Subway system and atms. More president pressure, donald trump faced by a second whistleblower. Kathleen time for a quick reminder of how u. S. Stocks ended. 1. 4 across the board, major markets gained 1. 5 after the u. S. September employment report was Strong Enough to convince investors and traders and the fed the u. S. Economy is not on the verge of trade war induced recession and at the same time not so strong it will prevent the fed from continuing to cut Interest Rates. S p, althoughhe we have the futures seeming lower at the open of the s p 500. Forecasts, but strong after the manufacturing 50. Rt, pmi below the jobs are growing, no recession. ,anufacturing jobs didnt drop and pirate private payrolls moving at the slowest since threemonth moving average. That is an issue. The on a claimant rate is down to 3. 5 . Economists say it is another sign the economy is Strong Enough to hold up although average our earnings, 2. 9 yearoveryear and that is a concern. We will see what happens this week. Equities market did not like it and it is transiting into gains on the asian futures. We are seeing the kospi and the nikkei futures pointing higher. New zealand has been up and running for about an hour. That is higher now. I put you on the nikkei futures. They are off. 5 . Australia, public holiday, labor day, but we are seeing haven demands. The yen is strengthening, the 106 and the against the u. S. Dollar. Chinese and u. S. Negotiators preparing to restart long stalled trade talks in washington. We are learning china is going into those talks with a new reluctance about a border broader trade deal. Selina wang joins us. What has changed . Selina what we are hearing from sources about china is it is west less willing to discuss these issues that have been longstanding issues on the part of the United States including around subsidies and chinas industrial policy and once to look at a more limited set of topics. It means those substantial issues are not going to be put on the table. That is of course a big issue because it takes off the table trumps demands which means we should be preparing for a long, drawn out trade war and anything discussed in talks will not address those. The view from china is that china needs a win, that trump needs a win. He is dealing with the impeachment crisis and the weakening u. S. Economy for businesses blame on the trade war. He could be willing to make concessions. His is no surprise it has been long said by china watchers that the chinese side is not going to give up its core economic model which is a key part of its National Security and economic security. It was never something that would be on the table. Anyone can say anything about what is likely. We dont know until we see what happens. I wonder if there is a possible something the chinese can do to give donald trump they can get a deal, not quite the deal trump wants but one that is good enough for both sides because it would be a winwin. Selina we have heard discussions have focused on a timeline for limited a limited deal which is the best case scenario. We reported several months ago the u. S. Administration was considering a deal around three phases which would be the largescale purchases of the u. S. Agricultural products. Implementing intellectualproperty commitments, china made an agreement to end a partial rollback of u. S. Tariffs. So it could clear the way for broader negotiations next year, but if china insists it will not engage on areas of industrial policy and subsidies, even limited agreement could break down because trump has said he will only agree to an allencompassing deal with china. In that Draft Agreement before talks broke down, the discussions did include a few concessions from the china side on industrial policy which included transparency from china on its subsidies as well as lessening chinas commitment to the made in china 2025 plan. It is possible what we have heard from sources what Robert Lighthizer is looking at, he could be looking at sequencing this type of deal. Kathleen it is not over until it is over. Hong kong is reeling from one of the most violent weekends. Subway stations vandalized. The chief north asia correspondent joins us from admiralty. It has been a crazy 72 hours. What has happened . Another monday morning stephen it is another monday morning. There is no end in site. About every monday morning when i am on Bloomberg Television it is recapping and even more violent weekends. That is what we saw even though there was a bit of a lull saturday, it came up yesterday as protesters attacked different businesses across the city, anything with china in the name or perceived ties to the mainland seemed to get attacked by a more radical branch of this movement. Shops were broken into and vandalized. The Train Network was on limited duty and post all day saturday with the exception of limited express trains to the airport. We are hearing there will be limited services as well as closing in the evening. The station behind me, admiralty, the epicenter of demonstrations. It will be closed all day long. Carrie lam and her government in hong kong imposing restrictive emergency provisions late last week. That seems to anger the protesters even more. The limited i say, because they invoked the parts of the provisions that they and facemasks that banned facemasks, but people more them in defiance. Hem in defiance. Another person was shot after the offduty Police Officer was surrounded by protesters late last week i believe friday night. A 14yearold boy was shot in the leg. Two protesters have been shot by the police and subsequently i police and subsequently i might add arrested by the authorities. Paul you mentioned the brazen defiance, so what does the government do next . Stephen what can the government do . Not listening to the demands. Four of five demands are outstanding. They have not acquiesced or give an indication they will. What can they do . 1922 colonial era Emergency Powers carrie lam late last week has much further broader powers she can put to her use including a curfew, including clamping down on users and some form of martial law. Beijing could get involved and they could deploy some of their military resources. The facemask ban was a first step in the Emergency Powers. That is why we saw a run on atms. We saw a run on grocery stores. There is lots of rumors spreading around the public about what the government might do if the city goes into martial law. People are certain toward food and water and get cash out of the banks. Stephen engle in admiralty in hong kong. Lets check in on first word news. Su we start with the latest Economic Data, u. S. Payroll numbers showing worrying signs, job losses in manufacturing. Prominent factories contracted by 2000 positions when economists were expecting a gain. This is a sign of the beating the u. S. Manufacturing is taking in the global slowdown and the trade war. Boris johnson will refuse to resign over brexit and is preparing to challenge the green to fire him if he fails to win a new deal. The queen to fire him if he fails to win a new deal. He will not sit down if he loses a vote of confidence in parliament. He says brexit will happen. Tore were mps that voted prevent that in the case of a new deal exit. Chinas foreign Currency Holding dipped with official figures below 3 trillion. China boosted its reserves for a 10th straight month to 53 million current value of 93 billion. In north korea, they are at odds with the Nuclear Talks with the u. S. The first meeting in eight months was described by washington as good discussions while pyongyang said negotiations did not meet expectations and broke down. This comes after a string of missile launches following the fire of a submarine Ballistic Missile wednesday. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im taking in. This is bloomberg. Paul still to come we are speaking to a woman from the council on Foreign Relations as we look ahead to revived trade talks. We will look at the market ands why this person thinks the u. S. Is touching down the rest of the world. This is bloomberg. Allen in sydney. Kathleen i am Kathleen Hays in new york. The week ahead on wall street is likely to focus on revived trade talks, the latest u. S. Inflation data coming up and a fresh batch of earnings. Su keenan has the latest. I know you will start on the jobs report because it sets up expectations for this week knowing the jobs report, a little bit goldilocks . Su not good or bad. Lets look at the number because it is where we left off friday and sets the tone. Employment and pay gains, wages decelerated as payroll wind. You can see the chart of the recent trend. Analysts say it doesnt look like a real acceleration in the fears puts at bay that have come in on manufacturing and recession fears at bay for the time being. Lets go into the market snapshot. Stocks rallied friday, particularly in the tech sector where apple was strong, semiconductors were strong. The s p is down for a third weekly loss. It underscores a trend weakness. Lets look at the stocks that are in focus. The tail end of the latest earnings with the are lines, delta, which was up friday, levi strauss, fast retailing, all earnings in the week ahead. And very much the focus of the market is on headlines out of trade talks and the latest with brexit which is out as a wildcard in the way the market might trade. Lets talk about oil. Futures posting their. Mainly because of Economic Data what is the story . Su the weakest in manufacturing, it all overshadows concerns about supply. Lets look at the fiveday chart. You can see the significant drop , the biggest weekly drop since july in the past week. The bigger picture. You are not only seeing us continuing to be down from the april high. Look at this chart, but the combined bullish position on the west texas intermediate and brent has dropped from 17 . What you are seeing is hedge funds pulling back on the outlook. We have the end of the summer driving time, seasonal demand also a factor. This demand question, how strong is the economy, the headwinds are having a big impact on the oil trade. Kathleen it is a driver for a lot of things. Lets get on to the jobs report and what it means not only for the economy but markets. Joining us is the director of research and the cabinet. Great to have you back in the studio. I want to start with the jobs report because a little bit goldilocks people are worried the purchasing Managers Index on manufacturing, below 50 for the second month in a row, the trade ,ar is pushing into recession added 136,000 new jobs, didnt meet estimates but many people take it has signed we are not going into recession. Goldilocks number that it could have been a lot worse. That is not the number that was posted. It was just bad enough it reinforces the need for the fed to cut one more time, potentially two more times. I was personally disappointed with the number. I am cheering for the u. S. Economy as a fan. I am disappointed by everything last week. I is them numbers coming in at a 10 year low was important to me. As i look and try to understand, what makes a recession happen . In any economy you have multiple people in the growth and recession. We had strong players bring you towards recession and they are the yield curve, manufacturing data and job numbers looking more disappointing. It was not just the payrolls. This shows turquoise bars which are the payroll changes and you are looking also, if you can see this one, the threemonth moving average, and average hourly earnings. 2. 9 . It is easing off of it. Even though unemployment is at a fresh 50 year low. Andy unemployment is a lagging indicator. What we see in the unemployment headline rate, it is the effects of the last three to five years. The number to watch in the employment report is yearoveryear gains. Mark,e to grow on that what is going to either help support or potentially decimate Consumer Confidence. And then it will have a broader economic impact. Paul you say the worst point in that report was the wages growth. We have got President Trump with what he calls a fantastic 3 increase. Is this part of a thing you can use to support whatever argument you want to put together a . Andy donald trump is a cheerleader for the economy. 3 is something that is only good if you are a very big fan. If you are looking for stronger growth, we really want to see growth in wages above the rate of inflation. It will continue to support near record highs, Consumer Confidence numbers. As it starts to dip, it will decelerate and run the risk of infecting Consumer Confidence. We run a real risk of recession in 2020. Paul markets didnt like the jobs report agree we saw the southern closing higher. Lets talk about earnings which is fundamental for what will happen next. If you look at this chart, we have the share of companies guiding earnings lower since 2016. Goldilocks job reports notwithstanding and optimism about the u. S. Economy, where do you see earnings heading . Andy they will not support the stock market for the next three months. The trouble with earnings it last year it was a difficult time. We were working with the effects of a very large Corporate Income tax which had been legislative the year before. Looking at what happened so far this year, every quarter is a yearoveryear miss. Analysts forecast this quarter will be another miss. Here is the problem. Talking about forecasts, how does the market response relative to this, it doesnt matter whether you have a good number or bad number. Except in one case, where the difference is is your present rate of growth or below because anything below 0 is negative growth and is a decline in profitability and revenue that can have a meaningful impact from the level as opposed to whether it is a win relative to expectations or not. Kathleen i love metaphors. The dipping economy into recession is like a tub of war. Tugofwar. Le on one side gets everybody polling, saying that is what happened. You have three factors you say are all lining up to make that call into recession. That pull into recession. You can explain why you think it will happen. The reason why is the yield curve on its own is not powerful enough to bring economy into recession. The history in the u. S. Is every time it has happened, we have had a recession in the next two years or so. There is nothing fundamental about longterm Interest Rates being lower than shortterm ones which cause a recession. It happens because of consumers and how they behave. Another number that is interesting is the difference between Consumer Confidence under the Current Situation and what consumers forecast for their own future. That number looks like your own card you your own church. There is aare these, defining trend the past seven years. It really reflects on pessimism about the longerterm future relative to today. This playhow would out . We are near alltime highs in the s p 500. A lot of signs arent saying we are heading to recession. When the fed starts cutting rates, although this does not have room to cut, you should get a big rally in stocks. If your scenario plays out, will there be a big buying opportunity . Andy i think not. When i look at the stock market, we are not at high valuations the we are a little north of average. A little north of average, there is less potential for downside. You think about prior markets, higher valuations, but there is not a Great Potential for growth as an investor. You are in the camp of being a cheerleader and hoping we pull out a big win over the next few years. Otherwise stock valuations above norms, for in stock below norms, it would dictate a rotation into Assets Abroad by u. S. Investors. Right, thank you so much for joining us this morning. Plenty or to come on daybreak asia. This is bloomberg. Paul a quick check of the latest is this flash headlines. Apple has changed its mind and approved a controversial after that shows Police Deployment controversial app that shows Police Deployment in hong kong. It is a mobile version of a website which helps users to avoid dangerous parts of the city. It was initially rejected because apple felt it encourages illegal activity but it has been cleared for sale in hong kong. Kathleen hong kong will raise its bid for the lsd after winning conditional support from key shareholders. They say the initial offer and but3 pounds, . 61 a share investors needed to opt 90 and 100 pounds if it wanted to be taken seriously. Plenty more to come. This is bloomberg. Paul 9 30 a. M. In sydney, markets closed in australia for labor day. The aussie dollar trading 67. 61, easing off after posting modest gains over the past week. I am paul allen in sydney. Hays in i am kathleen new york. We will get the first word news now with su keenan. Many of the train stations in hong kong remain closed after a weekend of protests and violence. Vitalism is going in after the government invoked a colonial era to bands the wearing of facemasks. Multiple the maturation turned to clashes with police as protesters set fires trains and businesses. Will itgnaling it is reluctant to agree to a broad trade deal ahead of talks this week in washington. Sources close to the negotiations a senior officials have told the u. S. A range of topics they are willing to discuss has narrowed. We are told the vice premier says the offer he will carry to washington will not include any commitments to reform industrial policies or subsidies. A new poll in japan suggests three quarters of response are unhappy about the higher sales tax. About 71 of people are concerned about the likely impact on the economy after the tax went up. The increase has been a key part of Prime Minister shinzo abes policy program. The rating of approval fell to 53 . The reserve bank of india says it will ease for as long as necessary after lowering Interest Rates for fifth time to support the slowing economy. They cut the benchmark repurchase rate by 25 points, in line with a majority view in a bloomberg survey. Mario draghi said he will keep and accommodative policy for as long as required. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am su keenan. This is bloomberg. Lets see how things are shaping up for asian markets. Get over to selena. Selina we are seeing a risk off response to the trade headlines. Falling more than. 1 , paring back losses of seeing the yen strength and 201 month high. This is in response to the headlines that the china site is looking to limit the scope of a trade deal and commitments on reforming Chinese Industrial policy and government subsidies that have been longstanding issues of the u. S. Side now may not be on the table, dimming views of the substantive trade deal. Looking at the impact of this on other currencies, seeing the offshore yuan weakening against the dollar, turning around the seven that seven level. Seeing with the yuan fixing could be tomorrow, how that may move. The aussie dollar and new Zealand Dollar are both weakening after straight trading days, seeing for the risk off response to the headlines. Switching boards to look at the markets. Australia, hong kong and Chinese Markets closed so we are seeing thinner trading. Looking at a mixed and muted open with nikkei futures falling. We did see the nikkei for more than 1. 5 and the kospi falling. Markets are digesting in addition to the trade talks, the risk around hong kong protests show no sign of heading up. Last week we saw the weaker manufacturing data followed by slightly betterthanexpected employment numbers. The recession picture is murky. X President Trump kathleen President Trump could have another whistleblower. His firm is now representing multiple was blowers, this attorney. Now ros krasny. How much does the second whistleblower increase any perils facing President Trump . It is unclear there how many whistleblowers there are but it seems like there is one more. This person could be a game haveer because they could more firsthand details of the very controversial call the president made with the ukrainian president in july. As we find out more about what this person knows and when or if they will come forward, looks like the white house is in defensive mode. The only comments we heard this weekend was trump on twitter, none of his usual surrogates around speaking on tv. Ore of his most loyal supportive members of congress were not heard from. It seems like it could be a game changer with plenty in play coming into the week. This weekerms of what holds, what are the next steps . Officials are several that are supposed to be speaking to panels. There is a number from the state department including one man who is a close confidant of the secretary of state mike pompeo and the former u. S. Ambassador fired ukraine, who was from her post at Rudy Giulianis request. She could be an interesting person, if she is allowed to speak. One thing that is in play, we dont know how amenable the Trump Administration is going to be to let members of the Administration Speak to congress. Waiting to hear more about whether the house committees have spoken or will to the first whistleblower and what the status is of the second. Kathleen selina wang was talking about the report china is narrowing the scope for trade talks. Shiftednd could have ahead of the much awaited discussions. What are we hearing from the white house . Ros we have not heard much from the white house in response. You wonder if everything is connected to the impeachment investigation. It is a cloud over donald trump and his administration and it is suggesting chinese negotiators could see they possibly have the upper hand from coming into these talks. They know President Trump watches the u. S. Stock market like a hawk. He is now coming around to the idea of a little deal which he has rejected in the past to get runs on the board as he goes into the impeachment timeframe. It could be something that is going on. Monthsseemed in recent the most hawkish members of the administration are the ones setting trade policy. I would expect to hear angry words from them in the next news cycle. Krasny, thank you for joining us. Lets bring in a veteran voice in the trade, Foreign Relations in washington policy she is ceo of National Capital strategy and adjunct senior fellow at the council on Foreign Relations and joins us from washington. S saying about the impeachment trouble, does that change the picture for the trade talks . Do you think the chinese would have a sense the president is looking for something in the win column . You have seen the first reaction to washington which is the chinese have come out with the first opening gambit of the trade discussions. They are putting on the table based on your reporting, they are putting on the table what is a very skinny delay, not even deal. If you are talking about agricultural purchases and some of the intellectual property advances they are looking to implement, those are in chinas interest. I think it is really hard to see over the current domestic u. S. Political environment that there are any parties which will look for concessions on the table. From the chinese perspective they didnt trust the president to begin with. Seeing in this impeachment environment vulnerability and i believe that the all right request by the president to intervene in u. S. Elections for the 2020 cycle does leave the president and the u. S. Vulnerable in this negotiation. From trumps perspective, what does it mean . It could go either way. He could become erratic. His negotiating team might work on something and then have it not an out because of a twist or a turn in the impeachment proceedings that are going to actually continue to unfold. Any give or say is concession by trump in this negotiation would be seen with skepticism. Because of the ask for interference in the the upcoming election, there is a lot of skepticism about any concessions he would put on the table. Paul this longrunning dispute we have seen many also starts before. And then we had u. S. Tr Robert Navarro saying he would not want a small deal some of the sites already at odds are the size already at odds . Heidi we will find out next week. You will have the next escalation on the table, ratcheting up from 250 billion in chinese exports. Quickly what the administrations response is. You have seen a layering in the past couple of weeks of an idea put forward to impose restrictions on portfolio, capital flows, u. S. Listings, really i think the chinese are not going to see the kind of listing of the National Security restrictions on huawei. I dont think any big movement will be made. I think we really if anything, the best case would probably be a little delay where you see the october 15 tariffs push back. You, in i want to ask terms of going into negotiations, the chinese are tough. They are known for that. Donald trump, the art of the deal, neither side is doing well. I cant help but wonder why would they, even one of them go into a deal saying it will get done . Isnt this what you do . If you can see one kernel of what would happen, it would move us forward, what would it be . Heidi that one thing would be that you dont see the escalation on october 15. Back,ou see a push implementation of that tariff little, ind you see a would not call it a deal, but a do theagreement to agricultural purchases by china and a delay on the october 15 ratcheting up. Lets move on to the aircraft decision. It is complicated, not getting the attention it deserves and there are threats to put tariffs on europe. Try 5 tariffs because they won this case over your Legal Support to airbus. When will it happen . This is complicated and you have to go deep into wto to figure out the jiujitsu on the colts the trade front. One of the Big Questions is what happens to the 232 auto tariffs due in november . Even if there is another ruling that is expected early next year , visavis boeing, is it an opportunity to negotiate or are you going to see for example the judgesat the appellate and the fact that there will not be, that it will be effectively as of december 10 a dead mechanism . That impedes the ability for the europeans to actually react in a way, appealing the ruling on airbus and moving forward with any kind of appeal or counter appeal by the United States, on anything that might be ruled on airbus. This does get complicated. There is an opportunity to actually ratchet down or take down the temperature on the trade negotiations with the u. S. There is an offramp, but i dont know if this administration is going to take it. What that the wise because does the u. S. Have the ability to fight a second major trade were considering difficulties with china and the slowing Global Growth picture and ambiguous jobs read . Was it expedient to set this one aside for a while . Is it expedient to set this aside for a while . Heidi 1wood think so but this president is prepared to fight and it is one of the leading challenges to the Global Economy now. You are starting to see that deflected in manufacturing numbers. You are seeing that in less than Robust Service sector numbers. Primek this is one of the concerns moving forward in the Global Economy and whether you will start to see this, the multiple front trade war play out in the Growth Numbers moving forward. Thank you so much. Complicated topic. You got through a lot in a short time. Thank you for joining us. I want to, i am excited to respect to the president of the Federal Reserve bank talking about the economy, speaking in denver. She said her outlook is benign although she sees lower import price gains weighing on inflation. Even the hawks want to see inflation move higher so is she open to the idea of a rate cut . Disputes, dollar gains, she dissented in the last meeting. She saw growth moderating to trend, not a concern. She said adjusting policy could be needed should data weaken. Not different from what she has said in the past but the context with weak purchasing integers, jobs report which was ok but not roaring, it could make a difference. She said the u. S. Economy is in a good place with low unemployment. We will see if we get any more remarks from esther george. Strike talks stall for General Motors. We will get a live update from detroit. This is bloomberg. I am paul allen in sydney. Kathleen i am Kathleen Hays in new york. General motors and Union Leaders hit a roadblock in the strike. Uaw said talks have taken a turn for the worst. The bureau chief joins us on the line with the latest. A turn for the worst. How worst is it . Often twists and turns in negotiations as you get to the final throes. That is where they are now. They set on a big issue which was temporary workers and how to make them fulltime. They have not told us how but they have a framework. Now the union wants assurances for factories that there will be job security for the workers. They want more investment in the plants in the United States. That has been an area which has been tough for gm to commit to because they dont need to add capacity in any place and you have plans under the alliance so they dont want to guarantee jobs. They want to pay pretty well for the jobs that they have no not really add much. Now and not really add much. Paul are there some other areas where agreement has been reached . David there is. Health care benefits. Gm wanted to make workers pay for more. The union held the line on that. There will be good ways for the raises for the workers. They will get strong profit sharing. It is a good compensation package they will get. Inhas included investment this. They will build electric trucks in a plant in detroit which was called on the endangered list and they will build a battery plant in ohio like gms giga factory to make batteries for cars and the union can organize that. There are goodies but there are plans they want, new vehicles, they would like to see vehicles come back from mexico to the u. S. I dont see General Motors doing that. This is a final thing the union is trying to get and maybe they will come to agreement in the next come days next few days. Kathleen there is a question of how much it costs the broader economy. Story,n a different ripples raising recession fears. You know that for suppliers in michigan and canada, bars and businesses that serve employees that find themselves tight on cash. This is a bigger concern. It is costing gm a large corporation. It. D we got to the two week mark we were looking at more than about 1 billion so we are going beyond that. Gm can recoup some of that after the strike ends by running overtime in certain plants and building inventories and have it for the economy there has been about 400 million in lost wages countrywide in the u. S. And half of that is in the state of michigan, where the biggest concerns are for recession. Agreementa tentative in the next few days and gm gets back to work, the stuff could beheaded off but there is the fear. Thank you very much for joining us. You can get a roundup of stories you need to know to get your day going in todays edition of daybreak. Bloombergs of drivers go to dayb on your terminals. It is available in the anywhere app. You can customize settings so you only get news on industries and assets you care about. This is bloomberg. Paul i am paul allen. Athleen i am Kathleen Hays now for a quick check of business flash headlines. Hsbc is said to have started a costcutting drive that threatens 10,000 jobs. The Financial Times say the Bank Executives are questioning why it has so many staff in europe but many of the highest returns are in asia. Any new cuts come on top of 5000 redundancies made in august. Moresaid hsbc could are that could report later this month. Launch aebooks bid to cryptocurrency was dealt a confidence below. Paypal is pulling out. We have been told several other founding founding members are considering pulling out over concerns on maintaining positive relationships with regulators who have reservations about libra. Kathleen chinas state oil company pulled out of and ability to develop offshore in iran in the latest corporate casualty. Iran said they are nepal no longer part of the deal. The French Energy giant total withdrew from the project where it was supposed have taken a majority stake. Plenty more in the next hour of daybreak asia. Huntersoftware sarah joins us to discuss the week ahead. It is almost it for daybreak australia this morning. We have trading in new zealand underway right now in australia is set to open in five minutes time. It has been a weird public holiday. Some parts of the country are open and others are not but the asx will trade so we have got futures wanting higher by a shade. New zealand, stronger than we saw the decent jobs report inspired equities rally in the u. S. On friday. All of the action in daybreak asia coming up next. This is bloomberg. Good morning. To daybreak me asia. Our top story this monday, no great expectations, china increasingly reluctant to agree to a trade deal and the topic has
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