switch and save up to $400 a year on your wireless bill. plus, get $250 back when you buy an eligible phone. that's simple. easy. awesome. call, click, or visit a store today. paul: welcome to daybreak australia. i'm paul allen. shery: i'm shery ahn. sophie: i'm sophie kamaruddin. we are counting down to asia's major market open. ♪ paul: here are the top stories we are covering in the next hour. trade talks under pressure. revives negotiations may suffer as the trump administration slaps travel bands on chinese officials. the s&p 500 falling sharply. chinese company sinking to their lowest since mid-august.

the big chief opens the door to rate cuts as he announces a new appetite for treasury and insists it is not the return of qe. shery: later in bloomberg technology global link, how washington's latest salvo against chinese tech is the most lethal threat to beijing's ai ambitions. let's get you started with a quick check of the markets. u.s. future slightly higher at the moment. this after the s&p 500 fell for a second consecutive session, down 1.6%. the dow also lost more than 300 point. semiconductors taking the biggest hit. they fell the most in about six weeks. we've had potential retaliation coming from china after the u.s. blacklisted its tech firms. it was really another rush to safety. we had a treasury rally that sent the 10 year yield towards 1.5%, the lowest in a month. haven currencies rallying such as the swiss franc and japanese yen.

we have the tech firms taking the biggest hit as well with the nasdaq falling 1.7%. let's see how things are shaping up for the asian market. sophie: after the drop in china, and chipmakers in wall street, futures in sydney pointing at losses of nearly 1%. nikkei futures in chicago have paired some of the decline. s. yuan at levels as the white house ahead of trade talks. the china mission might cut its day short by one. the pimco chief warned the trade war may push the u.s. into recession. the new imf head painted a glum outlook for the global economy which had weight on caterpillar. we will watch action on asian machinery firms. we will get a read on japanese machine-tool orders and australian consumer confidence. south korea is offer holiday -- off for holiday. paul: it is alphabet day.

let's get the first word news. ritika: turkey is continuing to send military forces to the border with syria ahead of its anticipated incursion against kurdish forces. the buildup comes after president trump indicated the u.s. would not propose a cross-border operation against longtime american allies. turkey says it will move into syria to take control of an area from kurdish fighters it considers to be terrorists. the brexit blame game is heating up, with the no deal divorce looking increasingly likely. sterling fell after boris johnson spoke to chancellor merkel and accused her of making a new deal impossible. sources tell us merkel insisted northern ireland must remain in the eu customs union. johnson says the eu's refusal paves the way towards a hard split in three weeks. the philippine central bank governor says he is likely finished cutting rates for this

byr, but could still ease reducing the amount of funds lenders must hold in reserves. it has two scheduled policy meetings before the end of the year. last month, and lower the overnight powering rate by 25 basis points to 4%. the third rate cut this year as the economy grows at its slowest pace since 2015. despite a record year for migrants being taken into custody in the u.s., the number of people apprehended on the mexico border has fallen for the fourth month in a row. border officers dealt with 52,000 migrants in september, down about 65% since the peak of 144,000 in may. the total number of migrants held in detention facilities has fallen from may's 19,000 to just 4000. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts. this is bloomberg.

paul: thanks. the trump administration is slapping bans on chinese officials linked to the mass detention of muslims. this is the latest in a series of u.s. steps to pressure beijing just as trade talks resume in washington. let's bring in our senior trade editor sarah mcgregor and our china correspondent tom mackenzie. sarah, what more can you tell us ban coming a day after the blacklisting of chinese firms? sarah: absolutely. the two issues are linked. these blacklisting of the chinese companies and the visa bans are related to these mass the tensions of minority muslims in china and u.s. concerns about that. these come before the very crucial trade talks in washington planned for thursday and friday. chinese officials are still going ahead, but there's a much bigger dark cloud over the talks.

i think a lot of these issues raised by the trump administration were more about national security concerns by the u.s. that maybe china's going to engage in espionage in the u.s. or the companies might have links to the people's liberation army. i think by opening up a new can of worms, they are linking some of their actions now to human rights violations in china and i don't think that will bode well for the government. it is quite an embarrassment and highlights, sheds more light on an issue they don't want in the headlines. shery: what does this mean for beijing? how could they possibly retaliate? tom: we did hear from officials in beijing yesterday saying we should wait and see, and they would retaliate. they put out a forceful set of comments in retaliation in relation to the blacklisting of these chinese companies. sarah is absolutely right. officials have made it very difficult for journalists to travel there and report on the

issues surrounding the population. we are talking about the far western edge of china. it borders afghanistan, kyrgyzstan. talking about one million people, according to the u.n., men, women and children locked up in detention camps. plenty examples reported by human rights organizations and journalists of torture, beatings and some deaths. huge numbers of people. you were talking about a surveillance system outside of those camps as well that has become suffocating are people living there, according to those reports. it is interesting the u.s. is highlighting this issue, opening up this new front. it will be in embarrassment for beijing that the profile of these detention camps is being raised to such a high level. geopolitically, it is interesting as well. we have heard almost silence from muslim majority countries. the u.s., pushing these concerns pushing these concerns

about violations of human rights abuses for a muslim minority group. in terms of the trade tensions, yes, we are expecting retaliation from china. it could come in the form of their own entities list. shery: it seems like washington may not be done in pressuring beijing. we are hearing up potential restrictions of flows into china. what else do we know? sarah: we know that since we broke news about a week and a half ago that all the different ways the white house is looking to try to restrict investment portfolio flows from the u.s. into china. they are really honing in on pension funds. the idea behind that and what they be able to get political support to rally behind his they would not want government workers, even armed forces to benefit from what they see as unfair practices by chinese companies, alleged human rights abuses, and to see their investments flowing into those type of companies. that they are part of these indexes. i think that conversation is

moving along. the key to it is how could the trump administration do this? there is really no answers about how they restrict these investments. i think the key is that the conversation is there. no one thought tariffs would be possible, they did them. it raises tensions. paul: yes, raising tensions seems to be a theme this week which may not have been expected ahead of some crucial trade talks. tom, even the nba is being swept up in all of this. tom: oh, very much so. we have this tweet from the general manager of the houston rockets in support of those hong kong protests. that caused massive backlash in china from everyone. from the state tv to companies like tencent and sports companies. banks cutting off their partnerships with the nba, which by the way, has 800 million fans in china. we had adam silver, the

commissioner of the nba, coming out yesterday and saying he regretted the fallout from this tweet from the g.m. of the houston rockets but would not apologize. won't try toanhe curtail the free speech of members of the national basketball association. he said that is not part of their culture. still loggerheads with beijing. we should expect more fallout from this issue. you have the likes of maple, saying this is increasingly a risk for corporate that have exposure to the mainland. they have to toe the line on these issues. shery: tom mackenzie, thank you. also thanks to sarah mcgregor. now let's turn to monetary policy. fed chairman jay powell is keeping rate cut hopes alive by focusing on the threats from the global economy. he also confirms he will start by bonds again to avoid a repeat of the turmoil in money markets.

kathleen hays is here with a recap. the door is open for more rate cuts. openeen: the door remains and will jay powell and his colleagues walk through? he was speaking at the national association for business economist. one of their annual meetings. just three weeks until the federal reserve october meeting. anything jay powell says about the economy is more closely watched, more closely listen to than ever. this speech was mostly big picture. he talked about fed research on the impact of oil price on the u.s. economy. he also talked about the strength of the economy. what does data dependence mean now? he seems to paint a really reasonably positive picture. rising wages, labor market looks pretty good. then in just a few words, almost at the end of the speech, he said the threat, where the

rising risks are coming from his global development like trade. it seems like the door is open to a cut. the question remains will he walk through? let's listen to one of the key phrases from jay powell. >> looking ahead, policy is not only preset course. the next fomc meeting is several weeks away and we will be carefully monitoring incoming information. we will be data-dependent, assessing the outlook and risks on a meeting by meeting basis. taking all of that into account, we will act is appropriate. kathleen: that is what we got from jay powell. towards the end of the speech, he sai something something -- said something traders are looking for. he says the federal reserve will start buying more federal securities to make sure the recent turmoil in money markets does not flare up again. he says he will do it soon. maybe the october 30 meeting is when he makes the formal announcement of exactly what they are going to do. he also said they are thinking

about buying treasury. three months, six months, maybe a year-long paper which is different from buying longer-term bonds. this is a significant issue, not a market mover and still not answering the question. cut the key rate on october 30. alone withowell not concerns about the damage being inflicted by the trade war. that has been raised by the new head of the imf. what did she have to say? kathleen: she just took over this job on october 1. took the occasion of her first major address to talk about something which echoed what jay powell said. she warned that the global threats from all of these various negative forces, she says everyone loses in a trade war. she said like jay powell, she sees uncertainty driven by trade, brexit, geopolitical tension. let's listen to what she said earlier. a> there is also, in my view,

risk of complacency. we are decelerating. we are not stopping. bad.it is not that yet, unless we ask now -- act ,ow, we are risking a potential more massive slowdown. kathleen: importantly, she also said with the imf world bank meeting convenes next week and the imf issues its latest world economic outlook, that they are going to downgrade their forecast for 2019 and 2020 growth again. it will be the fourth time this october. paul: global economics and policy editor kathleen hays, thank you for joining us. we have a lot more on the fed and jay powell coming up. the former fed official and no cofounder and partner of

cornerstone macro joins us. shery: shane tells us why innovation, real estate and health are top of her investment list. this is bloomberg. ♪

shery: u.s. stocks fell on concerns tensions with china are escalating just days before high-level trade talks resume. the s&p 500 tumbled and chinese companies that trade in new york fell to the lowest since mid-august. joining us now is cls investment senior portfolio manager. thank you for being here. we see the pressure from china on different fronts against beijing. one of them could be possible restrictions on portfolio flows. what could scrutinize index providers inputting chinese firms on their list? what could that look like and what with the implication be for markets? >> it has huge implications for

the market. it is an unprecedented move by the u.s. government. nothing like that has truly been done in recent history. the large emerging market indexes are heavy in chinese stocks. if you look at the total market $13.4hina is about trillion in equity market cap. that is four times larger than all of latin america and six times larger than india and six times larger than all of africa. it would put a huge strain on the emerging market indices provider as they think about how they are going to have to completely restructure their indices in order to align with the u.s. government policy. shery: what about the u.s. market themselves? because we have seen the moves in today's session, for example, this chart showing a basket of u.s. stocks that have outside trailingto tr china,

the s&p 500 by more than 1% which we the biggest underperformance in two months. you have to stay clear of these companiestha -- that have exposure to china as investors make decisions at the year end? shana: it is not entirely clear what the u.s. government is planning on restricting. if it will just be investment in chinese companies or if it will restrict chinese companies from having investment in china. it is not clear, but i think it will be a short-term dislocation to a specific number of companies that have that exposure. i really don't believe they will end up being restricted in total. too much harm to large multinational u.s. companies. i think the backlash for something like that would be substantial. paul: of course, this restriction, just one part of a broader rhetoric ahead of the

straight talk to this week. we have the blacklisting of eight chinese firms. the travel ban as well. the talk around trade seems to be getting gloomy. how do you position for this? shana: we have been largely defensive for quite some time now because we have been thinking we are in the late part of the economic cycle. with or without the trade talks, we felt that way. i think this sort of escalates moving into more economic weakness. it could very well push us into a recession, which president trump should think about considering you look back in history, presidents running for reelection do very poorly if there is an economic downturn. so, all of these things need to be considered. i think he's cognizant of that. it will be interesting to see how this develops, if china calls his bluff or if he is serious about how far he wants to take this.

there are unintended consequences. some of the things talked about like restricting investment in china would further weaken, which is something he is adamantly opposed to. there's a lot of moving parts here. i don't think that for us as investors over a long-term that we are going to worry so much about small, short-term dislocations in the market. paul: in the short-term, is all the tension, the rhetoric, is this setting us up for a repeat of what we saw in the fourth quarter last year? shana: it very well could be. if you look at the way we are positioning our portfolios, some of our favorite etf's now, they are the types of things that would work in a risk off environment which is likely to occur should we see a repeat of what happened in the fourth quarter of last year. l,ul: all right, shana sisse thank you so much for joining us. just to get you across an alert

on the bloomberg right now. this is some news from dow jones. aramco prospectus is excited to be published by the end of the month. to 2% byuld flow 1% late november or early december. just an alert, updating you on what is going on with that much anticipated aramco ipo. don't forget, if you are away from a screen, you can find in-depth analysis and the big newsmakers on bloomberg radio. now broadcasting live from our brand-new studio in hong kong. this is bloomberg. ♪

paul: this is bloomberg technology global link. i am paul allen in sydney alongside shery ahn in new york and bloomberg technology taylor riggs in san francisco. let's take a look at the top

global tech stories of the day. taylor: starting with paypal. $220 million loss on investments before taxes in the third quarter, driven in large part by the bet on uber before he went public. paypal says the investment for $500 billion of the ipo price has slumped more than a third. another investment in a latin american retailer dropped 10%. analysts are predicting some ugly quarterly numbers for softbank's vision fund after a rough few months for some of the highest profile startup investments. a botched ipo from wework compounded and sharp drops. the write-down could be $6 billion and morgan stanley has switched the profit estimate to a 3 billion-dollar loss. plans to giveer

up his seat on the board ahead of another appearance in court. he will remain that at the helm of the company but will not extend his directorship when it expires at the end of the month. li is putting some distance between himself and samsung as he prepares for a brief trial over bribery charges that could lend him back in jail. those are the top global tech stories we are watching. shery: thank you. the trump administration's blacklisting of eight chinese tech companies is more than just the latest salvo in the trade saga. it cast a shadow over revive talks and visions of china being a leader in artificial intelligence. shelly is in san francisco this week. what specific up and is are we talking about here? shelly: the main companies we are interested in are hikvision -- some of the main leaders in artificial intelligence and

facial recognition surveillance comedies -- companies. taylor: hard to tell if this is an ai issue or human rights issue, right? shelly: exactly right. it is no surprise, these companies are leaders in their field. the world's largest ai company megvii filed preliminary paperwork to do an ipo. these are clearly the top ai leaders in china. it is a direct hit by american authorities in some of china's national champions. shery: how much financing and funding to these companies need? shelly: these companies have a lot of money at stake. for example, with megvii, they are just about to hopefully do an ipo for them. you have been hearing that banks, goldman sachs and other banks looking into doing this ipo are now reconsidering these prospects, not to mention all the vc funds and companies that

have put money behind the company. paul: asia technology reporter shelly banjo, thank you for joining us. that is bloomberg technology global link. don't miss bloomberg technology it again sydney, 5 p.m. in new york. ♪

paul: 9:30 a.m. on a clear and cool spring wednesday morning in sydney. we have the market open 30 minutes away. futures weaker by 1%. u.s. equities closed lower as well as the tit-for-tat between the u.s. and china escalates again. i'm paul allen. shery: i'm shery ahn in new york where it is 6:30 p.m. but get the first word news. itika: china is signaling will hit back at the u.s.'s decision to blacklist more companies over alleged human rights violations against ethnic muslims. the foreign ministry told

reporters to stay tuned when asked about a response. the issue comes as the two sides prepared to revive trade talks, with china indicating it would prefer a never agreement over a sweeping deal. >> china will continue to take strong measures to safeguard its sovereignty, security and development interests. as for the retaliation you mentioned, are you looking forward to it? please pay attention. ritika: the national basketball association remains on a collision course with china after the commissioner defended free speech and indicated the league will not back down over a tweet about the protests in hong kong. hours after chinese estate tv and tencent said they would stop airing and streaming preseason games, silver says the nba will not tell people what they can or cannot say. >> it is not something we expected to happen. i think it is unfortunate, but

if it is the consequences of us adhering to our values which we feel it is important, we will adhere to those values. ritika: earnings surged about $1000 a day as the benchmark group adds recent sanctions on chinese companies. billions hauling to cargo of middle east oil to china climbed more than 15% to $130,000 a day according to the exchange in london. that is the highest level in 2.5 years. 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: australian markets come back online at the top of the hour. let's turn to sophie for what to watch. sophie: asia is looking risk off today after the drop we saw on wall street.

it was a broad-based selloff on weib, the function on the terminal. over 90% of stocks in those markets living as china warns to stay tuned for retaliation as trade tensions escalate. that took a toll on china exposed stocks in the u.s.. alibaba and baidu among the companies. they lost ground overnight is the white house considers restricting capital flow. the offshore yuan is holding overnight losses after reaching 716 against the dollar. further declines may send it towards the all-time low, which was last seen in early september. paul: thanks. let's get some more on what we should be watching as trading get underway in asia. adam haigh is with us. the latest a ramp-up in tension, the chinese companies with trading.

will we see that filter through asia today? adam: that is clearly the epicenter of the concern but it may be a surprise how hard these companies are getting hit. sophie was alluding to some of those chinese etf's that trade in the u.s. also the stocks that have a real degree of china sales exposure. they got pretty hard hit overnight in the u.s. of course, we will see that flow through to asia today. pooret up is it is pretty today with the sentiment taking a hit after this latest development of tensions flaring up. what is difficult is to predict whether, if anything, this will play into the hands, the talks that are supposed to be occurring in the next couple of days or so. it is a real important high-level talks that people have been pinning their hopes on as a chance towards a movement towards dialing back of the escalation of tensions. this has put a real question

mark around those talks about what we might get out of those talks. the global growth picture is always quite tricky as it is going into the first half of next year. we are hearing from some guests at pimco we were talking to bloomberg tv earlier talk about that. a really tough environment for growth. now you have another escalation of tensions. it adds to the reliance on central banks and whether or not central banks can really stem the slowdown in growth we are starting to see. shery: traders are now again lifting market prices for fed move so can market policy provide support to sovereign bond yields if that recession can be avoided? adam: yes. that is the key question. how far central banks have already gone in terms of dictating market forward pricing for policy response to what we are seeing? in the u.s., for example, the fed going another 50 basis

points or so by the end of this year is pretty firmly priced into the market with a longer-term rates that around 1% by this time next year. the market is already pricing for something significant. whether or not the fed can do something additional to ease some of those concerns, you may get a little bit of a pickup in longer-term bond yields. for now, that response from the fed and from others around the world is reasonably fairly factored in. in which case, you wonder what else is left in terms of a policy response. the fiscal side of things in places like australia and other parts of the world is looking somewhat tenuous. it does leave the appetite for people wanting to get a little bit longer on risk assets looking pretty tricky place to be at the moment. that is what you are seeing in sentiment at the moment. looking very cautious and people

are not wanting to make huge bets on a real, trade tensions really easing off and moving through to the next stage where scenariot least plot a where the global economy might blossom and we go into some upswing. that is where we are in the moment and that is why traders are so cautious. paul: bloomberg global markets editor adam haigh, thank you for joining us. forcheck out gtv another look at the charts. federal reserve chairman jerome powell has left the door open for more policy action. he told a conference in denver that global growth is slowing and the u.s. economic expansion is not over yet. >> i guess i do pocket the idea we are running the economy hi. this feels very sustainable. there is no aspect of the economy that is just booming. paul: so, some investors might have picked up on a few clues on

his remarks. roberto perli did. he is head of policy research at cornerstone macro and joins us now. thank you for joining us today. in terms of where the fed heads next, as kathleen hays was saying, the door is still open for further easing but are they can actually going to walk through it? roberto: i think powell today was a little bit more, i don't know, soft-spoken with respect to previous instances. for example, he said inflation is improving a little bit. inflation was one of the three reasons he mentioned for cutting rates. it means there is a probably a little less of a chance the fed continue cutting. he said policy is not on a predetermined course and that is another type of language, hey, we did to rate cuts already, don't be too sure we will do another one like the market largely expects. i think it was a little bit more

cautious than usual and more cautious than many people would have expected. given the way things are going with all the risks around, still case for the economy, another rate cut is probably in the cards. powell would probably prefer to wait but i don't know if he has the luxury to wait. paul: let's explore the vexing issue of inflation a little more. powell saying that inflation is booming. for someone such as unassuming as all of us here who remember the days when rates were above 20% and inflation was raging, inflation below 2%, it does not look particularly firm. is this an endemic problem in developed economies and what is the plan to resuscitate it? roberto: it is certainly an endemic problem because inflation is low not just in the u.s., but in other countries around the world, especially in

the developed world. there are a ton of reasons for that ranging from competition, technology, demographics, local activity, you name it. a lot of issues are structural and not cyclical. a central bank can and will, like the fed, will act on cyclical. they will cut rates more probably. but that is not the problem. policyer of monetary with reflect to stimulus is not what it used to be. we live in a very different world. structural challenges are figure, far bigger than they used to be. yeah, monetary policy does what they can, but thinking the fed will single-handedly lift thinkion from here, i that is hoping for a little bit much. shery: you just said it, it seems to be a significantly different world. the traditional drivers of recession don't seem to be

including reflation. if business executives continue to fear the continue to trade war from affecting the businesses. roberto: i think even chairman powell said it may be a couple of months ago. winds up andconomy recession, it is not because the rates are too high. to a bigger extreme, look at germany. germany flirting with recession because the 10 year bond is too high. i think the answer is no. there are other reasons here that are structural in nature and fiscal policy rather than monetary policy. the central bank has to do what they were test to do, and what they were tasked to do is provide support in any way they can for the economy. the only way they can provide support is by lowering interest rates.

not as effective as it used to be, but that is what they have to do and that is what they will do. let's not help for exaggerated results out of that. shery: it seems pretty clear today that they were going to provide support for the money markets at least. chairman powell talking about asset purchases, which in a way, sounds quite similar to what quantitative easing would be. explain to us how this would not be qe. roberto: that is a little bit different, right? with qe, i central bank or fed would inject excess liquidity with the aim of making things better with lowering longer-term interest rates, stimulating the economy. here in this case, all the fed will do is inject enough liquidity to prevent things from getting worse. in other words, i think the fed misjudged the amount of liquidity. look, everybody can make mistakes, not a problem. just correct it. that is what they will do, they

will correct the mistake they made earlier. they will expand the balance sheet and bring it back to a higher level to meet the demand the system is asking for. basic day-to-day job for a central bank. not qe, being a preventing things of getting worse. paul: yes, jay powell quite explicit that it is not qe. then again, the yield curve steepen, dropped by 10 basis points. did the market listen and is this going to be enough to counter the markets? roberto: i think the repo market has calmed thanks to the day-to-day injections of liquidity the fed performed in the last couple of weeks. the fed will continue to do that as long as necessary so am not particularly concerned about the dislocation in the labor market. by expanding the balance sheet, the fed will make day-to-day

intervention less necessary and eventually not necessary at all. either way, it is not a huge problem. a is not that the market has deep problem and there is something that flattens the health of the u.s. or global economy. starting to see some imbalance between demand and supply. it is the job of the central bank to meet that demand. the market today reacted to a lot of things, but as soon the powell speech became public and for about a half-hour, dollar futures come interest rates did not move that much than other news about other things. i think the market reacted more to that. i think the balance sheet is more in line with what the market expected. paul: get people thinking about qe. do you think we might be seeing it resurfaced somewhere down the track, maybe in 2020, 2021 when

the conventional policy tools become exhausted? we are already talking about it here in australia which is unprecedented. roberto: there is no doubt in my mind that when the time will come, meaning when there will be a recession, the fed will take rates to zero very quickly and that that will not be enough. we would have to do something else and the only other thing they can reasonably thing to do is another round of qe. that will happen, not just now. then, we get back into the old discussion we just had a minute ago -- will that be effective? will making longer-term rates even lower accomplish something from an economic perspective? i think there is reason to be a little bit doubtful. i think they will do it, no doubt. shery: roberto perli, thank you for joining us. cornerstone macro head of global policy research. we have an alert. we are hearing chinese exports has priced ipo shares at eight hong kong dollars.

7.6 2 billion hong kong dollars in the ipo. the retailer is backed by private equity firm and it was set to be pricing 930 million $10 hongt around $8 to kong apiece. $8.50 hong kong would be near the bottom in range. if you are away from a screen, you can find in-depth analysis and the days big newsmakers on bloomberg radio. now broadcasting live from our brand-new studio in hong kong. listen via the app, bloomberg radio plus, or bloombergradio.com. this is bloomberg. ♪

shery: we have breaking news. turkey is saying its military will cross the syrian border shortly. this coming after president trump cleared the way for the

nato ally to invade syria and then he walked back those comments, saying in a tweet he would totally destroy and obliterate turkey's economy if it takes unspecified off limit actions. we are now seeing turkey saying the military will cross the syrian border very shortly. let's go to washington and talk to josh. again, president trump after that warning tweet yesterday, come limiting turkey. give us the latest. josh: sure. well, this is a very complicated relationship that the u.s. has with turkey and has had for a long time. but, donald trump's relationship with president erdogan has been particularly tumultuous. and, as you mentioned, the u.s. policy here has been unclear over the last couple of days. but, what basically happened today in washington is that

president trump has tried to essentially walk back some of the declarations he made late sunday, which he also started to do yesterday. but essentially saying, look, we are not going to abandon the kurds who fought alongside the u.s. in northern syria to get rid of the islamic state fighters. that is coldly, comfort to the kurds who are there now with turkey who sees them as a national security threat, poised to cross the border and invade. so, look, this has alienated a lot of president trump's traditional allies on capitol hill at a time that is politically dicey for him to be in that situation. a lot of people are just waiting to see what the next steps are. paul: yeah, there are multiple implications of this. i wonder if you can explore a

couple for us. first, it will mean a significant redrawing of already complex interlocking alliances and that part of the world. and, what is it going to mean for all those islamic state prisoners kurds or keep elite -- are currently keeping an eye on? josh: at least from the u.s. perspective, trump has sort of implied that is something turkey will deal with and other countries will deal with, but nothing u.s. as you point out, this is a very complicated situation. there is ongoing war in syria. many say if turkey invades, as they appear poised to do, that they could align with bosch are al-assad,- bashar the president of syria, who the u.s. opposed. he is aligned with russia. many see this as a move that

would embolden russia and iran in the region. that, strategically speaking, is not what the u.s. has been pushing for for all the time they have been there. what exactly is going to happen, but this is domestically here in the u.s. created a difficult position for the president. he has said he wanted to pull u.s. troops out. he said at the end of last year. it prompted his secretary of defense to resign. he obviously has pushed through and he's basically surprised people of his own party when he did it. shery: josh gallu in washington. we see the impeachment saga unfold and the white house says it will not dissipate in the impeachment inquiry.

give us more details. josh: today, there was a lot going on today in washington with president trump because it began with him trying to walk back some of the things he said about turkey and trying to get back in good standing with the republicans in capitol hill who he needs right now to protect him from this impeachment inquiry. by the end of the day, he had basically made amends with many of them. then by early evening, the white house had sent a letter to capitol hill, essentially telling house speaker nancy pelosi that they are not going to cooperate with the inquiry at all. they said president trump will not, members of his administration will not. they will not provide documents, testimony. this is drawing a line in the sand and signaling they are ready to basically oppose anything they are doing in the house related to this inquiry.

they said they have been denied due process because they are not allowed to interview witnesses. they are not allowed to review the same evidence in the inquiry. and they are not going to help out. paul: all right, white house editor josh gallu, thank you for joining us. pimco has been weighing in on the potential threats to the global economy. the ceo says a hard brexit is better than the current situation of being in limbo and the trade war could push the u.s. into recession. he spoke with bloomberg editor-in-chief. >> the big picture is very simple. you have a trade war with china and we don't think it gets fixed in the near future. i think the best parallel you can think of is where they will be improvements, ups and downs. so, this is going to be interesting. >> do you see two economies

emerging? the division between the two, do you see two internets, two supply chains? >> much more regional economies and a global fight for some of the sectors. so, you think the u.s. will slow down. what i maintain is the first part of 2020 will be slow in the u.s. gsdp dip to 1% or something. if the rhetoric in the trade war gets worse, it may be in recession simply because of what is happening. >> which are you more scared of out of brexit or jeremy corbyn? >> thank you for this question. [laughter] >> not saying you cannot get both, by the way. [laughter] >> we think obviously that a full on labour government with the program they have would be very bad.

it somehow reminds me of when i grew up in 1981, starting to nationalize everything in sight. they had to do a 180 and a second was not a good thing. a core belief that i came to think the central government is not good at running things. it is not matter, the government is not really good at running things. >> do you see corbyn is another -- he will come in and run into trouble? >> if you look at his program, it is quite extreme. >> do you think that is worth brexit? just in terms of the effect -- you buy a lot of government bonds. >> we do and we like the u.k. we think that even in a brexit scenario, they are fine. >> hard brexit? >> in a hard brexit, they are

fine. what you need is revolution at this stage. i think we are in limbo and being in limbo is not a good thing. you have a situation where the politics, the government, the house, the voters -- it is so fragmented, i don't have to tell you this, that you need a way to get to an outcome. an outcome even if it is a hard brexit is better than having two more years in terms of a situation where nothing gets decided. shery: pimco ceo manny roman speaking with the bloomberg editor-in-chief. plenty more in the next hour. aberdeen standard investment senior political economist stephanie kelly joins us to talk to latest in the trade war and brexit. paul: that is almost it for daybreak australia this morning. a quick check on the markets. trading in new zealand underway. weaker by half of 1%.

australia due to open in a few minutes. futures currently weaker by almost 1% after we saw the war of words between the u.s. and china continue to escalate. more in a moment on daybreak asia. ♪

paul: good morning. we are under an hour away from market open in japan and south korea. shery: good evening from new york. i am shery ahn. sophie: and i am sophie kamaruddin in hong kong. welcome to "daybreak: asia." paul: our top stories, trade talks under pressure for revived negotiations may suffer as the trump administration slaps travel bans on chinese officials. the fed chief opens the d