♪ juliette: good morning and welcome to daybreak asia. i am juliette saly. ramy: i am ramy inocencio. top stories, president trump touts big progress on trade after a phone call with xi jinping, but the stakes remain high ahead of new talks next week. hold your horses, the pboc signals monetary policy in 2019 might not be as easy as some were hoping. of the shutdown

with little sign of progress. we are live to washington. juliette: we are just getting breaking numbers across the terminal. it is a miss for inflation for south korea. the month of december came in at a negative rate of 3.1%. it year on year has gone to a reading of 1.3%, down from 2% and below expectations of 1.7%. cpi core year on year the same as november, a revised figure now for november 1 .4%. seeing some downward pressure coming through on south korean inflation likely to keep the bank of korea on pause. they raised in november to 1.75%, the first gain in a year. seeing year on year 1.3% for .ecember, cpi, that is a miss

let's get to first word news. kathleen: china has announced plans to rein in lending by the nation's regional banks to areas beyond home basis. the regulatory commission said lenders including rural property of's must have the proper mustses -- cooperatives have the proper licenses. they are seeking ways to enhance buffett ability. south korea said kim jong-un wants more summits to resolve a nuclear impasse. moon jae-in said kim sent moon a personal letter of well wishes over the weekend. he said he would be willing to meet more often to advanced peace talks and a nuclear free korean peninsula. he will deliver a speech tuesday. the australian threat -- securities and investment commission will look at

employers and superannuation funds. this is according to a newspaper citing danielle press. they will ramp up surveillance of a scandal ridden sector which gives workers $50 million savings each year. arliament has approved year-end budget deal. the anti-migrant leak and antiestablishment five-star movement agreed to lower a 2019 deficit target to 2.04%. the initial 2.0% was rejected by brussels as read -- as breaching e.u. rules. 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. hays.athleen this is bloomberg. ramy: the backstory you need to know is u.s. and china reporting movement on the trade front. president trump tweeted big progress in talks with china, following a long phone call

saturday with xi jinping, who also reported progress. let's get the latest with the chief north asia correspondent in hong kong and ros krasny in washington, dc. walk us through the details of what we know. ros: we don't know who initiated know frombut we do president trump it was a long call, and he was effusive about it. it is not the first time he is treated about talks with china -- tweeted about talks with china going well, especially since the dinner meeting in what raise. -- buenos aires. he said china was a big encumbrance of deal. what he said yesterday -- big and comprehensive deal. what he said yesterday was the same, pointing to all areas of dispute. some people feel president trump is getting over his skis and

being more enthusiastic about the trade talks that may actually be the case, but those come as stephen pointed out in the previous our -- the previous hour, a week before the u.s. will go to beijing to continue talks. they had been going on all month as we understand by mont and other -- understand by phone and other methods. it does seem in the final days of 2018 the brinkmanship may be dissipating. each side has given some ground it seems in terms of concessions that could lead to the broader governance of debate deal. , you werestephen saying china will be more cautious with the latest developments. stephen: that is my read of it. but i have been a pessimist on these starts and talks.

the united states, the white house, they want very ambitious reforms coming from the chinese that necessarily cannot be provided in the short-term, such as the intellectual property theft. we are hearing perhaps the chinese are looking to revamp their passive law and to give more teeth to intellectual property rights legislation and laws to give claimants more compensation if there are pr has been via -- ipr has been violated. xi jinping wants to see stable progress. they don't want to see fits and starts like in may when the right-hand man of xi jinping went to washington and thought he had a deal with steve mnuchin, but it was cast aside by donald trump later. they are more cautious on this. but they are saying they like to

see that united states and china meet halfway on some of the pledges president xi and trump agreed on in their meeting in argentina. we have heard starting tomorrow china will have its third round 700 goods.cuts on the proof will be in the pudding, and the white house is getting pledge fatigue from the chinese. until some real progress happens. ramy: the two words that come to is fringe on the outside of things or fundamental, more of the core issues. the next were -- word we will hear is from xi jinping himself, giving his new year's address. what do we expect? stephen: don't expect fireworks or for him to attack the united states. why provoke the bear?

right now it is happy and effusive in praise of china. i would expect a similar speech from saturday to the cppcc, the advisory body, where he avoided the whole issue of trade war didn'tited states, mention many of the challenges facing the communist party leadership, which are great. the economy also slowing, there is corruption crackdown. there is the belt and road initiative troubles with partner countries around the world in central asia voicing some etc.rns about a debt trap, he played on the positive that was good for the domestic audience like china will continue to fight poverty, pollution, and it will fight corruption. his laundryping has

list. donald trump has a lot on his plate at home. the ongoing shutdown starting in the second week. on monday goeswn into its tense day. over the weekend more agencies they hasn the money stockpiles. seems like president trump has not spoken to the democratic leader in the house or the senate later since they had a contentious meeting in the oval office almost three weeks ago. no plans as far as i can tell to meet before the end of the year. january 3 is a big day, democrats take over the house. we would expect from leader , she is voted in as the house later to come up with a plan to end the shutdown and

assuming that passes the house, it will be taken to the senate. it could be interesting if the house and senate passed bills that trump would consider vetoing. graham,ear from lindsey one of the republican senators who talked with trump quite often. had lunch, sort of sounding optimistic. democratic leaders have heard some of the optimism before, rug pulled oute from them. they are being cautious, a little bit like the chinese. they don't want to think they have a deal, then trump sort of back stabs them. wait until the new year, i think. mr. trump had harsh words on twitter. that is not conducive to a deal, but anything is possible. but: it may be a new year,

it is old problems. ros krasny in washington and see david ingles -- and stephen engle. 10iette: australia opened minutes ago, the asx 200 up .1%. it will add to the solid week from last week. new zealand tracking higher up .2%. market along with singapore and hong kong will close early ahead of the new year holiday. we had data out of south korea, a little bit of a miss with year on year, data at 1.3% versus 1.7%.tes of 7% -- you can see the korean won non-deliverable forwards. some upside in asian currencies, ,he yen is a little weaker 110.35. china manufacturing, nonmanufacturing today coming.

, south korea,apan indonesia, philippines, taiwan, vietnam, bangladesh all closed. a number of markets out of action today. still had, the holiday invite jay powell would rather avoid. why the fed chair may have a lot to lose and little to gain in a face to face meeting with president trump. ramy: we will dig deeper into the u.s.-china trade development with a global strategist. this is bloomberg. ♪

ramy: this is daybreak asia. i am ramy inocencio in new york. juliette: i am juliette saly in singapore. asian stocks look like they could get relief from the recent wild swings after president trump reported big progress in trade talks with his

counterpart. global stocks set for the worst year since 2008 and oil is in its steepest orderly slump from 2014. -- quarterly slump from 2014. it hasn't been a great day or week -- year for equity investors. in terms of what you can expect over 2019, there is a lot of these headwinds. how positive are you reading into this latest of elements between the you -- development between the u.s. and china? i think 2018 has been weaker than expected. going into 2019, because of the slowdown of the rate increase by the u.s., most of the equity markets should do well going into 2019. one, the lifespan story,

the health care and bio sector, 2018, because of the obamacare, trumpcare, there had been weakness in the prices but this into itas a momentum and valuation stories are intact. fourthond point is the industry revolutions areas. we worry about the prices going down but sectors such as electric cars, hydro cars, energy storage system and solar energy is the sector chinese and asian countries are pushing for. that will be strong. [applause] poin, the policy changes we have a -- the last point, we are looking at policy changes. equity funds going into these asset plays. in china they are moving towards more aggressive fiscal and

monetary policies. there are some sectors that will benefit. all in all i think policies are going to be more into the equity market in general. juliette: there are some great conviction calls, but from my earlier point we have bubbling under everything here for investors intimate, the u.s. and china, and every day there is traders play news off. in terms of overall projections, are you thinking we could start to see some call between the drayton -- calm between the trade tension, or are you cautious? daniel: i am becoming more pessimist for that tension. if you look at 2018, you had u.s. scores of 20% plus, chinese scores of 15%, 16%.

the equity market has been down. china, you are looking at over 25% decline. all of this is related to the trade tension. we think by the end of february, the direction that it will be given, we think the trade tension will ease gradually. this is a longer-term process. will probably do more stimulus as well as u.s.. we are seeing more numbers slowing down. we think the second half, there is possibility of the rate not going up, even thinking about 2020 declines. wise, tradepolicy tension is an issue. it is going towards positive territories. ramy: you with your a good list of pros and cons.

in terms of dollar trajectory, where do you think that factors in? some folks are predicting a 25 basis point rise, some predicting none. daniel: we are looking at the dollar to be weekend, but it will -- to be weaker, but not that much. 96, 97 territory. by the end of next year, it to 93, 94.own a rise ofwe had dollars which affected negativity in the emerging market but in terms of direction of the rate and speed, looking at most one rate increase. it might not have had a rate rise going forward. if you look at cpi numbers

coming through in the u.s. and with the oil price declined this much, there is no reason it needs to be done going forward. because of that, it will most 2%, 3%, andak, that affects the emerging market. ramy: i want to go into the trajectory of the dollar and how that could play into emerging-market currencies. this is the world currency ranker function. we know the onslaught that has happened with em currencies, the argentine peso, all since last year, the 50% fall, the turkish lira. we can see the indonesian rupiah, the south african rand, the riyal. are there anything here you can see that would be a bigger support, get more support from the weakening dollar the lord --

dollar? you talked about high levels of external debt. if you look at most of the countries that have declined in currency values, it is because they have a huge level of external debt. it is much bigger. i am not sure whether there could be a strong support, but if the currency remains to be quite timid in terms of the dollars, further depreciation will be unlikely. china, japan -- korea, they have a huge amount of reserves as well as external debt is smaller. the currency depreciation shouldn't be too much, but there will be some depreciation going forward that house -- an impact.

the countries with the manufacturing segment, like korea, china and taiwan, these countries suffered significantly last year but if you look at the numbers, their valuation is cheap as well and reserves are high. juliette: you are behind the market, not expecting the fed to raise once. is and how that will differ from asia where the bank of japan has said it will not move, but the china central bank has room to cut rates. daniel: right, that is because of the -- the inflation numbers. all of these are going up to the territories. rise.only 1.9%

we think it is going to go down further. reason to push the further.rate as far as other central banks in asia, you can see the numbers not coming through. japan will not raise interest rates. three of raise once, but i don't think they will anymore. -- korea raised once, but i don't think they will anymore. the rate rise will be slowing in other places. most central banks in asia will be going for easier monetary policy. ramy: some positivity for em. thank you so much. more to come here on daybreak asia. this is bloomberg. ♪ ♪

welcome back. this is daybreak asia. i am ramy inocencio in new york.

juliette: i am juliette saly. a quick check of business flash headlines, disney and verizon have reached an 11th hour deal to keep sports programming floating. it was due to expire at 5:00 p.m. new york time. negotiations were seen as a litmus test for busy -- disney's business model charging a higher fees to espn even though many are switching off sports. ramy: sears could have another chance of survival with the chairman scrapping together a deal to save it from bankruptcy. finance $4.4 billion offer agreeing to a statement from esl investment. the plan needs approval from investors. lampert,uld outbid selling off piece by piece. juliette: according to an -- an end to the china --

[please stand by] australia in early trade. we are seeing every sector moving higher on the s&p asx 200, up .7%. the aussie dollar is a little bit flat against the greenback, holding at 70.48. looking at some of the stock movers across the australian session in early trade, 6%.urces leading gains over seeing strong moves coming through in some of the media players as well, seven western media is up 7.3%. ramy: we will hear from bloomberg intelligence analysts about what they predict will be driving asian markets in the new

year. this is bloomberg. ♪ ♪

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shipping too. just go to buyleesa.com today. you need this bed. is 10:30 a.m. in sydney, markets trading for 30 minutes, benchmarks looking like it will finish 2018 on a high up . york,6:30 p.m. in new december 30, s&p futures looking .8%, on the nearly back of some of the optimism between the phone call, xi jinping and donald trump. talking a bit about a defrosting of relations with u.s., china trade. i am ramy inocencio in new york. juliette: i am juliette saly. you are watching daybreak asia. let's get the first word news

with kathleen hays. kathleen: president trump reported big progress in trade talks with his counterpart xi jinping. trump tweeted a deal is moving along and will become preventive if made. the leader spoke in the delegation preparing to go to beijing for the resumption of trade talks. mccain's things -- and came days before the resumption of ties and diplomacy. president trump will welcome the new year with the government in partial shutdown and little indication of agreement to resolve. 400,000 are working without pay and 450,000 are furloughed. donald trump blames the democrats for the death of two children at the border with mexico and stresses is demand for wall funding. u.k. secretary liam fox the chances of brexit happening are 50-50 if parliament rejects new

withdrawal agreement -- the withdrawal agreement. he said it would be a sense the government had betrayed the people who voted in the referendum. he said it is a matter of honor for lawmakers to back may. the party of bangladeshi prime minister shaikh a sena is heading for a landslide victory. see -- ted the opposition has called the vote for cycle. inputs shake a sena -- it puts her at the longest serving prime minister since 1971. 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. hays, this is bloomberg. juliette: let's have a look at how we are seeing markets trade in early, the early session

here. australia and new zealand are open, the asx 200 looking good ahead of the course of last week. trump-xi sentiment giving a boost to asia, liquidity is low, not much trap -- trading happening and markets are closed including japan and china. we will have shortened days here in singapore and also in hong kong. watching a little bit of moves in currency, a bit of a miss on the south korean cpi, 1.3% year on year. uphave upside in wti crude, 1.5% and iron ore trading higher. it is the better -- final day of the year here this is where i will bring out my favorite function, the asia-pacific index. this is the five-year average. you can see these red boxes

showing what a volatile year we drop.ad in october, 9.5 we are on course for an 8.5% drop for december. compare that to 20 82 -- what will 2019 bring? there is interesting analysis saying despite the volatility of 2018, it is not armageddon, nowhere near the other crashes we have seen, but there is volatility in these markets. and --ck a positive positive end to the trading. at least for today. ramy: this week will be another holiday shortened one on wall street. it doesn'te learned mean volatility will be less. we have a fresh round of economic data, automakers sales and a public appearance by jay powell. is focus for many investors

the week ahead and year ahead. su keenan joins us are more. know when the volume is reduced, it adds to volatility. high unknowneeing according to one analyst, the market trying to find a bottom, footing, and the swings are indicative of that. december,urprise that the worst month in nearly a decade, we have a couple of hours trading in the year before september goes in the box -- december goes in the box. it will go down as a bad one. we see markets going nowhere after that. at the marketook snapshot, friday shows how we ended the volatile wild ride for the week. it started off one of the worst , and looking days

at one of the worst years for the bull market, tech sector and energy, the dollar was down for a second day and the bonds continue to be a focus. let's go into the faang stocks trade, to give you an idea how steady the selloff has been. very interesting to note, we will get more into it, apple picked as one of the top performers. date, look how year to some of the big performers on the market have been. i put disney at the top because it has been frozen, to borrow a term, pretty much flat. with the deal with verizon and other aspects, one analyst says they are poised to soar as a new disney for the future. , has a lotg winner to do with the internet infrastructure solutions they

offer and trust on the internet will be key going forward. a big chip stock retained a lot one ofmomentum as did the big medical device companies continuing to be winners last year and continued to be projected winners into 2019. juliette: i love a good frozen -- -- rosen we did kick off the year with remarks from the fed chair. su: we have economic data coming, even though we only have a couple days in the trading week ahead. monday we will get data on manufacturing. we will also get auto sales and home sales which are key and the latest jobs data in the first week of january. that is very key. we know the fed watches the jobs data and the fed chair will be

part of an interview with past shares. that will be part for market ratecipants to gleam the increases. fed futures are showing, traders do not believe there will be any insome see this as a cut 2020. into the bloomberg, it has been . bad year for equity bulls strategists have seen the bullish forecast steamrollered. one of the things we are seeing as we end the year getting into 2019 is a scramble to revamp and recalibrate the forecast for the near term and longer term. are: as analysts struggling, we are talking about oil and the yen, thing trades -- faang stocks trades. su: some of the key themes are the yen is one of the big

winners in the currency trade, seeingy ending up, but trade falling to 109. that is a lot to do the safe haven trade. let's take a look also at oil which has had a tremendous come down from its four-year high in october, and you are looking at west texas intermediate. we see bullish bets rising for brent crude where the expectation is oil could rise to $70 a barrel. in terms of stocks, you gene veterans. one of the he has a bullish outlook and that doing into 2019, the badly beaten up stock will shift, investors will shift their focus from slumping iphone sales to revenue growth and earnings, and that will be a positive, perhaps

in his view, a leading stock for the things -- the faangs. ramy: that is a bold call, seeing how they have taken it on the chin. analysts have been doing some crystal ball gazing for us. the take on the biggest things that could face asia's financial sector in 2019. ♪ recent tradee truce, there is still a fair amount of uncertainty regarding the trade war impacting consumer sentiment. >> we will continue to see the shift of manufacturing capacity out of china are the entire supply chain diversifies risk on volatility. is that will be limited downside because if trade tension continues on for a

long time, i think the chinese government will step in and reinstate the tax incentives to do some [indiscernible] >> the largest economies and trading partners going into a trade war, that is negative. [indiscernible] the container shipping sectors. >> oil prices will remain volatile next year, the trade war between the u.s. and china is only driving a slowdown. that will accelerate. china's top officials are remaining optimistic when it comes to the trade war. our conversation with -- this is bloomberg. ♪ ♪

we are counting down to asia's first major market open, and japanese futures, those are not looking like anything right now. we will keep going. this is daybreak asia. i am ramy inocencio in new york. juliette: i am juliette saly, japan getting the day off, no trade there. a former pboc governor is optimistic about a trade truce with the u.s. and china showing a mutual desire to tone down the tension. speaking in rome, he warned against relying on a bilateral approach and agreed reform of the wto is required. i am optimistic. on the one hand, it shows both sides have a desire to trade, try to

ease the frictions. on the other hand, it identifies important element of the trade. [indiscernible] will be over to pay more of american exports growth. on the other hand it is a structure like protecting intellectual property rights, , cyberogy transfer intrusion, cyber theft, those in chinesei think society we want to reform.

going to usewe are this kind of pressure to the legislation, the regulation but especially the more involvement in this regard. so i think for 90 days time, optimistici am quite that both sides can reach an agreement on that. >> [indiscernible] coming from china with a trade war -- the one you are already mentioning. anything china should do to avoid the trade war, do you think the majority societynk for chinese we sincerely hope the trade war

should be soft occasion. [indiscernible] ability of reform. we think some of reform are really necessary. so one of the risk is if we use too much for bilateral negotiation or bilateral compromise, it may cause a problem to today's multilateral [indiscernible] usa is very large country, so it require to do so. [indiscernible] discussion,

negotiation, could ease up the bilateral trade friction but hopefully we see that for the next three years, we really , you know, work together, especially for european countries, for asia, japan, korea, countries to work reform and discuss to really rely very much on the multilateral system to soften this kind of problem. imminentre the most issues chinese policymakers should address in 2019? what would be the biggest risk for the chinese economy next year? economy, it is not only for trade. chinese economy, in my mind, i

think chinese economy now is fromg to shift the gear the old development drive into a new growth drive. the old drive, i think it is not so bad, but [indiscernible] we rely too much on exports [indiscernible] it also means we rely too much on manufacturing sectors. but we need to shift more to the service sectors. that was the former pboc governor speaking to us in rome. china's central bank sets the record straight on its latest policy move. we have the details just ahead. this is bloomberg. ♪ ♪

asia.te: this is daybreak i am juliette saly in singapore. ramy: i'm ramy inocencio. let's do a quick check of business flash headlines. wells fargo will pay $575 million to settle claims over its sales practice scandal their the settlement with 50 states and the district of columbia resolves state investigations into their practices from 2002 to 2017. staff opening bogus accounts, charging improper mortgage fees and foisting insurance fees on customers. juliette: goldman sachs will be the topic for takeover advice for the second year in a row. their share of global dealmaking up fromo exceed 28%, 26.4%. morgan stanley, j.p. morgan,

citigroup and barclays round out the top five. overall deal volume fell shy of as record set in 2007 takeover aspirations are put on hold. ramy: complement remains of the north american box office champion for a second week in a row. movie and warner bros. studios collected $16 million. this be mary poppins returns which retained second place, bringing in $20 million in ticket sales. banks, theor central end of 2018 has been far from a holiday. we had talk of a meeting between president trump and jay powell, and the pboc pushing back against suggestions it is revving up his monetary policy engine. -- its monetary policy engine. roughly, what good -- kathleen,

what could they get out of this meeting? kathleen: i can understand what president trump would be to get out, we will not hike interest rates anymore, and what jay powell i think people figure could get out of it is expanding to the president what he is doing. a lot of this coming from a week ago, the white house staffers saying fed staff about having this meeting between the two men. -- context, let's have some after the president has criticized him, and there were reports he wanted to fire jay powell. it could ease public tensions, or what powell look -- he's giving into the future power. if they come out with trump not extent -- understanding that jay

powell has given him. the former governor who spent years in washington, worked at the fed board said, he could front powell, explain this to him. the criticism doesn't just come from the white house. market participants, if it isn't sensitive enough -- mohammed el-erian, formally of pimco, now a bloomberg columnist, says there are things jay powell could do differently. let's listen to what he said. even the fed is understanding it needs to communicate better. it needs to do two things. one, show it is more sensitive to markets and what is happening outside. the risk of spill backs, what the president has called get a better feel, and the fed has to realize you cannot keep a really important policy tool on

automatic pilot, that it needs to be more sensitive to what is happening. the fed can regain control and we can stop the self-inflicted wounds. they would say we are not on automatic pilot, but he will have to explain more and in january will be on a panel with ben bernanke and janet yellen, interviewed by the new york times. many questions will focus on this issue. it will be interesting to hear what not only jay powell but others say on this. jenna: on the other side of the break -- ramy: all the other side of the world, strange thing in terms of pbocnication, saying the would be open but may be staying the course. kathleen: we know there are things that came from china's that the economy is slowing down, they will put their on the monitor.

they already are. ourthe monitor -- pboc said policy hasn't changed at all, but leaders said they dropped the word neutral. thought, they have also stepped up lending facilities. he said it hasn't changed, but it will be more flexible, targeted. policymakers will not fled the economy with excessive liquidity , but this kind of topic was leading people to predict more cuts. one of the principal ways china has to make its policy more stimulative. any rate we will see what happens next. communication is what the central bankers have to do to make sure we are understanding. ramy: that is what everyone wants. kathleen hays their thank you. -- kathleen hays, thank you.

we will discuss china's outlook 2019 with a greater economist. this is bloomberg. ♪

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limited time, get $150 off - and free shipping too. just go to buyleesa.com today. you need this bed. haidi: -- jessica: good morning -- juliet: welcome. touting big progress on trade. the stakes remain high ahead of new talks due next week. hold your horses. monetary policy and 2019 might not be as easy as some were hoping. have littlell may

to gain and a lot to lose from a sit down with president donald trump. julette: let's have a look at how asian markets are shaping up. it will be a quiet day of trade here. a lot of the other is like , alsolia and new zealand in hong kong will be closing early for the new year's holiday. getting towards some kind of deal, a boost in sentiment. the new zealand market is around one third of 1%. that data coming through from china as well in terms of manufacturing index. we did have a little bit of a for coming in at 1.3% december. estimates of a 1.7% gain.

a little bit of weakness coming through in the yen and kiwi being sold off there. crude is still holding on to those small gains. $45 a barrel. i want to quickly show you what we are seeing in terms of some of the stock movers. today you have a number of australian and new zealand market stocks leading the market today. a couple of the banks there looking good in sydney. to the downside, a few health care stocks being switched out. a little bit of a defensive play, going back into risky asset socks -- asset stocks. goldman sachs has gone down to the first half of 2019. a further trend for rate hike

expectations. growth, now sees 2% down by 2.4 and probability leading rate hikes into 19. parliament has proved its 2019 budget after a standoff with the european commission. they agreed to lower a 2019 deficit target to 2.04%. was rejected by brussels. china has announced plans to rein in lending to areas beyond they home bases are you say those lenders, including cooperative must have the proper licenses.

kim jong-un once to resolve -- once to resolve the impasse. wants to resolve the impasse. he delivers his annual new year's eve speech on tuesday. 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'm kathleen hays. this is bloomberg. most asian markets are closed monday, but some might bigrelief from the claim of progress. in the editor in singapore. be very low volumes

today, but it is also the end of the year. absolutely. today in particular, there are some new markets that are closed. for us, and equities, it will be more of the u.s. stock index futures. obviously, australia is getting a nice boost as well. lookingoverall it is like a good last day of the year, good last day of the month. it will be another litmus test. >> absolutely. like you said, it is really one that is open that people can trade on. ramy: looking ahead to past new

year's day, what can we expect on the radar? >> that is a good question. there isen trading, so a chance of quite a bit of volatility. closed that it will be difficult to gauge what actually happened. looking at how volatile it has , typically what tends to happen is the following year has a nice little rally. that is something they can look forward to next year. some saying that the dollar could fall. thank you. the u.s. and china are reporting movement on the trade front. president trump tweeted that big progress was being made. callafter a lengthy phone with his counterpart on

saturday. let's get more from the business reporter. what do we know about the call? we know little about the specific details. they have been the most positive since the spat began in march of last year. saturdaye at length on . big progress was being made. any deal would be very comprehensive and it was moving along very well. difficult to know what he is referring to. close to 1% is a big rally. investors like what they heard from trump. what is china's side of the story? >> that's right.

both sides once stable progress. sides when to meet each other halfway. less positive on the prospects of a deal. inh sides taking different -- differing views. optimisticere quite about in -- an agreement. cease-fire on the tariffs and it seems to differ. of ais all part negotiating process before the next meeting between the two sides. we have been here before.

it has been at going in my head. , january 7, isd that what we are all barreling towards? that's right. that is a significant step in the process. we are likely -- both sides can take towards a deal. at the same time, we have that big hike hanging over the talks. that cease-fire that land -- that last from january 1. that would see them jumping from 10% to 25%. that is the threat hanging over the chinese side. compromises that

pleases both sides? it has dropped tariffs on 700. the question is, what more does it have to do? a lot is riding on what happens in 2019. still ahead, pushing progress. president trump and president xi jinping. we will discuss that with isaac stone fish. juliette: come a look at the economic outlook for next year. this is bloomberg. ♪

juliette: this is "daybreak:

asia." guest says the economic cost is high for china. good to have you back again. as reported, it was a bank the call. it seems like there. >> we think the probability of positive outcome from the u.s. china trade negotiation is priced in the market. foreshadow thel difficult relationship between the two countries in the days to come.

more importantly, china is on the u.s. side, they have gained the upper hand after the midterm elections, which produced a split congress. market.e recent stock slumping significantly in the past month. here -- that you make here, 6.2%make growth. under what certain dances do you think that could be achieved? >> we see a downside for china's

economy. i think of the u.s. china trade tensions. if there is no deal between the countries, the full of the mentation could reduce china's gdp growth. , the credit growth could affect the activity. also, the size of a property market crash. on the other hand, consumption, excluding the parts sales continue to be resilient. it has a higher propensity. the recent conference suggest good use of order. we think that the fiscal policy will play first hurdle.

we expect the deficit to be increased. from 2.6% this year. , the quota, we call it the shadow deficit, will be increased. contingency and undesirable outcome. that rate cutsay are premature, but i am curious as to what you think we might see. it is not just what is happening with the u.s. we have a chart that essentially shows a little bit of a borrowing binge with the total debt rising to 260% of its own economy. potential, what are

you expecting from the pboc? >> we expect marginally easing. not a major loosening. there is less room for china to implement -- to lose money to policy. government has recently shifted its focus. to stabilize the ratio. whatpears to be targeting is in line with non-gdp growth. it is around 10%. growth, to achieve that the pboc will still have -- we think two percentage points 2019 justbe needed in to prevent a tightening. we think the central bank will

continue to do that, to provide liquidity and lower the cost for the economy. we do have some data coming out of china. in terms of what you are expecting, a lot of them have been too optimistic. what is yours? mostly a survey of small and medium price. outlook in december. the manufacturing pmi may remain in december. we also track the economic activity using the model. that growthggests has accelerated further to 6.3%

year on year. based on the growth to 6.4, any growth is likely to be 6.6% this year. the official target around 6.5%. still, ending the year on a weak note. ramy: i'm trying to make heads or tails of what the pboc a -- on friday. kathleen hays is saying that they also want to embark on this easing. what is actually happening here? are they trying to keep options open? necessary.using is to benefit from liquidity in the

system. on the other hand, they will be no major loosening because the policy-based is much smaller 2009 wheno 2008 and the ratio was just about 150% of gdp. time, that gdp ratio might have increased, so that is why the pboc -- although i think that they will cut to the at the ratio, if we look monetary growth, it would only be around 10%. thanwould be much lower the level that we have seen in the past decade. leastly, it would be at 2.3% higher. very quickly.

-- ramy: very quickly, where do you think the renminbi will be? atwe forecast u.s. dollar this .65 at the end of 2019. a rough appreciation during the year. pressure appreciation on the renminbi. annual current account deficit. much positivity in the u.s. and china. that may change after the first quarter. gdp recovery in china with the ,ederal rate hike and cycle getting to the finish line. , as a result of global equities and the inclusion of the china market. ramy: we will have to leave it there.

and about 40 minutes time, we will have china's manufacturing and nontenure fracturing -- nonmanufacturing pmi. this is bloomberg. ♪

ramy: welcome back. this is "daybreak: asia." iniette: i'm juliette saly singapore. analysts have been doing some crystal ball gazing as the year draws to a close. we bring you their take on the biggest things that might face asia's financial sector in 2019. >> despite the recent trade truce, there is uncertainty regarding the trade war. >> we will continue to see the shift of manufacturing capacity out of china.

as the entire supply chain diversify their risk on a longer-term. >> our view is that there will be limited downside. if the trade tension continues on for a long. time,e -- long period of they will step in and reinstate the tax incentives. to of the largest economies and trading partners in a trade war is a clear negative. >> oil prices should remain volatile next year. it is only driving a slowdown. ramy: let's do a quick check of the latest business flash headlines. disney and verizon have reached

an 11th hour deal to keep programming flowing to cable customers. covering 4.6 million customers which was due to expire 5:00 -- new york time on new year's eve. charging higher fees for espn, even though many consumers are switching off sports. u.s. retailers sears might have another chance of survival. scraping together a last-ditch effort to get it out of bankruptcy. offer according to a statement. the plan needs approval from creditors. them and sellbid it off piece by piece. end to theting an nine month freeze on the new videogame licensing. beijing is said to have approved 80 new titles for commercial release. they told the newspaper it could

take months for officials to clear more than 5000 games waiting for approval by sensors. singapore has kicked off the third leadership transition and its 53 year history. interview. at our this is bloomberg. ♪ ♪ there's no place like home for the holidays ♪

♪ 'cause no matter how far away you roam ♪ ♪ if you want to be happy in a million ways ♪ ♪ for the holidays you can't beat home sweet home ♪

reporter: it is 8:30 a.m. in hong kong, looking foggy. we are an hour away from the open, but it will be shortened. i am juliette saly. ramy: i am not sure that is fog. you are watching daybreak asia. let's get to first word news. president trump they progress in trade talks with his chinese counterpart after a phone call saturday. he said a deal is moving along well and will be comprehensive. the leaders spoke at the u.s. -- as the u.s. delegation prepares to travel to beijing. it also came days before the 40th anniversary of diplomatic

ties between the u.s. and china. the u.s. will welcome the new year with a government in partial shutdown and little indication of imminent agreement. 400,000 federal employees are working without pay and 350,000 are for load. -- out of work. president trump stresses his demand for wall funding. the u.k. trade secretary liam fox said the chances of brexit happening is only 50-50 if parliament rejects the withdrawal agreement. if they broke -- vote down the deal, there would be a sense the government betrayed the people who voted for the deal. he said it is a matter of honor and would rather have a flawless -- a flawed deal. -- themer bangladeshi party of the bangladeshi prime

minister is heading for a landslide victory. the opposition has called the vote for sickle. it puts her in position to extend her role as the longest-serving independent prime minister. 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. hays.athleen this is bloomberg. juliette: it is looking lonely on my markets board. we are open in australia and new zealand, japan out of action along with south korea. we don't have china trading today. markets of other including taiwan, thailand, bangladesh, closed today. we did have positivity coming through in terms of the latest development between presidents asx leading, the gains and the anc up .3%. up 3%.

up .5%, $45.65, iron or trading, up .1%. singapore will open at the top of the marker and a shortened trading day along with hong kong, australia and new zealand. looking at futures, this is where you are seeing optimism coming through following the latest developments from the u.s. up .6%. active futures they had been up .7%. we are watching a gain in the offshore side -- offshore theese currency against u.s. the dollar. non-manufacturing pmi expected to be down from 53.4 in the

prior month and manufacturing 50, separating expansion from contraction at december. that will have implications for what we could see in the hong kong trading session. ride it has been a wild for investors of late, most of 2018 with markets experiencing big swings to the upside and downside. su keenan tried to make sense of all of that with jeff kling offer. -- jeff. he said this could be a time to get back in the bond markets. >> the good news for investors is credit spreads and fixed income complex is fairly priced. our general view had been the markets were overly complacent with the risks on the immediate horizon, now with the recent pullback, the entry point is better. su: let's talk about that.

what happened in the end of 2018? i think an analogy is the broad market was sipping champagne on the top deck of the titanic. they had been failing to pick up their heads and notice the iceberg. challenges is the with china, whether the trade relationship or the broader geopolitical risks, ongoing challenges with brexit, fiscal deficits in italy and france, these are things that have been here for some time but the markets were too caught up in the data out of the u.s., which was always a one-time phenomenon. it was fiscal stimulus through the tax plan of 2018. they continued softness and easing. that are one-time stimuli

were not necessarily playing into long-term growth and investors realized that. su: we are at a crossroads and we are at the heels of the december rate hike. there are questions about the comments and actions bribed -- give us your view. some believe jay powell is too rigid, others believe it is a tightening balance sheet. some say it a policy mistake -- was a policy mistake. >> i don't think so. markets are looking to the federal reserve and other central banks. i want to remind investors it isn't just a question of the fed, it is a question of central banks globally. realistically most global economies had been growing well above gdp. it is the central bank's mandate to rein that in. when it comes to the balance sheet and the comments from jay powell and the recent presser,

the reality is the fed is on a preset course. they should have done to spend -- spur on economic growth, take on debt, put that to productive usage, and to try and build off of that into a sustainable escape philosophy. what we saw from the federal reserve in the recent press conference and meeting was what investors should have been expecting. fan, it soundsed like. talk about the outlook. the key themes and challenges you face. the reality is as central banks have embarked on the unprecedented journey of quantitative easing with the specific goal in mind to encourage investors to take on debt for productive purposes, the challenges of migrating, so global economy, u.s. economy

continues to be a relatively strong footing but unfortunately we are going to have to face the increasing pile of debt. investors have picked up their head and realize we are climbing to the top of that market. -- that mountain. i do think it is an imminent deleveraging event, but it is coming in the next few years. investors are having to truly confront the massive amounts of debt that not just the u.s. has taken on but the global economy. talk about the bright spots and opportunities for investors. what is the focus? >> there are bright spots. one of those is the u.s. consumer particularly. within the u.s., debt has risen, but it has been on corporation'' balance sheets. the u.s. consumer in the rearview mirror was the cause of the previous crisis has you

leveraged significantly. one area in particular is on the housing side of the balance sheets. i think a bright spot of the economy for fixed income investors is to focus on the u.s. investor, but more granular, focus on the housing portion of that. new securities, the underwriting is much stronger than it has been. there is a significant supply imbalance for the millennial generation and first time homebuyers. i think that part of the economy will perform well and provide opportunity for investors in 2019. ramy: that was a portfolio manager from certain berke investment management -- thornburg investment management. the latest of element in the trade war, both leaders seemingly an agreement about progress. we will look at expectations from the center on u.s.-china relations.

this is bloomberg. ♪ . this is bloomberg. ♪

welcome back. this is daybreak asia. i am ramy inocencio. juliette: i am juliette saly. the u.s. and china reporting progress in trade talks very one-sided more enthusiastically than the other. president trump tweeted over the weekend, if made, the deal of a comprehensive, covering all points of dispute. big progress being made. president xi was more reserved, hoping for stable progress. to help us read between the lines as we approach the next round of take talks -- trade talks is a senior fellow from the asia society center on u.s. -china relations. he joins us from new york. thank you for joining us. you are cynical about this, suggesting president trump is trying to rally investor

sentiment and ensure wall street ends 2018 on a high. i could not have put it better myself. i am so services -- i am suspicious of this tweet on a saturday. it reflects less a real sense of optimism that the two sides will reach a deal that will deliver what trump promises and more this is a way for him to get better numbers in the market before the close of the year. and then in terms of what we could actually see from their talks later on in the month, how positive are you they will lead to some kind of stalemate? a stalemate is not that bad. perhaps similar to the situation trumporth korea where

promised a deal, he got one, it turned out to be less significant and important that he was promising, but it also did take us a long way to calling tensions, -- call me -- trump could over promise, under deliver but calm the markets and encourage investors because any sort of agreement even a patchy for one is better news for investors than no deal. bar you ares a low outlining, but you are probably right. the words coming to mind ever since we got this headline out was fringe change at the edges versus fundamental at the core. we have been talking about how fundamental change isn't going to happen. in effect the fringes we are talking about, stuff on i.t., forced transfer, is this enough to, how far can it get us before

we are back to square one? disagreement big in the trump administration whether these fringe agreements will be enough. another one is trump would like to rectify the trade imbalance. a lot disagree with him. he wants to export more to china. in there other people trump administration who want to see those fundamental changes being made have for china to change the way its economy works. people in china think, can you imagine if we ask the u.s. to you -- to fundamentally change their economy, they will say no, so we don't have to take that. the fringe is more likely to be resolved than anything fundamental. ramy: looking at the delegation --eup, deputy u.s. trade rep

treasury undersecretary, rob lighthizer, clearly not going -- what are the optics for this? chinese sensethe it is sending an olive branch not to send lighthizer, known for being hawkish on trade. i also think in china it is the deputies who hammer out the agreements and really work through on the details. optically it is not a bad thing we are not getting the most principled of the principled going to this meeting but people will work on details. juliette: what has been interesting is the way canada has found itself caught in this with canadians detained in china. in what sense do you think even if there is a deal reached between the u.s. and china or a stalemate, how will that work out for canada?

will this to be caught in the middle? -- they still be caught in the middle? >> i don't think this will work out well for canada. i think beijing intends to send the message to canada that this is not a way they like to be treated in a bilateral relationship, and the canadians will likely remain detained. it is impossible to predict but they will want to be able to say, you did this to our top huawei executive area we will do this to your citizens regardless what happens with any deal between the u.s. and china. i am pessimistic for them. juliette: what about what you are seeing in the u.s. in terms of back home with the democrats taking over the house? cannot take the -- change the political climate? >> i would think it not --

doesn't change much in trade. there is a surprising amount of consensus. even though we see harsh words from trump and schumer, there is amongsus on china policy democrats and republicans. i don't think there will be a major change with democrats taking the house. the stock market is a much better indicator, not that it is a reflection of the economy, but trump does seem to place a lot of importance on the stock market. the further that drops, the more encouraged he will be to give in. he himself has tied his own popularity to the ups and downs of the stock market. always a pleasure to talk with you, senior fellow at the asian society center on u.s.-china relations. willie face to face meeting between jay powell and donald trump help ease tensions?

this is bloomberg. ♪

welcome back, this is daybreak asia. this is ramy inocencio. juliette: i am juliette saly. singapore has kept the finance minister as its succeeding leader in the next few years. he will take over in a difficult

time as the city state struggles with slowing growth and global trade tensions. in an exclusive conversation in november, he told us what impact he sees from the trade war next year. run, it will be the impact is not fully felt yet because our growth forecast remains 3.5% for this year, but any trade tension and globalization will affect everyone. including the countries [indiscernible] but also collateral damage across our economy. the global supply chain is highly integrated. i was speaking to a number of multinationals including american multinationals on the impact of operations, and the impact will be felt across sectors. there are shifts that are happening. this does not escalate.

if it does, we will move away from the global production frontier and growth will be impacted. we'll have shortened impact and longer-term impact. perhaps in 2019 you may have to look at your projections? >> yes. we have reduced global growth anecast, and this will have even -- this is a global average number, uneven impact across countries and sectors. we are beginning to see the impact of this increased in certainty and reduced investment by businesses. haslinda: when we were talking about the uncertainties today, emerging market laid -- paid a big price. currencies getting snagged,

given the weakening of the yuan. is it overdone? >> the nature of financial markets is volatility's are to be expected. countryportant for us, to put out facts and figures. to what extent that overreaction can be corrected, i don't know. i would say the fundamentals are the efforts that have been put in since the crisis and the global financial crisis [indiscernible] is bearing fruit. we can continue to keep an eye on this and make sure we do the right thing. haslinda: are you comfortable where the saying dollar -- the sing dollar is?

some say it may not bode well for the economy. >> the monetary authority has been very careful in their deliberation, assessment of the state of the economy, global economy. provides an rate important stabilizer in our system. the right monetary policy has always been important to create stability so investment -- there can be long-term investment. so monetary policy is a stabilizing mechanism, but we are focused on structural policies in order to restructure the economy and keep up with changes ahead. haslinda: you are comfortable with where the sing dollar is? >> [indiscernible] announce what is appropriate. ramy: that was the singapore prime minister in waiting. to the central bank world now

and the end of 2018 has been far from a harlot day -- a holiday for them. talked to jay powell and the pboc pushing back on suggestions it is revving up its monetary policy engine. is here for more. what could powell and trump, if they meet, get out of this? kathleen: bury the hatchet, be best friends. criticize the public again, and jay powell says i will not raise interest rates. that is a joke, but what is going on, the wall street journal reported a week ago staffers at the white house were trying to set up a meeting with jay powell. president trump must also realize after a week in stocks, it wasn't only reports he is thinking of firing the fed chair, i think it is more broadly this is one more sense of unease.

we will see if anything comes to this. what if they do have some kind of agreement and everyone says it wasn't jay powell being, getting president trump to come to him, it was him came in -- caving into president trump. well-respected in federal reserve circles, this man set it would be an opportunity to confront trump and his criticism to explain why the fed is doing what it is doing. butmed el-erian, anything some sort of politician bashing the fed, he was the [indiscernible] at pimco, also well-respected international circles was on sunday tv. here is what he said. >> even the fed is understanding it needs to communicate better. it needs to do two things. show it is more sensitive to

markets and what is happening back,e, the risk of spill get a better feel for what is going on, second the fed has to realize it cannot keep a really important policy tool on automatic pilot, that it needs to be sensitive to what is happening. if it can regain control, and we can stop self-inflicted wounds. kathleen: it is a question also of communication. the markets have stepped up monetary stimulus, they say not really, not yet. ramy: bloomberg markets is up next. have a safe happy new year. this is bloomberg. ♪ is is bloomberg. ♪

>> welcome to "bloomberg markets." breaking news coming through from china. the manufacturing pmi numbers disappointing. 49.4. we were pretty much flat as the 50 line plus two months. we are seeing signs of contraction. got interaction on the australian dollar which is how we look at this. a little bit of a move to the upside. back again to where it was. there we go. the miss here. we