Talks as the edge towards a deal. Pboc warns of challenges ahead and warns of a slowing economy. Arabiasouth saudi lowers its target for saudi aramco ipo, but it is still expected to be one of the biggest in history. Australian markets have kicked off trading. Lets turn to sophie for what to watch. Sophie aussie shares are slightly higher by about. 1 after a twoday gain. 50 points shy of a record high we saw back in july. Altogether we are setting up for a mix to start potentially an agent given that hong kong remains a point of concern as the city faces yet another week of potential disruption. Nikkei futures in chicago swing to the downside this morning. Iecking on currency moves, want to highlight the pound is gaining ground early. This, after conservatives pledged to back Boris Johnsons brexit deal if the election goes through, if he is elected. The highest level since november 3. Aussie benchmark bonds holding study, continuing to climb after the best week for aussie 10 year bonds since april. Spot gold is extending the dole lets check in on the first word news now with su keenan. Su we start in saudi arabia, which has agreed to lower its aramco and pervak the size of its initial Public Offering to ensure a successful debut on the Stock Exchange in a month. Aramco will sell just 1. 5 of itself, which is about half of what had been considered. It is seeking a valuation 1. 7en 1. 6 trillion and trillion. The Federal Reserve says long Interest Rates could push renderers into risky actions that would threaten the nations financial stability. The ratet report says squeeze could erode lending standards. Lowan jay powell says Interest Rates may now be a permanent part of the u. S. Economic landscape. Two australia, where bushfires continue to rage across most of the each and eastern part of the country and are expected to worsen. Firefighters are already struggling more than with with more than 100 fires and local residents have been advised to move out. Four people are known to have been killed and more than 300 homes had been destroyed. About 2. 5 million acres of farmland burned out. , the closely now fought president ial election has ended in victory for the chinafriendly former defense official. He won more than 52 of the vote which shows the country remains deeply divided along ethnic lines. He captured the southern promises, while his rival took the north of the island. Global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im su keenan. This is bloomberg. Paul lets get back to our top story. Hong kong police have launched an operation to end a standoff with students at Polytechnic University after a weekend of violent clashes. Lets get over to the city with our chief north asia correspondent Stephen Engle. So, the police said this was not a raid, it is a dispersal. Can you explain the difference for us . Stephen yeah. We are still trying to decipher what the police is actually saying. We know there was a dispersal operation that was launched predawn within the last hour, 90 minutes. Now police are coming out and telling local media that they have not raided the university. We know that the police have atd tear gas in the pat here Polytechnic University which is just across Victoria Harbour from where we are right now, at the entrance to the central harbor tunnel. There has been a tense standoff for many days at that university. The last week on friday, many daylong standoff between protesters and police at the Chinese University further opt into the new territories, it actually ended fairly abruptly when the protesters stood down. This standoff, though, does not seem to be ending. The protesters are standing their ground. Hardened battle lines on both signs. Andeard early this morning a Facebook Live statement from police that the police will use force more aggressively, including the possibility of using live ammunition, live rounds, if there dispersal operation at Polytechnic University is met with increased violence. So it is definitely a standoff right now. Fires have been set as we have this live footage from Polytechnic University. Right now we do not know how this will transpire over this dispersal operation. Shery of course you are in the Central District right now. Heard of further disruptions around hong kong. What will he commute look like . Stephen well, schools have been closed again, so that keeps the kids off the streets, not at the buses. People will be coming to work this morning. There will be disruptions at the mpr and the mtr has announced some disclosures along rail lines. So there will be disruptions as a city has been accustomed to as of late. There are no protests happening right here, but obviously the central crossing tunnel will be affected yet again. It has been closed for a number of days. But again, the overarching story here is that there is no political solution to this. There is no security solutions. Both sides from the protesters and police and the government, they are digging in their heels. The number two man, the chief secretary, the number two to carrie lam, last week said more decisive measures will be taken to end the violence. Shery Stephen Engle, thank you for joining us from the ground in hong kong. Our chief north asia correspondent. With us now in new york for a deeper look at the hong kong tensions is robert hormats, vice chairman of kissinger associates. Always great having you with us. One of the rare steps we have seen recently has been Chinas Peoples Liberation Army coming out over their barracks and helping in the cleanup effort. Last week there was some commentary in the state media global times, which sounded pretty ominous. They were saying the rioters rampage is a short drive from the Shenzhen Armed Police force and a short walk for the Peoples Liberation army in hong kong. Is this something we could envision beijing coming into hong kong to take over . Robert i have been in china as you know for the last several days. China throughfrom japan last night. And the tone i found in beijing, i did not have any consensus thatal i at least was able to pick up, that they want to continue to use restraint. Shery what about restraint in the u. S. . The senate is now fast tracking the human rights democracy act for hong kong. If that passes the senate, it has already passed the house, will the president sign it . Robert i dont know the answer to that. I think the president has, on numerous occasions, made the point that this is an issue that has to be dealt with in the area. Question whether the u. S. Should or could appropriately play. It is a very complicated situation. Not being on the ground in hong kong, it is difficult for me to make a judgment. I suspect that american officials in hong kong and beijing are giving them a constant feed of information, and at the state department, and perhaps members of congress as well, giving them a sense of what the pros and cons of any degree of american involvement would be. It is sensitive. We do not know all that much the details about it, what is going on below the surface. For the u. S. To get involved i think that involves a lot of compilations that at this point i am not in a position to make. Paul there are a lot of risks involved for the u. S. If it doesnt pass the human rights and democracy bill especially considering that china considers the u. S. To be the black hand behind all of this. Robert well, i think that congress has to think about that and think whether this and passing that bill is a plus or a minus. They have to weigh a lot of calculations. It is a very sensitive issue in beijing, as you correctly have indicated. So, for the u. S. To get involved by passing a bill, could lead to a lot of repercussions that perhaps america does not, or needs to at least take into account before it takes its actions. And when we get involved in situations like that, you need very good judgment before acting. Because sometimes you can take actions and not realize the full implications of them. Paul all right. Robert hormats is staying with us because we have plenty more to discuss. Still to come, aside from hong kong, trade and other issues, hp rebuffs a bid to take over from xerox, saying it significantly undervalues the company. Shery and a perennial topic, trade. Constructive talks over the weekend. Are we close to locking down a deal . This is bloomberg. Is bloomberg. Paul this is daybreak asia. Shery u. S. And chinese trade negotiators held what are described as constructive discussions in a phone call on saturday as a look to address each sides core concerns. Tom mackenzie joins us from beijing. Tom, how different is this time than the last few times we thought there were constructive developments . We do not have a detailed readout of what happened in terms of this phone call on saturday. We have a brief statement from the chinese side saying this was initiated by the u. S. , but certainly it seems like they are moving the balls forward. The momentum is there. And this phone call that place between chinese it followed the comments that we got from larry kudlow on thursday, where he said they were closing in on the final stages of phase one of this deal. Have beene two sides wrangling over the details of things like chinas pledge to find more agricultural purchases from the u. S. Side in terms of quantity, timeframe, and industrial or intellectual property. Currencyurse their commitments as well along the yuan. All of those details discussed by lower ranking officials. Then you had this phone call on saturday which seemed to move things forward. But when you are on the final stages of these trade negotiations, they are the dicey us in terms of the possibility of the talks breaking down. You have to cast your eye back to may of this year when we thought we were close to a deal and it collapsed. Of course the big question is whether trump will put his name to the deal being fleshed out. Ultimately i think it comes down to that. Paul indeed. There is a sense we have been here before. How close do you think the two sides already putting ink on p aper . Tom again, we are still waiting for a date and a location as to where this phase one deal will be signed, if they do indeed get to that point. Sides seems like the too dovetailed in terms of commentary on this. The chinese side and u. S. Side suggesting there is continued momentum around these issues, agricultural purchases. Chinas concern is they will be tariff relief, that is what they are pushing for, at least a partial rollback of the tariffs the u. S. Is implemented. That is where chinas energy and focus has been. If the two sides can square those demands, that is the key question. Again, as many analysts will say , it is the easier part of the broader trade negotiations is phase two and three where you tackle the structural issues, things like industrial policy, the issues that are far more contentious than whether or not china will buy more soybeans from the u. S. Nonetheless we are talking about phase one, and it seems that the momentum at the moment the momentum is there. The question is if this will be palatable ultimately to president trump. Paul Tom Mackenzie in beijing, thank you for that update. As tom said, they trade talks do remain complicated. Says that hormats could be a major problem. Dealsom was saying these in the final stages are often at the dicey is the moment. You see these deals often fall over in terms of differences on the implementation and verification. Can we say at this stage how sure a footing the deal so far is on . Robert we really cannot. I would like to be optimistic about these negotiations, the two negotiators are worldclass negotiators. Hardhave been working very and are both experts in this area. And i am sure they are making progress. The problem is, and i have been a trade negotiator, is as you get down to the final strokes, sometimes brought agreements have to be put into precise words, and that can be a challenge. And i think tom laid out exactly the issues that are at stake here. One, the chinese do want a rollback in tariffs, particularly the tariffs imposed by the u. S. On september 1. The United States is pressing for more agricultural sales, which the president wants to be able to talk about when he campaigns in the midwest. Issues relating to offshore property and currency. So, a deal is certainly possible. Working out the final elements has obviously proved to be very challenging. I would also like to make the point that we have been through periods where we have positive talks that were close, we are on the verge, things are going constructively, only to find a few days later that they are not. And so we have been through this. And the other part of this is the market jumps at what it thinks is good news and comes from the mouths of people who should know, and then the market goes up and when nothing happens, there is a sense of disappointment. So i would hope that as they get closer, there is less public conversation, and the focus is really on making the final deal. I think the danger is if they do not make a final deal little boy soon, then we get to the deal relatively soon, then we get to the president s threats of additional tariffs on december 15. If that happens then the positive environment that seems to be emerging from what we have heard can be jilted by a new set of american tariffs with perhaps new chinese retaliation, and that sets us on to what i have always felt will be if we escalate this further, mutually assured disruption. Because then the markets will be disrupted, and then there may be other things that get thrown into the equation that are even more disrupted. So this has to be done relatively soon, or else the danger of things getting worse in middecember increases. Paul in terms of disruption, what is your assessment of the manner in which these talks have been conducted . Has there been enough regular contact, or is it all ad hoc . Robert well, it comes and goes. Ayere have been periods in m when we thought we had a deal and then there was no deal, and there was a time when there was not much in the way of conversations. These are people, they know how to negotiate. I think that the best thing would be to have a regular series of conversations that they have, and there are detail people who work below them, they have to get them going. I think now there is a seriousness of purpose. When i was in china just recently, chinese officials i think did demonstrate that they were committed to working out an arrangement, and i think Bob Lighthizer is as well. But the chinese will not just buy off on any deal. They will die off on a deal that they find they will buy off on a deal they find they are interested in. Tariffs are only one big part of it. That is something president xi jinping wants. I think president trump, if you get something good on agriculture that he can use at home, and then there is a period of calm that enables, one, the markets become more calm and less volatile based on every news story that comes out, and it sets the stage for the next round, or three rounds. They are the difficult parts of the equation. You need the confidence building agreement on this to get things going and tee them up. It could be five more rounds. This is a longterm process because this is a difficult issue. But at least cool things down, the notion of action and reaction that is disruptive to economies and makes things much more problematic and jolts the stock markets, that is very counterproductive on both sides. Elso the chinese economy, th president to raise the chinese economy as weakening because of this. The chinese economy is certainly not growing as rapidly, but i do not think it is mainly because of the trade war. I think there are a lot of other factors. And i think it is also hurting a lot of american businesses. We dont talk so much about that. First of all, businesses that use chinese components, intermediate goods, they are being adversely affected. If there is another terrorist increase on the another tariff increase on december 15, that is primarily consumer goods. I think the president wants something from the farmers and he does not want to do something to adversely affect consumers. The president and his team have a strong incentive to make a deal. Has thembassador, what Trump Administration achieved in the past 18 months . Because the way that i see it, the chinese demands have not changed. They still want tariffs to be rolled back, they do not want to go into i. P. Transfer. What the trump demonstration seems to robert i think the Trump Administration has come to recognize, certainly after may, that this big deal that they talked about is very complicated. The chinese are not going to change their fundamental system because the u. S. Pushes them to do this. There are areas where i think there can be common interests, like intellectual property. I do think some language or understandings are useful there. There are areas where agreement is possible and there is some mutuality. Some chinese also want to move ahead on some of these issues too, but the chinese have demonstrated they will not give into the u. S. If they find it is negative to their fundamental way of running their economy, or their fundamental interests, as the u. S. Has come to understand that. And the u. S. Cannot get everything at once from the chinese, because they may not be a jeffersonian democracy but they have Public Opinion and they have strong opinions within the communist party about what kind of deal should be and is appropriate. It is not as if president xi jinping does not have pressures on him. He has to represent the interests of the Chinese People and the party. It is a different system, but he still has to be reflective of their interests, just as we do on our side, only the system is somewhat different in the way it is done. Shery lets see when we can get that phase one trade deal. Hopefully soon. Ambassador, thank you so much. Plenty more to come. This is bloomberg. Shery we are counted down to asias first major market open. Nikkei futures down. 1 despite the fact we have seen a really weak japanese yen against the u. S. Dollar. Watch closely in the japan open. Area