>> a very good morning. australian markets have just opened for trade. >> good evening from bloomberg's global headquarters in new york. sophie: welcome to "daybreak: asia." >> out of stories this thursday -- the latest fed minutes indicating a more cautious approach to rate hikes. a policy cause is likely. trade talks wrap up in beijing amid rising hopes for a deal.

the u.s. wants assurances china will meet its commitments. the optimism is allen's by the u.s. shutdown. indicating a mixed start, oil, though, back in a bull market. >> let's get you started with a quick check of our market close. optimism over trade tensions between the u.s. and china really helping market sentiment. the s&p 500 led higher by tech, not to mention energy stocks as well. we saw some strength in semiconductors. .4%.ow up of course, we had a more cautious tone set in the fed minutes, allowing more optimism potential fed rate cause this year. that set up the market for a more positive day, although i have to say that it was upset a little bit by concerns over a prolonged government shutdown as president trump walked away from

a white house meeting with congressional leaders. take a look at wti because energy stocks were at the highest level in a month, helped by the fact that wti really and soared and the bull market, rising 23% from its 18-month low on christmas eve. saw a lot of pressure for the dollar as we had more dovish comments not only from the fed minutes but other fed officials as well. the bloomberg dollar index at the lowest level since september of this year. a little bit of pressure for s&p futures, which are at the moment unchanged, but this following a rather optimistic session from wall street on this wednesday. sophie: in asia, that global stock rally could be stalling. we see stocks in sydney little areged, but energy shares moving higher. beach energy, for example, opening 5% to the upside.

bhp sliding over 4% as goldman warns the rally in iron or cannot last. the benchmark trading at a november high, but clouds may be gathering as investors are piling into bearish bets. anticipated for tokyo stocks this morning as the yen keeps steady after recovering from a three-day drop. as you can see from the chart, the yen did reach 108 overnight and some strategists do see a move toward mid-107 levels. japanese investors will also have some heavyweight earnings to consider. from india, tcs kicks off the tech earnings lineup.

on the eco-agenda, trade figures due at 9:00 a.m. and half an hour later, inflation data. cpi may have stayed flat in his number you want trading at august highs ahead of that update as the yuan could test 680. >> that dollar weakness helping there as well. let's get you to first word news with selina wang s --ele -- selena wang. chrysler was stumped up less than $500 million to end the case, far below the $800 million it had earlier put aside. the case alleges some diesel engines violated u.s. emissions regulations, but were told the company will not have to admit wrongdoing as part of the agreement. the u.s. government remains in shutdown mode with president trump walking out of what he calls waste of time talks with democratic leaders.

he tweeted that he asked nancy pelosi if she would approve funds or his border wall if he reopened federal agencies for a month. she said no, so the president walked out. democratic lawmakers insist government must restart before wall talks can begin. >> he said if i open up the government, you won't do what i want -- that's cruel. that's callous, and that's using millions of innocent people as pawns, and it was wrong. a few minutes later, he sort of slammed the table, and when leader pelosi said she did not agree with the wall, he just walked out and said we have nothing to discuss. jong-un has wrapped his trip to beijing in a show of unity with president trump. wants toce says he

bring his strategy in line with beijing after president trump indicated a meeting could happen in the coming weeks. officials say south koreans view the trip as a positive ahead of a potential summit. defeat for tasted the second time in two days as the house of commons voted to take control of the timetable as parliament rejects her brexit deal. conservative rebels say they are against a no deal divorce. opposition leader jeremy corbyn will demand a general election if the deal fails in the commons next week. 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. this is bloomberg. >> three days since china u.s. trade talks have wrapped up with washington pushing for ways to ensure beijing will deliver on its commitment to end the trade war. our china correspondent john's us from beijing. we see some progress. it is an easier issue making the trade balance look a little bit

prettier and the thornier longer-term structural issues still remain. >> that's right. structural issues include, for example, china's subsidizing of its state companies and the fact that the u.s. wants that to end. also, other non-tariff barriers as well around trade and access to the trade market. the u.s. trade representative has said you have a need for an effective system for verification and effective enforcement on the back of any deal. exactly what structure that may take and how that is enforced is a key question as well and just to what extent beijing, china will stomach the effective policing of some of these proposals or agreements by the u.s. those topics are likely to be kicked forward by the premier who is taking the lead on negotiations on the chinese

side. agreements that seem to have come forward or made agreements on include china saying and committing to buy an more agricultural products and e.g. products and manufacturing products. they said that as well when they thought they had a deal, which trump then turn around and mixed .- and nixed it is those structural issues and this enforcement mechanism that they have talked about that will be slightly more difficult. of course, the clock is ticking not have af they do deal, tariffs could be ramped up from the u.s. side. >> we're also getting a report about the outcome of talks between north korean leader kim jong on. we know he made a birthday visit .his week

his hoping to pay more visits to china. we know he is helping to pay more visits to beijing saying believes china's development experience is valuable. we know that beijing plays a delicate but pretty key role in all of these discussions. after year without address suggesting maybe p'yongyang had reached a level of frustration with how things are proceeding. -- it is ad is reminder just how far relations have come between beijing and pyongyang because it was not that long ago -- a little over a year ago when relations between north korea and china were pretty frosted because of china's determination to enact those sanctions by the international community. of course, china responsible for

andvast majority of trade china had pretty effectively put and enforcede those sanctions, and that again ports -- points to the role china plays. the north koreans looking for that partner from the chinese side, the chinese side again being able to show to the u.s. d those sanctions, and that again ports -- points to the role that they have this card they can play. early on in the relationship, trump made an acknowledgment of the role china played in north korea and ensuring those sanctions are put in place. some of the analysts we been speaking to saying the fact kim jong-un was here on his birthday would point to some symbolism around the relationship and south korean officials coming out saying they are positive about what this means or the momentum going forward to any new summit between president trump and president kim. there was a lot of work to do to

in close to the agreements singapore around denuclearization. >> thank you so much for that. china correspondent tom mackenzie in beijing. minutes of the fed december meeting revealed that policymakers took a more cautious approach to further ratings raises than their statement indicated. kathleen hays is here with key points and also comments from top fed officials. the minutes today really echoing remarks froms friday. >> exactly. we really have to take this back to december 19 when the fed wrapped up a kid of-day meeting. it was not so much that people thought they would not wrap up their key rate. it waswe really have that the ss tanking, there's uncertainty about the global economy, and instead, the fed suggested maybe two hikes instead of three, but

certainly not with the market was looking for. the press conference did not lessthe fed sound any hesitant. jay powell started clearing up by saying they could be patient, and it looks like the minutes suggest that the fed was on board. many participants expressed the view that especially in an environment of muted inflation pressures, they are committed to being patient. in other words, take your time about rate hikes, see what is going on. also, they were and are paying attention. let's take a look at this. participants expressed that , the timingopments was clearer than ever, so we do not know exactly when we will hike again, how many times is still up in the air. the headline on his note this afternoon was the fed wants to

make sure you know they are not on autopilot. in other words, they are assessing the data as they decide what they will do. our fed team in washington saying also significant, the minutes are sounding more dovish . >> bloomberg tv also spoke with the fed bank president before those minutes came out, and he echoed what we eventually learn from the minutes, too, and also expressed concerns over what is going on in china. >> absolutely. he, too, seemed to be saying the head could pause. to look at fed has an economy that is strong, but in the end, he expressed his uncertainty

early sydney session. still ahead, we will get more on the on the push for a rate hike cause. a former fed governor joins us to break down the case for a more cautious path ahead. >> plus, risk assets she run the development on the trade and monetary policy front, but challenges remain under the hood. more on the markets next. this is bloomberg. ♪ the markets next. this is bloomberg. ♪

>> markets are well of the -- welcoming the latest developments on trade. it has been a pretty positive start to the year as expectations market short-term detente. we're also hearing more soothing .ords and tones -- do you think the

u.s. recovery rally continues in currencies as well as the oil bull market we are seeing resurging -- is all of that justified to you? isand think the sentiment obviously improved. it was pretty bad in december. ultimately, we saw some pretty sizable repositioning last year, so i do think there is so -- some reason they are seeing reversion and optimism, simply due to the fact we are seeing activity at least that might be viewed as progression in some of the major headline risks, particularly -- particularly overall, so i do think it is actually warranted given what the underlying fundamentals look like in the marketplace. athow would you be looking your strategy allocation going into the rest of the year? increasing voices saying emerging markets look pretty opportunistically interesting at the moment, particularly if we continue to get a background of as this kind of wait and see scenario for the

weights for the weakness to play through. >> valuations are certainly cheaper outside the u.s. we have brought em trading at about 11 times forward earnings, which is pretty attractive. we do see some signs the dollar may have peaked or at least stabilized, and we are seeing a significant shift in tell him from chinese regulatory bodies around being more accommodative, which should be able to provide additional tailwind commodity it of stories. volatility, to see particularly given the number of big headline risks out there. volatility is here to stay, but tohink you use volatility advantage but also take some chips off the table when you start to say -- to see a bit of a rebound.

>> how much of that volatility is coming because of the redlined down on the balance sheet? the balance sheet has been reduced by about five percent on a yearly basis, especially after the fed left the automatic pilot .n will this dance have to change sooner rather than later? >> it is certainly on the table to change. if they have to, they will those efforts. overall, i would say it is obvious these are having some impact. it's hard to make an argument that when they put the liquidity on the marketplace and where buying these large amounts of debt that it would have the obvious these are having some impact. it's hard to make an argument that when they put the liquidity if themarketplace underlying fundamentals in the data suggest that, as it does when it comes to the fed rate hiking cycle as well. if the fed trade issues

resolved more quickly or if , what are your views? >> the markets price it in basically zero. the fed is articulating two, so one seems to be an easy copout, but overall, i think one is warranted. we see a good enough effort that you can argue for one hike and if data does start to stabilize a bit, particularly outside the united states, we could easily see them move it back to 18 of-hike philosophy. i think it is hard for them to get more aggressive because i think there are underlying dynamics that will suppress growth rates in the united states in particular relative to what we've seen over the last couple of years. >> we've been looking at volatility and the general consensus is that we are set for another year of greater volatility or normal levels of volatility. volatility at the moment is looking pretty muted.

you looking at going into the rest of this year, and do you think right now is really the calm before the storm? >> i think it is time we talked about volatility because you think about the long-term history of the markets, the type of volatility we have seen over the last couple of months is not that out of the ordinary. we were just them basel into really high levels of complacency in the market, and so i think this type of volatility, we will just have to adjust to the fact that the markets can have 1%-plus move days on a consistent basis in the coming year and that is just the reality of markets reacting to the dynamics in the market when it comes to headline risk and corporate earnings dynamics, and this is not out of the ordinary. i think this will persist until we get to the end of this cycle. >> do you have a particular contrarian call that perhaps we thisot talking about at point? >> from a contrarian perspective, despite increasing

common carry around emerging-market debt and market carry looking attractive, it is on own and a lot of folks are not buying into the story. while you may argue it is not as contrarian as it once was, data suggest that not everyone has jumped on that game yet. i do think there is a bit of a contrarian trade still there, particularly because we know flows and capital flows as well as investor sentiment has a meaningful impact, and if we see people return to that, that provides an additional tailwind to those type of asset classes. >> great to have you with us. you can get a roundup of the stories you need to know to get your day going on this thursday dition of "daybreak." bloomberg subscribers can access on your mobile.

this is bloomberg. ♪

is "daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. let's get a check of the headlines. morgan stanley said to have dismissed underperforming staff in its annual review with cuts to rounds of fixed income and research divisions. about 100 people were let go as part of a scheduled update with the bank having added what it's called high-performing talent in the last year. morgan stanley plans to boost its bonus pool across institutional securities as part of the review. a bank will submit an application to the r.b.i. next week to name a new ceo. the current boss must suck down by the end of the month, after they rejected a request for him to extend his tenure. involved in a

decade-long debate. we will be breaking down the latest dovish indications from the fed. we will be joined by the former fed governor. that is next. is next.

haidi: it is 10:30 a.m. here. the markets have been trading for 30 minutes. we are seeing a flat session. the benchmark not moving much care we are seeing strong gains across the energy sector. outperforming the broader market, as oil entered a bull market. it comes to wti since christmas eve. given optimism coming trade talks between china and the u.s. and opec's curve. we should be getting a mixed lead despite another gain of data day of gains. before the day of gains. shery: u.s. futures a little bit under pressure. down 2/10 of 1%. we still have lingering concerns

of a prolonged government shutdown here after president trump walked out the white house meeting with congressional leaders. mentioned, more optimism over china-u.s. trade talks. the fed minutes showed a more dovish turn for the central bank. i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. you're watching "daybreak: asia." let's get you to first word news with selina wang. latest fed minutes show policymakers are taking a cautious approach to rate rises than the december statement indicated. the statement says fomc members have the view the current environment of muted inflation means they can be patient about tightening. the vote to hike rates us month was unanimous but the minutes show officials favored no change. sold 7.5 billion dollars of international bonds in the first test of how much damage the brutal killing of washington post mr. come all -- jamal khashoggi inflicted

investors appetite. the pricing was about 25 basis points over the existing saudi curve. reports from tokyo same nissan has reefed the french government on its internal investigation of carlos ghosn. terrace is a major shareholder and has been done -- demanding details of claims against him. he remains under arrest in tokyo with his detention running out on friday. he has appealed for bail but prosecutors may play new charges against him. lawyer gregs top palm is retiring after fighting for the bank over more than two decades. sharek on the so-called for wall street who fought with congressman contained scandals but threatened goldman's sake didn't. he was due to leave last year but his departure was put back. his colleague will be goldman sole legal -- soul legal leader from now on. manhattan's iconic chrysler building is set to be up for

sale. sources tell bloomberg the landmark is being marketed by majority owner abu dhabi. in dhabi bought the tower 2008 4 $800 million. they declined to comment on the sale. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm selina wang. this is bloomberg. haidi: let's look at aussie markets. fair -- pretty lackluster. very much like the scene behind me at the moment. shery: that is the case -- sophie: that is the case. a gloom when you look at the global stock rally. we have gains for aussie shares up about 1/10 of 8%. energy the biggest boost. we could see gains for a fourth day. when it comes to oil segments, santos among the energies and rising as much as

5%. the consumer sake -- stable sector is the drag given the plunge we are seeing in cost. if we look at the barn, the stock is sinking by a record as it forecast flood earning growth. that is for a group that fell as much as 40%. it did say the january trading conditions were slower than expected. they are looking to take it down 4%. rally willns iron or not last. earlier this week, we were come to sell at deutsche's on a less favorable outlook for its commodity exposure. i want to highlight the under pressure. it did win the bid for a $1.9 billion project in the uk's second city, birmingham. it has landed a string of major project.lems -- including several jobs. they are likely to be less vulnerable to brexit. even the latest developments around brexit, let's check in on the pound. it is holding onto overnight gains. we are keeping an eye on the yen

which could drop to mid 107 levels. given the moves we are seeing for the dollar. the u.s. dollar fell the most since december 20 overnight. in the wake of fed minutes. the trade optimism as well when it comes to u.s.-china talks, the offshore yuan looking to test the atp level. sophie kamaruddin, thank you. u.s. investors cheer the fed minutes that indicated a cautious approach to further rate hikes this year. a sentiment that has been at good by a number of fed officials in recent days. the former fed governor randall krasner expects caution in the coming months. york and we have our global economics and policy editor kathleen hays with us. great to have you with us. thank you for joining us. i know the fed is not supposed to react to market moves. however, we did see the worst december since the great depression. of this do you think

filters through the cautious tone we are seeing? randall: the fed can't help but notice something like that going on. it should be noticing some of that going on. but then it tries to step back and say, what is the fundamentals, what is driving it. is the market reacting this way because the economic fundamentals are going down or is it because there is concern about trade issues, political particularer concerns. they filtered through that and i think they still think the fundamentals of the economy are very strong. what they have tried to do is reduced the uncertainty around fed policy. there was a misunderstanding that the fed was on this path to hike rates more rapidly than they are going to be. i want to get right to something that i think is so interesting. and that would be simply expectations for the fed. you can go back three months, and if we go to world interest-rate projections, you can see on the screen come a

very popular thing. areprobability of a hike, hikes this year -- our hikes this year were high. now it is back to the point where the by the end of the are no one expects a hike. you don't get a probability higher than 15%. the cut probability has gotten higher. the cut probability is about 25 out of 100. what is the fed going to do? are we going to get any rate hikes? deposit in stable wait to see what happens. they could be hiking. they could cut. randall: for sure. i think they made it clear that they will be data dependent. the minutes came out today used that phrase. they will be going back to that. pivoting away from this gradual rise because they changed the statement to say, some further increases may be possible. we were pretty much on that path from before. i think that is a more nuanced approach. a sensible approach. theye economy goes down, could cut. i don't really see that as being

likely. the economy is not going to be throwing as strongly -- growing as strongly as last year. i don't see it going off the cliff as many people were talking about it. kathleen: when do they hike? randall: i think they will wait to see what happens with price pressures. we are seeing wages increase. if productivity increases also, that allows them to allow the economy to move forward without having to raise rates further. see how really going to investment and productivity yvonne and how wages evolve. i think that will be a wild before they take action. there is a nuanced argument that not much has changed in terms of this deal, as ever data dependent. i am wondering, all along in the background, you have the balance sheets runoff and you have levels of u.s. government debt, all of which will contribute to rising rates. in a senseeassure that it is still going on in the background, even if they do take a pause? randall: they are planning to

continue that. as the minutes also said, there were members of the federal open market committee that said they might reconsider the pace at which they are allowing the balance sheet to run off if conditions taken. if the economy moves down. that is potentially on the table. chairman powell mentioned that at the end of last week. i don't think they are on autopilot. i think they would like to be on a pilot but they have said, maybe we will have to flip off the switch of something goes unexpectedly. shery: financial conditions, on the bloomberg showing that. the rate rising to her you see the financial conditions tightening right there. we are talking about downside risks. what about upside risks? how much risk is there that we could see the effects of stimulus lasting longer and being bigger than expected? randall: you can see the economy continuing to grow at 3% as it has this past year. we have a lot of fiscal support. we also have fundamental fiscal reforms that are likely to

increase investment and increase productivity growth. there is a question about how important that is going to be? regulatory reforms. people would argue it is another boost to productivity growth. if we see a hike in productivity growth, we might see a fair amount of growth. that the fed does have to react -- then you are seeing inflation pressure, the fed will react. if it is driven by productivity growth than the fed does not have to react. kathleen: i want to ask you about what jim poehler told the wall street journal. knowere on the fomc, you him well and his thinking. he has said, if the fed keeps hiking rick scott -- rates, it could push the economy into recession. this is a three-month bill for the 10 year. every fed official says this is the one that counts. they counted it before when it was flattening. now you have this important one very flat.

what is the signal to you if you were there? if you be siding with the gym saying, we have to watch this yield curve? have to wait and see what happens? randall: you have to step back and see what is driving the yield curve. yield curve flattening or yield curve inversion is predicted 12 over the last four recessions thatse it inverts recession very often. sometimes it does, but sometimes it does without it. think one of the reasons we are seeing this flattening curve is because there is what all perception of inflation risk. a highnces will be inflation, almost nonexistent as far as people are concerned. also the general expectation of how high inflation is likely to be is quite low. is happened,what yield curve has gotten flat or inverted as the fed has been behind the curve. inflation is taken off. they have to jack interest rates up. then they bring the economy down. jim is right. if that is what the fed does,

but i do not think markets are expecting that and i am not expecting that. at the start of the new year as did last year, politics continues to loom large. the same issues we spent much of last year grappling with in terms of taking a look at whether it will filter through an trickle through the broader economy, in terms of negative or positive developments in the trade war and the government shutdown. we have heard from members of the fed who have said at this point, they are watching and waiting. if it drags on for longer, it is starting to have an impact. at what point as we get into potentially a third -- a fourth week of the government shutdown does the start to wait for the fed members that are making policy decisions? randall: the longer it goes on, the more potential effect it would have. right now i would agree with fed members who say it has little immediate impact. i think there is a longer and more fundamental impact on certainty about policy making. can the administration and congress get along? can they pass budgets?

to all sorts of policy issues if they can't get these basics right? there will be a standoff for an entire year, that is problematic for the markets. it is not just about the shutdown itself. but what does this mean for politics with the new congress? shery: finally, in these meetings, we saw several members talk about whether it would be appropriate to get rid of forward guidance entirely. there has been debate about this. does the fed have secret data we do not know about? where do you stand on this debate? randall: giving a broad notion of what they are thinking about, how they are thinking about things is valuable. depends on the circumstance on whether -- how much of the fed is trying to move expectations. was there, when i those dark days back in late 2008 and early 2009, we wanted to convey interest rates are now at zero and will stay there for quite some time. we do not want people to think

we would raise them up rapidly. that has changed. they are not sure what they want to do. i think that means they can't get -- give clear forward guidance. shery: thank you so much for joining us. hays asmberg, kathleen well, joining the conversation. , oil storms back into bull market territory. we will see what is fueling the optimism next. this is bloomberg. ♪

haidi: this is "daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. the growth engine for the world's car industry has been thrown into rivers with china recording its first yearly falling sales in more than two decades. ramy inocencio has the details on what it means for the global auto industry. it doesn't mean very well for the global auto industry. before we do that, let's look at

my chart here. to see the construct -- the contraction that has been happening on a month by month basis over 2018. it started in june of 2018. over the next several months, we can see it has just gotten worse. all told for 2018, the contraction is on the order of 6%, to 22.7 million vehicles sold. goldman sachs is saying for 2019, it could be even worse on the order of 7%. not only that, barclays is current global auto industry could very well be in recession. we do know a lot of reasons for this. let's hop into the bloomberg terminal. this is the china gdp growth chart. you can find this in the gtv library. we are at 6.5% for chinese economic growth. bloomberg forecasted this to fall further 26.35%. themight be thinking that stock prices related to the car

companies that are linked to china would be going down. but hop into some of these charts and i will show you that the opposite is happening. volkswagen, all jumping up 3.4%. this is at its highest in about two months or so. volkswagen also coming in here. relatedlso see china our company is also getting on the up and up. 3% here for basic. julie up by eight points for -- a .4%. the biggest jump in the past four months. elon musk visit to china, his big bet on the country coinciding with this disappointing news. for itsd break news first factory outside of the u.s. it has higher hopes. the timing could have been better. ramy: it is a bipolar kind of thing happening in china. elon musk and li keqiang both

meeting at the great hall in beijing. mr. lee was saying, we want to do have a firm foothold and expand the market. but also hoping elon musk can become an in-depth participant of china's opening and a promoter of the stability of china-u.s. relations. we have an interesting article out on which has better odds, whether he can do that or whether he can get up and running the shanghai factory he broke ground on. hopping quickly into the bloomberg terminal, i want to show you that there is support for the latter with tesla. bloomberg new energy finance is saying china is going to be one of the biggest drivers for sales for the foreseeable future. 2020-2022. more than 50%. haidi: ramy inocencio, thank you for that. staying without is. bloomberg has learned that fiat chrysler has agreed to settle a lawsuit over diesel emissions. the automaker will pay less than

500 million dollars over claims some of its diesel powered vehicles violated u.s. clean air rules. fromorter joins us washington. part of this, we understand, the company will not have to admit wrongdoing. >> that's right. that is what it appears to be. a key element of this storyline for the last two years. fiat chrysler ceo insisted steadfastly that fiat chrysler did not engage in any sort of deliberate scheme to environmentalcans regulators. that has been a key difference the company has maintained from day one. ever since that epa brought the initial allegations. chrysler haveat to admit to any wrongdoing as part of the settlement, and what does that mean for criminal investigations as well? ryan: we previously reported that the justice department has

a criminal probe going on in this case. the settlement appears to only ther the civil portion of justice department's inquiry. it is too soon to tell. for the civil element, it doesn't look like fiat press will have to admit any wrongdoing. haidi: brian -- shery: brian, thank you for that. ryan being in washington. wti crude has clawed its way -- it's way into territory. more than 20% recovery from its 18 month low on christmas eve. aaron clark joining us now from tokyo. just production cuts, but also optimism over trade talks? yeah, i think there are a few things driving oil surge. wti jumped 5.2% above $52 a barrel. back into a bull market. i think the main driver here is

opec plus group led by saudi arabia and russia. they said -- they announced last month they would cut productions in january by a 1.2 million barrels a day to help balance the market. i think that has shifted investor sentiment in market participant sentiment in the oil market. at the end of last year, we were really seeing people talk about the oversupply in concern. now people are focused on these cuts by opec. that has shifted the market sentiment and you are seeing more bullish overtones. the other thing is this group has done it before. lead arabia and russia cuts back in starting in january of 2017. they helped balance the market then. i think there -- they have a little bit of credibility with the market and folks know that they are focused and will try to do it again. i think that is why you are seeing this shift back to a bull market. haidi: saudi arabia's energy yesterdaylso pledged

that opec plus would continue to help maintain balance in the markets. these comments are crucial. the market is getting -- giving greater credibility or belief to what opec is saying and doing? he basically reiterated what they have been saying. they are implementing these cuts. they believe the 1.2 million barrels a day of cutbacks is enough to balance the market. but i think it has given people confidence. he also went further. he said if they need to take further action, they will. i think like you said, he is offering credibility. folks believe that russia and saudi arabia and the larger opec group of countries can get this done because they have done it before. i think that is really helping give investors confidence that these cuts will work and they will be able to balance the market. asia energyberg

editor aaron clark in tokyo taking a look at this resurgent bull market for oil. plenty more ahead on "daybreak: asia." this is bloomberg. ♪ this is bloomberg. ♪

haidi: mrs. "daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. let's preview the open in japan and south korea. here's sophie kamaruddin. sophie: the stop rally may be flagging in asia. after the continued 2% jump we saw on wednesday. the earnings outlook is looking dire. expecting the fourth quarter season to be dominated. we are the have had disappointing results from lg electronics. when it comes to the tokyo sharemarket, weakness anticipated. family mart among the names to report after the bell this thursday. this comes after they cut their off -- their outlook for sluggish winter sales. we will get numbers from them

which will offer a sense of chinese demand for industrial robots. i want to mention what goldman has to say when it comes to japanese stocks. the bank has cut a 12 mark -- 12 month target. from the nikkei 225, 22,000 from 23 k. this is as we are seeing weakness for japanese stocks. the stronger yen likely not adding any equity. sophie kamaruddin there on the markets. pretty mixed session so far. let's look at how the rest of the markets that are trading going into the japan open. australia seeing a struggle. we are above the trendline. point guard are of 1% higher. largely led higher with gains. oil prices. new zealand seeing a downside pressure. as if he mentioned, futures indicating weakness going into the open. seoul looking at

more positive. we do have china's cpi and ppi data numbers out today as well aren an hour's time, we expecting the south korean president to be speaking as well. this is bloomberg. ♪ well. this is bloomberg. ♪

i'm haidi stroud-watts in sydney where asia's major markets have opened up for trade. shery: good evening from bloomberg world headquarters in new york, i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong. welcome to "daybreak: asia." ♪ haidi: our top stories is thursday, the latest minutes indicate a cautious approach to rate hikes. muted inflation means a policy positive is likely. trade talks wrapping up in beijing.

the u.s. wants assurances that china will meet its commitments. shery: the world's auto sale engine hits the brakes with china seeing a force delivered to decline and death it -- in decades we will assess the implications. let's get a check of markets. trading in the asian sessions. we had a strong lead from there. sophie: that lead is peering out somewhat when you look at the start of cash trade and japan. the nikkei 225 off by a tenths of 8%. this comes off of goldman cutting its target from the nikkei and topics. stronger yen probably not adding any chair. -- cheer. when we look at the mood in seoul, we are seeing a gain of 1/10 of 1%. a word of warning from city saying -- saying the fourth quarter will be disappointing and dominated by mrs.. disappointing numbers from samsung and lg electronics. we are seeing losses for stocks and wellington.

up a 10th of 1%. tracking the overall rise we have seen in oil prices come in your crude. holding 52 dollars a barrel as oil has tracked into bull market territory. currencyin on the space, the as a dollar at about 1/10 of 1%. trading near a three-week high ahead of chinese cpi data. we are likely to see fairly flat growth for the month of december. i 1 -- when it comes to other items to note, we are keeping an ion retailer earnings from japan. we will get family mart's fast retailing future report after the bell today. sophie kamaruddin there on the market spread let's get you to first word news with selina wang. government u.s. remains in shutdown mode with president trump walking out of what he called a waste of time talks with democratic leaders. he tweeted he asked nancy pelosi if she would approve funds for his border while if he reopened

federal agencies for one month. she said no. the president walked up. democratic leaders insist government must restart before wall talks can begin. she said, if i open up the government, you will not do what i want. that is cruel. that is using millions of innocent people as ponds. and it was wrong. if you minutes later, he sort of slammed the table and when leader policy said she would not agree with the wall, he walked out and said, we have nothing to discuss. selina: theresa may tasted defeat for the second time in a house after how -- as of commons order to take control of the timetable as they reject their brexit deal. lawmakers vote next week with rebels saying they are against a no deal divorce. opposition leader jeremy corbyn will demand a general election if made's brexit -- may's frexit deal fails.

yet crisis -- of fiat chrysler expected to pay less. they will stumble -- less than half a billion dollars. an alleged to diesel violated u.s. clean air regulations but we are told fiat chrysler will not have to admit wrongdoing as part of the agreement. reports from tokyo saying this saying nissan has talked about carlos ghosn. paris a shareholder -- is a shareholder. arrest in tokyo with his current intention running out friday to he has appealed for a bail but prosecutors may lay new charges against him. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm selina wang. this is bloomberg. haidi: three days of china-u.s. trade talks have wrapped up with

washington ensuring that beijing will deliver on its commitments to end the trade war. our tom mackenzie joins us now. lots of sticking points remain. as you have pointed out in the past, the low hanging fruit has already been picked. tom: that's right. there has been reporting out of nikkei this morning suggesting one of the sticking points is the government subsidies for state owned enterprises. we also heard from the u.s. trade representative that he wants to see an end of the deal ongoing verification and effective enforcement. measures that would enable that. the details of how that verification process will be put into place and those checks and balances and any punishment on the back of any missteps by china as the u.s. would see it, those are questions as well as questions around subsidies for state owned enterprises. nikkei also saying during the talks between the u.s. and chinese, the chinese put forward

proposals, seen as positive by their u.s. negotiating counterparts. byhave had these commitments china to buy more agricultural energy and manufacturing products. seen as positive by u.s. officials. this gets kicked up the food chain to this expected meeting between china's vice premier -- vice premier and the u.s. trade representative's robert lighthizer is or who is expected next month or do have the timeframe, march 1. after which if you do not get a deal, you get additional tariffs are that is the threat from the u.s. side. that is what we are looking at. trump has said and tweeted leading into these meetings that he was seeing positivity. our sources say he is keen to see a deal to assuage the markets in the u.s. shery: breaking on the bloomberg, we are hearing for the first time from the china ministry of commerce, giving a statement on the u.s.-china trade talks. describing them as broad, deep,

a detailed, saying that china and the u.s. have agreed to continue close communications on trade. it showsails can make with the u.s. and the latest talks in beijing. the first time we are seeing official confirmation and description of what actually transpired in those three days of talks. still, falling short of the u.s. statement about talking about structural changes in china or anything on reciprocal imports from the u.s. goods. really, seems to be falling short of what we had expected. a very vague statement, as you suggest from chinese officials. we were awaiting their response, their official statement. now we have it. not many details. of course, the chinese are keen to be seen not to lose base in these talks with the u.s.

they want to convince their u.s. counterparts that they are ready to make deals, and put in place some changes to assuage the concerns out of washington. they also want to show their domestic audience that they are not bending over backwards for the u.s. and that they came extract concessions for the u.s.. what we are looking for in terms theimetables and i we have expected conversation between light heizer and the chinese. we are looking at a central committee meeting possibly .appening january 19 that is according to some of the analysts looking at this, given there has been changes at the local legislation structure. some of the regional governments changing of their data. seems like the calendar is opened up for this meeting of china's top 200 communist party officials, members of the military. toward the end of january. proposalsings, the are put forward that can be

consequential. we had last year, the proposal from a central committee meeting around the scrapping presidential term limits. something that will be watched closely. it had been expected to take place toward the end of 2018. some experts say the fact that it has been delayed points to division within the ruling party as to how to tackle economic slowdowns and the trade war. become our china correspondent in beijing, thank you. joining us from hong kong is the head of asia financial markets. now, weably heard right are discussing the response from the ministry of commerce and china describing the talks as broad, deep come a detailed. not a lot in terms of the concessions that potentially china could make as the ustr speaks. these fair and reciprocal and balanced trade relationships with china. what is your base case scenario rainout for how these trade talks will unfold until march 1? we have to remember

from what we have seen over the past few days, the primary focus from both sides is god for bid, the equity market should go down. that is all anyone is interested in. we are seeing the most positive possibles been put on thin gruel or we had no particular new development whatsoever. will buy more gas than soy. we have known that for months and months. what we want to see is something new on the structural side. the news reports are showing nothing has been achieved so ever. nonetheless, it is being wrapped up in positivity because god forbid the equity market should go down. shery: bloomberg has when a president trump wants a trade deal with china as soon as possible to boost markets. when it comes to the u.s. markets, the fed tightening and what will happen this year in much of rate hikes is as an important component of where the markets are going come if not more. what happens to asian financial markets? how important are these two elements and which one is more

important? michael: i would say the fed on balance, to be honest. they impact absolutely everyone, everywhere. on that front, it is all about god forbid of the equity market should go down. if you rewind back 6, 7 weeks ago, the fed was confident the u.s. economy was in a sweet spot. that they could raise rates. and everything looked great going forward. now you have one fed speaker saying it could be a hike. what the hell has happened in the past few weeks apart from the equity market going down? the answer is nothing. haidi: i suppose the question is, is this a change in tone from the fed or are a as data dependent as always, or is there a sense but despite not wanting to follow in the footsteps of greenspan and bernanke and yellen that we may get a powell put? michael: i think we will. they are not data dependent. they are equity market dependent. that became obvious pick and we

stop pretending they are data dependent? let's be honest about it. i want to switch to at the pboc is doing. kicking off the new year with a rrr cut. more lower-level stimulus measures already in place. there is an argument the pboc is doing too much, trying to juggle all of these objectives to do with employment, do with currency, economic growth stability, price stability. something has to give. what do you think that should be? michael: from what we can see, near-term is likely to be debt. i'm sure the pboc will be buying everything left and right doing their own portion of -- their own version of that. his second thing will have to go as a consequence whether they like it or not. despite the denials which standard practice in china will

be the currency. if they do some kind of qe, the currency will go through the floor. i'm waiting to see when that inevitability is financial and delivered to us. right frighten -- shery: now, we are seeing the news agency, the latest comments crossing the terminal. north korea, kim jong-un reaffirms commitment to need -- to denuclearization. --jinping says his correct their requests are reached -- are reasonable. these trade talks between the u.s. and china seem to be somehow linked to north korea developments. is this a positive or negative in terms of finding a resolution on trade talks and the relationship between the u.s. and china? tom: -- michael: it depends if you take a long-term view ordinance artificial short-term view. if you take a realistic view, these trade talks don't matter in the slightest. what is going on is a power struggle for the 21st century between china and the u.s.

everyone admits that. but they don't want to say it on camera. this trade deal is window dressing in terms of what we are going to do vis-a-vis the equity market for the first half of 2019. even if we get a trade deal, do you see her u.s. and china will find an agreement over the south china sea? i don't. really, this is just window dressing. korea does show absolutely the trade cannot be separated when geopolitics here they are part of the same picture. haidi: what is the best case scenario if you, like many other people, and i'm convinced by the argument that this is the big strategic attention moment of our time, and will be going on for much is months but years and decades to come, what is the best case scenario in finding an easy detente so that trade is not get disrupted? canhe global economy continue to function while these two superpowers try to work out

where their respective positions are in the coming decades? everything with globally, the best case scenario is we kicked the can down the road for 6, 9, 12, maybe 18 months. that is a buying opportunity across markets. cap we solve any problems? none whatsoever. michael, always so optimistic, to have you here. viewsl, appreciate your and insides is also -- as always. head of asia financial markets research, michael every will stay on with us. still ahead, the world order -- annualne is decline in do deliveries per the first time we have seen that fall in 20 years. we will be talking to through the implications and what shery: it means for global growth. the latest fed mint -- minutes indicate a cautious approach to rate hikes will -- and we will bring you the highlights. comments from top fed officials. this is bloomberg.

♪ ls. this is bloomberg. ♪

haidi: this is "daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. and minutes of the fed december meeting reveal policymakers took a cautious approach to further rate increases than their statement indicated. global economic and policy editor kathleen hays is in -- is here with comments from the four top fed officials. it seems the minutes really confirming chair powell's remarks from last week. kathleen: after the december 19 meeting, the markets were excited because they thought the fed should have indicated more caution and impatience on interest rate hikes. the stock had been falling. instead, the fed chair came out and sounded bullish. , andthis statement signaled, no, i see what you are saying, but don't worry.

we are in your camp. that is what the minutes of the meeting show. phrase,o a key suggesting the fed knows it will wait and watch in 2019. many participants expressed the view that especially in an environment of you muted inflation pressures, the committee could afford to be patient about further policy -- further rate hikes. in fact, the president of the boston fed continued -- considered hawkish was speaking to michael mckee after a speech in boston and he was talk about how the fed is trying to achieve its mandate amid uncertainty. isis implying that he probably in the mood for more rate hikes. but he knows this nation. let's listen to what eric rosengren said earlier. time,guess is that over we will see in 2018, the economy will be reasonably strong. and employment rate will drift down from 3.9% but it is now. financial markets will recover. i also realize that my forecasts

can be quite wrong in the financial markets have such a different view, at least until the last couple of days, it has been negative and volatile. i have to take those financial market considerations into account. kathleen: two fed bank credit -- presidents also indicating that there is a lot of uncertainty. the fed can wait and assess whether they will hike or cut the wallording to street journal saying he is worried fed raises too much and they will push the economy over into recession. haidi: kathleen hays there with a wrap of fed speak. michael every still with us in hong kong. you were fairly scornful about the idea of the fed being terrified of the end of this bull cycle. i am wondering, we have started off 2019 with the same politics seems dominating as they did last year. we are in week three, potentially week four of the government shutdown.

political bickering within their about the border wall. with the trade war as well and the brexit vote is coming up in the middle of january. these things, again as he said earlier, will see a kicking of the can down the road, a temporary detente, or how much of it will impact a deterioration in sentiment? probably most of them, if we are realistic, will see the can kicked down the road. the tail risk is so enormous. if they do go wrong. you can't continue to trade forever on that particular frame of mind. that everything will always permanently be kicked down the road. if there is one thing you can pick up from the fed aside from my rather cynical but genuine comment that it its equity , apartpays their salary from that, there is one thing you can pick up, that they are scared. you listen to what rosen graham was saying. the kind of guy who give speeches prognosticating what he

thinks the future will look like a saying, the financial markets do not agree with me. i'm not so sure. it seems to me there is nervousness in the background. i think they realize they are not sure where they are in the cycle and not sure where -- what is going to happen because of those tail risks. six or seven weeks ago, were not on their radar apparently. haidi: given we are at the end of the cycle, the late stages of the cycle, that we have seen such gains over the last few years. equity markets, particularly the u.s., it is healthy to get this correct. would you characterize this is a selloff is enough of a correction? look atbally, you economies like in australia where we have had an entire generation of people who have never seen what a recession looks like. the centralhink global problem we have had in australia, just as much in the u.s., in china too, we have an addiction to debt and asset

bubbles. for decades now, we have not had a real economy. we have central banks. their job is to make sure house prices go up and or equity prices go up. if either of those things go wrong, we do not have any central spine if the economy to prop it up. that is effectively what the entire global economic architecture is all about. everything else is window dressing. get equity prices up and keep them up, and house prices too. if you do not own equities unveiled on a house, then it is not a nice place for you to live in. the reason why populism is rising everywhere and we are seeing a political pushback in the form of things like brexit. it can't be sustained forever. goodness me, the powers that be are trying to squeeze every bit of juice out of this lemon that they can. from what we've heard the fed say, they think there is more juice left in it get. shery: what happens to asian equity markets and assets? we see the fed pausing this year.

we are already seeing the dollar falling to the weakest level since october on expectations of that happening. weaker: if you get a dollar, a fed -- the fed on hold, and being dovish, and if you get the trade war kicked down the road, then obviously it looks like more positive bank drop for asian equities in general. taking a bold view, if you presume that everything will go right, everything can be kicked down the road, and that nothing else will suddenly lurch out of left field, like the australian housing market, to bring one up there, given that we spoke about australia. there are a number of things you can't control and a lot of them have fat tail risks which would be negative. shery: thank you so much for that. michael every, head of asia financial markets research. plenty more to come on "daybreak: asia." this is bloomberg. ♪

shery: we have an alert.

the bank of japan governor gave a speech at the branch manager meeting. we are getting the latest thatnts from him saying japanese economy is expanding moderately, cpi is expected to gradually pick up toward 2%. the target of 2% we have seen inflation in japan linger at around half of that target. japan's financial system is maintaining stability -- stability according to the governor and also he is saying the boj will keep rates low for an extended period of time. the latest from the boj governor. gettinge are also breaking news crossing the bloomberg. this is a momentous development in china-north korea ties xi jinping has notified north korean leader kim to visit north korea, accepting the invitation to visit north korea. and his predecessor was the last head of state from china to visit north korea. that was back in 2005.

it follows kim's visit to beijing. it looks like it yields positivity when it comes to talks about relations with the u.s. this is bloomberg. ♪ ♪

from: where an hour away trading. a mixed picture when it comes to the markets that are trading so far in asia. also s&p futures in the u.s. showing a loss of momentum after four days of pretty robust gains for u.s. equities. aftersm is prevailing three days of talks between washington and beijing to put an end to the trade stalemate. some of the comments that got through from beijing, officials statements suggesting the talks broad, deep,,

comprehensive and they would continue. fairly -- we will take that positivity as we get it. >> especially when you have fed minutes showing a dovish stance coming from the federal reserve adding to the optimism. daybreak asia.g let's get the first word news. xiena: chinese president will visit pyongyang at the in -- invitation of kim jong on. he wrapped his fourth trip to beijing in four months. 10 -- 10 months. thecond summit between north korean leader in president trump. nuclear talks have stalled since their meeting last june. the latest move to aid smaller corporate center struggling as the economy slows. the pboc will lend money to

banks under a new policy instrument. approach toecemeal arresting the slowdown in the world's second-largest economy. the latest fed minutes show policymakers are taking a more cautious report -- approach to rate rises. the statement said members had the view that the current environment of muted inflation means they can be patient about tightening. some favored no change. reports say tokyo say nissan has briefed the french government on its internal investigation of carlos ghosn, france is a major shareholder and has been demand a details of claims against the former chairman. he remains under arrest. his appeal for a bail but his -- prosecutors may lay new charges against him. 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.

this is bloomberg. shery: let's take a look at how the asian markets are shaping up. lots of news. how are investors taking it? >> the picture has turned risk off with asian stocks snapping in advance. stocks have raised their earlier gains and the nikkei is off by .9 of 1%. how to set -- set to hold a three-day gain. and looking little changed them a the four-month high 681 against the dollar. keep investors hungry for more concrete specifics. .3 of 1%. oil moves back into a bull market territory. on some stocks to

watch, retailers very much in the spotlight. koster group sinking by a record in sydney after the sick -- supermarket supplier boasted -- predicted lower growth. and retails sliding after being cut to sell. fallingk is falling and the most since july, lower by over 9% this morning. this after reporting lower sales . the update comes ahead of earnings by other retailers in japan. shery: for more on japanese retailers, our analyst joins us from hong kong. let's kick things off with what sophie mentioned. offering profit outlook. how long are we expecting headwinds to persist? them toare expecting

face a number of challenges as we go forward. they are seeing a greater competition from imitators in markets like china. it is not just about the products being cheaper. also one thing that had been a wasngth from muji cross-selling to come from entry products. reader falling off the for them in terms of their sales associates, so that is hurting them. they are facing greater competition from online retailers in japan. japan has been slow to embrace online retail. towardrs are moving online. shery: we have seen muji trying to battle copycats. the chinese economy is stalling, how is that affecting japanese

retailers? china is their largest overseas market making them more susceptible to the downturn in consumer spending. what we are seeing as they are struggling to boost same-store sales. much more their growth is being driven by network expansion and expanding their online presence in the market. it will be much more challenging for them to drive growth just relying on one engine rather than two going forward. and in japan, the department stores and drug stores that have been dependent on chinese consumers are seeing a bit more trading down and also as consumers are facing more scrutiny when they come back in terms of their overseas purchases. the department stores are doing a better job working with travel agents. and doing a better job working

with the bloggers to itemize the impact. let's talk about demographics in japan, one of the biggest challenges for the government and bank of japan, the labor shortage, is it playing out across the space? tom: absolutely. if we look over the past five or 10 years, convenience stores have been growing rapidly. that will start to slow. there is a lack of workers and that is leading to a slowdown in the number of store openings. stores are starting to move away from the 24-hour operating model. we think as a result we will see a bit more earnings volatility. because of the worker shortage, you will see more spending developing on staff stores, efficiencyand enhancing technology. because of that spending a lot of the growth will be driven by

differentiation rather than the overall expansion of the market. we think particularly with the backdrop of higher taxes on tobacco, the ability of being able to differentiate yourself is going to be the key. they have taken the lead and we expect them to spend more on technology in the next couple of years. about fasts talk clo.iling or any club -- uni outlook, is that likely to be a trend we see across retailers? tom: yes, we think for one thing we look at earnings today, we think the weather will be a big theme. they will struggle to hit their

2% same-store sales target. same-store sales were down .3% year on year during q1, they have some high base your on your comparisons going forward. the weather is not cooperating so that is becoming a challenge. and they are being much more aggressive in terms of having their sales associates go in and try to highlight the products that are on sale. inventory levels were a little bit elevated so we think profitability could be hit. there are a lot more discount as we move forward. shery: always great to have your ask ford analysis, joining us. the car industry has been thrown into reverse, china reporting its first yearly fall in sales in more than two decades. joining us now is our auto industry analyst. ther roaring growth over

past two decades, this day had to come. if you take a look at the numbers, what is the narrative at play? steve: there's a couple of things and play, first of all first and foremost is the trade friction, it is slowing down the chinese economy. it is denting consumer confidence. even though a lot of the buyers probably have the cash or have the money to buy a new vehicle, they are unwilling to open up the purse per -- pursestrings. you did see retail sales declined 6%, the first in 20 years. effect.ad a lot of in 2015, the chinese government stimulus by cutting a purchase tax were autos by 50% from 10% down to 5% and that pulled a lot of sales forward into 2015, 2016 and partly 2017.

that is why you are also seeing a decline in 2018 of 6%. what is the biggest culprit, it would be easy to lame the trade war and we have spoken about some of those tensions feeding into a lack of investor certainty. are you seeing greater weakness the space compared to others? think the do not market has reached saturation. if you look at the number of vehicles per 1000, that is the metric we measure market saturation, it is still relatively low compared to other asian countries like japan and south korea and lower compared to the u.s. i do not think the market has reached saturation. the automakers are expanding and word into the western part of china. there were all of china. that is where they have been

seeing a lot more growth than the east coast, the larger metropolitan areas. we think that there is a lot of growth. last year, sales were around 21 or 22 million. we expect that to reach 30 million in the next five years or so. think there is a saturation. what is happening is the consumer confidence being dented and they are waiting, probably waiting for another stimulus. chinese car buyers are pretty savvy these days. toy have been accustomed these incentives. they may be waiting for new incentives coming up. in any slowdown some weaker brands could be hit disproportionately hard. who are the biggest ones here? mother hasink if

been talk that the chinese government will implement another stimulus pretty soon. if that is the case, that would automakers,local companies that have a strong product cadence, they have new vehicles being introduced with a have implemented a lot of that newer technologies. those may become attractive. i think if you look at earnings and valuation, you will continue to see weaker earnings in the first half. if the chinese government do implement auto stimulus, you will see evaluations pick up. at thing that still may be risk even if the valuation does pick up for the industry are the foreign joint ventures, companies like beijing auto which has strong ventures with the companies may

see lower valuations ,omparitively because the risk foreign companies made by a higher state then they own on those joint ventures like bmw has with brilliance. that, steve you for mann. china pushes ahead with stimulus to arrest a slowdown. we will discuss that with our chief asia-pacific economist chantawong -- chen wong. this is bloomberg. ♪

shery: this is daybreak asia. china is pushing ahead with stimulus to tackle the slowdown but some observers are not convinced the government will succeed and boosting growth. isry summers told us he

becoming increasingly concerned. larry: they may get it back up but that is not something which we can be certain and there may be consequences to the things get growthtry to back up. yes, i would be concerned looking at the chinese economy. in ours bring asia-pacific economist joining us with his views. the things that fall by the itside as beijing amplifies efforts, structural adjustments, institutional reforms, these are things we should no longer expect from beijing. chen: we definitely more -- expect more monetary and fiscal stimulus, we have never had any doubt about the chinese

governance determinants and to the available policy trying to stabilize the economy. one thing we are concerned about is those policy measures are becoming less effective in today's environment when the leverage is high. and also when this slowdown is met by the week confidence in the private sector. i would say in the end, they stood -- they could still stabilize the economy. deceleration is going to persist a bit longer than what people are expecting. au -- in the end, we expect stabilization, not really a strong rebound. often pboc has conflicting mandates. unemploymentty and as well as broader monetary policy decisions. the something need to give in order for policy to be more

consistent? they have changed positions for five times since 2011. why china has so many many cycles. policymakers always have to maintain a balance among multiple policy goals. there was have a top priority at different times. i would say when you're facing this kind of significant downside pressure on economic growth, near-term growth stability employment, growth becomes the top priority for the chinese policy makers. that is why i will say they will try to gear up the policy stimulus and luxury and the fiscal side to maintain the growth above 6%. i would say it is difficult to balance. they is a concern that could over stimulate the economy. i would say people are concerned

they may not, there is a chance under-stimulate the economy. there is an equal chance between under stimulate and over stimulate. happens, they will probably keep -- kick the can down the road and financial risk for the median -- medium-term will continue to rise. >> we have cpi and ppi numbers out of china. what are you expecting and will inflation data going forward, the trend on prices allow for more pboc easing? qian: right, there is a long list for pboc to worry. inflation is the last when they need to worry about. downect inflation to slow a little bit in december. inhink inflation pressure 2019 will stay subdued given the weakening of demand.

think, given that kind of subdued pressure will open a window for the central bank further easing monetary policy. >> what will that do to the chinese yuan especially when you have the u.s. not liking yuan weakness? right, a lot of people compared this round of economic slowdown with 2015 and 2016. when you have u.s. tightening depreciationunder pressure. one key difference between today and 2015 and 2016 as we have much tightened control on capital outflows. as a result, i would say when the central bank is facing this situation,ossible because of tightening of capital controls, policymakers can regain part of that money for policy stimulus, at the same

maintain relative stability in the exchange rate. are expecting the u.s. dollar to weaken, turnaround. the surge in the super cycle are expecting the u.s. dollar towhich started in 2014 will tun around and that is going to ease some of the depreciation pressure for renminbi. will provide side a breathing space. you mentioned capital controls are fairly strict, a have not been lifted in quite some time. does that give the pboc some room to abandon or de-prioritize currency is one of its policy objectives? massive outflows and fluctuations are not likely when you have these capital controls still in place. control is never really 100% effective. especially if there is a collapse in the domestic confidence, people are scared

and you see the outflow accelerating. i would say central bank would thatreful not to trigger kind of depreciation expectation. i would say even though they inld allow more flexibility 2018 and 19, they would still avoid that kind of depreciation expectation. >> interesting times ahead for the pboc and its balancing act. thank you. we are getting some breaking news crossing the bloomberg, carlos ghosn's lawyer appealing the decision to a higher court, the latest in this ongoing drama. carlos ghosn had lost his appeal on ongoing detention earlier this week diminishing his prospects of eating and early release on bail. he is fighting charges of financial misconduct while he was heading nissan motors.

this is another development that we are seeing after the tokyo district court rejected that petition that they will be appealing to a higher court. shery: the court has approved the request to keep carlos ghosn on detention until january 11. not surprising that they are appealing the decision. carlos ghosn could be held in a japanese jail for another six months on top of already being in jail for about seven weeks since his arrest. -- dismissed the chairman. getre hearing that we could the lawyers appealing that detention to a higher court. plenty to come. this is bloomberg. ♪

haidi: this is daybreak asia. to sophie's get kamaruddin in hong kong. sophie mn optimism among u.s.-china talks we saw the yuan rally. the government may be providing more fiscal measures but the comments from chinese officials did little for sentiment. pegatron.ng an eye on

after it was downgraded. shery: markets are not terribly inspired on the comments on trade talks after talks concluded. now seeing losses of 1% after three days of gains, seeing some of that profit taking place, the flat and the energy sector paring its gains by half, still up i .8 of 1%. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. rishaad: 9 a.m. in hong kong and

shine -- shanghai. asia-pacific markets snap a rally. >> trade talks wrapped up in beijing with rising hopes for a deal, the u.s. team wants assurances that china will meet its commitment. rishaad: china seeing the first decline in auto sales in a decade. the applications.