♪ it is 7:00 a.m. in hong kong, we are live from bloomberg's asian headquarters, welcome to "daybreak: asia." korea,eers in north trump officials say the u.s. is ready to invest but only when the nukes have gone. president trump does an about turn on china. he is going to help the t stay afloat. betty: i'm in new york, it is after 7:00 p.m. on sunday. malaysia sales in uncharted waters. economy corruption, missing money top on the list. and the china takes another step

toward mobile financial inclusion. they may open the door to some big shorts. ♪ betty: big events to watch out for this week, economic data as well as a visit to washington. i want to pull up this chart, investors will be watching the treasury yields, and in particular, this continued flattening of the yield curve. the yield curve is the flattest since 2007. ,here has been tepid inflation it's something we mentioned, the st. louis fed president warning that something will happen later

this year or next year. we will try to shed some light on to what the fed thinks about this. some testifying before congress. sure they will be talking about the flattening of the yield curve. yvonne: right. there is a lack of catalysts in the next couple of days, with there are some debt auctions, not a lot of u.s. data to move the needle. fed speakers will be key, givien that if they ignore, it could lead to more flattening on the curve. is it a sign of recession, you could not see that in the u.s. market. let's pull up where we ended on friday, of bullish undertone to the market, the dow up 90 -- 92. the tech shares continue to slump and that dragged down the nasdaq. today in muted start

asia. we have seen the bp reversal, -- zte reversal, the president saying and want to help them bring back jobs, that could be a positive for chinese stocks. malaysia had the stunning of victory, but otherwise pretty much flat. weakness.eeing some we saw the stall in the greenback, the u.s. 10 year yield below 3%. under anustralia just hour away, futures up about four points right now. the yield is ticking up about one basis points higher at 279 for the 10 year. were waiting for opens in japan and korea. checking futures in chicago. points, lookst 30 like a flat open. let's get to the first word news with rosalind chin.

indonesian police say six members of one family, including girls aged nine and 12, carried out a suicide bombing on three children -- three churches. the father detonated a car bomb, teenage sons used a motorbike and the mother and two daughters were explosives. police say the family recently visited syria and relate to a militant group. >> this act of terrorism is barbaric and beyond the limits of humanity. it has inflicted casualties among the people, police and innocent children, including the perpetrator herself and her own children, who acted as suicide almost. -- suicide bombers. >> the former malaysian prime minister denies a corruption scandal. he was fined for leaving the -- for after abandoning

what he said was a short holiday. an internal report will be declassified. one of president trump's most contentious campaign promises comes into being on monday. moving the u.s. embassy from tel aviv to jerusalem. he says it is time to recognize the city is the capital of israel. the region opposes the decision and the palestinian authority has written off all contact with the trump administration. the u.k. prime minister is calling for unity on brexit after her cabinet split in her plans for a relationship with europe was called crazy by her own foreign secretary. she has said that the country can trust her to deliver although the government still can't say what it wants from brexit. almost half of her cabinet opposes" some ties with the eu. 24 hours a day.

two senior trump administration officials said the u.s. is ready to allow investment in north korea once they have verifiable proof of irreversible denuclearization. we are prepared to open trade and investment in north korea as soon as we can. >> they will get our finest entrepreneurs, risktakers, capital providers, not taxpayers. private capital that comes in. north korea is different -- is it in need of energy support. they are in great need of agricultural equipment and technology. we can deliver that. yvonne: let's bring in our editor come a joining us from washington, d.c. to see you. it seems like both sides are making goodwill gestures ahead of the summit next month. ros: good to be back with you.

it definitely sounds like there is a charm offensive on both carrots being, laid out by north korea and the u.s. respectively. the best thing the u.s. could offer north korea is a chance for a higher standard of living. also on the site they have said we are not interested in a regime change, so that is a positive for kim jong-un. the comment by mike pompeo about bringing in u.s. investment, investing in energy, agriculture, infrastructure, that has to be a big incentive for kim jong-un, and at the same time north korea announced this weekend they will be shutting a nuclear facility, dismantling the facility ahead of the talks. they released the three u.s. prisoners. it seems like there's a lot of momentum building for the talks in singapore on june 12. we also had president trump

tweeting on saturday, thinking north korea for a smart and gracious gesture. that is about as far as you could get in his rhetoric from the old days of little rock it man. -- rocket man. it remains to be seen how it plays off, some analysts believe the more you build up hopes, the more disappointment you could get, but it looks promising at this point. yvonne: do we know what the other signatories in the pack will do? ros: on iran? yvonne: yes, we were also talking about iran. it's interesting really to see u.s. relations with north korea going in the opposite direction as relations with iran. today frometoric john bolton, the national security adviser, about possibly

putting sanctions on companies, european companies, that do business with iran that have jumped in the last couple of years after the 2015 pact. they could be left high and dry. he has asked if it is possible sanctions could be put in place, he says it depends on other governments. you have to think that is some harsh rhetoric to use about countries like france or germany or the u.k., which in theory are u.s. allies. we had a little bit of commentary from europe today. it looks left the other signatories are trying to hold the deal together. france thinks a deal can still be done, but germany's foreign minister actually sounded a little bit on the average -- the bearish side. i think europe is still digesting what might happen and whether it needs to roll back

the significant investments it has made in iran. we did have some more conciliatory comments from mike pompeo, he said he still hopes a deal can be put together that really works. thatcould be something takes place in the next weeks and months, many after the meeting with north korea. yvonne: maybe. certainly a lot on the plate ahead of that. thank you so much. chinese markets moving a step closer to the global financial community, in a ci added more than 200 mainland stocks to some of its indexes. from there ise also visiting washington, one of the events that could move the markets. su keenan is here with more. msci hasy in the u.s., is report for the emerging-market index, it will include china and the fact that

as of june 1, about 200 stocks, a-shares will be included in the index. this is a big move, it allows china to come into the global market as it has wanted and more important, allows the rest of the world access to the chinese stocks. whilee also know is that there has been some concern about the debt levels and capital controls in china, there is an enormous appetite to increase exposure to a $13 billion economy that has grown twice as fast as the u.s. index, we at the msci have a chart of it, it is widely followed, it is a gauge for some 12 trillion in global assets. ofht now, the weighting chinese stocks will be about .7%, it can grow over time to about 14%, and that is significant for a number of reasons. first, a lot of tracking funds through the contents of the msci

indexes, and that will mean they will also be buying chinese stocks. it also means that will be greater availability for shortselling. it got a bad name in china back in 2015 during the stock market crash, but the biggest issue with shortselling right now is the availability of stocks to borrow, and the msci inclusion will likely help improve availability. for china,lic win part of the global recognition by this widely followed index and he can only get bigger from here is what many are saying. betty: it seems that way. during to the wall street we get ahead, we mentioned trade talks coming up between the u.s. and china, what about the round of earnings, about 70% of the way through? we have a whole the earnings coming, retail stocks and tech are coming. stocks set to report, walmart, home depot. snapshot, wearket

ended on a positive note for the market, but it is close to unchanged. how these earnings and ego reports affect the market direction is a big question. let's get to the stocks that will be reporting. as i mentioned, home depot, walmart, cisco, a big tech stock of about 20% year-to-date. the focus will likely be on tencent. this is the big rock star stock in china that was at record highs in january. since then, it shed about 82 billion in value as investors priced in the cost of this massive spending spree. predicted to drop to the lowest level since 2003. let's move on to some of the ego data. probably what will be most in focus is the retail spending. economists predict it likely rose in april. they also expect the

manufacturing data to come in fairly strong. this is important, it is an important part of the economy. leslie, we have prince harry's marriage on saturday, the other big event. thank you. still ahead, crossed wires. president trump says he wants zte back in business after cutting them off for violations. betty: those details later, but next, the chinese companies added to the msci. ong joins us. this is bloomberg. ♪

♪ this is an important first step. we estimate in the coming months, this weighting will

increase, and the msci will increase shares in the coming years into its global index. also, other chinese companies listed outside of china. >> we feel that even with volatility, it will be generating opportunities because of the trump momentum and opportunities to buy. it will be a plus. i take it as a minor adjustment. it gets the world more educated on china. ♪ onsome positive opinions china's msci inclusion. joining us to talk more about wong.s ken to you, you just heard from jamie dimon saying it is a minor adjustment, but walk us through the significance of what we will hear later and what

this means. about 235 stocks entered into the index. from a symbolic standpoint, it will be eight shares into the msci benchmark. it will be at small amount of the index to begin with, about .8%, and full inclusion will be about 14%. when we talk about four inclusion, it will be a while. the first step, inclusion factor at the end of may, 2.5%, and only 5%. it took taiwan nine years to get full inclusion into the index. it could still be sometime before we see full inclusion for asia. they have quadrupled the daily limits for foreign investors and how much they can invest, that started this month. is it only a matter of time that beijing starts to lobby msci? to think it will take shorter

time than what korea and taiwan took? lobbied to get them included to begin with. msci is an independent provider, they are not going to take i would say, any specific bodies to tell them what should and shouldn't be included. we believe is going to be a bit of time. the quicker china opens its capital markets, the currency becomes much more freely convertible. it will probably he is here for investors. the other thing is corporate governance. yvonne: i wanted to ask you more about that. a lot of companies will be added, state-owned companies, the oil companies, banks. they don't operate like a typical western company does. in terms of governance, do you think we, will it be the same thing? ken: it could be. right now it is. we see a lot of these companies, a lot of times the reception we

get, the interaction we get has improved a little bit, but to be meet theo international standards, it will be sometime. their relations and when their management becomes more open and transparent with investors, it will be easier for investors, especially overseas investors, to have more confidence investing in these companies. yvonne: do you think the concerns about being able to short chinese stocks is overstated? ken: to some extent. , the institutional investors will participate a bit more into asian markets, there will be a bit more shares some of theser institutional investors to lend out, but one of the key problems is that the stock connect program, not all of the participants are able to participate in the program. when you look at the overall shorting volume and the ability to short socks right now in that

china asian market, it is limited. it's not just about asia inclusion, it is about more market dissonance to lend out -- participants to lend out in the shorting program. a robustere could be market for that, but you are saying is not going to happen anytime soon? ken: it will take a little bit of time. betty: what about the familiarity of foreign investors with these chinese stocks? they know the alibaba and tencent, that is no problem. but they are familiar with a fraction of what i am sure will onavailable, over 200 stocks the issue market -- the a share market. will increase volatility is there will not be initially familiarity? ken: things are improving. the test couple of years when we -- participated in conferences, a lot of foreign investors were asking a lot or detailed questions. a few years back we started

going to some of these asia conferences, a lot of the first questions, telling more about your company, give me the 101. now when we see a lot of these companies, a lot of the group meetings we participate in with global investors, they are not asking for the 101, they are asking for more details, getting into the balance sheets. i would say a lot of investors now are more in tune in terms of what a lot of these asian companies are doing. yvonne: just what we've seen in the asian market, we haven't been able to rake out of a downtrend, weighted down by trade talks. the data has been good, but not enough to lift in support some of these rallies. you broaden this chart which i thought was interesting, the valuation gap we see before 2015, between a-shares and h shares. that is narrowing. we don't have these arbitrage opportunities anymore. msci inclusion

could be the catalyst to ensure that everything is going to be tipped in favor of the market now? ken: not necessarily. you look at where we work three years ago, mid-2015, valuations for a shares were 50% more expensive, today they are on par. if you look at the stocks that will be incorporated in the china index, they are trading around 12 times earnings right now. very cheap. we look at their earnings growth in the next 12 months, about 15%. these large-cap stocks going into the msci index, they are very attractive. a lot of institutional investors are looking for value. stocks, goodt of potential opportunities for investors. yvonne: we will have to look ahead to the announcement today. thank you. en wong. we have some earnings coming through, they process agriculture commodities in

singapore, they are saying first quarter net income at 158 million sing dollars, and the net income sales, 6.3 billion sing dollars as well. they also talked about the geopolitics in the region, the economic uncertainties in global markets, that could weigh on the bottom line. we will continue watch the earnings of how singapore reacts to that in a couple of hours. bloomberg users can interact with our charts using tv . you can catch up on a key analysis and save charts for future reference. check it out. this is bloomberg. ♪

♪ a quick check on the latest business flash headlines. president trump has switched policy and order the commerce department to help zte stay after in the u.s., weeks

banning the company from buying american technology. he tweeted that he and the chinese president are working together so that zte can get back in business fast. trump, a turnabout for who is accused china of stealing jobs and tech. fujifilm entering a new deal. of the board are likely to follow jacobson out of the door. the icahn has been fighting deal. betty: morgan stanley warning investors to prepare for for the -- further market down chairs. a strategist writes that the tailwinds of the last nine we -- nine years are abating. he says equities have a limited rolling tops the super credit yields in stocks.

the banks this u.s. and asian corporate debt is at least attractive. coming up, change of fortune. onaysia turns the spotlight one mvps missing money. this is bloomberg. ♪

my hong kong.n take a look at the picture outside of the victoria harbour. the sun is out, good start to the week. three minutes away from the major market open. 7:30's p.m.y, but in new york. markets closing with optimism on friday as you can the s&p is up .2%. i am betty liu in new york. yvonne: i am yvonne man, you are watching daybreak asia. let's get to rosalind chin. rosalind: iran will stick to the 2015 nuclear deal despite americans decision to pull out. the president said the accord can provide if the other five

signatories stay firm despite the u.s. decision tramping on international agreements. the advisor john bolton warns the u.s. could impose sanctions on countries and companies that do business with iran. >> they would love to stay in the deal. why shouldn't they? they got everything they wanted from the obama administration, but i think the europeans will see it is in their interest ultimately to come along with us. is the u.s. going to impose sanctions on u.s. companies that -- european companies that do business? >> the answer is it depends on the conduct of other governments. yvonne: the uae energy minister capacity tos enough question the oil market should the u.s. imposed sanctions on iran. , they have anear adequate buffer of output, adding the cartel has dealt with similar situations in the past. >> we have been there before,

and i think opec has been resilient to you with many of those issues in the past. , uae,me of the countries kuwait, they have definitely spare capacity that can be used whenever a new organization production is required. the u.s. will allow investment in north korea once it has been proven the north has given up its nuclear program. john bolton said washington is ready to open talks on rebuilding the country while the secretary of state mike pompeo said american entrepreneurs are ready to move in. but they say there must be clear evidence of denuclearization. china's first entirely home built aircraft carrier has been put to sea for the increasing military strength. the vessel left sunday morning with other shipping warned to

stay clear of an area of ocean south of the port for the rest of the week. the carrier is based on a former soviet design and should be commissioned before 2020. disney's latest superhero movie talk to the north american box office for a third weekend in a row, helped by a big splash in china. infinity war brought in $61 million in the u.s. and canada and generated $200 million in china. tothat takes global growth $1.6 billion, making it the fifth highest grossing film of all time. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am rosalind chin. this is bloomberg. ♪ yvonne: we are counting down to major market opens in the asia-pacific. malaysia for be a big one, reopening after the stunning victory from the new prime minister. a preview of what to expect.

>> we will talk about malaysia, but a broader read, japan, looking at the overall picture, it is looking mixed. futures are moving up, but compare that to last close, it to gauge a consistent direction. lots of other things to consider. you had credit out of china exceeding expectations. late friday you had trump of course coming out and doing a bit of about-face on the te. -- zte. australia is in the longest weekly streak in about two years , so that is another positive. earnings as well something to .atch as we head into the open seven companies reporting. today is for us data is concerned, it is not heavy. consumer prices in india, but that comes out later on tonight. i am looking at my futures board , you could make a case japan might open lower. it is monday. yvonne: the thing we saw last week was the breakout of the

downtrend in the u.s. will that follow suit in asia? david: we have been talking about this chart in the s&p 500, compare it with asia. the s&p 500 broke this trapped last week. we were talking about thursday, there is your index, 2720. you see the down trend right here, there is your moving average. we did a similar charge. have a look at asia. we are close to it, not quite there yet. asia has a lot more -- the emerging market factor, and japan, which was several days last week. it might take time. if you look at the price moves, we are to do -- good days away. yvonne: the dollar seems to be in rally, sputtering a bit as well. but malaysia is a big one here today. seems like everyone is trying to gauge what knee-jerk reaction we will get. david: if we opened thursday it would have been bad. now most people are expecting

still a drop. it might be across the board. we will see what happens after 10 minutes time, but the shares earlier, they fell 6%. momentumered but lost into friday. this is a five day low. the middle portion is when the elections took place or after the election. it recovered but we are not quite back to levels of where it was before the election took place. infrastructure stocks will be in focus among other things. the likes of ibm, malaysian resources. promising to reveal a lot of infrastructure projects. -- if you asknies me if it will fall, most likely it will. betty: david ingles, a check of the markets. speaking of malaysia, unchartered waters, the dramatic

shape under the prime minister. that four party alliance is under scrutiny for how it plans to run the economy and tackle corruption. let's go to sophie kamaruddin and kuala lumpur. they have wasted little time since being sworn in thursday. tell us the first developments put in place. sophie: we do have a new dawn for malaysia as we wait for markets to reopen. a lot of energy, a lot of excitement but scrutiny as to the new government. we have updates, several press conferences, and we had one that would be in the crosshairs. this as they reopened the investigation into the scandal plaguing state investment funds, set on replacing the attorney general who had cleared them of wrongdoing in 2016, and cleared the pacification of one report that was protected by the act.

the men at the center are the ones of the scandal. they have barred them from leaving the country. after being called upon by party members to resign, we did see him step down from his post as well as the chairman. other key developments, the three cabinet ministers representing three of the four coalition parties of the group. they need to take on the defense portfolio. one will be home minister, and he wasef minister of -- named finance minister. he will become the first malaysian to take on the role in 44 years. tackling this immense challenge of reducing debt while scrapping the consumption tax, and in 2017, they account for $10 billion being brought into

government coffers. the announcements, that is encouraging, demonstrating the government understands the economic priorities as well as physical weaknesses. and there cannot be any comments on economic plans until he is sworn in as finance minister, but the government would review all contracts not seen in favor of malaysia including big-ticket projects. betty: the council of elders, they held their first meeting after the weekend. tell us about their priorities. sophie: we have a heavyweight team with people being brought back into the fray. the former finance minister, the previous central bank governor, .ho led for 16 years malaysian tycoon as well as .conomist

according to the council, they need to analyze the gsp and fuel subsidies, and when that is scrapped, they can move to end corruption and waste. corruption, very much the focus. the council of elders is putting together a special task force to review what has happened thus far to take the investigation going forward. and in his comments over the weekend, he did say the country did get along with out the gsp, that he is not concerned about what the scrapping of the consumption tesla mean, but he did highlight investors, fund managers have been concerned about the policy, given what it might mean. but they say they are not stupid and know what they are doing and will not look to increase the debt. thank you so much, sophie kamaruddin from kl this morning.

we will have all your stories covered on daybreak asia. one thing not just in malaysia but a slew of chinese data in terms of industrial production figures. that is due on tuesday. a bit of acceleration but other data could provide a mixed picture. this is what we are seeing in the gtv chart. factory output is one we are expecting, 6.4% growth, likely to go higher as mentioned, but it will be retail sales as well as fixed asset investment, the blue and purple lines, they are key to watch. just a bit less from the march numbers. investment slowed about 7.4%, slightly lower as well. but a lot has to do with what will play out in these u.s.-china trade talks, the second round. they said they could be more headwinds in the second half. perhaps peak growth given the reverse ay be able to trade war but these negotiations

could be prolonged, so the trade war -- the trade winds could hold up. betty: hard not to price in the you political risks. speaking about data, we are looking at that, expecting u.s. sales retail numbers for the month of april on tuesday. forecasters expecting a gain, another solid pickup to signal consumer spending to strengthen the second quarter after growing up the weakest pace from january through march. here is a chart to show you those declines we saw in retail sales in the first few months here in 2018, but certainly a robust last month. will we continue that again? it was a cold or than expected -- colder than expected april, so that might affect retail sales, but we did see healthy spending. up with the economy in good shape, which would mean more rate hikes ahead. president trump doesn't about

turn as we mentioned on the zte, ordering the commerce department to keep them afloat. this is bloomberg. ♪ this is bloomberg. ♪

this is daybreak asia. i am betty lou. yvonne: i am yvonne man. president trump is making a dramatic about turn on china, ordering the commerce department to help wireless company zte stay afloat in america. kathleen hays has the story for us. bywas a very dramatic sweep the president. why is he saying this now, and what is the rationale? kathleen: we would have to get donald trump onset, but it is interesting because this is right smack in the middle of the trade talks that just occurred in beijing, on getting ready for

another round of trade talks in washington with xi jinping's number one economic advisor. and the zte has a dramatic story. back in april trump ordered the congress department to cut them off from u.s. suppliers because they violated the sanctions against north korea and iran by selling them telecommunications equipment. as that has happened, this has had a very big effect on zte, choking the revenue. they suspended operations. they are saying the next two weeks are crucial, and administration officials told bloomberg that the chinese expected a reversal, this kind of reversal we got on sunday, to be a condition for agreeing to continue the talks with china. here is what donald trump tweeted out. pretty dramatic. let's take a look. areident xi of china and i working together to get massive chinese phone company zte a way

to get back into business fast. too many jobs in china lost. commerce department has been instructed to get it done. meanwhile we know that we have heard from china's ambassador to the u.s., and he said it remarks -- in remarks at the center on friday that he is upbeat. something has to be done to reduce the u.s. trade deficit with china, reduce the surplus, that they will be benefits, and is a problem for china, and meanwhile we are waiting to find jinping's number one guy on economics and trade, when is he coming. the white house said it would be this week. there has been no official dates even on either side, but as we get ready for the end of the public comments on may 22, this is a other reason why people are

expecting to see something happening with these two sides getting together. -- tariffs were regressive taxes that would hit u.s. competitiveness. thank you so much, kathleen hays global economics and policy editor. let's dig into the zte story. the chief insight strategy officer joining us on the phone. were you surprised by this about-face? yes. it speaks to some of the unintended consequences in terms of what we have seen the last few months of zte. they are essentially running in limbo and potentially in the danger zone. this shows the all the french that needed to happen -- the olive branch that needed to happen. the te, you are talking about the number two sort of telco guy in china. so this is not just jobs. it is a lot of ripple effects.

i think it was surprised but a positive step. betty: do you think there was any pressure from qualcomm or others who are really being disrupted are going to be ? srupted by this it was not just because of trade talks but also disruption to u.s. business. dan: specifically qualcomm. i would be shocked if qualcomm use their lobbyists to get in touch with them. this is not just the te but other suppliers really affecting the whole ecosystem. this is more of an example of where it started in april, it was thought that the te was the bad guys -- zte was the bad guy, not thinking it would go back to san diego and qualcomm. that played into it, and they are certain to realize what has prevailed. the last thing anyone wants is zte going into the telco graveyard.

betty: right. we keep hearing about how integral ztezte -- is to the chinese telecom industry. how else might this benefit u.s. tech companies? dan: i think part of it is it puts u.s. tax in a bit more production -- protection of strength, help them rescue zte, and i think it is one where qualcomm obviously the one that benefits specifically, on the one, but i think this is broader. it would be a significant step towards u.s.-china relations on the battlear inside royale. inhink some of those wars this step, if they are able to

zteue the te here -- rescue here. i could have a positive ripple effect on two sides. yvonne: that raises the question of what the president will get in return for extending the lifelines is the te. will this be enough to appease the chinese and offer concessions when it comes to made in china train 25? dan: we think this is really essential. this is thing that you know, i think at first it was kind of background noise, but as the situation with zte has become dire, it is something that if it is successful, it will go a huge way going into the talks as well as with the north korea summit around the corner, then there will be a lot of dialogue between u.s. and china going into that. is this thing you want disruptive factor going into the coming weeks.

the reason we saw the sunday tweet and summit, what i said maybe more aggressive action here is time is not on zte's side, and they need to do everything right now to make sure this situation doesn't get worse. yvonne: it is interesting. before we were talking about how zte pose security risks, now we talk about adding jobs or face jobs. as an analyst, how can you come up with a proper valuation on these tech companies when one day it is plagued by sanctions that export controls and another days about geopolitics? that has been the biggest quagmire for investors is that as the political landscape and the tide shifted dramatically with this being front and center, that risk factor has been so tough to analyze. i think what started happening is investors have started to see

the sights here and realized there was more talk than action. coming off the cliff, i think investors are starting to think that this is something that is little less of a risk in terms of the broader macro with china and the u.s., but ultimately it is a major x variable that is really consequences -- that is really complicated. yvonne: perhaps this is more park that bite. chief strategy officer joining us there by phone areas the latest on zte. more breaking news, ppi prices for the month of april. seeing a mixed picture with the year on year and month on month. we are seeing a gradual flow of 2%. growing 2% but heading off the 2.1% in march, this is due to the basic effects we have seen.

the prices which did actually going to contraction in march actually being a bit of growth, .1%. both in line with economist expectations, but there are some tailwinds when it comes to ppi prices, could be picking up in a month or so. the yen, that is going to be supporting commodity input rises. there is a bit of risk when it comes to the escalation of trade between the u.s. and china that potentially could weigh on prices of targeted monarchies as well. we will watch that. 109.34. plenty more. this is bloomberg. ♪ this is bloomberg. ♪

betty: a quick check of the business flash headlines. abu dhabi national oil company looking into acquiring a stake in indian refinery.

the sultan told bloomberg that adnoc is considering opportunities including joining saudi aramco to invest in a project. the state-run energy producer plans to invest $45 billion to as at refining capacity its complex by 65%. clean: china's biggest energy company is offering $11 billion to buy shares it does not own in the portuguese .lectricity giant edp the bid is 5% higher than edp's closing price on friday. a hold 23% of gdp and said it will hold the companies listing on the lisbon stock exchange. betty: walmart may be forced to publicly list flipchart in india. this gives walmart 77% of the e-commerce company and a foothold in one of the world's fastest-growing -- fastest-growing markets.

this gives investors as little as 14% the right to acquire walmart to take the company public in as soon as four years. much more ahead. morgan stanley, upbeat. we will talk to them. this is bloomberg. ♪ ♪

yvonne: we are live from bloomberg's asian headquarters. asia.ak australia markets hate into a new week on the back of their best winning streak in two years. energy stocks have led the way. malaysia andns to elastic sister election. betty: president trump does an about turn on china, ordering the commerce department to help zte stay afloat. jamison quits as xerox does the

blog. -- the plug. yvonne: we have been watching u.s.-china trade. a lot of data this week. focusing on one data point in particular that scenes -- that seems an ominous sign to global earnings. zte, south korean export growth, we saw the month of april fall for the first time since 2016. these epseighed on indexes. the 12-month estimates have started to roll over a bit despite the fact, that we have seen the u.s. and europe continue to rise. haveand em suggest that we

peaked in april already. to followe tough in the region. betty: that is not good for the kospi, which is already suffering. msci news on china, if the news continues to be bad on korea, might foreign investors bear back there korea holdings and start adding on with china stocks? we are looking more at that but let's get to the first word news with paul allen. paul: indonesian police say six members of one family, including girls ages nine and 12, carried out to aside bombings on three churches. seven other people were killed in the attacks. the father detonated a car bomb. two teenage sons used a motorbike. the mother and two daughters

were explosives. they were linked to the islamic state inspired militant group. terrorism isf really barbaric and beyond the limits of humanity. it has inflicted casualties among the people, police, and innocent children, including the perpetrator herself and her own children who acted as suicide bombers. the former malaysian prime freeter denies planning to amid rumors that he faces prosecution. he has been banned from leaving the country after planning a private flight to jakarta. the veteran leader says to to 1mdbhe investigation and will declassify an internal report. one president trump's most contentious campaign promises comes into being monday, moving

the u.s. embassy from tel aviv to jerusalem. in move could spark peace the middle east, he says. most of the region opposes the decision. uae energy minister says opec has enough capacity to cushion the oil markets should the u.s. reimpose sanctions on iran. told bloombergt three big producers can offer an adequate buffer of potential output, adding that the cartel has dealt with similar situations in the past. >> we have been there before. i think opec is resilient to deal with many of those issues in the past. member countries, saudi arabia, uae, kuwait, definitely have spare capacity wheneverbe used

production is required. global news, 24 hours a day, on air and on tictoc on , powered by more than 2700 journalists and analysts in over 120 countries. this is boomer. -- this is bloomberg. >> november 17, 2016, elections were november 9, some of these other etf trading. the broader reader across asia-pacific markets -- we will

talk about malaysia in just a moment. we are looking at a mixed picture. we are on the best weekly win streak in two years. we had japan cpi out, up 2%. inflation out of india's coming out later on. as far as earnings, the book awaits coming out of tokyo, about 70 companies across the -- the region are due out with their results. we will look at em later on. in thelooking a pause dollar rally. the 10-year is at 298. slightly steeper, but the five and 30 -- they were talking about this earlier, at the current pace, that will invert by the summer, perhaps september. a lot of the moves early on

right now, analysts are pointing to the flattening of the curve as perhaps what is behind the pause in the dollar rally. there is your rally for about three weeks. we are coming off of that now, which is why you see a reversal on the likes of the euro. the kiwi is something else, below $.70. you are looking at sterling basically flat. one-stop we are following closely is fujifilm. there is the headline, $6.1 billion deal scrapped. we are seeing a move in the stock, 1.2%. we have the ishares, the graphic for you. it is the malaysian etf that trades in the u.s. big plunge midweek last week. we all know why. it has recovered, but not quite. back to levels pre-election in malaysia, one market we will be watching 60 minutes from now.

you.: thank as the world awaits for u.s.-china trade talks to continue in washington, president trump may that's an policy shift, or being that's ordering the commerce department to help -- ordering the commerce department to help zte to stay afloat. this came in a tweet. kathleen: wow. that's all i can say. the guy knows how to leverage those tweets. the tweet basically said we have to help rescue z ddi corp. -- zte corp. here's what he said. president xi of china and i are working together to get zte a way to get back into business. this is interesting because president trump is try to underscore that, yes, he and his buddy, president xi, are working together on an important trade

issue. commerce department has been instructed to get it done. let's remember, back in april what happened. trump told the commerce department to cut zte off from u.s. surprises desk supplies suppliers.from u.s. the congress summer terry -- the commerce secretary wilbur ross accuse them of line. been's orders have devastating for te. -- for zte. their shares slumped trading in hong kong last week. officials telling bloomberg news over the weekend that china expected a reversal on zte to be a condition for continued talks. all of a sudden, trump throws this on the table. this is as we are waiting to find out when the vice premier, xi jinping's tops economic advisor, will come to the u.s. ross doesn'tlbur

know exactly when he will come. these talks will happen when it's appropriate. the public comment period in the u.s. concludes on may 22. that is the date people are watching xi jinping. we can see goodwill gestures on both sides. we had china's abbasid or to the see china's- we ambassador to the u.s. : as the u.s. ambassador from china said something encouraging. -- i don't think the trade imbalance will continue. for us, such an imbalance is already a benefit. that we need to make more effort to achieve some kind about in

our trade relationship. if you have a balanced approach, you can find a solution. t is less confident that china will be willing to cut subsidies the companies in the 2025 initiative. they want to climb up the food chain to provide commodities to high-tech products. they also cautioned of a glass curtain that will try to block the development of bilateral relationships between these two economic giants. . one more thing to throw on the table. the u.s. chamber of commerce, when he was filing its public called on friday, tariffsproposed china hidden regressive taxes. yvonne: starting things off my a good note.

more positive lives when it comes to geopolitics. trump administration officials say the u.s. is ready to allow investment in north korea once it has verifiable evidence of denuclearization. we guessed all of this would happen six months ago, we would say that this is crazy, that we would be heading into summit talks it said -- in singapore on such a good note. >> compared to last year, we have come a very long way. most of this happened when kim switched gears at the beginning of the year, reached out, what to the liv-ex, and then had the summit -- went to the only picks, and then had the summit set up. pompeii and bolton going out there, talking about economic incentives, how does that happen with north korea -- the sequencing here. they said, ok, we will give you

all this money if you give up your nuclear weapons in an irreversible way. kim said, i will give them away, but step-by-step. so how you are got out is a big question. yvonne: we are seeing that carrots coming through from the u.s. we did see the symbolic move from kim jong-un. they want journalists coming in. talk more about the denuclearization process and how complicated it could be for north korea. it is such a different program then we see an rn. it is much -- in iran. >> it is much different. they have different sites around the country. they have mobile launchers. verification will be a big part of this. the details really matter when anything happens. north korea announced over the weekend they would invite journalists to see the dismantling of the nuclear site. even as their questions over, ok, how effective is the site

right now? can easily build another site if they wanted to? is this just a symbolic gesture or a significant change? there is a lot we don't know right now about north korea's intentions, whether they are just stringing everybody along, or whether they really want to open up the economy in turn the corner. yvonne: there is a lot we don't know about these upcoming sanctions that will be reinstated with the u.s. leaving the iranian nuclear deal. we heard opec say they've got an f supply. what a -- enough supply. but what are we learning about how disruptive this will be? >> certainly, we are in the early days of feeling out exactly how much the u.s. will enforce these sanctions, particularly against the european companies. the indications are that they will. of course, we have also seen with zte, which was in violation of the iranian sanctions, trump is now willing to help the company. there's a lot of questions about

how exactly, how hard the u.s. will go in enforcing these sanctions. clearly, it is a concern for all the companies involved. iran is looking to shore up support. you have the foreign minister in beijing looking for some reassurances that china will keep buying its oil. it's one of its meaning -- main trading partners, an economic left line, especially if the u.s. is pressuring europe to step back with support for iran. much. thank you so , facing charges for allegedly up's and as malaysia reopens an inquiry -- for allegedly corruption as malaysia reopens an inquiry. yvonne: i will look for emerging markets. this is bloomberg. ♪ .

betty: this is daybreak: asia. yvonne: morgan stanley says valuations are now more attractive in emerging-market credit fx. the may -- the latest catalyst is em performance was due for repositioning. thank you for joining us. dollar rally seems to be spattering. oil prices are hovering around the $71 barrel mark. do think the worst is over for em? >> we are forecasting now dollar to resume its bears strength. bearishbearish -- its strenght.

yvonne: you are saying we are not seeing in thing more sinister? >> we did get some downsizing your data. the whole thing began from the fact that the dollar began to appreciate against the euro. at the same time, there was protectionism risks in em, some idiot centric -- some idiosyncratic issues that cause a correction. the fundamental trend of dollar appreciation will return concern. betty: you also tweaked it back in 2016. now when you assess the risks in the developing world, is it time to region that -- to rejib that? >> we think the em story on a broader basis is fine. we approach into managed. line, the policy side, what they are doing to monitor policy, labor policy and market policies. and inflation and current

account assets. parameters, they seem fine. we expected to be the differential between the u.s. and ian's growth that will continue -- em's growth that will continue. em's growth is sustainable. just following up on yvonne's point, what do you emerging markets -- and i know that i'll emerging markets are not the same -- but what are the vulnerable to? >> i think the most important we are watching is the u.s. rates and dollar. if you see u.s. cost of capital marketsthat fx emerging -- that affects emerging markets are currency. we are expecting the dollar to begin to resume its depreciation trend.

in the background, we are not expecting the 10-bit -- 10-year bond yield to improve in any manner. we expected to continue with its fundamental story. betty: how about inflation? what is your outlook for inflation in developing markets versus developed markets. are in of the large ems comfort zones, whether you pick up brazil or india, indonesia. all the large emerging markets are still continuing to manage their inflation dynamics right well. to deion is, in the last few months, you have seen downside surprise, doing better than what consensus is or what we were expecting on inflation. betty: and wage inflation in certain emerging markets, you continue to see upward pressure on of -- on wage inflation? >> at this point in time, it is only been a three to four

quarter recovery on em we don't expect wage pressures to build up. in terms of framework, we do look at the emerging markets, labor market policies. that's how wage pressures build up in the em. they intervene in the labor market. but demand-driven wage pressures are not visible in the em. yvonne: we were talking about indonesia, obviously. everybody wants to point their finger, perhaps their the most vulnerable, perhaps india. what is the most possible conclusion in asia? >> those are the two countries because of the current account deficit. if you see cost of capital rise in the u.s.. the fundamentals are very different in india and indonesia. i know the first big rise of the dollar trend that people are concerned about emerging markets.

but let's look at, say, india, which is at the forefront of the taper tantrum problem. and just response was i will run a credit account deficit and give negative because it -- negative deposit base of two basis points. that was really the proposition that india had in 2013. but today, it is totally different. at have real deposit rates 200 basis point positive. it's a very different backdrop in em are now. yvonne: what do you think will happen in malaysia today? >> i think there will be initial concerns by the market. we heard the government coming out and saying that they will manage reform policy. so we have to watch for the actual actions. i think the em backdrop is comfortable for malaysia, always going up.

you have a broader e.m. fundamental, which is constructive, this should help malaysia. yvonne: we will leave it there. coming up on bloomberg television on tuesday, and it's was an interview with president erdogan as campaigning gets away -- gets underway. this is bloomberg. ♪

a betty: quick check on the latest business headlines. resigned.son has sources tell us several members of the board are likely to follow jacobson out the door. the $6ve been fighting billion deal that would hand control of xerox the fujifilm. -- says the company's

exposure to iran is minimal. the company's multibillion-dollar deal for gas turbines and generators are now up in the air. they will wait to see exactly what the trump administration does. the exposure -- >> [indiscernible] political, governmental and that is exactly what we are going to do. betty: a filing in india shows that walmart may have to file flipcar. however, the filing says the terms of the deal gives investors as little as 14% and require walmart to take become a

public in his little as four years. more on a historic powershift, what traders will be watching. this is bloomberg. ♪ retail.

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yvonne: dark clouds looming over the lion's city. betty: happy monday. you are watching daybreak asia. let's get to first word news now with rob which and. rob: -- paul: it is actually paul allen today, betty. hassan rouhani says the accord can survive if the other five dignitaries stay firm despite the u.s. decision traveling on international agreements.

john bolton warned the u.s. could impose sanctions on companies and countries that do business with iran. >> they would love to stay in the deal. why shouldn't they? they got everything they wanted from the obama administration. i think the europeans will see that it is in their interest to come along with us. >> is the u.s. going to impose sanctions on european companies that continue to do business with iran? >> i think i did give the answer and the answers it's possible, depending on the conduct of other governments. two senior trump officials say the u.s. will allow investment in north korea once programs.ts nuclear john bolton says washington is ready to open talks on rebuilding the country. mike pompeo said american entrepreneurs are ready to move in. however, both say they must -- there must be clear evidence of denuclearization. china's first entirely home

built aircraft carrier is the latest sign of military strength. the unnamed vessel left sunday morning with other shipping want to steer clear of the ocean south of the port for the rest the week. the carrier is based on if over -- a former soviet design and should be complete by 2020. theresa may is called for unity after her cabinet split. she told the sunday times that the country can trust are to deliver, although her government still can't say what he wants from brexit. sunday telegraph says half of may's cabinet opposes her plan. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm paul allen. this is bloomberg. ♪ betty: let's get an update from asian markets.

flat when it comes to equities. things are turning positive. still muted, dave. when you are watching what is going on in malaysia. david: top of the next hour, we have an indication of the direction if you go by the currency. about 30 minutes back, 3.98 right now. we have imported it -- we have inverted it. in the ringgit versus the u.s. dollar, it takes you all the way back when the u.s. elections took place. there is your move today. so far, there is the level of dollar-ringgit. we already saw an initial move your when you look forward and that sort of thing. it. back from last week. -- it paired back from last week. ruffling -- we are

trading roughly at four for a u.s. dollar. i haven't seen a single analyst that has told us we will get a bump on the deal. maybe across-the-board decline. we will get a charge, just in case you want to compare what would be the biggest drop since the global financial crisis. 3% on theave to fall index for that to happen. this measures the percentage moves in the index. we will pull it up so we can see how that looks. back to the financial crisis -- not that we are going to get there -- but to put some context, that was a drop of about 9%. currently, we are not say anything because the market is still shut. if you measured by the etf send that sort of thing, we will get a chart and drop in malaysia.

yvonne: the sector that you are talking about, infrastructure stocks, they have political ties. david: keep in mind this is a market that has really sucked in a lot of foreign money leading into the elections. there was uncertainty a week before the elections. so infrastructure, that is one of them. because of the campaign was to review a lot of this infrastructure-related projects, including east-coaster railing, for example. of the four big names you want to watch later on, consumer stocks are also very much in the mix, following the pledge to get some more populous meeting on the gst. yvonne: that's interesting. of najeeb. support

i want to mention a few other names. carlsberg, judge consumer stocks we will -- dutch consumer stocks we will be watching. the chief executive officer is the brother. betty: thank you so much. we are watching this story that broke earlier. -- watchingroposed a proposed takeover. let's cross over to tokyo. we knew that the active investors led by icahn did not want this deal. how are the other investors reacting? >> the shares are up this morning. at first, that could seem puzzling because there is no way

to spin this as a big win for fuji films. they wanted to do this transaction. they structured of the transaction. they reached the agreement. they went through several steps. they have -- this has been going on since january. so it is a disappointment. from an investor point of view, you have to look at the numbers. the numbers were very confusing. for me to expire this deal, i need a whole five minutes. they tried to keep together joint venture and spending, the company of xerox itself. the valuations were miles apart between what fujifilm said this deal was worth compared to what icahn was saying it was worth. so the math was very positive -- complicated. investors feeling sense of relief that now the company can get back to some sort of more normal business move ahead with willg to seeing what icahn now do with his joint venture, that.erox half of

he will actually be able to find more value in terms of getting another buyer in. yvonne: where does this leave fujifilm in the industry? for fujicus from here film be how they will deal with which theyventure, had for decades with xerox and how that will continue in the document's business. it is a difficult business. the traditional office copier market has been plunging for many years. people don't need as much photocopying is a used to. however, there are still growing inkjet in terms of printing, high-speed inkjet printing. fujifilm is very strong that. xerox has a great distribution channel in the americas, which is one of fujifilm >>s weaker markets. they had been look -- fujifilm's weaker markets.

they have been looking for a way to use that. moment, the venture deal exists. icahn indicated that he is looking for other buyers. the ceo is a former person that worked with hp and sypris solutions. this is somebody -- and sypris solutions. this is some -- and surprise solutions. we see the stock up now for fujifilm. india is the world's fastest-growing oil market. oil minister spoke exclusively to bloomberg, saying he expects oil price to remain reasonable. $.49 in, we are of this

[indiscernible] energy price must be reasonable. we don't expect a $40 oil price. countryre a sensitive with its own issues. the price is [indiscernible] >> where do you do when it comes to iran oil? do you reduce your imports because of sanctions? >> everybody in this industry is watching -- the new geopolitical level.

>> saudi arabia has pledged to mitigate the impact of the sanctions when it comes to the higher oil price. what do think they can do to help is the market? >> india is emerging-market. of all the most favored of the energy players. we are open to one market. we have long-standing reliable partners who understand countries like saudi arabia, uae, iraq. with the changing geopolitics, best withvery strong south america. india is open to the world market. betty: that was the indian oil minister.

coming up on daybreak asia, chinese stocks will soon reach a new milestone with inclusion on some key msci indexes. we will look at possible consequences of that inclusion. this is bloomberg. ♪

yvonne: this is daybreak: asia. betty: malaysia is in uncharted waters as the new government takes shape. the party alliances under scrutiny -- the appliance -- the

party alliance is under scrutiny. tell us about the developments so far. energy and excitement following the shock election win we saw on may 9. in the wake of that, we have seen some updates regarding plans for the abolishment of the tax.the consumption in the crosshairs as well is 1mdb, saying he will reopen the case into the state investment fund. we are waiting with great anticipation to test for the reopening of markets -- for the reopening of markets. i'm joined with the head of malaysia research. thank you for joining us.

we saw some knee-jerk reaction when it came to the offshore markets. this morning, we did see a drop in the ringgit, the most in 16 months, trading just below that four handle against the dollar. what is your justification? >> if you did not believe in miracles before this, he should now. what we have seen in the last 45 days is nothing short of a miracle. we have seen a new transition of power. we have had no civil disturbances. we have seen the prime minister being appointed and key cabinet positions being filled. right now, things are progressing in line as best as we can hope. days, we willfew see positive developments, like appointments and key positions in the cabinet. we do think that there will be some knee-jerk [indiscernible] particularly by foreign investors, given that the shock

results were something that caught foreign investors totally unawares. as a result of the country risk we do expect to see a selloff in both the equity and bond markets. but having said that, we do expect -- you know, there is an underlying sense of positivity amongst investors. people are looking for opportunities to enter the markets at more attractive levels. immediate beyond the shocks and the underlying climate, the positivity is still intact. >> we are just hitting volatility, although there are underlying positives, but that has not stopped some from being bullish in malaysia. the outlook for the local share market, do you share that

sentiment? short-term,, in the what we can see is there will be some concerns. it depends on the volume of selling rushing for the doral it once. door all ator the once. we do think, in the end, the fundamentals will still maintain. the economic fundamentals for both the economy and impacting the stock market. >> the ringgit very much in the spotlight. leading up to the elections, we did see a strengthening of the currency, but hovering around those levels. what is the future, at least in the near term, for the currency? >> there will be an exit in both equity and bond markets,

particularly in the immediate term. there will be downward pressure on the ringgit. the ringgit may well break below the four marketing. that should not come as any surprise. >> do you see 4.1, 4.2? >> it is possible. >> and the holding a local bonds , you see some jitters there as well. >> i think there will be initial jitters. i think the market is also looking for a reaction from the international rating agencies. clearly, the new government will have to engage with ratings agencies to make sure the policies are on track and that concerns over the , with the planned withdrawal of gst, that somehow they have mitigating plans to plug that gap on fiscal revenues. >> plenty make of the assessment

that gst might be credit negative for malaysia? over the weekend, we did hear from the new government leadership, not to detail and the specific says yet, but holding to that pledge? thatearly, the concerns investors are feeling now with regards to economic lucy is because there isn't one. clarity onto have how the new government intends to plug the gap. we don't have you the details. in time, we expect the new government will be explaining their economic strategy with greater coherence. bute are waiting still, there are some underlying positives to be had. betty: thank you so much. just speaking with ahead

of our hb group malaysia. malaysia.up a major step for beijing gives investors access to equities that have been out of reach. >> from the world's most valuable distiller to banking and mining giants, greater exposure to you one's domestic a-shares -- you want -- yuan's domestic a-shares. it's a major coup for president xi jinping after three prior rejections. don't expect the economic of -- the equivalent of an economic parade. the pie isl slice of expected to bring billions of dollars of the china's equity market as index-tracking funds

buyin. beijingcould change if brings up for the market reform. yvonne: we are watching for the announcement of these companies are a closely. everyone thinking we will see quite a bit of a flow heading into the region. they have been tracking the did -- listed in shanghai. take a look at this chart. atf.is msci china the is what tracks some of msci inclusion in terms of new interest. that has lagged behind ishares. we have been seeing a lot of this volume let's take a look at what we see their -- we see

there. betty: let's just pull up this chart, which shows you that china a-shares are underperforming. no surprise, right? they have been trading at a ofcount with the knowledge less corporate governance, these restrictions that -- restrictive flows in and out. discount. you have a with the inclusion of mainland stocks in the msci, the expectation is this gap will continue to narrow as the chinese markets and chinese companies become more and more elevated and modernized. bloomberg users can interact with these charts. onwse the recent charts

bloomberg television and save reference, nowre a quick check of the latest business headlines at this hour. president trump switched to order the commerce department to help zte to stay afloat. he said that he and president xi jinping are working together to help zte get back in business fast. byis a major about turn trump who accuses china stealing american jobs and tech. yvonne: morgan stanley is warning investors to prepare for further market down shares, saying that it is the end of easing. policy tightening means the opposite now applies. equities have a limited 12-month upside. u.s. and asian corporate debt is least attractive. betty: abu dhabi national oil company is looking into acquiring a stake in an indian

refinery. the ceo told bloomberg that adnoc is considering opportunities, including potentially joining saudi aramco, to invest in the iran a gary project. now for a look at the next few hours, what are you watching? rishaad: minutes away from that open in malaysia. let's look at the political landscape that is being created. he is part of the pakistan party. looking also at the markup , talking about the choice of finance ministers, saying they are sending at the right misses it -- right messages. look at that.

and much more than that. , we have steven hamrick who will be here from the bank of australia. let's look at what we have for the next couple of hours. betty: watching those malaysian markets. first come a quick look at how the markets are trading right now. you have japan's nikkei up a tad. we are watching certain stocks, like fujifilm, the korean coffee that worsening of fundamentals. asia futures as well, pay leading uph to the election on wednesday it was down 1.7%. we are seeing decent gains on it

comes to the straight times index. take a look at your offshore malaysian market which we have been tracking as is unsure markets have enclosed. that's have been closed. the etf of malaysia futures is there. so there is a bit of downside. markets coverage continues with rish and haidi next. betty: stand by for bloomberg markets. this is bloomberg. ♪

rishaad: stocks across the asia-pacific, building on last week's healthy advance. attention training to malaysia after the historic election. trying to take another step toward local financial inclusion. msci financial decision opening the door to big shorts. in hong kong, i'm rishaad salamat. haidi: and in sydney, i'm haidi lun. also, president trump does an -- turn.m he wants the commerce department to help companies stay afloat in the u.s. this is "bloomberg markets: asia." ♪