>> 7:00 a.m. in hong kong. i am yvonne man. welcome to daybreak asia. a weaker yen may support japanese equities after the dollar rose to a three year high. futures indicate small gains elsewhere in asia. google's parent reports a surge of sales and spending. alphabet shares rose after the bell and then gave up a game. yvonne: i am betty liu in new york, where it is past 7:00 p.m. on monday evening as we get the week started. mike pompeo having a better week. succeed rex to tillerson as the next secretary of state.

amazon working on another big bet. robots in your home. we are going to be live in san francisco with the details on that. betty: skittishness in the markets over the 10 year treasury yield, moving up to the 3% level. what is going to happen once a crosses that level? a big question for the markets today. that might be why, if you look at this chart here, the fear index is jumping, as you can see on the right. the fear barometer, which according to credit suisse, measures the price of bullish to bearish options. it is showing a spike. the fear coming into the markets. some of that related of course

to the geopolitical tensions but also related to what we have seen in the treasury market. yvonne: treasury market is going to be dominating the news. we are really close. we are flirting with 3%. we did not quite hit that mark. there is a lot of company specific issues as well. aswere talking about tech well. it seems like investors are still not quite impressed. betty: they were not indeed. what was quite impressive was how mike pompeo seemed to pull out the nomination from the senate foreign relations committee, voting last minute here in favor of pompeo to be the next secretary of state. it paves the way for the cio director to -- let's discuss this with gregg sullivan. the key of course was rand paul, who at the last minute flipped his vote. >> that correct.

it looks very unlikely that pompeo would actually get a committee recommendation, which unprecedented. in the late afternoon, senator rand paul tempted twitter -- took to twitter to announce he had been having many discussions and got an assurance from pompeo that he agreed that the iraq war was a mistake among other things. rand paul announced he would be ,upporting mike pompeo reversing his earlier opposition and allowing him to clear the committee. recent trip to pyongyang solidified his confirmation as well -- solidify this confirmation as well? greg: he is close to trump, has president trump's ear. it may have complicated his support among democrats. the panel's top democrat, bob

menendez, actually said he took issue with the fact that he had not been forthcoming about his trip. with republicans, it helped shore up some support. democrats were may be rankled by that. betty: we are going to continue to watch these events unfold. greg sullivan, our washington correspondent. we saw lots of nervousness in the markets unfold as we had mentioned, the 10 year yield flirting. the dow closing slightly in the red. the s&p flat. the nasdaq down .2%. weaker yen may support japanese equities as tuesday trading gets underway after the dollar climbed. tech struggling after weighing down the major indexes in the u.s. romaine bostick joining us. much is said about this 3% level for the 10 year yield. how much does that way on sentiment?

>> with closed flat. getame in today hoping to up on from this earnings picture, positive earnings picture. showed up today. that spoiled the party. we saw it weigh on the markets as a whole. a cause people to rethink where rates and inflation are going, reevaluate capital spending, reevaluate things like venture investment and stock valuations. this earnings season has been a toed picture with consumer stable space. i don't know. we have to see. betty: we will watch with more tech earnings. is it possible that earnings might lift us out of this malaise? romaine: 44 names out of the mass at 100 are reporting this week. -- nasdaq 100 are reporting this week to when you think about it, their operating costs were very

high. you are seeing that reflected in the shares after market. facebook was down for a second day. twitter was down 2% because some of these concerns over the internet media space. take a look at something like apple. for four straight days now. a lot of that is on concern about iphone x sales and market penetration. we have got in a few indicators that some of the demand we are seeing on that consumer side of mayhardware tech space actually be weaker than normal. take a look at semiconductors. the index has fallen for four straight days, down 8% during that time. half of the companies in this index will report later this week, and it could be a canary in the coal mine for what we see out of the larger tech space. >> a bit of nervousness ahead of apple earnings.

as earnings are enough to entice buyers back, --'s earnings are not enough, what will be enough? romaine: it has been below 2%. what has happened with all of is thee rises lately two-year yield on the treasury has actually been trending above where the earnings dividend yield is. you can see this chart on to tv . you look at everything on the short end of the treasury curve. it's above the dividend yield on the s&p. only 25nth builds are points from surpassing that mark. there is a lot of attractive , thes on the lower end front end, of the treasury curve, outpacing some of the potential yield you will get off the s&p 500, and that might see a reallocation of money if investors think that is too good to pass up. yvonne: romaine bostick joining us from new york.

let's think a look at the set up in asia. we are looking at a mixed start on this tuesday morning. moves overnight, take a look at what we are seeing in x 50.ndex 60 -- nd trading in australia over one hour away. futures are looking you did as well. take a look at the aussie dollar, dropping to a fresh low after metal prices tumbled. they may be softening their stance. we have seen a bit of the bloomberg commodities index come off .75%. take a look at japan. we look pretty set up for a clear out performer for japan given what we have seen with dollar-yen. we have been hitting two-month highs. a decent dayeeing for tokyo stocks. in the meantime, let's get you caught up with a first word

news. jessica summers in new york. nine people were killed and 16 more injured after a van crashed into pedestrians in northern toronto. the driver has been arrested, but it is too early to speculate on a motive. the van jumped the curve at a busy intersection. the incident happened as ministers gathered in toronto ahead of their meeting in quebec city. emmanuel macron has arrived in washington for a three-day trip that will include an attempt to keep the u.s. in the iran nuclear deal. and the first state visit comes after a lavish welcome in paris last year. macron says his agenda include security, trade, and issues that go beyond the u.s. and france. angela merkel is due in washington on friday. facebook says it has removed terror groupsrom by actively looking for it.

human and computer review systems have been trained to seek out hate posts. facebook says 99% of that was flagged by internal procedures and not reported by users. struggling brazilian conglomerate is likely to miss a debt payment this week despite negotiating with banks for a loan. the privately held group will miss wednesday's deadline to settle $150 million in offshore bonds. they suffered climbing cash flow in the fallout of the inquiry linked to petrobras. day, andws, 24 hours a at tech talk on twitter. more than 120 countries. i am jessica summers. this is bloomberg. yvonne: alphabet has reported the strongest sales growth in

four years. first-quarter earnings beat analyst estimates. the highest we have seen. bought real estate and invested in may i, cloud computing, and consumer devices. let's bring in mark vadon in san francisco. it, given all of these privacy concerns surrounding facebook, google is insulated from some of this overhang. >> google has been prepared for this sort of privacy regulation, especially in europe. they have been preparing it for 18 months. the ceo made a point that most of their biggest business is from search ads which does not collect a lot of information about people and data, which is disingenuous because google has a massive business. similar data collection and add targeting like facebook. the big shocker we saw was the spending surging to $7.7

billion. does alphabet expect that to continue? >> they do. that was a one-off deal with a $2.4 billion acquisition of real estate in new york city. mrs. a trend they will see continue, and part of that is they are investing in things like data centers, and a lot of investment in their cloud business and machine learning capabilities. they are going up against amazon and apple and hardware. they expect to see the numbers continue to rise. yvonne: why did alphabet release new metrics? it was interesting for them to judge them by. >> we saw new adventures around that shows and there is a business. we did not see any new metrics from the cloud business, any new metrics around youtube or the hardware business, and this is where they have been pointing out this is a future growth for google.

been frustration for investors and shareholders for a long time and has not changed this quarter. betty: these privacy concerns, hitting big tech companies like alphabet. is there a sense that it is a one quarter concern and done? mark: there is a sense that little has enough -- google has enough to pay for compliance to get everything in the right order. sense thatget the they are sensing in any large legislation coming out of the sea, but they -- d.c., but they are certainly prepared. betty: using the money for mining the data of the customers to pay for the lawyers to protect them from the privacy concerns of their customers. thank you so much. the irony there. in san francisco. you can catch all of this and turn to your bloomberg for more on this story. go to tliv to get commentary and analysis from

bloomberg's expert editors. still ahead, emmanuel macron arrives in washington for some tough talks with trump. we will look at what is on the table later on this hour. yvonne: up next, is through the magic number for bond markets? real estatek with investors in just a moment. this is bloomberg. ♪ this is bloomberg. ♪

>> when we look at the decomposed it nature of the 10 move, we see it is mostly in breakeven inflation rates. i want talk that up to be inflation risk premium coming back into the yield curve. get% threshold is enough to people's attention. i don't think it is necessarily a bad line. -- sign. >> we have seen upward growth at a nominal rate. when you look at the turn here that has been underway, this is a 35 year trend in bonds to we

think it has just begun. >> you may have a market looking at the fed and saying how much are they willing to let inflation run above target? if this fed will not push back, maybe we need to have a cheaper term structure. that has been one of the biggest stories in the minds of investors today. this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new york. the magic number. benchmark treasury yields hovering around the key psychological level. how will yields reshape the investing landscape? i want to bring in ethan hunter in los angeles. ethan credited with helping create the commercial mortgage-backed securities market while he was at nomura securities.

we will ask you about the market in a moment, but first on this 3% level here on the 10-year, is this much ado about nothing? >> i think it is an important threshold psychologically, but i also think it is more than just psychological. we are living in a highly environment globally. people are leveraged. i think a lot of the same pressures, if not perhaps more, that caused the kind of tohestrated movements ultralow rates in 2009 and since our in place today. and i think -- >> like what, leverage? we do not have corporate leveraged to the same level perhaps, although there are

different measurements of these things. so, for example, we have a tripled the corporate bond outstanding that is about triple what it was only a couple of years ago. so tremendous leverage has been added to that part of the system and i think that we do not have a home borrower. we do not have a system that can withstand higher rates. we don't have the federal and $1ent with its debt trillion deficits that can withstand higher rates. so i think it is a cause for alarm, and i would imagine that judginged persists in rates higher, we will see a correction in the price of asset values. >> how big of a cause of alarm? a 2008 cause of alarm? or something not of that magnitude? ethan: it is more a kid to the

bernanke temper tantrum. response back to chairman bernanke's efforts to raise rates quite a while ago when the market reacted with its own taper tantrum. it was a temper tantrum. >> it was both, really. [laughter] ethan: i think there was an immense amount of capital looking to buy quality assets on dips. 2008-2009t force the correction at all. we will seenk that a reaction in the price of asset values for sure. >> speaking about that period, let's look at the 2000 level year as well. i want to bring up a chart. yieldss you the treasury

. those spreads are at the lowest level since 2007, and for market watchers, some say that is a recession, raising if not a red , at least a flag yellow flag that recession is coming. what do you think? been a bond market participant since the beginning of my career, and i started my career as a bond trader. i have great respect for the bond market. it's the bond market predicting what i believe will occur, which i think the fed has been, i think, a bit reckless and cavalier in announcing what they hope to achieve, which is as eight rate increases over the next two years. ishink that the bond market extremely skeptical, and i think they believe that there will be a correction in pricing, that will causelundering

a correction in economic vibrancy. think they are forecasting that in the way they are trading different parts of the yield curve. betty: where do you see the direction of quality going? we have seen toys "r" us, strapless when it comes to retail as well as the hotel sector. what does that mean for commercial mortgage-backed securities? commercial mortgage-backed securities cover of thebroad swath economy and different real estate categories. he mentioned retail and hotels as being two. i will address those to start. , think the fears about retail and there are many reasons to be fearful, i think, to a certain extent, are misunderstood. i think that what is not spoken about is how many retailers have

just lost their mojo. thatok at the ones we see have been chronically troubled for quite some time. toys "r" us, sears, macy's, and the question is not, my god, should we be nervous that these companies are leaving us? the question is, how did these companies stay around for so long without meeting anyone's needs? there is a sense that there is a revolution in retail. the old names that don't resonate with consumers anymore are going to go. winnersit will cause and losers, which is always very exciting for market participants. yvonne: what are the winners and losers? the mantra we have seen is that cash is king. with your picking up, this corporate mortgage-backed securities offer relative value to other bond asset classes?

ethan: commercial mortgage-backed securities and corporate bonds in general, especially investment, i think there is still -- we have seen so much money come into credit over the last year, seeking yield. i think that it is very difficult to find relative value in credit today. has been ane overcapacity of funding and credit across the board from private credit funds as well as the kind of fund that flow into the market. reflect beings overrun with capital today. >> we appreciate your interest site. he's joining us from los angeles. remember, bloomberg users, you can see the chart we show using gtv .

you can save those charts for your future reference as well. this is bloomberg. ♪

>> breaking news earnings coming through from sk hynix. a bit of a big focus given the rock we have seen in the markets on these. sk hynix first quarter estimating profit, beating estimates. analysts were expecting a 4.3 5 trillion won estimate of course. a net income missing as well as the top line here. net income coming in at 3.1 2,000,000,000,001. -- 3.1 2 trillion won. a lot of concerns after we saw tsmc. apple also ahead as well. they have seen the best days behind. betty: some pricing for dram

sk hynixikely to help peered up next, amazon's secret plan to give alexa a body. bring robots into your home. this is bloomberg. ♪ welcome to the xfinity store.

i can tell you about... streaming the most free tv shows and movies on the go. yeah, and... xfinity internet. it's so fast! and you can save by... by getting up to 5 mobile lines included. whoa, you're good. i'm just getting started. ♪ simple. easy. awesome. come see how you could save $400 or more a year with xfinity mobile. plus ask how to keep your current phone. visit your local xfinity store today.

yvonne:; 30 a.m. tuesday in hong kong. a bit cloudy. it's steaming with 24 degrees celsius. the ac was on for me last night. the humidity seems to be coming back here. 30 minutes of from asia's first major market open. betty: allergy season about to start up here in new york. it is 7:30 p.m. here in monday in the big apple. markets are closed, closing quite limp with eyes on the treasury markets and a stronger dollar. i am betty liu in new york. yvonne: i am yvonne man in hong kong. let's get to the first word news with jessica summers. jessica. swung inlphabet shares

late trading after first-quarter profit and revenue beat estimates. googles parent delivered earnings per share of $13.33, above the forecast peered other revenue which includes hardware, cloud, and apt sales, jumped 40% on the year. capital expenditures more than tripled. that primarily reflected the $2.4 billion purchase of offices in new york. the senate foreign relations favor of miked in pompeo being the next secretary of state. he's expected to win the approval of the full senate later this week to replace rex tillerson. dropped his opposition after pressure from fellow republicans in the white house. to ensure pompeo wasn't the first secretary of state nominee to be rejected since at least 1925. oil surged on the escalating conflict between saudi arabia and yemen. futures reached their highest since december 2014 after

iranian backed rebels launched unsuccessful missile attacks and a senior member of the militant group was killed in a coalition strike. withtexas crude flirted $68 and brent ended just below 75. the global benchmark traded at its widest premium to wti since january. ukip prime minister theresa may has suffered a third brexit the seat in the upper house of parliament in a week. the house of lords supported an amendment to a government bill that would insure most e.u. brakes areonomic written into british law after brexit. critical speakers of the posts legislation is unprincipled, unjustified, and confused. negotiations resume on tuesday. the canadian foreign minister washington arein in the "intensive phase." president trump that he could make mexican immigration curbs a condition.

the president said mexico must stop people heading straight through that country and into the u.s. and called for funding, fast. 24 hours a day, at tech talk on twitter, and powered by more than 2700 journalists and analysts in 100 20 countries -- 120 countries. this is bloomberg. yvonne: for more, let's get the latest with sophie kamaruddin. looks like we are facing a hectic start. this metals mayhem plunging after these talks about the u.s. softening sanctions. sophie: after two weeks of chaos, we are buckling and for the bumpy ride to continue jumping into the terminal. that is the line in white on this chart. aluminum very much getting a shock. usal's all prices of ro

surge. we have seen in hong kong the stock losing over 60% since early april. overnight, the share price was pummeled. a selloff in aluminum did spread to other metals. optimism won't be slapped with sanctions. nickel tumbled on monday with thee swings close to highest sphere volatility will continue with other potential shocks threatening the metals markets. we have nickel facing the risk of supply disruptions from top producers in the philippines. betty: we are talking about this topic ad nauseam p or the bond bear market. that's front and center on investors minds. sophie: we have the treasury 10 10 year yield. a break above that 3% mark, taking the 10 year two 325

percent. that could send the yield back to 2.7%. there is a repricing over way -- underway. int is tracking the uptick yields. we have the yen at a two-month could see stocks changing. a positive start is anticipated in tokyo. ditto for sydney. it will drag on australian stocks and cap players, expected to continue their side after another set of earnings, betty. betty: sophie kamaruddin checking the markets and the earnings as we heard the breaking news from south korea on sk hynix and their quarterly results topping estimates for the chipmaker. stephen engle now digging through the numbers. what are we learning? >> we have been watching this because coming on the heels of c, the follow-on

effects that we have seen in chip stocks, but high next showing resilient demand, beating most analysts forecasts. profit climbing to 4.1 billion u.s. dollars. in the previous quarter, it was $4.47 trillion. they had a couple better than expected quarters in a row here. sales were below expectations. first-quarter sales, 8.7 8.72,000,000,001 -- trillion won. dere is softness, but ram continues up. the average selling price, up 9% according to sk hynix. this comes on the heels of that but warning just last week,

again, the results bright in the prospects for another year of record revenue at high next, trying toey are finalize this deal along with bain capital for toshiba's chip division. that would give it a world beating market share in that memory division. keep in mind are has been softer than expected demand for the because skom apple hynix gets 12% of its revenue. betty: concerns when it comes to llayed.a stephen: it will be interesting what kind of guidance we are going to get from them going forward, especially as we have en,n the chip prices soft especially as they go into the deal with pain to get to achieve -- bain to get toshiba.

a second quarter in a row of better than expected results, from sk hynix showing resiliency. betty: a little more legs in this cycle. stephen: three month ago, we were saying it was iffy. we will push it down the road a little bit. will see how that all translates to the market open in seoul in a couple of minutes time. amazon working on yet another big bet. robots for the home. prototypes in employees homes by the end of the year with the consumer rollout possibly following in 2019. .et's go to mark he joins us from san francisco for more. tell us about this top-secret project underway. amazon in california, south of san francisco, has a large team working on a robot home.

this would be sort of a mobile alexa, mobile echo, that would follow you around your home, taking in moisture than commands. >> is this based on customer feedback? mark: i don't know. seems like something that the technology industry has been tantalized over for decades. the remember the jetsons from decades ago. we all remember the jetsons. that from decades ago. >> not anybody under 30, i think. [laughter] mark: i have seen the jetsons. >> the only reason i asked -- the only reason why i ask is there is already so much controversy. i guess you would say it around these home assistance.

and privacy concerns. i mean, what customers really want a robot roaming around that's produced by amazon? mark: no. [laughter] mark: but it's not happening now. right. it's not happening now. this is a few years away. it's going to be interesting to see if these privacy scandals, cambridge analytica, the facebook situation, amazon and apple have been clear that if they blow over, right? the problem is that privacy is not only for facebook or google, it's for the whole technology industry. people really lump in all of the tech companies into one. this would be a problem for everyone. that's why this amazon robot might he a difficult sell consumers. few years down the road, targeting to take this mainstream. betty: it does sound cool. you know i am just teasing you. amazon, and the

latest in their ventures. later in "daybreak asia," we will be joined exclusively by microsoft's vice president to discuss opportunities in ai like that. what does microsoft have up its sleeve? stay tuned for that, yvonne. yvonne: we have home bots. we have been talking about google and how much they are spending. friends should not expect much from emmanuel macron trip to washington. more information. this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new york. >> emmanuel macron has arrived in washington for the first state visit of the trump

presidency. kathleen hays was more on what the french president is looking for in the next few days. at the top of the list of course, we have been hearing about the iran nuclear deal and keeping the u.s. in that deal. that's the main objective for the europeans, right? kathleen: yes, it is, betty. let's take a look at this. a little bit of a table s macronss the trumps and kickoff this visit. it is a follow-up in a way to the very lavish estate visit that donald trump was treated to when he visited emmanuel macron last year in france. cement this grand atlantic partnership that he sees and sees himself being such an important part of. they will have such an interesting state visit in terms of the ceremony on the south lawn of the white house.

500 members of the u.s. armed forces cabinet secretaries, members of congress, military families. will all this pomp and circumstance ultimately lead to some important steps? yes. angela merkel follows up with her visit to the white house on friday. theresa may has had ongoing discussions with the white house. so what does europe want? agreementso finalize that will make the gilt stronger and therefore convinced donald trump it is ok to stay in this deal when it comes to inspections, when it comes to development of ballistic missiles, when it comes to iran's regional aggression. not letting it get to the powerful in this region. the europeans want a stronger impact that will work for everyone, including the united

states and donald trump. they do not want to renegotiate. here is what president macron said on fox news on sunday. is this agreement perfect? a joint comprehensive pact on action -- a perfect thing for our relationship with iran? no. but for nuclear, what do you have is a better option? -- as a better option? i don't see it. i don't have a plan b for nuclear against iran. that's a question we will discuss. tosident macron has pointed french diplomacy as key to participateu.s. to precipitat in the strikes. >> that could be a small victory, perhaps strengthen his position. taking a back seat to the iran nuclear deal. ?hat is macron seeking there

is,athleen: it certainly betty. this is very important on the trump team's side of his very important state visit. it's the first state visit the trump administration has hosted for any global leader. on the one hand, donald trump wants european markets more open to products from the u.s. and macron and europe broadly, they want a permanent exemption from the steel tariffs manufacturers and across the region. they are concerned about what this will do to their costs and competitiveness. the u.s. runs and agricultural surplus with the world, but a $12 billion foreign deficit with europe. this is something that donald trump will hit hard. it's a fascinating visit. macron has been referred to as the trump whisperer. we will see what he can get. [laughter] betty: plenty of fanfare as he

showed in the video. are planting the french tree in the white house, visiting some of the monuments as well. kathleen hays, thank you. kathleen hays joining us from tokyo. let's discuss the trip more with center connolly at the for strategic and international studies. thank you so much for joining us. the trump whisperer -- you have seen, he is president trump's go-to guy. how much of this trip is optics and how much can macron change trump's mind when it comes to the iran nuclear deal or on trade? >> this visit is going to be very heavy on symbolism. celebrating this historic bilateral relationship between the united states and france, our oldest partner and ally. that's why the president is taking the macrons to mount vernon to celebrate the rich heritage and legacy.

this visit feels extremely light on substance. president macron has a rich agenda. he wants to talk about the iran nuclear agreement and syria, potentially,, against the european union. he wants to talk russia, north korea, all the geopolitical issues, but it's unclear what the deliverables will be out of this meeting. what will president macri on -- take-home with him to -- macron -- what will president macron take-home with him to paris? yvonne: we have this upcoming summit with north korea to think about as well. it's quite crucial. this is not the type for the u.s. to show they are not a reliable partner in foreign diplomacy, so does that strength and perhaps macron's hand in persuading him on the iran nuclear deal? does it not matter much? heather: president macron and french diplomacy has been really on iran, keeping

them to a very high standard of transparency, so it is very natural for president macron to lead the discussion and say europe is ready to strengthen this agreement, build on top of it, but it's not going to work at president trump agrees to step away from the iran nuclear agreement. there is no plan b. europe does not have a fallback plan. this is a very important message from north korea because if the united states does not keep face with its negotiation for the iran nuclear agreement, can kim jong-un and the north koreans have faith that president trump will stand by the commitments he may or may not make when he meets with kim jong-un at a historic summit? these are big questions and it's unclear. expectations are being kept very minimal that present macron -- president macron can change president trump's mind on the iran nuclear agreement. >> what about plan b?

the french president is saying there is none right now, but behind the scenes, they are coming out with a contingency plan. what would a nuclear deal without the u.s. look like, and would he run adhere to it -- iran adhere to it? heather: they said they would be no agreement if the united states withdraws. has said russia and china are not going to stand by an agreement that was painstakingly negotiated if the united states withdraws. we don't know whether iran, believing there would be no economic and if it from maintaining this agreement, will start to do breakout technologies? the growingly start its nuclear capabilities, which would obviously be incredibly destabilizing for the entire middle east. that's what he means. there is no plan to meet contain iran should they support from this agreement.

bethis agreement will followed up with a one-day visit from angela merkel. do we expect --'s macron helping set up on the same issue? heather: they are both going to come with a similar agenda. the are the wonder twins on iran nuclear agreement. you will see a contrast. we are going to celebrate three days of strong u.s. french relations. president macron will be feted. chancellor merkel comes at the end. same message. i would expect a very different treatment. president trump has an unexplainable view, anti-german view, very concerned about growingutomotives, this trade deficit, and the current account surplus. while they will be bringing the same messages, chancellor merkel will not get the same warm embrace president trump has had

for president macron. betty: the two mavericks, i guess you call them, seemed to the goal better than and we knew from macron, you could not get president trump to stay in the paris climate accord either. sway?es hold more heather: we are seeing, whether oris prime minister abe president macron, they have developed a good relationship, and that's fantastic, but not relationship has to be used for purpose. what we seeing is even the good deliveringare they for those issues that are critical to our allies? you have a good relationship with president trump or maybe not, it may not matter at the end of the day if they cannot achieve where they want to move the united states closer to our allies concerns and interests.

betty: thank you so much. heather connolly. president macron and trump meet together today or tonight. for breaking news wherever you are, we have teamed up with twitter to launch the first global news network designed for social media, offering the live video coverage, hourly up date, top news reports verified by us. this is bloomberg. ♪

>> let's get a quick check on the latest business flash headlines. pausing a stepping up to ndai.ure on sunday -- hyu elliott says they should link up to form ak maker holding company that would oversee the group.

elliott says the group should raise dividends and return more than $11 billion to shareholders. yvonne: the wall street journal says a softbank's $1 billion and the chinese hailing company -- is said to be offering $30 million at a deal that would manbang. betty: oscar mean euros is for growing a bonus for 2017 a year after the carrier sparked a pr fiasco after physically hauling a passenger off an airplane. their image took a further blow when a dog died in its care. he had asked the board not to give him a payout, saying it's important to give a message about accountability. the chairman is also stepping down. continuinging up, the text theme, we will discuss

how microsoft sees ai in its future with the vice president and development. that's at 8:40 hong kong time. the market open, coming up. this is bloomberg. ♪ ♪

welcome to daybreak asia. the dollar rose to a three-year high, and interest indicates small gains elsewhere in the region. withpotlight at this hour, expert of even after slowing demand for chips. and item betty liu in new york and google's parent company is reporting a surge in sales and spending, sink gains after hours. and trade is on the table as macron comes to washington. ♪

yvonne: a lot of focus is on tech earnings and whether that 3% yield on the tenure is going to break and hurt the whole equities story. -- a lot ofon attention on commodities as well as this could be a tailwind for bonds. chart,look at the gtv with overnight use that treasury secretary steven mnuchin could be giving an escape route to resolve given a softening to the u.s. sanctions -- nbc aluminum -- and weeven percent see aluminum.

our yields set to follow lower with commodities? betty: the correlation is quite strong. or what is story missing in that chart as well is the greenback and how that is affecting the commodity markets. let's get the first world news with paul allen. off of that shares give up gains in late trading after first-quarter profit and revenue beat estimates. googles parent earned earnings-per-share well above forecasts. other revenue which includes hardware, cloud, and at sales jumped, and capital expenditures about early due to the billion-dollar purchase of chelsea micro offices in new york. u.k. prime minister theresa may has faced a third defeat in reks, ensuring most eu

ules a written to british law. total speakers says the governance on principled unjustified and confused. facebook says it has removed more content from terror groups suggest that islamic state and al qaeda by actively looking for it. have been retried to seek out hate posts and action was taken against almost 2 million pieces. of content the first three months of the year. was flanked by9% internal procedures and not reported by users. struggling brazilian conglomerate is likely to miss a debt payment of this week despite negotiating with banks for a long. sources say the perfect a help will miss the deadline to settle $150 million in offshore bonds. they suffer declining cash flow in the fallout of a car wash corruption inquiry.

global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. it's at the market open. with equities, the story comes in bond and aluminum and metals markets. the dollar rot strength -- brought strength. that is providing a left for japanese stocks in the nikkei 225 at the open. we are taking a look at chipmakers in a short while. we are seeing u.s. futures also taking higher. a close eye is on the bond market, as the 10 year yield is trading at 2.97% right now. racked to "a close eye on aluminum nickel prices after what we saw overnight in the wake of the u.s. softening sections.

the bumpy ride continuing for the global metals market. areking in on how miners faring, some turtles are the weakest segment so far this morning in australia. energy also under pressure. oil extended over gains overnight. iseep an eye on fortescue production rose. and this chipmaker sure is falling, to topic estimates that slowing demand and brightening prospects for another year of record revenue. the defaultverage on quarter.oquarter this could provide semiconductors players after semiconductors felt on a weak

earnings report. it is a mixed bag for semiconductor stocks in tokyo and korea. faring the korean won is -- this is the biggest drop for the currency in about three weeks. a big move in the currency markets for today given the strength we are seeing in the u.s. dollar spread. back ineopolitics is the spotlight in washington as president trump is earning in an expected victory with secretary of state mike pompeo. and french president emmanuel macron with his first visit. we are joined by jodi schneider, but start with pompeo. an expected he was going to get the nod from the foreign relations committee even though there was no doubt was going to get the large percentage vote.

>> it was mixed. someor ron paul had trouble with this nomination. but he decided to go along with the vote. was more symbolic than anything else because the senate majority leader mitch mcconnell said he would bring it to the floor this week, where it is likely that even then, before the committee vote,. that he was going to get the nod. go be the first time since 1925 that the senate foreign relations committee what not have approved in committee the incoming secretary of state. does with them been embarrassing for mike pompeo and the trump administration, but they bypassed that and he got the nod from the committee, even though democrats voted against them. he will likely be confirmed this week by the full senate. let's look at the state visit where the talk about human

will macron and yes talked himself as being. work like president trump. we were talking to our last guest and she was saying that not much substance is going to come out of these visits because trump seems to be hardline when it comes to iran as well as trade. yvonne: what is the best case that can come out? >> macron those uses relationship that he is developing president trump to try to particularly work on iran. i may talk the president has set a deadline to make a decision on iran. both france and germany and the u.k. -- which are partners in this with the u.s. --. very much the u.s. to stay in that the court they have been meeting amongst themselves to try to come up with a potential site agreement so that it will allow the u.s. to stay in. and also a plan b if the restaurants out. that is going to be what he really works out -- and also a onceb if the u.s. once out

wants out.nc more potential tariffs this is a real concern for european manufacturers. yvonne: what do they offer? followed up with his visit on friday and theresa may also trying to convince president trump to stay in this deal. betty: what could they offer to negotiate this? >> i think the biggest argument they are going to make and president macron will make in the next three days is in the u.s. interest to stay in the deal and stay with these other countries. not to leave and had to go on their own with iran. also i do not how mr. will make this argument, but a lot is made lately of this may 12 deadline coming up against a meeting that president trump is supposed to have the north korean leader.

if the u.s. pulls out of the iran deal, they'll make it harder to negotiate with north korean leader kim. and of the russell make is that there are criticisms that the u.s. has made that can. u.s. puzzle of the agreement, is going to be harder for tim to trust president trump what stay in an agreement that would be made with north korea. presume that will be part of the argument that mr. macron will be making. trade: what about lunch and whenbout on trade it comes to still and aluminum terrace and if that could be more permanent for europe with those exemptions? >> that is one of the things president macron will be looking at. hello bill be given an -- howon, and the tone long he will be given an exemption.

and things like nafta and the shown, presume that the accord would come up. not is something macron has enabled to convince president trump. again, it is unclear if this report means much more symbolically, because president trump has made material decisions in the past, even with people with whom he has a good rapport, including president abe, the left largely empty-handed. writer --ditional coming up on "daybreak asia", help artificial intelligence can help shipping companies cost ut millions of dollars in costs. economist next,

advise the biggest risks the global growth. this is bloomberg. ♪

yvonne: this is "daybreak asia". may helpile adrienne japanese companies of the u.s. dollar climbs, looks comes on the treasury market with a tenure not flirting with the key 3% level. joining this is the lead economist at devon bradstreet. we were talking to investor earlier was set as their percent level is significant, technically and psychologically. would you agree? >> yes, technically it is more significant.

it is not that significant from a macro economist perspective. desperatenk about it, were complaining the flattening of the curve was raising concern about whether growth can be sustained, and if we are close to a recession. where exactly in the business cycle are we and if we have hit growth and all that stuff, and now that the yield curve is reacting -- betty: have concerns disappeared? >> think there is a little technical there but there's more psychological that it is having 3%. is notmacro perspective, entirely a bad thing. betty: we have been here several times of this 3% level. is there any evidence this can be different if we do have about this level that we could see this accelerate? >> we have to see that. see if it is sustainable because you hit 3% before. the difference now is the fed

has communicated a lot better and a lot more in recent times about its. rate hike plans. that seems to be bacon can better in investors perceptions. and the dollar is wrecking better this time and the correlation has started coming back. of tradely because little, that subsided a joe political tensions have subsided and there's a feeling of war confidence that especially has more room. them, is going to support so it is driving up the long end of the curve as expected. betty: and. you mentioned the. dollar what is different this time around is the dollar is tracking more on this spike in yields are rising yields. chart shows you the dollar has been trading in an extremely tight range. whether rates go up or not.

is this time any different for the dollar? >> slightly different because we are in a different part of the business cycle than before when we reach this situation. we are definitely a more mature phase of the business cycle. and, the fed position. is slightly different we have had a few rate hikes and we're expecting our baseline forecast the cohort three more rate hikes. we are in the cap.com for one more than the fed has indicated. thes overall tightening of monetary policy situation and other central banks globally that are important also getting ready to pull out monetary policy. i expect the dollar to have a little bit more of a strength is time around. with a like to think is

different with the rising yields is that there is a surge in commodity prices that is driving these higher, as well as inflation expectations. do you think the fed actually needs to react to that? is it transitory or is there in the underlying pressure driving inflation up? already aware of the slight build up in inflation expectations. you are right that commodity and the dollar moved up in the directions we saw today -- so the inflation expectations up there also because of the macro expectations, just because the macro situation in the u.s. is quite stable. we are going to get slightly faster growth because of the stimulus package, at least in the short-term. and because of global macro factors and the new subsiding over the weekend a trade tensions might not actually lead to an escalation of the trade war, or a trade work may not happen instructions be less than

expected -- the geopolitical situation is moving. faster growthn of and expectation of more sustained local growth is actually driving expectations professor inflation, virtually leading to that long end of the curve reacting. at the imf warns about this that global growth rate is great, but what happens after worth seems to be a downturn when you have higher interest rates as well as higher debt levels. how sustainable is this? >> is the most important statement in the imf outlook. there has been a lot of discussion about in growth, and i say don't look at where we are or not, what you should take from the imf statement in the global business cycle is translation. lessransition a slightly growth does it mean will hit

recession tomorrow or we go into a downturn. it just means we are transitioning from a very synchronized global expansion cycle to somewhat less in a couple of years. if we can ensure and artificially transition, expression has room to run. that is the balance of risks that the registrant to warn us -- that the imf is trying to warn us. if we can control some of the disruptions, than. i think expression has room to run. we are in the transition stage. you, the economist from devon bradstreet. they catch up on key analysis on gtv . this is bloomberg. ♪

this is "daybreak asia". the firepower to europe and japan is trade tensions flare with the u.s.. capital owns a mcdonald's franchise in china and he spoke particularly the on trade. hand i do on one believe there are solutions to the trade issues. if anything i think trade tensions oh make things worse. >> to see slowdown in chinese investment in the u.s.? lower, 2017 was already 30% lower than 2016, and

2016 was a huge year. i suspect 2018 even lower. and will proactively look at deals in europe. --re the deadlock in japan we are doing a lot in japan. capitalnd of the day, can go wherever it is welcome. you investing in areas that are links to or part of the made in china 2025 strategy? whether that is ai, robotics, or electric vehicles? course, if the government supports these industries, there a cow want to look into. for example, information technology and medical equipment and so forth -- these in our sectors thatare see a lot of demand.

there is reasons to look into them for investment opportunities. we don't just follow government guidelines. >> what is the strategy of a buyout fund? >> our focus is on three types of buyouts. buybacks.is corporate for year we did multinational products. lifestyles, and another company called wall street english. and recently we completed a deal called gm ib, marketing intelligence and economics intelligence database company. >> can give an update on how to mcdonald's strategy is paying out? seen a company opening up stores last year that

is on record pace, and this year they are on track to open another 250 stores. year, there'll be 50 -- so we are well on our way to achieve the target we have set for ourselves. >> in terms of changes of for financial institutions operating in china, for maybe it sounds positive, but the reality is operating in the insurance or brokerage space is going to prove very difficult for foreign players to compete here domestically in china. >> the most interesting subsector in my view is asset management. asset management is one sector in china has never been truly developed many ways. given how much savings is in china, you can bet it is a matter of time.

citic as a chairman of capital speaking to tom mackenzie. tom has another high-profile interview coming up from the beijing auto show and magenta catches talk with the volkswagen ceo later today on bloomberg markets europe at 40 p.m. hong kong.- 4:30 p.m. in hong is get a. check of business flash headlines. the corridor iron ore shipments fell blaming maintenance work and poor weather as production costs rose. deliveries dropped just under 39 million tons, in light of the median forecast in a bloomberg survey. pocket expenses are seen as high $11 incompared with february. yvonne: u.s. treasury's dropping

sanctions and a path to lifting them. more than any90%, day since april 24 of leicester and officials they don't use measures. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. this wi-fi is fast. i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops.

oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. yvonne: we see dark clouds looming over the sky this morning, trench here in asia. betty: you are watching daybreak asia. is get the first world news with paul allen. can people have been killed and at least 16 injured after event crest to pedestrians in urban toronto. police say the driver has been arrested by this too. early to speculative on emotive. when this is the set -- witnesses say demand jumped a curb and hit people before driving away and the incident happened as g7 ministers headed in toronto at of meetings in quebec city in june.

oil surged on the escalating conflict in yemen, and futures in new york reaching the highest since december of 2014 after iranian rebels launched and successful missile attacks and the senior member of the molten group was killed in a saudi strike. with $70. flirted resume ontiations tuesday and the canadian foreign minister says talks in washington are in an intensive phase. president trump has said he can make immigration cap highlighting a deal is far from certain. on to the president said mexico must stop people heading to the u.s. and copper wall funding fast. french president emmanuel macron arrived in washington for a three-day trip that will include an attempt to keep u.s. and the iran nuclear deal. does the first visit in a trump

presidency. macron says his agenda includes security, trade, and dishes that go beyond the u.s. and france. angela merkel is due in washington on friday. this is bloomberg. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. yvonne: the latest with sophie kamaruddin. yet the u.s. ten-year treasury yields retreading just a touch. that has helped maintain support for the dollar, and the yen is under pressure in falling at. a two-month low that is supported equities by half a percent. i will get into that shortly, but we are seeing the 200 day aluminad the likes of

sliding as much as 7%. this bumpy ride continues for metals, extending declines as aluminum gets a shot after metal prices slumped the most in almost eight years overnight. switching up the board to specific metals among the more's performance in the nikkei 225. japanese chip related stocks are imco.e rise suggests some the stock is under pressure as sales fell short,. of the profits that estimates overall this as to concerns that peaked. have t hyundai mortars is gaining hyundai motors is

gaining ground after a merger of two units. and hotel raising to a two-year high after data signals record earnings can be obtainable for 2018. tech. we are staying on real parent out of that reporting after the bout and beat highest analyst estimates, but gave up those gains. remy innocencio is here to explain. ramy: even as he saw the bloomberg terminals fall, ups came in and the share after hours jumped. revenue came in and the shares jumped, and the cost came up and we saw this short-lived pop and drop as it were for alphabet stocks. let me run you to the numbers for earnings and revenues. eps was a big beat.

estimate there, and since helped by a brand-new accounting rule. but now needs to this goes gains as well as losses from what is called equity investments. one of its biggest investments is uber. they like a $3 billion gain that added three dollars and $.40 per share. yet see how revenue was almost $25 billion against the estimate of. $2 billion less. paid clicks doing very well at 55% higher on the year. hop on to the bloomberg terminal and don't go further into the revenue increase your. you can find this in the gtv library. you can see this 26% growth. the last time it was up this far was four years ago. this is the next two demand and mobile search ads and strong performance by you to veto services. -- youtube things

medial services -- youtube video services. this up to another bloomberg terminal chart the gtv library. -- out the score best growth margin. out for bets growth margin. bet. that often alphabet. cut computing at hardware. for the most part these are the biggest positive switch yvonne caused stocks to pop is momentarily. when it came to this increase in search we saw -- is it really going to stop anytime soon? cfo: that is actually what said. this is rising and continue to rise.

they you mentioned tripled year on year to $7.7 billion. puzzles ago back to the bloomberg terminal because one important thing we have to look at is the cost for traffic acquisition. $6.3 billion in your gtv library. this is up 36% from the first quarter in 2017. when you look at that in terms of a percentage of her revenue, that is 13.2% and that is an all-time high percentage there. the cfo said expect more of this as welle ads on mobile as those automated ads that. out on your screens should did say one good thing that investors might like is the pace of the change and the pace of the rise will be slowing. one final bloomberg terminals chart i want to show you before

i send it back -- besides the costs, that are concerned for investors to get the analyst recommendations. a and r is the function you want to go to. there are nearly seven or so buys and a few cells. there is really no red here. sells. no yourn see the price target its high. this is one of the highest looking back ever since late 2016. the premium. this huge, about 20% for a premium. considered, he pretty good earnings report, except for those costs. yet to give some in order to get some. and off about earnings are our top story in today's edition.

go to dayb on your terminal and it is available on the mobile and the bloomberg anywhere app and customized settings on the news industry's assets you care about. concern is growing that the demand for apple iphones may have bottomed out. suppliers have seen revenue growth pact sharply after the release of the latest devices. it's good to bloomberg tech reporter. let's start with what these taiwan companies do for apple. >> good morning. taiwan companies we are they exclusively and theynes for apple, split orders for ipads while

they make macbooks for apple. what did the say about apples overall sales? we have been looking at their numbers. their monthly revenue per stage and how apple devices are selling and the quarter. since these companies are required by local law to disclose monthly revenue numbers -- we think that we can probably show how apple's some performance is in the corridor. quarter. betty: what does it say about apples performance in the past quarter? >> in the january and march

period, which is the combined revenue for these companies are at the healthy 8%. compared to the holiday quarter, to has slowed down quite a bit in the holiday quarter. so combined revenue grew 8%, we can see a sharp slowdown. it is one reason why the market is jittery about apple over the past week. concernedare a bit that demand for apple's high-end iphone 10 may be softening. bloomberg's asian tech reporter. betty: thank youbetty: microsoft is saying it will shave $10 million off of costs from a hong kong shipping from using ai. we'll hear from the company's head of asia r&d next.

this is bloomberg. ♪

♪ asia".this is "daybreak intelligenceicial is becoming a vital part of logistics and supply chain management. orient overseas container like a ihe latest from to adopt converted with microsoft to save $10 million in operation costs annually. let's bring in the chairman of r&dosoft asia-pacific judges for an exclusive interview in our hong kong studio. it is adjusting to see the shift in microsoft. before it was about mobile and come first and now it seems microsoft is trying to leverage ai for growth. tells how this partnership fits into that picture and why? be here to talk

about microsoft in our strategy and the partnership in asia. they are in the important customer to us. yarn important player in the logistics business, and the partnership combines with ai enforcement learning. the data fore of information and is for the entire shipping logistics industry. we look forward to many of these kinds of new partnerships for many industry partners in the future of asia. yvonne: where else you see these opportunities? shipping and health care are big, ones how do these

partnerships shaped the asia-pacific? you see partnerships with private and public organizations? >> every industry try to -- i see the nextiate benefit in the four sectors. in manufacturing, there will be a lot in asia. and so-called industry 4.0 in made in china 2025. we will continue to see a lot of those. and the second will be logistics. i think that can be to the , logistics.nd, air i think ai is the catalyst for

the revolution in the health sector of many people, as expected for years. last but not least, financial services. tona will be more open market assets for financial service. and microsoft will team up with china anc management corporation in the financial service center. betty: privacy is a big topic, but to the problems pertain to microsoft or the insulated the report risks out there? any data,ai can do you need to do the competition. i think -- you need to do the computation.

we do all we could to help the protect,manage, analyze, individual data. platforms -- ita think it is our job, and it is up to the application and provide the platform to help achieve the goal to serve the customer. and to protect data privacy. betty: what you are saying about ai applications -- that is more and the business space, the shipping industry or financials. i am taking about the news earlier today with amazon, and yet this program to build robots for people's homes in a few years. where are you seeing the big

opportunity? is it with companies on the b2b side, or a more potential site on the consumer space for ai? >> i think the people certainly see a lot happening in the consumer space. broader -- thee physical transformation is provide the is to cloud in ai platform to be able to allow the company to with holistic information. is not just happening in the product, but how they connect to customers. side, wheneactive the data on customer support and the proactive side, and how we can make the customer base to be part of the market strategy.

other thing internally is how you use that yarn in big data to improve the operation. how do uset least, to unleashis -- employees creativity and innovation so they. could do more for the company so the copywriters like microsoft believe with the port and aspects to empower this information. betty: i am overstating it but it seems like there's an ai arms race around the world and was going to be the fastest a doctor and two is going to make this the most commercially viable. how is asia going to win that arms race? >> i think for anyone including asia, and one in the platform to develop at applications -- this is why we think it is important to lower the barrier of entry.

that is what we do at microsoft to make sure our platform can help the developer cannot ai applications easier and faster. and also talking about the talent. this book from has to. extend to the town said as well is why we leverage our long history and start developing ecosystem. the partnership allows us to nurture existing developers to be more ai ready. soon, the real-world project code development. betty: it is a fast the moment going on in ai. chairman of microsoft asia-pacific r&d group, they give for joining us. electric car start up his image to bring a new suv to market in china by the end of next year and to. the u.s. by mid-.

2020 the cofounder and ceo talk exclusively to bloomberg about the companies engine and the plans for the road ahead. into bring a suv to market 2019 is the target. you talk about the challenges you face, outline those. >> we are on track and will make this happen. if you do a car in three years, this is not a normal car developed process. if the take some risks, when it comes to the engineering part, convinced and confident we can make this happen by the end of next year. chinese market by end of 2019 and the united states by makes 2020 and europe in the second half of 2020. >> what is the funding target? roughly $1oking for

billion. when you for the development of the car and some other things, on the other hand we get great support from management. more than onebit billion that we need to raise and capital market. >> what is your cells target after you launch? thee are aiming for thousand units after four years because this is best we need to complete the plan to fill it up and profit are production in the plant. the volumet year, will be below 100,000 units, but wrapping up to 300,000 units over four years. >> what is the strategic value of partnering up with a state on company? >> they have a lot of resources. daft excess of supply chain and

supply power. debt negotiation power in the market. they get strong political support, and they have an emotional brand in china. >> who do you see as you may competitors? >> this product in 2019 doesn't have to many competitors. the electric car perspective, maybe, but not from the connected smart car. there be no other product having this. to slip in the market and our competitors are bmw, mercedes, audi. >> to the changes in the ownership of the chinese auto market do away with a competitive advantage that lets your hand? changes with more competition to the market makes it easier for other parties. to come in.

but we're not afraid of this because we are already in it. >> i what point do you consider an ipo? >> we're concentrating on getting the product to market at the end of next year it into the success of the audit the market, we can talk about an ipo. but this is too early to talk about it. andne: does the cofounder ceo speaking exclusively to tom mackenzie. more ahead on the big asia. this is bloomberg. ♪

betty: a quick look at how the markets are shedding right now. a lackluster trade for the asian markets, except for the japanese markets, getting a boost from the euchre yen. you can see the cost down 6/10 of 1%. it from "daybreak asia". stand by for "bloomberg markets". ♪

>> the 10 year treasury notes flirting with that their present handle. and profitability expectations with increasing concern of slowing demand for chips, and as essult jumping, indicating easier sanctions on the company, but or like must go. this is bloomberg markets. ♪