming the volatility issue that crypto has seconds,ing just a few is part of the appeal not holding it for as short a time as possible? >> in any new industry there are a lot of spectators. cryptoclaims allow traders to stay in the space. it can also be used for people who want to use it. the other one is security tokens , and the security tokens are bound by real-life assets. inallows not only liquidity

place. for a large that's very exciting and should sector paul: all right, we will have to leave it there. thank you for joining us. we will be back in a moment. this is bloomberg. ♪

paul: i'm paul allen in sydney. kathleen: and i'm kathleen hays in new york. you are watching daybreak australia. china will have more monetary and fiscal support as it grapples with a slowdown that has no end in sight. atse measures were announced the conference in beijing. let's get more on this from karen lee. a lot of stuff in three days. what did these chinese policymakers and up deciding and

putting up to the public? >> the biggest thing was there would be prudent cuts to fees and taxes and 2019. it is implied that they will target and limit stimulus and attention andased china, especially -- in china, trade war with a china. this was a glimpse into what the chinese government was thinking. what brought the chinese government to this thinking? >> obviously the trade war with the u.s.. there was optimism after the g20. there was a truce after they sorted things out and just days later the u.s. was involved in the arrest of one of the top executives of huawei.

there certainly huge uncertainty it is that issue and weighing on investors and waiting on everything. let's get a quick check of the latest business flash headlines. while wake will be removed out of the network for emergencies. dt had inherited equipment made by the company after the acquisition of the carrier e.u.. u.s. prosecutors have decided not to charge richard lugar over an alleged rape. it cast a pall over their leadership and ambition. the $30ill well below

at the time that liu's arrest was made public. paul: i'll clement the new releases including a revived mary poppins and the transformers prequel. hollywood will end 2018 on a high note. that stock is up 7.5%. that is almost it for daybreak australia. trading in new zealand is underway. in just a few minutes, we will have more from the open here. they are often just 7/10 of 1%. the aussie dollar is little changed. all right. coming up in the next hour, we're talking about 2018, but what is going to happen if wednesday nine -- 2019 get -- our guest has three

top convictions on the markets, the goals he think is moving higher. dollar.s the aussie that is what he's saying now. you definitely want to be around to hear from him. it's a question, of course, that everyone is wondering about, certainly the trade impact, the markets, and he thinks it will be the most significant factor driving sentiment. we are all watching the fed, wondering how we will see this fed hike unfold. how we will see further criticism from the white house. but we see so much from the white house with the march 1 deadline. and that observation about being short on the aussie dollar, that is interesting.

just recently, a number of analysts predicted the next move for the bank of australia may very well be a cut. action with all the daybreak asia coming up next.

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. paul: good morning. i am paul allen in sydney where markets just opened for trade. evening. good i am kathleen hays from bloomberg world heard quarters in new york. i want to welcome you to bloomberg daybreak asia. ♪ our top stories this monday, moves in the markets. new chin tries to convince investors jay powell will not be jim mattis is leaving his job two months early.