sophie: good morning. i'm sophie kamaruddin in hong kong. we are under an hour away from market opens in hong kong and south korea. kathleen: good evening from bloomberg global headquarters in new york. i'm kathleen hays. welcome to "daybreak asia." sophie: our top stories this friday -- the u.s. and china say they will remove tariffs as a trade deal approaches, but both sides say negotiations are making progress. investors are not so sure.

disney leaps in late trade with quarterly profit topping estimates as "the lion king roars at theaters and theme parks stay strong. kathleen: let's take a look at how asian markets are opening. the asx 200, a little bit higher beenthe 6726, which had the biggest advance in three weeks on the market close yesterday. now to nikkei futures, a fractional move higher. there is uncertainty about the trade war deal getting done. that will weigh on japanese stocks. stocks had risen for a third day yesterday, but there could be a fourth, the kind of company that could benefit from this u.s.-china trade deal.

stocks are looking about a half point higher, a little bit of hope there, and of course, the s&p 500 -- why is it down? because it was up so much today. the s&p 500 hit that all-time high. from here, we will have to wait to see some fresh impetus for stocks to continue to rally. let's get to first word news now with jessica summers. jessica: thanks, kathleen. the french president has attacked nato, saying it is effectively dead leaving collective defense commitments in doubt. he wants europe to create its own military group rather than rely on the increasingly withdrawn u.s.. former national security adviser stephen rice says the u.s. has been alienating allies in recent years. >> we have squandered the many of those allies by denigrating them, by making

everything transactional, by failing to tell the truth on multiple moments every day. jessica: china has hit the pause button on its recent gold buying spree. -- purchases state level, unchanged from the month earlier. mainland stockpiles were boosted by more than 100 tons. beijing has been buying gold to offset the fallout from the rumbling trade war. ritual banks going beyond its own shores. it says it wants to become a regional hub for technology firms' advanced data expertise. the monetary authority says doing so would improve making services at home at another parts of southeast asia. the managing director says southeast asia presents a huge

opportunity for virtual banks. >> we see some of these players becoming regionally important, ahead, singapore wants to be a base for these players as they grow in the region. jessica: former new york city mayor michael bloomberg is again weighing a white house run next year with an advisor saying he is concerned the current crop of democrats will not be able to beat president trump. bloomberg had considered a run earlier this year but decided to instead support other democratic efforts. he is the founder and majority owner of bloomberg lp, bloomberg's parent company p or global news on air and at tictoc on twitter powered by more than 27 hundred journalists and analysts in more than 120 countries. the u.s. and china

have agreed to roll back tariffs on each other's goods in phases as they work on another deal. larry kudlow has confirmed bloomberg there will be concessions if the so called one accord happens, but there are also reports of resistance within the white house. senior trade editor sarah mcgregor joins us from fell a -- senior trade editor sarah mcgregor joins us from hell a l.a.ins us from the only people opposed to it apparently are not speaking publicly. what does this tell us? always divisions, always the hawks who want to go harder on china. they want to try to extract as much as possible and there are people like larry kudlow who are much more market focus, and i think seeing the stock market get a bump from a good news trade day is always a relief for them. that said, it does seem like the

u.s. is at least publicly saying it will consider rolling back some of these tariffs if they get a trade deal, and that is a big if right now. what will they ask for from china to get that trade deal, and will china actually agree to those reforms? sophie: rolling back tariffs has been a key demand of beijing, but what does this recent development show you about what the white house wants? sarah: absolutely. we've seen for the white house has delayed or postponed tariffs but never removed tariffs they have put in place since the trade war began, so this would be a significant step, easing of tensions if it does take place, and it might show that donald trump really is serious about trying to get this deal ahead of the 2020 elections. no matter what happens, the u.s. is going to keep the threat of putting tariffs back in place if china does not live up to the made.es it has

they will definitely not remove the threat of tariffs, and i think the uncertainty will continue to weigh on the economy and make people nervous even if a deal is reached. been helping have run this process for a long time . this whole trade war episode. -- are they sense really getting close to getting phase one of a deal that is going to make the path open for the next phase if china does what it is supposed to do and areu.s. reduces tariffs, or they perceived as markets are weak? >> we have been burned before thinking there was a deal in may and then the talks collapse, so there is definitely reason to be pessimistic perhaps, at least skeptical, but trump does have 2020 elections coming up. one of his key promises in 2016

was to forge a new relationship with china, kind of show them who is boss, and stand up for american businesses. he will be able to sell this deal if he is able to reach a phase one deal any way he wants on the campaign trail. he is motivated probably more than ever before. i think it really will be down to the fact how they will be able to reach a big enough deal that trump will be able to sell it to the american people as this huge win for america. sophie: joining us for more street globalte macro strategist marvin low. we saw that selloff. let's go to the terminal to show viewers this chart that demonstrates 10-year yields are jumping to a three-year high. the yield curve steepening amid some optimism for growth since

the apparent release on the 2020 front shifted the outlook for you. >> i think the prior guest was talking about we have been here before, we have been burned before. we actually need to see a plan to get a sense of what 2020 will ultimately look like. the only aspect of trade that we have seen this year is around escalation. still aremistic, we somewhat cautious in the actual detail, and let's not forget we do not have anything on paper with regard to even where we will read up for a phase one deal. i would not call it a major breakout. certainly the fear trade, if you will, the doomsday trade that was in the market around august has reversed. the data has shown that it was

incorrect to be as negative as we were during that time. having said that, to percent is very far from where we started the year. has cut ande fed pause and one speaker after another seems to be signaling they intend where to stay unless things materially weaken. is this one of the reasons why we have seen the bottom in yields and people starting to now,here do yields be long how do i price them? interesting, right? really for the first time since the cutting process began over the summer, the market is listening to the fed, and fed credibility is coming back into the front line, so the market moves by the fed credibility and stabilizing things, but we still are pricing a cut much later than we had a few weeks ago, and while the

data has stabilized, it certainly has not shown any signs of rapid improvement, so we are going to take a step back. we will certainly evaluate the data as it comes, but by no means are we saying we will see .%, 2% plus growth kathleen: that is kind of a bold call because rate cuts are fully priced out of the market this year and next. what is going to weaken the economy? what is going to move the fed off its point of saying growth is good enough, inflation is close enough to growth targets, we will cut again? quick number one, inflation is not there. that remains a concern. part of this reflection trade has seen real and breakeven yields move back up, but they still remained below where they were and of summer when they collapsed and we are 10 and a half years into the cycle where job growth is not as fast and while the consumer remains engaged and certainly an important part of the u.s.

economy, a lot of the other manufacturing data still creates potentially a trough, but still concerned going out there. i don't think i've seen anything that makes me think we are re-accelerating growth. certainly a comprehensive trade deal that gets businesses back into investment mode could change that view, but like i said, the devil is in the details. momentum we are seeing with yields, are these yields a danger to equities? >> not yet. certainly, they will be at a certain point. there are good reasons for yields to go up. right now, i think yields are in a fitting from the thought that the economies are stabilizing, the global economy is stabilizing. you look at cyclicals versus defensive's when you look at how european equity markets have been performing. there's an expectation we might have seen a bottom on the global side of things, but we do need actual growth to support this

kind of pivot. kathleen: do you see any places moreia where you find interesting for bonds, less interesting? they are at a different point in a lot of their cycles than many other countries. there key rates are higher. central banks have more room to cut if they need to. offirst and foremost, kind the pivot on the tray discussion position. in a better korea and their relative markets if the positive tidings continue. i do think that even if we have yield, wecrease in still remain in a relatively low yield world. the-yield are something market will ultimately be attracted back to once we get some stabilization in terms of where yields will settle out. kathleen: thank you so much. still ahead on the show,

household spending data out of japan is out at the bottom of the hour. forecasts show consumers rushed to buy ahead of last month's sales tax hike. inhie: up next, disney jumps trading thanks to movie hits and strong sales at theme parks. this is bloomberg. ♪

kathleen: you are watching "daybreak asia." after earnings beat expectations, thanks in part to performance from "the lion king." su keenan has more. was not just movies but also the theme parks where they sold a lot of merchandise tied to the action films. let's go right to the after hours. at one point, shares were up

almost 6% after hours and rose to $141. look at the big picture year to date chart and you will notice shares also spike back in april, and that had to do and they first announced they were going to do the numbers they were expecting for their streaming service. overall revenue soared due in part to the acquisition of 20th century fox which closed back in march. as we mentioned movies like the action film "lion king," and " helped boosty 4 revenue. fourth quarter earnings beat estimates. again, the agreement putting these new streaming services on amazon which was also a big breakthrough because they were an initial holdout. tata.e: hakuna ma tell us more. before theming days launch of disney's seven dollars

a month streaming service. pushed bob iger has streaming service the relative urgency saying he needed to keep up with netflix and other rivals. >> we are still relatively small in terms of the scope of things, in terms of number of subscribers, but the best way for me to characterize it would be to say that we are enthusiastic about what we saw the consumer reaction to be. we certainly feel good about the product that's going to the marketplace next week, and we will know a lot more in just a few days. >> we will know more in a few days indeed. importantly, they reached agreements to get into distribution with amazon, samsung, and lg devices. that will introduce them to tens of millions of extra online viewers. they also had prior agreements and 8-ironnd apple,

with verizon will also ensure that when they launch next tuesday, they will be off to a very fast start. again, in all, a very strong report from disney, exceeding estimates, particularly on the movie studio side and a lot of excitement about what they might be able to do in the streaming space. sophie: i could see some excitement there, "disney and chill" perhaps. loom energy reported record revenue in the third quarter and posted another net loss in a string of reverses that goes back to at least 2015. kathleen: general motors has brought the curtain down on its time in ohio, selling its shuttered plant to an electric truck start up the deal ends five decades of gm building

vehicles in the state. sealed when unions failed to convince general motors to keep the firm open as part of a new labor contract agreed last month. sophie: peck has tried to turn things around, including shaking up the leadership team, but business has declined to such an extent that they decided to spin off its recent sales driver, old navy. our exclusive interview with john walters is just ahead. this is bloomberg. ♪

kathleen: this is "daybreak asia." i'm kathleen hays in new york.

sophie: i'm sophie kamaruddin in hong kong. the federal reserve sparking what could be a busy end of the year from goldman sachs which says it is seeing more deal chatter. goldman's president and coo spoke exclusively to bloomberg about risk appetite and the bank's current ventures. analystoldman sachs impact fund is effectively democratizing our giving and giving analysts the opportunity to choose not-for-profit organizations that they think need the money. finalistsst had six present to us and we are getting ready to choose a winner and we are really excited about. >> some people spend two years on wall street and move into the private equity world. clearly, you're investing in your young people. what is your pitch to them to stay and build a career at goldman sachs? >> we have a very diverse

workforce, very global business. we offer our analysts an opportunity to wander all over the firm and do very different things, and we think there is an enormous opportunity for them to stay longer and benefit their skill set. >> we have less than eight weeks left of this year. it's almost 2020. it's almost a new decade. can you tell us a littler about -- a little bit about what goldman sachs is going to look like in 36 months? uniquely going to be goldman sachs for as long as i'm running the firm and i hope longer than that. we are going to keep investing in our businesses and make our businesses stronger. there are market franchise opportunities and we are going to attack those and make our business stronger. >> do those mean m&a? >> we have made some acquisitions. we bought a company called united capital group earlier this year and that is an example. we will continue to look for

acquisition opportunities if they help our cause, but organically, we see tremendous growth opportunities within the firm. obviously, launching our markets platform is an example of a new business. our apple card venture with apple is an example of a new business. it is a combination of investing in exits the -- existing businesses and launching new platforms. >> another thing everyone is thinking about is what bonus season looks like. what can you tell people? we've been hearing pleaded -- pretty bleak numbers across the board. >> it is not to simmer. we have weeks to go. we are hard at work. business feels good. we are focused on delivering to year-end. your expectations for what year-end and internet share looks like in terms of activity? do you expect there will be a revival here? >> we actually see an uptick in risk appetite. i think what happened with the federal reserve and central banks around the world in terms of injecting liquidity into the

system and being relatively dovish has helped particularly the u.s. consumer. i would say the market is pretty wide open. activity levels are high. we are seeing deals being announced or contemplated, so i would say we are pretty constructive on the environment right now. led foster's group at the golden age of buyouts and we are everg one of the biggest buyouts being considered. can the market absorb a deal like that? is that kind of deal possible in this era? >> i would not comment on a specific transaction, but there's tremendous liquidity in public markets and private markets. we have seen an explosion of capital migrating into private markets. obviously private equity funds, and privateructures forms, so there is enormous liquidity in the market that could support big transactions. sophie: goldman sachs' president

and coo speaking exclusively to bloomberg. u.s. futures holding the overnight drop after falling during the month. making it one of the worst days since president trump was elected. it looks like a buying opportunity for some investors who have a grim view of the u.s. economy. bearish across the curve with the 10-year yield adding about ace -- eight basis points. third quarter sales in hong kong , south korea, and the americas were weak and a japan, there was a rush ahead of the sales tax hike, which was below company expectations. of data fromlew japan. wage and household spending

readings -- these are very, very important to the bank of japan. household spending, of course, what drives the economy. a big rush into reset -- into retail sales expected ahead of the sales tax hike. we will see if they live up to expectations. this is bloomberg. ♪

sophie: we are seeing some data come through from japan, keeping an eye on what is happening with households for japan, seeing spending accelerated ahead of the sales tax hike. we had retail sales growth accelerating year on year and the data coming through. household spending for september rising 9.5% on a yearly basis, beating the consensus for a 7% rise. a big rebound after the 1% increase we saw for the month of august. kathleen: another big number for the bank of japan as it hopes to

keep momentum going. labor cash earnings jumped. we are speaking in the realm of wages. are people trying to earn more money in these very tight labor markets? japan unemployment rate of about 2.3%. they were down 0.5% the month before, so potentially good news, welcoming to the air of the boj head. if he can get a little momentum, that's the sort of thing he hopes can help push up the inflation rate. with the big jump in household spending, i think this is the kind of thing that at least for right now, for these reports, paints a nice picture. certainly, given some of the other indicators for the .apanese economy

let's check in on the yen in the wake of that data drop. we are seeing it holding steady for the moment. not much changed then. we are seeing slight moves lower for the again, trading near a five-month low against the dollar. let's get to first word headlines with jessica summers. jessica: thanks, sophie. the u.s. and china have agreed to rollback tariffs on each other's products as they had toward an initial trade deal. the commerce minister of beijing says negotiators have had two weeks of serious and constructive discussions and have decided to remove the made. as progress is white house economic aid larry kudlow confirms the plan saying concessions will be made as the deal moves forward. the bank of england is again highlighting the threat to growth from brexit and the weaker global economy, hinting that it could be forced to join other central banks and loosen

monetary policy. governor mark carney pinpointed the risks and markets raised bets on a rate cut next year. two policymakers called for a cut immediately, although they were outvoted by the majority. >> around its projections for potential supply, net growth and therefore gdp growth are skewed to the downside in the second and third years of the forecast, reflecting the uncertainty around the exact nature of the fta with the eu and the transition to it. india's credit rating outlook has been cut to negative by moody's on concern about the weakening economy. the agency knows the growing debt burden is a struggle to narrow the financial deficit. rating,d india's the second lowest investment grade. and growth in the philippines

rebounded last quarter since the economy grew at a faster pace than expected thanks to the government overcoming spending bottlenecks. gdp expanded 6.2% from a year earlier, topping the median estimate in a bloomberg survey. government spending surged almost 10% in the september period following the approval of the budget in april. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. kathleen: thank you. back to washington where house democrats will open the public phase of their impeachment inquiry next week. meanwhile, behind the scenes, president trump's top advisors are clashing on how to respond. bloomberg's congressional editor joins us from d.c. president trump has a lot of clashing teams. what is the essence of the clash

when it comes to impeachment? >> it is a matter of who should be running the show in terms of defense, and if there should be similar external or additional resources brought in. some consternation in quarters at the white house over the way acting chief of staff mick mulvaney has handled things so far. including a news briefing where he seemed to suggest that yes, there was a quid pro quo in the deal with ukraine, which he then later had to walk back and try to clarify. there are others who want to team ofore professional communication specialists, lawyers brought in, and it's also a bit of a turf battle with the white house counsel arguing that this is a legal as well as a political matter and that he

should have a greater hand in it, so there is still some infighting going on, but president trump has pretty much made clear that he runs his own communication shop and directs and anyone is not going to be able to tap that down. sophie: we are seeing the probability around trump's impeachment taking slightly higher on the back of this news. what does that mean for trump's republican allies in the senate? how are they assessing the situation? are hangingblicans right behind the president and giving some very vocal defenses of him. he was at a rally in louisiana and was getting quite a bit of backing from leading republican figures in the senate, and there has been really no sign of a break.

what will make perhaps a difference if any will be when the public hearing starts, which will give voters the first chance to hear some of the beenmony that has already taking place behind closed doors, assess for themselves the credibility of the witnesses, and, you know, where they take it from there. at this point, there seems to be no incentive for them to break ranks. sophie: facebook says next year's presidential election is the company's highest priority. coo sheryl sandberg spoke to at a press conference in new york. >> we think the 2020 election is a massive test for us. and it should be. elections have changed. we have changed as a company. if you look back to 2016, of

course we were prepared for state actors. stuffew, more insidious we were not prepared for. we missed it. everyone missed it. that is different. finde really work hard to what we think of as coordinated inauthentic behavior. heard ofwe had never it. in 2017, we took down one. in the last year, we took down 50. seven in the last two weeks alone, so we are in a very different place. we are going after fake accounts. happenedgle thing that in the ira on facebook and 2016 was done through a fake account. we are able to take down fake accounts every day before anyone sees them. we did not have a fact checking program at all and 2016. if something is marked false by third-party fact checkers now, we can reduce distribution and show related articles so people

see the other side of the story, and really good independent stories have reported that fake news on facebook is definitely on the decline. i think the stanford study said it has gone down by more than half since 2016. and transparency. any016, you could only see ad on facebook targeted at you. when you went to a page, you did not know who was behind that page. now, we have an ad library so you can see anything that anyone is showing anyone in terms of political ads. it.nalists use we are running red team operations. we have a red team always looking for what the bad guys will try to do next to try to get ahead of this. this is a major test for us. were veryhe midterms focused. today they went very well. eu, parliamentary elections. we know that this is a big one

and this is the highest priority for the next year. kathleen: facebook coo sheryl sandberg. up next, international capital strategies' coo will discuss the .atest trade headlines this is bloomberg. ♪

sophie: this is "daybreak asia." i'm sophie kamaruddin in hong kong. kathleen: i'm kathleen hays in hong kong. u.s. and chinese authorities confirming any trade deal would concessions, and the news sparked a rally. to coo of theurn advisory firm international capital strategies. from whatgh the noise

is significant here. markets are so nervous. any headline that says nothing is going to happen, everybody trades on it and there could headlines before suggesting they are methodically working. >> this is a particularly active newsday for trade-related issues, and i think part of it is the chinese are using the press as part of this negotiation now. i would not be surprised if we don't have a lot of twists and turns in this story as we lead up to whatever the date is that the leaders decide they are going to actually meet and agree to whatever the phase one deal is, and i do think there will be an agreement on a phase one deal . --hink trump has been president trump has been

pressured and his commitment to move forward and the message out of the white house has been he wants to deal -- he wants to do a deal. the message to the markets is that a deal is coming, which kind of boxes him in when it comes to how he will be working with the chinese to come up with whatever phase one is going to look like. kathleen: the key part of it to me seems that the white house is talking about reducing tariffs on a phased basis, not just saying right up front, no tariffs, which suggests to me it is going to be a cause in enforcement mechanism. here's our plan for reducing tariffs as long as you, chinese, are doing x, y, and z. >> am watching the same press you guys are in terms of what this is looking like, in terms of what this phase i agreement is going to look like, but this is not a bottom-up negotiation like most trade agreements. this is really a leaders level,

principal level agreement where i do not think president xi is going to get on a plane to come here until he knows exactly what will be in the agreement and that will only happen when you have president trump signing off on that. sophie: when do you see structural reforms being folded more constructively into the dialogue? >> i feel like there's a lot of reasons there will be a phase one. i do not think we are likely to see phase ii and phase three. really, what the chinese are putting on the table are things that are in their interest. if you look at the commodity purchases, they need to buy pork. they need to buy soy. you look at the opening of the financial services market, this will help them get more capital into the country. if you look at ip, as they move toward coming more innovators, then they are going to need to have those protections themselves. i actually look at this and say

these are things the chinese are looking for. they are not looking for any of those big structural reforms that were the basis for the section 301 report that came out , looking at subsidies, looking at tech transfer, a lot of the big issues that cost u.s. workers jobs and are potentially looking to cut into the u.s. andss of innovation moving forward. i don't think china wants to put those on the table. i'm not optimistic we will see those big reforms in phase two, phase three. our attentionurn to this ongoing debate between fiscal policy and monetary policy. some views from the new managing director of the imf saying trump's tax cuts are brave, but you are not down with that idea.

>> i think it is interesting. there has been a lot of focus on christine lagarde and her first few days at the ecb, but we really do not know what the new managing director of the imf is going to bring except for this statement she came out with, which is that she thought the and were are brave way for president trump to spur growth. i think people are trying to figure out, is this a signal she's going to be very much more orgrowth than pro-austerity pro-fiscal reform? because that is very meaningful to the large program countries -- argentina, pakistan, ukraine. she is not a known quantity yet, and she's very early in the job, but she has played a very important role, so her views on issues of balancing growth

versus fiscal, for example, are meaningful. kathleen: turkey -- president erdogan will be in washington next week despite the clashing over syria, and at the same time when a big state-owned turkish bank is in trouble, indicted on criminal charges in the u.s. what is the play here? >> i think this has been an under reported story in the u.s. because there has been an press.he of there are a lot of issues on the table, but this bank has been indicted on charges for evading sanctions on a massive scale. one of the largest sanctions have had inran we our history, so this indictment was sitting around for quite some time. after theved right syria invasion by the turks, and

the second this, time the bank has failed to show up to court. this has all those interesting, intrigue-related parts of the story. giuliani has been linked to this in terms of representing the turks at some point. looking at how this will play in , this is clearly something president erdogan cares very much about, and it's because there are rumors this could reach way up into -- way up the chain in turkey. just have a few seconds to ask you a question -- does trump have leverage now over erdogan because of what happened in syria, because of what happened with the kurds? do you think maybe trump is trying to get something out of this? >> we will have to see. there are not a lot of friends

in washington of turkey right ,ow other than president trump or at least of president erdogan . it is very unclear who has what leverage where. we have had already, you know the president has not moved forward on imposing sanctions on the russian missile purchases, which he was obliged to do. we have a lot of mixed messages going on here, and i think that -- you know, i don't know if this next visit is going to clear it up, but i do think the issue of this bank will be higher on the agenda because now congress is starting to become interested, particularly in the connection trump has an giuliani has with the ability of this bank to somehow not be subject to judicial proceedings in the u.s.

sophie: a last look forward to president erdogan's visit to d.c. next week. let's get a check now with the latest business flash headlines. collapsed california utility pg&e now expects more than $6 billion in after-tax costs .inked to wildfires it reported a $1.6 billion loss for the third quarter, driven by a charge for claims related to fires in 2017 and last year. pg&e is not providing earnings guidance for 2019. kathleen: the latest twist in the long running sprint-t-mobile say there's no need for the justice department to sign off on the deal. it would lead to a reduction in competition and the deal is too complicated to enforce. reportedalph lauren

stronger sales at home and abroad. sales in north america rose 2%, reversing forecasts of a 2% fall. the label sees more european and south american shoppers off ca -- offsetting a lack of demand in chinese buyers. this is bloomberg. ♪

>> the global economy is in a gradual, synchronized slowdown, and it is important we act to do something about that. >> monetary policy we can see achieving its objective, but it can do so faster and with fewer negative side effect if fiscal policies are aligned with it. >> i think fiscal policy is a strong play and it has not been sufficiently addressed. isthis is when fiscal policy most powerful and monetary policy is the least powerful.

we have known that for a long time. has room to accommodate further. >> at this point, i think it is really to the politicians. fiscal experts weighing in on the important role of fiscal policy. marking 30 years since the fall of the berlin wall, the pivotal moment and the dramatic changes that followed marked a watershed moment in the history of europe and the world. let's see how germany has fared since. matt miller looks over its journey. matt: 30 years ago, the berlin wall comes down. germany unified for the first time since world war ii. the cost of integrating the former soviet satellites date does not come cheap. growth picks up, industrial production takes off, germany becomes the dominant economy of europe. in some sectors, the world.

volkswagen, bmw, siemens, basf to name a few at the heart of the machine. 19 99, the euro is born, but the european central bank headquartered in frankfurt, berlin loses its beloved deutschmark, but for then becomes the chief beneficiary of the common currency. as german economic might grows, problems are emerging. an increasingly hostile pressure, the european debt crisis, and the u.s.-china trade war sapping germany's export dominance. manufacturing collapses, exports plied, and germany peters on the edge of its first recession in more than six years. with merkel in the twilight of her power, germany struggling to restore its preeminence, pressure builds on the government to spend its way out of the economic malaise. the question is -- even if the fiscal taps are open, will it be enough to prime one-time engine of europe?

sophie: german gdp is among the key things to watch next week. monday, november 11, also the big alibaba signals day. kathleen: wednesday, we will have a decision from the reserve bank of new zealand. bloomberg economics expects the bank to cut the official cash rate by 25 basis points. then, as sophie mentioned, we will have german and japanese gdp reports thursday. coming up on the next hour of " we talk about the outlook for china trade and figures due later today. we want to get her look out for the economy and what she thinks about if the china trade deal is getting ready to actually happen. market open is next. this is bloomberg. ♪ sometimes your small screen is your big screen.

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>> good morning. i'm sophie kamaruddin in hong kong. >> good evening. i'm kathleen hays. welcome to "daybreak: asia." our top -- top stories this hour. u.s. and china say negotiations are making progress. that sparks an appetite for risk with asian stocks on track for a fifth week of gains now. feders see no further

moves for at least two years. banking on the future -- china weighs a string of mergers to help shore up the financial system. we have the details in beijing. sophie: let's get a check on the open in tokyo. we are seeing a japanese stock gain ground. .1%.ikkei 225 adding the yen is trading near a five month after slipping overnight. we are watching for earnings from honda, plus gating reaction to toyotas results -- gauge and reaction to toyota's -- gauging reaction to toyota's results. cash earnings also increased more than forecast. check out the move on jgb, the 10 year yield climbing about four basis points, rising to the highest level since may. let's check in on the kospi, which is adding 0.4%. we are waiting on earnings from

samsung, plus the finance ministry's budget report. for theseeing green aussie dollar, adding about 0.1% for the aussie shares. of home loans data and the rba's monetary policy statemen t. let's check in on toyota shares, which have opened to the upside, adding 1% this morning, after the quarterly profit top estimates, keeping the business on track amid slowing demand. cost controls and solid sales helped profitability, paving the way for a $1.8 billion share buyback. later this hour, we will be discussing toyota's earnings and the outlook for japan's auto sector with the head of asian auto research, janet lewis. let's get to first word news with jessica summers. haveca: the u.s. and china

agreed to rollback tariffs on each others' products as they edged towards an additional trade deal. negotiators have had two weeks of serious and constructive discussions and have decided to remove the duties as progress is made. white house economic aid larry kudlow confirmed concessions will be made as the deal moves forward. pausechina has hit the button on its recent gold buying spree. the pboc cap holding level at 62.6 million ounces in october -- level at 62.6ing million ounces in october, following 10 straight months of accumulation. beijing has been buying gold this year to offset the fallout from the rumbling trade war. rmer new york city mayor michael bloomberg is again weighing a white house run next year, with an advisor saying he is concerned the current crop of

democrats won't be able to defeat president trump. bloomberg had considered a run earlier this year, but decided to instead support other democratic efforts. he is the founder and majority owner of bloomberg lp, the parent company of bloomberg news. , saudi arabia is pursuing a commitment from its wealthiest citizens to buy into the upcoming aramco ipo. the kingdom is trying to shore up demand for the listing as international investors balk at the insistence that the energy giant is worth $2 trillion. potential buyers include prince although we been to allow -- prince bin-talal. news, on air and @tictoc on twitter. kathleen: investors are weighing the ying and y -- yin and yang

of trade chatter. we are joined now from singapore. what do you make of the bond market action today? broadly, it was cast as risk is back on, get out of safe havens like sovereigns. was it overdone? do you think this is part of the repricing of where bond yields should be now that the fed has paused? it's a lot easier for the fed to sell the message that they would like to take a pause amid the fact that people are more optimistic, that not only a trade deal is coming, but the rollback of some of the old tariffs, which is adding a bit of new information into the whole thing. it certainly will give equity markets a bit more optimism, particularly here in asia. we would expect to see that play out pretty well across asian markets, which are generally -- which generally like the performance of u.s. markets this year -- generally lag the performance of

u.s. markets this year. if you think of 10-year yields around the 2% to 2.25% yield area, that's probably a neutral reflection compared to where the fed funds rate is. something in that area is not too surprising. we are going pretty quickly. that maybe catching people's eye, the fact that yields have risen very quickly in the past few days, but they're more likely to settle down pretty soon, as they see other asset classes start to take the ball rolling from here. gold, retreating a bit. treasurer yields, up -- treasury yields, up. people will start to see the opportunities for rebalancing in towards the year end. markets, which may be -- markets which may have lagged -- sophie: breaking news. comfortable standing pat on

policy," seeming to echo charles evans yesterday, even jay powell, the chair of the federal reserve last week. kathleen: wage growth is moderate. he says, so far the trade policy impact on business remains modest. byalso thinks that firms hit terrorists are adjusting their supply chains. nothing big -- by tariffs are adjusting their supply chains. we cut the rates the third time. now we are going to watch. mark: yeah. in an ideal situation, the fed would like to be able to say we have given you 75 basis points worth of cuts. it is something we have done before if you look at fed history. 75 basis points in a relatively short time has done quite a lot of good help stabilize the economy and the mood in asset markets. the fed would really be hoping that that is enough to settle everybody down, and they can sit on their hands for quite a long time. in reality, every fed meeting is

live and we know how quickly they can change their mind, should the conditions change, should the data change. so, for the time being, they are really sending a very clear message that, in december, they would certainly like to keep rates on hold. for now, markets are happy to hear that message. when you look ahead to 2020, all it would need is a change in the situation on trade, a change in the data, some less optimistic outlook on the way that world growth is going and the fact that we have to consider the possibility that lower rates are needed. certainly, as far as the near-term is concerned, the fed is keen to give the message a pause is coming. traders, seeing some optimism there. the cny extended its rally for an eighth session. where to from here? certainly, the yuan

has probably gone a little bit further than the pboc would be comfortable with. it's new information, the fact that the tariff rollback could be happening. that's very positive for the yuan. the pboc knows that the basic data coming out of china is still relatively poor. we are going to get the trade data later today, and it may well show that china exports are struggling again. even though there's been a lot of stimulus this year in china, it has only slowly worked its way into the economy. where chinaituation would really like to have a very strong currency right now. so, yes, the pboc will allow market forces to push the yuan stronger, but they will probably push back a little bit. they won't want it to become a one-way bet. they won't want to see that he won accelerating too -- the yuan accelerating too quickly. they will moderate some of the gains in the yuan. sophie: as kathleen noted earlier, a lot of ian and yang

around these trade -- of yin and lines.ound these trade the white house is optimistic it will reach the china deal soon. what do you make of this? >> the sound bites for the past week or so have been very positive. everybody is getting used to the idea that somewhere in the background u.s. and china have decided it is much better for them to come sort of agreement and gradually, bit by bit, we are getting a little bit more information. it is certainly heading in the right direction, providing that donald trump doesn't come out and say, actually, i don't agree with this, then everyone should be happy. certainly the mood in the past week or so has been a lot better, and you can see it reflected in the way in which equity markets have been moving upwards. sophie: thanks so much, mark cranfield. more on the trade deal ahead. zhou will serena give us her macro outlook for

china and the wider region. kathleen: plus, the bloombergs coupon china, considering measures -- the bloomberg scoop on china. this is bloomberg. ♪

kathleen: this is "daybreak: asia." i'm kathleen hays in new york. sophie: i'm sophie kamaruddin. china is considering ways to bolster the financial system. problematic lenders with less than $14 billion of assets would be urged to restructure or combine. our china correspondent, selina wang, has more on this. what are chinese authorities proposing, and why? selina: authorities are taking a more comprehensive approach to the issue of troubled small banks in china. china has more than 3000 of these smaller lenders, and they have been struggling to deal

with rising bad loans, with china's efforts to reduce financial risks, and the economy. so far, we've seen the government take piecemeal steps, a takeover of a bank in may and bailouts of two others, but nothing comprehensive. according to our sources, what they are asking is for these banks with less than 100 billions and in assets -- ¥100 , argent themsets to -- urging them to -- we are hearing that existing shareholders would be encouraged to buy perpetual bonds. kathleen: such a great idea. if you need banks to restructure, it's a good idea, but it can be destabilizing as well. what are the risks of this? of risks here. this could provide some stabilization for the weaker institutions, but it's unclear if it does anything to solve the moral hazard problem, the fact that these banks are seen as

having a state backed guarantee. if china's banks get larger through these acquisitions, that means the chinese government may feel more compelled to save them. doing --overnment is dealing with a difficult balancing act. if the public actually were to lose faith in the ability of these big banks to be able to survive on their own, it could precipitate exactly the type of crisis they are seeking to avoid . when it comes to the risk for the large banks, it's a bit of a double edged sword. they could snap up some of their smaller rivals on the cheap, but on the other hand, they could probably be forced to absorb some of the institutions. kathleen: a step in the right direction. we will see how it goes. fascinating story. thanks so much for bringing it to us, selina wang, our china correspondent. headline.ortant the white house is, quote, "very optimistic it will reach a china deal soon."

this is according to an aide. let's go to hong kong now to speak with mizuho securities asia economist serena zhou. serena, here we sit. cranfield from our mliv team said, the last week, most of the flow suggests they are working their way toward some kind of deal, they are just hammering out the details. the white house had an internal disagreement, according to one report. that was all it took to cause a bit of a selloff. what do you think is going on? serena: china's ministry published a statement last saturday saying that china has confirmed to reach a consensus with the u.s. on core trade issues. i think the phase one trade deal has a lot to do with the core drew itsen china

bottom line in may. that would be including the removal of all the tariffs. think i wouldn't be surprised partial rolling back of existing tariffs in the phase one deal. kathleen: what would a partial rollback be? it seems to me they would both win. china wouldn't get the new ones imposed. the u.s. would have a way to enforce the deal, because if china doesn't do what it is supposed to do, they don't have to remove anymore tariffs. i would assume that's how they are setting it up. is that a win-win? serena: yes. actually, i think there have driversee fundamental for easing the u.s.-china trade tensions. the first one is growing economic headwinds for both economies. most recently, the u.s. manufacturing sector.

the second one, china also has a more stable external environment, political to cope with challenges in hong kong and taiwan. the third one, through the partial trade deal, it could help to dismiss the [indiscernible] tariffs isowbacks of a key -- the rollback of tariffs is a key demand for beijing. what are you reading here? serena: i'm looking for continued weakness in china's exports. china's high-frequency shipping index and the trade related pmi in october both pointed to slowing trade activity. i think this has not just to do with the ongoing china-u.s. trade war, but it also has a lot to do with the slowing global

demand. in this sense, even after china and the u.s. reach a partial or earlyl in november december, i think there won't be a turnaround shortly. sophie: what about the import side of the equation? we had xi jinping in shanghai at the expo. he said he would look to open the country up to more imports. the contribution has been on the decline. a big part ofk china's imports come from its reexport demand. if china's reexport is dropping, i think there cannot be a significant pickup in china's imports. a rate cut this week from the pboc. you are anticipating a rrr cut. serena: actually, i believe

china [indiscernible] is mainly because of those founding difficulties for small banks in china, small local banks. especially after the pboc takeover in may. you know that most of china's open market operations and most liquidity facilities set up by assessed by only be large banks in china. i believe that could benefit all the banks equally. it could be a way to help the pboc lower bank lending rates. kathleen: what's the biggest risk right now? pork prices are pushing up inflation. the property market is also being closely watched by many people. serena: yes. think thell, i

surgeon pork price should not be a problem for pboc's monetary easing. -- the surge in pork price should not be a problem for pboc's monetary easing. they will encourage more pork imports and subsidize pork consumption, as well as encouraging farmers to restock swine. on the other hand, i'm more worried about the increasing difficulties for property developers to finance from banks, from trust funds, and also the bond market onshore and offshore, because the government on new strict controls increase in property financing. sophie: thank you for joining us ahead of the october trade data. serena zhou, mizuho securities economist. today's edition of daybreak.

terminal.go on your this is bloomberg. ♪

sophie: you are watching "daybreak: asia." former ge boss jeffrey him out is joining the board of bloom isrgy -- jeffrey immelt joining the board of bloom energy. he is one of two new directors at a company trading far below its ipo price. it posted another net loss. the string of reverses goes back to at least 2015. kathleen: general motors has brought the curtain down on its time in ohio, selling its plant. decades of gmfive building vehicles in the state. 1966, butopened in

it's fate was sealed when the unions failed to convince gm to keep the plant open as part of the agreement last month. leaving his role as president and ceo after a short transmission -- ttransition. he tried to turn things around, but to little effect. gap decided to spin off its recent sales driver, old navy. kathleen: disney jumped in extended trading after reporting better-than-expected earnings and strong confidence in their highly anticipated streaming video service, disney plus, which is set to debut in just a few days. bloomberg's su keenan, watching the report, sifting through the analysis and reaction, has more. su: big jump after hours. at one point, it was almost 6% to $141 per share.

they beat on the top and bottom line. in aprilared back after the company first gave its ambitious numbers for subscription streaming video service. by 2024, they are expecting 90 million subscribers. significantly going into the earnings. let's take a look. $1.07 beating estimates. in terms of movie studios, "lion king" was one of the movies that helped push the box office revenue up, and the operating income for the movie division by close to 80%. the streaming service also, a big part of the conference call, the fact that disney was able to lock in a deal with amazon and fire tv to help distribution

were part of the message. sophie: we are not too far off from the launch of the streaming service. su: it launches on tuesday. it's been the big urgent call of bob iger. it may define his ceo-ship. we are are stil -- bob: still relatively small in terms of the scope of things, but i think the best way for me to characterize it would be to say that we're enthusiastic about what we saw, consumer reaction. we certainly feel good about the product that's going to the marketplace next week. we'll know a lot more in just a few days. su: they had prior agreements for distribution with apple, roku, verizon, all expected to make for a strong launch. there are some analysts who are skeptical. porter give, one of them -- porter bibb, one of them. they are aggressively moving in this direction. they launched early next week, so we shall see -- they launch

early next week, so we shall see. kathleen: su keenan, thank you very much. the latest policy statement from the reserve bank of australia. will they reserve their growth forecast? we will see. this is bloomberg. ♪ here, it all starts with a simple...

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>> breaking news from the reserve bank of australia, their outlook for the economy and there are some positive aspects. they do see dwelling investment, and other words new housing is seen as a drag for several quarters. they cut their gdp forecast to 2%% to 2.75%, pushing their inflation out six more months, acknowledging they are too far below. they do see progress to medium-term and wage growth no

longer expected to pick up and easeare prepared to monetary policy if needed. the question is, how soon will they cut them again, but not but the rbaistic, potentially not ready to cut rates. let's get to the first word headlines. >> french president emmanuel isron has said nato effectively dead with core defense commitments. he wants them to create their own military group rather than relying on the increasingly withdrawn u.s. u.s. --san rice has the says the u.s. has been alienating its allies in the

last new year's. >> we have squandered the goodwill by degrading them, making everything transactional, by failing to tell the truth on multiple moments everyday. >> the european commission is cutting is forecast come up economico block resilience that they say won't last forever. inflation remaining well below the goal of 2%. it has stumbled amid the trade war and weakening business confidence. the bank of england is again highlighting threats to growth from brexit and the weaker global economy, indicating it could be forced to join other central banks and loosen monetary policy. risk.arney pinpointed the

to policy makers called for a cut immediately, although they were outvoted by the majority. supplyrisk around the growth and gdp growth are skewed to the downside, reflecting the with the eu and the transition to it. global news 24 hours a day, powered by more than 2700 journalists and analysts and at tictoc on twitter, in more than 120 countries. i am jessica summers. this is bloomberg. taking a look at how asian markets are faring, stocks suffer a fifth weekly rise, matching the largest streak in nearly two years. the yanis holding losses. the 10 year yield and for the

biggest week, we jumped more than six years, and aussie yields are steepening and australia rising as much as 10 basis points. some stock movers , declining sales and hong kong and south korea. toyota also announced a share andack, ¥200 million worth later today, we will learn how honda performed. tokyo, jimfrom lewis, head of asia's auto research, so a strong showing from toyota.

washat really jumped out how robust their operation -- operating margin was. -- bys among the highest far the highest among global automakers. despite all the investments they are needing to make, they are still able to generate a rising level of profitability. and with share buybacks, what does that tell you? the share buyback is slightly smaller than last year's first versus 250,illion but the fact they are continuing outlays, they have a lot of cash available and they are using it to return to shareholders and i expect you could see another sizable

buyback by the end of the fiscal year will stop >> the auto industry is under pressure around the world, companies trying to figure out how to build hybrids as fast as they can. so important it seems about toyota is how they stand out japaneseto their competitors can others around the world. what are they doing to get all of that cash on their balance sheet? >> toyota has always run its business in a very efficient manner, but both have obviously had a few issues to deal with, alsohe bottom line it is -- always produced an average return, particularly in recent reporting.

is because they are so big, they can leverage the investment they need in different markets across a broad-based and if you are only selling a few million cars, it is a lot harder to do. specifically, they are taking definite steps to the chinese market. as whatnds out to you will add to the success and the dominance? first of all, they have a good range of products. it is not just pickup trucks, not just proffers -- not just crossovers. i think the underlying most important quality for toyota is that their current owners come is ato the brand and this

much cheaper way to sell cars than attracting a new customer, so it is that long-standing reputation you buy a toyota, you know you will not break down on the side of the road. also, they said -- consistently have very good fuel economy and even with the price of gasoline being relatively low, that reduces your money cost on the car. >> focusing more on the china market, toward a sales doing well. listen to what he had to say. >> our sales and china have from the 7% to 8% previous year despite declining beagle sales in the country will stop our market share is still low and there is still room to grow. new models have been well received by chinese buyers and the popularity of the new models

continue to grow. >> with that, how much of a pickup are you anticipating? >> for this year, we are looking growth.% premium cars are doing extremely well in selling without any discounting. there is long waiting lists for models like the es. they are in the process of launching the new rav4. the new corolla is also selling very well. japanese cars are very popular people buying their second cars. that is still just over 30% of the market in china and as more more people moved to buy their continuers, we see it to gain share in the chinese

market. >> expected to drop 21% on the year, what is going on? >> on the negative side for honda, the key headwind is andy motorcycle market, particularly the weak sales we have seen in markets like india which is a very important market. because it has had a fling the conditions, we see a pullback in that market, it has an impact on the bottom line. in this space, continues to do well and i expect that their financing is also done well. one of the things that toyota mentioned was an improvement in residual values and that is something honda is likely benefiting from as well. >> we will look forward to that

report. msci rolls out the welcome mat. what is changing and it's china index-- in its china next. this is bloomberg. ♪

>> you are watching daybreak asia. msci has announced the latest shakeup. it includes hundreds of new securities in the emerging market. this tell us? >> this is what msci announced two years ago. instarted with the inclusion 2018. in wedding will increase

that -- the waiting will important.d that is as of thefective close of this month. foreigners have been preparing for this. it is not surprising. we knew they would be small caps, mid-caps, stocks that are listed also eligible for the first time, so they have been buying ahead of this. more, 189to see included in the mid-cap space. >> exactly. that was a surprise at the time , moree chinese companies

exciting companies than we had before, there's obviously the mid-cap space, so a little concerned from foreign investors that they may have these smaller chinese companies in their portfolios, but this is something that msci has been looking at for years and consulting with index providers ensureeign investors to -- to make sure you don't get a company that goes bankrupt the next day. >> here in hong kong we are waiting for an index review. what are we anticipating? >> it is a really important index and it is a very good thing or a company because it is very old back in the 60's. the hang seng has actually only past 20changes in the

quarterly indices. year, we were saying they were the smallest company and at risk of being kicked out and tech,ere embroidered with china heine -- china-trump situation last year. have an 18 month history, but it is a stock that has done really well and chinese investors can finally buy it as of last week. a little bit of anticipation. >> etsy technology earnings due out. long-running unrest in

hong kong continues to take a toll on the city. hong kong may lose its status as asia's top financial center. let's bring in our financial quarter -- reporter. what do the numbers show? it is pretty powerful, they told a it is taking on hong kong. >> that is right. we can see where hong kong really shines. it has a legal system that phone companies can understand and it ranks highly on a number of standard of living metrics as well as very good restaurants, but it is the trend lines that are really worrying. if we look at ipo's here, they

have taken a steep drop. lose itse hong kong crown as the world's busiest of and we can also see that shanghai is really pulling away in terms of stock trading turnover. finally as we see on the one hand, singapore is really rising china's vastp and volume of wealth. from's a lot of pressure all places here and of course were china is catching up fast is on ease of business, so where the world bank index, it jumps from 46 to 31st this year.

traditionally dominated these indexes with hong kong quite closely behind and with china catching up, it has these problems of restrictions on moving capital in and out of the country as well as tents regulatory environments. at what hongook kong has had and how singapore is gaining, what is your conclusion? >> it is basically that. the gaps are closing, so it is not as intuitive as it would .ave been before >> thank you so much. push toe making a become southeast asia's hope for

tech firms and rolling up the welcome mat for virtual banks. we spoke to the head of the monetary authority of singapore in an exclusive interview. >> i think we can always do better. hope is that some of the players will come with very advanced abilities -- capabilities and do extension in a much cheaper and faster way to stop we see some of these players becoming regionally important and i think looking ahead, singapore was to be a bass player for these as they grow in the region and that --ns anchoring their anchoring them at the early stage of development. >> the envision a time that needs to be a consolidation within the banking industry?

he said that even three banks are too many. talking your views now about digital banks? me that we are aiming necessarily for consolidation. the some have been? -- it may not be a bad thing. many, soks is not too quite a diverse landscape. it is not clear to me that we need to see more consolidation. see ourare likely to existing joint ventures and and nonfinancial players.

consolidation on its own is mostly about cutting costs which am not sure is a paramount need no regulator think would like to see an overly concentrated taking sector. there is too much and i think in thesome diversity banking world is not a bad thing. forget our interactive tv function tv . .here, you can watch us live check it out at tv . this is bloomberg. ♪

asia.s is daybreak check on thequick latest business flash headlines. workheadlines from we inspired 13 employees accused of violating company policy. the chairman wrote to the staff saying it affected workers across the globe including in the u.s., canada, israel and latin america. we work says it will not tolerate disrespectful behavior.

toyota and an electric launching a joint venture next year. each company will supply capital and will move staff to the venture. europe'shas joined green bond with one of the largest environmental from a -- environmental friendly debt. it will use proceeds to reduce its carbon footprint and conserve resources. the markets are growing as into these cap their use of fossil fuels. pgd now faces more than $6 million in after-tax costs. it reported a $1.6 billion loss

or the third-quarter. -- tgv is not providing guidance for next year. a look at how markets are trading. trading, the nneka higher. we are seeing aussie shares fluctuating, gold miners among the laggards as bullion has for the worst week since 2017. capital economics sees aussie 10% if theyg trigger is pulled. [no audio] >> which may see a slowdown in

the contraction of export growth for the chinese economy. we are also waiting for chinese traded a -- data. this as we are seeing trendlines move markets. >> coming up, we will break down the push pull of trade talk deadlines with a managing director who has called the trade war the singular focus of president trump's 2020 campaign. stand by for bloomberg markets, headlines headline -- for the china open. this is bloomberg. ♪

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selena: welcome to "bloomberg markets: china open." ♪ say theys. and china will remove tariffs as a trade deal approaches. both sides site negotiations are making progress. shery: that sparks -- yvonne: that sparks an appetite for risk. lies the ground, hong kong may lose its title as asia's financial hub as