♪ >> the fifth these unchanged and sticks they graduatl goal. saw the dollar jumping that inflation may run hot. to submit u.s.ot threats hours before top-level trade talks begin. betty: in elon musk says tesla should generate cash profits in

the second half as margaret production accelerates. that sense for motor. -- that sounds familiar. and is "daybreak australia" two hours word from asia's first major market open. and is is just after 6:00 in new york and will look at the action in wall street and how it plays into the asia-pacific trading day. it is this just think the fed statement, no change in interest rates. it seems to hint at a more subdued economic path looks like the rate hike is as is. the interpretation of the comments about inflation seems to hit the market. paul: that is right. we will get more on the inflation target and what it means and this idea the fed might let things run away for a wild. hile.

we will talk to kathleen in a little bit. state ond we heard fficials say they will let inflation run a little longer. taking a hit at the dow falling by winter and 70 four points, to s&p also lower as you can see him and the nasdaq also in the right. ed. to as much as other indexes, but setting up for a softer session in asia. paul: it is going to be an interesting day here, but trading in new zealand is getting underway and has been for a couple of minutes now. the currencies have been. moving around in the wake of the fed decision the kiwi settling below $.70 u.s., and australia it is looking quite with futures pointing higher only at four

points, and the aussie dollar also settling below $.75 u.s.. but it a quick check on commodities, gold clinging on by its fingernails to the 1300 level" slipping below $68 a barrel as u.s. inventories rise. we have breaking news for you bank,ational australia give me a moment for like it the right buttons here. out national australia bank with a earnings cash profits of $3.29 billion at the interest income of $6.75 billion, these lines crossing the bloomberg terminal right now. this is one to watch at the moment command you can catch hours exclusive interview with ceo andrew thorburn on the bloomberg markets: asia at 1:30 p.m. sydney time and 11:

30 hong kong. and the fed has rocked the meeting living interest rates on hold, and left work economics policy editor kathleen hays with us. no change in policy or surprises, but significant changes to the wording. is amazing how much power one of the work could have come at it is one little work if one is focused on, and isometric. word is symmetric. the inflator after six years of doing it once, what does the fed say and how do they acknowledge this and how can they signal their intentions for future rate hikes? people are saying they acknowledge that they will move closer in the are getting their. re. chart, go at the gtv

to your bloomberg and follow along and can save this chart in your library. the me show you what they are looking at, 2% inflation target that has been met by the headline number. at 2%.quoise line at 1.9%, and even so, this is something a lot of people are figuring this will make the fed move. also noted some measures of labor market compensation are not moving so much. this is something that are cautious about. i want to give you the courts were this new word -- symmetric. inflation is expected to run near that symmetric 2% over the median term. it means you can go on either side. later in the policy statement the me while the candidates

inflation goal. saying,about officials profile bostick saying that inflation could move above 2%. percent, and bill dudley is saying i'm ok with 2%, but if it moves by a margin, will change our path. is nothing in the policy statement that suggests the fed he is ready to move off of but it is only may and we have seven months left in the year. could something happened the --but something happened in the upcoming? to change things? betty: does it give us a clue of how it will play out this year? kathleen: it is interesting but it goturprising that weaker in the first quarter, and

on the stronger not come up over the course of the year, but they propose that pricing business investment is moving right along and business investment is looking good. one thing that caught people's argument particularly if you are is the facthe fed, the fed it knowledged that inflation expectation has not risen. they are steady. another gtv the chart and the get an interesting comparison we put together, the connect inflation expectations to break even and had they are tracking crude oil. the five-year breakevens are in step with crude oil. if the fed sees that, it has number off lately, and two, any kind of change in inflation that is past memory by oil prices may discount, because all prices have moved up. we know the oil prices can move done quickly as well and that is one thing that may look past. one of the bond teams of the

world was on bloomberg television earlier and said this focus on inflation is not new. period.llen talk about exceeding. inflation over a certain he said he doesn't expect one more rate hike, let's is in to what bill said earlier on bloomberg tv. if the fed moves significantly higher, i expect a john wright type, i don't expect to or three or four or six power forward. i don't think they could do that. a note was written after the fed decision saying that inflation is a good metaphor. it is like when you are in gym class and you climb the rope and you you fall, the fed the bell on inflation and hitting that 2% target, and now they have to keep reading that bell loud and clear. the fed realizes that the

outlook is not assured with inflation. this is good news for the fed but it does it mean that the jump on the four rate hikes in 2018 horse just yet. hays in saneen francisco, thank you for that. for more on the market reaction on the fed statement and reactions on the language on inflation as we mentioned, and the dollar resuming its rise. su keenan is here with more on the losses we saw on the markets. we saw the market higher for the fed decision, but the dollar jumped on the decision" jumped and he saw stocks hold, and in our later it sounk in. tered a bearish reversal. we saw the talk of no rush to

raise rates hikes was explained, and you will talk about commodities and treasuries and what you are seeing is where we are spread between the five-year and 30 year yield come and that happened after the decision. let's get to the big movers because there's a sizable move. apple is celebrating it's very strong earnings impact. setbloomberg opinion best apple, i am sorry, you when. applauding the strong quarter. past priceame, long targets and beating estimates. a new climbed 70% since seo took over less than a year ago and she to a higher level. hit, they announced they can gains on tax reform, but sales are lower in the u.s..

that is 70% of earnings and hit investors. snapped taking a huge hit, disappointing investors capp.ers on its operates,d pushing the 10 year versus the two-year and the front and showing more hikes ahead. paul: let's talk about oil and is moving around recently, dipping below $68. what is the story with commodities? su: even though the dollar is higher, with slick at the chart, oil advancing on the iran decision a lot of concern about sanctions. take a look at gold, short of the big jump immediately on the fed decision, and then it came down. a bit of a pump as the dollar eased off of gains. paul: su keenan, thanks for your

analysis. let's crossed these numbers that we have breaking across the bloomberg on national australia bank. cash profit of 2.7 6 billion australian dollars, and funding pressures building in the second half that is on track to meet expense and growth guidance. targets. and they expect to reach the capital ratio of temple 5% by 2020. i will get more information on their ceo when i speak to them later today. now let's get the first world news with courtney collins. tortney: china says it wants conference on trade and comments from the senior government official came hours before talks began the delegation of trump administration officials. the official told bloomberg

beijing will not accept any preconditions such as abandoning its long-term advanced any fracturing ambitions or narrowing to trade gap by $100 billion. the world economy showed signs of stabilizing after recent moderation with manufacturing activity strengthening for the first time this year. markets factory pmi across 40 countries rose 53.5 in april. of 53.3,h is low economist from goldman sachs and j.p. morgan chase say not the back against the world economy just yet. president trump's massive fiscal stimulus plan is adding to the u.s. debt overload and forcing the government to drive up bond issuance as the fed shrinks its balance sheets. the us treasuries the state the amount of long-term debt itself billion and to $73 also investigating adding another five year sales to israel or calendar planning to

issue a new two-month bill later in 2018. and a political consulting firm at the heart of the facebook data mutilation scandal is shutting down. aysbridge analytica s afterre the solving numerous unfounded accusations as a reason for ceasing operations. it says is being vilified for activities that are not only legal, but widely accepted in online advertising. global news, 24 hours a day, on the air, and at tictoc on twitter. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. betty: up ahead as we count down the u.s.-china trade talks, a former official in the content and great administration. marketust ahead,

expecting to rate hikes in the next five months from the fed, but is that too much? that is next. this is bloomberg. ♪

paul: i am paul allen in sydney. betty: and you are watching "daybreak australia". no change ofling its path of inflation of the 2% target, and were joined from chicago by jim the uncle of beyond core research. after seeing the fed statement, what is your reaction? >> the fed is on course to raise rates and if you look at the market probabilities, they are assigning 100% chance they're going to raise rates in june, and a 77% chance of another rate hike in september.

the statement is fine, they are symmetrical, but the next meeting in june, they are going to raise rates in june, and september. what is warning the market is if the fed goes too far. we have quantitative tightening, and they're raising rates and western to see markets start to have a bit of a problem by a backdrop is the economy is booming and earnings are through the roof and everything is going -- going great, except equity is not making progress because there's a fear that the fed is going to do what they are good at and go too far. betty: they have gone to far one way and go too far the other. is there any evidence of that? jim: other than the financial markets and the flattening of the yield curve, no. the answer is is evidence in the economy the fed has gone too far, not really. there is evidence the economy is slowing and the consumer

sentiment and data out of europe and asia is much lower than the u.s. but that is outside of their purview, and if you look at the yield curve and look at the stock market,'s rebelling in the face of arguably some of the best earnings numbers we have seen maybe ever this late in the cycle -- that is where your evidences. markets aren't buying any of the good news and rallying. paul: we have had discussions at that commentary that circles around this rhetoric of searching for inflation and inflation is nearly there, rather than inflation running away and being a problem. is the market worried about inflation? jim: for those that they're not steeped into the financial 1.9 or are fed policy, 2.2 inflation, why do we care about this, this is rounding error stuff? to some extent that is true, but

one, the market benefits from those stimulus the fed has done and all central banks have done by bloating out sheets and providing stimulus. we are afraid it will start to take away and that is what is problematic. 50 raise rates in june and september and you believe there last not chart, race six times between now and the end of 2019, that is too much, endless we get a lot more inflation. will invert the yield curve and cause a recession and that is what is bothering the markets over the last couple of months. paul: you did accuse the fed of gore too far, and i wonder how much of this fed stashing away firepower circuit cut rates in the event of another crisis? jim: the only problem, i hate that logic and their hope the fed is not engaged in that logic that we're going to raise rates and we have something to cut later.

you are going to cause the crisis you will have to deal with if you are not careful with that. europe has shown there is the possibility of negative interest rates ainsworth to get really bad in the future. is still think what the fed is ultimately on a path for is trying to get back to what they perceive as normal, but what they're not appreciating is how much markets have become dependent on their easy money, and the fear of it going away is why there seems to be wobbly. betty: you think the fed is not aware of that? i think the fed is very aware that easy money investors. jim: we look at fed speeches and what we found is there talk about financial stability is a 14 year low. they are more worried about inflation. they think, because the earnings are good and the economics are

the, outlooks are good, noise we are seeing the markets is not about them and they think it is about other things. i do think it is about them and that is were the departure is in the markets right now. betty: you think if the swing the other way on qt that could plunge us into a recession? not necessarily a recession but it would plunge and continue to provide volatility in markets and continue the roller coaster, and that will wear on the economy overtime if markets are still volatile. page ande a two-step will not get it immediately into a recession but could cause problems if they continue down this path. jim, always provocative comments on the fed. you can get a round of that story and many more in today's edition of daybreak. to daybg subscribers

on the bloomberg anywhere app. chinese hong kong ipos expected to be the biggest anywhere since alibaba went public anywhere. we hear from the head of the chinese venture capital firm, and you can catch our talk next. this is bloomberg. ♪

betty: preparing for you hong kong a deal that may become the world's biggest this year and sources say don't raise rates of $10 billion. the morning venture capital is the early-stage investors and in exclusive interview their co told bloomberg he's still treats xiaomi as a large-scale startup. >> we are still very young. this is a startup company come

all that have large-scale business, and they have the global exposure right now. i think they continue to grow in this market, and that this income you think about all the chinese tech companies. have strategythem to expand the global market. capability to the scale up and go to the global market. more than that, this company is not just pure hardware company. they are internet services. modem.ve a new retaining is a new model. you cannot benchmark this

company with a traditional model. this is a hybrid. it is doing well in india and china. right now i know they bring the tv and smartphone, and the future that will bring more. investment have the and leverage at ecosystem. they can duplicate the approach, which is proven successful in china and the rest of the world. but, you need globalization. -- you need localization. but it is too early to tell, but i have confidence. paul: that was their ceo spoke

exclusively to bloomberg. and we speak more about their ipo plans later. up next, tesla first quarter earnings. stay tuned. ♪

sydneyt is a 30 a.m. in and the market's opening demand minutes time, and futures are looking quiet, up by just four points at the moment. betty: it is 6:30 p.m. in new york and you're watching "daybreak australia". -- let'sst world news get to first world news. courtney: inflation is close to target without any intention to veer from the path of gradual tightening, the fomc also noted weakness and growth in the first quarter, removing a reference in the march statement that the economic outlook have strengthened in recent months.

they bounce it out by noting solid growth in business investment. and the two black men wrongfully arrested settled on an undisclosed sum and the promise to pay college education and noticed -- and settled of the city of a promise of $200,000 program for non-entrepreneurs. starbucks described the arrests as reprehensible and briefly closed thousands of its stores for staff training. when of president trump's lawyers says there is still open to him giving in the interview to robert mueller despite the departure of a key advocate for cooperating counsel. rudy giuliani spoke with latest changes of the president's legal team. white house lawyer tight cup is am a flood, a i veteran who represented bill clinton during his impeachment hearing.

and the president of the international red cross says the war in syria has entered what he post they battle era and described the current situation on the ground as a threshold that will reshape the way humanitarian work is conducted both in syria and iraq. eitherbig actors will generate active this situation some consensus to stop the war, and to go into a phase in which more tranquility. or will see again another r dangerous situation and you may see new combat operations. global news, 24 hours a day, on the air, and at tictoc on twitter. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. betty: tesla is beating street

expectations for first-quarter results and the stock is losing ground though and after hours. rami, it seemed like good news to the production target? was less of a lost than expected, but if you asked me that question 30 minutes ago, i would have given you a different answer. is on musk is in a office, and refusing to answer questions, which is a first for him, and investors are not likely that. the past half hour shares are down there percent, and now down closer to 6% at this is clearly a price that is extracted from elon musk and what he is saying. these questions are so dry, you are killing me, and elon musk makes jokes on twitter, saying bankrupt, and investors not

happy about this. yesterday earlier, i would have for thet the visibility second quarter production and third-quarter production is not as clear as investors would actually like, because they are saying 5000 units a week. they're also saying this is exponential growth so they can't give an exact number. have paraphrased is we are going so fast we don't know, but investors don't like that. look at the top lines here. they are bees across the board, adjusted eps less of a lost than expected. thethe auto growth margin 18.8 percent versus the estimate of over 14. there's also margins of a goal of 25%, all these things are good, but what we are seeing is this lack of confidence in terms of what is happening in the future.

hop on to the bloomberg. i want to show you some good things. this is the amount of cars tesla made in the past quarter. we are nearing the 35,000 mark, and the number they are targeting is 5000 units per week in two months time. this is one good thing. one negative is the free cash flow. billion, now six quarters in the negative. one positive is tesla should be cash positive in the third as well as fourth quarter. paul: investors went through those numbers, and we had the stock jumped 3% and now it is negative. the prevailing sentiment is whether you feel you are able our you to hop onto

the bloomberg because the bears are taking charge. take a look at the short interest, the white light, the highest in two years on the concern of production. you can see share prices in the blue. gene munster said one argument is the company could actually go out of business. he had a caveat sing the argument is they could go to the moon. analysts are split. 12 holds.10 buys, and you can turn to your bloomberg for more on tesla results and go to tliv and get commentary and analysis from bloomberg's expert editors. spotify has tumbled despite a 45% jump in subscription think it's first quarter as he public company. for more let's go to bloomberg

ipo reporter alex barinka in san francisco. up, butsubscriptions unhappy market. is is the problem of how you monetize this business? >> that is something folks are live yet for a net income basis. the katie meier than estimates, but that includes some of the cost to get the committee public. the company went public through a direct listing a month ago. in terms of a mismatch of all of the results being in line with and the and estimates, negative share price reaction. i think some of it comes down to a recent of expectations. folks expecting spotify to beat its guidance on paid users and premium subscribers 75 million was in line with the guidance. butaps looking for more, with this company specifically at spotify going public through direct listing, was a situation

where basically they opened up the floor on day one of trading for all existing shareholders to sell. my sources that we have the time not as many shareholders did sell. 12 we see the stocks climb to 15% from that open price. i think if you are an investor now might be the time to do it. given the 5% selloff aftermarket on these decently good results, and be some of the profit taking is what is going on here. paul: how much of a cautionary tale is pandora? with ken spotify due to avoid the same fate? spotify can continue to do what has done well and it looks like radio more than spotify does come up at spotify is the market leader and two times bigger than apple music, which is the other music provider that has made a mark for smartphones.

spotify continues to press forward and grow subscribers, which they are trying to do in new venues. you saw the hulu partnership to provide video content and music content to subscribers for a bit more than its current music only fee. they continue to push into free users and these are based they hope to further down the line convert to paid users. they rolled out additional features to attack youtube and you to free content in audio. they are pushing to get more users and if they continue to do that and make progress to get to profitability, cap's spotify can prove are not going to go the way of pandora. betty: is at the music industry making a comeback and isn't that supposed to benefit these companies, or not? alex: spotify is pushing to prove that point.

they are saying they make money for the content creator and the music makers. they talk a lot about that the run-up of the listing, and if they can't justify the likes of taylor swift, who wants pulled her music off of spotify, and then decided to come back. if they can't prove their compass should be on spotify and the music makers can actually make money by pushing their music through their platform, they don't have anything for this user base to listen to. with music coming back they will continue to push to get this market leadership role. as we have seen in the battle for eyeballs and years, these things change quickly. so the ceo better keep on his toes or someone like apple can some up and steal share. betty: alex barinka, thank you for that information on spotify.

coming up next, steven mnuchin's mission to beijing and a trade standoff. it is tense. this is bloomberg. ♪

betty: good morning, i am betty lou in new york. and i am paul allen in sydney and you're watching "daybreak australia". the trump administration is downplaying it could break through with china when talks begin thursday, a chinese official has told bloomberg that asian want waiver in the face of american fa threats. we are joined by a professor of the harvard kennedy school of government and former u.s. secretary a state of defense and another of a book with a destinedic title, " for war."

think you for joining us. -- thank you for joining us. the u.s. saying they will avoid any pre-existing conditions, is the barcelo for this meeting? -- is the bar set low for this meeting? >> i think this is more foreplay and what i suspect will get worse before it gets worse. paul: if you were part of that , what would you be advising to stop it from getting worse? this is a follow-up of a meeting that occurred a month ago when the chinese star for the economy can to washington. steve mnuchin can to him and said were looking for you to cut when it a billion dollars off of

the $275 billion trade deficit this year. the chinese guy said, that is impossible. that we will see some movement on that front. i would not be surprised to find the chinese coming up with $50 billion worth of ways of cutting the current federal trade deficit. and also try to make concessions in other areas. at the same time, as you can see, this is not simply about one set of tariffs or another set of tariffs. now it is into the tech area. if you look at what happens with cte recently when the rest said we are no longer selling components, including chips. the stock collapsed. these are early stages for what is a relationship that is likely to get worse before it gets worse. paul: china in many respects can

afford to wait this out. is the expert in playing the long game because donald trump is facing midterm elections later this year and there is a risk the trade war could hurt part of his base in terms of farmers. is nothe reason china really being conciliatory ahead of this meeting? that is a good point and the chinese are doing their best to stir up american constituents, both in the business community and foreign committee, that have states and relationship and trade with china, to try to get trump to back off for a bit. i think that is part of the game. will we know from history of trade wars is they

can escalate quickly. they often spill over into other arenas. if there ischinese, a business deal to do, mnuchin says here is the terms and we want a deal, i suspect they will be pretty forthcoming if they figure they could have a deal be done in a civil manner. unfortunately, given this is caught up in a lucidity dynamic, when american perspective this is a china that is rising in our face and space everywhere, a adversary.trategic and on the chinese side they think americans are trying to hold them down. betty: the white house is trying to downplay any kind of idea of a breakthrough in this meeting. it might be tense and

ceremonious. but what kind of mandate to think he has from xi jinping? graham: i think he has a limited ifdate to get the settlement he cut, but president xi has fromthem the economic czar the program, and from their perspective to have it ambitious domestic program that is mainly about them and what their turn to do for china. its impact abroad, which it certainly has, is incidental or collateral. they haven't appreciated the extent of which this is now impacted american consciousness across political class and across the policy class, which is what the situation is getting worse. betty: on a final note, the currency for the chinese has

been declining ahead of this meeting. clearly it seems like the chinese are sending a signal. how much leverage the they have with the currency? graham: that is a good question, and they certainly do manage it carefully. you are right in what you said earlier that they are masters of the game of playing signals and adjusting and adapting. they have considerable the way. ay.leew the subject of north korea, this exact 2008 all over again with north korea willing to give away their infrastructure in exchange for cash and energy, are we going to see the return of the week after that versus a new dawn? i am in characteristically optimistic about this. there is a good chance that

trump and kim jong-un will announce that they have agreed to denuclearize the korean peninsula and to normalize relations, to other make threats, and begin the process -- to eliminate threats. they will handed off to negotiators and say they are detestable and outcome of those because our fujian complicated, but every month at every year we are negotiating with north korea that is not testing icbms and not testing nuclear weapons, and not at war with, is a good year. i would say the path where on is the best possible path given the feasible alternatives. is the way to but it worst possible path, except for all the others. graham, thank you so much on the upcoming talks between

the u.s. and china. is also the author of, " destined for war." we're the national australia bank massive profits while announcing plans to spin off its superannuation and asset management business and the lender says it is targeting a separation of the brand by day and of 2019 and also warning sees funding pressures helping in the second half, although for your expense targets are unchanged. paul: kraft heinz shares jumped in late trading after profits of a demand cents per share exceeded analyst estimates and revenues of $6.3 billion narrowly missed projections and sales in the u.s. generates some the percent of revenue and dropped 2.3%. shares have been hammered since last year's takeover attempt. betty: blaine are softbank and

talks of buying a stake in the world's second biggest reinsurer but discussions have come to a standstill and sources say the two sides us agree on the price and decided the state and how much control they would have. a deal with swiss re-might help reshape it into a technology investor. and: you can watch us live see our past interviews on our interactive to the function, tv , and back into any securities or bloomberg functions we talk about and be a part of the conversation by sending us messages during shows. this is for bloomberg subscribers only and check it out at tv . this is bloomberg. ♪

paul: i am paul allen in sydney. you are watching "daybreak australia" and the quick update of how the market is trading and about to trade in new zealand. marginally after loss

we saw in the u.s. trading also unchanged and futures in australia is looking to continue to focus on the troubled financial sector. looking better come up with a aussie dollar continuing to decline in the face of strengthening greenback. paul: it is all but in quiet here despite the week lead from wall street. that's like at what we should be watching is trading gets underway. bloomberg editor adam haigh is here, and with the earning season is doing in different parts of the world, it seems u.s. stocks are getting less expensive. >> and broadly speaking it is a decent u.s. earnings season and we haven't seen it in the way to equities architect is responding. but it has been decent and what

has been is change the federation cup position between the u.s. and europe. have a look at this chart in your gtv library that shows you the elevation premium narrowing between the u.s. and europe. we are getting to levels we haven't seen for a few years now. u.s. stocks are not as expensive relative to europe and it is a part of the function of people moving money into europe and some valuations getting tested there. 30 there's up that to get back to u.s. exposure is the differential has been done in favor of the u.s. and we'll see how the rest of the earning season plays out. there is 20 of global macro themes to get your head around, but from a valuation standpoint u.s. stocks are looking good. paul: adam haigh, they do for joining us. don't forget to check out the gtv library on the bloomberg terminal. thank you, i think that breaking news? united overseas bank with

a net income for the first quarter above estimates, 3% above analyst estimates net income at hundred 78 singapore dollars above the estimates of $965 million. n,t interest income coming i will watch out for shares when supermarkets start trading. paul: plenty of earnings crossing today. that does it for "daybreak australia" this morning, but i than men betty liu are up next with "daybreak asia". as boring as the fed meeting was supposed to be, we have interesting lines from the fed statement with no changes in policy and talk about the inflation outlook and the fed suggesting it will let inflation over should a little bit. at what special is the key question, and a professor from

the harvard institute joining us the next hour or so. paul: that is conducted on daybreak asia. stay tuned. ♪

betty: 7:00 a.m. in hong kong we bloomberg's asian headquarters. welcome to "bloomberg daybreak: asia." asian stocks headed for a mixed start as the fed delivers a bloomberg's asian hawkish hold. signaling inflation rising above 2%, remaining on track for gradual hikes this year. york, wherein new it is just after 7:00 p.m. this wednesday. ing not to submit to u.s. threats. elon musk says tesla should generate