manus: you are watching the best of "bloomberg middle east." the major stories driving the headlines this week. turkish troops pushing into northern syria after apparently clearing the way for action. president trump threatens to obliterate the turkish economy. saudi aramco's bonds extend their losses after being downgraded by fitch. could this have implications for the upcoming ipo? add qatar's energy minister recent aramcohe attack. exclusive interviews this hour.

there was much confusion this week about u.s. policy toward kurdish allies in syria and to nato member turkey. president trump seemed to make a major policy shift by saying the u.s. would authorize turkish military action over the border but later appeared to backpedal. we have more with two guests. >> last year, there was the issue of the pastor held by the turks. the turkish economy went into a tailspin on the back of american pressure. this is a serious threat. the key to me is what is off-limits?

in the previous statement from the white house, it seemed pretty clear that the u.s. was saying we are not going to stand in the way of the turkish government doing what they want to do in northern syria. and now, he is saying -- yes, but if they do anything off-limits -- i have a difficult time interpreting what that may be. it seems that in the u.s., trump's own allies in congress went up and said, hang on, these allies are key in the fight against the islamic state, and the islamic state is not defeated yet, and we are putting that at risk by doing this. yousef: where does that leave the u.s. administration when it comes to the regional puzzle? we have the russian president expected to show up in saudi arabia and the united arab emirates, you have ongoing tensions with iran -- it raises the bigger question about the role of the united states in this part of the world and its objectives. riad: iran, the foreign minister has already pointed out that the

u.s. is not a reliable partner for, in this case, the kurds and there is talk that on the back of this, the syrian kurds might say, let us ally ourselves more closely with the iranians. and, that would put at risk any chance of the u.s. playing a role in the syrian question. and at the same time, let us remember there was a strike of , for example, on the aramco facilities. we have yet to see a clear response on that or a clear call on, who is exactly responsible? they have said that iran was responsible, though it has not been blamed directly for launching the missiles. i think what will happen is the allies in the region might begin to wonder how serious president trump is when he does express support for the stance. and then he seems to be changing that stance again. yousef: it has been great getting your insights.

e, our editorhamad in africa. let us get some additional insights from the head of equities. you have been through a lot of these ups and downs in the geopolitics of this part of the world. this latest development around turkey, more of a reason to have a headache, or maybe it is a plus, because it will play potentially into higher oil prices, isn't it? >> it could result in higher oil prices, but i think the headline risk the region keep suffering. when we look at what impact this could have direct or indirect to the region. we see turkish assets are more

vulnerable to something like this. compared to something like in the gcc or africa. i would personally think that if there is any dislocation in the market because of this, it might be a buying opportunity , particularly for companies that do not have any direct exposure into turkey. manus: and the political olive branch is saudi to iran in regard to yemen, the first steps may be towards some kind of discussion. you think that could have implications for saudi valuations. we have talked over the last few backs about saudi giving evaluations. is this a key moment? ali: definitely. the conflict in yemen has taken a toll on the region and saudi arabia in particular. a cease-fire there or end of war will have two implications -- the risk premium attached to the region ought to be lowered , because there is one less war to worry about. the direct impact on saudi arabia is the funding part. there are no numbers and there is no clarity as to how much or

how big or how small, the average person in the region and the average saudi knows this is a drain on our economy and the finances of the country. ending that would mean that we are richer, and we are not depleting as quickly as we were. yousef: geopolitics, oil prices, and then you have also got the interest rates. three of the key pillars in equity valuations. ciber three months -- it has been coming down throughout the year in line with what we have been seeing in u.s. treasury yields. where does that leave the saudi bank, index given there has already been a rotation out of that? it adds to the pressure. ali: of course it does add to the pressure. we still think the saudi large-cap that rallied on the inclusion of trade has not corrected enough, and you are beginning to see the decoupling between the small, mid-cap, and the large mid-caps in that investors are looking for cheap valuations and strong fundamentals, not only inside

saudi arabia, but that theme is catching up across the region. they look to redeploy. manus: as we go into the reporting season, we have had the fitch downgrade on two names. they stand a little separately to the rest of the pack in your mind, or are you worried about all banks? ali: i would be worried more in the uae. and also in saudi, to a lesser extent. in saudi, what worries me is the corporate side, not so much the retail side of the books. i would be looking at the monitoring the formation on the corporate side. as we see, the big blows in saudi arabia have been mainly the larger groups, the big families. since 2008 to date, there's --

every few years, there has been a big bump on the corporate side and not the retail side. yousef: let us talk about the uae, green shoots and the data. i am going to be cautious with this one, because we have had quite a few people in the last year, year and a half say there are green shoots, but the capital flows have not gone after those green shoots. tell me about your thinking at the moment and why now might be a good time to get in. ali: look, we think there are things that optically could look cheap from a valuation point of view, but where does it take us? it is not a blue sky scenario for the uae, but we are not in a contracting mode. instead of growing 5%, we are growing 1.5%. which feels, the adjustment period, makes you feel like you are in a recession. if you look at those pockets that offer good valuations, still cash flow rich, able to maintain distribution, which

excites the region, and they remain the dominant force on a lot of the mid and small-cap names, i think you can still find some pockets of opportunity , with, of course, begin cautious and close monitoring is always recommended. manus: qatar this week invited big energy players such as exxon mobil and shell to help expand in part the world's largest national gas field. energy minister spoke exclusively to annmarie hordern about the aramco attacks and how that affected business. al-kaabi: we don't like to see any facilities be harmed

anywhere in the world. gas and oil facilities are strategic for all countries and for the supply of liquid's and gas around the world. so, of course, it was shocking to see an attack on the oil and gas facility and hopefully, that is the last one. annmarie: and prices have not stayed elevated. is there too much oil in the market? al-kaabi: when you look at the oil market and iran, which is curtailed in production and venezuela and libya -- it is surprising that 5 million barrels off the market is a huge shock that should have taken prices much higher. it seems the market is used to geopolitical risk, and there is abundant supply. annmarie: we have recessionary fears coming from europe and asia. do you think qatar is a winner or loser in the trade war, given the fact that the chinese may be less likely to purchase lng from the united states? al-kaabi: i think short-term, you could take that kind of approach, but long-term, you need to see a liberalized

world, where economies can flow around the world and prosper around the world, i mean. and for us, free trade is a best thing for a commodity that is such an important commodity for all countries. oil and gas should flow freely. we do not think that should come into trade wars. but what is happening between the u.s. and china will affect long-term will definitely affect the market. hopefully they will resolve issues soon. annmarie: everyone in the energy world wants to know what is going on for your northfield plans. this is huge for qatar. where are you in that expansion? mr. al-kaabi: we are on track. we have awarded most of the contracts. there are a few onshore contracts that will be given out by the end of this year. the first quarter, we will have secured all of the contracts for construction to start production

in 2024. we have a select few that we have invited to give us bids to enter about 30%. annmarie: can you name some names? mr. al-kaabi: all of the big players and qatar. annmarie: possibly exxon? shell. mr. al-kaabi: and others have been invited. and we have also invited a few others. and all of these will compete to give us the best proposal to show us an added value of entering. we don't need the finances. we have the project fully running, and we have the technical capability to do it on our own. manus: up next, tensions rise between washington and beijing as the trump administration blacklists chinese tech companies. this is bloomberg. ♪

manus: welcome back to the "best

of daybreak: middle east." the trump administration this week blacklisted eight chinese tech companies, accusing them of human rights violations. the unexpected move came just as negotiators make preparations for high-level trade talks. we have more from our chinese correspondent, selina wang, in beijing, and rbo. -- rob. selina: these companies are considered to be national superstars in china. two of them are in the video surveillance business, and they comprise as much as a third of the global surveillance market. cameras all around the world. they are the world's most valuable artificial intelligence companies. last valued at $7.5 billion with backing from the likes of softbank. they are now in semiconductors and chips. they are backed up by alibaba , and they have clients that

include lenovo and the chinese government as well. there artificial intelligence has helped with police arrests. in addition to the concerns that these companies may be involved in human rights violations, d.c. has also long been concerned about the relationships that these companies have with beijing and how they may play into china's overall aims to be a world leader in artificial intelligence. manus: good morning to you. we have seen tech as the centerpiece of the salvos. if we think about what has happened in the past seven days, tech is weaponized today. capital was potentially weaponized in hong kong and the protests there. how will this sit, the latest salvo sit with the chinese as they go to arbitrate? selina: manus, that is right. therray of issues further complicating these trade talks. when it comes to this blacklist in particular, we have been expecting this for quite some time from the trump administration.

is the timing of this that is especially provocative and surprising, especially because we are days away from these high-level trade negotiations. it also further complicates matters in the sense that donald trump is now bringing human rights as a reason for action. uaweiyou look at h and why it was put on the blacklist, that was because of grounds on national security. when you look at tariffs, and now human rights will complicate matters. it further narrows the opportunity for the two sides to even reach a mini deal. of course, as you mentioned, we also have the ongoing hong kong protests complicating matters. and there is the potential for reciprocity from china. after huawei was put on the blacklist, china came out with its own unreliable entities list, which would theoretically target very broad array of any

u.s. company that seems to damage the legitimate interests of a chinese firm. manus: great roundup. selina wang in beijing with the latest nuances on the trade matters. host,pen is our guest chief investment officer from mw capital management. he joins us from singapore. we are scratching our heads this morning. eight new companies on the blacklist, and the market seems to be convinced of a marginal breakthrough. does that add up for you, rob? rob: not really. it would be very surprising if any deal was made at all. in the case of president trump, he would want to get a very good deal and i don't think the chinese are willing to back out.

now, we have tech being weaponized. the chinese will not take that lightly. i do not see a trade deal coming from these discussions. yousef: let us flesh that out. the csi 300 is substantially higher. consumer staples, they are driving that move up. in terms of some of the other scenarios, maybe this is just a limited deal. any deal would help the sentiment. what would a mini deal do for markets? rob: well, i think if you did have a mini deal, even though that is not our base case, i don't think that would be popular with markets in general, particularly the asian markets. , which exports into china, which would then exported to the usa. that would obviously be positive, but when you look at the markets, and you were looking at the csi earlier it , has done extremely well year to date. my view is that the market is fairly complacent. if you don't get a deal, there is potential further downside risk. but we will see how these trade deal or negotiations continue. manus: in terms of how you protect yourself, i saw a great

piece this morning. jp morgan talks about gold and they talk about swiss, but on dollar-yen, they say it is the only cheap recessionary hedge out there. why? because it is 15% cheaper on average in the last 20 years. it is more appealing to them. would yen be a more appealing haven, relative to swiss, relative to gold, relative to treasury given that kind of , math? rob: yeah, that is a very good question. our view is that we are still dollar bulls at this time, but if we saw the manufacturing data declining further and the risk of a recession increasing, we would start to shift to the yen at that point in time. we think the trade is too early at this point, but we are looking at the yen as a safe haven currency. that is not to say that we would not hold yen plus some of the precious metals. we do like silver which is , trading at an attractive range against gold. we would go into silver holding

time, holdingin u.s. dollar, with a view of moving into the yen, should we see weakness. manus: up next hong kong reels , from one of the most violent weekend yet from the long-running pro-democracy protests. this is bloomberg. ♪

manus: welcome back to the "best of daybreak: middle east." hong kong began the week reeling from one of the most violent weekends of the long-running democracy protests. with shops and subway stations vandalized, and bank atm's knocked out, our chief north asia correspondent stephen engle joins us from outside of admiralty substation on monday. stephen: it was a massive backlash from the more hard-core element of the protest movement against what the government did late on friday, and that was imposing emergency orders on hong kong, specifically banning facemasks. but then, the protesters turned lull,saturday, a bit of a

and on sunday, they turned up with masks and also ratcheted up the violence against companies, against the police, and it was the 18th consecutive weekend of violence. perhaps even the most violent weekend we have seen. it has been 120 days since that fairly peaceful first million person march back on june 19. there is no end in sight right now. we are hearing there are calls for more protests today, a public holiday in hong kong, in 18 different districts in hong kong. as you can see behind me, the admiralty station is completely closed today. the entire network citywide will close as of 6:00 p.m. today. yousef: you can argue another metric for whether this has

escalated significantly is the fact that you have american sports teams getting pulled into this. specifically the houston rockets and the nba as a sport in the hong kong story. stephen: yes. it is an extremely complicated story and an issue affecting companies here in hong kong trying to do business in china. the threat they feel -- the nuts and bolts of this is the general manager of the houston rockets put out a tweet, perceived to be in support of the hong kong protest movement. well, that has gotten sharp rebuke from the online community in china. since then, the general manager has sinceston rockets clarified that he did not intend to make any insults to the chinese market. the houston rockets are by far and away the most popular team in china because of yao ming. yao ming is by far the most popular sports star in china. he played for the rockets from 2002 until 2011. the houston rockets have a lot of chinese sponsors, whether it

li ming, the shoemaker. this is a pr disaster for the rockets but for the nba. i want to add one more point, jack ma, the cofounder of alibaba, is the new owner of the nba brooklyn nets, playing in china this week for a couple of games. i don't have time to run through his statement, but he put out a lengthy one appealing to people in america. yes, we respect your freedom of speech, however, you must understand the sensitivities that the chinese nation has towards any question of sovereignty as it goes back to the opium war. a detailed explanation. this is a very complex issue. manus: let us stay with this. the hong kong exchanges said this week it will not proceed with its $36 billion unsolicited bid toward the london stock exchange. we got more on the scrapping of the plan with our deals

reporter, manuel. manuel: there was a big surprise when hong kong exchange came out of the blue with this surprising move for lse, and it was also surprising when this morning they withdrew their proposal. i think it was long anticipated that it was not going to be an easy move. there are a lot of challenges from convincing investors to also convincing regulators and key government officials. it was going to be challenging, but we all expected the hong kong exchange to fight it out a little bit longer and try to do more work on the deal. however, they had a deadline later this week, october 9. and they decided it was in their best interest to walk away. they definitely have to do a lot more work before making sure that they could succeed on this deal. it was going to be very challenging, for sure. manus: up next, saudi aramco's

bonds extend their losses after being downgraded by fitch. could this have implications for the upcoming ipo? this is bloomberg. ♪ from the couldn't be prouders

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manus: welcome back to the best of "daybreak, middle east." saudi aramco bonds extended their losses after being downgraded by fitch this week. meanwhile, dow jones reported it will publish its ipo prospectus by the end of the month. >> the downgrade came following a significant increase in geopolitical risk. following the recent attacks, the bonds in general -- the commodity did not increase as much as you would've expected it to, and the capital markets also did not have a dramatic effect following the news. based on that, we have seen some

weakness in the capital markets in both sovereigns and the aramco bonds, but this weakness came back a little bit. not to previous levels for two reasons. we have seen how good they have performed this year from one side and the other side, the geopolitical risk is there. yousef: with the potential ipo coming through in november, does that weigh in on the picture? because it is such a magnificent event in terms of size that it will suck quite a bit of capital from around the area. >> it will from the equity's perspective and from the capital market perspective. it will give more transparency and comfort. the ipo would be seen more as a positive aspect. yousef: what about oil prices? are they listing at the right time? at the moment, the market looks like it is shrugging off justifying a higher geopolitical risk and focusing more on the demand side of the equation. have you changed your oil forecast? >> absolutely, but aramco and

saudi were swift in reassuring the market and reassuring that the production will come back online very swiftly. so, yes, the geopolitical risk is a major pressure on the oil prices, but then again, you have the global economic pressure and the potential slow down leading to a drop in demand. yousef: when you look at the region as a whole, there has been an interesting move in the last few days. the bond spreads have been increasing a midst of the tensions. there is a great chart here for our clients giving us that perspective. you are becoming more cautious. you are accepting these geopolitical tensions have reached a level where it is having too much of an impact. >> absolutely. we are cautious for several reasons. one, we have had a very good run this year. we have been outperforming the emerging markets due to several factors. the other technical supported

factor that is also weighing on us is we have finished the inclusion last week. that is weighing on the technicals. and we have a general shift of markets preferring ig over high yield, which dramatically favors the emerging-market. those factors are done and we have the geopolitical tensions. that is why we are turning more cautious, especially in light of the valuations. yousef: how much risk will we see? what will we see on the sovereign end? >> we are seeing a lot of corporate announced and saudi will also be coming before year end. we think we will have significant issuance. from now until at least early december. yousef: let's talk about turkey. that has been an idiosyncratic story.

the change in tone from the u.s. president in a matter of hours and what that has done to markets and sentiment has been nothing short of almost unprecedented. do you think there will be an incursion that will bring collateral damage in terms of the turkish economy? >> last time there was an increase in tension between both parties. there is the risk there. will it escalate or not? that is a $1 million question. in terms of capital markets, we saw the first move in the currency. the capital markets in general have been weaker. given that turkey had a really good run from last december, at this point we would not speculate on escalation. we would rather take profit and look at a better entry point. manus: let us get more on the global trade tensions.

sources in washington said on thursday, the white house is looking at rolling out a previously agreed currency pact with china. that is part of that agreement which could see next week's tariff increases suspended. the white house continues to be talking about the first phase agreement with beijing. >> for the agents and the economy to really have the confidence, this needs to be not only a deal but it needs to give us the idea that it is sustainable and durable. otherwise, the key element of investment will not support the underlying economies. it is also important to recognize that it is not just trade that is holding back the world economy. what we are also seeing in the u.s. that the cycle is maturing,

the fiscal stance is less positive for growth, and over in china, we have seen past policy tightening. there has been some recent easing. and back in europe, a maturing cycle and the uncertainty we have seen on brexit coming through as well. there is a lot going on in the global economy and to my mind, a mini deal would take away some of the downside risks of things getting worse on the trade front but i don't think it gives us the kind of resolution that we really need to accelerate us out. tracy: it is tracy alloway in hong kong. we are going to ask you about the global uncertainties in a few minutes, but before we do, just on the trade deal or potential trade deal, there is a bloomberg report about a potential currency pact between the u.s. and china. take a look at this chart. all it up on the gtv function on your bloomberg, you can see the

report moved the offshore yuan earlier this morning. we know donald trump wants a weaker u.s. dollar at this point. what would it take for him to get a sustainably weaker currency? >> at the end of the day, if you really want to weaken the dollar, you need to do two things. you need and accommodative monetary policy combined with expectations that this is going to lift the economy stronger. because remember, a lot of the dollar support today is coming from the risk off sentiment that many investors have with respect to the global economy. to really get that strength coming through, i would think they need to pull out the fiscal tools at this point in time and i don't see that happening on a massive scale this side of the u.s. presidential election. manus: continuing with that conversation, it seems the chinese have gone for a stable yuan into these negotiations. it would appear they want

to rein in the yuan. what does that do to the yuan part of the equation? >> the key point of the mini deal, it is more about stability than any major shift in the currency. a stable outlook rather than a sudden and strong appreciation of the yuan which i don't think something that it is something that china has a major interest in either. it is about stability. it is about a mini deal taking away downside risks but we need to be confident that we are not going to see an opening up of the trade tensions vis-a-vis the european side as well. because this is not just about china. we have seen also threats of tariff issues directed in the european direction as well. that adds to the global uncertainty. tracy: on that point, the trade tensions feeding into a lot of the manufacturing data we have

seen recently. it has been quite weak. japan machinery orders coming in at the biggest fall in almost five years. some say we are almost any manufacturing recession. how much does that manufacturing weakness, that industrial weakness matter for the global economy? how quickly could it recover if we got a trade deal? >> we really need the trade deal to give us the strong idea of sustainability to get some kind of sharp recovery. and more needs to happen in the global economy. on the manufacturing side, we have seen a substantial slowdown. on the flipside, what we are seeing is quite a resilient consumer in the u.s. and elsewhere in the advanced economies. to my mind, the question is how long will it take for the manufacturing slowdown to start feeding into services?

when we look at the leading indicators of the pmi, we are seeing spillover and larger economies like germany which is dependent on the manufacturing sector, we see concern regarding the in the profit cycle across sectors that we can see is probably going to lead to slower pace of hiring, initially, we are already seeing that in the u.s. numbers. and i think we will see more of a slow down here. it is a story about the global economy going into a longer period of slower growth. i struggle to see what is the dynamic that is really going to reaccelerate us. i do not think monetary policy will give us that strong re-acceleration at this time. manus: jay powell says the fed will resume buying treasury security. he insists this is not a rerun

of qe. this is bloomberg. ♪

manus: welcome back to the best of "daybreak, middle east." jerome powell this week said the central bank will resume buying treasury securities to avoid a repeat of the turmoil in the money markets while leaving his options open on interest rates. he said the purchases would be made up of treasury bills and he stressed it should not be seen as a return to crisis qe. >> i want to emphasize that

growth of our balance sheet should in no way be confused with the large-scale asset purchase program's we deployed after the financial crisis. neither of the recent technical issues nor the purchase of treasury bills we are contemplating to resolve them should materially alter this stance of monetary policy. manus: yousef has got more. >> let us face facts. looking back, 2017, 2016, we knew the fed would have an unenviable task when it came to unwinding this massive balance sheet. it came to loggerheads in september. there was a delusion of paper. this really put a lot of pressure on overnight funding. markets could not find an offer on the repo market. it reeks of turmoil. starting on that side of the street a couple of decades ago, funding is always tighter especially in the year-end.

this was not that much of a catastrophe for repo guys but the fed did come to the rescue. they provided one-week, two-week repo's. they offered overnight repos and that has soothed the market concerns. i think this is a enough to have helped out the primary dealers deal with the dilution of paper on the streets right now. yousef: how much more are you expecting the fed to deliver on in terms of rate cuts as we end up 2019 going into 2020? are the markets mispricing expectations? >> the markets always want more. that is for sure. i think what we are looking at is at the fed highlighting overnight the payroll data. jay powell seems to be happy with the three-month average.

he has a benchmark somewhat lower, 135,000. we think it moves below that. and then the fed will shift from a mid-easing cycle to a full out easing cycle. i think it is predicated on the data. the fed has shifted back into data dependency. i would not be surprised to see two hits if we see a deterioration on the payroll data which i think is unlikely. we will have to see how the data plays out. yousef: you look at break even stephen, and we are at the lowest level in three years. how does that play into how strategy should be done in u.s. assets at the moment with everything we have talked about? >> historically, that suggests there is a lot of policy wiggle room for the fed but the inflation metrics have been so low for so long it does not appear that globally the easing

is affecting inflation in any part of the world. i don't know how much it will stoke the inflationary thoughts. i think they are concerned about the effects of the global growth that is waning everywhere impacting the u.s. economy. we see it in the manufacturing sector. everyone is worried about this moving into the consumption sector. this is what they are most concerned about, and they really want to defend possibly by taking more aggressive, preemptive action than i think they will come forward with. manus: later in the week, the fmoc minutes show policymakers getting down to serious business and are focused on inflation. jay powell promising to offset persistent undershooting of the 2% target to run above that for a period of time. the problem is that powell may no longer head the central bank when it comes to the time to

follow through on that vow. we got more with the global chief economist at societe generale. >> if we look ahead i would expect to see a further rate cuts from the fed at this stage. i think the trigger will be the economic data coming in, slowing pace of job creation, leading indicators on the pmi. i think that will feed into the decision process. if we look at just how low the fed will go, we expect that coming into 2021, we will see the range on the rate back to 00.25. one of the reasons for that is because we are building in this idea of a new undershoot-overshoot roll on the inflation side from the fed, which means it is not an exact science but it means we get about 50 basis points lower than we may have been otherwise if we were just mechanically applying

the old rules from the rule that is currently being communicated by the fed. i do think even in the short-term it gives us more monetary easing from the u.s. side. coming back to my previous point, i think monetary policy helps stabilize the situation. what i question is whether it can give us that lift off that we previously have been thinking about. previously, when you come into a downturn, the central bank eases policy, this helps credit constraints on various balance sheets and a helps increase the demand for credit. but also, importantly, by getting that strong lift down on the interest rate, you get that accelerating effect. i struggle to see how that is coming through at this point in time. i belong to the group of economists that think there is such a thing as a reversal rate , where if you get interest rates deeply into negative for a long period of time, it starts

to hurt the economy rather than help the economy. if you ask me where that reversal rate is, the answer is i will tell you when we have seen it. it is not something that any of us with any accuracy can predefine. i do think we are getting lower levels. i still think monetary policy is positive at this stage. just not that strong acceleration. manus: i am going to pivot to a reversale we hit rate with negative rates in europe at the moment? >> i think what we are seeing is a fragmented picture across your. the german rates and then there are the italian rates. it is a very different picture. what we have seen and i think this is an indication that we are getting closer to the reversal rate is we have seen a lot of noise out of the german financial industry. the larger managers there are warning us about the potential damages of those very low interest rates and negative interest rates as they persist

over the longer-term. keep in mind that the german banks will find it difficult to pass on the negative rates to their retail consumers. keep in mind that the pensions and insurance companies will also be struggling the lower the longer rate environment stays with us for. and a final point to the lower for longer -- it has been encouraging the hunt for yield. at some point in time, we can be concerned how much longer can you continue to sustain asset valuation that is mismatched with fundamentals but being supported by liquidity? manus: i am going to show you a greek government bond yield. we all lived through 30% yields. look at the 10 year government bond paper. back at 1.42. greece joined the negative bond club yesterday. is this madness or perfectly

acceptable logic? >> first of all, if we think about what is going on today, are we worried there is going to be a new debt restructuring in greece and to my mind the answer is no. are we worried we will see any kind of exit by greece from the the euro? again, my answer is no. as an investor looking at greece and a hunt for yield, it makes sense to go into greece at this point in time from the belief of those two questions. now, of course, if things start to deteriorate again, we could be in a different position. in the short-term, i think it is very consistent what we are seeing elsewhere. manus: up next, hong kong violence continues. is the city heading for a recession? this is bloomberg. ♪

manus: welcome back to the best of "daybreak, middle east."

0.3%, the number of the day in our size and scope segment on thursday. >> today's number is a forecast. 0.3% is the latest forecast from j.p. morgan for hong kong's gdp growth for the year. they are one of a number of economists forecasting growth of basically flat for the year which would be the weakest reading since 2009. if we are talking about quarter on quarter growth, it is likely or more than likely that hong kong has already fallen into a technical recession in the third quarter. we will get the numbers at the end of october to confirm that. we expect another quarter of contraction in the third quarter. manus: good to see you. hong kong suffered through crises before. the question to ask ourselves is what is different this time that it has gone on and on and what does it mean going forward?

>> one common comparable to make with the current situation when you look at the economic numbers is you go back to 2008-2009 and the financial crisis, and then back to the sars epidemic case. when things were bad, they were really bad. but when the crisis ended and the epidemic or the health situation was lifted, things went back to normal pretty quickly. in this case, the way people are looking at the situation, given how tense the situation is and the trade war, there is not a clear path to an ending scene. if there is no solution, there is no endpoint and there is a hard way of seeing an end quickly. manus: you can catch "daybreak middle east" right here on

bloomberg television 8:00 a.m. dubai time. do join us then. this is bloomberg. ♪

host: coming up on "bloomberg best," the stories that shaped the week in business around the world. the u.s. and china meet again to discuss trade issues. >> a remodeling of china's economy was never on the table. >> it is rather surprising that the chinese are here at all. >> the largest agreement that it has yet to be worked out. >> u.s. policy comes under fire as turkey sends troops into syria. >> it is been unusually high pushback from republican senators. host: the white house says it will not cooperate with an impeachment inquiry.