Good. The uncertainty around the talks casts new doubt on growth. Robert kaplan says he is not sure the u. S. Economy can severe downturn. They see a power play to a new brexit deal. Gilts shery jump. Shery lets get you gilts jump. Gaining. 25futures percent after positive comments coming from President Trump on trade talks between the u. S. And china. Themism was already felt in regular session with the s p 500 closing. 6 higher. We had banks and automakers leading the gains. It did not hurt that we got u. S. Cpi members below expectations this morning, doing little to discourage Market Expectations that we could be more fed easing. The best performer on the markets today was the Energy Sector as we had wti rebounding from a two month low, gaining the most in three weeks after the secretarygeneral came out and said its members and allies, including russia, would do whatever it takes to avoid another oil slump. Lets see how markets are trading in asia. Sophie australian markets are open. Adding. 3 asx 200 while on see bonds are falling, pushing the 10 year yield higher by eight basis points this morning. Qb stocks are getting ground, up. 2 . This even as we saw manufacturing pmi contract for a Third Straight month, sticking below 50 as the Economic Outlook remains grim from new zealand. Japan and south korea prepare for talks in geneva on the wto dispute. The firstt a read for 10 days of october and we will be getting singaporean retail sales, expected to slow fromtrial output, also due indiana and factory output from malaysia as well. The Administration Delivering its budget 2022. Economists will be expecting a wider fiscal deficit. Paul. Paul thanks, lets check in on the first word news now with jessica summers. Jessica thanks. The Un Security Council has held a closeddoor meeting on turkeys incursion into syria amid widening criticism of the military operation. European ambassadors called on turkey to call off the attack while the u. S. Envoy refrain from joining the criticism. Erdogan, isident, threatening to spend send millions of refugees to europe. The dallas fed president has told bloomberg that it is not clear if the slowdown in the u. S. Will turn more severe in the face of weaker Global Growth and the trade war. Robert kaplan says the u. S. Is in a fragile place and could go either way. Growth slowed to an annualized 2 in the Second Quarter and is forecast to have further moderated in the third quarter. I think we are in a fragile period in year, which is why i am glad the fed has taken action in july and september but i think this could go either way. We could avert a more severe slow down but i think the jury is out. Weree policymakers divided on parts of the stimulus package announced by mario draghi. The account of the meeting shows some members of the governing council were ready to support an even deeper rate cut in exchange for dropping the idea of resuming bond purchases. Others needed to be convinced about lowering rates at all because of concern about adverse effects. Of relief. That is after a highquality, low stress exhibition game in shanghai. The Brooklyn Nets each of the lakers in front of a near sellout crowd, giving the league some respite after a week of damaging headlines and lost sponsors. The fallout from a tweet supporting the protests in hong kong has ruptured his ties to china and scenic face criticism in the u. S. Over its attitude to freedom of speech. And indonesia has found that almost 1 5 of the countrys working Palm Oil Plantations are illegal. Government inspectorauthoritieso identify the owners. The funding comes after the state auditor reported that 81 of indonesias Palm Plantations are breaking regulations. 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 jessica summers. This is bloomberg. Paul thanks, jessica. Lets get to our top story. Trade talks wrapping up in washington with initial signs pointing to a positive day one. The highlevel meeting was extended late into the afternoon and will continue on friday. Completed a we just negotiation with china. We are doing very well. We are having another one tomorrow. I am meeting with the vice premier over at the white house. And i think it is going really well. I will say, i think it is going really well. Paul lets get to our china correspondent, Tom Mackenzie, in beijing. Tom, progress report. How much have we seen so far . Tom from the president , he is sounding very up beat about how much progress has been made in these talks. Crucially, he will be meeting he in thehara liu white house. That is a Key Development and suggests there has been material progress in these talks. It is unlikely that the ohara he would bea liu meeting if there was not traction in the talks. We have seen the chinese agreeing to discuss this currency packed with the u. S. And in return, we are hearing that that would result in a freezing of additional tariffs that are due to hidden october hit in october 15. The u. S. Side has signed off on some licenses for huawei, which has eased some of the curves around that company. Some of the things that have moved in the last 12 to 24 hours, feeding into this optimism around the talks in the markets as well. It seems like it would be a mini deal, not this comprehensive deal that trump had touted previously. Shery what are the implications for both sides . Whenwell, Steven Mnuchin, he talked about this in february, said it was one of the strongest agreements ever, but bloomberg intelligence, our own inhouse team, suggests that maybe it will not have as great an implication for chinas fx policy as may be Steven Mnuchin had suggested and it may be more of a facesaving effort for the two sides to reach what they are describing as some of the deals. Where you get the core issues around intellectual property in tech transfer, ironed out at a later stage. In terms of what it might look like, it will probably mirror the kind of agreement the u. S. Came to with mexico and canada, which involves some of the previous g20 agreements on things like transparency, so maybe not as much in occasion as chinas fx policy regime some have suggested that it seems to move things forward. Potentially a mini deal. Shery on top of those tariffs, the u. S. Has implemented some other measures against china, including blacklisting tech firms, not to mention sanctioning some of their shipping companies. Do we know if beijing has any more demands towards the u. S. At this point . Tom we do know that the chinese have turned to the u. S. And said, look, can you move back and reduce these sanctions, end these sanctions on posco shipping . Cosco shipping . Usa the shipping companys involvement in Oil Transports from iran. The u. S. Had its own sanctions on iran. It had a major impact and froze it out of the Global Financial system so china is keen to get those sanctions lifted and that was one key demand. What a difference one week makes. Just on monday and tuesday, we were reporting on the blacklisting of these chinese tech companies, the travel bands. It seems like bans. It seems like the chinese are prepared to sideline those issues to focus on moving things forward in terms of potentially this smaller, more limited deal. Shery Tom Mackenzie in beijing. Thank you. Here in the u. S. , fbi agent have arrested two ukrainian men for u. S. Campaign finance. They are said to have helped Rudy Giuliani seek damaging information on democrats and are the latest characters in the impeachment drama. Breaking news editor Greg Sullivan joins us from washington. So what do we know about these two men and how they are connected to the impeachment inquiry . Greg these two individuals are actually not strangers to invest in investigators. They have had to turn over documents. Were arrestedhey last night at Dallas Airport with oneway tickets outside of the country. Prosecutors say that they committed to raising funds for an unnamed congressman, but in tryingght his help to remove the u. S. Ambassador to ukraine. They helped Rudy Giuliani as he sought to pressure ukraine to investigate joe biden and his son, hunter. It is those efforts that are at the center of the congressional impeachment inquiry into trump and these arrest will no doubt lazy scrutiny on Rudy Giuliani and possibly President Trump himself. The top democrat in the senate, chuck schumer, has called for Rudy Giuliani to testify in congress about these arrests. President trump speaking to reporters a short bit ago said he does not know these two individuals. Paul the impeachment issue aside, difficulties emerging on the foreign fun as well. President trumps decision to pull troops out of syria seems to be testing republican support for him. How is that playing out . Greg thats right. Several lawmakers from both parties have been critical of this decision. Even in his own party. It is a rare center displeasure from the president. In other scandals or controversies, republicans have been loathe to criticize him. Military with background are concerned that the u. S. Has betrayed an ally in the fight against the Islamic State group and there is concern for the region as turkey goes into the country. Lawmakers are taking probable steps here to push back. They threatened sanctions against turkey. Lawmakers are introducing legislation to put sanctions on turkey. One senator says he believes there is bipartisan, vetoproof support for such a move. Paul so theres pushback, but how does has it affected the president s thinking on syria . Greg it doesnt appear so. President trump actually speaking to reporters on that a bit ago and said he believes that American People do not want to see the u. S. Military involved in the regional conflict. And he said that while it is possible that there could be something very, very harsh coming on the sanctions front, his preference would be to see a mediating deal between the kurds in turkey, so it does not look like the pressure has changed his thinking on whether american troops are needed at this moment. Paul Greg Sullivan in washington, thank you so much for joining us. Still to come, Robert Kaplan urges caution. The dallas fed president explains why the central bank should take a measured approach to rate cuts in an exclusive interview. Shery up next, the pound rallied the most in seven months as the u. K. And irish Prime Minister say they see a pathway to a deal. This is bloomberg. Shery breaking news at the moment. We are hearing from the minneapolis fed president , neel kashkari, saying he will support the fomc if it decides on 25 basis point rate cut. This timing as he speaks to the wall street journal. He is saying he does not expect a recession but warns that it is possible. If the data continues, another rate cut would be warranted. And he does not see any major Financial Stability risks for now coming from the fed minneapolis president , neel kashkari. Paul. Paul all right. Lets get over to our hong to hong kong now and check the markets this morning. Sophie. Sophie after a choppy few days across assets, hopes of a partial trade deal in d. C. Has helped the offshore yuan recover, trading. 7, retreating from the hit early thursday. With the potential currency packed in the mix, bets are piling up in the Options Market for the yuan to rally. And check out the pound. Just slipping a cut from a twoweek high. It has surged the most since march on a possible pathway towards her brexit deal. They are willing to be optimistic. A pair down free trade agreement. Volsnuary 2018 high with higher. Shery thank you so much for that. Joining us now from singapore is the bank of America Merrill lynch head of global g10 fx strategy. Thank you so much for joining us today. We are hearing of a potential packed between the u. S. And china pact between the u. S. And china this week. What would that mean for both countries and their currencies . They aret seems that converging towards a deal. This is definitely good news. It avoids a further escalation. However, it is a mini trade deal. On what focus will be thatned with the tariffs have already increased. We will expect the deal to include a detailed timetable for implementation of what it will take actually to eventually reduce the tariffs. They remain high for now. Increase, buther the negative impact on the economy will continue in such a have implementation risks. Bottom line, it is good news if we do have a deal. We are not out of the woods yet. Shery what are the implementation risks youre talking about right now . Would expect steps that china will have to take to implement this deal, assuming that this takes place. Then, both sides will be able to reduce tariffs to pretrade war levels. Primarily addressing the u. S. On intellectual property rights, we have to focus on the details. How long this will take, how difficult, challenging it will be to implement it, to see whether this is feasible or not. We are talking about a timetable that will be just a few months. It will take much longer. Tariffsto acknowledge are high and affecting the economy. The sooner we remove these tariffs, the better. Shery what are the tariff risks for the pact. The best house in a bad global neighborhood as we see the economic slowdown what on the risks for china of agreeing to this . Thanos now, i think having a trade deal is good news for china as well. Its economy has been affected by all this uncertainty. Any details on the currency, i do not think, will be important in the shortterm anyway. Ratehave an Exchange Mechanism but we also have to say that trade tensions continue. This is what keeps the dollar strong. Trade policy protection actually supports the dollar, so for now, we do believe the dollar will remain relatively strong. Thats not forget, it is not only the trade tensions between the u. S. And china. There are trade tensions between the u. S. With still at risk. Paul it is not just the dollar that has been keeping strong in this environment of uncertain trade outcomes and weaker Global Growth. It is the yen, of course, which has been a powerhouse as well. Still, the yeny, remains undervalued. We do believe that even if we have a mini trade deal between the u. S. And china, the uncertainty will remain relatively high so we believe young will also remain strong. The only different currency that might be stronger even for the dollar, our forecast is in the next few months, dollaryen may drop down to 100. To equilibrium is between 90 95. Even at this level, yen will remain undervalued. A lot of risks ahead of us, so market uncertainty will still support the dollar and the yen, but more the yen compared to the dollar. Paul dollaryen certain to attract the attention of the boj. Do you think that there is a chance of intervention . Thanos this might be the level where the boj might get concerned. Up to this level, we dont expect the boj to do much. The boj might be concerned. Even at thisn, level, will remain undervalued. That would affect Inflation Expectations and the boj might push against it. There is still a lot until we reach these levels. Shery which are the asian currencies that could still outperform even if we get a stronger u. S. Dollar Going Forward . Now, a lot depends on trade, because of escalation and trade tensions. Affects have been under pressure. And actually, within the emergingmarket complex, the asean currencies are short. Assuming we get a deal, assuming we get good news on trade, then we have to look at current is where the market is particularly short. Won stands out. This is where positions are stretched. Given the short positioning, the yen should do relatively well in this environment, but again, a lot will depend on the details in the trade deal, which have been through a roller coaster so far, expecting a deal. We did not get a deal. Lets wait to see if this is fine and lets wait to see how far this mini trade deal actually goes, whether it really reduces uncertainty or is just one step in the right direction. There are still a lot of risks ahead of us. Paul we have had some encouraging signs. Encouraging signs on the brexit front with the Prime Ministers of britain and ireland saying perhaps they can see a path forwards on the irish border, so perhaps, given that encouraging mood music, what is your output for the pound . Thanos definitely, the pound is the currency with the potential to move the most in the nextthe. Obviously, we had some good news yesterday, but it has been a roller coaster. There are still risks. If you think logically, both sides should have strong incentives to compromise. If there is no deal, you get the whatr overnight, which is both sides are supposed to avoid. We remain optimistic, but so far, logic has not prevailed. If we have to say that if there is a deal, with respect to the dollar, it can appreciate above 130. If there is no deal, it can we can weaken below 110. There is a binary. They are in the right direction. Finally, we have some good news there that logic could prevail, but again, lets see if they come up with a deal. Time is very short. Paul all right. Liu he, bank of America Thanos vamvakidis, bank of America Merrill lynch head of global g10 fx strategy. And you can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers can go to dayb on their terminals and it is also available on mobile in the bloomberg anywhere app. You can customiz