haidi: good morning. i'm haidi stroud-watts in sydney. shery: good evening from new york, i'm shery ahn. sophie: i'm sophie in hong kong. welcome to daybreak asia. ♪ haidi: the top stories this tuesday -- markets pivotal for global growth. the dollar strengthens again and treasuries fall. trade talks resume in beijing among cautious optimism.

is there a just enough to offer new on hold. labor with its first earnings. we are live in obama. yokohama. shery: we saw the dow fall for the fourth consecutive session, down 2/10 of 1%. the s&p 500 finished unchanged. we have industrials being led higher by railroad stocks, but utilities are slow. health care stocks weighed on the index. we have small caps really outperforming the broader market with the russell 2000 gaining 8/10 of 1%. u.s. futures at the moment unchanged. investors could be sitting on the sidelines as we see these trade talks unfold in beijing. we could be headed for another government shutdown come friday when funding runs out. a lot to watch out for this week as we head to the asia open. sophie: we are seeing a mixed

session potentially in asia this tuesday. japanese stocks set to come back online. they could be opening on the downside with the yen trading at its six-week low. we are seeing a flat start to cash in australia. we are waiting on australian home loan data and get a gauge on business conditions. this morning, we did see the confidence index take a hit. we will talk about australia. seeing some loose upside for some resource players. ngo energy. to the downside, we have adelaide sliding this morning. this after it was cut to sell at citi. haidi? haidi: sophie in hong kong. letter to the first word news with jessica summers. jessica: the u.s. and china have begun new trade talks, as president trump's march 1 tariff deadline is looming closer. deputies of delegations met in

beijing, involving vice premier, the treasury secretary steven mnuchin, and trade representative robert lighthizer. china make make enough concessions. the u.s. is keeping up the pressure on china, hinting at an us or them ultimatum over huawei. secretary of state pompeo -- mike pompeo says it could harm links with washington and limit the availability of american equipment. huawei is a key base in europe. the trump administration is accused the company of espionage and working for china's government. >> we see that around the world. it also makes it more difficult for america. if that equipment is co-located with american systems, it makes is difficult to partner with them. we want to make sure we identify them in the risks associated.

sophie: the u.k. prime minister theresa may is bringing forward a statement of brexit from wednesday to tuesday. she is not considering a customs union with the eu, a key demand of jeremy corbyn. dragging u.k. investment to the lowest since the financial crisis quarter. gdp rising just 2/10 of 1%. s the political ambitions of the princess is over, the electoral world commission banned her from running. ief redenomination -- br nomination brought a public admonition from her brother, the king. he said it was improper and greatly inappropriate. global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries, i'm jessica summers.

shery: back to the markets. we saw u.s. stocks in search of direction as we have uncertainty about u.s.-china trade policy, not to mention a stronger dollar. eight consecutive sessions of gains for the u.s. dollar. let's bring in su keenan with a look at the markets. another session of thin trading. su: it appears some are waiting on the side. this is trade talks viewed to be pivotal. you also have the possible shutdown. many waiting to see how that will play out. let's look at the bloomberg real quick. shery mention the eight-day rally in the dollar. the charts are showing we could return to the highs of 2017. this is a 200 moving week of the average dollar and it points towards further strength. as we look at the snapshot, that strength has been putting pressure on commodities.

we did see a lot of the health care sector stocks showing weakness. we go to the next board, strength in railroad stocks. one of the reasons that was a strong sector. activision blizzard down more than 7%. biggest one-day loss in more than two years. that is ahead of its earnings later tuesday. they are very big into video games. call of duty, a very significant game. maybe passed its prime. there is something called fortnite that seems to be putting all the other software gamers in turmoil. there is a lot of anxiety on the part of investors. there are reports they may be laying off or cutting some jobs. let's take a look at what else. a medical device company could be the target for a buyout which was one of the biggest winners. avis getting an upgrade in goldman because the rent-a-car

industry has been under pressure. oili: i commodities, falling in the lowest. gold seeing a decline. it was not entirely the strength of dollar at play? su: a lot of factors. we also did have some -- let's look at the bloomberg one more time. there is now starting to be a downtrend for commodities. gold as well as oil, as you can see. if we going to last five days of trading for both gold and oil, you can see it pronounced. with oil, it has to do with other factors such as concerned about the trade issue with china. that clearly could impact demand and that is offsetting a lot of the boost that oil has been getting because of the cuts by opec. take a look at gold. you can see the stronger dollar starting to have an impact on what has been an upswing in gold. the dollar has been viewed as a haven play of late. with a rout ofn

wall street. let's bring in the president of aa bank in st. louis. great to have you. we see super muted volumes of the past few trading sessions. inching higher when it comes to the overnight session, but it is clear investors are waiting for an outcome. waiting for what happens when it comes to this brexit parliamentary vote. what are the next catalysts that could drive it higher or lower? >> i think we will continue to see a lot of investors and investors out of the market through february. march is a big month for trade negotiation and the budget negotiations in the u.s. the fmoc has decided to stay on the sideline so interest rates, they have removed that concern, if you will, for the markets. market it is really, the

will trade more importantly on what happens with u.s. china trade. trading inaw today's the last hour or so of the session, the market bulls were coming back but it was interesting to see they were buying small caps and mid-caps. this chart showing the performance of the russell 2000 against the s&p 500. while the dollar has been wallng range bound, does street have growing fears of recession, why are we seeing this outperformance in smaller companies? chris: i think there is certainly concerns about recessions, but those have been put off now. the fmoc has paused rates. while a lot of economists predicted recession in 2019, most have pushed it passed this year. we feel we will see continued growth through 2019. there is still a lot of

uncertainties and we still have some questions to be answered, but global growth we believe will continue to hold up. shery: s&p 500 valuations have climbed up with the years rally at about -- how close are we to fair value and what will it take to take it higher? chris: i think we are pretty close to fair value. i think a trade resolution will push investors back into it and give them the confidence to get back into the markets. a lot of cash still sitting on the sidelines. i think any kind of trade resolution, it will put things higher. we have decent business confidence, although it is falling through a little bit. i think that is what it is going to take. an end to some of the uncertainties and a major one is trade. views i want to get your on what has been happening with the u.s. dollar.

there has been one clear trend. eight days of gains. take a look at this chart. it has actually gained every day since the end of january's statement of the fed on rate hikes. is that a bit counterintuitive that the fed turns dovish and we have a complete turnaround in expectations for what the dollar does this year? how does that inform or change a view you might have held at the start of the year as how emerging markets have done this year? chris: it is something we did not expect to see. the interest rate expectations, the differential, certainly supports currency. going into this year, with the fed pulling back on their interest rate policy and looking to pause, we thought it would weigh on the u.s. dollar. we have seen a little bit of a reversal. we have seen some dollar strength recently but over the course of the year, we are confident in the emerging markets. we think the developed markets

are going to struggle to see real growth, but the opportunities we feel are still on the emerging markets. we do think that the dollar in particular will drift lower. it is interesting when you are bullish on china at a time not a lot of people are given the domestic structural slowdown, the uncertainty over trade. what makes you positive on china? chinese markets for the first day of the year at a bullish start to trading. chris: we think the stimulus that china has put in place and infrastructure spending they have announced has not trickled into the markets yet. i think as that trickled into the markets, you will see that be more supportive of china's markets. at the same time, you will see some inflows from index changes. that is occurring, adding the china a-shares is going to see

more demand on those shares and that in itself are going to support the chinese equity market. shery: what about other markets? we have seen india release a very populist budget as well. are there any other developing markets we should be watching? chris: we like brazil and india both. brazil has a new pro business government. they are announcing some pension reforms probably in the next few days. economy the brazilian is set to continue to see a nice rebound due to some policy changes. at the same time, you have india that will lead global gdp. it will outgrow all other countries. thehave demographics during india. you have young, educated, massive middle-class society in india that we believe will continue to support good growth and really shoot india really up

into -- we expect them to be the second largest economy behind china by 2030. they will continue to be a good opportunity. that theys not hurt just cut the interest rates. chris gaffney of tiaa bank. we are seeing some movers in the early trading in sydney. let's turn to sophie. sophie: let's kick it off with challenger, the retirement fund manager, falling as much as 6.1% this morning after disappointing results. first-half profits, 27%. chief executive says the challenging operating conditions and looking ahead the four-year guidance will be down to a lower range. challenger does not expect to meet its 18% normalized roe target. on the flipside, we are seeing super retail jump as much as 7.5%.

positive sales growth. super retail has said some managers are underpaid and the ceo will step down on february 20. group coming in at 110 million aussie dollars. it has reported charges coming in at 310 to 340 million aussie dollar's after taxes. haidi? haidi: sophie in hong kong. still ahead, nissan reporting earnings after the scandal that engulfed carlos ghosn, giving investors their first glimpse of the fallout. trump first, why the administration has more leverage in trade talks than ever before. hear from the hayman capital founder next. this is bloomberg. ♪

haidi: this is daybreak asia. i'm haidi stroud-watts. shery: u.s. and chinese negotiators have resumed trade talks as the march 1 tariff closes in. why stop at trade? kyle bass says there is a lot more to discuss. kyle: that are so many different fronts we need to be negotiating on. number one, chinese steal billions of dollars a year on i.p. whether you look at the trade department or u.s. reps to the white house, it is somewhere in that category.and then you have policy with subsidization of electricity. property and all the things they do on the industrial policy. and then the geopolitical assertiveness and military assertiveness in the south china sea. now they have given us another thing to think about with the interment of the million plus in

china. there are so many different fronts we need to be confronting them on and trade is so small. in the instance of trade, i think that is maybe 10% or 20% of the argument. >> that involves a lot more people when you bring up geopolitics. there is this march 1 deadline. what is the market pricing in when it comes to anything concrete coming out of a china-u.s. trade discussion? kyle: what i see in the market is the market has an 80% probability that a trade deal gets done. we believe that depending upon how the wind is blowing that day, and how president trump feels, that might be properly the price. did what happens if we do it elect tol on trade and discuss later the more difficult issues, then i think the administration gets a "win." in the markets rejoice briefly.

when you look at the underpinnings of our relationship with china, it is that a very difficult place in i ts historical terms. trade by march 1 may or may not happen. if the chinese are not willing to negotiate on some of the more difficult issues, i think the trade rep and his team won't engage and get a trade deal done until president trump overrules them. >> i'm interested in having a relatively successful deal written out. how do you ensure the government -- uphold what has been agreed -- how do we see the change of behavior be exerted by china in the longer-term? kyle: again, this is difficult to cover in a few minutes in our discussion, but i think the agreement of course needs to be both measurable and there also needs to be potential

consequences for them not upholding the agreement. the old saying with china, look at what they do, not at what they say. they have set for a long time they would implement various policies they never adhere to. i think it is important for any agreement to be measurable and punishable to the extent that one side does not uphold their agreement. that is the difficult dance that we do with regimes like china. bass, chiefwas kyle investment officer at hayman capital management. you can get a roundup of the stories you need to know in today's edition of daybreak. mobilelso available on on the bloomberg anywhere app. you can personalize setting so you just get news on the industries and assets you care about. this is bloomberg. ♪

haidi: this is daybreak asia. shares closed near a session low monday as investors considered a new report on china's slowing smartphone market. it says apple shipments to china plunged in the last quarter of 2018. ramy is that the wall with more. ramy: so much for apple contributing more topline as well as bottom line growth to the country, right? because what we are seeing right now is the fall in terms of the share price over the past three days, last time we saw this was six weeks ago. just today, 6/10 of a percent. the past few days, nearly 5%. this is over concerns of what is happening with the slowdown in china's economy, the more expensive iphones, as well as the saturation rate. people are just not coming out to buy new phones because they

do cost more. let's flip up the screen and let me run you through the idc numbers that dropped earlier today. is thenge bars here share of each company -- huawei, apple, xiaomi. we can see the growth or decline is in blue. huawei actually rose 23%. that was the best out of the five companies here. then we get to apple, down by nearly 20%. xiaomi actually turned out to be a bigger contraction, about 35%. we can see this continues to impact what is happening with apple here. also, one really interesting thing that just dropped as well. the 13f filings on apple with regards to managers. oakridge and jpmorgan in the past few hours revealed in the fourth quarter of 2018, they all reduce their holdings. this narrative that a lot of

people are holding out from the shares, evidence over the past three days. haidi: huawei has some good news coming out of the chinese domestic market, but this comes amidst what has to be the toughest period of the company operating overseas. ramy: we know about many western powers, united states chief among them, pushing back against huawei. u.s. secretary of state pompeo is on a european tour now in hungary and saying this when asked from reporters about huawei. he says if that equipment is code located, placed in the same place where we have important american systems, it makes it difficult for us to partner alongside them. we want to make sure we identify the opportunities and risks with using the equipment and make their own decisions. we also have some sound for mr. pompeo. >> they are a sovereign nation. they get to make their own

decisions with respect to these things. what is imperative is we share with them the risks that huawei's presence in their networks presents. actual risks to their own people, privacy protections for their own people. the risk that china will use the data in a way that is not good for hungary. an obligation to share that information with them and we will do so. ramy: mr. pompeo is saying it is either us or huawei. he is pushing back across the eu as you go through hungary, poland, slovakia and iceland with the same narrative. it is either you or it is us. haidi: the pressure continues to mount. ramy there with the latest. coming up next, investors will finally learn the ghosn when nissan reports later. we will be live at the company's headquarters. this is bloomberg. ♪ the latest innovation from xfinity

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"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. jessica: i am jessica summers with the first word news. the u.s. and china have begun new trade talks, as president trump's trade deadline is looming closer. delegations met in beijing and of top-level talks on thursday and friday, involving the vice premier, treasury secretary steven mnuchin, and trade representative robert lighthizer. china may make enough concessions to allow an extension in the truce. new talks underway in washington to salvage funding for security along the mexican border and avoid a second government shutdown. friday night is the deadline for some federal agencies. lawmakers may decide to pass a

stopgap extension to keep them operating. president trump is heading to texas for a rally that will include renewed demands for his border wall. the trial of the former malaysian prime minister has been delayed indefinitely as he prepares an appeal against charges linked to the missing billions. a state investment fund. he faces 42 counts, including corruption, embezzlement and breach of trust over his role in the fund. he denies any wrongdoing. the proceedings were already running well behind schedule. eu member states may jointly respond to cyberattacks allegedly conducted by a chinese state linked hacker group. bloomberg sources said the u.k. presented evidence last month of network infiltration by an organization known as advanced persistent threat 10. pushback includes sanctions. apt 10 is at the center of the u.s. justice department's

indictments on december. global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. shery: asian markets lacking clear direction at the moment after falling for the last four consecutive sessions. let's get a check on the australian market. sophie: lack of clear direction. we are seeing aussie stocks continuing to decline. off by 1/10 of a percent, led by tech and consumer discretionary shares. the aussie dollar holding its five-week low ahead of home loans data due at 8:30 a.m. hong kong time. checking in on some movers of note in sydney. we are seeing super retail gaining ground, although it has eased its earlier advance, after seeing positive sales growth. we are seeing some downside. pac group under pressure, losing 7.6% this morning.

we did have them beating $110 million he dollars. it does expect to recognize charges over the last 30 million aussie after-tax. we do have adelaide losing ground. this after being cut by citi. we did have citi saying the company has been able to adapt to its new environment. trends urban up by 2.6%. we are seeing some weakness but total revenue has been climbing so that a bright spot but investors getting that for the results. haidi: sophie in hong kong. let's turn to the earnings season in japan. nissan set to unveil its first results. what is the future going to be going into the

stretch for nissan. taking a look at how the stock has fared over the past year -- in lost over 18%. losses accelerating towards the end of 2018. aside from the drama, the carmakers suffered weak sales growth in china and the u.s.. brexit woes also a dark cloud for nissan because three of every 10 cars in the u.k. nissan expected to post lower operating profit. there is concerned that volume producers will start a price war. taking a look at the year-to-date performance of nissan, we are seeing a little bit of a pickup.

mainly domestic automaker especially when number one is so big in this market. automakers here are global.

market for important all of them but it is one market. >> are you seeing the gap narrow a little bit? i have noticed the expectations with net income. the gaps are years now have been quite qide. -- wide. are you seeing a narrowing of that gap? >> for sure. interestingly in his final days, carlos ghosn was focus more on renault. its houses getting more in order. they have turned in the last couple of years some fairly decent numbers. >> when you look at the numbers for nissan, they are not looking great but is nissan in better shape going forward with ghosn out of the picture than they were 86 days ago? >> they are certainly heading on a different course right now.

the thing is, what i worry about are the long-term issues. they really need to have cooperation. a lot of their product programs are joint programs with renault. so much is geared into this. they need to find a solution that everyone can be happy with and i don't know if they can. >> we have heard the ceo may step down towards the summertime. there is another leadership vacuum. maybe he gets kicked up to the chairmanship, we don't know. we new chairman of renault, are hearing that nissan does not want him as a cochair. >> it is tough because part of being an alliance is each side needs to make sacrifices from time to time. redundancies have to be eliminated. somebody's program has to be chosen at the expense of somebody else's. if you have a complete alliance of equals, everybody has to have a not invented here

syndrome so it is tough to make decisions if there is no one in charge. >> carlos ghosn forever out of the picture? >> yes, he is gone. i don't know how his legal issues resolved, but i think as a leader of renault, nissan, that is over. >> did not end well? >> well, we both go to the wedding. >> christopher richter. a few months ago, he talked about the intrigue with brutus an julius caesar. to there is comparisons memory antoinette and the wedding party. shery: the drama going on. stephen engle there. we will be watching some other japanese earnings out later today, including rakuten. haidi: coming up, the dollar is on the longest rally for three

years, the racing all rises for this year. we will talk about the outlook and whether this rally is sustainable. this is bloomberg. ♪

haidi: we are counting down to asia's first major markets open this morning. japan treasures back online. chinese markets return to trade as well. this is daybreak: asia. i'm haidi stroud-watts. shery: i'm shery ahn. the dollar's unrelenting march higher may find another year as central banks follow the fed's dovish pivot.

the dollar has gained in every trading day since the fed's january rate decision. let's discuss that with terry weissman who is in the strong dollar camp. is this because you are seeing risk and that prompting, safe haven buying in the dollar that will offset a dovish fed? terry: it has something to do with the strengthen the dollar the past few weeks, but it is about growth in the u.s., sustaining strong levels against what is effectively lower global growth abroad. like i said, risk has something to do with it but in the final analysis, it will do well. shery: how much are your pricing in in terms of the fed's dovishness because the chart on the bloomberg showing the odds of a rate hike now below zero. is this being to dovish? thierry: i think so.

i don't think fed will cut rates this year. there will be interesting dynamics towards the back half of year. they will have to act on that hawkish sentiment. the most important thing is wages in the u.s. which will continue to rise and put pressure on inflation. eventually, the fed will go back to being in hawkish mode. that is in the back half of the year. haidi: we are seeing this bond story, falling yields, capitulation yields being the key stories so far early in the year. with you're talking about german bunds. do you see this as continuing, and at this pace, is there any of that diversion story left? thierry: we see bond yields staying steady the next few weeks or months. i don't think there is going to be anything that promotes global growth until the middle of the year when the chinese stock start stimulating and some fiscal stimulus out of europe. in the meantime, yes, bond yields will stay low but we

expect to see some emergence. to that extent, currencies like the euro will stay weak against the dollar and u.s. yields will be fairly steady or leveled against our yield. the premiumng at and inflation expectations, the latter of which continues to sink when you look at inflation expectations. the blue line is breaking even on treasuries. 1.7%, down from the last quarter with over 2.1%. the white line is a 10 year premium which is seeing more interest among investors. does this idea that this is going to be another year where we don't see a real inflation taking place -- is this going to be a narrative that continues this year? is this a structural think we are seeing not just in the u.s., put across economies like japan, australia or eurozone? thierry: if you are talking

about u.s. breakevens, the prospect that inflation will pick up in the back half of the year, we expect breakevens to continue to rise into the back half of this year. the market indecently -- increasingly anticipates. why did they collapse? because oil prices collapsed. inflation was taken out of pricing, of the breakevens. to the extent oil prices will stay steady, and wages in the u.s. continue to pick up over the course of the year, i think the market and central banks like the fed will be more confident about the inflation story. shery: if you are expecting a stronger dollar right now, where do you put the yuan? we have seen some strength but because of concerns over trade talks, it fell last week. thierry: dollar continues to rise. yuan falling a little bit. we have a short-term target predicated on the view we will

probably not see much of a breakthrough coming from these trade talks. that will put some pressure on the dollar. the back half of the year is a different story. china will stimulate. i think we can get confidence about chinese growth bottoming out the next few months. by then, we can see dollar-yuan lower. shery: where do you put the pboc monetary policy easing when it comes to gauging where the yuan will be? thierry: there will be some easing out of the pboc. the next that could be interest rate cut. china attempting to reflate, more about and lenders outside the banking systm doing more to promote lending. again, it is exactly those kind of measures that will actually sustain the value. these will all the growth enhancing measures by the policymakers in china. shery: really interesting point. thank you so much for that,

thierry. let's take a look at some of the stories training across the bloomberg universe. on bloomberg.com, read about singapore's incredibly shrinking stock market and why analysts say it is a delisting trend that could be a good sign. among the most read stories, apple's black site with little security for workers. plus, online criticism over tencent's investments on reddit. tictoc is covering a new study that shows sleep deprivation could reduce the dna's ability to repair itself. check out those stories on bloomberg online or the terminal. this is bloomberg. ♪

shery: this is daybreak: asia. haidi: let's get you a quick check of the latest business headlines. reddit has raised $300 million

from investors, one of whom has sparked online condemnation. tencent was among those in the round. link posting imagery banned by beijing. reddit has long been banned in china and declined to comment on the investment. shery: edm has cut the bonus pool for investment bankers after a slump in equity offers in the last quarter. it has been reduced by 8% with managing directors hardest hit and more staff will receive no bonus at all compared with 2017. stock sales plunged in the final quarter as the benchmark suffered its worst quarterly performance since 2015. haidi: struggling california utility pg&e says the boardroom shakeup after bankruptcy will see the return of nearly half of the current directors. no more than five current members will stand for reelection, with 11 independent

directors joining them. pg&e filed for bankruptcy in the face of $30 billion of liability that relate to the recent devastating wildfires. shery: activision blizzard fell to its lowest in two years ahead of earnings on tuesday. the stock slumped more than 7% after benchmark cut its price target on the expectation of fewer product successes and uncertainty of contributions around mobile and advertising. revenue projected to fall 2% this year and activision is planning layoffs that could be in the hundreds. haidi: let's take a look at what lies in store for the japan reopened and south korea coming online. sophie is in hong kong. gains at the start of cash trade in tokyo after the long week off, but a lackluster start. we will be gauging results and tech players on warnings that

smartphone shipments are on the decline. we have the minutes for the january decision, also on the lineup. let's check in on some names to watch. nissan expected to post lower operating profits. shiba on the radar as the company response to a report that it will have its operating profit forecast. toshiba saying the four-year forecast is close to what was reported. this after reporting a net loss in the fourth quarter and its guidance missed the lowest estimate. ncsoft also missed estimates for profit in sales of the fourth quarter. watch for moves at the start of trade. shery: sophie with the latest. let's get a check on the currencies around the region. the japanese yen holding steady at around 110. really weakening from the 108 level. why the chinese yuan is also

holding steady at 6. not a lot of movement when it comes to the market. haidi: we are waiting for the reopening of trading in tokyo after the public holiday. coming back from the lowest since the start of the year. ♪

haidi: a very good morning. i am haidi stroud-watts in sydney. shery: good evening from bloomberg's global headquarters in new york. i am shery ahn. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." haidi: our top stories this tuesday, markets look set for a muted start in a week that has been pivotal for global growth. treasuries fall. trade talks resume in beijing with cautious optimism of a deal. china may offer enough to put me tariffs on hold.

shery: