The netherlands opposing it. Does that mean when madame lagarde comes in, she might encounter the same sort of obstacles to extending the stimulus . Yvonne the cap that open ended. Rishaad they will go even lower and that is a ball in the court of the likes of germany and france to have the ease to borrow more, should they want to. Lets look at the reverberations in this part of the world, in the absence of trading in south korea, taiwan, and autumn festival in china. The bazooka coming through from the ecb, nikkei up 9 10 of 1 , part of that down to the weakness of the yen, continuing weakness. Australian market up, hang seng one third of 1 higher. We have at the moment a situation on trade optimism, as that is definitely filtering true. Could we get an interim trade deal before we get to a proper trade deal . It is something donald trump is probably against at the moment, but he has made hence it is possible, although the white house decided to put a kibosh on it, saying there is no interim deal in place. Some of these other movies out there, a lot of this in light of what happened. The euro did clive, about unchanged in the session here in asia, 1. 10, and also futures again we have yields going up, 10 year yields in japan a big move, about four basis points higher, taking the yield which was about. 26 percent in negative terrain to 17 basis points below the gain line there. , in thehore yuan absence of trading, we have that on seven of. 10 days ago we weres trading 10 days ago we were trading on 7. 18. Yvonne first word news with Tom Mackenzie in beijing. Of recession in the u. S. Is back with Economic Indicators flashing warning signs, however the message is mixed. Manufacturing is slumming, uncertainty is mounting and businesses are cutting expenditure, but unemployment is near a fivedecade low. Stock prices are high on the fed is cutting rates. Economists say there is a 35 chance of a recession in the next 12 months, up from 15 one year ago. Malaysia kept its benchmark rate unchanged as the economy showed steady growth despite the close of despite the global showdown. They held overnight rates at 3 saying current policy is accommodative and supportive. The bank kept its growth projection unchanged at 4. 3 to isr to 4. 8 but says that subject to further Downside Risks from worsening trade tensions. Indian inflation accelerates the most since october while remaining within the r. B. I. Mediumterm target, bolstering expectations for lower Interest Rates. Consumer rices rose 3. 2 in august from a year earlier, slightly lower than the median estimate in a Bloomberg Survey of 41 economists. Inflation is now below the r. B. I. s 4 target for 14 for 13 straight months. Oil fell as opec and its allies called on producers to abide by an agreed output curb. The difficult thing that cartel faces in trying to balance the market, futures declined in new york for a third day as traders weighed the rising threat to opec from new sources of crude. Oil has fallen from a peak in april as the trade war has dented and outlook for global demand. Global news, 24 hours a day on air, and on tictoc and twitter, powered by more than 2700 journalists and analysts in over 120 countries. Im Tom Mackenzie. This is bloomberg. Lets about trade. Talk sources in washington say Administration Officials have discussed an interim trade deal with china that would even remove some tariffs in some cases. We are told a potential deal would come in exchange for beijings commitment on intellectual property and purchases of u. S. Farm goods. But President Trump says he still wants a wider agreement. Talk is something people about. I would rather get the whole deal done. We have taken in many many billions of dollars in tariffs. I would rather get the entire chinese done. If we are going to do the deal, lets get it done. Joining us now in hong kong, both sides getting out olive branchs, could we get a deal by the end of the year . Think over the next 12 months, a truce, basically a ceasefire agreement between the two parties is a likely outcome. What do we mean by ceasefire . Tot not adding more shocks incomes areand reversing from the tariffs that were mentioned in the report. The details are not clear. Does it mean they reversed the existing tariff or reverse the threatened tariffs . So we will have to see details and how they are flushed out eventually, but the base case from our side is that both sides decide not to refrain from sides more shocks decide to refrain from adding more shocks, and a breakthrough between the two parties is more difficult to predict, especially in the background, there is a deeper conversation about treatment of china in the trade system, and the soa treatments, marketing opening market opening, et cetera, and that is more sensitive. So if trump wants a wide deal, that is going to be more difficult. Rishaad the damage has been done in large part. Six months, maybe nine months down the road, where we go next has probably been predetermined by what has already happened, and that is the problem. It may not save us from a deeper slow down globally. Exactly. Lets remember that in the background, there is already a slowdown. The u. S. , even in that growth will slow below 2 Going Forward, especially next year. These uncertainties definitely are making businesses more afraid to invest in the new supply chains, new factories et cetera, so even if you could maybe reduce uncertainties on the trade side with afire deal, there is a bigger question of what to do with fundamental limitations in the economy. So the damage has been done, yes. Rishaad singapore,d here in why our bond selling off . Why are Global Equities starting to show signs of life, to breathe . Our markets looking through this slow down and looking at growth after that . Would like a slightly more encouraging headline on trade. People are expecting the worst possible case over the past few weeks, but not with the sign of rapprochement between the two parties, the u. S. And china, you can maybe change the pricing for that a little bit, and on top of that, as far as Major Economies are concerned, markets are beginning to sense there is a game plan on the policy side excluding trade, the monetary policy. We just got from the central bank yesterday rumors about germany may be changing its fiscal stance a little bit, and of course a measure from china over the weekend and a hint it at meetings in the remainder of the year. So this is giving a little bit of relief to the markets. Lets compare current levels to what we had a year ago, still much lower. ,part from the week volatility the question about the Business Cycle remains in place. Yvonne right. Chinese stocks have woken up from their slumber as well, we are seeing more Risk Appetite heading in there, and the government is giving all these gifts, right . You have them opening markets, bringing down quotas for q. V. , is it going to be smooth sailing through october and onward . Is a think what we have combination that is good enough to reduce rich ashen risk over reduce Recession Risk over the next 12 months. For many investors its a good enough combination to maintain exposures to some of the credit stories, for instance. But smooth sailing before the end of the year . We still think we need a bigger push on the policy side. What we mean by that . We need confirmation of dovishness by the fed. Yvonne they are going to cut next week, you think . We think they are going to cut by 25 basis points and likely guide markets to do more cuts by the end of the year. That is our baseline. It is very tricky, because if the fed wants to have two cuts and they have three meetings left before the end of the year, how they communicate around that one meeting where they will cut will be in issue. So our guess is, next week they are going to cut and also present for two more cuts before the end of the year, or at least guide markets toward that outcome. Rishaad stick around with us. We are going to dig into the mario draghi decision to revive kiwi despite opposition from other ecb members. We get a look at that, and the read through from the fed and beyond, still ahead. Yvonne the biggest truck hailing start up once selfdriving vehicles. S about the the ceo road ahead. This is bloomberg. Risks surrounding the pointeda outlook remain to the downside. We still think the probability of a recession for the euro area is small, but has gone up in view of the weakening Economic Outlook and the continued prominence of downside risk. Governments with fiscal space should act in an effective and timely manner. We have a mandate. We will pursue price stability and we dont target exchange rates. Period. That was mario draghi, ecb president , speaking after he overcame critics to deliver a and justzone stimulus, a sale of at the ecb announced yesterday. The cut in the deposit rate was premuch expected, but was a contentious issue, politics as well, as the reintroduction of qe. If im not mistaken, just very shortly after they exited that program, 20 billion euros i month a month as long as necessary. They also lowered the Interest Rates on tltros and no calendar based guidance until they meet price stability targets. The market reaction, certainly not one you would expect given the element of surprise they introduced. Have a look at the fourth column. We set this for the time the headlines roque overnight where we are. So these are net moves from Mario Draghis statement, and look at european debt, down the toilet 13. 5 basis points on your german twoyear bond. Yvonne just 10 months ago they were exiting qe, now here we are. Our asian macro strategist is still in hong kong for us. Andwere saying eurodollar value overgrowth, which is basically what the market has been doing the past couple of days our so days or so. Is the trend now pricing in inflation . I you willing to stick your neck out on that . Are you willing to stick your neck out on that . We believe in the needle inflationaryildly environment, is no longer tenable. In the next one to three years you will have a recession type and for the upside scenario, the dollar should definitely weaken and also in the scenario, the pressures in the economy will be sufficient to move the needle in favor of existing, maturing businesses that have been suffering for quite a while. So that is working this year and that is why we favor these trades Going Forward. It makes sense because of the scenarios, not just momentum. Rishaad where would dollar weakness come from . You have others like the japanese, europeans with qe in place, youve got those things happening with negative rates, youve got the yield spread which favors the dollar, so why would the dollar appreciate . Currencyof all, the hasnt that much since mid2018. If you look at the trade weight of the dollar it is moving basically sideways, up and down, slightly stronger now, but if you just think about what will happen in the next one to three years, the fundamental problem on the policy side is that we have never figured out a way to deal with a significant rise in the labor share of National Income and its applications for corporate profits. At the same time you raise rates, you kill the Business Cycle. This has been the pattern all the time. In line of new central bank to medications, the strategy will probably have a way to avoid that, but more concretely for the u. S. It means keeping the real rate very low and potentially as a result, making your currency far more competitive. Obviously, that scenario we have been advocating for quite some time hasnt materialized, but at terms of convincing scenarios in the next one year to three years, it could still be very likely what we go through. What u. S. L is more on policymakers would use as an economy stimulation tool, and there you have the dollar. That is why we think despite all the easing by other central eases the weaker dollar in the medium term and still holds. Whether reflation happens or not is another matter, but what qe does is create asset bubbles, and you could probably see that coming. Im sure of it. How does that dictate your investment philosophy . We are slightly more skeptical about the asset bubble story. Yes, bond yields are very low, but most of it is actually due to the structural forces, in our view. So they are essentially reflecting what is happening in the economy, and when you have bond yields so low, valuations for other assets should reflect that as well. Here isorking thesis there are parts of the market where things are bubbly, valuation,s of the we see many opportunities and where we see those opportunities are in emerging markets. They have underperformed massively in past decades, especially against the s p 500. And if you really have a game changer among global policymakers, then this could really shine in the mediumterm. So we continue to maintain our tilt either to Credit Opportunities when things are in the middle scenario and for Equity Opportunities if growth ability begins to pick up. Seem, homan, your the trade is contingent if dollar rolls over. You mentioned earlier that was her call, it hasnt happened yet, you expect it to happen. At what point would it change your mind that the dollar will not roll over . If the fed fails to communicate a sufficiently convincing strategy for the potential Recession Risk that would occur on the rise, that would be if, for instance, we fail to see a significant compression in the real Interest Rate in the next three to six months. We could potentially reassess the Economic Cycle risk at the global level and we might change our mind on emerging markets. What we have been seeing from Central Banks is that their strategy is changing. This is not the typical Interest Rate cycle or the typical easing cycle, this is not like the 1990s and 2000. I think key Central Banks like the fed are extremely sensitive to signs of deterioration in the economy. They are more willing to tolerate higher inflation, so we think they take it seriously and theherefore leave significant Dollar Strength from this point onward, we dont think it is still not likely. Homin lee, asia macro strategist, thank you. Always appreciate your time. In of the pinoy central bank the philippines, the central talking about a rate cut that may come sooner than later. The inflation picture is improving, which i would immediately look i would imagine him eating they have more space to cut. The next meeting is 13 days, september 26. The reason i bring it up is that the last time we spoke to him on the show, he said september 26 is probably a time when they can deliver that. So less than two weeks from now. We will speak with him at some point soon. Coming up in the program, room for more rate cuts. We will be live out of moon by later this hour to talk about moon by we will be live in mumbai. This is bloomberg. Yvonne lets get the business flash headlines. Amazons whole foods unit is changing medical benefit eligibility requirements that could lead almost could leave almost 2000 workers without coverage. Staff would have to work 30 years to qualify, up from the current requirement of 20 hours. The change will affect just under 2 of the whole foods workforce. Japan has put up with zero Interest Rates for years but at least Bank Accounts for free are free. That may change. Jp morgan reports there may be costs for accounts if japan deepens Interest Rates. It was warned last month that lenders may have to consider such a move. The biggest Property Developer in hong kong is posting a jump before the political crisis. The underlying profit rose more than 4 billion u. S. Dollars in the year ending june 30, slightly missing the mean estimates of economists. The Company Offered a gloomy forecast, saying the economy is clouded by populism and protectionism. Rishaad we are heading into the lunch break in tokyo. Lets look at some stocks that have been moving. Up 5. 8 at one stage, a plan to buy a majority stake in a fashion retailer. It is putting a bit of a rocket under them. Softbank 2. 8 up, wework executives discussing curbing the voting power of the founder adam newman. We go into the lunch break. Thats the imperial palace. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. David the im Tom Mackenzie with first word headlines. Sources in washington say Administration Officials have discussed an interim trade deal with china that would delay or remove some tariffs. The potential deal would come in exchange for beijings commitment on intellectual property and purchases of u. S. Farm products. However, President Trump says he still wants a wider agreement. Some of americas closest allies are calling for an end to the trade war. Australia, canada, singapore and indonesia issued a joint statement calling for an end to the standoff, writing in the australian newspaper that there finance ministers warned the postworld war ii multilateral system is under threat. They acknowledge there are legitimate issues to be addressed, but say the threat of Collateral Damage is rising. And the u. S. Ship industry is calling on the government to ease a ban on tech sales to huawei. The Semiconductor Association has written to the commerce secretary, wilbur ross, asking approvalssion