paul: welcome to daybreak australia. shery: i'm shery ahn in new york. sophie: i'm sophie kamaruddin in hong kong. we are counting down to asia's major markets open. ♪ paul: here are the top stories we are covering in the next hour. tension rises as washington concerns. new trade tariffs. u.s. officials say china has reneged in some of its commitments. to beijing team says one law

strike a deal. the fed is increasingly worried about corporate debt. lending standards are slipping. startedet's get you with a quick check of the markets close on the monday session in the u.s. we are seeing u.s. futures starting to trade. pressure down 7/10 of 1%. not surprising given that we have seen after the market closed, ambassador lighthizer came out and confirmed tariffs will rise on chinese goods on friday. secretary mnuchin also saying we have seen a big change in direction on the trade talks. a lot of pressure on futures at the moment. during the trading session, during the regular session, the s&p 500 managed to recover some of the earlier losses. the s&p 500 have fallen as much as 1.6%. it closed down .5%. the pressure was mostly from the

tech companies with exposure to china, not to mention machinery firms taking a hit. the dow was down one quarter percent, while the nasdaq was down a quarter percent. let's see how we are saving up in asia. asian markets back after the golden week break. sophie: we also have returning from the long weekend. currencies and commodities in the crossfire. nikkei futures carried monday's steep decline as japanese traders face a steep return. reporting today ahead of honda in the week. asx 200 may have recovered somewhat after being dragged lower on monday. chinese stocks 5.6% lower. flipping the board in australia, the jury is out on whether the rba will cut the rate. we will find out midday if the governor will make a more explicit shift to easing. also on the agenda, retail

sales. it is likely to have narrowed slightly for australia, paul. paul: thanks very much. let's get straight to the big story of the day. the u.s. will raise tariffs on chinese goods on credit. bloomberg news trade reporter sean done was at the briefing. what were the reasons the u.s. side gave to this? sean: the u.s. side has been very clear in the reason for this and the change of temperature. that is they feel the chinese aside was reneging on commitments they made prior to last week's session. over the weekend, a draft was sent over by the chinese in which a whole series of commitments were rolled back on. that prompted president trump on sunday to issue the tweets threatening the tariffs. it will prompt new tariffs to a minute past

midnight on friday. shery: the vice premier was supposed to go to washington on wednesday. how are those plans looking now? shawn: what we're hearing from the u.s. side, bob lighthizer and secretary steven mnuchin, is they still expect the vice premier to lead a delegation to washington on thursday. some other folks are raising questions about that. if the chinese delegation were to arrive here on thursday just hours before these tariffs were to take place, it could be a real tough position for them to be in. and potentially very embarrassing for them at home. , treasury secretary steven mnuchin also said the deal was 90% done. this seems a bit unusual to trash it all now. is this just a bargaining tactic? did you get a sense from the

media briefing that there is a way forward? shawn: i think the way a lot of people greeted yesterday's tweets from the president was this was a tactic to raise the pressure on the chinese before they came to town. what became apparent in the past hour in this off-camera briefing by robert lighthizer and steven mnuchin is that there was some pretty fundamental differences. from the u.s.'s perspective, a fundamental change in the chinese position. that change, we are told, is that the chinese all of a sudden has decided they cannot in trying into law measures on forced technology transfers and other issues. neither ambassador lighthizer or secretary mnuchin would detail the issues but we are told it is a series of major issues. that is not a good sign in terms of these negotiations, if just a few hours ago, the markets in the u.s. were taking -- were

hoping this was just a negotiating tactic. i think the mood clearly has changed in the last couple of hours and we are looking at a much harder road back to an agreement. is this a much political calculation by the president in order to satisfy the china hawks? shawn: that is a good question. the china hawks in washington are not singly within the administration. they are also on the democratic side. chuck schumer, the senate minority leader, was backing the president in terms of his tough stance on china, urging him to hang tough. that gets at the political calculus for the president as he seeks reelection in 2020. the worst thing he could do is appear weak on china in any way. a weak deal would open him up to criticism not just from china hawks, but also from democrats, that he reneged on a big promise. there are a lot of people in the u.s., including farmers and

businesses that have suffered as a result of these tariffs, who really want these trade wars to end. how that comes out in the wash will be hard to see until we get to the ballot box of november of next year. shery: shawn donnan in washington. those trade news causing stocksrs who sold after reducing losses in the regular-season. su keenan has more. the losses were pretty much focused on those sectors that could get hit by the trade war. su: it is almost deja vu all over again. we saw a lot of the stocks selloff on the threat. one analyst said as we saw stocks climb out, the trade war is nothing new. it has been hanging over us. now the white house comes out with news of the threat and makes it official that tariffs will rise. we are seeing everything falloff again. you will notice the futures on there, they are negative.

the materials were lower in the regular session. the weakest area perhaps of the trade concerns. let's take a look at the bloomberg, if you will, because commodities also taking a hit in this latest session, particularly the grains and soft commodities. corn, soybeans. that was one of the weakest areas. let's take a look at some of the biggest movers in stocks. you will notice apple and a lot , we arehip stocks seeing them slightly lower in extended hours, along with caterpillar, deer. some of the big manufacturers in the bull's-eye of the tariffs. lower on the news of a ridesharing strike that would affect uber and lyft riders. that is ahead of the earnings report on tuesday. one of these rare ipo's heavily hyped but under port --

underperforming so the earnings will be critical. and anadarko, which is receiving occidental.bid from they are very much going to be in the news as we wait for some indication of whether they accept the bid. anadarko hasu, its own thing going on but the broader oil picture has been impacted by this trade development. tell us more about that. su: let's go to the five-day. you can see how oil have fallen. futures on oil this time yesterday were down from 2%. we saw it clawback up on news that the u.s. is going to send ships into the mid east, recovered from earlier declines. there are real crosscurrents here. you look at the bigger picture. trying to talk down the price of oil. again, the trade concerns weigh

heavily on price. so, it is expected to have another wild ride in this tuesday session. paul: su keenan, thank you very much for updating us on the markets. let's get a look at the first word news with jessica summers. issica: the federal reserve stepping up its warning about corporate debt. it says the market expanded 20% last year and lending standards are continuing to slide. the fed's by annual stability report says the biggest existing debt are also the ones taking on the riskiest loans. it adds protections lenders include in case borrowers default are continuing to erode. in indonesia, growth slowed in the first quarter as the global slowdown hit exports. gdp rose a fraction over 5% in the march period from the year-earlier, lower than the 5.2% estimate in the bloomberg survey. growth in southeast asia's biggest economy has been around

5% since 2015, well below the 7% target. the pilot of the plane that caught fire in moscow says the jet was still happy with fuel as it came down. the crew followed procedures for lending but did not dump fuel. the pilot says he does not know why the plane hit the runway so hard. initial investigations suggest the jet lost communication when it was hit by lightning after takeoff. a new united nations report says nature is in more danger now than at any time in human history. with extinction looming for at least one million times of animals and plants. species are being lost at a rate hundreds of times faster than in the past. human behavior a major cause. it also says many speeches faced extension within decade both on land and in the ocean. day, onews 24 hours a air and on tictoc on twitter,

powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. paul: thanks very much. for a ahead, the bets on rate cut when the rba meets today. shane oliver will tell us why he made that call back in december. shery: next, we speak about navigating the latest resurgence in trade tensions. the former u.s. ambassador to china joins us. this is bloomberg. ♪

paul: we are counting down to the sydney open on a crisp and cool autumn tuesday. futures higher by 2/10 of 1%. those are due to reset 15 minutes before the open, so we will keep an eye on those in the context of a slightly lower u.s. close.

i'm paul allen in sydney. shery: i'm shery ahn in new york. you are watching daybreak australia. paul: trade tensions and market nerves top the agenda today. washington confirming it will raise new tariffs on china on friday amid frustration that the pace of negotiations. robert lighthizer spoke even as the chinese team prepares to fly to the u.s. for the next round of talks. to assess the implications, max baucus, former u.s. ambassador to china and a member of the senate for 36 years as well. ambassador, in your experience with china, how can you see a way forward on this trade deal considering treasury secretary steven mnuchin said it was not a percent done? reluctance by the chinese on intellectual property. mr. baucus: i'm reminded by a chinese saying that all

negotiations last into darkness. both sides are prostrate -- posturing. the president is posturing, i think, with his threats of tariffs. the chinese may not come after all. both countries definitely need an agreement. trump does because he wants the stock market to go up, not done. xi wants to look strong in china and show he is the man. there will be a deal. i think frankly, it is interesting that president trump and secretary mnuchin and robert lighthizer really do not have a lot of experience in negotiating with the chinese. they are kind of green about all of this, right? my experience is with china, a lot of talk, sometimes they will backtrack, sometimes not. it is the way it is. you have to be patient, be patient, positive. stick with it, and after a while, you will get a deal but you will see a lot of moving around.

there is no deal until it is all over. it is not over until it is all over. we are getting close because both countries have to have an agreement. paul: if patience is one of the watch words, what he hopes of getting something ironed out by friday? mr. baucus: that is a good question. they might not actually. friday is a few days from now, you may never know. the hope is, and i hope there is a higher probability that there will not go up because they will reach some kind of deal. or, as the case last time, they will postpone the increase of tariffs for a few more days, maybe a week or two before they wrap it up. that is what i think will happen. shery: go ahead. mr. baucus: no, that's fine. shery: if we do see those tariffs go up, we are going to see over on u.s. tariffs go up. this chart showing the levels on chinese goods already 25% on $50

billion of goods. 10% to 25% on $200 billion. not to mention the president mentioned additional tariffs, some $325 billion. what that means is overall, u.s. tariff levels will go up. that will hurt consumers and prices will go up. how much does the president have in terms of political capital and support to go ahead with this posturing? mr. baucus: i think that initially, he's got some support because a lot of americans say hit china hard. once those increase in tariffs start to kick in which will be three weeks or a month in, then it will not be a very popular move. on the other hand, china will have to figure out what it does it america puts those tariffs in place. china does not have the maneuver room. having said that, china is very clever.

they will figure out all kinds of ways to retaliate. some of them not so apparent. some of them, a little bit questionable, but they will find a way. the main thing is to be logical and reasonable about this that we will not see a big increase in tariffs. maybe a few days extension because both countries need to reach some kind of deal. having said that, that is only the beginning. if we get a trade deal, that is not going to be the end of tensions between the u.s. and china. i think it will increase. trade is easy. the hard stuff is huawei, zte, national security. shery: all of those issues, and enforcing the trade deal, right? we are now seeing the u.s. economy showing really strong numbers. jobs data really spectacular. we have seen the stock market rally. is the president right in his calculations that if you are going to tackle china's unfair trade practices, the time is now? mr. baucus: i think he thinks he is in a position of strength. the u.s. economy is strong in

significant respect because congress passed this huge tax cut that was not paid for. $1.43 trillion over 10 years not paid for. congress passed a big budget spending bill, not paid for. a lot of stimulus in the american economy today. the president said he would cut back on a lot of regulations. after a while, that will peter out, at least the tax-cut. today, yeah, he thinks he is pretty strong. the stock market is up. we saw the stock market did almost 500 points if you hours ago. he cares a lot about the market. shery: really quickly, if the president cannot get a deal signed with china before 2020 reelection bid, is that at risk? will he suffered then? mr. baucus: a huge risk depending on what the tariff levels are. if the current tariff levels

increase to 25% as president trump indicates, maybe on top of that, that is going to be devastating from my judgment to him. paul: all right, thank you very much, max baucus, former u.s. ambassador to china, for joining us. you can get a roundup of the stories you need to know in today's edition of daybreak. bloomberg subscribers can go on their terminals. also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get news on the industries and assets you care about. this is bloomberg. ♪

paul: i am paul allen in sydney. shery: i am shery ahn in new york. let's get a quick check of the latest business flash headlines. would have been told anadarko's is likely to decide on occidental's bid better than chevron. occidental raised the cash

portion of its offer and pledged to pay a $1 billion breakup fee that anadarko would owe chevron if it switches allegiance. anadarko became the best performer in the s&p 500. paul: kraft heinz trying to clean up a procurement mess and will restate earnings for 2016, 2017 and part of last year. it says it found evidence of employee misconduct in procurement which raised the costs of goods sold and the impact on earnings should be less than 2%. warren buffett says he remains confident. shery: apple will unveil a range of new apps and upgrades at the annual software congress next month. it continues the dance between wooing app makers and competing against its own features. maps, reminders, messages and new apps for the apple watch

that makes it more independent from the iphone. you can add one more red flag to the global central bank. the fed is stepping up its warnings about the perils of risky corporate debt. our global economics and policy editor kathleen hays is here with the details. what exactly did they say? kathleen: this is a level of risk the federal reserve has seen rising when it looks like corporate jet, particularly the highly leveraged kind of corporate debt that is out there. this is part of their semiannual financial stability report. they gave a similar warning last year, but it did not sound quite like this. corporate debt, let's jump into the bloomberg library to give you a picture of what the increase looks like since the end of 2008 when it was at 46% of gdp. it's up at more than 50% of gdp. in the report, some of the highlights they have pointed out. businesses with the biggest debt

loads are now the ones taking on the riskiest loans. that is not reassuring. they note the protection that lenders give borrowers against default are starting to erode. credit standards for new leverage loans curated -- deteriorated further over the past six months. a quote from the fed stability report. let's bring up that quote. "the historically high level of business debt and the recent concentration of debt growth among the riskiest firms could pose a risk to those firms and potentially their creditors." doesn't this feel a little bit like the financial crisis? you can see what they are tried to get us to think about. they have been warning since last year on these weaker standards of leverage lending. it is clearly a concern. paul: in a couple of hours, we will be going to interviewing the dallas fed president. he already raised that red flag on corporate debt way back in may. kathleen: it was a special essay that rob kaplan wrote.

let's remember, he worked on wall street for many years. he knows what it is like to be in investor and look at these kind of things as moneymakers or money losers. he noted nonfinancial corporate debt is higher than the peak of 2008. the chart i just showed you. his concern is not so much it is tipping is over now. it is a question that there is an economic downturn, the risks around it could amplify the downturn. things could spillover. he also flagged u.s. corporate debt is the reason for the fed to pause on its rate hikes back in may. we will have a lot of interesting things to talk about when he joins us in a couple of hours. paul: all right, kathleen hays in new york. thank you for joining us. coming up, we are going to be hearing from a market strategist who says the latest china u.s. trade is not changing his

investment plans. we will be asking why, coming up next. this is bloomberg. ♪

paul: 8:30 a.m. in sydney. market open 90 minutes away. currently, futures pointing higher. a live question as to whether or not those futures have priced in the latest developments we have had on the trade front out of the u.s. we will keep an eye on those. they do reset before the market open. i'm paul allen in sydney. shery: i'm shery ahn in new york where it is 6:30 p.m. let's get the first word news with jessica summers. jessica: the u.s. will raise tariffs on chinese goods on friday, accusing beijing of pack peddling on commitments it made on negotiations. the trade talks will continue with the chinese delegation still set to visit washington on

thursday and friday. trade representative robert lighthizer told reporters that significant issues remain unresolved, including whether tariffs will remain in place. treasury secretary steven mnuchin is refusing the latest attempt to obtain six years of president trump's personal tax return. writing to the house ways and means chairman, these are the democrats request "lacks the did amid legislative purpose, and therefore not authorizing to disclose the requested documents." the democrats could pursue more forceful measures such as a subpoena. the lira tumbled as turkey's top electoral body nullified the local election in istanbul and ordered a revote. it is a victory for president receivewho refused to that his candidate lost in the city where he built his political career. the lira fell more than 3%, leading to emerging-market losses and reaching the lowest

level in seven months. iran is signaling it may scale back some of its commitments under the 2015 nuclear deal in response to growing pressure from the u.s. a senior government official says tehran does not plan to abandon the accord as president trump has, but may make minor adjustments. the official adds eu leaders have been informed and president rouhani will make the announcement on wednesday. and, former goldman sachs roger in has been placed under house arrest ahead of his trial over a scandal to writing -- surrounding the malaysian investment fund. he arrived in new york monday morning and appeared in federal court the same day. he pled not guilty to charges he broke american anti-bribery laws and inspired to launder money that was embezzled from the fund. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700

journalists and analysts. this is bloomberg. shery: thank you. we are seeing japan and south korea returning from holiday. let's get a market check with sophie in hong kong. sophie: asian stocks may regain some footing after monday's selloff as trade talks are set to continue. nikkei futures in chicago are extending as japanese traders return to their debts. we are watching for tech shares to play catch-up and for autos to move after to go to's u.s. auto sales missed estimates. we will have plenty of earnings to react to, including sony. checking on adr. we do have the stock up more than nearly 10%. sony is back in the black, but it did cut its profit forecast after the phone business posted a quarterly loss and ps4 sales

slowing. a quick check on currencies this morning. the yen is holding gains. if trade talks do not break down in d.c. the offshore yuan is eying .680. the aussie dollar is staying underwater ahead of the rba decision. recovering some ground on monday. shery: thank you so much. one thing that we know is uncertainty has returned to the markets with the u.s. trade representative confirming the u.s. will increase tariffs on china this week. treasury secretary steve mnuchin saying a deal was 90% done, but then talks of a big change in direction. to put all of this in context, all of he -- oliver, chief asset strategist. great to have you with us. we are seeing u.s. futures falling after the comments from both ambassador lighthizer and secretary mnuchin but during the regular session, we saw much of

the losses being recovered across the session. oliver: the initial fear that talks had completely broken down. that china was not going to come to the u.s. on wednesday to continue talks. that was kind of the worst case scenario and you saw the sharp move down at the open. as more news came out, you saw this is probably more positioning and specifically positioning by president trump towards his base. reality is setting in that they will get -- not get the master deal they are hoping for and a lot of work to be done. overreaction an the moment the news broke. we think there will be a deal. it will be a very mediocre deal, but one that both sides can live with. that is where we see this playing out. it has not really impacted our thesis in terms of investing. shery: if the tariffs do go up from 10% to 25% on $200 billion

of chinese goods -- we are talking about the deadline being friday -- how does that affect the earnings picture? oliver: it will have an impact. from a u.s. investors perspective, the timing is pretty good in the sense that the u.s. economy is growing at a stronger case than most people thought just if you weeks ago. a 50,oyment is very low, 60 year low. if calculations are correct and this lasts a long time and a half percent it on gdp, right now, the economy can take that hit. on the chinese side, china is really stimulating and that is impacting growth nicely. there again, it could help, but the earnings picture becomes murky. our best bet is these tariffs will be implement it on friday but then reversed relatively quickly. to us, this is pandering to the base that trump needs to get riled up as we go into the

election cycle. paul: oliver, what was the comparative reaction on the equities market tell us? we had chinese stocks suffering one of the worst days in about three years. the u.s., after an initial shock, a reasonable recovery. the russell 2000 and it higher. does this tell us anything about which country is better equipped? oliver: as everybody has been saying, no one wins in a trade war. but on a relative basis, it hurts china much more than it hurts the u.s., especially given what growth expectations are. it is not surprising to see chinese and asian stocks in general getting beat up worst in the u.s. on a much broader basis, emerging markets is effectively a value play and emerging-market in chinese stocks are value compared to u.s. stocks. the problem is value is out of

favor right now and you don't have the same amount of dollars chasing it and you will have disproportionate selloffs and there is that news -- bad news. paul: what sort of investment strategy do you favor? the ago for some of the small caps? oliver: we continue to favor large-cap u.s. stocks. we want to buy high-quality stocks. we want to take names that are both taking market share from -- also improving margins and have a solid growth outlook. the bottom line is the world is slowing somewhat. it has done better in the first quarter than some expected, but there are still some cloudy skies ahead. owning that quality is very important. we are sticking to those growth names and category killers, if you wish. shery: we are starting to see despite having chinese stimulus and helping the chinese economy,

it does not translate to other economies being helped as well, potential because of the nature has changed. what does that say for the rest of the world and markets and the rest of the world that will not gain as much as before from chinese help? oliver: that is the problem around the world. you have seen on a broader basis, you have seen trade barriers the last 25 years come down across the world and now coming back up. you have china that is trying to reengineer its economy. you have trade barriers going up. in have value emerging-market being out of favor and political trouble spots. i think if you are going to be in emerging-market investor, you have to be willing to take a lot of volatility and be very patient. i don't think this cycle is anywhere near done. we continue to underweight emerging markets. we continue to underweight china because i would say china

specifically because it is not an emerging market anymore. i think it is going to be difficult to make money, or to outperform there. shery: we continue to see the slowdown globally, including in europe. data has not been to positive. other any good valuations? oliver: europe -- large-cap european equities, we think are very attractively valued. there are some great names out there that pay a solid dividend. almost 100 basis above their u.s. counterparts. that is attractive. keeping in mind that europe is challenging. allocation is 50% to european equities as opposed to being overweight. we think in these times right now, given what is happening with currencies, commodities, and where interest rates are globally, the u.s. continues to be the best place to be. we don't expect a repeat of the

first quarter. shery: always great having you with us. oliver pursche. we have breaking news at the moment.it is a deal we were expecting for some time. the board of anadarko saying the proposal from occidental is superior to that from chevron. we're expecting this decision today as we had heard occidental's takeover bid might be favored by anadarko. occidental has raised the offer for $76 per share. they have also offered a cash portion which has been raised. the eliminated the need for a shareholder vote. also, occidental is willing to pay the $1 billion breakup fee from chevron. anadarko's board coming out and saying the occidental offer is superior. they are intending to terminate the chevron merger. of course, we still have about

four days to go to hear from chevron if they make any move within the next four days. -- anadarkoidental liking occidental's offer of $76 per share, 22% stop. we will have much more coming up on this story and more. anadarko right now saying they will pay chevron the $1 billion fee if it enters into occidental. coming up, to cut or not to cut. global easing could start with the rba decision in the coming hours. emp capital shane oliver tells us why ozzie rates could go to the lowest on record. this is bloomberg. ♪

shery: i am shery and in new york. paul: i am paul allen in sydney. you are watching daybreak

australia. trading in japan reopens after the longest market holiday in more than 70 years. bloomberg's across asset asia editor is here. it has been fairly ugly on the markets. japan coming back in the middle of all of this. what can we expect? >> all the development in the past 24 hours, from yesterday having that big selloff, and you losses as markets started to look at these negotiations on trade are somehow going to be resolved. and then we have the comments this morning. in the middle of that, the japan market has not traded since april 26 and has reached a lot of what we saw last week, including the fed meeting. i think what is going on with trade will be the main thing and we will probably see that under pressure. the nikkei 225 futures in deep selloff yesterday. that is going to be the main focus today.

we also have the very big selloff in china yesterday. yeah, japanese markets probably coming back from a golden week to what is now going -- not going to be a very golden day for them. shery: especially as we have a data heavy week. policy decision heavy week in asia. the rba rate decision this morning. chances are they could cut. andreea: the rba could become the first developed world bank to cut interest rates. the odds to that have increased since the inflation report. at the same time, the market remains fairly split. we do have an election coming up in less than two weeks. that could play into their thinking. one thing is for certain, we should keep an eye on the aussie dollar and the volatility has increased on the prospect of perhaps the first rate movement since 2016.

also, we have central-bank meetings in other parts. new zealand tomorrow. we could see a rate cut there. in developing markets, malaysia is meeting today. they could potentially consider a rate cut. philippines later this week, where a rate cut is on the card. thank you very much for joining us. you can check out our library and some of the charts we have been talking about on the bloomberg terminal. let's stay with the rba. late last year, our next guest was the first major economist to start forecasting rate cuts and he says today's decision will be a very, very close call. shane oliver is amp capital's chief economist. i cannot think of anyone better to have on today because you were the first to predict a likely easing cycle. is today the day?

shane: i think it is. as you just said, it is a very close call. we are in the midst of an election campaign. let's wait and see how the election pans out. what sort of fiscal stimulus we will get ultimately. we have not seen much of a rise in unemployment and they put a lot of weight on that. the flipside is since the reserve bank last reviewed their inflation forecasts in february, we are seeing weaker growth numbers. probably have to downgrade their growth. most important, we saw some much weaker than expected inflation numbers, particular at an underlying level. another reason to downgrade. the longer they leave this where inflation drags below the target zone, the greater the risk they will lose credibility. it is a very close call. paul: let's talk about the inflation number. we have a chart that illustrates that. the first quarter inflation read was very weak. have thatl bank

mandate. manage inflation, manage employment. employment is in great shape so what does the rba give more weight to? shane: that is the big question. move would be more way towards the employment stats. they have been strong. the latest number was 5%. still down from where it was the last few years. they will say that is a good sign and will help support the economy. i think you have to look at other things. waiting until unemployment rises could be waiting too late. unemployment in australia has been a lagging indicator. often up to six months. if you wait until unemployment rises, you already have weak signals in terms of overall growth and inflation and you could be leading to a steeper

downturn. shery: elections are around the corner. why can't the rba just wait to see who wins and what we are going to see in terms of fiscal stimulus? shane: that is a good argument. i think it is one the reserve bank will be conscious of. they have done that in the past if they feel the need to do so. they did that in the 2013 federal election campaign and also in 2007. the question is is there a sense of urgency this time around? i think there probably will the, but -- be, but they could conclude it is not. that is fair enough. of course, once the election is out of the way, they will get a bit of a handle on the size of any fiscal stimulus we are likely to see over the next six months. that might be also something they can afford to wait for. shery: when it comes to economic data out of australia, we have

seen a surprise to the upside. this chart showing that australia's data surprise index has been surprising to the outside the line in blue as opposed to the u.s. where it has been a little disappointed. to the rba wait and see if this rough patch in growth is a temporary trend? shane: it could, but you have to bear in mind that growth in australia is running below the level of the u.s. the u.s. has a much tighter labor market. 3.6% unemployment. the under employed is 7.3%. those same numbers for ross trillion are 5%. -- for australia are 5%. it is putting more downward pressure on the inflation numbers. i think this puts more pressure on the reserve bank of australia than the fed in the u.s. at present. paul: that has been weighing on wage growth as well.

in terms of timing, if we set the data aside and look at the way the rba behaves, typically, they really telegraph that something is coming. first, have a really done that this time? on friday, a statement on monetary policy. isn't that the perfect stage to set the scene? shane: that is another argument to wait. they have not formally moved to an easy bias. a slight edging in that direction and more talks of rate hikes, but they have not said it is likely the next move will be a cut. they have not actually said that. the lessback in 2015, formal statement of the end of 2014 was it stays on hold for stability. they then cut in february of

2015. economists said that was not in easing bias. i think -- yes, there is an argument. there is a counter argument to all of this and that is if they don't ease today and revise the inflation forecast on friday, that might look a little jarring because we have are prized down. they have not done anything. secondly, it could save the aussie dollar rise because there are a lot of shorts that have been built up in the australian dollar against the u.s. dollar. if you don't get the easing, the aussie dollar could have a bit of a bounce which could come at a bad time for australia. shery: shane oliver, amp capital chief economist. if you missed part of that conversation, you can always find it on the bloomberg. you can watch past interviews and watch us live. dive into any of the securities

or bloomberg functions we talk about. become part of the conversation by sending us instant messages during our show. check it out. this is bloomberg. ♪

shery: i am shery ahn in new york. sydney am paul allen in and you are watching daybreak australia. that's get a quick check of the latest business flash headlines. missing fourth-quarter profit next after setting aside more money than anticipated. debt income of $140 million in march compared to $147 million a year earlier and less than half of the average of estimates compiled by bloomberg. acceleratingn since the new ceo. shery: china starbucks aims to raise more than half $1 billion in an ipo in new york.

force to sell 30 million $16 a piece which would be the six largest share sale on u.s. exchanges so far this year. luckin's spending heavily to the starbucks at the top copy company in china. it has almost 2500 outlets across the mainland. paul: a chinese livestream are has put his ipo plans on hold following president trump's threats to raise tariffs. the company planned to launch on monday but sources say it may postpone by at least a week. ouyu is backed by tencent and aimed to raise $500 billion and start trading by may 16. shery: plenty more ahead. wells fargo asset management strategist brian jacobson sees the biggest opportunities. down more than 15% since the january high. we will find out where he is recommending clients put their

money next. paul: that is it from daybreak australia. we will have all the action in daybreak asia coming up next. stay with us. this is bloomberg. ♪

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>> good morning. we are under an hour away from the australian market open. shery: i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong. welcome to "daybreak asia." paul: tension rises as washington confirms new trade tariffs this week. china has reneged on some of its commitments, say the u.s. behind the smiles, big differences remain. china says ty