a very good morning. in sydney, australia markets have just opened for trade. shery ahn: good evening, from washington, d.c. sophie: welcome to "daybreak: asia." >> our top stories this friday anasian markets look set for next friday session after wall street closed essentially flat. there are concerns the u.s. and china may be further apart on trade than thought. a warning about the eurozone

slowdown, mario draghi blaming the trade war for the deepening downside. the shutdown drags on as the center blocks rival bills to reopen the government. president trump says he will not cave on his wall. started with au quick check of our market close in the u.s. concerns over trade tensions between the u.s. and china not to mention ongoing government shutdown causing concern. almost finished unchanged. s&p 500 and nasdaq, though, were higher. we did see airlines rally as american and southwest predicted strong revenue gain. not to mention the philadelphia semiconductor index saw its best gain since 2006. let's see how we are shaping up for the asian markets. >> we are rounding out a tepid doubt on cast sustainability of the january rally. global stocks are headed for the first down week in five. sydni shares are headed for the

first weekly loss in 3 -- sydney shares. we saw futures climbing overnight, so we could see some back-and-forth in terms of sentiment. them.have a under pressure, falling as much and a cut torning the dividend. we do have that very much in focus. haidi: let's get you to first word news. here is selina wang in san francisco. administrationmp ordering nonemergency workers out of venezuela. washington has recognized juan ido as head of state saying nicolas maduro rigged election and has no validity.

a top chinese regulator has told bloomberg that more global banks will soon get approval for majority ownership at their local security ventures. in december, ubs became the first board company to win approval for a majority stake under new rules. beijing promises to allow greater access to the $40 trillion sector. >> carlos ghosn just resigned tot night, and now it's time define and put a new government in place. what is the most important thing .s to prepare the future >> a private cage of business sentiment in china is at its lowest level on record. the index is based on a survey by london's web economics, and it felt to 50.7 this month down from 51.4 in december or the stock is so positive but the decembereading since

2014. carlos ghosn's fall is complete with his resignation as chairman and ceo of renault. he led the company for two decades but lost power after his arrest in japan for financial misconduct. >> carlos ghosn just resigned last night, and now it's time to define and to put a new whatnance in place because is today the most important thing is to prepare the future of renault. >> investigators in california have cleared struggling utility pg&e of causing the second most destructive wildfire in state history.

shares soared on the news before trading was briefly halted. the report covers fires in the wine country in 2017 and blames a private electrical system, not pg&e equipment. the company still faces massive liabilities linked to devastating fires last year. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts for more than 120 countries. this is bloomberg. : thank you. markets strained today as investors worry china and the u.s. are further apart on trade than ever. the trade secretary insists a want to find a solution. deal.want to make a we believe the chinese would want to make a deal. , those general impulses can result in a very finite, very detailed, very enforceable set of commitments. >> here in washington, d.c., our breaking news reporter craig sullivan joins us with the latest.

really seems secretary ross was trying to temper expectations for to come out in negotiations next week. >> it really does seem that way. here is secretary ross speaking just ahead of these talks with high-ranking chinese officials. it does seem the administration is trying to indicate that they want a deal, they think china wants a deal, but major issues remain. ross pointed to the fact that there are easier trade issues like increasing chinese buying of u.s. exports and harder things like intellectual property. members of the administration also mentioned enforcement mechanisms. it seems they are farther apart on the hard things, much closer on the easy things. if a deal can be reached remains to be seen. we heard earlier in the shutdown from the u.s. trade representative's office that

negotiations would continue despite the ongoing government shutdown. they were not specific about if they had to pare back at all or how many workers would still be on it or how specifically it would affect, but they did say talks would continue and as we have seen, the u.s. fed is still making the case and still seem to be preparing for these upcoming talks. >> they seem to have taken the contentious route judging by the tone struck by wilbur ross, saying the two sides are far apart. it seems like washington will insist on deeper structural reforms from china, that beijing may not be ready or willing or able to deliver on. >> it does seem the u.s. side has not backed down on that. we have seen the chinese have indicated a willingness to buy u.s. exports before. they have made commitments to try to increase purchasing and that has not been enough yet for the trump administration. we have seen administration officials come back repeatedly and say they are looking for

structural change, really steep demands the chinese might be unwilling to make. again, wilbur ross pointing to things like intellectual property and we heard kudlow recently asked how these things would be enforced, how any agreements would actually be enforced and as of yet, nothing seems to be on the table that appeases the trump administration. shutdown, 34 of the and continuing. we had two bills voted down in the senate. we also hear word that the white house is repairing the details of a proclamation of a national emergency. what is the latest and where do we go from here? >> they took their first votes on government funding since the shutdown began. the senate voted on rival plans to reopen the government. 'se was president trump proposal to reopen the government with border wall funding. one was aboard a proposal that wall funding.

neither were able to pass the senate. -- both werecked blocked. cnn is reporting that they have seen a draft proclamation for a national emergency declaration, but that report stated that no decision has been made on issuing a national emergency declaration, so we are back right where we were before today. could it be a way to save face for president trump if he ? clares a national emergency if he goes to the higher court, he could still blame it on the court, he did his best. >> that could potentially work, but luck to gop lawmakers are very wary about a declaration of an emergency, especially on something like this. they see that as an increase in executive power that they might not a comfortable with. there may be other ways for trump to save face, but they may have to be legislative. we will see what happens with negotiations going into the weekend. thank you for that.

the gridlock in washington certainly is not helping ahead of trade talks next week. earlier, i spoke with former u.s. trade representative carla hills who was a cheap nasa negotiator under george bush senior. she says the shutdown is creating an unprecedented environment amidst all the uncertainty. take a listen. >> this is an environment that has never existed before. i think we are in our fifth week of shutdown, longest in american history. it is really very difficult for forwarditutions to move . i think it is going to be quite a challenge, but we have been talking to the chinese for some period of time, and they know what our key issues are. we know what their key issues are. the question is -- can we make ome progress? the two largest economies simply must work together if the global economy is to flourish, and our

respective economies as well. sort of deal can we expect by march 1? >> i cannot tell you that, and i do not think anyone can tell you that. what we can tell you is what our hopes are. i think we can legitimately hope that we can persuade the chinese that it is in their interest to protect intellectual property, that as they move from a controlled, heavy industry economy into more of a consumer economy, it is in their interest not to discriminate against inward investment that would .evise jobs and tax revenues i would like to sit down and talk to them about how we can have win-win situations and protection of intellectual property. they filed a lot of patents last year, a very high number, and they need to protect their intellectual property, or that

will not be sustained. the u.s. trade representative said that any deal needs to be viable and enforceable. does this complicate the situation right now? >> i agree with him. i do believe any agreement should be enforceable. haidi: the government shutdown also affecting some different timelines in congress, including .he new nafta deal, the usmca what can we expect on that front when this is going on and this needs to get done this year? >> i think that no one can tell you what is going to happen to it is an because agreement that already has problems attached to it. the democrats have suggested they are not enthusiastic about .he labor provisions others expressed some reservations, and we still have

the steel and aluminum tariffs that are against both canada and mexico, and we have the threat of auto tariffs. with that uncertainty, it is very difficult for the parties we are negotiating with to be comfortable about moving forward and they, too, have to approve the agreement. i don't think you can say "i will give you a specific date when this agreement will be confirmed by our congress." that was my interview with former u.s. trade representative carla hills. still ahead, hear why the president of toshiba is very worried about global trade tensions. >> plus, what investors should really be focused on when it comes to market returns. jason brady joins us next. this is bloomberg. ♪

>> if you look at just the economy itself, i think we are doing just fine. the growth trajectory maybe has slowed a little bit but the underlying economy is chugging along pretty well. there willn likely be another financial crisis. it will probably occur somewhere else in the financial system. i think this time there's a chance the banks will be the buffer as opposed to the cause. >> i think the economy is slowing globally, slowing in the u.s., slowing in china, two

largest economies. that does not mean we are in any mode peopleis-type like to talk themselves into. >> if the u.s. consumer is strong unemployed employed and making more money, the u.s. has a pretty good position. growtha slowdown, less rate. we do not see what other people are seeing. we will see what happens. global banking ceos who have been speaking at davos. >> wall street closing mostly higher as a rally in semiconductors helped temper concerns the u.s. and china may be further apart on trade than we thought. joining us now, jason brady, the president and ceo of thornburg investment management. always great to have you with us. despite all the talk of doom and economies ine europe and trade tensions, we did see some resilience in the u.s. stock market. does this point to further

momentum in the markets right now? >> i think what you saw is a market and global economy reacting to a number of key inputs, if it's trade challenges, that slowdown. 2018 from an asset class was really 6 million ways to die, choose one. now we have better valuations. some real support for some basic blocking and tackling businesses. financials were the last war, not the next one and that is a place where it's interesting returns even in the context of a global slowdown. haidi: he was also warning about credit markets, if its corporate debt or sovereign debt. is this going to be a real risk this year? >> i actually think that is the locus of risk going forward in the markets. we look across asset classes over a long time and we see that

leverage in the financial system is less in the sense of investors. , butwas a 2008 story in the investments is higher. you see a notable increase in triple b in the's. you see leverage in high-yield and very high levels. a source ofly to be instability, of vulnerability. maybe not recession but vulnerability and that is something investors need to be prepared to take advantage of as it happens. haidi: you mentioned that despite all of these looming risks, there is a sense of complacency or optimism. i would to talk about how inkets might not be pricing the worst-case scenario. we talked to a lot of people who

suggest this is going to be a longer-term battle and a strategic competitive battleground, and you can see how it has taken a toll on sentiment, not just on chinese stocks, as president trump would like to point out, but also in the u.s. as well. is there a sense that animal spirits are being decimated by this and that will be something that will be hard to come back from you can not just in the u.s., but anywhere supply chain and trading volumes are having an effect. greg set is a great question and sentiment is certainly something that is important in the shorter term and for valuations in the shorter term. as i look longer-term, i think you are right to focus on the trade war versus other headlines . the u.s. government shutdown is temporary. the trade war could come up the global growth perspective. as we look at the opportunity set, it is important to understand that as global slows, you will need compounding returns.

2017-20 18 was finding growth, leveraging that, making sure we're exposed to growth as much as possible. findto me looks like let's this in this is that will perform if growth slows or not. haidi: what is the most you ctive dividend market >> i actually think there's a number of them. one key element of dividends is it is important to take a global perspective. some of the best dividends are available certainly outside the united states. one of our largest holdings is china mobile. another large one is jpmorgan. these are disparate businesses with a focus on cash flow generation. the key point is they are real businesses that give investors actual cash returns which compound. can compounding return provide significant amounts of value. it's about half of global equity

returns over history, something that again got lost a little bit in let's go for growth 2017 and 2018. it is much more attractive today and going forward. no recessionre is ahead and the economy keeps on rolling, does that mean we could see more upside for u.s. banks? inhave seen them outperform year.ginning of this >> i think u.s. banks are in pretty good position, certainly from the capital perspective and not just banks but the financial sector year overall. one thing to keep in mind and one thing to pay attention to is leases.eserve of how are they managing their balance sheet? the consumer in the u.s. is still in pretty good shape. it is really at the corporate and government level where there is a challenge. do not think about the banking lot -- a la 2007.

you have a reasonably good economy although slowing. it looks pretty attractive to us in in the context of what i believe will be a global slowdown. haidi: we have not talked about the fed which is unusual in the markets-oriented conversation. >> the fed -- everyone asks about the fed and reasonably so. if you were to build a one-factor model on the market over the course of the last few months, you would really be on fed statements, right? which is probably not tremendously healthy. the fed has given themselves room to cause. as they cause and look at the data coming in, the question is -- what is going to spark joy for them? are they going to see a growth moment? are they going to see the acceleration --re- --

re-acceleration? they will have room to look at the data and decide not certainly next week at the january 30 meeting, probably not in march, but as we move forward. we believe inflation is a real danger and the fed will probably have to raise a little bit and that is contrary to what market expectations have become. thank you for joining us. really appreciate your time. you can get a wrap up of the stories you need to know to get your day going in today's edition of bloomberg daybreak. you can't tweet the settings where you get news on industries and asset classes that matter to you. this is bloomberg. ♪ erg. ♪

>> is very positive. keepest will be if we can 60 during the slower demand period. shery ahn: this is "daybreak

asia." haidi: let's get you a quick check of the latest business flash headlines. starbucks beating analyst estimates in the americas and asia pacific regions. central sales in china gained 1%, marking the second straight quarter of growth. a rare decline in china last year sparked concern about the region and wait on shares. shery ahn: british airways' owner abandoned its eight-month the discounting airline reeling during the slowing travel season. region rejected and of offers from idg saying they undervalue the airline. they said they would not make a further bid and would sell its stake in the carrier. haidi: the airline belonging to china's beleaguered hna group is

ready to sell dollar-denominated bonds. we said earlier this month it more than $100 million offshore bond quarter. this is bloomberg. ♪ er. this is bloomberg. ♪

selena: this is "daybreak: asia." bills ending the u.s. government shutdown have been rejected in the senate. a democratic bill without wall funding was also voted down. president trump tweeted he will not caved on his wall. the dispute means he will not deliver his state of the union address in congress is planned next week. big business is sounding a new warner on brexit with airbus' ceo announcing what he calls the madness of its supporters.

airbus says it directly employs 14 -- 14,000 people in the u.k. >> if there is a no deal brexit, we at airbus will have to make a potentially very harmful decision for the u.k.. please do not listen to the ' madness insisting that because we have huge plants here we will never leave. in china,selina: internet users reporting that is working browser again. george soros's warning of what he calls the mortal danger in china's use of artificial intelligence to suppress any threat to the president and communist party. gives an inherent

advantage to to italian toernments -- advantage totalitarian governments. >> china is not the only authoritarian regime in the this undoubtedly with the wealthiest, strongest, and in machineped learning and artificial intelligence. selina: global news 24 hours a day on air and at tictoc on twitter. let's check in on how aussie markets are faring. sophie: aussie shares are rising for a second day.

he needed a level of corrections that will likely continue for a little bit longer in an orderly fashion. energy shares gained ground rising after oil prices rose overnight amid growing instability over venezuela, but health care is the biggest drag, off by 1.4%, and this is as resmed is falling the most since may 2015 after second-quarter sales missed the lowest estimates and buybacks have been temporarily suspended by the company due to recent acquisitions and a.m. p plunged as much as 10% earlier after saying underlying profit will fall about 35% as costs from its financial scandal mount. plus, it cut its dividend payout to a record low and riva energy is slipping after projecting a refiningings with margin continuing to perform .elow forecast into 2019

search in of to quickly check on the aussie dollar, which is retreating further after falling to a three-week low overnight, it is headed for a seven -- second weekly loss. shery ahn: thank you for that. semiconductor stocks fell after intel of us are fierce revenue forecast fell short of the lowest analysts estimate tracked by bloomberg. for more, we are joined by a bloomberg intelligence senior analyst. we did get some confidence boost , really not long-lived. has in telegraph pretty early. expectations are getting ahead to callelves in trying

the bottom of the semiconductor names which we think is too early. is weak cloud demand and likely to remain so for the first half of 2019. we think there is pretty serious risk from the mobile handset demand cycle as well. the first half, the picture is pretty weak. if you step back and take a look it, expectations are low, but that does not mean because of weak guidance it, expectations t that does not, we are off to the races again. i think this is going to be a little bit more drawn out. reached ae if we have turning point, but right now, it is still a love/hate relationship with these semiconductor names. it has to doch of

with the ongoing u.s.-china trade war and potentially a slowdown in the economy? has more to do with latch cloud providers, particularly in the united states, taking a pause after a very strong 2018. that has nothing to do with a tariff drama. the second part of it, mobile, is also potentially macro related and also handset cycle related. we are getting to the point of saturation and features perhaps are not rich enough for people to go out and buy that new extremely expensive handset. you compound that with weakness in macro in china and compound that with trade drama, this potentially augments the weakness in the already pretty if the semiconductor cycle to begin with. >> what about the supply side of things? we know last year, the south korean semi-giant sk and samsung

through records amounts of cash -- record amounts of cash through investment. isthe supply/demand balance a key driver, particularly in the memory names, which are dominated by the koreans and ,apanese, and in that situation better position. supply cuts will be swifter, potentially deeper, and that will match demand much more easily, potentially as early as q 2019. -- as three the supply we will continue to build up, given this secular growth story, we are expanding our data storage across different devices and in the data center, so there is a secular growth story, but the rate of growth of supply has to be reduced to match up with

demand and that is not happening fast enough, may not happen in 2019 at all, so we will have to wait and watch to see what toshiba and sk hynix do. those are my two companies to watch. >> how much are you watching what china is doing as well? we have heardthose it is a natil priority for beijing to become a global force in the semiconductor industry. is that something we need to be concerned about in the coming quarters and years? >> we have heard this rhetoric the desire and appetite is certainly there, but the intellectual property is not. we are very, very far away from any conductor intellectual property being organically developed in china. we do not think it is going to happen organically in the near term. that takes multiple years to develop. you could potentially by some,

but the m&a appetite for cross-border transactions is thety low right now given regulatory regime in both fronts. yes, the appetite is there, the desire is there, but i do not think that they will have dramatic scale in the near term. time.lly appreciate your afterirlines rallied three carriers handily beat fourth-quarter earnings expectations. investors had actually been for impact, if you will, after warnings about weaker pricing power earlier this month. it was a pretty smooth flight, if you will. >> pretty smooth flight over the course of today and are all u.s. airlines because the uplift they got were from american air -- run three companies, american airlines being first to report earlier today. they said that there pricing they arethey said going to raise fares and beat their competitors on top of

that. on top oft that. how is that possible echo in part because they will focus on their hubs. cowan, for example, can't out and said they are setting themselves up for what could be a very good 2019. let's bring up how these three airlines closed the day. american airlines ended the day of the most in about a week. a 6% pop here. southwest airlines and jetblue both seeing a close they have not seen since early december. southwest airlines here saying that they are going to be seeing more demand for business travel. in addition, they are already seeing some demand for last-minute travel and that people are willing to pay those higher prices. b 5% press, which is a revenue indicator, beats the highest expectations.

hopped into the bloomberg terminal. while we are looking at american airlines, i want to show you this interesting chart. american airlines is in yellow. even though they had that pop, they still are not doing well relative to continental holdings . delta airlines, which is relatively flat. the reason for this that investors also need to know is that they have a huge debt burden. aside from this negativity, it really is all uplift today in u.s. airlines. >> also a bit of negativity when ongoing to this government shutdown, on its 34th day. really worried about air travel. >> how could they not be when it comes to the tsa and all the we'velse -- sick outs seen?

the industry seeing a kind of tipping point. let's show you the quote from jetblue's ceo and president. the longer goes on the longer it will take for the nation's air travel structure to rebound. other folks, american airlines ceo saying long lines and delayed air space, southwest saying they are losing up to $15 million in sales in january. delta saying is costing them $25 million a month. i just mentioned the tsa transportation security of ministration. they are seeing a lot of rising sick outs. this is where they were last year. this is where they work on wednesday here in the united .tates we can see that this is something interesting that is happening. a lot of folks are saying they cannot come in because they cannot get to work because they

are not getting paid. that is clearly a real and honest reason for what is going on. the faa says there's no impact and waitaffic control times, interestingly, are still less than 30 minutes. can we do more with less? but we can see the numbers here. >> when will that breaking point cap? thank you so much for that. coming up on the show, mario draghi admits downside risks to the u.s. economy are now dominant. we read between the lines next. this is bloomberg. ♪

"daybreak: asia this isery ahn: "daybreak: asia." the ok and a month-long

freeze-dried regulators. gamesal approval for some is a positive trend but the company still awaiting the eau claire 14 of of its most popular titles. shery ahn: las vegas sands fell as analysts question is loss of market share in macau, particularly in the mass market which has been seen as a sweet spot. shares saw their biggest drop in three weeks. >> a new deal with virgin galactic. the designer makes next generation clothing for trips to space. ,he designs are yet to be seen but they will not be like traditional space boots as the ship has -- does not have

pressurized cabins. they're working on a space center in new mexico. raised theaghi has alert level on the euro area slowdown is global growth slows and the trade war persists, pushing any rate hike further into the future. bloomberg global economics and policy editor kathleen hays joins us with the latest. president draghi came close to fully downgrading his outlook in december but this time he had to cave. kathleen: that is true. this shift does come after his saying that downside risks are predominant in the economy. he did say those risks were broadly balanced. even mario draghi cannot ignore the preponderance of data that to this paving the way

point. let's hear this clip from the ecb press conference earlier. >> the risks around the euro area growth outlook have moved to the downside on account of uncertaintiese of related to the geopolitical oftors and the threat protectionist vulnerabilities in emerging markets and financial market volatility. kathleen: mario draghi did stress the global forces buffeting the area that he and his colleagues have no control over the risk of a hard brexit, for example. the ongoing trade were between the u.s. and china, china's economic slowdown -- you could make a long list. area's much the economy

was downgraded sharply. we got the purchasing managers index looking at and you factoring, that key gauge falling just below 50, so that number issuing contraction and factory output as well. mario draghi did reassure investors to a certain extent but put an emphasis on solid economic fundamentals which he still sees. they will head twitter inflation target, etc. the prospect of more targeted long-term financing operations was raised at the meeting, but a decision about it was not discussed and that was also nuanced, but another way for the ecb to say that they are watching risks but not so worried about the euro economy there going to do that now. he also stressed that these global forces are being met with enforcement by government but the idea that there will be a rate hike before he leaves in october, many people saying that is not going to happen. he missed his chance to

normalize, according to the chairman of ubs, and now it will be up to someone else to make that move but probably not until 2019, some people say. malaysia's central bank made no move on rates either even though we saw the economic growth rate slowing. what was the rationale? >> i think they were very balanced in their outlook. they did not reveal a lot about where they think they are headed next. inflation has been below 1% since june. what's really interesting -- jump into the bloomberg library for a look at malaysia gdp. you can see it is now down to about four point 4%. they were looking for 4.7% this year. decisionthe first rate .

they did not really indicate what they are going to do next. one of the pressures on all asian central banks, lest year in 2018, the story was on the fed -- the story was the fed was on a steady path of rate hikes. the ecb is signaling that the concerns of a domestic economy perhaps will forestall their next rate hike. it seems many of them have a little breathing room to look at what they need to do without looking over their shoulder about foreign investors drying their money out of their bonds, out of their currencies. to rest, see what happens, and make your next move with a little less pressure on you. we will see what happens next, as always. >> we just got some breaking news on brexit crossing the bloomberg. the democratic unionist party, and northern ireland political party that props up the

minority-made government, has decided to back may's brexit deal next week according to a report in "the sun." have said the party have privately decided to back theresa may's brexit deal next week when she toughens it up. it is a major breakthrough if this is in fact true for number 10, "the sun saying delicate deliberations are ongoing, and they are close to agreeing to an amendment to another showdown vote on tuesday that would curtail that popular and contentious irish backstop. forave seen a strengthening four days that this will be down the road and potentially lead to a second referendum. >> we have seen more pressure mounting on prime minister may to rule out a no deal brexit. also, there were calls for a delay, as you said, of the

brexit deadline. we have heard from ceo pressure vs such as from airbus, saying it could be forced to move plants out of the u.k.. big developments when it comes to what could happen to prime minister may's deal on brexit. >> plenty more to calm on daybreak: asia. this is bloomberg. ♪

asia: this is "daybreak: ." shery ahn: markets in korea and japan open at the top of the hour. sophie: futures are hinting at gains for the nikkei while the yen is staying there overnight lows reached amid the broad

dollar strength we have been seeing. investors positioning for the offense do next week and with that lingering caution, global stocks are headed for the first down week in five. we will get reaction to honda hyundai motor. in japan, we're watching for reaction to inflation. tokyo showed surprising strength rising to the highest level since 2015 for this january with cpi including fresh food, the line in blue on this chart, a leading indicator for national figures rising 1.1% on a yearly basis, stronger than the .9% increase that was forecast, but that likely will not remove any negative pressure on prices coming from oil, as we have seen. haidi: let's take a look at asia markets and how they are faring before we get to the open of trading in tokyo.

this is the state of play when it comes to australia and new zealand. pretty modest gains when it comes to trading in australia. falling intoust negative territory by about .1%. nikkei futures unchanged as we go into that open in tokyo. we are again for how the chipmakers and semiconductor sectors have fared given we had a whipsaw session overnight. ofr earnings results out intel suggesting we will see further headwinds going into the rest of the year for the industry. nikkei futures just taking up to positive territory at the moment. ahn: it has really been a rocky week for investors. they had to weigh what is going .n with investors we will be discussing that with the president as cio of merck investment coming up on "daybreak: asia."

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that's how xfinity makes tv... simple. easy. awesome. haidi: a very good morning. shery: i'm shery ahn. sophie: welcome to "daybreak: asia." ♪ haidi: our top stories is friday, asian markets are drifting after wall street expressed concern that the u.s. and china may be further apart divisionsilbur ross remain. the clock is ticking down to next week's crucial talks.

shery: and the end of the road for carlos ghosn. some big names coming up later on, don't miss mark mobius. he will have lead to say when it comes to what to make of these markets. emerging markets coming under pressure along with the rest of global equities, trying to find their way, balancing out what has been positive earnings with increasingly deep uncertainties when it comes to trade. selfie is in hong kong. sophie: we are rounding out -- sophie is in hong kong. theman sachs heading for first down week in five with different signals. the nikkei news has reported that u.s.-japan trade talks will

be delayed. today we are seeing the nikkei 225 adding .2%. reaction to the tokyo cpi update that we got this morning as well. in sydney we are seeing stocks rise for a second day, led higher by real estate and energy which is rising after oil prices climbed overnight over growing instability over venezuela. the aussie retreating after falling to a three-week low. amid concerns over rising mortgage rates. the pound gaining ground early in the asia session, jumping after the sun reported privately deciding to back theresa may's brexit deal next week. word: is get the first

news. trump administration ordering all nonemergency federal employees out of venezuela amid the deepening power struggle in caracas. washington has recognized the president as head of state. the administration is ignoring venezuela's expulsion of u.s. , saying the embassy remains open. two bills to end the 34 they government shutdown has been rejected in the senate. the republican sponsor plan includes some protections for immigrants and $5.7 billion for a border wall. without wallc bill funding was also voted down. president trump tweeted that he will not caved on his wall but said he will not deliver his state of the union address plan for next week. starting jumped of reports that theresa may will have the support of a small northern

ireland party if that's with a vote next week. the airbus ceo denounced what he called the madness of brexit supporters saying the playmaker have to make decisions that could be harmful for the u.k.. if there is a no deal brexit, we at airbus will have to make potentially harmful decisions for the u.k.. we have huge plants here and we will not move and we will always be here. they are wrong. >> investigators in california have cleared pg&e of causing the second most instructive wildfire in state history. shares soared on the news before trading was briefly halted. it was tied to electrical equipment, not pg&e equipment. 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. u.s. commerce secretary wilbur ross said washington and beijing want to end the trade war but the outcome will depend on whether china deepens economic reforms and further opens up its markets. tom mackenzie joins us. like there ism any backing down. it seems there is a dialing back of expectations, specifically from the u.s. side. wilbur ross saying there has aroundogress in areas china's pledges to buy more products from the u.s., but in terms of the issues we keep coming back to, intellectual property and market access, there still needs to be a lot of work done. take a listen to what he had to say.

deal, wewant to make a believe the chinese would want to make a deal. hopefully those two general impulses can result in a very finite, very detailed, very enforceable set of commitments. tom: and in another interview, he said they were miles away on getting a resolution. those wents follow heard from the chief economic advisor to president trump who earlier in the week said that even though talks were moving ahead, there was a need for a verifiable agreement. timetables and checks. that is something a lot of people think the chinese will find hard to stomach. ahead for those talks in washington for the withe and end of next week the u.s. trade representative. he made it clear that those conversations would be fairly

crucial as to the direction of travel. the clock is ticking down toward that deadline, after which the trump administration said they could raise the tariffs to 25%. the very significant, and those comments on dialing back those expectations. he did say we could expect a statement from the two sides on the back of those talks next week. china saying it will grant more licenses to wall street banks. what do we know? tom: it was an exclusive interview in davos. china made moves last year to open up the financial sector, allowing wall street banks and others to potentially have majority stake in a joint danger in security businesses here in china. to some extent it has been a pretty slow process.

they expected additional approvals to come through in the coming months. take a listen. following relaxed the equity here to 51%. thatas taken advantage of and has been given a license to hold 51%. , shareholdersime can own 100%. the same arrangement has been put in place. >> they got a majority stake back in november of last year. jpmorgan and nomura both have their applications in with the regulator and are just awaiting those approvals. that six-month timeline jives with what we've heard from both those banks in terms of the time frames they are looking at as well. from the chinese perspective, the benefits of getting these firms involved in is to add transparency and a bit of

clarity and to improve the financial sector here. get a slice ofto the financial sector. he also talked about the london-shanghai stock connect that many thought would be ready to launch by the end of last year. that has been delayed because of brexit negotiations in the u.k. shery: tom mackenzie, thanks that. here from the toshiba chairman about his concerns over global trade tension. that interview is coming up later in the show. haidi: we will take a look at how workers are weighing growth concerns. this is bloomberg. ♪

shery: welcome back. this is "daybreak: asia." haidi: markets are weighing a deluge of conflicting headlines on trading growth concerns to earnings optimism. axel merk joins us. great to have you. the ee rally is starting to peter off a bit. there's a sense that the markets are unconvinced at the moment. thoughtw the train of that the trade war will not be resolved quickly and we will continue to see continued pressure on global growth, or do you look at earnings which have been pretty positive? a little bit of everything. i'm not that optimistic on growth. the one headwinds that has not been consider is rising wage

pressures. the u.s. is faced with all that. i'm reasonably positive a lot of the attention we've had, there was a huge short position in treasuries going into the fourth quarter. that rally in treasuries got everybody's scared, thinking something must be wrong. so now we will not have rate hikes for a while, but i think we may get them the second half of the year as we are working through some of those issues and wage pressures continue to rise. it's interesting that mario draghi addressed overnight the rising wage pressures. is this the year that structurally we see that transmission finally come through? axel: i don't think it will be a huge issue. it increases productivity, which is true to an extent, but wagers -- wages

are more pressure. draghi says higher wages help the consumer. he is quite positive. a lot of what he said was muted and he has downgraded the growth forecast, but he is just facing reality and reflecting that. haven't made a decision other than saying things are a little slower. he does point to various issues around the world and said the odds are high there is a positive outcome to many of them. the reason they have to do a because this moving on has impacted sentiment. motivatedaghi will be to do an exit because he is retiring at the end of the year. i think a rate hike in the eurozone is likely. that means higher volatility in the market. investors have been trying to figure out the health of the global economy not to mnuchin where trade talks are

going. when you have this environment of higher volatility, how do you adjust or rebalance the portfolio to be able to reflect this new risk environment? investors have some sort of risk profile. the problem is can -- is any just have it on paper and don't really know what it means. a 60% equity allocation makes a difference on the environment. rising interest rates are predicting those higher volatility's, it would be prudent to take some chips off the table. it is still prudent to diversify. the headwinds to earnings i think will be there. i don't think we have an imminent recession which is usually one of the key ingredients to a real bear market. i think it is just prudent to is probablynd cash

not a bad thing for many investors. today we saw airlines rally because they had a strong outlook for revenue. at the same time, ceos were warning of this government shutdown in the u.s. potentially affecting them in the future. what sectors should you watch out for, should you be cautious on when you continue to see political uncertainty here in the u.s.? .nd just globally as well like theething shutdown is always going to be a short-term factor. in any sector is going to be shrugged off. inreceived a mandate december that is still subject to approval to manager gold-mining fun. its environment where interest

rates are turning down, so we like it. i'm not telling anybody to go into any sector. theshould not be driven by news that the day as many people are. there is always something to be concerned about. to have atant secondary approach and stick to that. i don't think a recession is imminent. the u.s. consumer is way too strong for that. that means we will have continued pressures on the inflationary side that are discounted right now. comparisonsr-year will be unfavorable. all of that speaks toward higher rates, to be more defensive. i'm not suggesting everybody should do is sort of thing we do . it's more on the speculative side for many investors.

, given thatng not much circumstantially has changed since december, the tone when you look at the lack of prior hawks now coming to the table as well. what has actually changed? isl: i near-term rate hike off the table. keep in mind what esther george's community -- concern had been. she was a community banker. he was concerned that zero interest rates for causing financial instability. i don't think she is gung ho about a hike or not hike. that hawkishness might not be quite as aggressive in the current environment. that is something to keep in mind. what is important, the fed needs to have a plan. they were wrongfooted most

notably on the quantitative tightening. they have not made up their mind where they should take that too. they thought they could make a decision the end of this year. andthey have to backpedal say maybe we will end it sooner. they don't know where they want to be, and that's a problem. the fed is the benchmark of risk-free assets. the fed is working through that. when the market has a tantrum, it's ok to loosen up. by the end of the year i would not be surprised if they would have rate hikes. debt levels on government and corporate balance sheets are pretty high at the moment. ceo warningm one caution about this problem. how big of a risk will this be? axel: to me, the biggest example

of her problem was in the eurozone a few years ago. what you don't want to have is risk-averse assets. debt at theot of low end of the investment grade sector that could be moving to the junk sector. thate same time, people hold that stuff know there is that risk. so there could be a shock to the market if we have a wave of downgrades, but i don't consider that to be a systemic risk. , there are issues because a lot of people have gotten a lot of debt. the one thing that will show that active management is going to come back, because they can differentiate where the real challenges are. that is generally of phenomena and when the interest rates are compressed.

indexing is the right thing to do. active management will be outperforming. think there will be a systemic risk, but as rates move higher, there'll be more jitters in parts of those markets. shery: great to have you with us, axel merk joining us from san francisco. by presidentve they can help china and india. we are looking at venezuela, next. this is bloomberg. ♪

haidi: this is "daybreak: asia." shery: a quick check of the latest business flash headlines. intel shares told in late trade after lower than jack did -- lower than projected

profits.arter sales were $18.7 billion against the average estimate of $19 billion. the results signal a tapering in the long boom expanding to build out cloud data centers. haidi: beating key estimates,, will sales rose 4% in the americas. stain -- same-store sales in china gained 1% marking a second straight quarter of growth. norwegian air something most on record as the british airways owner abandoned its eight-month pursuit. the decision leaves the discount carrier reeling as it faces a cash crunch during the slow northern winter season.

they had rejected to offers from iag saying they under ballot the airline. they will not make a further bid and will sell is 4% stake in the carrier. growing instability in thatuela has painted president nicolas euro to five calls from the u.s. and other oil is to step down, but heading for the first weekly loss in four weeks as investors try to weigh out all the different competing narratives. see howkind of investors are looking at the buildup of stockpiles on the .nvestor side of things what potential more sanctions could do to venezuela. what is likely to win out in terms of market sentiment at this point? i think folks in the market

are watching what the united states will do. there are two scenarios i have heard from analysts. one is simply the u.s. stops importing venezuelan oil. the oil will go somewhere else, to china or other countries. but if the trump administration decides to put pressure on venezuela similar to what they do to iran, oil cannot really go anywhere, and that will put a damper or put a large list tag on the market. you could see prices rise because of that. any kind of lost to the market will boost prices and it will help drive the narrative that maybe 2019 will be a recovery year, not an oversupply like everyone thought. is of what has been happening over the last 24-48 hours, you seen the markets looking at this as more of a harder disruption to the oil market and perhaps

pushing up prices going forward. have started to see opec trying to we take charge of the oil market. does this complicate things a little bit for opec? stephen: it does make the job for opec a little more difficult. they have to figure out who will be boosting production. isthe same time, venezuela the rotating president this year of opec. that will put in administrative hurdle and crunch on things to see how opec deals with an israeli not having a potential de facto leader and who will have that -- venezuela not having a potential to affect a leader. shery: stephen, thank you so much for that comes singapore. in a moment, the end of the road for carlos ghosn as he quits

renault. that is next. this is bloomberg. ♪

haidi: this is "daybreak: asia." a top chinese regulator has told bloomberg more banks will it approval former geordie ownership in the local security ventures. ubs became the first foreign company to win approval for majority stake. number and jpmorgan have also applied and beijing promises to allow greater access to its $40 trillion financial sector. the equityrelaxed share -- voting equity share to 51% and ubs has taken advantage of that and has been given a license to own 51%.

, shareholdersime can own 100%. the same arrangement has been put in place. gauge of business sentiment in china is at the lowest level on record. fellndex based on a survey to 50.7 this month, down from 51.4% in december. still in positive territory, but still the weakest reading since the survey was launched in 2013. -- georgeata example soros is warning of what he calls the mortal danger in china's use of artificial intelligence to suppress any and theo president xi communist party. overves to tell a tear societies.

it said the database will use algorithms to determine whether a person is a threat to the one-party system. >> china is not the only authoritarian regime in the world. but it is undoubtedly the wealthiest, strongest, and most developed in machine learning and artificial intelligence. malaysia investigators have uncovered details on how one investor could have made gains from entities that the agency. they're looking into a bond sale in 2009 involving a state wealth fund. believe he and his associate siphoned off $126 million from the deal. markets trading in asia seem to be having our positive day after

falling in the last session. sophie has a check of how things are looking. sophie: asian stocks are gaining ground, it just eking out and advance for the week. sparked byes arising concerns in venezuela and tech shares are leading the gains in tokyo and seoul the chipmakers continue to climb despite intel's disappointing forecasts. let's look at some of the stock movers in that space. the japanese semiconductor equipment maker continuing to climb with his peers as investors seem to shrug off the soft earnings we've seen. netmarble is jumping the most in october on expectations that china may announce in the second --rter whether to approve which would be good for korean game makers.

the pound,ck on which is broken through its 200 day moving average. traders say is prompting leverage funds to add to an existing loan. there appears to be a clear shift. targeting one move and then heading towards 145. the pound hit november highs against the dollar after a report that a key party has privately agreed to pack -- back theresa's new brexit deal. saying that the party that is supporting her minority government will support the prime minister's plan. that's to be understood as accepting an irish backstop if there is time limitation put on that. let's look at the fallout.

gainshad four days of when it comes to the pound. that largely seem to be on anticipation that it will be kicked down the road. there will be a postponement of brexit and maybe it will pass forward to a second referendum. how does this potentially change things, given that we know the are respect stop is unlikely to be one that is movable? the fact that the dup have indicated they are prepared to accept theresa may's brexit plan, how long the deadline has to be is still not quite clear. enough brexit members of parliament who the initial plan, plan lost by over 200 votes. opposite from the sterling perspective, if by some sort of

miracle the plan got past next week, it could remove all the uncertainty in take the deal off the table. the question is, how many other conservatives will back it? we still have to wait to hear from the e.u., are they prepared to agree to a specific timeline? so far they have said no. out,years has been floated but that is all they had really done. the question is, what is the response going to be to this? we are still waiting for you to come to us with what you want. so there are still uncertainty, but a positive step as far as starting is concerned. shery: mark carney came out talking about how they cannot fully prepare for a no deal brexit. given the political situation right now, is it inevitable that

the boe will keep rates on hold for the perceivable future, and what does that spell for sterling? >> there is so much uncertainty out there. i'm not sure if anyone is sure how that will play out yet. in terms of the interest rate play, sterling is dominated by how brexit plays out. if the market is looking at brexit, if it is an extension of it may worry the market if the no deal comes back into fruition. if it gets rejected, the question is, what is the backup plan the u.k. wants to come up with? is there a consensus plan?

plan, itis a consensus comes back to the irish backstop. we always keep coming back one way or another to the irish backstop. there is no new alexander the great around to solve the gordian knot. how it plays out, we will just have to wait and see. shery: thank you so much for that, david. fallen inomino has carlos ghosn's two decade career as an auto industry titan. renault has named new leadership after he resigned while still detained in tokyo, charged with financial crimes. stephen engle has been following the story from the very beginning. it is really the end of an era. what does it mean for the renault and nissan alliance?

stephen: troubles are not over. it is a new page in the history of renault and whitney nissan and mitsubishi having new theership, a chance to turn page on carlos ghosn. there are still significant challenges ahead. confidenceo restore at the company at a time of severe disruption in the auto industry. they need to improve corporate governance across the board, especially at nissan. his the new -- the new chairman is the ceo of michelin he will be given full responsibility for managing the alliance. ceoceo was named interim and carlos ghosn was arrested in japan back in november. he will now be the full-time ceo. finance minister speaking exclusively to ,loomberg television in davos

he said the first priority is to consolidate the lines between renault and nissan. all three car companies have said the alliance is important, even though there are differences on the share structure of that alliance. that is something to be taken up at a later time. chief challenges are bridging the cultural gaps that widened under carlos ghosn between renault and nissan. plus navigating the political crosscurrents we have in france and japan, and then there is that bugaboo, corporate governance. this is what he had to say. next first priority is to with theew governance renault group, which i will work on immediately. another essential task, the ongoing tour -- talks with the alliance.

a mile, carlos ghosn did resign ahead of that board meeting that named new leadership at renault. time simply ran out and carlos ghosn. he realized he would probably be detained for quite some time and could not carry out his duties at renault. haidi: what have we heard so far from the ceo? stephen: he also had his own press conference in tokyo. he welcomed the changes and said the chairman's summit he fully respects. but again, corporate governors will be one of his biggest challenges. this is what he had to say about the new leadership at renault. that, but he said all the things i just said. issaid the biggest challenge going to be corporate governance. he also said it will soon be time for him to step aside because his time is also running short.

he did not give a timeframe, but nissan will have its annual meeting in june so that is likely the timeframe he gets the reforms underway and completed at nissan. sometime in the coming months, saying he will pass the baton after thebaton after the n this jarring leadership crisis over the last few weeks. stephen engle with the latest on nissan. a good news earnings story of the day for starbucks. the company beat first-quarter estimates. perhaps most interesting is what is going on in china. remy has the details for us. the weakness we saw last year really derailed the share price for a while. that is a good way to put it.

they are seeing the effects of china's economic slowdown. they are banking on things like the starbucks roast really here continueai, trying to to expand everything they are doing there. say forrts continue to every 15 hours, a new starbucks store opens up in china. let me walk you through the numbers overall for china. in terms of overall revenue, that came in at $6.6 billion. $6.4 billion was the estimate. shares stopped just a little over 2%. china and asia-pacific, they saw sales up 3%. the estimate was for 1.5%. , we can seeo china

the growth is happening, two consecutive quarters of growth but it is lukewarm, just up by about 1%. i guess this is enough for investors to continue to into china after the surprise drop. before this we could see the growth was almost up to double digits, nearly 10% back in the fourth quarter of 2017. there are a lot of those china problems, for example the transactions. there were fewer transactions, they fell by 2%. that means people are just buying more at each time. also reports of layoffs and office closures. competition, one spending millions every year to try to compete and dislodge starbucks as number one in the

country. shery: thank you so much. coming up next, precious memories. we hear from the toshiba chairman about why they are holding onto a key state in the chip business. this is bloomberg. ♪

haidi: toshiba's chairman says he is very worried about a further escalation in the tariffs were between japan's two biggest trading partners. they do to reach a deal by the march 1 deadline would add to the laundry list of worries for japan inc. >> i'm now very much worried about the china-u.s. trade war. i think it is not only a trade war for national security issues.

the united states is trying decoupling. if that comes true [indiscernible] we are very much cautiously watching this trend. they have got to fix this problem. >> your flash memory chip business was sold off to a conglomerate, and their plans years, how in three has that been factored into your midterm plan? >> we still have a 40% stake of the toshiba memory chip business. including the 40% stake profit.

>> in terms of your buyback plan, you have completed about 42%. the assumption is that are prospects are stable. one investor has asked you to expand your buyback program. do you think it is fair for argyle to ask that of you? are regulated from corporate law. within the a buyback distributable amount. argyle request we make 1.1. we are on the process of restructuring.

we need some money for restructure and we need some money for dividend. $700 billion buyback i think is fair. i met many activists and hedge fund leaders and they say ok, that is fair. >> are you likely to expand? -- expand the buyback program? we are in the process to make a buyback. on track right now. coming up next, malaysia uncovers new details about links

mdb.n entity that preceded 1 details coming up. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm haidi stroud-watts in sydney. malaysia investigators have uncovered more details of how the fugitive financier jho low could have made gains.

they're looking into a 1.2 billion dollar bond sale that took place in 2009. let's get more details from kuala lumpur. what is the investment authority and how does it connect back to jho low and this entire widening saga? >> the investment authority was actually the original service as a sovereign wealth fund with jho low as one of its special advisors. late in 2009, the federal government decided to take it over and it was rebranded as 1 mdb. shery: explain what transactions occurred that he could profit from the fund. complex, but i will

make it as simple as possible. according to investigators we they were looking to raise money through a bond sale. bank to arrange the sale. the bonds were sold at a discount to three parties, including a company that was somehow linked to jho low. later on that same day, the bonds were resold to local companies and a higher price. in that way, the original purchases as well as jho low were able to benefit from the sale. he and his associate profited by about $126 million. thank you so much for that.

quick check of the latest business flash headlines. tencent will be a stock to watch later when hong kong begins trading. this ends a month-long freeze by regulators that had left its plan locked since march. tencent is still awaiting the all clear for two of its most popular titles. analysts questioned the loss of market share in macau, particularly the mass market, which has been the casino's sweet spot. share saw their biggest drop in three weeks. continuing uncertainty in china and concessions for macau are seen as key issues for investors. haidi: the future of the casino isire built by stanley ho

now in question after one of his children struck an alliance with another wealthy family. the reporth foundation, she and her siblings hold a combined 53% of the entity. sjm has endured a decade-long fight for internal control. shery: most trading across asia in the green. let's get to sophie in hong kong. sophie: asian stocks could be set for a second day of gains. as you pointed out, tencent will be a stock to watch as we see the end of a month-long freeze on its gains. a production update comes at the end of a week that saw the minor lose nearly $1 billion in value. where watching for any reaction in the insurance space.

reportedly negotiating a sale of the health insurance arm. before we headed over to bloomberg markets asia, let's check how markets are faring in this friday morning session so far. upside,ei 225 seeing an the cost be getting a little bit of lift there. here in australia, modest gains on the asx 200. futures pointing higher and keep an eye on that monthsing its best two -- keep an eye on the yuan. this is bloomberg. ♪

♪ >> 9:00 a.m. in hong kong and shanghai. this is "bloomberg markets: china open." defining themakers gathering gloom to see an uptick in demand and are leading the way in tokyo and seoul, korea. >> yuan offering a rebuke to president trump's protectionist views. sorts withhrough of tencent regulators approving fortnight instant on the list.