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tv   Bloomberg Daybreak Australia  Bloomberg  October 2, 2019 6:00pm-7:00pm EDT

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paul: welcome to "daybreak australia." i'm shery ahn a bloomberg world headquarters in new york. we are counting down to asia's major market opens. paul: here are the top stories we are covering in the next hour -- stocks tumbled to their lowest since august as more disappointing data fueled fears the u.s. economy is hitting the brakes. disappointing data, too, in hong kong. months of protests crippling tourism. retail sales falling through the floor.
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the indonesian president speaks exclusively to bloomberg saying no one wins in a trade war, and he is refusing to take sides. later, tesla says delivery records still fall short of elon musk's target. for now, let's get you a quick check of the markets. we are seeing u.s. futures higher by .1%, but this after major indices lost more than one point 5%. the s&p 500 fell the most since august 23. remember, august 23rd was when president trump announced those two sets of tariffs on chinese goods. every sector on the s&p 500 was in the red, and energy and financials led the decline. we had the 10-year yield also falling for a fifth consecutive session and pulling out a route -- holding at around 1.6%. right now, the dollar holding steady as of course, we are awaiting that service sector numbers out of the u.s. in
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tomorrow's session, this coming on the back of another disappointing set of numbers when it came to private payrolls. that number for august being revised down, so business is really more concerned about the economic outlook. at 1500old spiked above level. we are seeing it hold steady. wti also coming under a little bit of pressure, down .3%. it broke the $53 a barrel mark in today's session as we have u.s. crude inventories also rising more than expected, and of course, demand concerns pressuring the markets. let's see how things are setting up for asia. paul: much as you would expect, the impacts of those weak private payrolls data and u.s. private equities likely to weigh on things here. we already have new zealand up and running, trading for about an hour now, already down more
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than 1%. futures in australia look to be faring even worse, currently lower than 1.8 percent. let's look at the nikkei, though. that is in positive territory. we have seen the yen gaining strength amid all this turmoil. south korea is set to close for a holiday today. let's check on the first word news now with ritika gupta. ritika: the indonesian president has told bloomberg he will not take sides in a u.s.-china trade war. in an expose of interview in jakarta, he said he intends to use his second term to introduce a wide range of reforms letuding changes to indonesia attract foreign investment. he also said trade tensions hurt all sides and he must make sure indonesia does not suffer from the fallout. >> indonesia wants to take opportunities so that the trade war does not negatively impact our country. we have good relations with u.s., china, and the most
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important thing is our national interest comes first. more fromu can catch our exclusive interview in about 20 minutes. stay tuned for all that. president trump has lashed out at democrats and the news media in a wide-ranging, angry press conference at the white house. he labeled joe biden and his son as stone cold cricket without providing evidence. he also defended his conversation with ukrainian leader and accused the house intelligence committee chairman of committing treason. >> i had a great call with the president of the ukraine. it was 100%. you have the transcript. ff, the chairman of the committee, relayed call that it are not take place. i think he had some kind of a mental breakdown. ritika: the u.k. prime minister was suspend parliament next week so he can lay out a new legislative program ahead of the brexit deadline. the suspension will last six
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ons with mp's returning october 16. johnson has also announced a new brexit plan, telling the eu he will make no more offers. brussels says there are problems with the plan, but johnson is refusing to back down. no doubt of what the alternative is. the alternative is no deal. that is not an outcome we want. it is not an outcome we seek at all, but let me tell you, my friends, it is an outcome for which we are prepared. ritika: the president of iran is the mainying he finds terms of the proposal to revive the accord acceptable. the plan calls for the u.s. to lift sanctions on iran, allowing it to export oil and collect the revenue. in return, iran is required to not pursue nuclear weapons and instead help pursue gulf security. global news 24 hours a day on air and at tictoc on twitter
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powered by more than 2700 journalists and analysts in more than 120 countries. i ritika gupta. this is bloomberg. shery: thank you. u.s. stocks hit their lowest levels in more than a month as economic slowdown fears continue to mount. nasdaq, s&p, and doubt fell over 1.5% after private payroll data disappointed in the manufacturing indicators slumped to the lowest in a decade. of course, back-to-back disappointing economic numbers did not help markets. the focus seems to be shifting to what is happening tomorrow in terms of data. >> what we saw is the number.nting august does get a little quirky and we will see that friday, if it follows trends, which it is a bounce higher and a revision higher from the august numbers, but the real key is tomorrow, as you mentioned, in the services
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sector ism. most of the u.s. economy is driven by services only, 10% or 15% by manufacturing. we have seen the ism manufacturing index go below 50 at a time actually when the fed was raising rates. i do not see the fed pushing the panic in. that was at the end of 2015, early 2016. sector holds up tomorrow, i think the markets are going to start looking past it, and this might be looking like a really good opportunity. paul: through all of this, the consumer has been a total much strength. are we starting to see signs that may be consumer strength is beginning to be at risk? >> i would say quite the opposite. look at real average earnings, which will be the -- the data set comes out again next thursday, the real average earnings, disposable income of the consumer adjusted for inflation, has been increasing
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for most of this year, and it has been leading corporate profit. it kind of stands to reason, the more disposable income a consumer has, the more they are spending, they are propping up the economy. that plays well into corporate profit, it looks like a good sign for the fourth quarter for equity markets once we get past this manufacturing number. shery: we also had some political news, especially from the progressive side of the democratic party. what can you tell us on how this is impacting market sentiment? >> this has been more of a psychological impact. senator sanders has been trailing in the polls. he is only running about third in the democratic primary so far . he paused his run today for health reasons. he had a couple of since put in his heart. he's one of the oldest in the field, and people are wondering at his age, could he continue and seek the presidency? it does tell you he is more in-line with warren in terms of their policies, and if sanders
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does need to drop out or does fall in the polls because people do not feel he can carry on, it is more likely his supporters will follow warren, and that makes her the prohibitive favorite for the democratic primary to run against trump, and she has been seen as unfriendly toward markets. she does not get a pass when it comes to that. she has been very hard on the banks, et cetera that weight on markets, in addition to what we saw. shery: i think she had another tax proposal for lobbyists. thank you so much for the latest on the markets. victorias now is fernandes. great to have you with us. vince was telling us that perhaps if we get a positive reading when it comes to the service sector tomorrow, that markets could look past this, including what the fed could do. what are your expectations? >> i think he is right in that
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sense. we know the u.s. economy is roughly 70%, 75% based on services, so we know the manufacturing numbers have been slower. we have been anticipating to see those slower. they were a little more so, i think, and people anticipated, which is why we had the selloff, but we had some one offs playing into these numbers. we have the boeing issue that has been there a couple of months. we had the general motors strike as well. chance that that turns around. i would not use that is a big recession indicator by itself, especially if they services numbers are positive and come around. again, the consumer has been the driving force all year. we will see if that continues. also headed to nonfarm payroll numbers on friday. could we see another outsize
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rally in treasuries if that number comes gain weaker than expected? >> people are looking at every number that comes out. nonfarm payrolls is always the big one. it sets the tone for the market for that day and the following day, especially since it comes out on a friday for the weekend. if those numbers are better than expected, i think we will see yields move higher. if they come in lower and it tends to support what we see on the manufacturing side, i think we will see yields come down a little bit and stay in the lower end of this trading range they have been in. closer tore coming the next earnings season, and i just want to bring up this chart on the bloomberg terminal that companiesnumber of guiding expectations lower is now at the highest since 2016. while easy fed policy has propped up equities prices, it has not really translated into performance for the companies listed on the exchanges.
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>> is a lot of questions to go on when we talk with companies about how much we think the actions by the fed has actually followed through into the economy. i do not think the last rate cut was really necessary. i'm not sure if we get another 25 basis point cut that will do much for the economy at as well. people will be focused on earnings, however, and we know that as we go into the end of a quarter, like we just finished third quarter, expectations start to come down on earnings and we usually tend to have a spike of deep surprise. we saw that this year. earnings were a little over 1% year-over-year. we might see something close to that in the third quarter, even though expectations are lower at this point, but people will definitely be watching. again, it's in the fourth quarter that we are getting these numbers. that is huge for the consumer. it's the holiday spending season, so a lot of data will be coming in, really shaping the market as we go into the end of the year. paul: i have another chart, to your point, i want to bring up that shows how the s&p has reacted to earnings in the past.
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if we cast our minds back to the final quarter of 2018, we saw that big selloff. what do you think the chances are of history repeating in 2019? seeell, i don't want to history repeat itself. i hope that does not happen. we did have reports come out this last week that said the consumer is looking to spend equal to or a little bit more this holiday season than they did last season, so that will help on the consumer side. third-quarter earnings that come out, again, we have had a lot of volatility going on. there's a lot of trade issues that have been going and uncertainties regarding that, so i'm not sure how much of that will play through in third-quarter earnings, how much it actually affected numbers. i think we will definitely hear it on the call. that will affect guidance going forward, so expect more volatility in the markets as earnings really kicks in in about two weeks. we had president trump today blaming this selloff on the impeachment drama in washington.
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he tweeted all of this impeachment nonsense is driving the stock market and your 401(k)'s down, but that is exactly what democrats want to do. they are willing to hurt the country with only the 2020 election in mind. what is your assessment of what the impact has been on the markets from all this political drama? >> i think you have multiple issues going on. i really feel it is kind of like the entertainer with all the plates spinning at the same time. we do have the impeachment, but we also have the trade war going on with china. today, we had the announcement of the eu tariffs that will go into effect on october 18. we have brexit. we have all sorts of things happening, so i do not think we can say the uncertainty and volatility that results from that is strictly from the impeachment side, but, yes, it will add to it. it will make their be more questions from corporations on what they want to do going forward based on how they think tax issues may change.
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paul: thanks so much for joining us. still to come, hong kong retail sales plunge the most on record as the protests take an increasing toll on the economy. we will be live in the city later this hour. shery: up next, a list of european goods to be hit by new tariffs including wine, cheese, and whiskey. we will break it all down. this is bloomberg. ♪
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shery: i'm shery ahn in new york. paul: i'm paul allen and sydney. you are watching "daybreak australia." the u.s. is ready to slap billions of tariffs on products following a landmark ruling from the wto on aircraft subsidies. sarah, you have been looking
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down the list. what do you see? sarah: there are some pretty popular products on that list. things like olives, cheese, some type of wine, some cuts of pork. we also see aircraft on the list, and that is fully formed aircraft, large aircraft. they will be hit with a 10% tariff. there really is an expectation because there's 25% duties on some of these other goods like olives and cheese that this could mean a slight rise at least in consumer prices for some of these products. that being said, some other luxury items were left off the list that were on an initial one, things like letter goods from some of those brand-name labels. i think there was a mixed bag today that we got out of the u.s. still are expecting the wto to rule on u.s. subsidies to boeing. can we expect the u.s. to retaliate?
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the u.s. hastely, said it will retaliate. in the meantime, the u.s. is pushing the idea that they want to negotiate a settlement. they think the tariffs they announced today, what they are calling retaliatory tariffs, they think it will push europe into a corner. we cannot forget they are also hanging over the head of europe the threat of auto tariffs completely separately using a u.s. law over national security threats, so the u.s. has a little bit of leverage, and i think they might want to try to push europe into a corner with some of these tariffs, but as you said, there's another case coming up at the wto. the eu unfairly subsidizes boeing, so they have a little bit of leverage as well. we will have to see how this plays out in coming months. wto asurope going to the well. what are we setting up for? what will happen next? sarah: what we are waiting for is a procedural step. where expect october 14 for a
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requested meeting, to sort of finalize these meetings. of course, that would be only a few days after it is going to increase tariffs over $200 billion over chinese goods, i think what we are really setting up for is a real escalation in the tariff war unless the trump administration can really negotiate these solutions it wants with china, with europe, so rather than the tariff war is being ratcheted back, they seem to be being ratcheted up right now, and that is not great for the global economy. editor sarahtrade mcgregor, thanks very much. you can get a roundabout the stories need to know to get your day going in today's addition of daybreak. bloomberg subscribers go to dayb on their terminals. you can customize your settings so you're only getting news on the industries and assets that
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you care about. this is bloomberg. ♪
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this is "bloomberg technology global link." let's take a look at the top global tech stories of the day. taylor? taylor: starting with apple, they are easing restrictions on third-party app developers, reducing the priorities given to its own apps when users ask siri for help. currently, it defaults to apple's own phone pork pie message app, but a new update will allow it to default to whichever app users rely on. the move comes as apple faces scrutiny over how it competes with developers. microsoft is back in the smartphone race with a dual screen foldable device that will run on the android operating system. pointrface duo has 25
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six-edge screens and marks microsoft's return to the handset market after product failures and costly write-downs pushed it out three years ago. the tech giant still faces skepticism from some investors about a deeper move into the hardware business. of wework conveys a new head operations. the former director places chris hill who had run the japan set up since it began two years ago. hill is the brother-in-law of the former wework ceo, adam neumann. japan is one of the company's most important markets as it is home to softbank, which has invested more than $10 billion in the company. those are the top global tech stories we are watching. paul: thanks, taylor. tesla slumped in late trading even after reporting record quarterly deliveries. the detroit bureau chief david welch has been digging into the tesla headlines, which have been crossing over the past hour.
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97,000 cars delivered looks pretty good. why were investors disappointed? always, it's a matter of expectations and last week, elon musk went out and said that they could possibly hit triple digits or more than 100,000 vehicles, so it was a record. it was a good quarter, but they did not hit the expectation that he set out there for the market, investorslways makes nervous. they are kind of watching for any sign that there is enough electric vehicle demand out tesla's goals,y or if there's not, they will flee the stock. i would not say that this is a sign there are not enough buyers out there for ev's, but it is a sign that elon sees a number he things he can hit and they don't hit it, and investors react to that all the time. i do wonder how shares would have reacted if he had just kept his mouth shut and not said
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anything. and any case, they were down as much as 6%, probably down 4% in aftermarket trading right now. taylor: what do you make of lowering the cost to defend work it share? much market share because nobody else is really selling in ev. you have german carmakers just bringing vehicles out and you have competitors from nissan and general motors competing models that are cheaper. they are really different kinds of electric vehicles. what's really going on is after you get through the people who love electric vehicles and gotta have one, you start getting into the heart of the car market, and many of those consumers are less convinced. tesla is selling cheaper versions of the model three, so it lowers revenue. to convince some of those people, tesla has done some things like free charging. they have lower prices. they have given more features in certain packages and that sort of thing.
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what investors worry about is when you are lowering revenue but also theins, more expensive models that frequent sell for more than $100,000, where are you going to make profit? tesla is not a terribly efficient manufacturing company, and making electric vehicle parts is still expensive. in a $100,000 vehicle, you could bury a lot of those costs. in a $45,000 auto three, much more difficult to do so. at some point, investors are going to want to see where the profits come from, and if the vehicles keep getting cheaper and cheaper, it will be tougher and tougher to do that. quickly, tesla a favorite target for short-sellers. is there enough to begin to silence the bears? >> i don't think so. i think this will be probably a short lip, and you will see regular trading resume and probably some opportunistic buying tomorrow perhaps.
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paul: detroit bureau chief david welch, thank you for joining us. that is "bloomberg technology global link." don't miss "bloomberg technology at 7:00 a.m. and hong kong, 5:00 a.m. -- 7:00 a.m. in sydney, 5:00 a.m. and hong kong and 5:00 p.m. in new york. this is bloomberg. ♪
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paul: 8:30 a.m. thursday morning here in sydney. it's another beautiful day out on the harbor, but it looks like we will have another ugly day on the markets. the open 90 minutes away. we have futures currently lower by 1.8% after more disappointing data in the u.s. and a protectable reaction on u.s. equities markets. i'm paul allen in sydney. shery: i'm shery ahn in new york where it is 6:30 pm you are watching "daybreak australia." let's get to first word news. ritika: four months of increasingly violent unrest in hong kong have triggered a record fall in retail sales. tourism has plunged with arrivals to mainland china slumping 42% in august.
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demand for luxury goods such as jewelry and watches plummeted by almost half. airbus is warning american jobs will be threatened if the trump administration goes ahead with tariffs. the wto authorized 7.5 billion dollars in duties against the european union at the end of a 15-year dispute about state aid. airbus says about 40% of the components and its average planes come from the u.s. supporting 275,000 jobs in 40 states. news outlets say a boeing engineer filed a complaint alleging managers denied a backup that might have alerted pilots to problems with the 737 max. the reports say boeing managers were urged to consider a secondary system for checking airspeed that could detect when
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aircraft altitude sensors were not working. day two of u.s. auto sales reports saw ford beat expectations but fall more than 5% in the september period. fiat chrysler sales were basically flat in the quarter, better than the anticipated drop of 1.6%. brown pickups outsold the chevrolet silverado by about 6000 trucks. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. shery: thank you. let's get a check of how futures are trading at the moment. we are seeing downside pressure for keyway stocks. u.s. futures at the moment gaining .2% alongside nikkei futures, which are gaining .25
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percent, despite the fact the japanese yen is at the strongest level in about a week against the u.s. dollar. sydney futures taking a hit, down 1.8% at the moment. paul: thanks. let's get more on what we should be watching us trading gets under way in asia. bloomberg's global markets editor adam haigh is with us. how seriously will investors need to worry about this data, or can they be assured the u.s. consumer is fine? adam: what we've seen is a slew of data that has tested the assumption about of manufacturing follow-up is spilling over to the u.s. consumer. these jobs numbers are certainly part of the picture, but we really have to wait until friday for the more comprehensive jobs report, but certainly, you tend to think if we get a miss on that, you are going to see even more money moving into treasuries and this ongoing steepening of people pricing in
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further easing from the fed, so investors in this part of the world absolutely should be very clear on how this slowdown in global growth is playing out, but from a markets perspective, as this chart shows you, it is more about technical breakdowns happening. u.s. equities going through some of those key moving averages, it settingg to the wave of that's coming, and the declines were reasonably pronounced for u.s. equities and reasonably broad, and indeed, it looks like the start of asian equities here 1.5 the japan open looking percent lower and similar magnitude of declines in australia and hong kong. clearly, markets in china and south korea are actually shut today. there will be a concentration and a realization that, you know, we are having this slew now of data coming out that is really testing assumptions around any recovery people thought might be happening in the back end of the year in terms of global growth, and as i
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said, the next thing people will be looking out for with that services data coming on thursday in the u.s. and of course, nonfarm payrolls on friday. shery: of course, that will catch the eye of the fed and perhaps markets now hoping central banks will come to the rescue again. when it comes to the australia markets, interestingly, goldman sachs making an analysis of what a qe program in australia could look like. what has been the reaction? adam: there has been a reasonable amount of interest in the analysis, in part because it was informed by the rba's own model and kind of an extension of that by the analysts at goldman sachs, and they are really looking for the idea that without going into negative rates, the way that the rba can get back towards their targeted inflation rate would be by doing program of theg value of around 200 billy --
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billion aussie dollars. lower hasey driver been the unemployment uptick and the challenge to being able to get any kind of wage growth that is really sustainable, but of course, that is not just an australian problem. that is a problem the world over, this kind of problem has been running for some time, going back in the u.s. to the former fed chair under janet yellen. she talked about it being a conundrum, and it continues to be. the point here is that having brought rates down to 7.5% earlier in the week, the market still pricing for him to probably hold in november but still looking for lower rates going into 20/20, so the expectation that some kind of unconventional monetary policy will come is very much being vetted into market pricing now and into the way strategists are analyzing that is more about exactly what kind of policy that will unfold.
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still, there's a reasonable amount of debate going on as to how that will prevail. shery: thank you so much for your insights. you can find adam's charts on the g tv library on the bloomberg. the economic pain in hong kong is intensifying with retail sales posting a record plunge as a long-running and escalating protests cripple tourism and spending. our chief asia correspondent stephen engle has the latest. we've heard from the financial secretary talking about the potential for even more stimulus. how bad were the numbers? stephen: if you look on october shops have been closed all day long. this is some of the world's most expensive retail property, and these shops have to close down. if they don't get rent relief,
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they will be suffering, obviously, so this is being seen across the city, and the perception, of course, being broadcast around the world of hong kong aflame, obviously trickling down to people arriving or lack thereof, and the numbers are stark. retail sales falling the most on record in august. the value of retail sales down 23% year-over-year in august. also visits from mainland china. keep in mind, the majority, the bulk of people who come to hong kong are from mainland china. especially during this particular golden week -- there's two golden weeks in china, this week for the national holiday and the spring festival, which is the lunar new year holiday. that's when hong kong get the bulk of their retail sales. visits to mainland china fell 42% in august and maybe the pain is not even fully felt just yet. luxury goods like watches and fell by nearly
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half. the designer as well as co-ceo .f product -- prada we can see in the last two weeks alone, the stock is down some 16%. she spoke at a show in amsterdam, saying hong kong is a disaster, like for everybody. that kind of sums up what is happening to the economy here in hong kong. disaster being driven in large part by all the protests. what is ahead for the protesters? stephen: it's not going to die down according to the people we have spoken to. october 1 was that date circled on the calendar. let's build toward october 1 and send a message to chinese leaders that this is a concern for us, but now that an 18-year-old protester was shot -- yes, he was wielding a steel
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rod. there's many different views on who is to blame in this, but the fact that one protester was shot, not lethally, thank goodness, at least right now. he is said to be out of danger. but that might inadvertently add more fuel to the fire for the protesters. in fact, alvin young, an opposition lawmaker, saying people are angry. this unrest will continue and could escalate, and it has escalated. if you just look at some of the numbers from the police yesterday. here is a tear gas canister. these were everywhere on the streets on october 1. 1400 tear gas canisters could be found around the streets of hong kong. that's how many were fired. six live rounds including five in the air as warning shots, one obviously into the chest of a protester. 269 arrest on october 1 alone. 930 three rubber bullets. protesters, according to the police, using lethal violence. that's why, again, the police
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are taking deterrent measures as well. numbers aroundk this ongoing disruption. tanks so much for joining us. now let's get to a bloomberg exclusive. the indonesian president aims to deliver on some of the major reforms that investors have been demanding. bloombergo editor-in-chief john micklethwait and his hometown on central java. they began by discussing widespread student ryan's against-- riots controversial changes to a crime bill. >> this is indonesia. indonesia is a democracy. if people want to express their opinions, they can come up with the most important thing is no anarchy, no riots, no destroying public facilities. foreignan imagine companies not investing in a ed gay people,ann
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that made it hard for women to go out after 10:00. from their point of view, surely you should just get rid of that law. >> we have delayed the revision of the criminal code. we want to get feedback from the public. there are many articles in the revision that are being misinterpreted so that the information received by the public is misunderstood. >> back in 2014, you were the hero of the reformers. now you have protesters protesting against you. does that worry you at all? >> no, no. i think they are normal. when i was mayor, there were protests. there were normal. when i was governor, there were protests every day, too. they were normal. as president, there are protests in front of the palace, too. sometimes i ask them to come in and i listen to what they want to say.
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sometimes i don't. john: you invite the protesters to see you and talk to them? sometimes they meet me. sometimes they do not want to meet me. assure foray to investors and people who care about liberalism in indonesia that you are still on the side your tablet. i wondered -- many foreign investors are watching closely. in you guarantee she will be your cabinet? >> just wait. on october 20, there will be a presidential inauguration. there will be an inauguration of ministers after that and we will introduce them. i will tell you now, i guarantee
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she will be on the cabinet. the decision,en but she will be in the cabinet. john: you have been a champion of sort of resource nationalism. you have now put a ban on nickel or being exported in a raw state. is that your strategy number that you want these things to be made and to finish products in indonesia? freeport. not is a business process, political policy. second, for nickel, we want raw materials to be processed and indonesia to become semi-processed or processed goods. we won't see po to become processed goods. why not? or jet fuel or soap. john: the crucial subject of palm oil, you are one of the world's biggest producers, but in theknow, consumers west, the european union, big companies like unilever and nestle. prices have gone down. palm oil companies have withdrawn from some of the
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international specifications. what are you going to do about this? how can you support industry? >> this is not a light problem. 16.5 million farmers and workers are in the plantation area. we are responsible for higher cp a price. several times, i have sent a team to the eu to explain this. our production is 46 million tons per year, but this is discriminatory, not supposed to be like this. trade must be open, but truth be told, we will fight this because this is about 16.5 million people. the indonesian president speaking exclusively with bloomberg's editor-in-chief john micklethwait. later, we get reaction to his the low institute southeast asia project's
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president. this is bloomberg.
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shery: i'm shery ahn in new york. paul: and i'm paul allen in sydney. you are watching "daybreak australia." the reserve bank of australia remains in the headlines after cutting interest rates to a record low this week. our next guest says the debate about the desirability of some -- of such cuts is starting to heat up. the chief economist with commonwealth bank joins us from sydney. we have been getting into law of diminishing returns territory. the cost of borrowing was not really high. when rates are the slow, what are even lower rates going to do? >> not a lot, i think. freeingrowers are not up any actual cash to spend. the aussie dollar does not quite respond as much to where rates are sitting right now, and i think most people think
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something is going wrong, so it has been a negative for business and consumer confidence as well. paul: the idea is to drive jobs, drive inflation, but all we are really seeing is it driving house prices back up again. it is a potential constraint on how much further the reserve bank goes. right now, i thing they are pretty happy seeing a bit of positivity coming through the housing market, turning around the negative wealth effect that has been weighing on the consumer side for a while. into acould that turn bubble again? >> there's certainly risks because we are improving affordability, lowering interest and mortgage rates at a time when population growth in the city of melbourne in particular is still pretty strong, so they have all the preconditions there for a decent rise in house prices over the next 12 months. it does mean maybe we will be talking about macro policy .efore too soon the mainere are we in
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objective of the rba's recent rate cuts, which was tightening the labor market? have we made any progress? >> we have yet to see much coming through in terms of employment but we are still getting strong jobs growth at the moment. the labor market is pretty solid. rate cuts help your the market, but clearly, the reserve bank, their full employing objective in inflation target, if you like, is taking a backwards step at the moment in terms of importance for policy settings. paul: yes, inflation stubbornly low across the developed world, really. we have heard the economy is at a gentle turning point, but are we really seeing that in some of those metrics we have been talking about, like trade numbers which we will have later on and jobs and inflation?
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>> i think gentle is the key word. we are seeing some of the negatives that have held the economy back starting to ease, so the big drop-off in residential sales activity, for example, that is starting to turn around. the drought probably had some negative impact. the effect on resource experts also waning, so recent prospects a bit of a pickup. paul: the conversation is already starting to turn towards qe. we have had some speculation and discussion from goldman sachs about the size of the bond buying program the rba might get into. really want to get your feeling on what we might see and when it might happen. with the rba get to zero on the cash rate first or stop before then? >> at think they will probably stop before zero. the early countries have kind of got to zero and negative rates, those running big current accounts, that gives it a bit more flex ability where they can push interest rates.
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we do not think it is enough to validate negative rates, so qe comes on the agenda probably after the next rate cut, but i think at the moment, the reserve bank is reluctant to go down that path. they want to save a little bit of ammunition to offset any kind of negative global shop that may be building out there at the moment. shery: when is the next rate cut? will they wait it out until we see some traction from the recent rate cuts? >> they have made it clear they are still prepared to cut rates again if needed. it does suggest they need a bit of evidence to accumulate for that. we think the next cut will be in february next year, taking the cash rate down to .5%. paul: the rba has been saying for years now that there's a lot of spare capacity in the economy. where should australia's growth rate be to make them happy? >> they have made pretty clear that normal growth for australia
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these days is 2.75 percent, so we are a long way from there the moment. they can do an unemployment rate of 4.5%, so we are a fair way off that target as well. there's plenty of spare capacity in the economy. i think it makes them confident they can cut rates without necessarily having to worry about any generalized inflation. the only inflation you might get is perhaps a bit of an increase in wages. they now routinely say that would be a good thing. paul: thanks so much for joining us today. you can watch us live and see past interviews on our interactive tv function. you can also dive into any of the securities on bloomberg functions we talk about and become part of the conversation. this is for bloomberg subscribers only. this is bloomberg. ♪
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no deals yet, but we saw this similar to the business, which helps clients manage risk in their portfolios. the ceo is counting on china to drive future growth. the largest indian
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manufacturer of flexible packaging says it will invest millions over the next years to expand its development of eco-friendly products. they say they see a big profit 10 show in prime minister narendra modi's plan. there is consumption in india as the country's huge millennial population drives the global purchasing trends. shery: plenty more still ahead on "daybreak: asia." a guest joins us to discuss currency moves from a global growth concern. "daybreak:is all for australia" this morning. we have had new zealand up and running. tad, with weaker by a dollars.and aussie and this is after we saw the index declined by about 1.5% on wednesday.
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disappointing data from the u.s.. thosere expected to drive declines today. that is it for "daybreak: asia."ia" on "daybreak: ♪
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♪ paul: good morning. i am paul allen in sydney. we are under one hour away from the market open in australia and japan. good afternoon. from bloomberg headquarters in new york, i am shery ahn. welcome to "daybreak: asia." ♪ top stories this thursday, stocks tumbled to their lowest since august as more disappointing data sees the u.s. economy hitting breaks. and in hong kong, months of

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