paul: i'm paul allen in sydney. >> good evening. i'm shery ahn. kamaruddin.ophie welcome to daybreak asia. paul: our top stories this thursday, no change and no signs of change. hold andates are on jay powell indicates little chance for a move in the coming year. and facing an angry agm. the board is truly sorry people may have been exposed to harm.

shery: and a rocky road ahead for china. the world's top auto market heads for an unprecedented second straight year of failed declines. comingnd south korea online. here is what to watch. sophie: stocks open higher with nikkei and topics opening with two -- .2%. data earlier this week showing a pickup in business spending and reduced prices. the yen looking steady after jay powell's speech which reinforced the dollar has a negative bias. which assets will benefit most from the fed's 2020 outlook? we will check in on the open in seoul. .7%.ospi up we have aussie shares moving to the downside with a risk on move this morning. futures are also gaining ground.

it lets check in on currencies this morning. the aussie dollar bumping its timeagain for a sixth moving below 68.80. and the british pound back up above 132 -- above 1.32. more on u.k. politics now, here's a check of first word news. u.k. votes later thursday in an election that will defined the relationship with the eu for years to come. brexit has been the central issue in the campaign with prime minister boris johnson insisting the contentious divorce will ify happen quickly conservatives earn a strong victory. uncertainty has left several leaders. saudi aramco advising 10% and

taking the market valuations almost $1.9 trillion. the goal is a $2 trillion valuation and it's within reach. are thet and apple country's biggest companies along with aramco. aviation regulators say approval to fly is not imminent. the plane has been out of action since march after two fatal crashes linked to the faulty altitude sensor. boeing was hoping the faa would approve software updates before the end of the year allowing the max back into the skies. will be returned to service when safety issues have been addressed, pilots have received all the training they need to safely operate the aircraft.

this process is not guided by a calendar or schedule. >> and the space company owned by jeff bezos has another success launching and landing the same rocket for the sixth time. texas. off in west it reached a peak altitude of 140 kilometers above the official threshold of space with the new rocket coming in to head just ahead of the capsule. global news 24 hours a day on powered byquick take more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. asian markets have the chance to react to the fed's rate decision. jay powell indicating there is no policy change. robust. economy remains

we have our guest in hong kong and local head of east asia. we also welcome the principal global investor of chief global economist. with you.start off we did not see a great delivery action in u.s. equity markets as the fed chair was speaking. do you expect to see much of an impact in asian markets? >> not really. as he said, it has been well priced. -- as you said, it has been well priced. policy will give time and space for asian central banks to reengage and recalibrate their policies. i expect a number of them will want to ease. but into 2020, it will mean weaker asian currencies. bob, i want to bring you into this point.

-- in at this point. to what degree is the fed's decision going to ease pressure on some of asia's central banks to take action? bob: i think that is exactly what has happened. cutsu look at the three the fed has had so far this year , it certainly allowed in india and some other countries, it allowed them to be much more accommodating. and i think all of that process of accommodation has certainly helped the global economy. we are seeing better numbers in china. we are seeing better data in the united states. i think europe and japan are lagging a little bit but we are starting to see a small bounce in europe. and we ultimately will in japan. what the fed has done is precisely right at the right time. were you surprised at the unanimous nature of this boat

given how divided the committee has been previously? they certainly have been divided. i think this was the first unanimous vote in some time. it is pretty clear that now that the fed is at this level and things picking up, it certainly was the right move to be more accommodative. theythat real about-face did in january, the dollar is also weakened and it. weakened a bit. and certainly for emerging economies. to the point about emerging markets, this chart on the bloomberg shows the minimum dot is at current rate levels. not a single committee member projecting a rate cut. does this decision today make

things a bit more hawkish relative to pricing as we move to 2020? cliff: again, probably not really. what happened with treasury yields overnight is that they fell of you -- a few basis points. the market is taking off some short covering in treasuries. it meant that they were more hawkish and became less hawkish as the day went on. my mind question in right now across a number of asian countries and even in industrial countries is, what is monetary policy doing? this willknow that ultimately have a stimulus effect? -- torket tends to street treat every stimulus package with a tickertape parade. i wonder, sometimes. irtainly in china's case, don't think that monetary policy has much stimulative effect here -- stimulative effect.

paul: i know you're concerned about the growing debt problem in the past. is that concern rising for you? cliff: it is. we put it back on the front burner a couple months ago. and we expect a pretty steady stream. not a flood, but a stream of credit default events as we go to the new year. emerging markets have something like around 4.7% or 4.8 trillion something around $4.7 trillion or $4.8 trillion in maturities. we are expecting a period of em indigestion as we try to get through this. paul: you mentioned at the beginning that the fed's decision wasn't much of a catalyst for asian markets. is the big catalyst really going to be trade? particularly this phase one deal?

what are your expectations for that? oddf: something a little that we are increasingly beginning to think is that even if we get a phase one deal, we might still be in a trade war after all this is over. the disagreement over phase one is basically about how much ag does china purchase? and how many rollbacks the u.s. does. if there is disagreement at this late stage in the negotiations, that should be taken as a sign that there will be disagreement after phase one is announced. trumpmmitments of the administration -- the commitments that the trump administration wants from china may not be physically deliverable over the next couple of years. that will be a tipping point. shery: talk about the impact of the trade tensions. the gtb charts are showing the

recession probability has fallen below 30% which has been the .evel what happens if the trade one phase to a falls apart? leave the fed to stance on hold without further cuts? bob: i think the fed will stay on hold. if the phase one deal falls add someat will uncertainty. but as cliff mentioned, this conflict is not going to go away. even with the phase one deal on ag products and a little bit of tariff cuts. the conflict is going to stay. there will certainly be some uncertainties as we go forward. is,as important as trade some of the underlying fundamentals are really more important and coming to the fore right now. we are seeing a little better economic momentum in china.

as you look at business surveys, car sales have improved a little bit. electricity production and a the uniteder data in states i think is coming from some underlying economic fundamentals that are less related to trade uncertainty or trade problems than some of the headlines seem to indicate. even if there is failure with the current deal or if it is put off until next year, i think that we will see some positive momentum. things pick up a bit as we get to 2020. shery: what about positive momentum when it comes to the markets in china? we have seen the rally of the shanghai composite but underperforming the s&p 500. if you don't see the pboc put forth this big measure for supporting the economy, can

there be momentum to the upside? again, we are still cautious on chinese equities. what is happening right now is that the government appears to have really taken off all the on fiscal policy. if you look at the money market commentary day by day, there is a lot of government deposits adding to onshore liquidity. ismeans government spending spending on infrastructure. the chinese economy is that this is a runner that keeps getting tired because of the debt load. while we can expect maybe a couple months of pickup, just like any runner can run faster for a little while, we think this will slow down again. it will get tired again as we head into the new year.

i think the chinese equity market has been quite rational this year because it knows about the underlying problems and it knows about the limitations. shery: thank you so much for usg bankghts, in global markets research head of east asia. bob is sticking around. we will talk about japan's economy after posting the biggest fall in machine orders in months. this is bloomberg. ♪

paul: this is daybreak asia. shery: i'm shery ahn in new york. more on the news out of japan, machine orders plunging 6% on the month. it would be the biggest fall since july. the fourth consecutive month of declines. the expectation was for a rebound.

we are also getting on friday industrial production data in the boj's survey. let's ringback the chief global economist. thank you for sticking around. talk about japan because the economy is very much under pressure at the moment. we have seen the fiscal measures , the package of $121 billion coming from the japanese government. how much will this help? bob: i think the fiscal package will certainly help. you have to keep in mind that a lot of macroeconomic data in japan is pretty volatile. we saw that with third-quarter gdp when it went from seasonally adjusted annual rate to .4% to 1.8%. is of the key drivers investment. japan,look forward for keep in mind it is part of the global economy. think about what the global economy is doing.

i mentioned in the prior block that i think we are seeing more momentum out of china and out of the u.s. expecting, for several months now, the u.s. and global economy to pick up a bit as we go into 2020. we are also seeing a little better data out of southeast asian countries. south korea, taiwan, singapore. technology orders tend to be a leading segment of what is going on in the world. i think japan, in part, is being hit by the impact of the value added tax hike at the first of october. it is probably part of why the third quarter was so big. that means third-quarter gdp will not be great. trough of economic growth in japan, probably, in the first quarter.

and with the rest of the world picking up, that would be my view that japan, while lagging, will feed into that pickup as 2020 progresses. shery: japan has been the stubbornly low inflation numbers. this chart on the bloomberg consistently below the 2% inflation target. now that we have more support coming from fiscal measures and a pickup up in the global economy, how much more will this mean for the bank of japan? bob: i think it will certainly help. i think you have to keep the long-term view and perspective for japan. years, decades really, japan saw fairly significant deflation. andnow with a slow economy tough times in japan, there is not deflation. there is some positive inflation.

it is certainly below the banks target. but even at half a percent -- but even at .5%, it is different from the price decreases we have seen in japan for quite some time. i think the boj needs to recognize that some things have changed. i think this is a positive move. is certainlyus trying to reverse some of the problems that were started by the hike in the value added tax. but i think there is progress on the inflation goal. ultimately, i think the bank will be successful in having inflation just move up slowly, gradually. it will move up. keeping with the theme of cautious optimism, we have seen some rises in the copper price, the iron ore price, oil nudging up with progress on the trade front.

when it comes to global growth, you're wildly optimistic -- mildly optimistic. can you clarify mild for us? bob: global growth has been in a slowdown for almost two years. it began in china in late 2017 and early 2018 when they tried to slow the growth of debt and ease their pollution problems. as china grows slow, we see growth slow in countries that sell into china. i think things are picking up. a mild we could see pickup in growth. this is really the third midcycle slowdown. rebound is the third wave

of rebound. i think china's stimulus is really kind of timid. this is toward the end of the cycle. optimisticcautiously for 2020, we could run into some in 2021.in the u.s. paul: i consider it to be rather curious news out of the working conference this week, trying to deemphasize growth, you have double the size of the economy. how do you square that circle? i'm not sure you do. clearly growth is slowing as the prior guest had mentioned. it will continue to slow. china has larger debt problems. creditll not allow the spigot to expand as they have in the past.

force starting to shrink. ,ith a shrinking population authorities have to recognize that growth is going to slow. i think that is simply a recognition of fact. they are going to double the size of the economy. that can happen, but it will certainly take more time than they have suggested in the past. one piece of good news we got on the trade front is from south korea. the export numbers for the first 10 days of this month rebounding almost 8% on year. south korean exports had been falling for 10 months or so. is this the beginning of a turnaround in the trade flows around asia? bob: i think it is.

while the export numbers out of china with the most recent data were not great, if you look at china's imports, they have been improving. that is just another piece of data that suggests china is picking up. we have seen better business surveys in south korea, singapore, and taiwan. those countries tend to be the leading edge of what is going on in the world economy. i think that bodes well for this a mildm that we have pickup and global growth to come about and continue. shery: great to have you, bob principal global investors chief global economy. we have plenty to come on "daybreak asia." this is bloomberg. ♪

watching daybreak

asia. let's get a check of the latest business headlines. we work is selling off assets after it seeks to raise cash and rework its operation. it is managed by q which helps companies organize tasks and services. the business has been owned for eight months. investors is said to include the managed by q co-founder. >> we were the biggest rival in china. work's biggest rival timesharethe first sale could raise about $100 million. spacesates more than 200 including hong kong, singapore, and new york. shery: the former president of pending ators is now self driving auto start up.

he says solo drivers of gas powered vehicles are fundamental problems behind pollution, congestion, and accidents. coming up next, investors looking ahead to christine lagarde's talk at the ecb. this is bloomberg. ♪

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next -- >> it is telling you it is a fed-- is groping in the dark. we are not getting wage acceleration or inflation, so 4%.is nehru above >> the fed will try to keep inflation from going even further down. >> this is a fed tilting toward accommodation because of the risks at the outlook. >> the next move is probably a cut and probably because of inflation. >> investment spending is

negative. we have seen factory shipments going negative. i think the biggest part of the economy, consumer spending is holding up, yes i'm it is consistent. >> it is a different regime. even if they do start raising rates, they are barely raising rates. this is a far cry from normalization. consistent,real coherent message. guests reacting to the fed rate decision. asian stocks rate -- stocks trading mixed. steady while the dollar is trading near a one-month low after the biggest drop for the currency since october. the korean won gaining ground further while the kospi is rising. trading at a november 27 high with a bullish course on korean stocks building this week.

credit suisse raise the target on earnings stabilizing by tech. nomura favoring ship makers next year. ozzie shares are the clear outlier. with00 off half a percent banks leading the draw. one of those laggards is under pressure as it faces shareholder higher today. you had the chairman apologizing. earlier, japan display gaining ground. now, just a little change. paul: thanks very much for that. discuss now that we have the federal reserve out of the way. the next big bank focus will be ecb. christine lagarde heading up her first meeting as president on thursday, grappling with an

economy that needs more stimulus. kathleen, how telling will this meeting be on lagarde's thinking and also plans for the ecb? kathleen: i think a lot of people are thinking she will not come out of the gate for force because she is too sappy for that. remember, when she testified, spoke the european parliament when she was getting ready to be approved as the new head of the european central bank, she stressed her role as the head of the imf, a former finance minister of france. she is not an economist. there has been off the record some grumbling that they have a politician headed by an organization that should be added up by an economist. at the same time, she is a savvy politician.

everyone is hoping that she is the head of the ecb who can now talk to other european leaders, chancellors, presidents, who can help them boost inflation because mario draghi's bazooka did not help get the ecb that far. .et's look at a simple chart euro area inflation, their target is just below 2%. services inflation is looking pretty good, but look at headline inflation, 1%. super court inflation, taking out some key commodities, that is at 1.4. they have a long way to go. so many people are figuring that negative rates are not working, bankers and economists are thinking about it bond purchases

, they are supposed to end in september. ecbmberg recently said the is done cutting rates. they will keep the bond purchase up until 2021. the question for christine lagarde, especially at a time where the ecb government counsel is divided so harshly between hawks and doves. paul: kathleen, in that environment, what can christine lagarde inform the public about? kathleen: there is a strategic review in the works for the ecb at the beginning of next year. people are wondering what she might even say broadly. the idea, if some of your key tenets are working, you need to make a change. like, maybe change of the inflation target, maybe putting

it a little bit higher so you can convince people you want to get there. those are the kind of clues people are thinking she might touch on. the ecb is updating economic productions. -- economic projections. some numbers have been better think itery least, i will that lagarde will expressed confidence that there will be a rebound in the second half of this year that the ecb is looking for. economy still struggles. as long as the trade war continues, a lot of things weighing on the european economy that monetary policy can fix. maybe somehow christine lagarde will be able to bring a little magic to those problems. shery: let's get over to the first headlines.

d on debutrabia's soar in re-add. the stock jumped by the daily limit, putting the kingdom's goal of a $2 trillion valuation within reach. aramco has become the world's most valuable listed company. it has been part of the plan to wean saudi arabia off fossil fuels. the number people killed in the volcanic eruption in new zealand is up to 18 after two more people died in hospital. rescue crews have not been able to look for bodies of those unaccounted for. increasing risk of a coming election -- of another eruption. -- israel with

another election. neither benjamin netanyahu nor benny gantz has been able to strike a deal after neither of their parties were able to secure a majority. movie mogul harvey weinstein is said to have reached a $47 million settlement with his accusers amid allegations of sexual harassment and rape. the company would be paid by weinstein's company's insurance firm with about one third to go to lawyers. it would not require weinstein to admit wrongdoing or pay anything personally. weinstein has denied allegations of sexual abuse. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. yuan traders seem undaunted by the looming

deadline for tariffs on chinese goods, even as investors elsewhere are piling in for protection. tradedthe chinese yuan at the deadline on sunday? >> the chinese yuan has been very stable, trading in a range of less than 1%. , bearishtions market bets versus bullish bets is that the lowest since july. this means that people are not expecting the tariffs to be implemented, and therefore there is no need to hedge. risk -- what the is the rest of the world doing ahead of this deadline? livia: the rest of the world, there has been a lot of hedging, a lot of protection. this could be because chinese

traders, they don't need to take the risk. it also means, if we do see the tariffs implemented, the yuan could have a big move, citi says 7.25. or shery: we are seeing a jump in the hong kong dollar. it is largely seasonal move. usually, towards the end of the year, we have some banks hoarding cash. at the same time, we are seeing phenomenon where the hong kong dollar lending rates are higher than the u.s. libor. this means it is less profitable to make a carry trade. that is unwinding and thus the hong kong dollar is strengthening. shery: livia yap, thank you. you can get a round up of the

stories you need to know to get your day going with today's edition. available in your terminal and on mobile. this is bloomberg. ♪

"daybreak: asia." shery: china's car industry could see a consolidation acceleration in the coming years as it heads for an unprecedented second annual sales declined. however, our next guest is expecting a low single-digit recovery in the mainland passenger markets next year. joining us is fits ratings china research director. what are we expecting in terms of market consolidation in the

auto industry in china and would --s help the industry year industry next year? >> we had this weakness for a year and a half already. divergence inf this market. chinese automakers actually losing market shares to foreign competitors. aroundshares climbed by three percentage points this year after about a two percentage point decline last year. still, we saw a lot of divergence performance, chinese local brands. players.ding there are some smaller, weaker brands to be shaken out amidst and week market environment financial markets.

shery: does that mean we will see more credit risk for these squeezed brands? jing: we see credit risk as players. space.chinese auto weakerr smaller, companies in china, getting around including land, buildings, even license of vehicle manufacturing could be valuable to some ev startups. paul: if you have a stable outlook for most chinese makers, what is your outlook for profitability? about the whole industry, the profitability is

set to weaken. for those leading joint venture oem's, profitability can also be eroded by discounts and also increasing exposure to the ev products. overall, we do think they have some room to pass over the pressure to suppliers and dealers. paul: how are the locally produced brands, particularly suv's, coping with foreign competition? were auv's actually bright spot of the chinese auto market over the past few years. we think mexican slowdown in the low-end segment. that playground for all of these smaller local brands. we think increasing competition

from foreign brands as they catch up, with lower-priced suv models, and they have more attractive features. paul: thanks so much for joining us today. still to come, after months of protests, hong kong's property sector has been hit hard. there could be an upside after all. this is bloomberg. ♪

.aul: this is "daybreak: asia shery: hsbc's search for a new ended up seem to have where they started. back in august, in said that he -- back in august, quinn said he did not see himself as a caretaker and started laying out long-term strategies. benefit ofok standard chartered's indonesia unit. japan'speting with matsui and the final race. market value of more than $2

billion. a winner could emerge as soon as next week. bank: a chairman says the is truly sorry that it could have exposed people to harm after australia's financial crimes agency said it failed to deduct -- to detect transactions related to child abuse. has wiped $5 billion off the lender's market value. >> as a board and individuals, we are devastated that anyone could have been exposed to the risk of harm due to failures by westpac. paul: for more, let's bring it finance reporter, emily. the chairman saying sorry but does that ring a little hollow? this has been going on for years. emily: they are rocked, really,

devastated at what is going on. we have to take them at their word that this has rocked everyone in the bank. are doesn'ty they alter the fact in many shareholders minds that this happened. today, we are currently at shareholders questions, these are smaller retail shareholders, not normally the people who get to have their say. shareholders standing up to say, was there something wrong with didculture and westpac that not allow these things to get reported? was there not enough investment in technology? the bank can start by saying sorry. in earlier guest was predicting what he called a spicy agm.

has the bank done enough damage control? emily: i think the word used most so far is disappointed. we have not seen yelling, screaming, but we did see them ask repeatedly how this could happen and what has been australia's oldest bank and second-biggest bank disappointment, frustration, and just bewilderment that something like this could happen. shery: thank you. we are going to leave that they are but of course you can go to live . you can find some of the events you may have missed earlier. months of protest and a struggling local economy have hammered property stocks in hong kong but analysts are starting to see a silver lining in

valuations. investors have been bailing out of property. is that because of fundamental reasons or just sentiment given the ongoing protests? >> it is really because of both. if you look at some of the , they are down about 30%. what that means is that the property sector, and if you look rightv, you can see this away, the property sector is trading at the biggest discount on a price to earnings ratio effort. at somes means is that point, property companies are going to be too cheap to ignore. investors are looking at them. the biggest question right now is how long the unrest will last.

right now, we are expecting to see economic decline in the first quarter of next year and the second quarter. if that happens, we could see that these low prices are justified. investors say they have fallen way too much. bull casewhat is the here? that ift is interesting you look at the financial statements, they are not very bearish. they say, yes, of course, traffic is down, we are not necessarily expecting tourists to come back right away, but if you look at net leverage and the level of debt companies have, it has been unmoved in the past four quarters. gross margins are actually now at the highest level in the past three years. what that means is that, yes,

'sme sectors of the company topline and bottom-line growth is being affected but, right now, it is not being seen anywhere in the earnings reports. the sentiment is quite bearish. from a fundamental perspective, we are not quite there yet. shery: fundamentally speaking, many thinking you cannot get out of this one without resolution on the protests. is this worth considering if you are thinking of getting into the property markets now in hong kong? elena: absolutely. that is something investors are talking about and is the big bear case here. property sectors, these companies have very diversified businesses. they do have assets that are

affected by a drop in retail sales, a drop in food traffic traffic likeot malls. one area of income can fall maybe 25% as a result of a decline -- the food traffic and retail sales and more fixed part of the income is going to be steady, at least for now, for the time being. paul: thanks so much for joining us. let's get a preview of what to watch in the markets later this morning. as hong kong's property sector manages the headwinds, they have reportedly cut rates for some. we are also watching cathay

pacific and other asian carriers after the profit forecast was slowingrade wars and global growth. daimler and tesla suppliers on watch. the carmaker plans to raise prices of model three cars imported to china in january. shery: the bloomberg markets china open is next. we will be joined by the standard chartered chief economist. later, special coverage of christine lagarde's first ecb decision and subsequent news conference. that is coming up from 8:45 thursday night hong kong time this is bloomberg. ♪

-- welcome to "bloomberg "arkets china open. david: no change and no signs of change. the fed leaves rates on hold. yvonne: months of unrest have weakened the foundations of property stocks in hong kong but analysts say there could be a silver lining. tom: sterling may be in the spotlight as the u.k. heads to the polls. ♪

the fed and jay powell signaling no change in 2020. what will the priorities be for the pboc in china? we may get some clues ahead of this key meeting that wraps up later today. theclock ticks down to potential tariffs this weekend. we may get some signs of what they agreed on in terms of the growth objective as well. i believe we have a rate decision in the region, plus inflation out of india. philippine --yvonne: philippines is the next to do that decision. risk assets, it was mixed, but bank of america coming out with

an interesting note when it comes to qualcomm, saying they may get a boost if apple starts to develop these 5g iphones. 1% thanks to the likes of samsung and thailand coming online. futures, inflation numbers coming out, could continue to see the recent surge in inflation. that offshoreg renminbi basically reversing the losses yesterday after the dollar fell to the five year low. about five basis points after that statement and press briefing by jay powell. it seems like bond traders are saying there is a high bar now set. heading back into negative territory come around negative one basis points.

the dollar spot index reversing gains of 2019. we cite big move fire when it came to the aussie dollar. we will see if it will make that sixth attempt to break the downtrend. ecb,pound given that the and the u.k. starts voting today with that election. the peso largely strong here ahead of that policy decision. hong kong dollar, we were watching this movement here, it is jumped the most since august if it sticksll see throughout the asian session. >> i am going to get right to that brexit-related election. the u.k. votes later thursday in an election that will define its

relationship with the european union for years. brexit has been the central issue with prime minister boris johnson insisting that the contentious divorce will only happen quickly if conservatives own a strong victory. hoping for aaders johnson when only so the drawnout negotiations can come out to an end. to israel, another election after the fractured armament missed the deadline to form a government. neither prime minister benjamin netanyahu nor opposition leader benny gantz have been able to strike the necessary coalition deals. neither of their parties security parliamentary -- secured a parliamentary majority. laws, theia, privacy

dominance of tech giants. a special unit will monitor platforms with scrutiny of online advertising. it is a response to a sweeping report from the regulator which calls for a crackdown on tax, including penalties for inappropriate use of personal data. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am su keenan. this is bloomberg. the federal reserve made it clear it sees no more need for rate cuts and said they may continue rates where they are through 2020. economics editor kathleen hays is here with more. kathleen: everybody fell into line, no dissent. row, three rate cuts in a

let's stop now, see what happens next. jay powell at the press conference made it clear, we have done enough. >> decisions through the course of the last year, we believe monetary policy is the right decision, supporting economic growth, a strong job market. jay powell was also pressed on, you have been talking a lot about the trade war, there are reasons for preemptive moves. he did stress global development. a the serial assessment of the outlook -- the material assessment of the outlook to do rate cuts. staying with the target for the fed to hike rates. look at dot

on the far left, you see all the dots. everybody early in the year who were not looking for three rate cuts have to be on board. oft line shows that 13 out 17 members, for the rate to stay where it is completely next year. else is with jay powell. bond traders may see a dovish tilt. the bar is high in either direction for another cut or hike. david: let's talk about the ecb. later tonight, christine lagarde's first meeting. kathleen: a successful politician. she ran the imf, she was a french finance minister. you see her here when she was in

september, speaking to the european parliament so they could firm her. she is not an economist. there's been some grumbling at the ecb off the record that you have a politician. but a lot of people say, you need a savvy politician. who else can talk leaders into spending money on their economy. look at inflation. line of services, just below 2%. the headline, the turquoise number, they are far below where they need to be. a recent survey says they are done cutting rates. negative rates are harmful. they will keep buying bonds until late 2021. whatever christine lagarde hints about the strategic review, you will change the way you are

trying to move the economy higher. expressed confidence in the forecast for the pickup in the second half of the year. david: good stuff. 12 hours from now, will hear what she has to say. yvonne: joining us now, let's bring in standard chartered chief global economist david mann. on a fedave you reaction day. jay powell saying likely they will stay on hold. do you think the market will continue to buy that? david m.: i think they should do. our view is that we will see no change in the policy rates from the fed all the way through 2020. if anything, it would be more likely the cut rather than a hike. we believe we are in a global slow-motion slowdown. the u.s. is in line with that. messaging the sort of we are seeing right now is exactly in line with the way we

think they should be acting come on hold and ready to do more if needed. david i.: is that the same way of saying they move down in the dollar, 2020 is a down year for the u.s. dollar? david m.: that is what we are thinking. we do not think it is necessarily an aggressive down year. plenty of other central banks that may be in a similar position. the way we look at it, we have to be looking out for things like news on the u.s.-china trade war. renminbirticularly the over the past 12 months. if we are right that we would see more good rather than bad news, it could mean more strength of currency in asia that we have seen over the past year or so. u.s. as well as in the the slow down,

because of the longer structural drag affecting worldwide debts and deglobalization. tom: some of the structural issues are blamed for the lack see- saying you have to significant inflation. we have a chart showing u.s. gdp is outstripping inflation. where do you look for signs that prices are picking up given the unemployment rates are so low? david m.: that is a very good point on how tight labor markets subdued wage cost pressure. this is also one of the reasons why you're seeing this sense of losing out on a sense of inequality. if you look at this on a multi-decade basis, it is a

relatively tight labor market, but they don't feel the opportunities. compared to where they were decades ago, they have that sense of losing out. over the coming years, with higher inequality comes weaker growth rates. if you get the tax reform we saw in the u.s. in 2017, it supported growth in 2018 but the benefits went to higher income groups and you did not get as much of a reaction as you would have otherwise. we would link in this outcome the fed, the ecb, the boj, any of them quite right in reconsidering what the right type of policy mask -- policy mix would be. that combination of fiscal and monetary policy working much more closely especially if we get some central-bank independence. how much support does the

eu economy require from the ecb? david m.: the way we are looking at it, there are enough signs that the chances of a recession in the euro area are relatively low. the ecb has already taken some preemptive action. if we see more good rather than .t news certainly, rate cuts which, as you mentioned earlier, there is a growing amount of evidence in our view that negative rates are not a useful policy tool. savers struggling to find where they can get a return on their savings. we think this means even more reasons for policy fixes and europe would be included in that. yvonne: david, thank you.

still ahead, we will talk about hong kong property stocks which have plunged says the protests started. analysts starting to see a silver lining. tom: first, as the trade war rages on, chinese policy members have to balance a slowing economy and rising debt. this is bloomberg. ♪

tom: about 13 minutes for the open of trade and the mainland and hong kong. willates are that yuan come in at 7.0258. at 7.0208. yvonne: yuan traders seem

undaunted when it comes to sunday's looming deadline of tariffs. investors elsewhere are piling into protection. let's get the low down. livia, are people nervous or not nervous? livia: we are seeing some nervousness in that volatility has jumped. at the same time, there is not that much hedging. demand for bullish bets is still quite low, meaning that analysts they think it will be delayed on sunday, and that means the market has something to hedge. some seasonal demand for liquidity. at the same time, there has also been a large gap between the

bor as wellollar hi as the u.s. libor. this means it is not as profitable. the carry trade popular earlier in the year is not popular anymore. tom: fx and rates reporter, livia, thank you very much indeed. let's turn to the economic or conference in china. it is expected to offer some details about its 2020 economic strategy. wein, when that ends today, may get some clothes. they will talk about how they balance the economic slowdown with financial risks and the impact from the trade wars. still with us, david mann. what are the key things you are looking for out of this work conference? is it significant? david m.: what they are looking for in 2020, overriding

everything, will be achieving the doubling of gdp versus 2010. whatever it takes to achieve the growth rate to get there is what we will likely to see. -- well china has been using fiscal policy quite aggressively this year, it is muted on the impact from trade wars, the fiscal stimulus, to achieve a growth rate just above 6%. what is also good news, while they are achieving that, there is a balance to be had in not allowing things like an indiscriminate credit boom or the housing market to be too gung ho. policymakers in china have been acute really where -- acutely aware of the challenges. the year, in 2018, we saw deleveraging drive really

writing into the economy. the delivering risks that china want to mitigate against. tom: we saw reports from the latest money supply data that the deleveraging continues. is there a risk that it will inflate some of the financial risks and bubbles once again? will they be able to allocate the capital more efficiently? tom: we are certain -- david m.: we are certainly seeing this word viable houston line with some of the projects. -- viable used in line with some of the projects. it does make the stimulus more difficult to implement shorter-term, which is unusual. this has not been an issue, a lot of building done regardless. now it is much more targeted,

which we see as a positive to a tackle this major issue because of pipeline of defaults that were in the works. there is no reason to be taking action now to be added to that. yvonne: going back to something you said earlier, if they continue on these targets bypany 6% doubled of gdp 2020, is there a risk that if they stick to these targets that we would be seeing slower growth later on? is it better to miss these targets and get longer, better growth in the long-term? david m.: once 2020's targets are achieved, we are expecting that the emphasis for growth will be replaced with high-quality growth, and focusing on the environment again and other social issues, moving away from just having a specific number on the gdp target.

to your point, that does add to the risk of 2021 dna weaker growth year -- 2021 being a weaker growth year for the global economy. 21% ofhis year will be gdp growth on it some. also, if we had in the fact that because the u.s.-china trade war incentive structure is such that it makes sense to come to some sort of phase one deal with relatively good news, what happens in 2021 could again be more of a concern. to be worried about growth in 2021. it may turn out to be a reasonable pace growth here, slightly above last year. david i.: that is fair enough. china is arguably -- and you have outlined your view -- 6% or below.

percent.5 every single company out here that sells to this 3 billion person market, is the slow down a consumption slowdown? is in the way of looking at auto sales. autos were a major part of the story this year in china and that is something the industry has not been used to for more than a decade. if you look at the india case, there are major challenges because of the reforms of the past and on top of that, the still sluggish nature of private sector investment and the need to get through india's own debt problems, these are all holding back growth. once that is resolved, it may not necessarily be something resolved immediately, it is actually india that we see has the faster growing economy than china through the 2020's.

that is not something that will be easy to do over the next few months. yvonne: david, thank you. chartered, standard chief global economist, joining us. more ahead. this is bloomberg. ♪

check of the latest business flash headlines. bangkok bank emerging as a leading better -- a leading bidder for control of standard chartered's indonesian unit. they are competing with a japanese company for almost 90%. ork's biggest rival in china has applied to list shares with an ipo on the new york stock exchange. it started in china but now operates more than 200 co-worker spaces and 44 cities.

david: moments away from the open. on track for a sixth day of gains on the shanghai composite. the open is up next. this is bloomberg. ♪ here, it all starts with a simple...

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you are watching bloomberg markets china open. we had the fed out of the way. leaving rates unchanged. forecasting no action when it comes to 2020. itt the u.s. will do when comes to tariffs on chinese goods. of course, in beijing, that central economic conference is wrapping up. tom: we have some priorities for the pboc. there are some hints of priorities. it wraps up later today. we may get a sense of where it

is china's economic policymakers want to see things in 2020 given all the challenges they face in 2020. the clock ticks down to that potential tariffs deadline. more soybean purchases from china. open,ms of the market shenzhen is flat. up .2%.casts are individual up to the stocks. we had some upgrades from some of the analyst. bmw has signed a deal with gunga. that is around with him batteries. it is worth about 540 million euros. most of that was an upgrade by dds.

a lot of strength on the back of that upgrade. we can move onto the currency in terms of the cnh offshore. a bit of strength around some optimism on trade. again, that weaker dollar. 7.02.s the picture at yvonne: that is what you get across the region. -- david: that is what you get across the region. the enterprises index is better as well. liquidity concerns moving in. let's change things up and look at the other market now. we are looking at the philippines because of those stocks at the bottom.

we are same for the declines right now. a lot of the suppliers of water are being rethought. let's put it that way. yvonne: joining us now is the head of asia allocation and globalize management. this is probably the less interview we will have with you for this year. -- this whole goldilocks scenario, the stocks rose and fell. will that be the case? >> we have risks in our location. we are still expecting some interest rate hikes going into 2021. looking at the data, it looks a

bit on the dovish side. -- buying quite a bit of funds at the moment. the balance sheet has been expanded. we would not bet against the central banks. in terms of what we have seen in asia, it is probably justified. david: will the dow start tanking? adrian: we think the u.s. dollar looks very expensive. we probably have two scenarios. the u.s. will probably see its biggest decline in terms of growth. the growth should take up more here in asia. central banks are still on the

dovish side. that should bode well for asia. tom: you are be risking your asset allocation. what does that look like? over the last two or three months, we saw some creatures coming out of asia. been expended by around 10% for next year. china is doing much better. we see activity picking up quite strongly. the pmi's are moving by 50. we double down a couple of weeks ago. i think there is more upside. probably 10 or 15% for next year. we bought more equities on the global side. we bought some emerging market equities back. that is probably one of the key changes they did.

we have a very low interest rate environment. that is where we see investors allocating their assets. >> you talk about fixed income. a middle-of-the-roader approach is needed. what matches that middle-of-the-road definition? adrian: we define middle-of-the-road as you don't want to be too risky to the end of the cycle. we are seeing record demands of outstanding bonds. you don't want to be into the high-yield bonds location. we actually have a big focus on emerging markets. we could get around five or 6% yield. you have the yield pickup to

u.s. investment grade bonds. that is how we would position it . david: we are looking at the same sort of earnings rebound for 2019 from 2018. it is the same projections you are getting. adrian: we called our 2020 outlook the year of choices. there is a lot of political noise. there is a lot of answers on trade, hopefully we will get more indications on this december tariffs. i think the growth outlook was too optimistic. nobody expected that they would .ut it looks like we're getting a trade truth.

interesting in terms of earnings growth. the risk that the outlook is too optimistic. europe looks a bit more bleak. david: that's much of talk about with adrian. >> to the first word news now. su keenan is in new york. >> we will start with the latest on boeing. the 737 max will not return to service before the new year. aviation regulators saying that approval to fly is not imminent. the plane has been out of action since march. this after two fatal crashes that have been linked to the faulty altitude center. -- sensor. boeing had hoped that the faa would approve new software updates by the end of the year

that would allow the max back into the sky. two myanmar nap and that affect the leader. she has denied allegations of genocide. the international court of justice claimed that thousands of people were systematically attacked with many more fling. the situation is complicated and not easily fathomed. she has riveted the accident of -- harvey weinstein is said to have rish a proposed $47 million settlement with his accusers. this amid allegations of sexual harassment and rape. one source says the money would be paid by weinstein's companies insurance firms. weinsteinot require to admit wrongdoing or pay any

thing personally. he still faces criminal charges but he has so far denied allegations of sexual abuse. soared onramco which its day one of trading. and took its10% market valuation almost one point -- $1.9 trillion -- market valuation to almost $1.9 trillion. aramco has surpassed microsoft and apple as the most valuable listed company. a is the critical part of plan to win saudi arabia off of fossil fuels. dayal news, 24 hours per brought to you by 2700 journalists and analysts in 120 countries. i am su keenan, this is

bloomberg. hong kong property stocks have been hammered. this is one of the world's most expensive real estate market. analysts are starting to see a silver lining. yvonne: for more on this, we are joined by our stocks reported. adrian is still with us. investors have really been hitting the sector so hard given the political rest out there. do you think it is because of the fundamental reasons or purely sentiment? >> it is both. some of them also the biggest companies in real estate are in areas that are affected by protesters. of course traffic is down. tourists are unwilling to come

down and shop around. if you look at some of the fundamentals perspectives, they are more or less unaffected. the gross margins are at the highest levels in three years. that is quite a bit of something. that is a leverage ratio. the level of debt the companies have. this attack inee fundamentals. tom: what are they saying in terms of the analyst about violations -- valuations? haven't they been affected by broad-based fund flows? elena: one of the analysts i spoke to said it is because of the general outflows out of the area.

hong kong is leaving every sector in the hang seng index. if you look at some of the companies and some of the ,ompanies that have diversified they are seeing a pickup and a double down in metrics. like prices in the commercial sector. they are not going down. the retail part of the business is getting affected. no doubt about that. we are seeing retail sales slumping. we are seeing concerns about gdp going down in the first quarter of next year and in the second quarter of next year. of course, there is a big uncertainty around the property sector. that is something that everyone is trying to figure out right now. david: let's ask adrian right next year.

it is obviously cheap. is a cheap enough? is hong kong cheap enough relative to other markets? adrian: it is definitely cheap. you would have done very well in hong kong. we are not too far away from that. hong kong is one of the bigger markets in the index. perspective, it is probably still too early around that. this is one of the chinese offshore equities. it is an easy trade for this year. at one point, you have to close that. it is to easy to close that.

chinese stocks have more support. all of the support. the sentiment is going in this direction. if you want to allocate in hong side, ifhe defensive you said he stocks look interesting at this point, there is value. from a relative perspective, it is too early. david: i am guessing you get a good dividend deal there as well. this is on the back of that move that we had yesterday. at this moment, it remained stable, the hong kong exchange rate -- remains stable, the hong kong exchange rate. people are more prone to selling the hong kong dollar here. we can watch what is going on. let's talk about what is coming up. the u.k. plans for -- prepares

for a general election. what investors want to see next. this is bloomberg. ♪

>> the central estimate is concern for the majority of around 28. at this stage, we don't like we can do that with parliament. >> this is a binary decision in many ways. you either wind-up with a boris johnson government or a jeremy corbyn hung parliaments. makrs--usually marx -- marks labor down. because they did that, we have a good chance of forming a small liver majority. -- small parliament is

labor majority. >> we could have a hung parliament. in that situation, the liberal second,s who are in they would have a significant influence in the next parliament. tom: some of our earlier guess counting down to the u.k. general election. still with us is adrian. you have been adding u.k. equities. are you betting on a majority? adrian: yes, we could finally to this journey.

it also means the second round will be trade. everything has been set in stone. weyou look at u.k. equities, were underway since the beginning of the year. we can put some of this in our portfolios in october and november. if you really want to speculate on the end of the brexit, it is an undervalued currency. it has rallied already a little bit. tom: brexit is bad for the u.k. economy. thean: brexit can be for u.k. economy. but think a lot is baked in and the numbers.

they have started to sort out the necessary things. i think we can look forward. very important for the i would markets. i think that is a big achievement already. isn't there a case that if you get a labor government, there is less of a chance for at least longer-term, that could be a boost. this is something the markets are missing. adrian: absolutely. the initial reaction will be on the negative side. we would finally get this brexit deal done. there is new uncertainty. the initial reaction would be on the negative side at this point. long-term, more stimulus could be positive for the economy. if you look at the next six or

12 months, the labor would win. they get some kind of proof and can get the stimulus done. >> everyone tells us that. you mentioned the pound is undervalued. by what measure? what makes you come to that conclusion? are those challenged by what is going on with brexit? the other you look at models, it is undervalued. that is nothing new in japanese yen and other currencies. expect the currency will be valued.

-- fairly valued. of course, there is a lot of uncertainty on the fair values and a moving target as well. it depends on the economy and various things. we have to see what the eventuality will be between the yuan and the u.k.. we think there should be a trade deal. maybe something similar. we could have more treatise coming up. that should bode well for the economy. yvonne: thank you so much for joining us. david: here is an update on the hong kong markets. it dipped below 7.80. will get you an update, coming up next. this is bloomberg. ♪

tom: welcome back, a quick check of the latest business flash headlines. --c's search for the they have quietly dropped references to quinn as interim boss. he said he did not see himself as a caretaker and has begun laying out a long-term strategy for hsbc. chase bankers will have to convince a robot that it is necessary to drain the minibar. they started using machine learning technology to see whether expense reports apply -- comply with coupling policy. anything that makes expenses easier. the shanghai composite is down.

hsi is 1.3%. we are looking ahead to any details out of that economic conference here in beijing. david: water supplies continuing declines.ble-digit they may not get that contract extended until 2025. -- the the built-in philippine markets are down. do with thes has to dollar weakness. that is boosting asian currencies and a lot of that on the iphone tech cycle as well. people are looking ahead to that 5g upgrade. the second major currency

and focus will be the euro. -- in focus will be the euro. plenty more ahead. this is bloomberg. ♪

>> why doesn't wall street value airlines as much as they should? >> our largest investor is warren buffett. he says you guys are the chicago the business world. you have not had a bad decade, you have had a bad century. >> what percentage of people actually lose their luggage? >> we never lose it, it is mishandled. mepeople would not recognize .