haidi: a very good morning and a happy new year. australian markets have just opened for trade. juliette: i'm juliette saly in singapore. welcome to "daybreak: asia." our top story, president trump called top congressional leaders to meeting after suggesting he is open to a deal to end the government shutdown.

china's present talks of changes unseen in a century as he's prepared for major speech on taiwan. asian stocks set to kickoff 2019 on a muted tone after global equities had the worst year since the global financial crisis. juliette: we are getting some breaking news across the terminal. 1.3%, the survey was for drop of .9%, all of this coming in an election year. the impact of the housing downturn particularly those key markets of sydney, melbourne, and brisbane. falling 1.3%, so that is certainly a miss there. the chinese president makes a speech in taiwan later wednesday, after a new year address which stressed self-reliance a minute and

economic slowdown and continuing tensions with the united states. tom mackenzie joins us now from beijing. -- weas the key takeaway don't seem to have tom at the moment. let's go back to some of this data that we did have. pmi coming in at 54.6 in november. a little bit of wheat data coming in down under to kickstart 2019. haidi: as you mentioned some of the concerns and what it will do to consumer sentiment is top of mind for the rba and politicians here in an election year, in terms of policies continuing to ,ominate, the key market thing president trump has invited top congressional leaders from both houses to a white briefing on border security after suggesting he wants to make a deal to end the partial government shutdown. joe sobczyk joins us from washington.

is this a sign of an autoliv leave from trump? do we see a potential break in the stalemate? joe: the president has gone back-and-forth and forth a bit. he wants the wall to be a barrier. this is the first chance since the shutdown started on the 22nd potentialr for face-to-face meeting between the president and congressional leaders on the subject. thatven't heard publicly they had accepted the meeting, it would be tomorrow in washington and it is at least a chance for the talks to begin, but democrats are pressing ahead with their own strategy for dealing with this. what has been the strategy for the democrats in dealing with trump?

have a fair bit of leverage because on thursday, the democrats will take control of the house. that will give them the ability to reset some of the legislative -- agenda. but the city remains under republican control, and they are unwilling to go beyond what trump will agree to. so they can set up a situation where they will pass, or they are planning to pass legislation that had previously been approved by the republican-controlled senate until trump rejected it, which would temporarily fund the department of homeland security until february 8, while the negotiations over wall money continue. $1.3 billion for border security, but not money for the wall. give the rest of the departments that are shutdown currently, keep them funded end of the fiscal

year, but republicans are reluctant to take it up -- take it out unless trump gives some sign that he would sign legislation, because that is what broke up the deal last time. how quickly could all of this potentially end? joe: they could end it if there is some breakthrough where trump is willing to compromise and the democrats in the house are willing to compromise. they could wrap it up by the end of the week. it doesn't look very promising for that to happen, unless there are some major concessions on both sides. this could drag out into a third week. we are already on day 11 now and there is no vote scheduled tomorrow in either the house or senate, so it would have to be fairly quick work once the new congress reconvenes on thursday,

but we will have to see some signs that there is some actual give-and-take going on. last year's problems being dragged into 2019. joe, thank you so much for that. let's get the first word news and were looking at her still as the country's new president has been sworn in. the former army captain is promising to tackle crime, corruption, and economic malaise . a new opinion polls suggest that too much after his victory, 75% of resilience think the new leader is on the right track. however, it is given up most of its postelection gains. a new path in nuclear talks if the u.s. does not relax economic sanctions. kim confirms his willingness to meet with trump again, but he

speech offered no new initiatives to advance talks. india will make physical settlement mandatory through april this year individual reduce volatility and curb excessive speculation. the securities and exchange board said the changing rules will be staggered from april to october. it may act a volatility around the expiration of contracts which happen on the last thursday of every month. david einhorn closing out 2018 with his biggest annual loss for greenlight capital. the firm's main hedge fund fell 9% in december, according to investor update. that extended the annual decline to 34%. industriesome of the best returns an early years but it has lost 20% since 2015. global news, 24 hours a day, on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. coming up, look at what is in store for oil prices after crude slumped to its first annual low since -- lost since 2015. we'll get the strategy for another volatile year ahead. stay with us. this is bloomberg. ♪

juliette: you are watching daybreak asia. we are having a quick look at markets here. have a look at what happened in the u.s. over the course of 2018. this chart showing that we did see december a positive one for u.s. stocks amid very low volumes, or least ending the years trade higher. but of course it was a terrible year in terms of volatility and for investor sentiment overall,

the worst year for stocks since 2008. the worst year since 2008. it's like when you look at this function, new zealand still out of action, japan still on holiday as well. australian stock starting the new year on a little bit of a negative note, down by .3%. still very thin trading volumes coming through there. we're watching the big miners in particular, a cyclone hit one out rio tinto's minds and bhp still going on with that latest development there. so the miners coming under a little bit of pressure. the spot gold price flat at $1281.

tracking higher now, up by about .2%. that's a little bit of a positive move coming through when you look at some of the 1.4%, butpper down by overall it has been a bit of a negative start to the australian trading session and that's about the only one that we can really talk to at the moment because it is still pretty much a holiday session this japan out of action, new zealand not trading today either. haidi: just easing into the year with a bit of a negative tone. we talked about asian stocks and how they're going to kick off 2019. it looks pretty muted. where the worst years for global equity since the financial crisis, no matter how you cut it. joining us from melbourne is kyle rodda.

thatt to put up this chart paints a broader picture, it doesn't matter where you look, we saw oil capitulating earlier, we had the nasdaq falling to a bear market earlier in the year. we ended with german equities and s&p financials all falling into fair territory. are you opportunistically buying, looking at good value being made available at the moment? to try'm looking to try the trends more or less. the big concern in markets that this point is there is a high probability that we will be facing a recession in the united states in the next 12-18 month. what was once strong u.s. growth will converge with other geography across the world.

on the basis there is an increased likelihood that we will be looking at slower growth into 2019. juliette: what is that leave the fed? is been priced into one move, and you still have to run off on autopilot. is that a bigger concern in terms of tightening liquidity positions globally? kyle: definitely, and that is the insidious one that has to be kept in ion going into 2019. whether the fed could the handbrake on, it will still become tighter with the fact that the program will continue and effectively start she can off their own tightening program. i'll go with what the markets are projecting, we've had rate

hikes effectively priced out. modest cuts and been priced in by traders. we are looking at effectively a situation where markets are thinking we are entering slower growth and a dovish fit. we will have to wait lowball to see if we can get that support and the fed can give us that feedback. as it stands, trading is lower than -- they're expecting more dovish fit in softer growth because of tighter financial conditions. those are the variables driving what people are trying to exploit to be able to profit out of those situations. juliette: you think gold could be making a comeback? that's in relation to what you are expecting from the fed. more or less. you should still see institutional instability that we're seeing in washington.

that will provide some support for gold. the multiyear trends going on, gold has maintained its upward trajectory for the better part of a number of years and bounced nicely off the u.s. dollar terms back in august or september. see a short-term pullback in gold because things -- just on the basis we've seen since the government shutdown, some of the concerns around what the fed is going to do. i think if you take into consideration that the fed are pretty much one and dine with the last hike. the prospect of global growth being much softer in the year ahead. the euro is not particularly attractive. see gold up asly the year goes on.

it opens up quite quickly which might provide an opportunity to capitalize on the risk off sentiment. juliette: our last guess was bearish on the aussie dollar against the u.s. dollar. kyle: it gets you do benefit both ways. see the 2016 low being a key the benefitch, but of trading the yen in situations against commodity currencies is that if we do see a global growth slowdown and volatility picking up, there will be unwinding of that carry trade and that will benefit long positions on the yen. conversely if we see a slowdown

in the global economy, it will start prompting central bankers to look more seriously at cutting interest rates to be able to stimulate those economies that will probably be affected by. bank of canada is my ideal one at the moment. still a bit of a neutral been there, taking those positions where if we start to see interest rates -- interest rate cuts and depreciating currency as result, an extension of , it willglobal growth give you a double whammy. that's how you potentially benefit on such a situation when things to become quite bearish. by march we may get something, things are looking a

little more optimistic. is that going to be enough for the markets, given that the china-u.s. cop edition is shaping up to be the greatest battleground strategically, politically and possibly militarily of our time? kyle: absolutely. case of oneic hegemony trying to battle against the rise of power to protect its interests. it's very difficult because we have to try to see it through a lens as far as the near term. leading into the backend of his term. the problem is going to be i cannot necessarily see china giving up its strategic interest in the long-term. he fought back on the china 2025 policy. they want to have control over

the asian region. they want chinese sought power across the world. i don't think it's going to connect well with what the white house policy will be going forward and what western , althoughoing forward we might see resolution to the trade war on paper, there will still be bumps along the road as they but heads in the future over strategic differences. thanks so much for joining us. president trump his finger on the twitter button this morning. he has been saying he is looking forward to meeting the chairman kim of north korea and that kim realizes so well that north korea has great economic potential. meetingng up that next with kim jong-un, president trump seemingly very positive about that next meeting after they met in singapore last year. haidi: maybe a little bit of an

olive branch after a pretty stern nationally televised message from the north korean leader, warning about the continued sanctions and what it could mean when it comes to north korea's strategy. president trump also tweeting about a number of things, citing media reports saying it makes the case for a 2020 reelection. also tweeting that gas prices are lower and expected to go down this year. this would be good for president you can get a roundup of the stories you need to know to get your day going in today's edition of "daybreak: asia." it's also available on the mobile, in the bloomberg, and the u.s. shutdown dragon on -- dragging on. news onget the

industries and across the asset classes that you care about. this is bloomberg. ♪

juliette: is is "daybreak: asia." i'm juliette saly in singapore. on wednesday,h stressing the importance of self-reliance amid the economic and the in china continued trade tensions with the united states. tom mackenzie joins us now from beijing. it was a difficult year for beijing. what is the key takeaway that his speech really has to offer? tom: it essentially the key message from president xi was ,ne that stressed essentially don't panic. that was the key line, trying to

express that policymakers have things under control, even as he said all manner, all sorts of risk and challenges faced the chinese economy in particular, looking back to 2018 and saying reform measures have been put in place, the economic indicators that he and other policymakers were looking at remain at a reasonable level and that policymakers would take additional steps to support the private sector as well, as the economy slows. if we needed a reminder that, we saw the latest manufacturing data slipping into contraction for the month of december, and of course the trade tensions as well. and focusing on next week when we expect the delegation of u.s. officials company -- to come here. and were facing up to that march 1 deadline, 90 days after which additional tariffs could be put in place. the chinese very keen to make

sure that doesn't happen, to try to get some resolution. there are reports that officials are looking at the rate in china 25 program and reassessing that and potentially a new law to push that or restrict some of transfers. china would argue it is making steps to avert those concerns. the focus will be on those talks next week. president xi trying to put ,orward a reassuring message even as the tensions and stresses continue. juliette: china also said to be seeking talks with india to push a regional free trade pact. what do we know about that? chineseare hearing that officials have reached out to

their indian counterparts should try to push forward the agreement, regional comprehensive economic agreement. they want to try to get this wrapped up by the in the 2019, that is what we are hearing, and essential player in that agreement would be india. they are looking at talks with their counterparts. the indians may push the trying the -- the chinese to try to reduce the number of zero tear up goods. indians are concerned about a flood of chinese goods into their markets if the trade deal is signed. they also may push for an extension of the timeframe for which they would need to remove levees and duties on some products as well. immigration also a likely topic of discussion between the two sides. they expect the meeting to take place likely before the end of this month. juliette: tom mackenzie there for us from beijing.

kim jong-un delivers a sanctions warning to president trump. we will bring you all the details, next, and keep you updated on markets, although they are pretty thin for the first trading day of the year. this is bloomberg. ♪

haidi: it is 10:30 a.m. here in sydney. markets have been trading for about 30 minutes lab. -- now. pretty lackluster start. downside at 1/10 of 1%. gains in health care and materials. losses across financials and utilities. in the trading sessions. -- session. several markets still closed for the holidays. global equities ending out 2018 with a whimper. juliette: it is 6:30 p.m. in new york. s&p futures are looking like they could have positivity when

they start 2019. have a look at the beautiful skyline there of new york after they heralded in the new year. we could see wall street open higher after it was the worst year for u.s. stocks since 2008. you are watching daybreak asia. let's get you the first word news. president has invited top to a whiteal leaders house briefing on border security after suggesting he wants to make a deal to end the government shutdown. topinvitation includes the eight leaders of the house and senate. offering an was olive branch to nancy pelosi. chinese president makes a speech on wednesday morning, marking 40 years since anand to direct military confrontation.

earlier address to stress self-reliance. ofcited a series technological achievements in 2018 and said the government would keep growth from slowing too quickly. as really as prime minister started 2019 with the new year's , including record funding for schools and hospitals. it will reverse his government's slump in poll ratings. a budget will be headed down in april. a vote must take place by may. the u.k. prime minister used a video message of her around to urge in and to the divisions over brexit, saying the country has all it needs to flow -- thrive. written could turn a polar -- corner if they vote later this month.

she has been talks over the christmas break and will continue those discussions this week. global news 24 hours a day on in more thanctoc, 120 countries. this is bloomberg. my gmm function is a little bit lonely today. new zealand and japan market still closed. everyone in australia might still be at the beach. at 5648.00 is flat we are seeing a little bit of gains coming through in those health-care stocks. bhp still with its ongoing dispute. you are seeing some weakness today coming through in some of the banking stocks. seeing some communication stocks coming under pressure, too. wti crude starting the new year

on a positive front. up by over 1%. gold is a little bit weaker there at $1280 an ounce. i want to look at the aussie dollar. we are awaiting the chinese manufacturing data. we had the official gauge coming through on monday saying that we saw the first contraction since 2016 below that level of 50. we've also had some disappointing data coming through in australia itself today. the house prices index falling by 1.3% in december. you have seen a little bit of movement coming through in the aussie dollar. at the moment, fairly steady there. we had our guest earlier on in the session saying, it could get to 65 this year. certainly steady at the moment. haidi: we continue to look at politics as being the dominant

theme as we get into 2019. kim jong-un has issued a warning to the united states in his new it was lessss, inflammatory than his speech made a year ago. he is threatening a new if the u.s. doesn't live up to its promises. our chief north asia correspondent is here. this was a nationally televised address. was this for the domestic audience? we saw president trump extending an olive branch, saying he's looking forward to engaging with kim again. is there a sense that kim is feeling left out given everything that trump is dealing with domestically at the moment? >> absolutely. donald trump preoccupied with so many other things. korea is not a top the priority list. kim jong-un seems to see progress not progressing much since that june summit last year

in singapore. it's an interesting speech from kim jong-un to the domestic audience. it sent mixed messages. he did warn donald trump that the north koreans are losing patience and that they might seek another path if the united states does not relax those economic sanctions. and does not live up to the promises that apparently donald trump has made to kim jong-un at that summit. donald trump, this is an encouraging sign. he took the positive side were kim jong-un was pledging he still wants to meet donald trump , perhaps as early as the beginning part of this year. this is the tweet from president trump in the last hour, citing pbs newshour. saying that kim jong-un is saying that north korea will not make or test nuclear weapons or give them to others.

he is ready to meet him again anytime. he also goes on to say, i look forward to meeting with chairman kim who realizes that north korea possesses great economic potential. the was a mixed signal coming from kim jong-un. he said if the u.s. does not we willits promises, have no choice but to seek a new path. no indication what that would be. presumably, to resume its nuclear ambitions. he did not offer any other new initiatives in his new year's speech. twoi: what about kim's closest neighbors? what messages did he say -- sense to them? >> he wants to see greater cooperation nation -- cooperation. eul.id warm soul -- worn soue

let's hear about that subject. that as theposition north and the south firmly problem -- promised, joint military exercises with foreign powers should no longer be allowed. into themore equipment korean peninsula should be stopped. >> south korea praised the speech from kim jong-un, saying it was the first time publicly that he had used the term complete denuclearization. that's part of the desire from the united states, verifiable and irreversible denuclearization. that pyongyang has for complete denuclearization is different than the united states's definition. they want the united states also to remove any nuclear capable arsenals from the korean peninsula. chief northberg's

asia correspondent joining us in hong kong. 2018 tapped off another dismal year for commodities. what does 2019 hold? we will discuss that next. this is bloomberg. ♪

>> this is daybreak asia. another poor year in 2018, hurt by substantial well says -- losses and energy. guest joins us now. happy new year. what are the most important factors when it comes to watching commodities in 2019? we should point out --

>> a gauge of returns on 22 raw materials from crops to energy to metal. that sank about 13% in 2018. that followed annual gains in 16 and 17. a poor performance. ,eople will be picking through if similar factors that led these losses. these are familiar things people have to contend with in the commodity space this year. it's about global growth. if it isn't firing to the extent the people expected, what are the implications for demand across various markets? which markets could find themselves with too much supply in a weaker demand environment. very specifically on china. it's a linchpin of commodity demand. what does a slowdown there mean? what are the implications for sectors like steel and base metal?

plenty to contend with. we've seen some signs of bearish signals. china, a decline in december. data point that the notes a contraction. pretty bearish backdrop as we enter this new year. gold had its best month in december in about two years. is that a potential bright spot for this year? that's the question, isn't it? there are plenty of bearish factors for other commodities. the answer looks to be yes. final quarter of last year, we saw gold make up some ground. certainly been helped by those doubts around global growth. also by a weaker dollar. what we have seen out of the federal reserve the u.s. has been supported.

looking forvestors potential upside in gold. we heard from phillips futures in the last couple of days. they expect very robust haven -- haven demand in the first quarter of this year driven by those concerns about geopolitical -- geopolitics and slower global growth. haidi: senior energy and commodities reporter there in melbourne for us. let's stay focused on oil and energy markets. let's bring in our guest. happy new year. thanks for coming in so early for us. inhave seen crude move lockstep a little bit with equity markets. you are calling for a rebounding quarter one. is that because we could see a bit of an easing between the tensions? >> absolutely. i have a more constructive outlook for q1 for crude.

i'm actually looking at what i expect for equity markets and the broader sentiment in the financial markets. these days, since the fourth quarter of last year, you can't be in oil markets analyst without looking at what interest rates are doing, what bonds are doing, what equities are doing. the turmoil we saw in the financial markets in the fourth quarter of last year was the main determinant for where oil prices are. on and on where basis, they were going in lockstep. what i expect in the first we saw of this year, some very positive comments coming out of beijing and washington to regards to the u.s.-china talks that are set to begin next week. need aump and xi breakthrough. that's my gut feeling. i'm not a political analyst. if we see some of that breakthrough coming through,

march 1 is the deadline. i have a feel that there will be some positive announcements before that. the moment that happens, i think you are going to see a lot of investors coming back. the risk on sentiment back. crude has to go up. juliette: what price? the other factor is the fed and the dollar. >> absolutely. a lot of people say, if you have a more positive outlook for crude, what will the rebound look like? we saw highs of 86 and a low of 50 for brent last year. in the mid 50's, around 54 or so the past few days. a rebound could look like -- especially for the first quarter -- into the 60's. another reason i say calling for a rebound by the end of the first quarter, we will also start to see the impact of the

opec cuts by then. it's going to take a while. russia can't cut immediately. i would say, may a rebound would put brent in the mid-60's. 70, probably not. i'm not too bullish either. haidi: i'm glad you bring up opec. we finished up the year with certain parts of the market starting to question the credibility of opec and friends. the nature and level of its influence. question, who is the swing producer? the u.s. is the top producer. it is competing with the saudi's and russia. are we looking at another year where u.s. shale is the swing producer? and looking to what they do as opposed to what opec can do. >> thanks for bringing that up.

always a good one to talk about. versus u.s.non-opec shale. you said there are skeptics. there have been skeptics and ability tot opec's curb access supply in the market. that was true in 2017. it's just even then, cooperation and cohesion between the saudi's and russians. is going to succeed. it did succeed in 2017. i do believe it is going to succeed. they are still accommodative. we've heard talk of extraordinary meetings being called. day1.2 billion barrels per don't appear to be enough. as i said, give it some time. it's going to impact the market. onto shale.

shale production grew the most annually in the history of the u.s. in 2018. that growth is expected to be a little bit less, based on the projections, in 2019. i was paying attention to some reports over the end of last companies,ll medium-sized companies, already starting to say that they will cut back on their 2019 , given the slump in prices. is probably starting to happen at the margins. that we seesued -- a smaller extent of shell growth in the u.s.. whatdless, that is not opec needs to look out for. that's not what supply demand is going to be following. it's going to be what happens within the u.s. and china, the trade war, the fed.

the interest rate hikes will be a smaller factor in 2019. the dollar is going to remain strong. that's not going to be a major determinant. it will be demand. keep an eye on that. juliette: even if demand continues to slow, even if we see a resolution between china takehe u.s., that will some time to filter through to the demand side. you still don't see a significant overhang as being an issue? >> i do not. cut, around december 6, that looked like a possibility. they did come through with a 1.2 million barrels agreement. they will deliver on it. 1.2 sits close to what the consensus was before the opec cuts deal as to the amount of overhang the world might have in 2019. overhang estimates

have been revised down to about 300,000 barrels per day. that's not a huge amount of overhang. we should start to see the at the startncing of q2. haidi: we always appreciate your time. ahead a look at what lies in oil packs in 2019. coming up, home prices have fallen the most since 1980. just in time for a key election year. all the details, up next. this is bloomberg. ♪

haidi: this is daybreak asia. a quick check of the latest business flash headlines.

china's crackdown on lending has claimed another bit, an online intermediary is the latest to shut up shop. it will start refunding its lenders after months of losses, a process it expects to take up to five years. haidi: macau gaming revenues growth the investor estimates, boosting help about a rebound. weakness inread -- china's economy for a second straight month. 17% in december, the fastest clip since august. in china ise maker predicting a big kick to its 2018 profit. rise 25%,rnings will defying the nation's economic slump.

revenue in 2019 has seen rising 14%. they are the toast of choice for hasa's elite and bit -- been highly coveted by its rising middle class. sydney property values have tumbled more than 11%, according to the late just -- latest data out this morning. economists are protecting a further 10% drop. markets are beginning to get nervous. much asple saying as 30% in the worst case scenario. it's just gravity, isn't it? >> it is. start has shown that the housing downturn in sydney is accelerating. 8.9% in 2018w alone. those declines aren't just limited to the biggest cities. melbourne down 8%.

in 2018.y, 4.8% the main drivers of this downturn have been a gradual tightening of credit standards over the past four years. policymakers were growing nervous that the market was overheating. that led to a tightening of credit. loans touded limiting investors, capping interest only mortgages, calling for more verification of expenses and income. figures out today continue to show those measures have worked. juliette: it certainly worrying for homeowners. there was also that strong peak as well in prices seemed quite inflated and a lot of those key cities. how worried do you think the central bank is going to be in 2019? it doesn't look like they are in the path to hike rates. >> it certainly is a concern for

the reserve bank of australia. they are concerned that a prolonged downturn could be a drag on consumption, which props up 60% of the nation's economy. the deputy governor last month warned, if the major banks poured back credit any further, that could exacerbate the downturn. announcedegulator that it was dropping its cap on interest-only lending. it's important to remember, nobody is panicking just yet. of ay was the epicenter massive five-year property boom that ran from 2012 until the peak in 2017. even with a price declines, prices in sydney are still up more than 60%. homeowners aren't underwater yet. haidi: our bloomberg managing

editor for australia, there for us. quick check of asian markets. just aussie markets trading so far. we are looking ahead for the sole open. more positivity to come. ♪

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haidi: a very good morning. asia's major markets have just open for trade. juliette: welcome to daybreak asia. this: our top stories wednesday. muted start for the trading year for asian stock markets. data, the yeni gaining. stressing self-reliance.