>> asia-pacific shares are set to rise after wall street saw some fresh highs on renewed optimism. oil is extending its best winning streak of the year. brent is on its longest run since 2012. 's and truck's give hope to auto sales, although we are not likely to hit last year's numbers. a newle is looking at

system to unlock the new iphone and digital payments. >> coming to you from bloomberg's headquarters in new york. i am betty lou. yvonne: i am in yvonne man. inflation data out of south korea. pretty much a miss when it comes to the year on year figures. we have pretty much been around the 2% target for this year already. we are falling about .1%. not too much to be worried about. there has been a lot of central-bank hawkishness. are they ready for some tightening as well? we heard from the governor last month. it could be well on track if this economy recovery continues here in we will see how that plays through. betty: it is interesting. we are paying so much attention

to these inflation numbers. it looks like we're seeing this global tightening trend. people are doubting fed tightening trends. the one who started it is now falling behind, perhaps. yvonne: more selective when it comes to data dependency. they are not looking for these recent inflation trends. let's look at how things are playing in the asia-pacific. the recent trading session on wall street. ere quite pronounced. the dollar was the star. that is taking a hit with the kiwi at 7286. australia, we have that decision later on. look at some more slightly hawkish comments coming out from governor philip lowe. the aussie is going nowhere. equities seeing some slight

gains. also, japan following the fallout of the tokyo election for shinzo abe, we did not see a lot of reaction. it was quite muted. we will see as that continues and there are more calls for a regime change, especially against the government. 113 for dollar-yen. that is quite bullish when it comes to equities. we could see a 130-point game. -- gain. looking a little lackluster. pretty much on holiday mode all day here. happy fourth of july. betty: thank you. people are already on their july 4 holiday. we closed three hours earlier at 1:00 p.m. it was a shortened training day

-- trading day. to, theu were alluding dow was the index that hit a fresh high. we saw some of that fall back to close up by 130 points. we will probably have some fireworks based on july 4. we will have some range aboundness. it had been up by about 10 points. we are not seeing a lot of stuff happening. what we are seeing in terms of the weight, we are seeing the nasdaq tumbling. in terms of technology shares, they are dropping right now. 32 are up. we are having a little difference of opinion on what is happening on our board. i think the numbers are different than these. apple and facebook are all down on the day.

let's switch to what is happening in terms of the energy sector. those are all correct. those are all up on the day. the reason is because of what is happening in my bloomberg terminal. 1624 here. the reason for this is that the oil rig count is now falling for the first week in terms of the last 24 weeks here. 1624 if you are f following along at home. >> take another look at that apple stock. ramy: that would be quite good. yvonne: speaking of oil, we have the june u.s. auto sales that came out today. ramy: suv's as well as pickups giving the left to what is

happening. june infor the month of terms of year on year sales. there is a silver lining. in five of the eight major car companies, as well as asian car companies in the united states, they actually beat estimates. some of them by some pretty good numbers. you see the tops in terms of the auto stocks. chrysler, the biggest percentage jump. 4%. ford is up by 3%. as is general motors and toyota. take a look at what is happening in terms of tesla. tesla on a downward trend. down 2.5%. we want to see what happens when trading picks up on wednesday. what happens is after the bell. they announced 25,000 cars being shipped. there is a shortage in battery

packs that has hindered them from getting up to where they have been in the first quarter. 25,000 and change in terms of cars shipped there. we will see what is happening in terms of the day after july 4. yvonne: thank you. let's get to the first news. u.s., thend the relations between the powers are being affected by negative elements. is reported by state media. it follows the u.s. coming close to a disputed island. the two leaders will meet at the g-20 in hamburg. xi jinping has a derived -- arrived for talks with proven. putin's foreign it made -- affairs advisor describes the

relationship as the best in history. putin and trump will meet on the sidelines of the g-20. qatar has given into 13 demands. it is not known what the letter contains. the month-long crisis can finally be resolved. showing upmages throughout the country in support. the saudi led block will meet in cairo to plan their next move. rose to itsduction highest in june. collectiveons raised output by 260,000 barrels a day. half came from libya and nigeria. its longest run of gains this year. enjoying its longest rally since 2012. the president of national has beennd fox sports

fired among allegations of sexual harassment. committed anz unspecified breach. issues amongling others with former anchor bill o'reilly. i am nina. this is bloomberg. betty: u.s. equities are kicking off rather quietly. still kicking off the second half of the year on a generally positive tone. the bank shares climbed on energy. good to seed kudla, you here. i know you rank the opening bell this morning. david: that is right. a great honor and a lot of fun. betty: looking towards the second half of this year, a lot

of the story for the first half was the ed. -- fed. david: we had the trump trade and the reflation trade. health care doing better in the second half. we have seen a reversal of that. we have seen the inflation and the energy come back. one day we think does not a trend make. technology remains a leader. betty: despite the selloff. david: despite the selloff. those investors are not awaiting waiting for what their portfolios look like now. there have been a lot of comparisons to 2000. prices are high, but valuation is still reasonable. that is the growth story. betty: are you looking at forward or current pe? david: we look at that compared to the s&p 500. we are barely above the s&p 500

in the tech sector in general. we think that you stay with technology. betty: why stay in tech? yes, the valuations may be more reasonable than before. but before was rather crazy. is that the right comparison or can you find that are valuable elsewhere? make theople comparisons because the prices are higher, but the valuations are reasonable. you look at the broad spectrum of where we can invest. you want to be in growth stocks, not value. we have gdp in the first quarter at an anemic rate. we expect that growth will only be at about 2%. environment, we see the economic data still coming in mixed and growth not that strong. we want to stay away from value stocks.

to dependat value more on a secular growth story like technology rather than relying on forces. we do not have that tailwind right now. yvonne: you mentioned about this. you also hear a lot of central-bank hawkishness. we have seen another big jump in yields. central banks seem to be traveling the market more so than at any time when qe ended a couple of years ago. david: the problem with central banks around the world, and we will talk more about it, the problem with central banks is that they want to remove accommodation, but they do not have the growth to do so. we are in an environment where central banks want to do that. they want to remove commendation, they cannot.

they are struggling with growth around the world. the chief investment strategist at mainstay capital management. sounds pretty good, right? that is the prediction of one of our guests. we will ask it why he is still so bullish. yvonne: manufacturing gains are still heading higher. what will that mean for central-bank policy? ♪

."tty: this is "daybreak: asia i am betty lou in new york. yvonne: i am yvonne man in hong kong. enjoying a global move up in manufacturing gauges. the central banks revisit move to tighten monetary policy. let's visit with kathleen hays. what do you have a kathleen? kathleen: let's definitely start

with the united states. index,chasing managers' this is one to watch in the united states. all of these gauges, when you look at manufacturing, if they are above 60, they are signaling growth. 57.8.mber, if you compare to previous months, the manufacturing -- what isnd the going on with purchasing managers, they have it retired. powering up again. new orders hitting a three-month high. postedof 18 industries growth. again, it was not just the u.s. you saw the survey in japan enjoying a big jump in optimism. the pmi moved back above 50, signaling growth. we have the europe pmi rising.

mexico, their pmi rose as well. even in countries where it slow down a bit, the pmi still stayed above 50. how much will manufacturing pick up jobs probably? will it make much of a difference? the main conundrum for central banks is inflation. falling inhe rate is many countries, inflation is not rising. in sum, they are pulling away from the inflation target even more. reserve,he federal which is most likely to raise rates next. on will see the jobs report friday. betty: absolutely. half lane, stay with us. i want to bring back our guest host.

david, why do you say the fed is becoming less dependent? david: we think they are becoming less data dependent because they have to if they want to raise rates. betty: like with strong numbers like this? david: we are getting strong numbers in pmi. our pmi, china's pmi, all very strong. inflation.seeing an inflation is lower now than it was a year ago in the u.s. we are seeing the inflation readings coming down. betty: have you figured that puzzle out, why? david: i think a lot of people would like to figure that out. the central banks have a target of 2%. we are moving away from that

target rather than closer to it. that is the paradox that they have. the central banks around the world, they want to remove accommodation. a want to normalize rates. they will make the story work to matter the data. kathleen: this is very thinksting. some people it is the risk that they run by taking away stimulus that they think is fueling the economy. just for fun, let's bring up another bloomberg chart. thehows you that the pce, fed's main gauge and the one that is right behind it in line, both of them made such a sharp move. what is the risk for the markets? there is a risk in bonds and stocks, too. david: the risk is that we have a policy event that becomes a market event. the risk is the indices are

moving too fast. we have had three rate hikes in the u.s. over the past few months. they are hiking in the face of not a lot of inflation with this latest economic data. we run the risk of a market event. ago, we wereeks getting close to where we could start moving towards an inversion, which would be really bad. that would indicate a recession, possibly. do you feel like we are anywhere near that? david: not at this point. kathleen: you watch a lot of companies. you talked to a lot of companies. why are prices not rising? is it the internet. i do not want to raise my prices and lose market shares. rising?prices not

david: there are lots of schools of thought on this here it technology is one reason. robots do not demand higher wages. they do not create wage pressure. there are a lot of schools of thoughts out there. fact is that prices are not going up. david, you mentioned in possibility of an event in the next few months is quite high. do you think it is wise for investors to prepare for something like this? david: you need to be constructive on the markets. we are still bullish on stocks. some have a diversified portfolio with those hedges in place. when you look at risks to the market, there are not a lot except for the policy event by the fed.

the biggest risk is that policy event by the fed or other central banks around the world. if central banks are raising the rates, that could be reason to buy stocks. they are really not doing much at all. are we at one of those points for stocks? david: what they are doing is really reassuring. hikesave had four rate in the last several months. they are doing it at a fashion and a pace, we are looking at the market and the economy and the pace of interest rate hikes. we cannot have a conversation about central banks without pulling up our favorite function. we do pull it up a lot. i just want to point to this

number here, which looks a little higher than what we saw here. by december, a 53.5% chance we will get at least one more hike. where do you stand i the end of this year? byid: one more hike december. i think they will work on their balance sheet. betty: when? david: that is what they will be talking about with the september meeting. we will not see another hike in september. they will start to work on the balance sheets. betty: david, stay with us. david kudla, our guest host for this hour. kathleen hays also joining us. you can get a roundup of what is ."ppening in "daybreak: asia

you can customize your settings so that you only get the news on the industries and the assets that you care about. this is bloomberg. ♪

yvonne: this is "daybreak: asia ." betty: i am betty liu in new york. the u.s. is streamlining its wealth management is this in europe. withtions will be combined messed up businesses to reduce the number of offshore booking centers. wealth managers are under pressure from locker room -- record low rates. a former barclays executive told a london court that they will deny conspiracy and -- conspiracy to commit fraud.

richard are the most senior u.k. bank executives to face charges in the financial crisis. authorities are said to be widening an investigation into the $400 million bond market. they are examining whether banks, brokers, pension funds colluded. are calling for records of online chats and other communication. yvonne: a chinese court has million of assets belonging to an internet giant. -- move came after this ase portrayed

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reporter: 7:30 a.m. tuesday in hong kong. we start with a little bit of rain. a little cloudy as we start. asia's first markets opening. pretty great-looking. not that way here in new york. betty: 7:30 p.m. monday evening here in new york. highsw hitting fresh during the session. i'm betty liu here in new york. yvonne: i need on man in hong kong. you are watching daybreak asia. now to your first word news with nina melendez. reporter: japanese finance minister is strengthening his political power base bridging

factions in the diet can give more control over the ruling dip -- liberal democratic party. he pledged support for prime minister shinzo abe after the bruising defeat in local elections. that may force him to rethink policy, including his ambition of rewriting japan's pacifist constitution. japan and the eu say they are close to a free-trade deal that would bring together two regions that account for more than a quarter of the world's economic output. eu trade commissioner told reporters the basic deal is in place and an announcement could come on thursday. japan wants to remove levies on auto exports, but the eu wants tarriffs lessened. there seems little chance of sales matching last year's record in the auto market. deliveries are expected to fall 16.5 million vehicles, which would still be one of the best years in

history. most automakers saw better sales than expected last month after a five-month losing streak. tesla delivered just enough cars in the second quarter to meet its first half sales guidance, with production held back by a temporary shortage of batteries. it shipped more than 22,000 cars and suvs, compared with more than 25,000 in the first quarter. tesla also says the new model three will go into production on friday, with the aim of turning out 20000 and month by the end of the year. global -- global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i mean a melendez. this is bloomberg. thank you. we are counting down some of the major market opens in asia. we bring in our global markets editor, adam haigh. we are waiting for the r.b.i. decision. it has been resilient. is it now time to reverse?

reporter: the message coming anz from the people at freddie aussie dollar bulls to be aware as we go into this message. they are making the claim of resilience. let's bring it up on the terminal. it shows you the strength of the aussie dollar recently. last week was characterized i a bankerslobal central pushing more on the hawkish commentary, and the expectations commentary ande discussion in the market has been around whether the rba will in the hawkish language. all things considered, if we go into the meeting today, we expect that won't be the case here, but there is still a risk and that skews a downside disappointment risk for the aussie.

people are cautioning against any hawkish move from the rba and think they will have to wait before they got the inflation numbers this month before they make any change to their incredibly neutral stance, which they have maintained for some months right now. betty: the people at bank of america have been asking the question, could this be the end of the bull run for equities? you have been looking at cel-sci consensus indicators. yvonne: what is that showing off? -- us? reporter: it would be a brave one to call it the end of the equity bull market, but it is now the second longest in u.s. history. this bank of america proprietary is interesting, because they see the measure of bullishness is up to levels they have not seen for five or six years now. they use that as a contrarian tool to suggest that maybe more downside positioning should be warranted at this point in time.

of course, being over weight, u.s. stocks is a profitable position to be in the global portfolio. people are settling into that europe,, settling into which has done well recently, and swapping over more into emerging-market equities in the last 18 months. there are a number of reasons. the u.s. growth profile relative recovery and emerging markets has been a good place to be. i think this bank of america indicator is one of the latest signs we see from a very cautious investor base or almost looking for reasons to try and sell down u.s. stocks positions. yvonne: let's bring back david kudla. as well,been bullish

but as we have seen this many taper tantrum happening, what does that mean for em overall? kenneth still be the em story we saw at the beginning of 2016 and 2017? >> we think emerging markets will be one of the strongest areas for several years now. in theference between past, rising interest rates could be a concern. --rging markets because concern for emerging markets because they affect capital flows, but we think with economies growing enough to support the interest rate hikes, that is good for emerging and emerging markets win in that trade-off. betty: just to follow your point, we were taking a look at some of the other signals and warning signs. shows theart, it outperformance we have seen with

em and developed markets since the beginning of this year. we also chart it with this early warning signal risk index, which measures financial stress, and it looks like it could be bottoming out in april. history does suggest once that index starts to rise, we cem stocks start to fall -- we see em stocks start to fall. hawkishness.t that you hear from the bank of canada and the ecb singing the same tune about raising rates. is that something we should be worried about? david: i think we need to be concerned about it. we need to keep an eye on it. when we look at valuations of emerging markets, we look at cyclically adjusted price-to-earnings ratio, 14 versus 34 the s&p 500. we had that warning about how potentiallyons are, a call to the end of the bull market. we don't think we're there yet

for the u.s. we think there's some complacency for the u.s., in the first half of the year with drawdowns, but em is attractively priced, more attractively valued. we think it has much better potential. betty: it's interesting with emerging markets. we were showing hr last week where they have given the rise of some of these big tech companies like samsung and alibaba, now with emerging markets investors, you have to look at tech shares. you have to look more at tech shares then maybe other indicators before oil, for instance. the energy space used to be much more relevant. that? agree with is that something you are noticing as you are investing in emerging markets? david: i do. i think it is important, when i talked about technology earlier, when we look at technology about the world, alibaba, samsung, tencent, those companies are

more broadly valued here. i don't think it's overvalued here, but even better evaluations abroad, more opportunity in tech and emerging -- markets. betty: speaking about technology, apple said to be working on this 3-d facial recognition system for the new iphone, due out later this year it will replace the friend. -- current fingerprint scan that allows users to unlock their phone. mark gurman heard more about this from l.a. reporter: apple is planning a big splash, upgrading the iphone with a brand-new design and new features. one new features we are expecting is a 3-d-based facial recognition sensor combined with technology, so users will only have to scanned their phase two logging. currently, iphones use a touch id fingerprint scanner that lets you put your farm on the home button to log in, download apps, and make payments.

it will not have any bezels around the sides or edges, meaning there's no room for the home button. virtual.ecome they will have to click the bottom of the screen to launch syria, navigate apps, and go back to the home screen. that means they would have to put a touch id screener on the back of the phone. itself isscreen difficult. apple is relying on the 3-d sensor to allow people to still log in. that, 3-d reconstructions of the face with eye scanning is more accurate and collects more data than a fingerprints answer, meaning your fund -- fingerprint sensor, meaning your phone will be more secure. mark gurman, bloomberg news, los angeles. betty: let's continue our discussion with david kudla. a few years ago, we were counting out apple.just as we were doing that, they got

their mojo back, so to speak. but they are still sitting on this big pile of cash. right? a buyer of apple, what do you think of the outlook for apple? david: i think the outlook is still good for apple. i think there is some concern. do they still have innovative tendencies? , thischnologies they have is an example of what is still happening at apple with 3-d, how they are transforming the economy, the internet of things. betty: is that why you by apple, though? david: the other thing is the assets they have a broad -- not necessarily through investment, but financial engineering, stock buybacks, we have that on the horizon as well as an option. whitey you think stocks

like apple are some of the victims of the mass showing in tech shares? david: baby with the bathwater. a lot of the big names that have run up, the same stocks have got hit pretty hard over the past month. that, butee more of those are the companies that will continue. people will be concerned about narrowing leadership at the stock market, but the top 10 stocks in the u.s. stock market only make up about a third of the gains, compared to 2015, the top 10 stocks were 100%. we really don't have narrowing leadership. we still have stocks and apple is one of them. yvonne: tech is one of your favorite sectors. let's talk about the other ones you are looking at. fedncials, health care, the test was a good indication we will see good buybacks. what do you still like at the moment? david: we do like the banks.

a couple of good things happened last week. we saw a steepening of the yield curve. also, capitals will be able to be returned to shareholders, so banks will look more favorable. one cyclical sectors home builders. we had new home sales in the yearcoming at 1620% higher -- 16.8% higher year-over-year, 5.8% for existing home sales. that is topline to the homebuilders. we like bad as cyclical play. we like the banks, we like health care, and technology. yvonne: a little bit of everything. david kudla, stay with us. plenty more to talk about. commodities next, particularly with gold. the precious metal should reach almost 20% growth this year. jim records of strategic

intelligence joins us next. this is bloomberg. ♪

yvonne: we are counting down to asia's markets this morning. take a look at the imperial palace in tokyo. futures getting firmer this morning, up 6/10 of 1%. we were expecting a 140 point gain on the opening of the nikkei 225, breaking above 113 for the dollar-yen. i need on man in hong kong. betty: i'm betty liu in new york. commodities dropping the most since december, gains in the dollar and higher equity prices limited the demand for the traditional safe haven. our next guest is still bullish. bug,been a long time gold expecting a 10% gain, making it almost 20% for the year in gains. jim rickards is the editor of strategic intelligence.

isning us from -- joining us david kudla, our guest host for this hour. lay it out again. why do you think, with no inflation insight in the u.s., why do you think gold is going up? >> the reason is, in first half, gold was up about 8% against enormous headwinds. defense raised rates in december, again in march, again in june. we have seen a slowing economy. everything looks like we are heading into a recession. yet, gold went up almost 8% in that environment. as we go forward, the fed is of -- ahe last to know recession is coming. they will have to reverse course. they will certainly not raise rates in july.no meeting in august. they will not raise rates in september or november. we will see about december.

they will have to do the ninth flip-flop since may 2013. yet, sol not cut rates the easing forward guidance message, which has not been priced into the market, will be an enormous talent for gold. ware's also heading for with north korea, it's pretty obvious at this point. betty: is it? >> yes. the secretary of defense and --eral mattis have given president trump and president xi jinping met. president trump said he would lay off. xi i need time. trump said he would give 100 days. that was up july 15. betty: you have laid this out, but there's a lot of give in this outlook.

if we go to war with north korea, i would want to own gold. that's how we look at gold as a hedge against fear. but why should investors hold gold over the lungs -- long-term? over the last five years, gold the s&p 500 up 80%. we look at the long-term as well. why do i want to own gold for the long-term as an investor? >> the long-term case is even stronger than the short-term. gold will be case, $10,000 or higher. upward oray it is down, you are privileging the dollar, making the dollar your yardstick.

to me, if i have a set number of ounces, and the dollar per ounce went down, it means the dollar's strength -- gold is money, euros is money, bitcoin is money. none of these things are investment with commodities. their money. you trade one for the other. is expressing a liquidity preference and value preference. that's all you are doing. none of these things are investments. yvonne: i have a question for you. yourentioned how much, 1350 was your target, given what we have seen in the price action in the market so far, we have been talking to david about this throughout the morning that yields are rising, curves are steepening, we see rotation out of growth into value. some are saying this is a sustainable rotation.when you see global equities, rates are now higher, not the best environment for

gold bulls like yourself. what would change the narrative for you? >> the narrative is the one i just laid out. the yield maturity on the u.s. treasury at the end of 2013 was 3%. we have seen this movie before. it goes up and down. there are no trends. there's no rotation. we have reversals. we see it in oil, gold, basically every market. up,t now, yields are going gold is going down, dollars days.if you are leveraged are a arede, if you hedge fund, today was a bad day.if you are russia, china, it was a good day. interesting.lways between talking to jim, who has been a long time bowl on gold, and someone like you, you are in incks, a longtime bull stocks, you see it so differently. do you share any of his views?

are you a fire of gold at all? , in thees, we have tracks we have owned, precious metals. there are times where it makes sense to have it in your portfolio. as a hedge in the portfolio. there are times when we see gold moving higher. there are times when we have so much risk or uncertainty in stocks. we do want to hedge with precious metals. that could be a construction -- constructive hedge in a portfolio. it is the all in on gold that we don't agree with. that's where we prefer a diversified approach. we would use it as a hedge, but not the all in approach. not burying it in the backyard. i have always recommended 10%. people put words in your mouth,

they say jim rickards said to sell everything and by gold, don't believe that. i don't believe the end of the world is coming. i think changes in the imf is coming. we are not that far apart. when you talk about pricing in war with north korea, would you be putting in more than 10% or holding more than 10%? >> no, because if i'm worried about my long-term price target, and i am or i wouldn't be presenting it, a 10% allocation that goes up 10 times assures the rest of your portfolio. see you.m, good to jim rickards, the editor of strategic intelligence. david, thank you for being our guest host is our, chief investment strategist of mainstay capital management. much more ahead on "bloomberg daybreak: asia." this is bloomberg.

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yvonne: this is "bloomberg daybreak: asia," i'm yvonne man in hong kong. betty: i'm that he really new york. let's get a check of business flash headlines. are sentiggest shivers to establish a new combined container operation after missing a july 1 target because of approval delays. all the necessary international permits have been obtained for the combination with another company. the venture will create the world's six largest carrier, set to launch in april. yvonne: japanese oil refiner aims to raise as much as 1.2 billion dollars from a share sale as early as july 12. it is facing opposition from the company's founding family, which has about 34% of the stock.

if successful, they say would dilute the holding below the one third needed to block the merger. retailerxury goods showing thatsold, the chinese name doesn't have the cachet of a french or italian one. it has attack -- attracted stars like nicole kidman, but struggled to gain buyers. yvonne: in the next hour, we are watching trading getting underway in australia, japan, and korea. the rba decision is coming out later on. japan futures is the one to watch. we are seeing about 130 point game at the open with futures coming up a bit. gains about half of 1% right now.

the move in the dollar right now seems to be the star. dollar-yen breaking above 113. a lot of questions about shinzo abe right now. the shell of his most divisive policies and the tokyo defeat. more to come. this is bloomberg. ♪

yvonne: asia pacific stocks set to rise after wall street saw fresh highs. betty: oil is extending its best winning streak of the year and on the longest run since 2012. the u.s. is cutting rates for the first time in 24 weeks. yvonne: a bruising defeat in tokyo. it may face a change of policy. betty: china and russia say they are getting on famously. the u.s. is mourned about new negativity.

yvonne: this is the second hour of "daybreak asia." i'm yvonne man in hong kong. betty: it is just after 8:00 p.m. in new york. i am betty liu. we had a shortened trading day today given the independence day holiday. we still managed to reach some highs before the dow was dragged down before the selling in tech shares. that will likely spill over into the next trading day on wednesday here in the u.s. yvonne: possibly here in asia as well. i want to wish a happy early fourth of july to you in the u.s. to talk about the thin volumes. we saw pronounced moves overnight. talk about the 10 year treasury yield jumping to 2.34%. the dollar was also the big star. better manufacturing data out of the u.s.

let's look at this function to look at how the asia state of play is so far. we are continuing on with the upbeat sentiment, particularly in japan with futures there. up .6%. the nikkei 225 is up .6% because it is a hollered -- higher dollar-yen. mixed for fx in asia so far. and the kiwie yuan dollar. the aussie is holding flat. no change expected even though there is an rba decision later on. hawkish statement coming from the governor there. betty: a good summary. the rba decision will stand out in today's trade in asia particularly before close tomorrow. let's get to the first word news with remy inocencio. ramy: the japanese finance minister is strengthening his political power base to give him more control over the ruling

liberal democratic party. he also pledged support for the prime minister after the bruising defeat in love joe -- local tokyo elections. how that might hurt the ambition of rewriting the japanese constitution. the chinese president has arrived in russia with talks with president putin just as talks with the u.s. have hit rough waters. moscow and beijing will sign dozens of agreements during the visit. adviser foreign affairs say russia china relations are the best in history. there also looking for a window trump on thedent sidelines at the g 20. qatar is given a response to the list of 13 demand. that is a letter to the near of kuwait. it is not known what the letter contains are at the crisis can be resolved. support for qatar's leader remains strong.

led bloc will meet in cairo this wednesday to plan the next move. looking to commodities, opec oil production rose to the highest of the year in june. they pumped more crude. cartel asians raised collective output compared with may. half of that came from libya and nigeria. prices rose strongly with oil extending his longest run of gains this year. active oil rig in the u.s. this year fell for the first time in 24 weeks. global news. 24 hours a day. powered by more than 2600 journalists and analysts in more than 120 countries. i'm remy inocencio. this is bloomberg. ♪ yvonne: thank you. the chinese president has warned of a negative turn in relations with the u.s. according to chinese state podcasters. -- broadcasters. this comes ahead of the g-20 in hamburg where he will meet

president trump. let's bring in a reporter. things are looking a little bit strange right now and the relationship. reporter: they're reporting that the chinese president did tell trump that ties are also affected by negative elements. the first announcement that things are not going so well between the two leaders of the two biggest economies in the world. we have seen a series of moves or events which have not pleased the chinese. on thee were reporting u.s. destroyer that is very close to a small island that is controlled by the chinese. ultimately the disputed south china sea area. there are sanctions put on a chinese bank. and also proposed $1.3 billion arms deal with time on. the report listing china among the world's human trafficking offenders. togetherngs all adding

as not being very friendly. any actions going on in taiwan are taken very seriously by china it is a very sensitive area. this comes after december's move where president trump excepted a phone call from the president of taiwan. even though they had a great the tone inpril, the mood is changing between china and the u.s. betty: we also have the president of china in moscow as well, what are weeks acting out of that? rosalind: at the same time as the relationship between the u.s. and china are not doing well, the chinese president is meeting with vladimir putin. these two seem to have a more normal licensure. things have not been so rocky. you could say that things are great. president putin's foreign affairs advisors described china russia relations is the best in history. we know that they will be meeting to discuss strategic

issues as well as business deals. definitely in one area, the deployment in south korea. both russia and china are against it. they've come out saying they are against strategic interests and that china and russia urges troops to be withdrawn. this is an area where they both stand strongly against what is been going on in south korea. we all know president trump does need china -- she has been asking for china to do more on reining in north korea. so far, the president has felt that china has not done enough. after a phone call yesterday, japan came out saying the u.s. and japan both agreed that china should do a lot more. all of these leaders will be at the big event, the g-20. president trump's first official anding with vladimir putin

shinzo abe to talk about north korea. it could be a very interesting time at the g-20. betty: thank you so much. haveng ahead, ipo's enjoyed a strong first half. we will see if that form can be maintained in the coming months. yvonne: up next, shinzo abe's tokyo for show might force and to rethink his policies. this is bloomberg. ♪

betty: this is "daybreak asia." i'm betty liu in new york. yvonne: i'm yvonne man in hong kong. shinzo abe might scrap divisive policies after his party's crushing defeat in the tokyo election over the weekend. let's get to the asia government reporter joining us from tokyo.

isabel, what is likely to be on the chopping lock for shinzo abe? isabel: the most controversial policy that he has in the plans ahead is to change the constitution. that is something that divides the electorate. a lot of people are against any kind of change. a lot of people do not want the change he is proposing. there are people that do support what he says. the question is, given the state of his public support, the lack of discipline in his party, whether he is prepared to push ahead with this idea which would take a lot of energy and might portray him as somebody less interested now in the economy than he perhaps should be. what does this mean for his other policies? how do local election results way into a national issue like changing the constitution? isabel: it was a terrible

bloodbath of a election, a symptom of how far his popularity has fallen. the party was maintained by him having solid support within the electorate who wanted to keep him as leader because he would lead them into a election victory. if he can't do that, do they still want him as leader, they might be more prepared to criticize him. that has been playing out in the last few weeks. another policy they have criticized as been the plan to form a trade agreement with the eu. many japanese lawmakers are supported by the agricultural sector and they want to protect cheesemakers and farmers from potential competitive exports from the eu. that is something that shinzo abe is hoping to seal in an outline agreement this week. be seen if you can do so or if it has any content. will see if there will be the details behind that to back it

up. isabel, thank you so much on day two of the fallout from the tokyo election. our next guest says these results are a huge wake-up call and they should see shinzo abe offer further economic stimulus to win the support. rodgers,s now is an the ceo of rogers investment advisors. ed, as an investor, you see the silver lining here despite the devastation it seems to have caused for abe's credibility? i think there will be a significant silver lining. i agree with all of isabel's comments. abe isminister they -- really sweating it right now. we view this election as a wake-up call for shinzo abe. thectural reform was with governor of tokyo is now promising to deliver know that

he has control of the tokyo metropolitan assembly. wake-up callg -- for shinzo abe to focus on the things that are important for the people of japan. focusing on the constitution changes are his issue, not the country's issue. betty: i thought it was interesting, but i don't want to gain,oo much into one-day but the markets themselves, look at the nikkei, they are rallying right now. that and really short-term movement here, it does not seem like investors are worried about the implications of this. i guess part of it has to do with the feeling that he will not be losing his job anytime soon at least? contrary, we interpret this as a huge signal. toher shinzo abe starts refocus his energies and political capital where it should be focus. or, voters are willing to show

him and the party the door. 2009, the lasto time this happened, they lost control of the tokyo metropolitan government and it presaged the takeover of the deep pj who held power for four years. all people have been concerned that shinzo abe's support is not as strong as it might seem. it has been strong because there's been no alternative. now that there is a credible alternative, we need to take this as an opportunity to focus on the economy and structural change to position japan for the 21st century. that is what she is promising to do. he will leave a response to the challenge, the voters are saying they wanted to respond to, or he won't. this is a democratic country. we will feel the fx at the ballot box. how do you think the governor pull it off?

she was a former tv personality. beat out this unrivaled candidate like shinzo abe who is never been beaten in the last four or five years. what this she actually represent overall for japan when it comes to politics? is this the start of a new regime change? ed: absolutely. is -- if you look at the last 40-50 years of japanese politics, it is quite often personality driven, not issue driven. she represents a new direction for japanese mothers to express their views. let's not forget they saw this in shinzo abe. he was made prime minister on a platform of creating positive change and structural change that positions japan to cope in the 21st century. printing money and

spending money is easy enough to do, structural change is hard. tellingnese people are people they are ready for change, you need to lead in the right direction. she has been very clear, she says i will revitalize tokyo as a global financial center, i will make government more efficient and transparent -- these are more concrete changes than the way japan has been run. the people are voting for these changes. i think she represents a new direction in japanese politics. yvonne: does the need to be a welcome change from doj as well -- boj? heard that the bank of japan needs to start talking about a tapering at the end of the year. ed: i think with regard to the bank of japan and the current

cabinet, i have been very vocal as a fan of shinzo abe's economics and the structural change issue. i think what you will see in the coming are changes at the cabinet levels to be expected in response to this defeat at the ballot box. we will see renewed focus on making sure the institutions -- the bank japan of japan, etc., will be focus on achieving structural change. this is their wake-up call. is that like shinzo abe is in it -- is in any danger of losing power. if they want to stay in power, they will have to be more proactive. that is the most important message from this election. create the structural change that you promised, it is very simple. betty: even if they do put in the structural changes that are badly needed, it is not going to be instant relief for the economy.

where does the japanese economy -- where does this leave the japanese economy in the meantime firstseems to be on this -- verge -- i wouldn't say lift off, but bright lights come you're seeing some of than japan? teetering along and five quarters of positive gdp growth is real. those are real numbers. what has not happened is the greatly forward. when we get to 4% gdp growth? is that possible in the modern economy? absolutely yes. what do you have to do, sponsor osborne heirship, make structural changes, change the banking system, change the way financial services work in japan. there are parts of this economy that are very inefficiently run at this point in time.

you need to unleash that. -- unleash ition through structural change. that is what this election was truly about, a mandate for change. i've lived in japan for 30 years. the culture is entrenched. people do not want to go in a new direction. to a certain extent that is true, but the voters are telling us they are ready for a change. trillion gdp,s $1 larger than the entire country of holland, what a great place to make those changes. if you can change tokyo, you can change japan. if you can do that, you can become prime minister. yvonne: always good to have you. the ceo of rogers investment advisors. you can get a roundup of today's stories in daybreak. go to the terminal. it is also available on the smartphone bloomberg anywhere app.

make sure to check it out. this is bloomberg. ♪

yvonne: this is "daybreak asia." check of thek latest business flash headlines at this hour. ubs is streamlining its wealth management business in europe and will expand the roles of senior executives in much of the region. cross-border operations will be combined with domestic businesses to reduce the number of offshore booking centers from switzerland, germany, and the u.k. yvonne: former berkeley executives -- barclays executives said they will deny conspiracy to commit fraud. othersmer ceo and three

are the most senior u.k. bank executives to face criminal charges from the financial crisis. it relates to loans made available to qatar in a deal that raised $16 billion. arey: mexican authorities widening on investigation into the country's $400 million bond market. a securities regulator is examining whether banks, brokers, and pension funds colluded to suppress prices for government securities. they had joined antitrust authorities to request records. court haschinese frozen georgia million dollars of assets longing to an internet media giant. the move came after china merchants bank got an order on june 26. he is now struggling with a cash freeze after a foray into cars

and smartphones. shares of japanese automakers are rising in tokyo after the u.s. sales numbers. they beat estimates, suvs and trucks shore up the market. ramy inocencio is here with the details on the auto sales numbers. up i wasn i was waking looking at all these numbers. i would have expected they would have all missed expectations are at that has been the general sentiment over the last five months of decline. but in fact, they beat most estimates for the u.s. automakers as well as for japanese automakers. going through some of the numbers, toyota, honda, and nissan all beat. toyota coming in with a 2.1% change. the estimate was for a jump of 1.2%. both a growth year, but double what was expected. with honda, it was 0.8% in terms of growth. 0.5.stimate was

nissan, the estimate was from -2%, a contraction, to a positive 2% for the company. all of the shares we will be watching in today's trading are interesting to see what would happen. interesting for nissan, it has been in the negative, down a quarter of a percent, but all these are now on the rise. right now looking at u.s. auto sales, hop into the bloomberg terminal. this is g #the tv 919. what i want you to know is that ever since the start of this year, where have the numbers been going -- down. they continue to go down. 3% in terms of a fall in june. the annualized selling rate slipping to 16.5 million vehicles. with that said, ford, fiat chrysler, and toyota all beat estimates. off the highs of course.

talking about tesla in particular, sales took a hit because of a battery shortage. the that be a problem for model three sedan production that will start on friday? ramy: looking at the share price it looks like it might be the ond -- case, it is down 2.5% monday. this might be the bottleneck when it comes to pushing new tesla models out. for the second quarter, they came in at 22,000 cars that were shipped. that is already notably down 3000 cars from the first quarter. that could way on the share price when we start trading on wednesday. also note for the first half brought it also towards the lower end of the estimate, between 47-50,000. yvonne: rainey innocencio a wrapup of u.s. car sales. still ahead, readings on global manufacturing gauges to talk about.

but i change how central banks think about their policies. we will have analysis coming up. this is bloomberg. ♪

quite blue ing singapore. on yvonne man in hong kong. betty: looks gorgeous. i'm betty liu in new york. you are watching "daybreak asia." ramy: china has told the u.s. that relations between the two powers are being affected by negative elements. the chinese president's comment came in a phone call with president trump and it was reported by state media. that follows u.s. naval patrol close to a chinese controlled island. tensions have risen ever since the chinese president's visit to the united states. they will meet this week in the g-20 in hamburg.

japan and the european union say they are close to a free-trade deal which will bring together to regions that a, for more than a quarter of the world's economic output. the trade commissioner told reporters the basic deal is in place. announcement could come on thursday. japan must to remove levies on auto exports, the eu wants terror free access to products. suvs and trucks continue to shore up the u.s. auto market. if things little chance of sales reaching last year's record. best in like one of the history. on a calls -- automakers saw better numbers than expected. pushing gm and ford shares higher. tesla delivered just enough cars in the second quarter to meet its first half sales. production was held back by a temporary shortage of batteries. suvs,pped 22,000 cars and

that is compared with 25,000 in the first quarter. tesla also says the new model three will go into production this friday. the aim of trading 20,000 a month by the end of this year. global news. 24 hours a day. powered by more than 2600 journalists and analysts in more than 120 countries. i'm remy inocencio. this is bloomberg. ♪ let's look at how markets are playing out in the asia-pacific. stocks are climbing with australia being up 1.3 percent. we saw a mixed picture on wall street with a shortened session next to the fourth of july holiday. overall, it was decent due to the been boeing's. yields jumping again and the dollar took a bounce as well. let's get the latest. adam: good morning. we are seeing a decent rebound in banks and some of the energy stocks.

a couple of interesting movers as well. up stemming from reports from the australian financial review that they are thinking about laying the groundwork to have another listed investment vehicle on the asx by the end of this year. it looks like it will be some version of a global equities on a which we do very well on the australian market. they have confirmed that saying that something is in the works, but still unclear on the details. as i said, banks doing very well. commonwealth bank shares continuing that rally on thursday. pushing higher. things have been under a lot of pressure recently. getting a bit more of that rally. financials across the world are improving somewhat. australia is seeing a little bit of that benefit coming through today. betty: the aussie dollar has been pretty resilient, strengthening going into today's rba decision.

is there going to be a decision bulls? aussie bowls -- at how well the aussie dollar has been doing. the 1.5% and the rally we have been seeing in the aussie in the recent weeks. the trade weighted version we are showing you hear. this is all in the context of central bankers tilting more towards hawkish commentary in the last couple of weeks. the big question going into the rba today is whether they follow theirnd change any of language with leans more away from the neutral stance or more into the camp of the hawkish till, as we heard from the boe and the ecb in the last few weeks. it feels like -- and traders are

saying -- the risk is on the downside going into this meeting. any tilt away from the neutral stance from the rba and we might see the aussie rallying even further. my view is that will probably not see that today. it will be a closely scrutinize policy statement when we get that. betty: we will be watching for that. thank you so much. u.s. factories powering i at their fastest rate in three years. manufacturing gauges moving higher. is this going to fuel central banks determination to tighten monetary policy? kathleen hays is here with more. what is going on with manufacturing? kathleen: it is getting stronger. you see the headline number, it has jumped to 57.8, 2.5 points in the month of june, the

sharpest in three years. chart,ook at a bloomberg #973. what you see here is the turquoise line, that is the isn index. look at it jumping up. this white line is a broader number, the investor production number put together by the federal reserve. of people of a survey come what they are seeing purchasing in their own companies. bottom line, the trend continues to be higher for both of those. what is driving isn? here are the highlights from earlier today. moving well above 60. the employment gauge at its highest level since 2011. 15 of 18 industries showing growth. not just the u.s., a global move. the hours ago we saw chinese index went back above 50. japan's survey of largest

manufacturers saw a big boost in optimism. we saw the euro area pmi rising to 57.3 in june. the u.k. index did pull down, but even there it was still above 50. any number of a 50 still equals growth, so still positive. we have to add australia to the list. theuple of days ago, australian industrial performance index shows more growth. so muchwe always talk about inflation and wages, but when it comes to manufacturing, how much do central banks and janet yellen pay attention to these numbers? the firstthe isn is data of the month because it covers manufacturing and higher countries. now the fed is covering the jobs report on friday. the cannot jim is inflation. let's pull up another chart so we can look at inflation in the u.s.. #77.

you can look at the same kind of chart for other countries come what you see is inflation is rolling over. for pce is moving lower. the consumer price index is moving in the same direction. earlier we were talking to someone from mainstay capital management, he said even with stronger pmi's around the world, this continues to be an issue. >> we are getting stronger numbers in pmi. china's pmi, our pmi, all very strong. here, for itumber to be the strongest extraordinary. we are not seeing inflation. inflation is lower now than it was a year ago. the numbers are convinced that they will move to higher rates particularly the united states. yeteuro area, it is not self-sustaining. we have to be patient with that policy. reuters putting out a story

saying some ecb officials are more cautious on hitting any move away from their whether it is rates or the bond purchases the turbulence we saw in currencies and bond markets last week. if we move on to japan, inflation is still far from the target. people know that the move up in the survey. has move higher before the bank of japan can move something into action. yvonne: thank you. coming up next, why chinese companies hold off on listing in the mainland in the second half of the year. their outlook coming up next. this is bloomberg. ♪

betty: this is "daybreak asia." hong kong's ipo market

was active in the first half. there are warnings now that the global growth, rising geopolitical tensions, and brexit might put a dampener on all things. great to have you here. -- robust activity in hong kong for the first half. we saw more new listings and the value of these listings grew quite a bit. is any way we can keep this momentum going? in hong kong we have 72 ipo cases. they raised a total of 6.9 billion. compared to others, the numbers represent an 80% increase. we expect this to continue on. you have a very strong pipeline. there are over 130 companies that have already submitted

applications. while we are talking, 30 companies are in the fundraising stage. they will be listed in hong kong within the coming few weeks. in 117, there will be 160, a record-breaking year. yvonne: you said in the second half we might see a bit of a peter and here because of the market volatility -- will it be a cause an ipo activity or will we see a drawdown? benson: there will not be a major drawback, but what we hope to see is that there will be large-scale ipo coming to hong kong. alibaba?ike the next theon: we have to wait for consultation papers and get it done. the next year or the year after we could see something high tag

and other companies coming over to hong kong. and the second half, if we are able to attract for the entire 2017, when it 60 companies listing in hong kong, it will be a record-breaking year for hong kong. whether chinaious shared inclusion in the msci is rumored about a couple of weeks ago. how is that additive to the ipo outlook? benson: it is a positive thing. let's go back to years ago exactly this time of the year, we had the asian market crash followed by the suspension in the ipo. then there was a market reforms. 247 ipor there were with in the first half total fundraising of 18.5 billion u.s.. we believe this trend will

continue, but another point we is 24/7 companies listed on asia, half of it has been listed in the first quarter. that is very unique because if the chinaabout market, right in the middle of the first quarter we had the chinese new year. so over half the companies are being listed there. we see ity and june, slightly slowing down in the approval process. for the entire year, we believe there will be drench a 20-350 fundraisingth total . it might go all the way up to 32-37,000,000,000 u.s. betty: that is a large number. i'm also curious about the tech

outlook. i know yvonne that's a now little bit. the greater bay development that i heard about when i was there. how much is that going to -- at what point could that spill over into listings or more business for the hong kong exchange? benson: i think the bay area sign,ork was the first but we don't for see it bringing a lot of impact for the second half. for the recent developments in , for -- we welcome the entire concept framework. the most important reason is if you think about the first half of dominating the ipo market in the world, one third of the fundraising is from that company. if you think about nasdaq in

terms of numbers, 40% is from the pharmaceutical and large farm sector. these are the industries that hong kong is latching on. so with consultation papers, hopefully in the future we will be able to attract these companies. the paper you're talking about is a new exchange they are proposing that would allow firms that don't necessarily have a profit yet to start listing. it is focusing on the revenue model. who do you think that is going to attract? in would they want to list hong kong versus the nasdaq? benson: sometimes when we face clients, they as is where they should list their ipo. ask companies to go ipo in the countries where you are active. your investors are there, your customers are there, and they

all know you. sometimes we see examples where the companies go elsewhere, but the trade rewards are not great. that markets is not have the insurance of those companies. yvonne: so is this seen as a relaxation of rules that are designed to detect shareholders? timesthis a sign of the that hong kong cannot miss out on the next alibaba again? benson: this is more of the latter case. now we're talking about high-tech economies. set manyave had was years ago. i think it is time -- i wouldn't say for sure we have to go, but it is time for the market. the market too, and have insights so regulators will be able to set the appropriate limits. some ipos ine had

new york. i'm curious given the volatility that we have seen in tech shares and the selloff, might that also andeneficial for hong kong other overseas stock exchanges when you see this kind of volatility in the u.s. market? benson: definitely. what the hong kong stock exchange is trying to attract are focusing on high-tech and new economies from china. hopefully after the passing of the consultation. we will see new groups coming out soon. betty: thank you so much. the entrepreneur group leader at pwc hong kong. one feature on the bloomberg we want to bring to your attention is the interactive tv function. you can watch us live and see previous interviews and dive

into any of the securities are bloomberg functions that we talk about. and, you can become part of the conversation by sending us instant messages during our shows. this is for bloomberg six fibers only. check it out. this is bloomberg. ♪

yvonne: this is "daybreak asia." betty: a quick check of the

latest business flash headlines. japan's three biggest shippers are expected to establish a new combined container operation this week after missing a july 1 target because of approval delays. all the necessary international permits have not been obtained for a combination of the three companies. the venture is going to create the world's six largest carrier. it is set to launch in april. yvonne: a japanese refiner is plunging today on a potential $1.2 billion share sale. broughtible merger shares down 13%. dealy different steel -- over at the other company. the stock jumped 1.5%. there facing opposition from the founding family which controls 34% of the stock. a luxury goods retailer is selling shanghai came saying

that a chinese name does not have the cachet of a french or italian one. it struggled to gain the broader following. researcher and founder of tang ranked 10th among female buyers. yvonne: apple is said to be working on technology to allow users to unlock iphones using facial recognition and set of fingerprints. the new phone goes on sale later on this year. controlsng tested that login, digital payment, and the opening of some applications by scanning a user's face. they're testing the scanning which might not be ready at launch time. internet users in china are going to find it harder to get around the government's great firewall after a popular

provider was forced to shut down. our asian technology editor has been tracking this. for those of us who do not know bp and and the technicalities, what happened here? week, one of the more popular services in china sent a notice to its users morning them that they would shutdown by july 1. they were offering refunds. -- they said basically the shutdown had been ordered from above by government authorities. yvonne: it is something that you use when you go to china because you have to get around the great firewall. who uses the vpn the most? edwin: a lot of corporations in china need unfettered access to the internet. corporations use it. government agencies use it. geos use it. of course, a lot of people use

it. they use it for entertainment purposes, get around the firewall. betty: private entertainment purposes. what is the political context of this kind down, edwin? edwin: we are approaching a generational transfer of power towards the end of the year. the party congress. usually, every time there is a transfer of power, the authorities tend to crack down on the internet. yet seen crackdowns on live streaming. yet seen tightening on certain types of content. an aspect of that. on the flip side, it could very be that green vpn step outside the bounds. but there's been a lot of speculation that vpns are the for area -- the next target

a tightening. media: i saw social buzzing about this. that wrapup on that story. that is almost it for us on "daybreak asia." let's look at what's coming up. here,pecting any changes but commenting to be divided on the future of the rba. rishad: this is it at the end of the day, on the one hand house prices in sydney and melbourne going through the roof, at the same time on economy is chugging along and could do with a interest rate cut more than anything else. we will discuss this with shane oliver. he will be giving us a tour in australian retail sales and 35 minutes. in 3.5 hours, the rba decision is taking place. exchange, very much

in focus at the moment. looks like the deutsche merger is out the window. what we do have is brexit looming over it. the group talking to for thet the prospects clearing that will happen in the future under brexit. it is all up in the air right now. that is what might happen next. betty: all right. looking forward to it. he will be straight ahead for us with haidi lun on bloomberg markets. that is it for "daybreak asia." have a good july 4 here. standby for bloomberg markets. this is bloomberg. ♪

♪ haidi: it is another :00 a.m. in hong+++