away are under one hour from market open in japan and south korea. shery: in bloomberg's new york headquarters, i'm shery ahn. --nne: sophie: welcome to "bloomberg

daybreak asia." ♪ thisr top stories wednesday, new questions about president trump's many deal that says china's higher purchases of agricultural goods depend on a reduction in u.s. tariffs. ♪ the imf cuts its outlook for the fourth straight time. and sterling reaches a new high on high optimism about a new brexit deal. ♪ shery: breaking news out of south korea. the jobless rate ticked up to 3.4% in september. the estimate was to gain from 3.1%, so the unemployment rate higher than expected. we have seen weakness in the private sector, south korea very exposed to trade tensions and slowing global demand, although we have seen passage of that extra budget in august, which

could provide support for labor markets, but so far september unemployment at three point 4%. australian markets just open. let's turn to sophie. sophie. sophie: sherri, shares in sydney are breaking ground, advancing fifth straight day, in tokyo the nikkei 225 open. it fresh 2019 high with valuations below the five-year average. for korean investors, aside from ok jobless rate, the be policy decision is on tap with a 25 point basis point rate cut expected, which could spur a rally in bonds. mccrory sees 10 year yields dropping as low as 100 basis points by the end of the year. kiwi dollar, fluctuating this morning, gaining one third of 1% after third quarter inflation beat

estimates but still came in targetedalling below a midpoint. the deputy governor said this morning there are reasonable prospects that the key rate in new zealand goes lower. looking at bonds, kiwi and australian debts tracking lower, a possible brexit deal adding to risk sentiment which overnight saw cable top 128, no trading from a near five month volatility jumps to the highest level since july 2016 referent -- brexit referendum. haidi: let's get you to first word news. theka: fresh doubts about trump many trade deal with sources in beijing saying china wants tariffs rolled back before agreeing to purchase american farm goods. china isld on -- told ready to start buying american agricultural goods as part of the phase one agreement, not likely to reach the 40 billion dollars touted by the president

and current circumstances. the house of representatives added to pressure on hong kong, passing a bill requiring an annual review on whether the city is sufficiently autonomous from beijing to justify special u.s. trading status. it also threatens officials who undermined the city's freedom. beijing desmet -- dismissed the move, saying it interferes with internal affairs. hong kong executive carrie lam delivers an address in a few hours. we will be there. turkey continues to send forces and armor into northern syria, despite calls for a cease-fire in its battle with the kurds. the u.s. imposed sanctions on three top turkish ministers and says harsher manners -- harsher measures are in the pipeline. washington's withdrawal of troops from the region has left moscow as the powerbroker. india's trade deficit lowered the the lowest -- narrowed to

the lowest in seven months in september as a downturn snap spending on imports. the gap between outgoing and incoming shipments was 10.8 billion dollars last month, down from $13.5 billion in august. global news 24 hours a day, on air, at tictoc and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm risk at bupa -- rikita gupta. this is bloomberg. deal: a potential trade and positive brexit talk gave bulls a chance to run, united airlines grabbing the spotlight after hours. su keenan has highlights. should we start with the regular session? off to aearnings got good start, layer in brexit and trade news, analysts say it is what we like to see. take a look at the snapshot,

health care stocks among the leaders, treasuries pressured lower, that had a lot to do with the risk on backdrop spurred by the report from the u.k.. let's go into the bloomberg, because the brexit relief rally could be seen. look at the yellow line on the chart we are pulling up. it can be seen in np futures, which seemed to rise with the currency charts out of the u.k.. let's look at big earnings, because as one fund manager said, you have the markets obviously responding well to all the news, earnings and geopolitical, banks kicked it off, j.p. morgan, undisputed leader in the credit field of banks, it is trading -- its trading revenue rose 14%, almost double the gain predicted. that was enough to boost the stock to a multiyear high intraday. wells fargo's ceo said they hope to do better on the cause front.

goldman sachs turned in revenue than.92 billion, much more expected. other earnings, blackrock climbed on solid results. unitedhealth group beat analysts' invest -- analysts' estimates and beat the full year as medical costs table i's -- as medical costs stabilize, and johnson & johnson rising as a result. a positive first run for a lot of these companies. : but not positively continuing after the bell, at least two companies raising outlooks. su: let's go to after hours, sizable gains that will likely translate into wednesday's session. sleep number, maker of mattresses, record earnings, you can see the big boost. ual boosting its outlook yet again. the airline says it is ahead of pace for 2020 earnings. the cost of outlook is slightly exceeding forecasts, because

they are seeing stronger travel demand, lower-than-expected fuel prices. take a look at sleep number. they announced record results, net sales grew 14% with a 10% year-over-year. i don't know if we have a sleep number chart we can show you, but that was a very positive result for that company. su keenan, thank you. joining us now is northern trust see il bob brown to discuss market moves. bob, great to have you with us. cio bob brownust to discuss market moves. we have seen financials rally, even though it was a mixed bag on earnings. chart on the bloomberg shows up financials seem to have broken out of their trend. i wonder though, given we are in this fed easing cycle, can you fight the fed? plenty of people are concerned about the impact of lower net interest on banks, but we think that is probably discounted. when you look at the valuations of banks, the action today is a

good example that many people went into the earnings season expecting almost an earnings recession. we think that was too pessimistic to expect one letter loan to cores of negative year to year earnings growth. the quarter on quarter growth for q4 should be any easy comp and negative expectations from the flat to lower yield curve is probably discounted in financials. when you have strong earnings coming from firms like jp morgan, it caught people by surprise without a doubt. shery: when you are in this lower for longer rate environment, where do you go searching for yield? what are your thoughts on where we can find best value in the most attractive sectors? bob: we are looking for high-quality companies and those that are interest-rate sensitive in particular. we like global reads, global listed infrastructure, but more broadly we still favor u.s. equities, high-quality u.s. equities that have business models that have very impressive

positions in their industries, such as jp morgan, they are absolutely the place to be. in this lower for longer, lower growth environment, it is not an environment that is forgiving for all companies. you have to think about those companies that have dominant business models and that can't survive and thrive and a 1.5 percent to two port -- 22% growth environment -- 1.5% growth environment to two point % growth environment. but that is not something we are seeing. see interesting reaction to positive news coming out of brexit. is this a bit of fatigue from the big headlines? or is the market range bound for a while and looking for a reason to break out in this late cycle? bob: we have a modestly overweight risk across our

portfolios. the risk for investors is that they focus too much on risk scenarios instead of the best case for the next year. in our mind, it is that the u.s. does not have a recession, grows about 1.9%, earnings remained low, fed remains accommodative. you are in this global easing cycle, earnings grow at mid single digits. that is not a bad environment for risk assets. so when the bad case does not get realized, that is, a temporary truce and trade, brexit doesn't seem to be falling apart, they are upside risks to this market as well. people keep waiting for something to go wrong, and they are not thinking enough, and our mind, about things going right or things even being ok. and then they forget them before they know it u.s. equities are up almost 20% for the year, and that is a big miss. really making the u.s. economy oks the strength of the u.s. consumer. you believe that continues to be the driver keeping the economy

away from recession? bob: absolutely. the consumer, not just in the u.s. but elsewhere, has been a strong level of support. and we think that continues, low unemployment will drive consumption. and the longer that people are employed, the more confidence they are going to have. saving rates are actually pretty high, so the cushion, the wherewithal consumers are building up, is increasingly getting larger and larger every day. the mending factoring sector without doubt has been weak. there are certain parts of the u.s. economy, the manufacturing sector in particular, probably feels like a many recession, but you can't extrapolate small, micro parts of the u.s. economy more broadly into a 21 trillion dollar economy. the reality is, the broad, u.s.-based consumer part of the and theis doing fine, risky as investors forget that basic fact.

haidi: northern trust ceo bob browne, sticking with us. still ahead, will we see a brexit breakthrough? negotiators are nearing a draft oil that could come as early as today. cut, bank of korea set to its key rate in the next few hours. a morgan stanley representative joins us. this is bloomberg. ♪

♪ shery: thisshery: is daybreak asia. i'm shery ahn in new york. haidi: i'm haiti stroud-watts in sydney. northern trust released its five-year outlook forecasting global market activity and market returns for an extension extensive range of asset classes. at itowne is here to look

with us. a lot of assumptions from the past five years that we have already started to see globally and thematically in terms of asset classes, equity, below longer-term averages, mildly positive yields when it comes to fixed income, real assets more of the same. alternatives may be looking more interesting. where do you put your money? if we are still on this search for yields, search for value over the next five years, what is looking good? bob: it is important not to be too bearish. many peers in the industry forecast high probability and a level of confidence and we don't understand that -- a recession is right around the corner. that is a huge bet, a huge opportunity cost for investors inking something is going to go wrong, instead of the more likely scenario that it is more of the same. the two largest economies in the world, china and the u.s., will slow down, but we don't think that they go into a recession. it is a risk, but nothing more

than a risk scenario, scenario where the u.s. rose at 1.7%, which is our forecast for the next five years, and yields remain low. we think the fed will bottom out at about 1% on fed funds, not zero. we are not forecasting negative rates. can it happen? absolutely, but that is a risk scenario. given our view of moderate growth, the u.s. as well as china avoid a recession and central banks remain accommodative. you want to be fully invested but diversified and focus on interest rate sensitive equities and high-quality equities. we remain overweighting u.s. equities. we think our investors should look at global reads, thinking about asset classes and companies that benefit over a long duration of time from lower rates, and if you buy high-quality commercial real estate if you are an individual investor, not only do you get steady income, you get a business model that actually benefits from a lower rate environment.

these are things we encourage investors think about. if we assume some of the geopolitical tensions get cleared over the next year or next few months, and we have super accommodative monetary policy globally, is that upside benefit for emerging markets? of: we have this theme irreconcilable differences. that is a big impact, not just on emerging markets in china, but the u.s. as well. and that is the idea that this trade tension between the u.s. and china is not going to disappear. there may moments of temporary truce, such as what we have seen last week. end investors forget at their peril what the upside of those truces mean for the markets. but we are not going back to where we were free president trump, pre-u.s. evaluation of the china-u.s. relationship. we think boast companies are

going through a discovery process on what the new equilibrium is, not just in terms of trade, but in terms of geopolitical relationship. it is going to take time for those two governments and markets to figure that out. but for now, the next year or so, we think markets are used to the idea and have found a market equilibrium of ongoing tension. we don't think markets expect tariffs to be unwound, but they are probably not expecting things to get worse. so they continue as is, that is probably pretty good for investors. what we worry about is what we call tariff proliferation, that the u.s. starts going after europe and other major economic blocks on the trade front. that is a risk scenario, not our base case. the base case is that markets get used to this ongoing tension. that will lead to lower growth. interesting in your five-year outlook that despite brexit drama we continue to see, you put u.k. equities

return outperforming some countries. why? by: the part being driven valuation, the starting point is important for any investor who is taking a long-term view. you could buy a really high-quality asset, but if you pay too much on day one, you are not getting a good return. so we think there is value there. we think that a lot of bad news, over a five-year horizon, is absolutely discounted with regard to u.k. equities and even european equities more broadly. we are not expecting a hard, really ugly brexit though. that is an important caveat with regard to that forecast. if we are going to be wrong about a hard, ugly brexit, we are going to be wrong about that forecast. but it seems that whenever we are on the cusp of that happening, both sides pullback, basically they know the consequences of that economically as well as for the markets and socially are so severe. looking through your

report, the climate risk theme really jumps out, particularly being in australia and this market in particular. are there missed opportunities that you see, potentially? bob: i'm glad you used that word. we think there are both opportunities as well as risk. there will be both winners and losers. what we are trying to point out years,s that over five however, in anticipation of longer-term damage to the climate, that is absolutely a factor over the next five years. you have to think about the potential of continuation for subsidies over -- subsidies for electric cars, carbon taxes, pro-or anti-energy policies, more broadly. but it is important to highlight with regard to this transition risk that it is not only going

to be a one-way street. you have to think about the impact on the politics. in a low growth environment, voters will be as concerned about job security as they are about the long-term consequences of climate damage. politicians are going to have to bob and weave with regard to where they are in the cycle politically, do they need to focus on job security or focus long-term on resolving the issues surrounding climate change? won'tnners and losers necessarily be the same over certain periods of time. they're going to vary depending where we are in the political cycle. shery: bob, thank you, bob browne, northern trust cio. bloomberge to come on daybreak asia. this is bloomberg. ♪

♪ watching daybreak asia. eu officials say negotiators are closing in on a draft exit deal

and are optimistic of a breakthrough in coming hours. the pound surge on these reports, climbing to a near four-month high. let's get more with katie. ,he chart on the bloomberg surging above the 200 day average. is there room for a further rally here on out? at 127, therere is an eye on 135 is a deal -- if the deal is reached. missoula was looking out 140, so there is room for rally, especially since the market is short sterling. as the shorts come off, you can see the rally find another gear, but it is definitely important to watch any response from the irish government. that is what kicked off last week's rally. it has been an incredibly strong week for sterling. but a lot of this depends on the irish government's response. haidi: how are traders positioning for this week? : implied volatility, look

at one week of implied volatility in sterling, it is at its highest level since after the brexit vote three years ago. that shows this market is on edge and in either direction, there could be huge moves depending on what kind of deal, of draft we see. but if you also look at ---month options, shery: when you talk to traders, what do they tell you? do they even want to trade this? when brexit started, nobody could make calls on what happens next. katie: it is definitely not for the trade of heart -- for the faint of heart. the narrative for currency markets in the last 18 months has been, where is the volatility? if you are a day trader and

follow reddish politics, you love this. this morning the bank of england britain'sy said largest banks have neutral exposure to sterling right now because the weeks leading up to october 31 are going to be so volatile. so there is a lot of room for gains here, but there could be a lot of pain ahead. shery: katie, thank you. looking ahead at what happens to the pound is not easy, our bloomberg affects and rates reporter. let's look at business flash headlines. jp morgan stretching its lead over its wall street rivals, shares editing an all-time high after the bank reports's biggest rise in revenue from fixed income trading in almost three years and announces a surprising jump in fees from investment banking, storing its advantage over goldman sachs in more than a year. goldman has been focused on investing and sharpening trade execution. berkshire hathaway six permission from the fed to raise

its stake in bank of america above 10%, that is a level that often triggers regulatory review. the company revealed in july its holding had reached that threshold and is now filed an application with a number of assurances that it will remain a passive investor in bank of america. saudi aramco may have to pay as much as 450 million dollars in fees to advisors working on its upcoming share offering. we are told a group of about 20 banks are off -- are involved in preparations and the fees would represent around 1% of the $40 billion aramco is hoping to raise in the ipo. ♪

that is usually important this is a durable solution because the negative impact of these trade policies are coming through confidence of facts. if we don't think there will be a durable solution, these effects continue to have very weak manufacturing, very weak global trade, and we need to stop that. >> technologically, you are going to correct more and more. targeting or protect is. -- to the 21st century.

>> what we are seeing is day-to-day tit-for-tat which is a normal part of any negotiating situation. you have more trade on certain this are going to that. i think we want to take out insurance against these risks and the idea that the trade war might morph into some more serious -- our earlierof guests on global growth concerns including james bullard. stay tuned for our exclusive conversation with him in a few minutes. despite the somber outlook from him and the imf, asian stocks can dictate a positive key from -- cue from wall street. shares are rising for a fifth day.

they are tracking slightly lower early in the asia session paid with risk sentiment warming up, bonds are falling. the again just holding a five day drop near a 19 week low. rideid the dollar-yen can out selling orders and could recover to the 200 day moving average around 109.5. checking in on the kiwi dollar, it is hovering around three after reversing earlier loss on the inflation beat, paring its earlier gain after the rbnz deputy governor said lower rate may still be needed for new zealand. the kiwi outperforming the aussie dollar this morning, haidi. >> sophie kamaruddin in hong kong. more clouds are gathering over china as 44% of companies estimate weaker earnings recorded. that figure has grown the worst which reported a deterioration. bloomberg economics forecasts saying the economy slowed from

6.3% in the first half. the house of representatives has added to the pressure on hong kong government, passing a bill that requires an annual review of whether the autonomous from beijing to justify special u.s. trading status. the bill threatens sanctions against officials who undermine the city. beijing dismissed saying it grossly interferes in china's internal affairs. hong kong chief executive carrie lam will deliver an annual policy address and ours. we will be there to bring you the very latest. jumped as u.k. and european union negotiators be closing in on a new draft brexit bill. officials in brussels they also not concluded and there will be issues but there are clear signs that tech is being ready. they want to present wednesday ahead of the leaders, it clear that sent carolyn to highest

performance. indonesia posted a surprise trade deficit in september as trade war and global slowdown to weigh on the economy. exports contracted for an 11th consecutive month, following iphone 7 percent from a year theier but not as much as six point 5% decline forecast in a bloomberg survey. that last a deficit of one to $60 million versus of more than $100 million surplus. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. shery: thank you. back to that big exclusive, st. louis said president jim bullard is making the case for more rate cap. he told us he thinks the fed should consider additional insurance to. -- insurance cuts.

>> i think we moved a lot in the last year. if we were sitting here a year ago, we would have been top about the raising rates 2019, not lowering rates. instead, during january and february, we we were taking the interest rate hikes off table and then getting into june, july, august to september, we started talking about reducing rate. this shift in monetary policy in the u.s. has been dramatic over the last year. i would say 125, 135 basis points, not just for 50 basis points that we have had. so one part of what we need to do is take stock of where we are, but i think also, we have to consider additional insurance in the meetings ahead. >> should the fed be more aggressive than the risks to the economy? >> if you buy the argument i just made, we have been pretty aggressive. normally, you would sing with long and variable lags and

policy, that it would take a wild for those things to have an impact on actual hard data in the u.s. i would expect those kind of effects to come online during the second half of 2019, the first half of 2020, and you are seeing some of that in housing markets, where the financing activity and other things have picked up. >> you dissented in favor of a half point cut instead of a quarter-point cart. >> -- click. >> -- cut. >> i do not want to prejudge the meeting. let's get to the meeting and make a decision there. guys fix the pain and the agony of trade war? question athis little earlier today also, but obviously, we cannot do anything direct about trade, but we do have our mandate to maintain

high employment and low tolation, and we are trying do the best we can to take on board what is going on with the trade war and other risks that the global economy and to economy, and conduct the monetary policy that will help us meet our objectives as best we can. labory, we have a great market, but the inflation side has been somewhat weak. we have been below target. inflation expectations remain below target. i would like to re-center inflation and inflation expectations back at our 2% target. i think that would be a great outcome. shery: our exclusive conversation with james bullard. take a closer look at how the trade war is affecting global growth in monetary policy p or we will bring in the morgan stanley warbler economist. we have the imf making a fifth straight cut to their 2019 growth forecast. the data has been disappointing. we had domestic activity

indicators to come on the second part of the week. if the fed -- can monetary policy, as extraordinary and pushed to its limits and we are seeing, can it make up that detriment the trade war? >> if you look at what is happening, global growth or growth in asia, the reality is rose has been slowing down in slow motion. i think monetary policy easing will help to provide a growth cushion, but the reality is, for recovery into 2020 fiscal policy is probably what will be the more effective policy tool. happeningk at what is in asia, fiscal easing has started five it is in china. specifically in korea. we think it will have to step up more for us to see recovery to overcome what is happening on the trade tensions side. shery: what is going to drive

that recovery? i am looking at the expectations we have for chinese gdp coming in at the end of the week, and that is going to be weak as well. of the world seems to be slowing down. who is going to pick up the slack to drive the recovery or is this just cyclical? seeing think we are both a cyclical slowdown as well as a structural slowdown. the growth outlook will depend on the interface between trade tensions and policy easing for us to see a more evident recovery. there has to be a sustainable resolution on the trade died and more policy easing, so we are not arguing that using so far is not affect. we are merely are given fact that if you look at policy easing we have seen so far, the size of easing is smaller than what we have seen in those cycles. to the extent which policy easing is not coming through in a preemptive way, coming through

in a reactive way, even as gdp expect,s what we recovery we expect among we would see it going forward and it will probably be a mild one. ultimately, it will hinge on those two factors. shery: especially when it comes to the pboc, when it comes to smaller measures for monetary policy. can we expect them to do more if their economy slows down even more dressed -- drastically? deyi: if you look at what is happening on the monetary policy and an fiscal front, it seems like a difference in this easing cycle is the heavy lifting is on the fiscal side. there has been some monetary policy easing that it has been relatively cautious. we do not expect a lot more cuts. we do expect fiscal easing to calm more evidently. if you look at the forecast, we expect that reached him .2% on gdp this year. 7.6% of gdp last year.

that is 2.6% widening in terms of policy. while we expect policymakers to do this on the fiscal front, earlier this year, fiscal easing was very much centered on tax cuts. corporate tax cuts. that has not really had a very relative impact on growth because we have a lot of these tax cuts which were saved rather than spend. going forward as policymakers find the issuance, we suspect they will focus on incremental. shery: we really have not seen that much spending in europe where they have budget goals. we have the new imf chief saying that if we do see a deeper slowdown, perhaps we will need lowball, coordinated fiscal stimulus. will we get there? deyi: so i think the thing about this cycle is it has been

slowing down in slow motion. any policy easing we expect to see will very likely, in slow motion as well and the reason for that is because given the fact that the growth slowdown is caused by trade tensions on which policymakers do not have 100% visibility or predictability is really difficult for them to assume a certain outcome for policy easing. i think he will probably need to see more downside risk before we get coordinated policy easing on a regional or global scale. saying thatave been the slowdown globally has been playing out in slow motion. if there is a resolution to the trade tensions, will be recovery be in slow motion as well? i am wondering how long it will take to restore animal spirits. deyi: i think the way we look at trade tensions is if you look at how things have evolved, the pendulum has been swinging

between temporary escalation and de-escalation but we do not quite get to the extreme ends of spectrum. we do not get to a stage whereby there is a sustainable resolution just because of the fact that there are some differences between u.s. and china side which we think is not clear to us whether there's been any progress in terms of reconciling these differences. now at the same time, we do not get the most bearish outcome, which is one of sustained escalation. we get that either because the u.s. or china hits a threshold. we have seen policymakers reacting to asset markets in the past. if that is the case, then the slowdown has been in slow motion which will also mean policy easing is in slow motion and any recovery we could expect to see going over it is very likely to be a very mild one. if we do get to a sustained resolution on the trade side, that is what will set the stage out some more evidence,

recovery, and a stronger recovery. it is not clear that we are there yet. what we have seen over the weekend seems more like an uncertain pause, so we will be watching out for what happens in the run-up to the aipac meeting. shery: deyi tan is sticking around, morgan stanley asia economist. we have a response from the hong kong government when it comes to the u.s. house passing that human rights and democracy act on hong kong. now, they are expressing regret over the passage of that legislation as well as another act in a resolution on hong kong. the house of representatives of the united states congress. the government spokesperson saying since the return to the motherland, hong kong has been exercising -- a high degree of a autonomy. this comes after the u.s. house passed that legislation along with three other measures denouncing the human rights and

democracy issues in hong kong. we have plenty more to come. this is bloomberg. ♪

shery: shinzo abe speaking in parliament in japan, saying that japan will be releasing $6.5 million to go towards typhoon relief as one of the most powerful typhoons are in decades damaging to infrastructure as well as causing some 43 deaths. speaking in parliament, saying 710 million yen from reserves will be relief, for typhoon $6.5 million. shery: we are awaiting the bank of korea rate decision after the unemployment rate picked up to 3.4% in the month of september. let's get back to the morgan stanley economist, deyi tan. we have the unemployment rate higher than expected.

cpi numbers recently dropping into contraction for the first time ever. is a rate cut assured at this point? >> we expect the bok to cut rates by 25 basis points today. this is really predicated on a few factors. if you look at the last meeting, there were two votes for a cut. whenever there's two or more for a cut, there is a more than even chance of a cut in the meeting, which is today. the other thing to note is the macro outlook, as you alluded to right now, is not looking that great for career. bok was expecting a second half recovery in their numbers but we think the macro momentum is going to surprise to the downside of expectations. export numbers were not looking great. thea is suffering from trade tensions. domestic demand undergoing adjustments as property markets slowdown and the labor market is not doing that well at this point in time. shery: we have seen the korean

won under pressure. will this exacerbate the financial imbalances already in place? deyi: even as policymakers think about protecting financial stability, the reality is protecting financial stability does not mean you continue to maintain a tight policy. it means you need to ease to optimal levels to ensure gdp growth does not do too much so your debt to gdp ratio does not continue the rise in an uncontrollable way. bear in mind that they have been checking below the inflation target points of 2% for quite a while now, so we'll rates in career are not exact -- rates in korea are not exactly low. theproductive part of economy can still borrow. fiscal easing will need to come through to provide for the support to the economy as well. shery: again, it is where we

,ant to see fiscal easing fiscal infrastructure investment and easing to be doing the heavy lifting in this economy. deyi: we do want to see that. i think the good news is that if you look at the budget proposal for korea, they are expecting a wider fiscal deficit of 3.6% of gdp versus 2.2% for this year. based on our estimation, all else equal, 0.4 to 0.5% for gdp growth. it is fully implemented. what we will be watching out for at this point going forward is how much this gets approved because opposition parties have said they tend to water some of this down. they called the supplementary budget earlier this year. it has been watered down. the other thing is the execution front because what we have historically seen as the fiscal deficit in reality tends to come

in more narrow than what was planned. we need to get all of these factors cranking to see a recovery in the case of korea which is suffering from most structural and cyclical headwinds at this point in time. shery: always great to have you. deyi tan, morgan stanley asia economist. we are expecting the bank of korea decision potentially within the next hour or so. breaking news crossing the bloomberg when it comes to the ipo environment in australia. latitude. the consumer lender is postponing its initial public offering. we had reports of that yesterday prior, but the company has confirmed it is withdrawing its ipo. the ipo would have been the largest for australia so far this year. they could have raised 1.1 billion aussie dollars. we will be getting more details on that. they have withdrawn the plan for the ipo. this is bloomberg. ♪

shery: this is "daybreak asia." i am shery ahn in new york. >> i am haidi stroud-watts in sydney. work is said to be in talks on a potential debt deal as the company looks to deal with a limiting cash crunch. let's get over to our asia tech executive editor, peter elstrom. what is the latest with this wework dibacco, and why are the numbers changing? debayi tan -- this wework cle, and why are the numbers changing? peter: the big issue is that the company is running low on cash. they really need a cash infusion of some sort. one of the offers on the table from j.p. morgan, this is a debt package of $5 billion. the competing offer is from softbank, a big shareholder in

the company. the second package would give softbank control over wework at this point. they are working to these alternatives. j.p. morgan's feels interesting because you're kind of piling debt on top of the deeply indebted company and the interest rates kind of reflect that additional risk they are taking. in some cases, our sources are telling us the bonds would carry a 50 been said -- 15% interest rate, reflecting the risks the company has. the board is working its way through. we expected that they are going to make progress in this in the next few days. we may be able to even get a decision later on this week. are in the meantime, we hearing that softbank is doing its own groundwork to restructure pit what are the implications of these latest talks on the shareholder? peter: first softbank, this is a big deal. this is one of the startups that it put the most money in. has spent very significantly

on this company. softbank wants to take stakes in the big startups around the world. they have a big stake in uber, the ridehailing company, and some of the other ridehailing companies globally. wework is one of the most significant bets. it has proved pretty risky. some investors have been -- about the profile. they rent out that space in the short-term. wework trying to go public, they went through this botched process. softbank has a lot on the line to make sure the company survives and is able to get in a kind of financial shape they need for an ipo. softbank is in the process of raising a second big investment fund. the first was 100 billion dollars. softbank would like the second one to be bigger but they kind of need to show they can deliver on some of these big deals. haidi: peter elstrom, thank you so much for the latest on wework .

markets open in tokyo and seoul. that's turn to sophie. -- let's turn to sophie. sophie: s&p has taken on a cautious term. treasury futures trading flat. the nikkei 225 could open at a fresh 2019 high. taking a look at some stocks we are keeping an eye on today, we are keeping an eye on takeda as they agree to sell to a swiss firm. the drugmaker on watch with a deal to sell three products in asia for 9.6 billion yen. and another is -- the bank of korea is expected to cut rates for the second time this year on slowing inflation and growth areas macquarrie is favoring korean bonds, forecasting the 10 year yield dropped to as low as 1.1% by year-end. macquarie recommends increasing the duration of korean bond holdings with the prospect

of rising supplies, which may be temporary. haidi. haidi: coming up on the next hour of "daybreak asia," governor quinn big joins us to clegg joins us. this is bloomberg. ♪

haidi: a very good morning. good evening from new york, i'm shery ahn. selena: welcome to "daybreak: asia." . haidi: our top stories this wednesday, the imf is cutting its outlook for the fifth straight time.

starting reaches a four month optimism about her brexit deal. a new draft agreement could be close. lam preparesrrie her annual policy address. there.live japan and south korea coming online. let's go straight to the market action with selena. the asian expected, markets are being pushed higher optimism andnings brexit optimism that is prevailing. to nikkei is going up franchise with almost every sector in the green led higher by the financial sector and the industrial sector. we are seeing some pressure on the dollar-yen after testing those highs from the trade optimism last week. the dollar-yen could head toward 110 by year end if the fed inns

further easing. this positivity despite the imf cutting its global growth forecast for the fifth straight time. korea, the cost be on its third straight day of led higher by the utility sector. muted reaction from the unemployment data so far. a are seeing somewhat of positive reaction despite the unemployment data reaching higher than last month. economists forecasting 25 basis point cut, if the cut goes as planned it would take the rate back to record low from a few years ago. by the trade war and the traits that would japan. taking a look at new zealand, the risk on sentiment continuing , with the fourth straight day of gains.

inflation gaining 1.5% from a year earlier, not exactly a blockbuster surprise. we did hear the central bank saying it shows the economy is in a good space though lower interest rates may still be needed. the new zealand dollar is paring back some of the earlier gains after the report. bert -- member in list saying inflation report could bring some relief. you the firstet word news. >> their fresh doubts over president trump's many trade deal with forces in beijing saying china wants terrace rollback report will agree to boost purchases of american farm goods. were told china is ready to start buying more agricultural products as part of a phase i agreement which is unlikely to reach the $40 billion touted by the president. the house of representatives has added to the pressure on the hong kong government, passing a

bill that requires an annual when the city is autonomous from beijing. it also threatens sanctions against officials who undermined the city's freedom. kong says it regrets the move. beijing said grossly interfered in china's internal affairs. the hong kong chief executive carrie lam will deliver her annual policy address in a few hours. we will be there to bring you the very latest. turkey continues to sin forces into northern syria despite calls for a cease-fire with the kurds. saying harsher measures are in the pipeline. washington's withdrawal of troops from the region has left russia as the dibacco power broker. moscow says it will not allow turkish forces to fight the advancing syrian army. u.k. andjumped as

european union negotiators seem to be closing in on a new draft brexit deal. officials in brussels say the talks have been muted and there could still be issues, but there are clear signs that a text is being readied. ahead of thursday's leader summit, it sent starting to its highest in nearly four months. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: the international monetary fund is not raising a red bird -- recession lack yet there ismake it clear a rising threat of a severe downturn. kathleen hays is here with the latest. was it as high as 3.9% at one point?

kathleen: four of those cuts in a year, and that is how much the trade war has been taking a bite out of growth. manufacturing, investment around the world. the chief economist at the international monetary fund spoke to bloomberg television earlier and she deftly put the trade war front and center as one of the major forces creating these downward pressures. she also suggested that a definitive agreement on trade is going to be part of ending these pressures. let's listen. that is hugely important it is a solution. the negative impact of these -- if we don't think there's going to be a solution, these effects will continue to have very weak manufacturing and global trade. kathleen: let's look at some of the big individual forecast major parts of the world,

starting with united states. in 2018 the imf thought it would , but it is down to 1.7%. growth,around potential encouraging the fed to start cutting rates again. clearly the trade war is what the fed has its ion here. europe had quite a dramatic reduction because 1.9% is what the imf thought growth would be. it is down to 1.2%. germany, many people think is already in recession, europe's biggest economy. this is a major driver here. it is an export driven country. china, we have been watching very closely. 6.6imf thought in 2018 percent. now the forecast is 6.1%. in keeping with what we've been hearing from economist honor show, 5.8% for 2020.

it is still decent growth, but for the chinese it is not good enough. said 2.5% is where the global recession starts. that is the gauge, and we are not forecasting that. however, she said policy mistakes have to be averted. hays joining us. we're speaking with several big names at the imf meetings including the philippine finance and the bank of international settlements gm. we are looking forward to those conversations. let's get to our guests here in sydney. sydney.s us now in before we get to the doom and gloom for of the imf downward vision and the global economic

some markets hitting their 2019 highs. gains just shyng of 2% and the nikkei, 1.5%. is it the time for japanese equities to shine? >> i guess so, and i think a lot of it has to do with the fact that we have public sentiment on trade. we are getting rumblings that maybe we will be part of a deal at the apec summit when the leaders meet face-to-face. it does usually render some sort of positive outcome. we have china saying they want to see the december tariffs rollback before they would sign any sort of partial deal. maybe president trump could make a concession if we see china make agricultural purchases before the meeting.

that is positive for the markets. we have optimism through global equity markets as well at the moment. haidi: this chart goes to why the imf is feeling optimistic as well, global expansion. we are at the end of the cycle but looking ahead to china gdp numbers this week, we are expecting the weakest quarter we have had and what has been a pretty terrible year for the chinese economy. -- with thee war trade war revolution fix this? away,t is the key take regardless of whatever partial deal we get, the concessions are not large enough. tariff escalation remain a very real risk for the market. on that basis we don't have the uncertainty removed when it comes to business and corporate

and picking up investment with theagain re-acceleration and global growth. that's something a partial trade deal is not going to be able to achieve. another key worry on our radar is the fact that leading indicators are still declining and deteriorating. ist means the hard data another key risk for the markets , the fact that we still have a slowdown ongoing and it is actually accelerating at the moment. we don't have the second derivative in terms of that deceleration of leading indicators pointing to a recovery at this stage. matterbut does that even at this stage when you have central-bank support around the world? bad news continues to be good news for the markets. storyt is one part of the and i think that is why we see

the s&p 500 still hovering around all-time highs, despite the fact that we have a global synchronized slow down this year. we still have a trade impasse between the u.s. and china and if we look at that relationship, it is fundamentally deteriorating, even if we get a partial deal we still have bilateral tensions escalating if we look at other areas, regardless of trade. that is one of the key factors like you say, we do have central banks becoming more vocally supportive and more supportive in actions. we have seen a multitude of central-bank stepping to the forefront in terms of monetary policy easing this year. when it comes to the fed, which is the big one to watch, it still remains behind the curve, in our opinion. neutral rate has tracks lower for the u.s. economy. that means on a real-time basis, the policy rates in the u.s.

remain too restrictive in terms of where productivity growth is at the moment. that means until the fed gets ahead of the curve, there is only so much they can do in terms of backstopping markets and confidence. shery: hold that thought, eleanor is sticking around. still ahead, we will check the outlook for starting and stocks with negotiator said to be posing in on a brexit agreement. chairman of the conglomerate that owns land rover said whatever happens, sometimes clarity is better than a desirable result. this is bloomberg. ♪

haidi: this is "daybreak: asia." shery: i'm shery ahn in new york. diving back into the u.s. market action, earnings are front and center one in, strong round of reports from banks and health

care giants help boost stocks to a four-week high. su keenan has the latest. we also have the forecast after hours. you see a company called sleep number that makes air mattresses. boosting the outlook once again. reaping the rewards of a turnaround plan, plus the cost outlook for this year slightly exceeds the company's forecast. lower fuel prices, strong travel demand and they are ahead of pace for 2020 earnings targets. you rarely hear that, and that's pushing stocks, the third quarter net sales grew 13%. year-to-date net sales with a very strong performance there. shery: su keenan with the latest on the markets. eleanor is still with us.

you mentioned earlier how stocks were just stuck in a range. this chart showing exactly that. we have really not been able to get to new highs, but we have seen the earnings season now kickoff, the bar has been lowered significantly. out?this be what breaks us unfortunately,k not to sound like a doom longer, but it could be the catalyst we think that brexit to the downside, in terms of the fact estimates for q3 earnings season still remain too high and the backdrop of elevated economic uncertainties, and the impact of tariffs throughout this year and the ongoing strong u.s. dollar. we could actually see the u.s. corporate report not match that

lowered bar that we see this quarter. then the biggest risk is also the 2020 outlook, so i think there is a huge risk that ceos come out and report a much more somber outlook into find -- financial year 2020. that is where the risk lies in the fact that we have at the moment consensus that estimates forecasting and acceleration of earnings growth throughout the financial year 2020. if we see the ceos come out and report a less than rosy outlook, and the fact that we have industries setting up at the potentially we have layoffs coming through the pipeline as well. that feeds into the stronger consumer narrative and that we won't see the uplift in earnings for 2020. that is potentially a big stumbling block for equity markets at the moment.

any time we have this doom and gloom scenario coming from some people, the optimist share the consumer sentiment. eleanor: when it comes to the u.s. consumer, it is important to note that the u.s. consumer is typically a very lagging indicator of the economic cycle. when we look at the labor market cycle, the corporate profit cycle as well, and a lot of people are likening this period 2015-2016 the acceleration and growth that we saw, but we are actually much later in the economic cycle this time around. we are later in the labor market cycle and it is hard for the consumer to sustain the level of spending that is need to support the u.s. economy.

slow and continuing to leading indicators continue to point downwards. flow: so where should the actually go then? eleanor: it's not that we are so pessimistic. we don't rule out and acceleration and growth next year. but the key takeaway is that it is too early yet. as you say in your question, the search for yield will be on going 2020. towe think there no reason sway away from that defensive position we have had all year. we want to maintain that until we see a clear indication that we will get that acceleration in growth in 2020 and have the recession risk off the table. i don't think we have crossed the rubicon in terms of a downturn where we can say we are heading straight for recession and it is all over.

but we cannot say we will get a cyclical upswing in growth. our message really is that we want to stay in the defensive sector. we want to be defensively positioned until we get clear confirmation that we will have a cyclical upswing in global growth. we don't think the fed or there yet because of their policy response. it's going to be moving target. haidi: eleanor is sick -- sticking around with us. coming up next, we will check in on the outlook for starting and u.k. assets as negotiators in europe work into the night on a new brexit deal. this is bloomberg. ♪

shery: this is "daybreak: asia." haidi: the u.k. and eu seem to

be edging closer to a last-minute brexit agreement. on oris it depends johnson winning the vote in parliament. i want to listen to some sound from one of the companies and the industries caught in the crosshairs of the brexit uncertainty. here is what he had to say. long, it'seen too foricult to keep playing too long. beally the situation should important from a separation point of view. we keep reiterating what is going to happen in the next few days. haidi: has a point when he says tariffs are the new normal and when it comes to brexit, as long as we know something with

certainty is better than having the best results. but it doesn't feel like we are that close to having anything in certainty. right, they he is uncertainty is paralyzing businesses and investments in the u.k. and pretty much the whole economy is on standby until we get a result on this brexit outcome. if you were to look at the last 24 hours of headlines and press and snippets we have received, then potentially you would be pretty optimistic on the fact that maybe were going to see a deal reach between european union and great britain. but i think history tells us -- the path to a deal is still questionable. there is still a great hurdle to be overcome. don't forget we have seen a deal reached one time before, but it was voted down three times in parliament. i'm not sure what sort of concessions boris johnson could have offered or the eu could

have offered that would mean something significantly different to theresa may's deal. is likely to be a similar rendition to something that has already been proposed. it would just be a version of her deal with lipstick on. that means is going to face that parliamentary hurdle. don't see that bmp on board with whatever is proposed by boris johnson, then we are not going to see it passed that parliamentary ratification hurdle. thehey bring some of european research groups, it the arithmetic just may not stack up. a little bittalk about the british pound. we have seen traders compact -- -- what ison how to the risk, there is a lot of risk

premium to remove if we actually get something pretty quickly. eleanor: 100%, if we do see something reached that does look like it can pass parliament, than certainly the british pound could actually become one of the top performers by year-end in such a short space of time. but i really think that where it becomes a treacherous trade is the fact that there is so much headline risk embedded in that trade that also the fact that the parliamentary hurdle is huge, and whether we could even see a deal reach between the eu and brexit. haidi: such a pleasure having you on with us, eleanor, here with us in sydney. will the fed cut again? we will have an exclusive interview just ahead. this is bloomberg. ♪ everyone uses their phone differently.

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haidi: breaking news on the bloomberg right now. china having a response to that hong kong legislation passed in congress, urging the u.s. to stop pushing forward the bill over hong kong. we are talking about the human rights and democracy act at the u.s. house has just passed. there is a similar bill in the senate. other measures have been passed in the u.s. house. we have seen the chinese government strongly opposing this bill as grossly interfering in china's internal affairs. china saying it strongly condemns the u.s. house's bill passage on hong kong.

this would be the human rights and democracy act that would establish annual reviews to determine whether hong kong is officially autonomous to actually grant it special trading status. we are getting a response from china saying it strongly condemns this bill. let's get a check of the other headlines. imf has lowered its forecast for global growth this year for a fifth straight time, citing a broad deceleration across the world as trade tensions undermine any expansion. saying global gdp will rise by julyown .2 from the projection. estimates for growth in advance economy such as the u.s. and germany were also cut back. narrowedrade deficit to the lowest in seven months in september as a downturn sapped spending on imports. the gap between -- between

outgoing and incoming imports was $10.8 billion last month, down from 13.5 billion in august. indonesia posted a surprise trade deficit in september as the trade war in global slowdown continue to weigh on the economy. exports contracted for 11 consecutive month, calling 5.7% from a year ago, but not as much as the 6.5% forecast in a bloomberg survey. it deficits.ft global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. shery: the st. louis fed president is making the case for more rate cuts, citing the trade war and other downside risk. he told us he thinks the fed should consider additional insurance cuts incoming meetings to deal with global -- growing

economic concerns. >> i think we have moved a lot in the last year. if we were sitting here year ago, we would've been talking about the fed raising rates in 2019, not lowering rates. instead, during january and february, we said we were taking the interest rate hikes off the table, then getting into june, july, august, and september, we started talking about reducing rates. the shift in monetary policy in the u.s. has been quite dramatic over the last year. 125-135 basis points, not just the 50 basis points we have had. we need to take stock of where we are, but i think also we have to consider additional insurance in the meetings ahead. so you are saying be more aggressive due to the risk in the economy? >> we have been pretty itressive, and normally

would take a while for those things to have an impact on actual hard data in the u.s.. i would expect those kind of effects to come online during the second half of 2019 and the first half of 2020. you are seeing some of that in housing markets, for instance, where refinancing activity and other things have picked up. think next time around that there will be .5 cuts? >> generally speaking, i would like to do more, but i don't want to prejudge the meeting. let's get to the meeting and make decisions there. >> can you fix the pain and agony of a trade war? i got this question a little earlier today, but obviously we cannot do anything directly about trade. but we do have our and eight to

to maintainmandate high employment and low inflation. we are trying to do the best we can to take on board what is going on with the trade war and other risk in the global economy and to the u.s. economy and conduct a monetary policy that will help us meet our objectives as best we can. aankly, we certainly have great labor market, but the inflation side has been somewhat weak. we have been below target and inflation expectations remain below target. i would like to re-center inflation and expectations back to the 2% target. i think that would be a great outcome. our exclusive conversation with james bullard, reminding us there's only so much central banks can do to fix the pain and agony of the trade war. highlighting the fact that inflation has not quite been on target in the u.s..

we are seeing green across the board here, very risk on sentiment today. earnings expectations better than expected with the nikkei up 1.64%, opening at 2019 highs, with almost every stock in the index in the green with the health care sector leading the gains. the yen is slightly strengthening today. i want to highlight some research expecting begin to reach 110 by year end, arguing that the fed may stop its monetary easing later this year on the back of better than expected data coming out of the u.s. housing market. we are just getting more reaction when it comes to the

u.s. supporting or passing this bill in the house. china responding, saying china will tally eight over the u.s. bill on hong kong, saying china strongly condemns the u.s. house bill passage on hong kong and that the united states should stop pushing forward that bill on hong kong. shery: breaking news coming from the financial times, saying that eu regulators are expecting to announce on wednesday, ending measures to force broadcom to suspend anticompetitive behavior while it is being investigated. the u.s. chipmaker and brussels are expected to fight on the case all the way through the european court. that is coming from the financial times. the indian conglomerate that owns jaguar land rover sees the new normal for the auto industry. said it is better

to be optimistic amid all the global concerns. looking attter to be the glass half-full going forward. tensions, youade have the u.s.-china issue and then you have the hong kong issue. is,fact of the matter nations are getting more protective. [indiscernible] you agree this is something every executive needs to grapple with privet of the trouble spots you highlighted, which is the hardest to navigate through, to really get your head around? to call how it

might end up so you just have to kind of work through it. >> sometimes it is better to have clarity then a good result. for example, with brexit, it has been too long. one needs clarity, ideally. it is very important from a separation point of view. is going toing what happen in the next few days in the u.k. china is a really big market. we are looking forward to things start looking up.

how frustrating can it be that in an age of multilateralism and technology we seem to be building up barriers, turning to tariffs rather than open borders and trade. do you worry that it is a shift of goods, -- for good, or is it temporary? think it will go up and down, but the shift is there. fundamentally, you are always discussions. from a digital point of view you have technological efforts. you have to deal with these factors as you move forward. you have to look at the relationship with the key countries.

doing business with the u.k. or the u.s. is one thing. if you are a chinese company in business with the u.s., these things keep changing. tata chairman speaking to caroline hyde and scarlet fu we're getting that china, theom ministry of foreign affairs in china saying that the u.s. should not be pushing that bill and should stop pushing for that bill over hong kong, strongly condemning the u.s. house bill passage on hong kong and that china will retaliate. the yen starting to strengthen after a streak of a day -- days of losses. lots more to come. this is bloomberg.

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>> i and my team have not ignored any views expressed on this very important piece of legislation. the council will halt its work in relation to the bill. shoulderlly have to much of the responsibility. protesters stormed into the legislative council building. this is something we should seriously condemn. there are still lingering doubts about the government security. i will reiterate here there is no such plan, the bill is dead. the choice of not resigning is my own choice. the government will formally withdraw the bill, it is obvious containment this

extends far beyond the bill. haidi: some comments from the hong kong chief executive, carrie lam as she prepares to deliver her annual third policy address later on today. in the meantime, china is threatening to retaliate against the u.s. after the house passed a bill and is supporting the pro-democracy protesters. sophie, we just heard the reaction remarks from the ministry of finance, strongly condemning passing the bill to the house and saying that china -- the u.s. should not pass the bill or fear retaliation. house: with the u.s. passing 304 measures to support protesters in hong kong, it certainly adds pressure to carrie lam and her supporters. chinese officials have already pushed back, saying there will be retaliation. it remains to be seen but that will be.

the hong kong government this morning in a statement expressing regrets over the passage of those measures by the u.s. house, reaffirming that hong kong is administered by hong kong people. it is important to note that while those measures have passed the house, the bill that would review the status with the u.s., that is pending a vote in the senate and that has yet to be determined as to the timing. back to the here and now in hong kong, head of the 11:00 a.m. policy address by the chief have seen business as usual with traffic on going here. with respect to the 200 initiative set to be announced, you can expect the professor will not make an appearance with the economy very much top of mind. shery: what are we expecting carrie lam to say?

sophie: in the preview on tuesday she noticed that housing , welfare issues will be top of mind. seel media reporting we may measures such as an increase subsidy for public transport, first time home owner incentives , and with thed sectors impacted the most such as retail and tourism, we expect theures like rent on top of package that was announced back in august which needs to be passed during this session. as for longer-term stimulus, we expect a step up in infrastructure investment as previously signaled by the financial secretary. about 1.1 trillion hong kong dollars are roughly $148 billion

u.s. in the war chest, which has remained a key pillar for the city's credit rating outlook. shery: thank you so much, sophie. let's bring in our guest, a professor emeritus. we have heard china threatening measures and retaliation if the u.s. passes that hong kong bill. we know that legislation is also up for a vote in the senate, the house has already passed it. do we know at this point what kind of retaliation we could see? will it be further linked to perhaps trade talks? david: i think china will try to keep it somewhat separate from the trade talks. you heard your own reporter just say that we don't know exactly what kind of retaliation. in some ways this is interference in internal affairs.

but for hong kong, it is not such a big deal. the bigger deal is the hong kong policy act which was passed before, which gives hong kong special privileges in terms of technology transfer. it treats hong kong like it was still a british colony, with a good relationship with britain. that is one thing hong kong really has to avoid, which is getting the u.s. congress to withdraw the hong kong policy act. at that point we have not seen that happen. this is kind of windowdressing for the united states, for the u.s. congress should try and show it actually can do something about the protests, but i don't see this is really that big an issue. a conundrumuch of is it for the trump administration, given that although it might be symbolic, it does not make the mood between these two any better when they are at these crucial trade negotiations? david: in the united states, you

have separation of powers. you have congress and you have the president, and the administration is trying to solve the problem. know how well the president gets along with ted cruz and people in the congress who are really pushing these kinds of policies, but i don't think -- as i said, i don't think it is that began issue. china wants to make this deal, i think, to a certain extent. both sides want to make the deal, i think. can findhink, if they a way to make a deal, they will make a deal, and this won't break it. we are getting the latest announcement from south korea. the bank of korea has cut its key interest rate to 1.25% from 1.5%. this is matching a record low that we have not seen in years.

now we are seeing they have cut their key interest rate to 1.15%, as it was widely expected. we have seen the south korean economy decelerating, not to mention that there has been more room for cuts as consumer price inflation has fallen into contraction territory for the first time ever. what they key to see say about the growth forecast. the be ok cutting key interest rates to 1.25% as expected, by 21 economists out of 25. forre now seeing weakness the south korean won and the cost be getting .6%. ofdi: the global trend easier policy continues here in asia. let's get back to a look ahead at what we're expecting from the hong kong chief executive, carrie lam, as she delivers her annual address later on today. .e'll get back to our guest

you are still here with us, professor. i want to throw up a quick chart the unenforceability issue in hong kong. 90%,prices have been up despite multiple financial crises. we are expecting carrie lam to address these issues of livelihood and housing affordability. i'm just wondering whether that will go much toward appeasing the people of hong kong or appeasing the protesters, given that what they are asking for is more on the existential side of demand. for muchey are asking more political reforms, which she cannot give in on. it is not in her authority anymore. those are decisions that would have to be made in beijing.

the extradition bill, she had to get approval from beijing to pull that bill. she is talking about housing, and it is important that she do that. problem in thes first place. she needs a bold vision, a kind of looking at singapore and saying why is singapore stable? houses young people have and apartments, there parents have a good retirement package. there is a lot of money here in hong kong. she needs to get a good package, a new housing program, to try to make sure that most of the people in hong kong live in some kind of government housing and then still have some kind of private sector. she has beijing on her side on this, the resistance. the reason housing prices have been going up so steadily is the property tycoon's.

beijing doesn't like them very much these days. they played a role and now they want to be able to improve and resolve hong kong's problem, and beijing has gone after the largest property tycoon here. they put pressure on people to say they have a bigger plan. we will see if she can do it, but i don't think she has the focus at this point or the vision herself to really come up with a comprehensive program. but that is what hong kong needs. if she's not going to touch the politics, she really needs to come up with a major housing policy. and i'm afraid she's not going to do it. i'm just wondering, you brought of a comparison of singapore. can hong kong afford a meaningful correction when it comes to the property market and

with some of the tycoons you spoke about? the cusp of recessionary conditions. is in danger of losing its position ahead of singapore? has being the gateway to the mainland become a detriment rather than an advantage if you are an investor? david: if the level of instability continues, it's going to lose its position anyway. companies have started to move toward singapore, they are thinking about that. hong kong is facing a decline, there is no doubt. lots of issues where they need to pour the money in. the government has sat on money for days. they give out peanuts to people, just little pieces. it is time to be bold. she has got to do it, and i don't think she will. but you read all the newspapers locally, the south china post

said be bold. but it is not her personality. she would have to work really hard for beijing to do it, but they could squeeze the property sector. that's the way it goes. key there seems to be beijing. they don't seem to be too happy with the way carrie lam has done business. there has been a lot of speculation that she really can't do much because her hands are tied by beijing. david: on politics, her hands are tied, no doubt. but on economics, she controls the budget. her hands would not be tied. she would have to go in talk to beijing and explain why these policies are necessary. i think she would get a pretty good ear. as i said, beijing has articulated satisfaction with the property sector here, with

the property developers, and has called on them to do something. moment, ais is the good opportunity for her to do something. also her own legacy. her legacy right now is that she is the worst chief executive that we've had. she created the crisis and brought on the violence. does she want to go down through history as that, or does she want to go down as the person who solved housing problem in hong kong? if she would put forward a comprehensive package, even the young people would feel they have to respond to her. haidi: thank you so much for joining us, professor p. we are awaiting carrie lam's annual address. this is bloomberg. ♪ everyone uses their phone differently.

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welcome to "bloomberg markets: china open." i am tom mackenzie. yvonne: i am yvonne man. david: stories today, hong kong braces as carrie lam prepares her policy address. we are live at the government complex. speech comes amid tensions between beijing and washington. china is threatening to retaliate on human rights, calling it a gross interference in its internal affairs. growing doubts about the

health of the global economy. the i