♪ yvonne: asia pacific stocks may pare a back to back weekly advance as the china-trump inquiry pushes the dollar down. >> wall street is ending higher with the nasdaq at a record. rising about tapering. yvonne: microsoft turnaround is back as cloud growth marches on. >> frankfurt is the brexit winner. we are talking the latest to

confirm that. ,"onne: this is "daybreak asia live from bloomberg's asian headquarters in hong kong. ramy: betty is out today, i am david ingles. this is the first major market open here in the asian pacific. lots on the play. talk the ecb.e to it seemed like it was all about inflation the first time around. it is just not there. we look ahead to mario draghi and taper talk. there is talk about when auto maxx will stop -- start. were expecting to go into this trading session with the stark contrast between the boj and ecb. the adjustment you mentioned we saw in the bond markets and currency markets. and the euro.s

the dollar is stronger. the euro back to levels of what -- yvonne: 23 month highs, remarkable. the whipsaw, we have a chart. i have to show it off. twoentioned about those year highs for the euro. we saw whipsaw after the statement came out. it went lower and ran back up as soon as mario draghi started speaking. as much as he wanted to keep that the discussion vague on the timing of taper, the euro bulls latched on. you look at this chart and see the euro in the white. the blue line is the spread between the u.s. 10 year and german 10-year bund spread. these two have moved in tandem most of the last year. the euro gains of late are out of sync from that rate differential. dave, onyou wonder,

whether the euro bulls are taking it too far? now the euro 1.16. the bigger euro-dollar playing a big part in politics. david: the dollar moves lower, that is a clear-cut trend. you have an incremental strain in the euro overnight. have a look at the close overnight. the s&p 500 is closing off a few points from the top. the telcos are very much in focus. microsoft earnings we will be fleshing out in a few moments. have a look at the nasdaq. last i checked that was the ninth straight day of gains. yvonne: a record. david: longest streak, two and a half years. yvonne: that is the case, these tech earnings quite strong throughout the week. take a look at equity futures in asia. day aftering a red the remarkable nine day winning streak in the msci.

we are down in the europol, down 0.25%. kiwi, .7404. rba's neutral, nominal interest rate. i am watching the bank and energy. brent over $50, shying away from that level toward the close. the aussie dollar has been the clear mover, roughly at the same levels this time yesterday. yvonne: look at how things are looking throughout the week. it may take a while to hit that panel. governor's to speak later on today. we will see if he can continue this hawkish tilt. japan, we are seeing dollar-yen 111.89. that is a fresh july low.

not doing enough to bring down the yen despite pushing back that deadline for 2% inflation yesterday for that boj and maintaining yield curve control. equity futures heading lower today, as well. here is first word news with courtney collins. courtney: the imf has agreed to a new conditional bailout for greece, bringing an end to two years of speculation whether it would participate in a rescue program. a new loanproved worth as much as $1.8 billion. it grants a seal of approval demanded by many of greece's euro-area creditors. res --ends on counti countries providing debt relief. we are told the governing council may discuss tapering at its next meeting in september, but is unlikely to reach a conclusion than.

bloomberg predicted the bank would use its september gathering to signal a reduction in the case of qe. >> a very substantial degree of monetary accommodations are still needed for underlying inflation pressures to gradually build up in support headline inflation developments in the medium-term. courtney: the second round of brexit talks wound up with the key divisions on display. told the u.k.er team to come back next month with more details. they shrugged off david davis' suggestion that flex ability is needed on both sides. they talked about flexibility and clarification. >> the idea that by the back end of the next year, 2018, we would have signed off on the terms of brexit for the european union

and put into play alternative replacement trade arrangements that will govern goods and services for the future, is completely unrealistic. find for exxon mobil what are called egregious sanctions when rex tillerson was ceo. they broke ukraine-related sanctions by signing eight documents on oil and gas ofjects in russia in may 2016. they said it was known to be named in the sanctions. exxon must pay $2 million. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. yvonne: courtney, thank you. washington news broke the market. u.s. special counsel robert mueller is said to be expanding his russian investigations to include businesses of donald trump and his associates. david: the plot thickens.

let's get more on the story. we are joined from washington by joe. for viewers just waking up across the asia-pacific, what are the two points they need to know about developments? --: special counsel are council mueller has a mandate. any link between trump trade officials in russian officials. there are primarily three areas of inquiry that are known at this point. those are some property sales involving condos, apartments, and things like that, to russians. the miss universe pageant in 2013 that was held in moscow, and a particular trump development in new york that company.a capital they are coming under scrutiny. in addition, the special

counsel's office has taken over the investigation into possible money-laundering involving the former campaign manager, paul manafort. it is interesting because if you take a look at the transactions you mentioned, dating back close to 10 years ago, do we know exactly what special counsel robert mueller is looking for in these transactions? point, it is a collection of information. they are looking for possible money-laundering. i would suspect. and whether there were any over payingsactions for properties or anything that would look suspicious. he is casting a fairly wide net. i do not know that he has it narrowed down to any specific events, but those are the things they are collecting now. yvonne: thank you so much, live

it with of the latest bloomberg skill. the s&p 500 climbed to a second successive record. here for look at the key movers is su keenan, joining us from new york. , the trump story was effect. if you look at the details joe gave us it hit the market hard at the start. look at the close, hard to tell there were major gyrations in the market. let's go into the bloomberg, take a look at the graph intraday chart and see if you can tell where news of a broadening investigation into president trump and his cohorts -- if you have a, take a look. it was 10:00 when the news broke and you saw a sharp drop. i take it we do not have the chart, so i will move on. wait for it, as we say here. we have a qualcomm down 5%.

the earnings disappointments are hitting tech companies. home depot down in a big way. an amazon scare, amazon teaming up with sears to sell can more -- kenmore appliances. companies down, wall street thought it was overdone. a strong earnings report. we have that intraday chart, i will take a peek. because it was a big drop off the top of the market. what we're looking at here is, what overvaluation? they look relatively cheap compared to u.s. treasuries. david: su, another stock in focus, microsoft had numbers. the stock moving higher last

night in late trade. give us more details on these numbers. su: it was a really strong performance and will set up a nice for friday trading for tech, for microsoft. they really blew it out. cloud sales almost doubled. rises 43%. in terms of the turnaround for the company, if we have video -- some of the big headlines, the company really performing well. that is what many of the investors want to know, how successful is he at the turnaround, the underlying trends, the shift the clouds, and what it means on the legacy? they are likely to be in motion for a long period of time. that is the take away. we have a five-year price chart up 19% this year, but up

dramatically over the past couple years. we were at an all-time high almost every day this week. that stock is up and away the undercurrent. this is a dark spot for microsoft. but one of the bright spots, but 23 cent per share bump from a tax write-off related to the business.artphone they also got a significant tax rate benefit that boosted profitability by 23 cents a share. a good shot in the arm for the stock and a positive outlook for the company. david: fingers crossed, hopefully these numbers do justify these valuations. plenty more on "daybreak asia." we will look at the fx markets. and the latest central bank announcements with the head of currencies and rate at barclays. yvonne: later on on bloomberg

markets, our chat with the at 11:40 hongrman kong time. david: before that conversation, we will look at the bond markets here, implications of what we have from central banks overnight with wells fargo. this is bloomberg. ♪

david: we are counting down to the open of asia's first major market. japan futures not looking good. 29 degrees in tokyo. the markets have been on the hotter side. very good this week, looking at an open above 20,000. this is "daybreak asia," i am david in glass -- ingles.

yvonne: and i am yvonne man. bonds rallied at -- as the ecb subduedt focused on inflation pressures in the euro zone and the need for ongoing policy support. let's dig deeper with a brian of strategy ind st. louis. great to have you. interesting to see this divergence of where the euro went, and bonds. what stuck out to you the most about the ecb statement and the press conference that followed? brian: when you look at all the central banks, the common theme even though they are at different points here, they are all delaying or pushing out, or slow talking their next move. whether it is the boj, ecb or the messages here

across the globe, -- message is across the globe, stop and wait before taking the next step. overnight, we had that horrible, horrible option of 10 year tips. is there more to inflation not being there, than what the results adjusted? at two.ay below two or the last time we saw that level was at the height of the global financial crisis. brian: the bond market is telling us the bond market is concerned about inflation. , but believeing it it is transitory. they are right to be a little more concerned. whenever you look at the longer-term indications with the market pricing inflation, expectations are just not there.

more often than not, the bond market tends to get things right. yvonne: is that story going to change? mario draghi is talking about autumn. when you have core inflation at one point at 3%, how much will that change by the time we get to september or october? brian: i think it will be difficult. i do not see the inflation pressures anywhere across the globe. i wonder if some of these thoughts ares' perhaps more hope than reality. you should be seeing -- just look at the u.s., where the economy is a bit in front of what you see in the ecb. here in the u.s., where is the inflation? unemployment is low, the growth is better. not great, but better than you see in the eurozone. there is still a lack of

inflation. i do not know where it is coming from. but it will be more of a problem, more difficult to find then the central -- than the central banks wish. david: how long should i build my portfolio? brian: i have no problem adding duration to portfolios. i see no scenario where we worry about long-term rates moving materially higher. they are not cheap, by any stretch. it would not be a call that it is cheap. i do not see where the pressures are coming from. not only in the near term, but systemically, over the long-term, there are factors at play with demographics and debt and other factors that should limit interest rate concerns on the long end. i can see the central banks getting ahead of where they should be in terms of, at least

in the u.s., continuing to very slowly raise the short end. movingt see the long end much, i see the curve flattening in the year ahead. yvonne: we saw in terms of peripherals and bunds, tightening overnight. i have a chart to show our viewers. it shows the net change when it comes to basis points in those bunds. italy remains behind in all this. you mention this before when spreads of not narrowed as much. uncertainty when it comes to its own elections this year. do you see this as an opportunity to buy? brian: no. i see those spreads is relatively tight. thissaid, we're kind of in place where if the central banks keep policies in place, rates state extremely low. investors are going to continue to be incentivized and take

risk. as long as everything else remains calm and we grow, and there are no major hiccups in the growth picture. i do think growth prices can stay relatively expensive. i do not think you are getting a good risk-reward trade-off for those. if you go into those types of positions for the yield, relative yield, i think it is a play where you might have to be number -- nimble. you could get whipsawed if something different happens. david: the dollar is super weak. monetary conditions are becoming too loose. brian: i do not think so, not at this point. i think it is going to take time for that to filter through the u.s. economy.

i do not think the fed is overly concerned about this at this point. i would say a pass for now. if the dollar continues to itken, we get above 1.20, may be more of a concern. i do not think the fed should be in a hurry, in any case. rehling, wells fargo fixed income strategy. yvonne: building an internet services powerhouse. this is bloomberg. ♪

david: you are watching bloomberg, "daybreak asia," i am david ingles. yvonne: i am yvonne man. i just rose 9%, a big push into

the cloud really beginning to pay off. david: let's get details on this. cory johnson, nice to see you. what did we learn from this set of numbers? cory: microsoft is really managing this transition from a ship it in a box software company reliance upon updates of windows and office, to a cloud computing software company. still focusing on same kind of customers. some of them are billed very difference -- different and offered in a different fashion, and they are managing it quite well. three months ago, the biggest blemish on microsoft's -- how is it this time around? a product that tries to show off what it software can

do, more than being a really important business and profit them. for this is fundamentally a software company, still. the surface is cool and doing alright given what it is and the focus of the company. them. this is fundamentallythe real tm these results is that the cloud business is growing. amazing numbers. they are growing at 96% in constant currency. that is stunning from this company. it shows you a real acceleration of what is already a giant business for them. david: cory, nice to see you. cory johnson, our editor at large, breaking down the earnings of microsoft. they are trading at 28 times earnings, very good numbers. transitionan't quite to the surface, i do not know what it is. i was tempted to get one.

lots more coming up in the program. ,he inflation dream of the boj is it slipping further and further and fur yvonne: it is friday, looking to

be a great way to start the weekend. 7:30 a.m. friday in hong kong. half an hour away from asia's first major market open. david: bright skies, which means it will start raining in a few minutes. yvonne: do not jinx it. david: still happy hour some places. a very good thursday evening and good morning. i am david ingles. yvonne: i am yvonne man, you are watching "daybreak asia." courtney: special counsel investigating alleged ties between the trump campaign and russia is said to be widening to include business transactions.

fbi teams are looking at russian purchases of apartments and trump buildings and the president's involvement in a controversial development in new york with russian associates, as well as the 2013 miss universe pageant in moscow. president trump can claim a win to redraw the trade map. the u.s. now can ship rice to china for the first time after the two sides finalize trade protocol. this comes after weeks when china opened for the first time in more than a decade. they are increasing imports of american natural gas. china's deleveraging campaign is taking on its biggest target yet, the public sector itself. policymakers have focused on my ability of banks and private sector companies. thatdent xi made it clear loaded, state-owned companies must stop borrowing. he said china should hold

officials accountable for debt. interest rate its unchanged again as predicted by all economists we surveyed. on benchmark rate has been hold at 7.4% since october. inflation has picked up in southeast asia's biggest economy, but remains within their 3% to 5% target. it is keeping a lid on price pressure. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. yvonne: we are counting down to some of the major market opened in the asia-pacific. let's get the latest from adam haigh. he joins us live it from sydney. good morning to you. with the markets trading at near west third -- records, fears for fund managers. but you are seeing some silver linings when it comes to small caps?

yeah. one of the things when we hit record highs day after day for u.s. equities, you have to do more work. fund managers have to scrutinize more to find pockets of value. one area there may be space for gains is u.s. small caps. dive into the bloomberg terminal, this chart. it shows you how small caps have struggled over the last year. the fact that the gaps between the best-performing and worst-performing in u.s. small caps is really opening up. the gap between the best and worst is almost 13 percentage points, which is way higher than the average over the last 15 years. this shows you there may be room for more gains as these pockets of the value open up and get

taken advantage of and people buy into these kinds of spaces, given it is getting harder and harder as they push up to find real value. of theone of the areas markets where we see valuations really stretch and i think a lot would agree, is india. the bulls have been rending -- running amok in the mumbai -- in mumbai. perhaps some optimism on the rupee? what is going on there? adam: you are right come on the indian stock story. every man and his dog seems to be bullish on indian equities. -- interesting chart here. this shows you the options traders on the currency come on the rupee, they are getting into a bullish camp, as well. volatility the rupee

having come off to record lows. this is in the context of record low inflation, the r.b.i. doing a good job of managing inflation. the sense now is that even with this gradual unwind of stimulus from central banks, the rupee is in a good position to withstand volatility. very good fundamentals back home in india. the options market with at the foreign exchange traders showing this is a place to get bullish positions and hold on to those. david: adam, nice to see you. adam haigh joining us live out of sydney. central-bank divergence overshadowing markets. the boj fights its lonely 2% battle. at the otherecb end of the spectrum looking at the change of tack. -- tech. more oflet's look for

this with kathleen hays, where she covered the boj. we heard from governor kuroda, he held course, but pushed back the goalpost when they would hit inflation. what was your take? kathleen: my take is that andrnor corroded -- kuroda the team at the boj is clear, they are in it for the long haul. in the more reason to dig and continue to fight the reflation fight. i want to preface this whole discussion around the view of questioning this theme of central-bank diversion. not because of the boj, they are the side we look at when we want to say there is diversions -- divergence. a lot of questions for governor kuroda about pushing the inflation target out to 2020.

he said 2% is a necessary target. he made it so clear, you have to understand, japan is fighting a 20 year deflation legacy. let's hear what he said. >> i would like to point out, there is strong deflationary mindset among japanese corporate and households, compared to the u.s. they remain cautious about raising prices, with wage growth. i do not believe it will last long. the moment toward reaching the 2% inflation target is firmly maintained. kathleen: this is an important question for governor corroded -- kuroda. let's look at this bloomberg chart. including the years that over,or kuroda took profits have looked good. is the wages, that change in wages and japan. also at the press conference, was pressed on

that question, what can you do, can you ease more? he said we could ease more, so he does not rule that out. is, aeresting point here lot of asian nations. they are trying to the leverage. rather than decide on weakness, you can say it is a sign of determination and strength in the boj. some say it may turn out to be futile, but that is what they are doing. david: they will need determination. we were supposed to hit the target by now. the second piece is the ecb. draghi, is he sitting pretty now? insiden: so many stories the ecb, they are getting ready, they want to signal. --io draghi sounds like me

sounds like, "me, taper?" the ecb wants to see is a tightening of financial conditions. here is what he said at his press conference. draghi: we only have to wait for wages and prices to follow course to our objective, objective.ard our the last thing the governing council may want is actually an unwanted tightening of the financing conditions. objective. the last thing the governing council mayit either slows downs process, or may even jeopardize. when we hear the stories about the ecb getting this paper started, there is also the bundesbank within the ecb. is that the voice we are hearing in those kinds of stories?

we are waiting to hear mario draghi speak in jackson hall. he seemed to signal the ecb would talk about this question when they taper to october. too early for him to deliver the clarifying speech markets want to hear. david: that leaves the fed all alone in the corner. kathleen: starting to look that way, david. the fed made it clear, we want to normalize the balance sheet. yes, inflation has been low. we are doubtful, but want to forge ahead. note out today, no change from the fed. they will not see anything from the balance sheet. he says they have not done enough to prepare markets. --means usn global font u.s.l bond markets -- the and global bond markets.

the jp morgan not looking for a big change. yvonne: great work this week in tokyo. let's talk about the australian pushingnd -- market, centcloser to the 80 u.s. mark. let's get the latest from paul allen in sydney. we are expected to hear the governor next week. what will be be watching out for ? paul: the aussie dollar has been interesting, we touched nearly $.80. what really touched it off was the rba minutes on tuesday where the bank was talking about the pointl cash rate of three 5%, some distance above the 1.5% we have now. two speeches today, one from the deputy governor. and in a couple hours time,

another from the assistant governor bullock in melbourne. it has been to reinforce or push back against these arguments that the rba is looking at tightening, judging by what is going on with the dollar. enough currency traders seem to think that is going to happen. it'll be interesting to see the rba draw on that currency again. happent time we saw that was under graeme stephens, when the dollar was lower than it is now. it'll be very closely watch. very quickly come on let's have a look at the iron or price. that is not letting up either, is it? paul: no, it won't lie down. we saw iron ore prices get the $70 before pulling back. it has been a volatile year. everyone still expects that the pullback.

outlook a fading demand as transitory. one bank says the steel market should soften. what we seeing is cyclical and seasonal. goldman has a price forecast in the 40's for iron ore next year. some see it in the 50's. it is taking a long time for reality to catch up to these dire predictions. david: they should be banned from australia. [laughter] yvonne: more on that later. goldman sachs sees the green shoots in the japanese economy. this is bloomberg. ♪

yvonne: we are counting you down

to asia's first major market opens as morning. japan futures up 30 points today. seeing a bit of dollar weakness against the dollar yen, holding at 112 or so. david: roughly. yvonne: i am yvonne man. david: and i am david ingles here in hong kong. we talked to goldman sachs on thursday. there are signs in the japanese economy that inflation is about to creep in. bank's chief of japan says it is likely the boj will persist with its current policy framework given ambitious targets. >> the top of mind question for many investors we speak with is, what is the endgame for this so-called yield curve control,

quantitative framing easement and asset purchase program? on, post histay expiration of next april? the number one question is, how much longer can the bank of japan sustain the current program. for what it is worth, our view is, because they set their inflation target quite high and ambitious at 2%, it is quite likely they will persist with framework, including yield curve control and asset purchases they are currently executing. having said that, we are of the view there are some signs of inflation beginning to creep through. some green shoots, wages are picking up, inflation expectations creeping higher area while not the 2% the boj is aiming for, we will see

increasing signs of inflation in the next six to 12 months down the road. the time of for their price targets our goals, is the boj effectively acknowledging they need to continue easing for many years to come? >> it would appear so. we do not know exactly how long that will be. a lot will ride on whether kuroda leaves next spring. postponethat they did of their timeline for reaching inflation target levels, the market is interpreting that as more for longer. we are seeing a divergence of central banks. thefed and boj on one hand, bank of japan will continue this aggressive program for the for siebel future. >> i want to bring up a chart here. nominal gdp.

we have a robert shiller in the next hour. he does acclaimed work with janet yellen and others on the animal spirit. nominal gdp, here is the u.s. hurdle rate of 4%. nominal has failed, rolled over. how critical is it that nominal gdp is rolled over? it is super critical because at the end of the day, corporate managers think in nominal terms as opposed to real terms. clearly, there has been an initial jumpstart to getting the economy, getting growth to expand. but more needs to be done. the concern of the markets is, that the market currently in japan may be distracted by other issues and needs to refocus its attention on the economy, trying

to get those animal spirits to revive. the corporate sector is in fine shape. we have a record profit margins, record cash balances. it is not as if there is no cash around. you bring up the right point, where is the trigger, the catalyst to get corporate managers to deploy that cash to the economy through capex and other means? again, it is not as if everything is in deflation and back to five years ago. we are in a much better place. but morning's be done to make sure the cycle is sustained. david: she was speaking on bloomberg surveillance earlier. yvonne: live out of greece, the imf agreed to this new conditional bailout for greece, approved for a $1.8 billion conditional loan. this is ending two years of

speculation on whether they would be participating with of this rescue program. david: it is almost a stamp of approval. it just to verify they have agreed, in principle, contingent on support from other euro zone economies. frome getting comments lagarde. it is also on the imf website. a greek deal would only be effective if it meets -- makes the debt sustainable and faces more structural reforms. it urges greece to open up its products and services market. it comes back to rehabilitating the economy and financial sector of the economy. $1.8 billion. yvonne: given how this is just a point,onal deal at this this issue could arise again when we have german elections in the fall.

there is the question whether the greece will receive -- whether greece will receive funds from the imf. in a roundup of stories daybreak. subscribers go to dayb . it is also available on your phone or at. find the assets you care about. this is bloomberg. ♪

yvonne: this is "daybreak asia," i am yvonne man. david: and i am david ingles. we are both here in hong kong. earnings out of india, reliant industries, jumping 8.6% from a year back, powered by chemicals and refining. net income rising $1.3 billion. sales soar at 20%.

another has invested billion in southwest, sneering almost 10% in the country. but so far, not delivering substantial revenue growth. yvonne: dennis williams says management and nissan's plant threatened to close it down as employees want to join a union. there is intimidation and threats. a spokesperson denied williams' claims, calling allegations of intimidation totally false. david: under scrutiny, the hna group caught up in another inquiry into bankruptcy of a company they had invested previously. it is a san francisco-based travel agency. a regional airline but has recently made news, more than $40 billion of

acquisitions, spread across six continents, using their shares as collateral for a massive debt buildup. yvonne: legal troubles in the and underwriters sued for allegedly inflating profit margins to learn investors to their 2016 ipo. they raised $1.4 billion, the biggest in the u.s. last year. the city of birmingham pension fund was named, as well as citigroup and jpmorgan. the first market open just minutes away. yvonne: let's get the latest with sophie kamaruddin. investors,week for may be more inclined to step back and i just what we got from the boj and ecb. volatility heading to fresh lows. futures in the region set for a mixed open. sydney looking to

open lower by 4/10 of 1%. i want to show you what we are watching the region when it comes to the equity markets. we were talking about nissan facing allegations. and the carmaker industry, after trump reportedly asked abe to open up the japanese auto market to u.s. players. display, watch for lg shares after samsung said to be outsourcing lcd panels from the south korean company. forecast, a jump of 44%. they raised the stock to outperform. d toside petroleum rerate underperform with a 26 aussie price target. that is just a look at what we are going to be watching when trading gets underway in australia, japan, korea, just moments from now.

given what weted, have observed this week. -- given what we have observed this week. this is bloomberg. ♪

♪ have: asia-pacific stocks a back to back wake advantage for the whitening trump-russia increase pushing the dollar down. yvonne: regional shares are down . david: president xi turns his attention to the public sector. china state owned companies will be held accountable for their debt. yvonne: president trump marks six months in the white house. we will assess his performance so far. david: this is the second hour

of "daybreak: asia" coming to you from our asian headquarters. i'm david ingles. yvonne: five yvonne mann. good weather for those of making your way to the office. which means little start raining in 15 minutes or so. back to the big news overnight. we had the boj, the ecb, no change in forward guidance, but it is not over. we still have two central-bank speakers so to speak, in more ways than one. yvonne: the deputy governor as well as the assistant governor, and they are in this hawkish tilt coming out sending the much closer to that 80 territory mark. for the rest of the region, we are going to sophie kamaruddin. we have some

dampening of the optimism when it comes to asian equity markets. we have stocks down. the nikkei 225 is down, the cost be is down by 0.2% -- the kospi is down by 0.2%. in hong kong and japan are near a two-year high. the dollar weakness that we saw overnight, given the one-to punch after draghi and concerns around donald trump. we have the korean won adding 0.5%, resuming gains for a second session. the aussie looking weak at about 0.1%. the short-term top looks to be in place. consolidatingis here, adding about 0.1% area the yen is looking firm.

and the euro trading near a 23 month high. it is tougher when it comes to the ecb's case. reading between the lines of draghi's press conference, he perhaps let the door open for more stimulus as he focused on inflation pressures. strategists are back to the drawing board when it comes to the currency. we have hedge funds turning the most bullish since 2011 as the dollar falls out of favor. 117.14 inlimbed to the near term. we have not seen this level since january 2015. i want to take a last look at the yen as the boj has its dovish crooning. 1.80. converging around 11 it could be had at the 125.11 h

andle. this is the red line on the chart. the next level support, that can be seen at 110.76. this -- theline on green line on this chart. yvonne and david. david: it sounds like so for -- like super mario so far. an extrapolation of dollar-yen using one of the indicators a lot of people like to use. what's get an update on first word news with paul allen in sydney. paul: the special counsel investigating alleged ties between the trump campaign and russia are said to be widening to include business transactions. arere told fbi teams looking at russian purchases of apartments in trump buildings, the president's involvement in a controversial development in russia, and that missed universe

pageant in moscow. --they refuse to give grounds, telling the u.k. team to come back next month with more detail. he also shrugged off david davis's suggestion that flexibility is needed by both sides. the first round of talks was about organization, the second about presentation, and the third must be about clarification. >> the idea that i the back end of next year, 2018, we would have signed off on the terms of exit by britain from the european union and put in place alternative replacement trade arrangements to govern goods and services for the future is completely unrealistic. the new survey says british exporters are sleepwalking after brexit, unprepared for leaving the eu. yetll finds almost 50% have to review their plans more than

a year after the referendum. that is despite the eu being a trading partner for almost nine out of 10 companies. andresults are a concern, wait and see is not an adequate strategy. resident trump can claim -- president trump can claim a win. they can now ship rice to the first time to china since they finalized a trade protocol. it comes weeks after china reopen markets to u.s. beef for the first time in more than a decade. beijing is also including more biotech products. china's deleveraging campaign is taking on its biggest target yet, the public sector itself. policymakersc -- have focused on bigger companies. now, president xi has made it clear that local authorities must cut borrowing. speaking of last weekend's conference, he says china should

keep officials accountable for debt. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. david: thank you. that is one of the key themes we have been following, the bank of japan with its 2% battle. on the left side, you have the boj, and on the right, perhaps the fed. withe: for the latest kathleen hays, she joins us from tokyo where she has been for the boj. governor kuroda holding course with the inflation target. what is the forecast now? kathleen: my forecast is we will see more of the same, because governor kuroda has made it clear he is not deviating on this path of unprecedented monetary stimulus. i have share with you a line of the story that ran here in

tokyo. they refer to japan as the world's petri dish for central-bank experiments. boy, is that the phrase of the week? is governor kuroda is doing everything he can come up throwing everything he can at this problem, and one thing is determination. the bank of japan has pushed back the date they will meet that 2% inflation goal to 2020. kuroda at the conference yesterday, sticking to it. realistic and necessary target in a country that has been fighting deflation for 20 years. it finally has made a turn. let's listen to what governor kuroda said. we hads regrettable that to push back the timing to reach the inflation target, but we believe it is important to reach an assessment based on the data and projections. kathleen: again, governor kuroda that when the facts

change, you change her mind. hisrnor kuroda has dragged feet on technology and this, but as we were saying earlier, maybe he is starting to prepare the world for his to parch or as head of the central bank by putting a policy in place that is not just governor kuroda's or based on the time you get there come up making sure we get there. kuroda did not ease -- roll out more easing if possible. etri dish.at pret it is clear he is not following the fed. if the ecb is heading in that direction, he is not following them. reason to exit. he will do everything that must be done and more. david: i like the petri dish phrase. kathleen: isn't that great? david: it is where monetary policy comes into one.

the ecb is not rushing to the executor. and toss itke this out the window for the moment? kathleen: i think maybe we should all look at it because to me the key part of this is you can have the bank of japan over here, but it is obvious. ecb and the fed on the other side, but mario draghi seems to be in the middle. maybe they want to move in that direction, but they are not ready yet to stop buying the number of bonds they are buying. to reduce theying balance sheet, and mario draghi made it clear at the press conference yesterday after the and eurohat the ecb area needs more stimulus. he does not want tighter financial conditions. let's listen to what he said. >> the only have to wait for wages and prices to follow course to our objective, to move

toward our objectives. the last thing a governing council may want is actually an unwanted tightening of the financing conditions. that either slows down the process or jeopardizes it. it seems mario draghi has made clear that he is not ready to move yet, and maybe we will discuss this by september or october, but they are not ready to make a big announcement, or even at jackson hole. we have been excited thinking he did this three years ago when he was ready to start quantitative easing, maybe now he will give something at jackson hole. it seems to me what he said yesterday cast doubt on some big announcement taking place in jackson hole. cool waterting some

on the rumors when we learned he was attending jackson hole. kathleen hays, thank you. the other story we are tracking, one bloomberg broke a couple hours ago, the special counsel investigating alleges russian interference in the election is expanding its brief to look into president trump's business dealings. david: sophie schneider is here, following this from the beginning. we know it is significant, jody, how significant? could be damaging to the president, because it brings it closer to him and his business dealings. which the investigation before into russian interference and election, bute this seems to open up a new chapter. it is also interesting because president trump himself actually mueller, the special investigator, from crossing the red line into

looking into his own a business dealings, saying there would be a red line that would be crossed. perhaps he anticipated this was coming closer to him, so it is a very interesting time in the investigation. yvonne: interesting to hear from sarah huckabee sanders saying the president could fire moller, but he will not. there are other things president said this week, particularly with this article in "the new york times" thas well. if you knewt says sessions would recuse himself, he would not have nominated him. sessions has no plan to quit soon, but this is a public break in this relationship with the president, someone who has been by him. jodi: attorney general's and presidents don't historically see eye to eye, but this seems to be very unusual. he really blasted him, the president really blasted jeff sessions in that interview,

saying he should not have taken havejob and he should not recused himself, and he would not be in this situation with investigations. jeff sessions says i am staying by the president. it would probably not be a great because you him, are already dealing with the fired fbi director trying to find a replacement there and with the investigations going on. however, it does seem it would be difficult and some awkward moments, one would presume in conversations with the attorney general and the president. david: at this point, we are six months in to the presidency of donald trump. i would like to ask you what has been accomplished? i don't think we will have a significant answer for that, if any, because you have all of these distractions. if you had to pick one, would there be an a comes a, schmidt they can be proud of at this point? jodi: they did get a supreme

court justice confirmed and sitting, and has already proven to be a vocal proponent of conservative views and strict constitutional views, and that is something that donald trump and his supporters wanted to see. that is one thing. it is a very limited travel ban in place after a lot of lingl -- legal wrangling. legislatively, there has been very little accomplished. including repealing obamacare, which is something the president at every campaign speech said he was going to do. they had been a -- unable to do it so far. and the big things like tax reform and infrastructure really have not even begun area we have not seen anything more than a few little hearings on that. and come take a recess back in september, they will have to pass a budget or risk

government shutdown. we have seen that before, and there will be wrangling over the debt ceiling. it is hard to see how the big things will be accomplished. yvonne: it seems it will be a 2018 story at the least. david: still ahead, we will bring it back to the asia-pacific. we are having a look at chinese insurers. they have outperform the market, despite scrutiny from chinese regulators. we will getvonne: back to the focus on the ecb's town representing asymmetric risk to the euro. this is bloomberg. ♪ ♪

yvonne: this is "daybreak: asia ." i'm yvonne man. david: and i'd even -- david ingles.

when we look at the euro, it is close to a two-year high. we are joined by the head of asia rates and affects for barclays. nice to see you. help me out here. i am headed to europe in a few weeks. do i change my money now or in a few weeks? guest: that is a good question. euronk the reality is the has surprised a lot of expectations. .t has continued to strengthen positioning has moved toward growth has trended higher, credits are flowing to the economy. what is missing, and i think we heard this from mario draghi yesterday is the willingness of the ecb to pull the trigger on taking away some of this accommodative policy, it is still not there. the core inflation is still very weak in europe and is not moving higher. our own forecasts are but

nine -- are benign. the euro has done well. is there more upside? sort of it from these levels. we think the euro would drift lower. you made a valuable point, on the other side, there is a dollar looking vulnerable in the last several months given any lack of legislative perhaps worries about the u.s. economy turning over, and a fed that has been less than hawkish. yvonne: it is interesting because mario draghi was pressed when it came to the euro strength, and there were questions about it. they shrugged it off. received some attention from the council. he had the chance to talk it down, but did not do so, and sounded more content to not bring anything down. do you think that signaled anything? where do you think the euro

could go in the next three to six months? mitul: i am not sure it signals a great deal. --hink the reality is he draghi is probably looking at european growth, european trade, and the fact that a -- that euro is said, it is resulting in tightening in financial conditions, and i think the ecb will be wary of that. that as thel argue euro drifts lower rather than hire, we think these sort of levels are around the highs we would expect in the euro-dollar and the downside risk is opening up. that is why we are talking about asymmetric risk with a lot being priced into the euro. talk aboutnt to japan and the boj saying it will take more and more time to get to that target.

what are the implications? i have to imagine that giving from what we heard from mr. kuroda yesterday, the yen has to be your favorite currency for the next 18 months? mitul: the yen is certainly --kend, and that pressure using the funding currency, but one thing to bear in mind, in japan, growth has been above trend for a long time. the yen has come under pressure because it has been one of the only court central banks to maintain its target in terms of not reallyarget and changing that. yesterday, with the target inflation being moved up and the adding of near-term bias. it is an undervalued currency at a time when you are seeing such a big move into carry trad especially with such -- carry trades, especially with such low

volatility. it would be positive for the yen, given japan's very strong net foreign position. we think we will see more yen upside rather than downside, even despite the bank of japan's stance yesterday. yvonne: we actually have seen the dollar rise against the yen since mid april, and contrasting from what we were saying from the mexican peso and the loony, let's talk about the aussie. there is a lot of calls here for the aussie. do you think the markets have are right when it comes to that central-bank -- have it right when it comes to that central-bank? mitul: we are probably looking for a hike around the second quarter next year to begin, but clearly sentiment has shifted. the rhetoric has become or hawkish. yesterday's job numbers have robust,have been

especially in a full-time employment. due toll be key now is cpi numbers next week and comments by officials from the rba to see if we are moving toward a hike from the beginning of next month, i think it is too early to look at that. it is another currency that is priced in a lot of good news. i am not turning particularly bearish, but there is a lot priced into the aussie dollar. david: the move from 76 to 79 has given it the hike it does not want or need. there is a future on the bloomberg we like to show off which is the interactive tv function. just type in tv . see previous interviews, and on the right side, you can look at securities in a bloomberg functions and

charts we like to talk about. of the become part conversation. send me and david instant messages during the shows. this is for bloomberg subscribers only. be sure to check out to be go. this is bloomberg. ♪ ♪

let's do a quick check of the business flash headlines. tuition blowers are sharing a for making the fec the case against j.p. morgan chase. the bank was accused of failing -- thelose that it was bank admitted disclose or failures in 2008 to 2013, and said they were unintentional and actions have since been taken. david: deutsche bank is bracing for hard brexit. the ceo says better is an immense amount of details to be

ironed out, and they will try to minimize disruption for clients. moved tom will be frankfurt. deutsche cannot afford to wait for the outcome of brexit.

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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. yvonne: happy friday. 8:30 in singapore. we are half hour away from opening of trade there. david: you are watching "daybreak: asia." i got a handshake this morning between greece and the imf. here is the first word news with paul allen in sydney. agreed to af has new bailout, bringing an end to speculation over whether it would participate in a rescue program. the fund approved a new loan worth as much as $1.8 billion that grants a seal of approval demanded by many of greece's euro area creditors.

depend on those countries for debt relief. sources inside the eurozone say the ecb may not make a decision about a stimulus program until october. we are told the council may discuss tapering at its next meeting, but is unlikely to reach a decision. before thursday's meeting, forecasters estimated they would -- degree ofsubstantial monetary accommodations is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium-term. -- a hindu nationalist hindu nationalist is india's new president. he is backed by the prime minister and was the clear winner among lawmakers and legislators. a is the former governor of state, and has longtime groups

-- links to a hindu group accused of stoking hatred. orders exceeded all forecasts, as apple suppliers to up for the new iphone. 7%jumped almost double the estimate. the value of those orders rose to more than $40 billion, the highest of any june on record. the taiwan dollar remains strong, well the central bank is seen holding steady this year. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. yvonne: paul, thank you. it looks to be a quiet friday for the markets. let's see how everything is faring. we may see these back to back advances, despite the little bit of red in equity markets. sophie: we are seeing a weekly advance nonetheless.

we have australian shares leading the drop, down 0.8%. we are seeing a change in fortunes when it comes to the currency space. , and the aussie is retreating from a two-year high ahead of the rba deputy governor's speech. abu dhabi stocks are sliding as well. when it comes to the aussie they may the 80 level, feel left behind when it reaches that level. the base metal does have its skeptics. bulls and bears have follies and record output to consider when it comes to the outlook for that metal. taking a look at steel prices, tanking from a 2013 high as buyers turned wary. that is also weighing on in shanghai.n

despite the rise in oil, we have new york crude up, holding at that $47 a barrel mark. the have shares in sydney sliding, and financials are falling about 0.9% after a two day rise to that sector. the segmented is still up. upgradinggan stanley aussie banks on earnings resilience with the threat out of the way. concerns remain, especially strength.sumer david: interesting that you mentioned him a have a look at the won. what sophie was mentioning, we did get data out of south korea, the sort of update we get in the first 20

days out of south korea that exports are up 22%, 23%. see how that comes into fruition. yvonne: taiwan looked really good yesterday, export orders up by 13%. david: these two big exporting countries, taiwan relies on 60% of its gdp. very good. that is the take away. yvonne: let's shift gears to china, the leveraging -- the leveraging campaign taking on its biggest challenge so far. policy mark -- makers have focused on my abilities and gains in private sector companies, the president xi has made it clear that local authorities are bloated and needs to cut borrowing. david: i wonder what he is pointing the finger. let's get more details on this story.

chris, nice to see you. how significant is this? hris: people are saying these comments by xi jinping represent ofimportant shift on part policy makers. part of it is the venue. he was speaking last weekend at a once in five years authoring of the financial regulators to set financial policies over the coming half decade. we have seen in these conferences over the decade -- past couple of decades that they really do set the tone for policies going forward. five years back, the priority was financial innovation, and in that intervening i've years, we saw a lot of new things happen. innovation, af boom in wealth management.

we saw alibaba go into market funds, creating money market funds. we saw peer-to-peer lending boom. lots of things happened based on the theme decided five years ago. the theme for the coming five years is taking on leverage and reducing debt growth on the part andtate owned in her prizes local governments, as xi jinping enterprisesek -- in and local governments, as xi jinping said last week. we have heard this story many times before. how much truth should we put in this this time? goes to one ofy the big challenges for the communist party. if you are a pop -- communi party padres -- communist party

cadre, you grow. new projects, new developments, is somewhat less important. it is the top line growth that gives you advanced. is saying that if you are a local government official, we are going to look at over your career, how you contributed to debt growth and count that against you. really a different mindset. how you change the whole incentive structure of communist party cadres without harming the economy. keep in mind that the government still has a national growth target. it will be very difficult to see just how this pans out, but it is quite clear that xi jinping regards deleveraging as a priority. good point youa

brought up, because in the past, we know the model is you , andrage growth incentives increase in growth build up. if they go ahead with this initiative, i am sure there is in growth -- an implication in growth. what else? see withat we might regards to state owned enterprises fronts is further consolidation. you get rid of the number of as soe's out there borrowing. you consolidate and rationalize them. we see increased sales of state owned or stick sales of the .tate -- stake sales implications for the bond market.

crucially, what will be important is how they rule these out. do they come out with big new initiatives that spook the markets? or do they do it gradually in a way that allows growth to slow somewhat from a strong 6.9% last quarter, or does it happen in a more haphazard fashion? the execution remains the big question. yvonne: thank you. insurers have outperformed the hang seng index by at least 10% this month. the result comes as china's top regulator continues to scrutinize life insurance products sold by companies. david: let's have a closer look at the move, what is behind this. we are joined by stephen lambdin. stephen: the general trend is that investment has been

good. has beenthe money chasing from northbound to southbound. we have seen in the first half of this month. a lot of money goes into channels, and that is in the tune of billions of dollars. to give you an example, the shares in hong kong were held at about 27% by mainland investors. that is an increase from about 13% at the end of march. even if i compare that to the rest of his peers, it is the highest among insurance hsbc, for banks, and example. yvonne: are investors overlooking some of the risk when they continue to scrutinize some of these life insurance products? steven: not necessarily.

largely speaking, it is because of the shared discount for this particular name. new channel life is trading at a 40% discount compared to its china counterpart. david: we have seen the outperformance of china's insurers over the hang seng. 6099.s #btv this is a 12 month look at returns. the hang seng index is not bad, but when you compare it, it looks like the bears are loose on the overall benchmark. it takes you back to these individual names, and i believe it filed for an ipo this month. what should we expect from that? should i rush in and try to get an allocation? steven: it is still early to see, but from a lun

perspective, it could be $1 billion to $1.5 billion. a lot of the valuations are being benchmarked to technology stocks. for traditional companies, we are talking about high single digits at most, low teens. for technology, we are talking 30, or 60 times. a lot of expectation has been built in for this company, because it is not a traditional company. it is online and writing through the consumer boom and -- riding through the consumer boom in china. yvonne: it could be a potential disruptor for the whole industry. thank you very much, talking more about the insurance sector here in hong kong and china. coming up next, clear skies ahead for a budget airline. this is bloomberg. ♪ ♪

yvonne: "daybreak: asia this is "daybreak: asia -- this is "daybreak: asia." you are looking at a bit of sky here. let's talk airlines, because spring airlines is set to restore some flights from china to japan and south korea. the announcement comes as political tensions ease between china and its neighbors. yvonne: the deployment of the missile system seems to be the of contention. the ceo told tom mackenzie that giant airport being built in china will provide more spots for private carriers. fly more flights from

japan, korea, and the southwest asia region. japan is most profitable. -- it is -- those countries are larger. we are still developing. we are looking for the new .resident tom: where is the competition coming from? itit high-speed rail? -- is high-speed rail? not direct from the airline,

but from china we see lots of opportunity occupying probably 80%. important,na is very especially for the young generation who likes to use the online. think -- tom: how much of a challenge is getting new slots? >> a lot of airlines have no place to go. beijing has known slot, -- has no slot, shanghai has not for 12 months. aircraftng haul, the try to fly. they try to fly to the u.s. and europe. for a lot of airlines, latin

america. but in the next few years, you will see a lot of the new also shanghai adds a new terminal, and so does another airport. we are next five years, coming to the market. david: that was the chairman of yu.ng, wang yvonne: let's look closer into china's aviation market. thank you for joining us. seeave taken four months to a thought between china and south korea relations after this issue between the deployment of the missile. will it be business as usual once again? is that what we see signs of?

guest: it has followed about 30% for chinese characters, -- carriers, and you will see it gradual. it does impact some of the carriers who have a large exposure to korea, such as terms ofr in profitability. in the meantime, the chinese carriers have been putting on more capacity on other groups, for example in both third quarter, -- in the third quarter, we have seen a ramped up in the capacity, and that is what we are concerned about because it was not met by a stronger demand growth in could impact negatively the yield and domestic routes that are traditionally the cash cows for the chinese carriers, in addition to korea and japanese routes. that we do situation

not get a follow-through on demand, and you mentioned we are getting an aggressive ramping up, if you had to pick an airline most exposed to lower passenger yields, what would it be? rrine: for domestic exposure, it would be china southern. it has the largest exposure to domestic routes. yvonne: so that is the one to watch. interesting because china's geopolitical stance, not just with south korea, but other countries is quite unstable. it may not stop at south korea. what is the likelihood of another spat happening again? is this something asian carriers need to constantly be reminded or prepared for? corrine: china outbound traffic tends to be one of the largest markets for a lot of the asian carriers. growingeen going -- very rapidly.

for example, chinese inbound and arrivals have been growing rapidly come a especially this year to vietnam, malaysia, even singapore. if you look at the greater toeme of things, they tend have a short-term impact of less than a year. we are bullish on the overall long-term growth prospects of the chinese airline sector. china's trouble market is only half of the united states -- travel orchid is only half of the united states and travel, but is growing four times faster. in 15 years time, we project that china will be the largest aviation market in the world. david: the entire sector is a long-term buy. --n you look at the quanti compared toation

full service, we are at 10% of the markets. does that make from an buyingent standpoint into low-cost carriers like spring air more compelling than buying into another stock at the moment? it is an interesting point, because right now 90% of china's investec market is controlled -- investment market is controlled by nine airline groups. low-cost carrier penetration is low, and with rising per capita income, this will enable more people in china to fly. low-cost flyers -- carriers offer cheaper alternatives in enabling more of these families, leisure travelers to go abroad. spring their is well-positioned -- spring air is well-positioned. they have had growth in 10 years. very competitive cost structure. they have the highest passenger

load sector of all the asian carriers. it is that in the near term, it does face quite strong retaliation from the asian incumbent airlines in china, which, have also been upgrading their fleets. just like spring air, they have a young fleet averaging six years, and they have tried to trim cost by cutting commissions. perspective.cial thank you for joining us from singapore. david: you can get a roundup of the stories in need to know. today's edition of "daybreak" dayb .bscribers, you can also customize the settings so you get news on industries and topics you care

about. out. it this is bloomberg. ♪ ♪

yvonne: this is "daybreak: asia ." david: that is almost it for us at "daybreak: asia." here is a look at what is coming up over the next few hours. reporter: we have got them in

spades. the ecb looking at all that and what is said, kathleen will talk to a professor at an international university. also, someone else's giving his tuppence worth of what he thought. yvonne: you have some global tourism talks about what is ahead. tourism in china is growing. that'll be in about an hour and a half from now. ♪ whoooo.

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♪ it is 11:00 a.m. in sydney. i'm haidi lun. , it's just gone 9:00 a.m. in hong kong and beijing. i am rishaad salamat coming to you from bloomberg's asia headquarters in hong kong. this is "bloomberg markets: asia." ♪ haidi: asia pacific markets , the dollar its lowest and was a year. rishaad: president xi rn