paul: welcome to daybreak australia. i'm paul allen at the asia-pacific city summit. shery: i'm shery ahn in new york. sophie: i'm sophie kamaruddin in hong kong. we are counting down asia's major market open. ♪ paul: here are the top stories we are covering in the next hour. wall street slides as investors wait the fed's promise. apple downgraded. tech stocks will be in focus later as the japan-korea spat troubles on.

president moon says they may be forced to retaliate. deutsche bank swings the ax from asia to america, the savings latest turnaround plan fails to impress the market. shery: later in bloomberg technology global link, samsung being stung by japan's new restrictions on tech. saysll be joined who problems in the electronic industry goes much deeper. let's get you started on the quick check of the monday close in the u.s. the s&p 500 fell for the second consecutive session. health and tech stocks as some of the big decliners. apple falling more than 2% on the downgrade, but german manufacturer besf falling after they cut their outlook. overall, we felt he lingering impact of the strong u.s. jobs data that we got last week. that really clouding the outlook for fed rate cuts. investors pretty much focused on what chair powell will stay in

congress later this week. meantime, we also saw a big gain for energy stocks. wti gaining ground on rising geopolitical tensions. u.s. futures not doing much at the moment. let's see how we are setting up or asia. sophie: some lingering caution on this side of the globe with kiwi shares extending monday's drop. hit hard and the benchmark looks set to rebound a touch after sliding 2.2% yesterday, with investors and companies and policymakers accepting the ramifications. drag on samsung shares. the stock lost about $13 billion in money cap that month -- this month. negate futures in chicago are looking lower. the yen is looking at the three-day the client. aussie futures hinting at a slight recovery after the asx 200 lost. the central bank lineup, malaysia looking like a contender but most candidates expect no change at today's

decision. paul. the main event, paul: let's get the first word news now. >> thanks. an independent think tank says there is a significant risk the u.s. will breach its debt ceiling in september. the bypass and policy center sees october over november as a likely date due to falling corporate tax revenue. the treasury department has been using so-called extraordinary measures since march 2 when the u.s. hit its $22 trillion limit on borrowing. iran says it is already enriched uranium at levels agreed -- beyond levels agreed in the nuclear deal and may push the process as high as 20%. the enrichment has been confirmed and tehran says it will scale back compliance with the nuclear deal every 60 days unless european powers find ways to offset u.s. sentients. enriched 90% to

reach nuclear weapons. signs of recovery as offers a discount. deliveries of sedans, suv's and multipurpose vehicles rose almost 5% in june from a year earlier, reaching 1.8 million cars. that the first decrease in sales since last year. demand for cars has been hit by the trade war, domestic slowdown and strict emissions laws. signs of a recovery in taiwan. exports surprisingly robust. the first increase since october. overseas shipments climbed .5% as demand from the u.s. and south korea made up for falling deliveries to china. the median estimate is a decline of 4.7%. only one of the economists forecast a rise. global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and

analysts in more than 120 countries. this is bloomberg. shery: thank you. deutsche bank shares tumbled in new york following similar losses in frankfurt. the ceo radical restructuring plans fell flat. from sydney to london to new seen many employees leaving with a personal belongings and a white envelope. that's bring in our finance reporter. where are the cuts going to be the deepest? >> it is not where. we know there are 18,000 potential cuts. what is interesting is we have heard that equity sales and trading are going to be cut but that only accounts for thousands of jobs. it does not account for the full figure so we are still waiting to hear where these cuts are really going to be precisely located. it is really interesting because this is in the context of a broader job cut over the last 10 years since the crisis.

where could these former employees and up? -- end up? lananh: this is also another very tricky question. we have seen hundreds of thousands of people leave the financial industry since the financial crisis. we have heard talk about some people having skills infant tech being able to pick up their skills from banking and move into new industries. but across the board, the financial industry has gone through this way above automation where the reduction in staff has been huge across the industry. you thing about goldman sachs ceo saying his equity staff used to be 500 people and now has been cut down to three in terms of the functions being performed. it is really difficult to see where all of these 18,000 staff are going to end up. the writingurse, has been on the wall in asia as well. we have seen people in hong kong in the last week starting to pack up. do we know how asia will be

affected? lananh: this is interesting because what we are hearing from asia is the staff there do not hear a lot of communication and they have been unhappy about the communication from germany all the way to asia. it's almost as if the further they are, the less clear it is. what we have heard is that people have been packing up their desks in asia and new york over the last few weeks. some departures have come and attendance is down across some of these offices as people look to either move on or plan their next move. another interesting thing is in the real estate market, the real estate agents are certain to come out and see how they can least the space that is being used by deutsche bank. paul: all right, finance reporter, lananh nguyen, thank you for joining us. still to come, susquehanna financials breaks down the ban onof japan's export the global tech sector. shery: josh zielinski sees a

rate cut in the next six months and is bullish on the bull market. we will speak to him when we come back. this is bloomberg. ♪

paul: we are counting down to the citi open -- sydney open. futures looking kind of flat right now. i'm paul allen in brisbane. shery: i'm shery ahn in new york. latest u.s.into the drop in stocks, it appears investors are taking a cautious approach ahead of a week full of central bank activity. su keenan joins us with more. we have the fed chair jay powell speaking in congress, not to mention we are reeling from the strong u.s. labor data as we greetedsu: it was blowout data -- data we got last week. su: it was blowout data affecting the markets. one strategist said the market

will be very disappointed if the cuts don't go the way that is planned. let's take a look at the market snapshot. we did see the dollar stronger. bonds and the gold retreating. of course, you notice financials were a big area, both financial and health care stocks led the way lower. the deutsche bank news we heard about weighed heavily on stocks for banks as well as the interest rate picture. the futures almost virtually flat. many were saying it was almost an uneventful monday. we typically see this after a long holiday weekend. many professionals take the entire week off. it will be a wait-and-see week as we count down jay powell's testimony before congress. takeake a looks -- let's a look at the big movers. the german chemical maker really hammered a lot of the chemical stocks as it slashed its sales and profit forecast. the world's biggest chemical maker and it is succumbing to a

weakening economic automotive market, a deepening economic slowdown for the robo economy as a whole. and definitely fallout from the china-u.s. traits about -- trade spout. we also saw apple in the spotlight, down more than 2%. what is amazing is we had a fit analyst so far not putting -- fifth analyst so far now putting a sell. we have not seen this since 1987, this many analysts negative on apple. managed to bypass the restrictions on huawei. take a look at the financials, deutsche bank, you know the story, the cutbacks. the ny mellon, goldman sachs, some say are in concerns about growth for that industry. that is the latest on the monday trade. shery: thank you so much for that with the latest on the markets.

joining us right now is jalinski advisory group president josh jalinski. great to have you with us. we continue to see stock market losses given the lingering effects of the strong u.s. labor data we had last week. is it possible to see u.s. equities run higher? we have had some softer data to put out on the goldilocks scenario with the fed. josh: i think definitely, i anticipate the bull market to resume its run. i think we will have some soft lift in the summer, people taking off. may be sell in july and maybe go away. long-term, i don't see this ending the bull market rally. shery: what about the earnings season? what are you expecting and could we see more volatility, macro down moves, or bottom up given that it will be about individual names? josh: i think it will be about individual names. if you look at the big companies -- google dominant in search. facebook dominant in social media.

sony companies have consolidated. even with the boeing airbus, only two big names. so few names in these multinational spaces. i really find that the earnings season -- you might see some weakness with the china trade war but i think the bull market resumes. see the bull market resuming. you sound reasonably optimistic on earnings. what would stop the bull market? an escalation of the trade war or fed policy? josh: i think i fed policy error is the biggest risk right now. i also think political risk is also a big risk, but the u.s.-china deal has to happen going into 2020. the president wants it. it will get done. china knows they sort of have a leverage point there. i think the u.s.-china trade war is rattling but much ado about nothing. maybe that will be resume --

resolved by the end of the year. paul: so, to that end, how important is this jay powell testimony this week? ashave the macro picture, well with president trump again voicing his displeasure with the fed. it's all colliding. what are you expecting? josh: i'm expecting within the next six months, you might see a quarter-point rate cut. i think that needs to happen. whether it happens by the end of this month or the end of this year, i don't think it really matters. long-term, we are fine. we are talking about preparing for retirement. the newb ook called the retirement reject -- reality check. focus on tuning up the market noise and focus on protecting your money, saving for the future and growing long-term. shery: we have not yet seen a big impact from the trade tensions of the tariff wars. we are seeing manufacturing jobs

increasing 17,000 last week. what will be the impact on the individual sectors? semiconductor stuck in the middle, today losing ground. we are not just talking about this industry being hit by tensions with huawei. we are also talking about the japan-south korea spat. josh: i think we all need semiconductors. if you look at semiconductor broad category, you have one or two major players. intel is so dominant in this space, i think whatever there is short-term. the huawei thing is just market noise. i don't see it derailing the economy. the sectors i would be more worried about his drug prices, pharmaceuticals, with some of the price control. shery: right. those areas as well. whether it is huawei and the trumpet administration stepping in, in health care, we could see more regulations. josh: apple, so many of these

companies are dependent on huawei. there is this ecosystem of interdependence. i think, yes, we are going to keep huawei out of our intelligence community. but i think it is too involved in everything else. shery: you already saw apple getting downgraded today and taking a hit, down more than 2%. could you see these escalating and impacting apple? ish: my worries about apple they have not been product innovators. year ago.he apple x a i have no desire to buy another phone. apple is sort of like microsoft in the early 2000. they were so dominant for so long. i don't think that is macroeconomic. i think apple needs to innovate and they are not innovating right now. paul: jalinski advisory group president josh jalinski, thank you for joining us. be sure to check out josh's latest book. you can get a roundup of the

stories you need to know to get your day going in today's edition of daybreak. you can go on your terminals. it is also available on mobile on the bloomberg anywhere app. customize the settings so you only get news on the industries and assets you care about. this is bloomberg. ♪

shery: this is bloomberg technology global link. i'm shery ahn in new york, alongside emily chang in san francisco. let's take a look at the top global tech stories of the day. emily: apple fell more than 2% after being downgraded to sell. the move brings a number of analysts up to five along with 57 ratings. the highest number since at least 1997. apple's decline helped push down the s&p 500 id index which was among the worst performing

secotrs. nintendo is moving some of its switch production from china to vietnam. it may start work within the next few months. nintendo's target of 18 million switch sales this year will not be affected. nintendo currently makes all of its consoles in china. chinese grocery delivery startup is seeking new funds and affect the valuation of $3 billion. it plans to raise up to $500 million and has some high-profile backers including tencent and goldman sachs. the five-year-old company says it reached positive cash flow of the end of last year. those are the top global tech stories we are watching. shery: south korea is sending a potential retaliation against japan after a chip spat rumbles on. the vicious cycle of measures and countermeasures will not be

ideal for both countries. but if south korean companies begin experiencing actual damage, the government will have no choice but to respond as necessary. i hope it does not come to that. we urge japan to withdraw its measures. shery: japan curbed semiconductor components to korea has reinvigorated tensions and could have far-reaching implications for the supply chain. mehdi, a senior analyst at susquehanna financial group, joins us now from san francisco. great to have you with us. we have been talking about a potential bottoming out for the semiconductor industry. how big of an impact with the latest of element have on the sector? mehdi: i think it has more of an impact on the psychology. if you think about supply and demand for semiconductor industry, we have been in a multi-quarter inventory correction. although we are seeing some bottoming in that inventory

cycle, or inventory correction cycle, there is a lack of visibility in market demand. that context in the supply chain, what i see going on between japan and korea is a reflection of manufacturers trying to position themselves for the next cycle. there is not really much of a detail but we have seen these tensions in the past, especially we are at the bottom of the cycle. we just have to wait and see what the details are with any potential ban. one thing you want to keep in mind, japan as a whole needs the components korea makes. if they cut back on supply of raw materials, it could hurt japan more than it hurts korea. shery: this could keep escalating. but psychology aside, people telling bloomberg that right now samsung has a months worth of supply of these products that

they need from japan. could there be materials impact on samsung electronics who depend on these japanese suppliers? mehdi: i think we have to be careful with some of the comments about capturing the headlines. for example, companies like micron, western digital, they would certainly benefit from a ban on supply of raw materials to korea. and perhaps, they will be highlighting some of these benefits to non-korean competitors of samsung. i certainly doubt if samsung has reduced inventory to only one month, samsung is a really sophisticated conglomerate. i would think that i have actually more than one quarter of inventory. plus, these negotiations are still going. there is not much detail. what you see capturing the

headlines, a lot of speculation. we have not seen much details coming out of japan. emily: samsung reported disappointing results last week ended clearly is suffering from broader macro economic slowdown and perhaps what is going on between the u.s. and china. do you have a sense of why this is happening now and what it means for samsung specifically, let's say, in the next quarter? mehdi: i think what samsung highlighted in the preliminary results last thursday is something that is impacting more so the semiconductor manufacturers, including micron, western digital, hynix. seasonalitymuch a into the second half. six month ago, most of the semiconductor companies were highlighted in a pickup of july 1. recovery, there is no as a highlighted earlier, may

the inventory correction is coming to an end. there is no pickup in end market demand and this is impacting samsung and samsung's competitors. perhaps this is why japan is trying to exert their influence and trying to extract more economics, realizing the suppliers have no visibility on an market demand. if japan can capitalize on this situation, maybe it would work out better. we just don't know when the cycle will turn around anyway. emily: quickly, are there non-south korean ship companies that can benefit? mehdi: hypothetically, yes. whoon and western digital are competitors would benefit on the memory side. on the display side, there are

taiwanese display manufacturers that would benefit. also is one of the manufacturers of other components, so yes, there would be a few competitors that would benefit. as i said earlier, japan needs componentsisplay from korea. a big buyer of display from samsung and they will eventually hurt themselves. shery: thank you for your time today. that is bloomberg technology global link. do not miss uber technology at 7 a.m. in sydney, 5:00 a.m. in hong kong at 5 p.m. in new york up next, an interview with one of the most powerful republicans in u.s. military affairs, congressman matt thornberry discusses iran and the prospect of more talks with north korea.

this is bloomberg. ♪

paul: i'm paul allen in brisbane. shery: i'm shery ahn in new york. let's get the first word news. >> thanks. deutsche bank symbols in frankfurt and new york as the latest turnaround plan fell flat with the market. shares in germany closed down more than 5%. raising initial gains sparked by news of 18,000 global job losses. analysts say the ceo profit goals are to ambitions, pointing to concerns the bank is focusing on a competitive home market and low-margin financing. the irish prime minister says eu leaders would feel a great deal of reluctance about giving the

u.k. another brexit delay. he says many eu nations are frustrated and would only consider postponing for a good reason such as a u.k. general election. boris johnson and jeremy hunt both said they would meet the eu with or without a deal, but a number of conservative mp's have said they are ready to block a no deal divorce. greece's new prime minister has been sworn into the role. an appeal for bailout creditors has failed. euro group finance ministers says it has received billions in rescue loans and commitments are commitments. he won sunday's election on pledges to cut back and negotiate terms with greece's creditors. fund manager jeffrey epstein is being held at a correctional center in new york as he awaits a bail hearing on charges of sex trafficking and conspiracy. the charges include sex acts

with girls as young as 14 carries a minimum of 10 years in prison if convicted. prosecutors asked the judge to hold him in jail until his trial. >> the charges are very serious and carry with them and maximum sentence of 45 years in jail, which is somewhat of his age is basically a life sentence. we think he has every incentive to try to flee the jurisdiction. when you have two planes and you love much of the year -- live much of the year abroad, that is real. >> global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. shery: thank you. major markets across asia about to open after retreating from a two month high. here's sophie in hong kong. sophie: taking a look at the damage report because it was a rough start to the week. losses across the board.

looking at india, that's all the most fall in nine months as the government budget proposal disappointed expectations for a boost to the slowing economy. hte next focus is the -- the next focus is the earnings season. the market was also felt on the mainland, with the china compass it falling the most since donald trump re-escalated the trade war. losing the most ground with gold miners among the most performers. new ipo's on the horizon. the pain was felt in south korean assets. second worst day of the year, sliding 2.2% on monday. the biggest fall since october. it has wiped out its gains of the year amid rising volatility. shery? right, thank you for that. let's get more on what we should be watching as trading gets underway in asia.

jackie edwards joins us. central banks obviously the big focus this week. the big one the fed. in asia, you have the malaysian rate decision today. analysts not really exciting any movement, are they? jackie: that is right. they are not expect that much movement today. it is set to be unchanged, according to a bloomberg survey of economists. they are expect the rate to stay at 3%. but the policy decision will be scrutinized heavily for any sign of a dovish plan which could signal a further rate cut. you have issues like week exports in malaysia and inflation which have added to policymakers issues that they need to consider after they cut rates in may. seeingto that, we are overseas investors are pumping more money into higher-yielding indonesian debt.

malaysian bonds have been losing out to those markets. while today's review is highly unlikely to bring on another cut today, the statements that come out from the central bankers will be parsed heavily for any indication that a further cut is in the horizon. shery: let's turn to commodities because we are seeing some wild swings in gold. does the rally still have room to run? jackie: gold has had a very wild ride this year. in fact, gold prices closed in the first half near six year high. this is happening as growth concerns are taking center stage. central banks are becoming more dovish. and you have issues like the u.s.-trade war and tensions with iran. prospects for lower rates and fresh stimulus suggests the rally has room to continue. even when you have that stronger-than-expected u.s. jobs report on friday that took a little bit of steam out of the

rally. that outlook has aided gold miners around the world. you have that, again, trade and geopolitical tensions. issues like the u.s.-china trade conflict, if that does not resolve, there could be more room for this rally to run as investors look for safe havens. shery: thank you for that, jackie edwards. we have an alert on a story we have been following. news of a u.s. department spokesperson that the u.s. is stressing cooperation between south korea and japan. this comes after japan has restricted exports of three highly specialized products to south korea. traditionally, the u.s. has stepped forward in these disputes, especially when it comes to historical disputes between south korea and japan. the trump administration has not set anything as of yet, but a u.s. department spokesperson

is stressing cooperation between south korea and japan. let's stay with geopolitics. yeartle after a president trump withdrew u.s. nuclear deal with iran. tehran's government has broken a restriction on its stockpile. how will the u.s. respond? i sat down with congressman mac thornberry, the chair of the top ranking republican of the house armed services committee, to find out what comes next. rep. thornberry: iran is trying to get european nations to back off some of the sanctions and hope by creating a crisis atmosphere, that they can divide the u.s. and our european allies and get some sort of relief after this. i think the most important thing for us is to not let that happen. to work very closely with our european allies, but also to

maintain a strong military presence. i don't think it is a coincidence that these bombings of tinkers started at a time when we did not have a carrier in the persian gulf. we used to have one or two but cap ist have enough that when the last prices -- crisis begin. shery: we are seeing the president dispatch more troops. will that help? rep. thornberry: the troops he is sending our defensive, because i think there has been specific intelligence which -- where americans in iraq and throughout the middle east could be threatened by iranians or their proxy. the president has tried to say do not tack americans but i don't think we are done with this yet. shery: how are european allies receiving this offer of more cooperation in the area given that the u.s. has withdrawn from

the u.s. new video? rep. thornberry: the europeans have tried to set up a mechanism to allow some commercial ties with iran that are in areas that are not covered by the sanctions. so, they are trying to have their cake and eat it too, as it were. the european allies are very concerned about running afoul of our sanctions because when it comes to dealing with u.s. banks and other u.s. entities, it can have a big economic effect on them as well. shery: president trump recently backing down on a military strike against iran. when will the military action be appropriate? rep. thornberry: well, the president has been pretty clear. you attack americans and there will be a response. in that case, they attacked an american unmanned aircraft. most of us thought there would be some sort of response. the president decided that a

kinetic response was not appropriate to give the iranians every opportunity to negotiate and do not back away from a military confrontation. we read that things are happening in cyberspace and other domains are occurring. i think the president has given them every opportunity. if they continue to push, especially attacking americans, i do think he will respond. shery: we are seeing nuclear threats coming from north korea and the president has met with kim jong-un last week. despite the fact there has been no progress of denuclearization, should there be more congressional oversight on the diplomatic efforts with north korea? rep. thornberry: well, they are pretty good at keeping congress updated as to when they are talking and what they are trying to achieve. i don't think you can bring 535 members of congress in on every detail of the negotiation.

but, i do think there is a sentiment in congress in both parties that we have had our handshakes, we have talked nice about each other but there has to be real substantive progress towards denuclearization for there to be any easing of sanctions. shery: are you seeing that? rep. thornberry: i have not seen it yet. there has been some rumors back and forth but i don't think we have seen it yet. shery: and this situation, is it a good idea to invite kim jong-un to the white house? rep. thornberry: to invite him just to invite him does not accomplish anything. i think the grip and grin diplomacy has gone as far as it can go and just a personal relationship between the two leaders. president trump has given it every opportunity to succeed but we have to have substance. we have to have north korea take specific steps towards denuclearization. so far, we have not seen any change in their nuclear program, missile program, or the threats

they posed to the region or the united states. shery: that was my conversation with republican congressman mac thornberry, ranking member of the house armed services committee. coming up next, a big week for the fed as chairman powell prepares to address congress. we will spec to a fed water, -- he will tell us what to watch for this week. this is bloomberg. ♪

rates set to continue this week as bond markets, the federal reserve will move at the end of the month. central banks from malaysia to canada prepare their own decisions this week. our global economics and policy editor kathleen hays is here with the review. why are bond bulls thinking the fed will cut rates despite the

very strong labor report last week? kathleen: it certainly was strong. the consensus is now, the fed may be going to the aggressive 50 basis point rate cut. henry mcveigh, the head of was onmacro at kkr, bloomberg television earlier. this is what he said when asked about it. >> i think the market got too dovish on the fed. the idea they would do 50 basis point in terms of easing in july is too optimistic. ultimately, the fed sees low-inflation and i think they see slowing growth. the prudent thing to do is 25 basis points. kathleen: our bloomberg team did a survey. i like to focus on the head of global rates strategy for td securities. she is saying go long treasuries because the structural reason for fate that kites -- fed rate

cuts are still there. it is not just a trade war. you still have what happens with brexit. the iran-u.s. tensions that shery was talking about with the u.s. congressman. we have a tariffs. an impact on those on businesses and consumers as well. we have seen manufacturing weakest around the world. inflation expectations are low in the u.s. that is despite a tight labor market which should be pushing wages growth up but it is really kind of plateaued. that, i look at the german chemical giant slashing its 2019 growth forecast in large part because of trade and the uncertainty it causes. one more reason what people are saying when the fed will still cut is the yield curve. three-month build to the 10-year note yield.

you can see that is still inverted. not as deeply inverted, but for many people, this is a strong signal that even with some strong, solid domestic economy indicators, this is more of a leading indicator the fed has to at least make that 25 basis point insurance cut. you made a fairly compelling case for why the fed would cut, but why would the fed not cut at their meeting at the end of the month? what would that mean for the bond market? kathleen: it would surprise a lot of people because this is what the bond market has priced in. let's take a look at another chart looking at the futures market and what the implication is of the forecast. odds forcan see is the the rate moving lower has been steadily increasing. from the june meeting, and has gone lower and now we are back to the 25 basis point cut. --ther research report today

roberto used to be on the division of monetary affairs of the board of governors. he says he thinks the market overprice is more like 50% to 55% cut in july, night 90% as the market seems to see it. he points out, the june meeting was very divided. nine of 17 did not see any rate cuts this year so all the more reason for the markets, for economists and probably some people in the white house to be focused on what jay powell says when he talks to congress this week starting on wednesday. two days of testimony. people are hoping we get a clear signal of where he things the fed is going in the july meeting. paul: global economic and policy editor kathleen hays, thank you for joining us. global markets will be watching jay powell's testimony very closely. the founder and president of the ankor research joins us now from

chicago. jim, we just heard kathleen lay out the argument for and against the fed moving. where do you see them heading? jim: i see them moving 25 basis points. i think the risk is that they move 50 basis points, not move at all. this is typical of the way the fed rate cycle begins. the market runs ahead, prices it in. andeconomists screaming kicking, believing they won't do it, saying the market is too dovish. this is the way all the rate cycle start but ultimately, it will not be in insurance cut but a campaign towards lower yields. maybe they go 50 in the first move but if they don't, they follow-up with another 25 basis points in september. paul: we are seeing some research from citigroup today. saying the july rate cut is not a done deal. the markets are priced in at least 25 basis points.

what sort of reaction can we see if they get nothing at all? jim: i respectfully disagree with citibank. it is a done deal, it is priced in. if the fed decides not to move rates at the july meeting, the reaction of the market could be toxic. it would be a swift drop in stock markets because they are expecting it. and the criticism that they have been getting out of the white house will pale in comparison to the criticism they would get if they did not move. i don't know if that bothers them or affects them. nevertheless, the markets have priced it in and they are expecting it. if they don't deliver, i think it would be a very tough play for the stock market. shery: let's talk about the criticism. we continue to see the barrage of tweets coming from president trump. does he have a point because we see a different type of inflation world where you have a tight labor market but still wage gains not being pronounced.

what is happening? jim: i think he does have a point that the fair -- fed errored by raising rates in september and have been a bit slow in recognizing the change towards rate cuts. i think he is of overdoing it a little bit. people get what he wants and he keeps piling on. i also think he is right and that the driving force in all of this is there is no inflation. what i mean by no inflation is we are not seeing an uptick, even in this payroll report. average hourly earnings down ticked to 3.1%. this is basically not the way it is supposed to work. every model that economists put together of how unemployment is supposed to drive inflation is flat out not working because we just don't seem to generate any inflation. i think that is the basis for why the markets have been calling for a rate cut. there is no inflation, no fear of inflation. we have rates too high if we are

going to continue to have inflation with the one handle and get even lower in other countries rated shery: chair powell speaking this week in congress. how will he have to thread his comments this time around as he tries not to get the markets too excited but at the same time not to disappoint? jim: he will talk about low-inflation, risks to the global economy which is code word for trade. then, he will talk up the strength of the domestic economy. don't get too excited because things are still ok in the domestic economy. that will be taken as a sign that they are going to probably lower rates. his idea is probably not more than 25%, 50 total. we will see if the markets hold in this idea there will be three or four rate cuts in the next year. it is a lot more aggressive in the cutting than he is. he will balance low-inflation and the domestic economy

that will be a signal that rates will come down. interviewedou were for a position as a fed governor. had you taken the job, how aggressive would you be prepared to be? jim: if i had taken the job, i would not have been there for the july meeting. if i was, i would be advocating for a 50 basis point move down. i don't see a risk of inflation. i don't see a risk of a bubble igniting in financial markets to buy lower rates. i do see a risk of them going the other way if you don't give it. i think it is ok to be aggressive in trade rates now. you can always raise them later if you have a fear of a bubble or if inflation starts to percolate, something it has not done in 10 years. i would be more aggressive in cutting them now and watching and waiting, rather than 25 basis points of watching and waiting. paul: thank you very much,

bianco research president and founder jim bianco. watch us live and see past interviews on our function. you can dive into any securities or bloomberg functions we talk about. you can become part of the conversation by sending us messages during the show. this is for bloomberg subscribers only. check it out. this is bloomberg. ♪

shery: let's get a quick check of the latest business flash headlines. leading chemical maker is cutting full-year sales and profits forecast on the deepening slowdown weakening auto markets and the fallout from the u.s.-china trade war. the company notes a disappointing scenting quarter and says earnings will be as much as 30% lower this year than last. the chemical sector has been hard-hit by the trade war as demands slow because of a wide range of group -- across a wide

range of industries. uni credit has raised $1.2 billion by selling his remaining 18% stake. the sale begin after the markets closed in milan and two months after it disposed of an initial 17% of the internet lender. the ceo is reviewing unicredit's performance ahead of a new three-year strategic plan that will be released in december. we want to clarify an item we presented earlier. jeffrey epstein pleaded not guilty to two federal charges related to sex trafficking when he appeared in a new york court on monday. coming up, we have an exclusive interview with uber eats head of apac. and tiger founder and ceo. plenty more still ahead in the next hour on daybreak asia. this is bloomberg. ♪

paul: good morning pan i am at the summit. we are under -- good morning. i am at the summit. shery: i am shery ahn. kamaruddinm sophie in hong kong. welcome to "daybreak: asia." paul: our top stories this hour, asian stocks are facing a muted start. apple downgra