"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.

and opec is in what ever it takes mode to stop rises. kathleen: we have a reminder of how u.s. stocks entered the session. coal in your stocking, u.s. investors. it was an ugly close. since 2008.week dow jones futures down 1.81%. 500 is losing another 50 points, more than 2%. it's down 17.5%. it peaked in september. dramaticq, that is a move. falling into a bear market officially. it peaked august 29.

cusp.s still on the traders are talking about the stop. after such a severe you have the s&p futures 4/10 of aown nearly percent. we will see if it continues to .all maybe we will see a little stability here. so let's get on with it. let's get to the first word news. haslinda amin is joining us from singapore. kathleen, a number of people are now known killed in the indonesian synonymy. dozens more are unaccounted for. most of the victims were tourists killed by two giant waves thought to be triggered by a corruption in the nearby krakatoa volcano.

italy has pushed a revised budget through the senate and now they have to go to the end of the year deadline. they are under pressure from the european union. have accusedrties them of having incorrect figures to be fixed on the fly. the tokyo district court has ruled that he can be held in detention since -- until january 1. his lawyer has challenged prosecutor allegations that perch the personnel office at nissan. opec has confirmed it and its allies will cut production by

1.2 million barrels next month. saysae energy minister that opec members will lower output by 800,000 barrels and independents, including russia, will cut by 40,000. dayal news trey flowers a on bloomberg -- please hours a day on bloomberg and tictoc on twitter. amin.aslinda this is bloomberg. we have had trading in australia underway for about an hour. we are in the middle of a shortened australian session. a third of 1%, but a few things to consider here. it we do have the open in australia, stocks and it alphabetical order.

-- in all medical order. just started trading. they are currently looking a little weaker. kathleen? paul, let's get back to washington, delivering and -- andme christmas unwelcome christmas break for investors. the government shutdown and the departure of defense secretary james mattis, new chin is trying to convince traders that jay powell is safe. >> i did speak with the treasury secretary last night about a bunch of things, including the lapse of appropriations and he did mention that to me. kathleen: that was bloomberg editor roz krasner a --ros krasny in washington. let's start with the shutdown. it seems like this brouhaha about jay powell getting fired

will settle down, but the shutdown will only pick up speed. is certainly will, kathleen. it's an unusual shutdown in that congressional washington has gone. they have gone for the christmas holidays. chuck schumer, the democratic leader, was spotted in a bar in new york, celebrating the holiday, and basically, there is no urgency between now and after resolution, get a and mick mulvaney, the incoming white house chief of staff has been one of the point people for the white house on this. nancy pelosi, the incoming democratic leader in the house has talked about how this may not be settled until january 3. that is quite a way off. it does look like the sides are far apart.

the offer that has come from the white house may be coming down a little bit. some hints of that. it would be quite unusual to go all the way to the new year before we get the resolution, but it's not out of the question. kathleen: we have the breaking news friday afternoon the president asking is a buyers -- asking his advisers, hey, can i write your jay powell? after we hear this from mr. mulvaney, does it feel like it is done or is there more to go? i think this story has legs. one thing we have not heard is from president trump himself. he is not shy about tweeting, but he has not come out with a statement. the statement has come from secretary mnuchin and is being echoed as a soundbite by the incoming chief of staff

mulvaney. so, there has been a report in the last hour or so that the white house is trying to get .eetings going it's certainly not unusual for the president to meet with the head of the federal reserve. but the amount of job owning and has put onat trump the federal reserve is quite extraordinary. every time the president says something about the fed, the markets are going to be very, very jittery. i would look for that story to keep rolling. it was a little over an hour ago we got the news that secretary steven mnuchin called bankers after the news of the

market selloff. : he said, and treasury officials have said that they thought it was the prudent thing to do. it's the market selloff and the government shutdown and really to take the temperature on wall street. not just how the government shutdown may be affecting them, but whether it has an impact on their liquidity, but those calls and the meeting going ahead with the president's working group to assure everyone that financial markets are in working order. i do not think there has been any question about it, but it can never hurt to have an extra layer of reassurance with the federal government shutdown.

and they could be furloughed at this point. with these shutdown and all the questions we are asking, president trump is moving jim mattis out a couple months early. why is he doing that? ros: well, it sounds like, from once jimear, that mattis announced his resignation, trump just wanted to sweep the defense department clean and get his new person in their, at least on an acting basis. it's not terribly unusual to not want to have a lingering time with an old secretary and two months is kind of a long time. but it also seems like president trump irked by the very pointed sent, that general mattis aboutwith his resignation

his policy disagreements with ,resident trump, so given that i think president just wanted him out of the way. ny in all right ,ros kras washington. still to come, will volatility continue into 20? we will dig into that. kathleen: opec restrictions have not gone into effect and already producers are looking at of stimulus. this is bloomberg. ♪

kathleen: this is daybreak asia. i'm kathleen hays in new york. paul: and i'm paul allen in sydney. s&p 500 futures started training a short while ago, currently a lower, as you might expect.

there is the trump versus paul dispute, the government shutdown, the early departure of defense secretary mattis. typically this time of year is quiet. but we are entering a bear market. let's look at what 2019 may hold in the face of all this upheaval. steveg us from singapore, n. thanks for joining us. there is a laundry list of inks for people to be bearish about. which of those are top of your mind? debate -- ihe fed cannot remember a fed rate hike lasting this long, and we continue to hear a vocal minorities suggesting the fed has made a policy error. that certainly does not rate for investor sentiment. do you think that the fed

has made a policy mistake? we've been talking about that rate hike for what feels like forever. the markets knew it was coming. did this twitter were the president trump has been raging on jay powell -- didn't just make it a lot worse? yes, it just adds to the mountain of risk we are dealing with going into the holiday season and you could sense the markets were going to tank. there was no real hope for a plan. we have risk permeating every corner of the globe right now. this malaise in washington certainly adds to the negativity. about perception versus reality. i think the perception is so negative, it is hard to shift investor sentiment into a positive bias. kathleen: whenever there's so

much negativity, right, and the worst week for the stock 2008, things -- did not look that bad. the market had a big move up. is this market setting itself up at least for that after such a big downdraft? there's a lot of negativity permeating in the is ans, but a lot of it exception. the reality is the u.s. economy is not that bad. i think some of the forward projections suggest we could see gdp dropped to 3% or slightly below into q4 2019. i think there's an over exaggeration. that is by no means recessionary. if you look at the yield curve, recessionary is a probability, but if you look at the data, it's not that bad. china is coming out with x .5 gdp. 6.3%bly will tail down to

or six point 4%. that does not suggest china is that bad. built up onably holiday season inventory meltdown. it will be interesting to see if the markets do recover. it looks like we will be entering the new year on shaky footings. i want to ask you about one of your top three convictions for 2019. you see gold moving higher? why is that you go -- why is that? stephen: we are getting to the end of the fed rate hike cycle and is a lot of risk that continues to permeate and the market. this could perhaps promote a more dovish outlook from central banks. i also see a little decoupling, golden the u.s. dollar. i am not suggesting it will , althoughstantially one might assume that it would

be weaker, but i think gold has got that appeal. i think equity markets, though they could move higher, i think they will continue to struggle and this would suggest to me that gold could remain at very viable hedge. not only is there geopolitical risk, but stock market risk through 2019. mention in your previous answer a lot of the data is looking ok. employment numbers are looking ok. seen's the selloff we have . does that improve valuations? stephen: this is the key metric here. i think we are getting into a great debate here. people are perhaps leaning too much on the fiscal stimulus impact fading to quickly in the market. i do not think that will be the case. i think earnings, especially valuations certainly make it bargain hunting

going into the new year, provided the u.s. economic data stays relatively upbeat, i think we are on a positive tangent going into 2018. there is a funny notion i have that bad news may be considered good news going into 2019. sliding economic data, that could supply a more dovish fed and that could help the market. it will be interesting to see what tengion traders -- tangent traders trade off on. failed tothing we mention was trade. are you feeling optimistic about a revelation on that -- resolution on that? i think the tit-for-tat escalation, we could have reached peak tariffs. we could possibly have one more.

more about intellectual property rights in the theft of u.s. technology know-how. i think we are starting to see that continue to ramp up. the u.s. majoret issues around china. they are really offering up a lot of money and that could potentially be negative because these countries cannot pay back this debt. kathleen: your view is that it will get stronger and it will get weaker -- that would be logical, but besides that, there's still concern about being hit by the trade war. there's all kinds of issues. what's it going to mean for markets more broadly?

stephen: the stronger yen is part and parcel given that we could see new equities in the new year and the japanese have been such massive buyers of u.s. assets. , the hedgeese hedges ratios are running around 48% right now, so my feeling is twofold. if we start to see further weakness in u.s. equity markets, that could trigger one of two things. havens.e safe for the be quite strong markets. kathleen: if you have to pick -- emerging marsh it emerging market in asia to put my money report, which is it? stephen: i think of a little leery about the malaysian markets right now. i think their overall price is negative.

the landscape is potentially destabilizing. that is not one of my hotspots going into 2019. kathleen: that's what i'm looking for. a red flag. stay away. thank you, stephen innes. interactive tvur function, tv. you can catch up on past interviews or dive into any function we are talking about day and and day out. you can be part of the conversation. please do. send us instant messages. this is for subscribers only. check it out. tv . this is bloomberg.

paul: this is daybreak asia. on paul allen in sydney. kathleen: i'm kathleen hays in new york. we will get straight to a quick check of business flash headlines. reports in germany are that

volkswagen may have introduced it functions in software to reduce in missions cheating. it battles back the dominant are that would keep the in missions low. vw is set to meet regulators early in the new year. singapore has joined malaysia in drying goldman sachs into an investigation of money missing from the investment fund. singapore police have been examining goldman's relationship with the fund for the year. goldman units have already been charged in malaysia. huawei will be moved out of the gear of the police force and emergency services. removed equipment made by the chinese company after the

acquisition of a company that used huawei gear throughout his systems. the world's second-largest economy is in an economic slowdown with no signs of ending. as we head into the new year, we ask our analyst for their predictions around china's slowing economy and its sectors. ♪ i think this is the story of 2019. if you see the increase, it could be very, very negative. >> of course, there's the looming chinese consumption slowdown. how down? thistially, as we see looking into the future, there

could still be some growth there. there's that massive growth segment really ramping up. it will be impacted by the economic slowdown of china and we think that it will go downwards from the early cycle and then it will move on to late cycle commodities. >> we do believe that luxury profit gains will flow into 2019. theccept -- we expect consumption to increase in china after luxury that -- luxury china cut prices after lowers him promote taxes in 2019. just ahead on the show, more on the china slow

down. the promise of monetary and fiscal stimulus and 2019. the outlook for the yuan. keep it right here. this is bloomberg. ♪

>> it is 10:30 a.m. and sydney. markets trading for 30 minutes right now. by asx is weaker by .1% -- .5%. markets closing at 2:00 p.m. local. >> you can see it is a beautiful, clear, when to reunite -- wintry night. i am kathleen hays in new york. >> and i am paul allen in sydney, and you are watching daybreak asia. first word news with haslinda amin in singapore. paul, the white house has moved to calm the markets losses in recent

days. steven mnuchin spoke to the six largest u.s. banks over the weekend and were told they had liquidity for business and other operations. mnuchin assured financial markets that jay powell is safe at the fed amid reports that president trump has discussed firing him. the shutdown in washington is expected to drag into the new year with republicans and democrats at odds over president trump's boardwalk. order wall.y -- mick milani said they are awaiting a counter offer to the president's demand for $5 billion with no vote expected before the end of the week. top democrats say they have no intention of paying up. >> $5 billion is a lot of money. day,is 2 million meals a for a year, for seniors. and to spend it on that strategy rather than stuff that improves border security is something that just not going to do. haslinda: our going defense

secretary will leave two months early with president trump promoting his talk to -- top deputy. it follows criticism about the withdrawal from syria and a sense of turmoil in the national security team. a former boeing executive joins the administration last year. chinese state media say lawmakers will consider legislation preventing the forced transfer of technology. the people's daily sentence the minister urged them to protect the intellectual property rights of overseas investors. if implemented, the proposed new law will address a topic that has been at the heart of that in the trade war. spacex has capped a record year with the deployment of a new gps satellite for the u.s. air force. the mission was the 21st of the year, breaking the previous high of 18 set in 2017.

it was delayed several times because of technical issues in bad weather. valuation has risen along with its launch record. day, onews, 24 hours a air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda amin. this is bloomberg. paul: thanks very much, haslinda. let's check the state of play for the markets. asx off .6%, and all sectors are lower. the only major sector in the green right now, materials, but only just. s&p has been trading for a while by, currently off by .5% -- .2%.

adam haigh is with us. adam, how is this chatter about president trump and jay powell going to affect things through the lens of last week's volatile trading? it isyou can say unsettling people and that is the message we are getting from the trading desk this morning. stephen mnuchin has come out with some fairly, you know, categorical statements about people's nerves, and that seems to be working at the moment if you look at the prices we are seeing on our screens where you had a bit of thestrengthening against dollar, but nothing to bed, and indeed, you had a weakness open on the s&p 500, but they have come back and they are looking only slightly down at the moment, so clearly, the overall context here is we still have the existing worries, which are that financial conditions are tightening in the u.s., people are very uncertain going into 2019 about how their asset allocation is going to play out, do they need to be moving even

more cautious? have a got to the worst of the selloff in global equities. and then, the notion of how it will continue to play out next year. you have the backdrop that looks very, very uncertain, and i think the key message from what we have heard over the weekend in terms of whether trump is considering removing jay powell is that, you know, it adds to an structurery layered that is quite unsettling for investors. over how thin liquidity is the christmas period, a lot of of people are out and away on holidays. andl we get into next year through this holiday period, very difficult to see any sustainable rally for risk assets at this point. kathleen: notwithstanding that president trump probably cannot remain jay powell, certainly not without some kind of great difficulty, the legal aspects of the do not look very strong. it seems that so much as in the market now, right, adam? maybe the market does not rally from here, but you look at the

bit of a bounce in the s&p 500, the asian markets, s&p a little lower. do you think it has exhausted itself for a while? do you think we can get through the holidays waiting for 2019 to begin? adam: clearly, kathleen, a big chunk of investors in the markets do on that view. that you will be up to get some kind of relief rally from risk assets and talks they -- stocks may be able to perform. you heard last week from bob a staunchhe has been believer in the us equity bull market, and he looks at these kind of charts now in the nasdaq down 20%, that one is in your gtv library, we can make that picture across global markets. that's so many markets now are at significant valuation discounts. and the opportunity for a relief rally off the back of those kind of levels is clearly increasing day by day as this market selloff kind of deepens. was making hise

maybe we need to get through this holiday period, into january, where we get the earlier release of the numbers in the first week of january. we get into the fourth quarter earnings season, and if we get substantial members that give people a bit of positivity and the idea that maybe things are already, as you suggest, largely accounted for in a market pricing, and then we could get into a period of relief for equities, but i think, at the moment, and given what has just happened over the weekend with the trump/powell situation, there is not really anything people can hang their hat on now to really want to dive back into stocks, given that volatility is clearly elevated. market liquidity is down during this holiday period. no one wants to die back in at this point. kathleen: thank you so much to adam haigh. on to china -- dive back in at this point. kathleen: thank you so much to

adam haigh. our next guest says the pboc will allow a higher to a -way currency.o it strengthens to 6.0 by year-end. 6.80 by year-end. when you look at all the different factors that will determine this currency you rate -- currency rate, is at how things will be, is at the next thing and asked by the pboc as they develop targeted lending programs? does it come from the u.s.? is it the federal reserve and how they slow down the rate hike path? chineseyear, we see leaders would like to increase the stimulus, and also we are adding easing, so this year, we saw that the diversion see between the peak -- divergency

has been raging. that the, i think differences will continue, but i think the good news is that china right now is increasing its stimulus, so it will help to not add too much easing bias. we saw that even though the fed stopped the rate hike, the pboc may still continuing increasing ancontinue increasing is bias or cutting interest rates. the more important thing is that the renminbi rebounds emily us some room for the pboc to cut interest rates. the pboc will be happy to do it because the economy i think it's economy has downside risks. where theso how about

u.s. and china stand in trade war, trade negotiations? it seems like one week, they are ready to get a deal, the next week, they pull back again. what do you see, what do you expect, and how important will that be to where the currency goes? china-u.s. tensions in the to postill continue some uncertainty on the renminbi. decidedly whenever u.s. to push rolet any tariff hike -- push forward any tariff hike plans, we speculate the pboc will allow further renminbi appreciation, and that will be on the first of march, so i there are differences between the china and u.s. it is multidimensional. international property

protection. in such an aspect, it is quite difficult for them to reach a comprehensive deal, and i think reachikely, they tend to an agreement or extend the deadline of negotiations, so i think that such a china-u.s. tensions will continue to post some uncertainty until at least the first half of 2019 on the renminbi side. is forour forecast china-u.s. tensions to persist in terms of trade, but no escalation. on the other hand, we have the huawei issue, these tit-for-tat arrests. haschinese military expressed concern about general matters and president trump has a reputation for being unpredictable. i am just wondering if you say no escalation, perhaps you are being a little optimist.

-- optimistic. ken: i think i'm still biased on the optimistic side. i think, so far, we have seen that china and u.s. leaders tried to separate the tariff negotiations from other aspects of conflict. there is a meeting in january to discuss the tariff tensions, so i think that this is still posing some significant china-u.s. in -- tensions. the u.s. economy next year, we are in good shape. economy -- downside risks. andalso the tariffs tensions could also impose some damage on the u.s. economy as

well, so i think if this goes in this way, the u.s. may be losing some upper hand in the china -u.s. negotiation in the second half of next year. we may see that the u.s. may try to compromise more in this type of discussion. paul: ok, in terms of stimulus from china, if we could return to that topic, we have tax and fee cuts coming. and further cuts to the rrr potentially in the pipeline, but how far can that rrr because before becomes a risk? ken: i think -- before it becomes a risk? ken: i think the key focus is china. we just saw more details about the individual tax cuts. if you take a look at the breakdown of the individual tax it is a small proportion for the whole tax revenue in china.

really wants to have a property economy, they mean need the tariffsto cut comprehensively not only in the individual income side. we need to see that they cut the tax also in the revenue from the corporate. the tax will be quite into ardent for china to -- important for china to deliver as a property economy. kathleen: so what is the biggest risk your outlook? it seems to me reasonably positive that the people's bank of china can take the steps in need to do, cut the reserve requirement ratio, the government can cut taxes, etc., but things don't always go as planned. what is the biggest downside risk? ken: the biggest downside risk is china-u.s. tensions. the u.s. side, it is still quite unpredictable in this type of negotiation.

china and u.s. has reached some agreement on the trade said, but suddenly, we see there is still tariffs imposed on chinese goods later on in june, but i think this year, we still need cautious of china-u.s. tensions. there is still a lot of uncertainty in china-u.s. negotiations, so i think, especially in q1, when the deadline is coming, on the first of march, we still need to pay much attention on such types of deferment of china-u.s. negotiations. kathleen: thank you so much for joining us. strategist.sian fx up next, opec confirms output curves for next month. -- opec confirms output curves for next month. this is bloomberg. ♪

kathleen: this is "daybreak asia ." i am kathleen hays in new york. paul: and i am paul allen in sydney. the ink is barely dry on opec's new agreement to cut output, but they are pledging to deepen the cuts. joins usng reporter -- from seoul. why are some of these nations looking to extend the curb so early? basically, oil prices have plunged more than 10%, even after the opec plus alliance have decided to trim output in early december. to prop upthey want prices and reduce the oversupply, but the market has been having doubts over the effectiveness of the deal because there are fears of researching u.s. shale production as well as consensus over weakening economic growth.

despite the saudi oil minister's comments on how the producer group will most likely extend the agreement in april, his assurance did not do much to stop the decline in oil prices. paul: so specifically, have we heard anything about further cuts beyond what was announced earlier this month? plan: well, because the cuts to stabilize the market, some members of the opec have already said they would extend or even deepen their six-month record to curb production. officials from iraq, kuwait, and the uae agreed to, with saudi arabia, expectation that the group will extend the agreement for another six months. saudis have volunteered to take the lead in trimming output by more than it has agreed. the kingdom plans to pump about 10.2 million barrels per day in january at rather than 10.3 million barrels per day, alluded to it in the opec plus agreement. in terms ofll,

further cuts beyond what was earlier announced, very important issue. and of course, the uae energy thatter has been saying the president held a conference in kuwait. what were the takeaways from kuwait.in what were the takeaways from that? >> ministers took turns and repeating the message that opec will deliver its 800,000 barrels per day cut and continue their cooperation with other producers in the group to balance the market. the uae minister, who is also the opec president, said that while trimming -- while the planned 1.2 million barrels per day cut took account of surging u.s. shale production, and it has also been carefully studied, if the deal requires more than what is needed are planned, there are always up for discussions and come up with the right balance, so now, investors are really looking forward to if

the comments from the opec will support the oil prices from the current level. kathleen: very important questions. one of the things the stock market has been watching so closely. heesu lee and seoul. thank you so much for joining us. one of the largest iron ore miner's is staying bullish on china despite the ongoing trade war and a slowdown in the mainland economy. last month, the ceo told us she is confident demand will remain strong and she is encouraged by the messages from aging and washington. -- beijing and washington. >> there was a consistency of messaging. president xi spoke and had a similar theme, opening up and reform for china. for us, that it's very positive because we are seeing that very strong steel production that is driving demand for iron ore, and that gives us confidence to make we investment decisions that announced earlier this year, so consistency of message is really key for us. >> you talked about the boolean onmand from china -- bulli

demand from china. how long do you see this current uptick continuing? and is it sustainable and to 2019? -- into 2019? tons ofy one billion steel. that has far extended anyone's expectation. saysnk the chinese economy a number of leaders can be used to stimulate demand, so we are seeing the outlook up. >> what other leaders? >> investment and infrastructure, belt and road, air, infrastructure jiving the very strong demand for steel. we are not seeing -- driving demand for steel. there is demand for steel and iron ore. >> what is your view on the trade war?

there are midterm elections which could change the narrative coming from the white house depending on what happens. but australia, you have benefited with the iron ore. as a key supplier, how do you see this playing out? >> have really yet to see what the impact of the tariffs is going to be. if you look back over history, the periods of trade protectionism have not been positive for global growth. aboute some concerns global impact. but we are seeing that china and the message and we heard from president xi yesterday is that they are very positive about the outlook. they will continue to drive that demand for steel and iron ore, so we see that as a net positive. numbera clearly is your one customer, but you want to die for survive the cost -- diversif the customer base. ythat could impact it significantly. arever the long-term, we going to see growth.

there may be short-term impacts from tariffs. are seeing very strong growth over the last decade or so and we see a long-term view for the region more broadly. fortescue's ceo, elizabeth gains, speaking to bloomberg and shanghai. for some of the stories trending across the bloomberg universe come on the web, bloomberg the mythwrites about of china's great technology grab. see why she says carmakers know how to safeguard their ip. donald trump is dominating most-readred list -- list. the indonesian tsunami. at least 168 people have died. many more injured or missing. you can check out both stores trending on bloomberg online or on the terminal. ♪

>> time for a quick check of the latest business flash headlines. jd.com avoided the biggest crisis in its history as u.s. prosecutors decided not to charge the founder over an alleged rape. it may global headlines and have to doubts over jd's leaderships and ambitions. the $30 at thew time his arrest was made public. tesla is said to be cutting prices in china to revive reportedly slumping sales. the cost of the new model three as well as the x and the s were reduced as much as 23% last month after beijing moved to suspend higher tariffs. the starting price for a model ,hree in china, 499,000 yuan $72,000. beat maryaquaman

poppins. over $67 million in theaters across the u.s. and canada. keep it right here. this is bloomberg. ♪ ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom. ♪

paul: good morning. i am paul allen in sydney, where asia's major markets have just opened for trade. kathleen: good evening. i am kathleen hays. welcome to "daybreak asia." our top stories today, mnuchin tries to convince investors that jay powell will not be fired, and his job remains safe at the fed. paul: china announces more staggered stimulus as the economy grapples with a slowdown made worse by the trade war. kathleen: indonesia rel from yet

another investor -- reels from yet another disaster. paul: ok, let's check the state of the markets that are open in the region. at the moment, we have got the .zx pushing higher positive territory in new zealand up .3%. in australia, we are recovering from a week open. open.k the asx 200 almost flat. the kospi opening up higher by one point at the moment. trading that nudged into positive territory as well. all right, let's get a check of the first word news. here is haslinda amin in singapore. the number of people now known killed in indonesians economy isnesia's 222. most of them were tourists,

thought to have been triggered by an irruption of the nearby volcano. the disaster comes ahead of the peak holiday season and may hurt the tourism industry and put further pressure on the rupiah. italy's populist governments managed to push a revised budget through the senate and now needs final approval from the lower house to meet an end of year deadline. senators approved the spending plan curtailed after pressure union.e european opposition parties accused the government of using a confidence vote to force it through. nissan boss, carlos ghosn, is expected to spend the rest of 2018 in jail but may be released on bail after new year. the tokyo district court ruled he could be held and attention until january 1 but is not being allowed visitors. his lawyer has challenged prosecutors latest allegations during the financial

crisis in 2008. its has confirmed it and allies will cut oil production by 1.2 million barrels a day from next month. holdse energy minister the presidency and says opec members will lower output by 800,000 barrels including russia. india, areiran, and exempt from the anticipated cuts. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda amin. and this is bloomberg. kathleen: thanks so much. ashington delivering christmas break for global investors. on top of the government shutdown, the white house has been forced to assure mattis that jay powell's job is safe. put out a tweet

last night specifically saying he realizes he does not have the ability to -- >> we said he had told him that. it -- i didve heard speak with the secretary last night about a bunch of things. he did mention that to me. a bloomberg editor joining us from washington. jay powell, donald trump, thinks he wants to fire him. his advisor is saying he knows he cannot, but where does this effort told trump's get jay powell to do what he wants him to do? >> kathleen, it sounds like president trump or his aides are looking to convene a meeting with the fed chief over the next few weeks. something that certainly is not unusual. the president and said official -- presidents and fed officials do meaet from time to time.

you know, it certainly seems like they are coming into a bit of a clash. i don't know what the purpose of the meeting would be to achieve. whether the president thinks he can browbeat jay powell in person versus the jawboning he has been doing on twitter. unnerved thenly markets, as you noted. we heard from a lot of traders and lawmakers over the weekend that this would be a really sort of catastrophic events in terms fed -- -- independent otherdependence and many things. we are waiting to hear more about what the meeting might be about. kathleen: it is interesting. the new york fed president will bloomberg that even if powell -- excuse me -- if trump could

remove power all, it is interesting to me that he is calling talk banks to calm them down when it seems like a lot of the problem they are having is coming from the white house. has mnuchin said what he's got from these calls? ros: very interesting statement. he talked about how, don't worry, there is plenty of liquidity in the market. it is a real head scratching because i don't think anybody has really been talking about a liquidity crunch. obviously, markets go down, markets go up, and it has not been any sense that the decline has been especially disorderly, so you really want to kind of see what was behind the cause that mnuchin made, the meeting that he's called. tomorrow with the president's working group, a group that meets from time to time, but is most closely associated with times of market prices, nobody

that we have spoken to has really identified such a crisis, so it is all a bit of a mystery. if he actuallyar talked about the big elephant in the room, which is what president trump might want to do with the fed. paul: also, all a bit of a mystery is what is going on with the shutdown. a number of people have left washington, but negotiations are continuing, right? negotiations always continue at some level, even though lawmakers have kind of fled for the holidays back to their home state. nancy pelosi has gone that to california. to new york. back the only person he has not left town is president trump, who cannot go to florida for the holidays, but talks continue. it seems like the two sides, republicans and democrats, still pretty far apart on their .emands for border security

in the democratic is, they would call it border security. republicans would call it funding for president trump swap. orboth sides, we heard today confirmation that this could run into january 3, when the new congress starts without a resolution. unusually large amount of news coming out of washington at the moment considering the time of year. let's talk about jim mattis. he was supposed to be staying on for a couple of months to use the transition, but now, president trump is kicking him out on january 1. why is that? ros: if you look at the letter that general mattis sent when he resignation, there was a pretty sharp criticism of the president in the way he treats allies, the way he conducts his foreign policy, basically saying i cannot live with this. so i think president trump having taken that on board just

thought it was better to have them out of their altogether. so general mattis cannot for example go and meet with troops, have a fair world to her, and really, you know, do something befit is on decades in the military. president trump likes to have the upper hand in his administration, so not letting general mattis leave on his own terms is perhaps not too unexpected. paul: all right. interesting times in washington. thanks for joining us. merry christmas to you to. try and -- you too. try and enjoy it. adam haigh joining us. losses whenearly the trading week started. reversing already. people taking comfort from this seen fromhave steven mnuchin to calm things down.

adam: there is no denying the fact that this has unsettled people. people are trying to think about what it means for the top echelons to remove a central bank governor. we have seen a bit of yen strength. the s&p 500 opened a bit weaker. they has since rallied. japan, the stock market has closed today, and the treasuries trading is a bit limited. main reads wehe have on market sentiment reaction at the moment, but clearly, it is unsettling people. it adds another level of unknowing to the worries that are already out there. a selloff in equities last week with around the idea that powell was accepting of the volatility markets and the fed governors believe it has not gone far enough to start to really impact the economy in any meaningful way, so they are so comfortable course,t idea, and of

going into 2019 with the financial conditions tightening as they are and have been doing thesome months, it makes end to the year very tricky, because you get closures, liquidity, and certainly coming off significantly, and in many markets, it dries up quite a bit, so that does exacerbate some of the moves you see in markets. it is a week that will be characterized by loss of closures and markets, lots of people ducking out for holiday. predicament going into 2019. there does not seem to be anything that people can hang their hat on to want to jump back in in any meaningful way to give sustainability to any equity in rally. let's turn the dial more towards asia. is there any room for some in asianle rebound stocks given that it's only

india and new zealand that so far have posted gains for 2018? you can only go down so long before you have to go up, right? adam: fighting talk, kathleen, isn't it? clearly, there are significant valuation discounts in a number of asian equity markets, and indeed, we have had some relief rallies in some of the asian fx markets. there are people who believe that there is some more strength to come. as you pointed out, very few equity markets have had positive returns in 2018, and indeed, lots of forecasts going into next year are somewhat bound by the fact that you have the overarching trade war issue. you have an earnings growth environment that is very restricted on a number of fronts in places like japan. the consensus numbers have been dialed down significantly and you have foreign investors fleeing the market at a significant clip. in places like china and hong kong that are, you know, very

deep into their markets, you have the overarching worry of how the tech sector performance. that is one of the notable be rated sectors this year. the asian tech space. and of course, you know, in markets like india that have done ok lately, they have their going into 2019 with the general elections and the most recent local elections showing that modi is in somewhat of a predicament going into those elections, so plenty of worries and the markets like india as well, so across the borders, we get into this holiday season. it is difficult to really see any chance of a sustainable rebound from here. the only kind of saving grace i suppose is to add liquidity. you can get more sizable moves. there may be a little bit more potential for people to take a bit of risk, if they are feeling brave at the end of the year. kathleen: geopolitics playing such a big role in 2018. i think we are suggesting it may

be playing a bigger role next year as well. thank you so much, adam haigh. still ahead, we are going to talk currencies. our next guest says the u.s. dollar has a big rally ahead. we ask why. later, china confirms more monetary and fiscal support in 2019. we will look at the main takeaway for the plan. this is bloomberg. ♪

paul: this is "daybreak asia." i am paul allen in sydney. kathleen: i am kathleen hays in new york. the fed appears to be approaching the end of its hiking cycle. people say the fed in consensus since it will be hiking at least two more times this year, but some are saying maybe not. you may have to positive bottom line, what does this mean in the bond market in the u.s., around the world? .oining us, hayden brisco

it's interesting that we have had this big move in stocks, right? big selloff. bonds have rallied some, but the move is so much less extreme. what do you make of that? what is the bond market thinking, this somewhat more dovish fed stance is going to meet for them -- mean for them? >> the bond market is trying to get its head around inflation. that is the key thing. we are observing that inflation is starting to accelerate to the downside. this year, it's been really tough. essentially, they have been selling off the same time as equities have been selling off, so correlation going down to one when normally, we are used to negative correlation. we think it is time to get bonds back in the portfolio with lower inflation rates. you throw in oil coming down, which has not even fed into the headlines yet, and that is coming quarters. all of that is pointing to bond

bullish again and the negative correlation can start to exert itself with risk assets, so we are layering risk back into our credit portfolios along with risky assets right now. kathleen: care enough. you're saying it's going to come down because you don't see a lot of signs yet that the headline pceers for pce and core have really pulled back. just a little bit, but they are both still around 2%. that is one of the things the fed chair made at his press conference. hayden: you are spot on. it should have peaked out around the fourth quarter. the leading indicators are showing us on a three-month on three-month momentum that they are starting to bend down. one of the big phenomenons we will see is how much of an impact oil will have and how it seats through. obviously, that has not happened yet. we have got to see if oil stays at the low 40 hamels. if it does, we are in for a bit

of a shock on the inflation front come next year. paul: what about the risk of the inversion of the two-year and 10 year curves? can you still see that happening ? hayden: easily. as the fed starts to ratchet back the expectations around the rate hikes, lower implosion rates happening -- inflation rates happening here, we expect it to start to slow, not collapse. you throw that into the mixing bold, you can see them invert again. obviously, risk assets around the world are under a lot of pressure. we know the financial's asian -- tion, that is all a pretty toxic mix. it could invert quite easily here, i think. paul: in terms of the u.s. dollar, you are forecasting a blowoff top rally. could you lay out your case for

us? hayden: fundamentally, the u.s. dollar should be selling off. you have a twin deficit that is growing and growing by the day. but i think, technically, there is a huge short in u.s. dollars around the world, particularly in emerging market countries, so as the u.s. has repatriated money, we see a very strong u.s. dollar. a good clean out in the u.s. dollar back to the highs if you are looking at the dxy. it could go beyond that. we still think there is a big squeeze to go on here in the u.s. dollar. kathleen: so you like bonds. do you like treasuries and corporate bonds? how does that factor over to the rest of the world? rallying,easuries are inflation is coming down, you could imagine there are still positive factors rather bond markets in developing, and in

emerging markets. hayden: one of our top takes for 2019 is still chinese bonds. so they after a similar to u.s. treasuries. obviously, they have been cutting rates. we had the economic work conference again. there was another subtle adjustment to cut rates. liquidity is still going to be pumped into the economy so the overnight repo rates will be quite low. very supportive for bond markets. again, inflation is likely to come down, particularly because food inflation is starting to roll over there. the top pick is chinese high-yield. that has been a beacon of asset already, so it is very unusual. u.s. high-yield has been holding in an chinese high-yield has got absolutely blown out in credit spreads. that is the top pick because it's starting to break liquidity and to the chinese market which is very supportive for these bonds. and you have a yield on the bond market around 10%. around 750 basis points.

when you are looking at u.s. spreads, somewhere between 400 to 500 basis points. kathleen: is the market is pricing -- mispricing? you think there is a lot more risk and a lot more reward. do you think that is the wrong way to look at it? do you think there are other reasons why you have such wider yields? the junk-bond type bonds in china, do you think they are a good investment? hayden: i think you are spot on. they have been risky. 2018. because there is a like of liquidity in the chinese market because they were tightening rates. all of those are really positive reforms that have been undergoing in china and we are very positive longer-term. now, they have reversed course. they have just reversed course and they are starting to put

liquidity back in. the liquidity that you are seeing in the cutting of rates, it won't show up in the official chinese statistics. most likely, third quarter of next year. there is always a six-month to nine-month delay. that is showing up in official statistics in the chinese economy, so you know, you cannot wait for those official statistics. aboutve to start thinking layering back in. we can buy these risky assets and start to put duration in our portfolios. paul: we will have to leave it there. hayden brisco, ubs asset management head of fixed income. thanks for joining us this morning on "daybreak asia." you can get a roundup of the stories you need to go to get your day -- you need to know to get your day going. bloomberg subscribers can go to dayb on their terminals and it's also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get the news on industries and assets you care about.

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kathleen: this is "daybreak asia." i am kathleen hays in new york. paul: i am paul allen in sydney. let's get a quick check of the latest business flash headlines. malaysia ins joined the investigation of money missing from the 1mdb investment fund. sources say singapore police have been examining goldman's relationship with the fund since at least late last year. cooperation was not a focus of any investigation. kathleen: reports from germany say volkswagen may have introduced potentially illegal functions in a software update intended to address a mission. the new program dials back filtering after a certain amount

of fuel consumption, which would keep emissions low for the duration of the standard test cycle. vw is set to meet regulators. telco bt is to remove it wally gear out of the network of the police force and other havingcies services, already pulled one-way gear from the structure. it inherited equipment made by the chinese company after the acquisition of ee, which used huawei gear throughout its systems. let's get a bit of a check of what's going on in the markets in this part of the world. new zealand has been up and running for a few hours and it turned rather sharply positive, now up .3%. in australia, the asx improving after some steeper declines. kospi in south korea off .3%. if you're wondering where the nikkei is, it is closed for holiday today in japan.

still to come here on bloomberg "daybreak asia," china is true all out more stimulus as it grapples with a slowdown. we will get into that next. this is bloomberg. ♪

paul: it is 8:30 a.m. in hong kong, monday morning. we are one hour away from the open of trading there. i am all allen in sydney. kathleen: and i -- paul allen in sydney. kathleen: i am kathleen hays in new york. haslinda amin. sophie: -- haslinda: the shutdown in washington is now expected to drag into the new year with republicans and democrats at odds over president trump's border wall. mick mulvaney says the administration is awaiting a counter offer to the president's demand for $5 billion, but no vote expected before the end of the week. top democrats say they have no intention of paying up. >> $5 billion is a lot of money.

that is 650,000 children attending headstart. it's 2 million meals a day, for a year, for seniors. and to spend it on a fourth century strategy rather than on stuff that actually improves border security is something that we are just not going to do. outgoing defense secretary jim mattis will leave two months early with president trump promoting his top deputy. it was announced in a tweet and follows criticism about the withdrawal from syria and a sense of turmoil in the national security team. petrochina ham is a former boeing executive who joined -- patrick is a former boeing executive who joined the administration last year. chinese state media say lawmakers will consider legislation preventing the forced transfer of technology. the people daily says the minister urged them to protect the intellectual property rights of overseas investors by

proposing tax sharing. if implemented, the proposed new law will address a topic that has been at the heart of u.s. concerns in the trade war. spacex has capped a record year with the deployment of a new gps satellite for the u.s. air force. the mission was the 21st of the year, breaking the previous high of 18 set in 2017. it was delayed several times because of technical issues in and bad weather. spacex's valuation has risen along with its launch record. it is now rated the third most valuable venture make start up after uber and airbnb. up aftere bank start uber and airbnb. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda amin. this is bloomberg. kathleen: thanks haslinda. andnese central bankers regulators are taking new steps to further open financial markets in 2018. the move follows china's annual work conference which concluded

last week. our chinese economy editor joining us now from tokyo. james, a three-day meeting. taking place at a time when, clearly, china -- like the u.s. -- is at a critical point. what are the main takeaways from the conference statement? james: we are going to see a continuation of the current economic policy of stimulus. the government is going to hold back on a massive fiscal stimulus like we saw in 2008 during the financial crisis. government is promising large tax cuts and reductions in fees for companies. but so far, the indication is the monetary policy is not going to open the floodgates of monetary stimulus. they are trying to keep a balance between overstimulating

from that channel. so, you know, we may see a four rrr cuts in 2018, so there may be something like that. also, the central bank announced a new policy last week similar to the boe funding lending schemes, which is where the central bank will be giving cheap money to banks. you may see some more of that targeted monetary stimulus as well. kathleen: the reserve requirement ratio cuts are certainly brought. you're making the point that seems absolutely true that the pboc and government is trying to have a very targeted approach. thelending facilities, latest to go on companies. i am curious, when you look at this, you know, the small companies or even the medium companies, has sensitive are they when it comes to these lending facilities versus tax cuts? how protective are these stimulus tools? james: that's a good question

that is hard to answer. a lot of the problem with china is not that there is not money available, it's that the stimulus the government is putting and is not getting to the places that really need the money. the cutbacks and debt, the government's attempt to slow the growth that over the last couple of years, really choked off lending funds for the small and medium-sized places and the companies which don't have the state backing that the enterprise has, so with the government trying to increased stimulus and trying to funnel money into these private companies, the question is, will it actually get there or will banks continue with their current policy of not really lend toerly keen to private companies and filing any extra money they do get back into the system. tax cuts for my you know, and those kind of things, will be helpful for companies.

it remains to be seen whether, you know, the central bank, especially, can get past the transmission of getting their policy of stimulus to where it is actually needed. james, how about financial risks? what do the authorities have to say about that? james: there has definitely been a pullback on how they spoke about that compared to the statement in 2017. there is still, you know, the central government is still raising the question of financial risk, and they want to lower the expansion of that, but they are looking for a slowdown. instead of trying to cut out -- cut back, they are trying to look to slow it in relation to the growth of the economy. it is so mentioned. it is obviously a concern, but they are much less keen to work on those structural risks as opposed to working to stimulate

the economy. still an issue, still a problem, but it is less at the forefront than it was 12 months ago. paul: there is more data coming later on this week and early next week. industrial profits, various pmi's. are they going to add to signs of a slowdown? james: the industrial profits data should be interesting. it has been slowing down for a think about four months, five months. questions lot of about how accurate that data is. there's other ways of measuring the headline number which shows the profits have been trekking over that same period or i guess since the middle of this year, so that will be interesting to see how bad it does get and whether the data is any more reliable. people think it has been more reliable. showing a slowdown in chinese manufacturing. it is meant to be 50 in december, which is the dividing

line between expansion and contraction. we see other things like the pmi from one. province -- from that pardons. the -- from a province. who is to say it couldn't be worse? there are other things it has shown are getting worse. i would be interested to see them but i do not expect a rebound from the numbers we have seen recently. paul: all right. china economy editor james major in tokyo. with that update from the economic work conference. the s&p globalis a pic chief economist, sean roach. thanks for joining us. let's continue on with some of what james was telling us in terms of chinese stimulus. the cost of borrowing in china, now at a two-year low. do you expect to see a lot of companies refinancing in 2019? way we are, the

thinking about stimulus at the moment is there are basically stimulus that chinese authorities can pull. monetary policy, credit policy, fiscal policy, and housing policy. and i think where the market has some concern at the moment is that while they have used monetary policy, and you're right, rates in money markets and short-term interest rates are very low, there is some concern that some of the changes in rules and regulations we have seen over the last two years or so in terms of deleveraging have made it much harder for the lower short-term interest rates to feed through to the broader economy and the broader financial system, so we will have to wait and the. we might need to see some further using in the rules and regulations and restrictions and perhaps some pullback on some of the tightening in shadow bank credit for some of this monetary policy stimulus to feed through to the real economy.

paul: so what kind of alterations might you expect ofn to see in terms stimulus, more easing of regulation, to allow that to happen in 2019? shaun: i think the first thing they are going to want to really try and do is boost and ease constraints on local governments, so we should expect the closure on local government bond issuance to use in 2019. signaled by the work conference and provide a large boost we think to the overall stimulus program, so i think looking for local governments to lead the uptick in borrowing next year is going to be key for growth. kathleen: how important is it broadly to what the world and asia, for the u.s. and china, to get on the road to finally resolving these issues? doing a negotiation? coming to some conclusion, which we hear intermittently that they

really want to do? think of a country like japan. they have been doing pretty well. their economy has been growing. inflation halfway to target. but the longer the trade workers on and a more exports are threatened, and the more businesses are uncertain, it just -- and the more exports are threatened, and a more businesses are uncertain, it weighs on asia. shaun: the way we would look at the china-u.s. issue is an issue of technology rather than trade, and the good news for china is that the impact on its on technology sector will be a bit of a slow burn issue, because what is really happening is this policy uncertainty in some of the measures adopted by the u.s. are targeted at technology supply chains in asia. that is why a lot of the rest of asia is exposed. japan, asia, and taiwan, of course. china has time to sort some of

these issues out. the bad news for china is it maynately that require substantial reforms to its overall economic roadmap. that itg the way perceives growth in the technology sector, the way it things ip protection, market access, foreign firms in key technology sectors, and a level playing field for foreign firms. roadmap, it reform might take some time to fix. we are starting to see some progress on that. we heard that a new law is in considered to help protect foreign ip in china. that is goodness, but i think it will take time, really, to show the world that it is serious about these efforts, and it will mean some sort of track record of complying with the new rules it is considering. kathleen: for the chinese, they view many of the things they are asked to do as why now?foreign concerns forced into a joint

venture. they made money, so why are you now?complaining even so, i agree with what you said, but the white house team, president trump, they want a concrete agreement. will the chinese be able to make a concrete agreement, something us specific as intellectual property rights, right now? -- as specific as intellectual property rights right now? shaun: it is unlikely. we need to step back from the tariff debate. while that is important and will be helpful for global growth and global policy certainty to ensure that those tariffs maybe stay up a 10% level with some sort of trajectory towards where they were at the start of the process over time, we should look at the broader u.s. policy effort, which is looking at into theke investment u.s. by chinese firms, export bans on certain industries going into china. these are policies that will have as large if not a bigger affect them iteris over the

medium -- than the tariffs over the medium term. we are not seeing any signs that the u.s. is willing to pull back on those particular policies. i think that will require quite a substantial policy change in china that will take, frankly, years rather than months. paul: this is going to take time. what do you think the most likely outcome is of this pause in trade hostilities? is the deadline going to get pushed out into 2019 and possibly beyond? good news i but the think is that they are talking and we are starting to see china start to make moves in the u.s. direction, so we should expect to see that process continue. i think a good resolution of this process would be for the two sides to continue talking. and for the u.s. to recognize that it will take time for china to make the required policy changes. it is not going to happen overnight. the two sidessee talking, i think that is a very positive outcome.when we start to see

perhaps, those negotiations breakdown, that is one policy uncertainty rises, and the key risk to growth in asia from that is that firms just wait and see. far, this has been an investment recovery. if firms are uncertain, the best decision for them is to stop investing, maybe wait to see what happens. if all firms do that, you typically see quite a large impact on overall growth. i think that is the main concern. paul: just quickly, i want to get your thoughts on what the key risks for china are going forward. we have more data as james was saying. it could indicate the slowdown continues. up. continues to pile where do you see the key risks for the chinese economy? isun: the key risk really something i referred to a little bit earlier, which is policy effectiveness, so china is using. we think, since the second quarter of last year.

we have seen financial conditions move from broadly tight to somewhat neutral, and typically, that table as his growth with about a two quarter lad, so we should see the effects of that may be in q1, q2, next year. , they center on this policy easing being effective. if you focus on large parts of shadow banking, it is only reasonable to expect that easing monetary policy will not only have a weaker effect, but will take longer in this cycle than it has in past cycles, and while most people recognize that is true, there is still some uncertainty about whether this policy using is going to be anywhere like as effective as we have seen in past cycles, and that is what is really, i think, lending a little bit of uncertainty to the whole prices and it is undermining confidence and china. we think policy can work overall. broadly, we would expect to see it mainly work through infrastructure investment next

year. so that bond issuance by local governments target that we should expect to see in march is going to be key, but it's going to be perhaps a slower, weaker cycle this time around compared to what we have seen in previous rounds. paul: all right, shaun roache, s&p global aipac chief economist. thanks for joining us this morning on "daybreak asia." than 200 next, more killed, dozens missing. we will have the latest on the tsunami in indonesia. this is bloomberg. ♪

kathleen: the number of people killed by the indonesian tsunami over the weekend has top 200 now with dozens missing in the tourist region. international correspondent for southeast asia, haslinda amin, is watching this story. what a tough time for indonesia. how bad was this natural disaster? haslinda: definitely a tough

time. it is the latest in a string of bad luck, so to speak, for indonesia, and the extent of the damage is pretty bad. you talked about 200 dead, more than 800 injured, dozens missing, hotels damaged, boats damaged as well. we heard about a band performing by the beach, a band called 17. in the end, two of the band members were swept to the sea, crew and we had two members missing. that is the extent of the damage we are seeing at this want in time. you're seeing pictures of that. saturday,mi struck on 9:30 p.m., no signs. it struck in the southern sumatra islands, and tw provinceso were affected. what is interesting is the fact that the president of indonesia has been trying to promote this

area. in fact, he dubbed it as the new bali, hoping to attract more tourists to this part of indonesia, only to be dampened inthis latest disaster indonesia, so as you can see, indonesia pretty much reeling from the damage of the latest tsunami. enclave as surfing well. there were no warning signs. we think often of tsunamis coming after an earthquake. there was no earthquake here, but there was something going on that may have triggered the tsunami. what was it? haslinda: you are right. this is what is unusual. there were no signs. there was nothing to react to. a couple of theories are there, and one theory that is being i guess that about right now is volcano that perhaps a which has been erupting since

june probably spew molten law the -- lava under the sea, that undersea eruption caused the water levels to rise. kathleen,to remember, is currently, in indonesia, it is the full moon. unnaturally high and the waves are stronger than normal. that perhaps made the situation even worse. there were no signs. no one to blame. investigations are still going on right now. kathleen: ring of fire. beautiful area. if you live there, you have kind of gotten used to knowing that that risk is out there. a series of natural disasters. a big election in april. if you're the leader of the country, people are looking to you at a time when it is not tragedy. it is a major factor potentially and how the vote goes. it impactst is, and sentiment among the people and investors as well.

we talk about areas which would andact a lot of tourists, the tourism dollar accounts for a lot of the economy. he was hoping for that to prop up growth that has been hovering at 5%. that is not to be. a long way away. 6% is a long way away. among the worst performers in asia this year. you can see it is down 7% year-to-date. is not going to help the indonesian economy. kathleen: haslinda amin, thank you so very much. she knows this area so well. still more ahead on daybreak asia. this is bloomberg. ♪

kathleen: jd.com is in one of the big crises of its histories as prosecutors decided not to over rape. at stock closed 6% higher $21, but still well below the $30 at the time his arrest was made public. tesla is said to be cutting prices in china to revive something sales. reuters says the cost of the new were reduced by as much as 26% after beijing's

move to suspend higher tariffs on vehicles imported from the u.s. the starting price is 499,000 yuan or $72,000. warner bros. made the biggest splash at the north american box office. aquaman beat four new releases, including mary poppins. the movie based on a d.c. comics character took just over $67 million in theaters across the u.s. and canada. hollywood will and 2018 on a high note with the box office earnings of 7.5% over last year. before we head over to bloomberg markets: asia, let's take a quick look at how markets are trading right now. postinggot new zealand a solid .3 percent gain, up 23 points. 200, gaining. kospi still lower, 7.5 points. 0.36%.

this is interesting because, after a very large moss in the u.s. on friday, the worst week 8, its. stocks since 200 is interesting to see this decline. singapore futures down a point. just there early, very marginally. taipei is up about .25%, and kuala lumpur also marginally higher, so less pessimism and a little more optimism as asia is opening. that is it for "daybreak asia." our markets coverage continues. stand by for bloomberg markets: the china open. this is bloomberg. ♪

rishaad: welcome to "bloomberg markets: china open." yvonne: he says the fed chairman is safe. rishaad: china announcing more stimulus as the economy grapples with a slow down made worse by the trade war. yvonne: opec confirms next month. they are in a moment to support oil prices.