7:00 a.m. here in hong kong. i am yvonne man. >> i am david and less. geopolitics gripping stocks, down the most in months. oido, the yen rally. >> concerns in china, the onshore yuan slides with levels, fears of more depreciation to come. >> italy can be back at the polls in july, after failing to name a cabinet. >> president trump turns up the heat on china, upping the list on tariffs. the rest of the list comes next

week. david: good morning. joining usjust a across the asia-pacific, good evening. we want to give you a sense of how strong the headwinds are across equity markets. on the bloomberg, quite a drop for equity markets overnight. , $270arkets opened billion of market cap wiped out of the s&p 500. europe, wiping out $260 billion u.s. dollars. i think it sets us up for interesting meetings next month with the fed as well as the ecb. they are adjusting issues when it comes to em, this turmoil and italy as well. a lot of big questions here for

investors, of the bond market continues to get pummeled. david: that is the transmission of fact in what might keep the likes of mario draghi away. a blowout in yields affects the budget. yield, an explosion higher, if you will. 24 hours ago the two-year italy, 250 basis points. now.an see the 277 right it'll be interesting to see how much demand will be. a lot of time to be hitting the markets. we are looking in total, about asked billion in debt issued. 5, 7 and 10 year bonds. yvonne: we were in negative territory a few weeks ago. we do see when it comes to the 10-year german bund yield, they are taking lower. -- ticking lower.

spain, contagion in portugal. the u.s. 10 year yield is the eye-opening one. you see a basis point drop of 15. 2.78%, where did the 3% go? we have not seen moves like this since brexit. buyg intohave seen equities, but we did not see that. david: have a look at dollar-yen, 108.58. watching the euro, they are seeing a little bounce. as data is concerned, later tonight gdp and inflation out of the united states and growing inflation out of europe. yvonne: s&p 500, has dropped more than 1%. futures also pointing to future declines for the wednesday session in the u.s..

whati futures, we watch happens with dollar yen well. we do see the risk obsession when it comes to the currency, futures down 25 points this morning. david: that is a 1.5% drop priced in. let's take a look at what happened overnight in the united date. oilsuries is surging, plunging. strategist pointing to political woes in italy as a catalyst. we have su keenan with the details on the action overnight. take us through the damage. su: what is going on in italy feeds into the fears of the interest rates market here in the u.s. will the fed now slow down its rate hikes? it is already causing a scramble. let's go on to the chart on the market snapshot. it was a move to this -- safe havens. the dow down 1.5%. it accelerated once we saw

europe's uglylose. goldman sachs when it gets to , ge is adeclines function of the company. they have to/-- they have to slash their dividends. let's go into the bloomberg with the theme of the day, the european risk pushing the s&p 500 out of its range. gtv is where you can find these charts in our library of charts. had been moving higher out of its range and coming down in a 1.5% decline. there is real concern as this thing feeds on itself how we are setting up or the wednesday trade here in the u.s.. yvonne: they are calling it the italian bond quake. it is wreaking havoc in the united states.

if we go right back into the bloomberg one more time to look at the bond quake, i will fix my chart here. this chart is called the italian two-year surging. you talked about how this is almost unprecedented. you see it graphically represented, a huge jump. it is pretty dramatic. it raises concerns with the italy, the fact there may be another election, the eurozone issues are resurfacing from a decade ago. what happens with our own fed, take a look at morgan stanley, which is probably one of the biggest declines we saw in the bank stocks. we have a chart of morgan stanley for you. biggest drop in two years in addition to concerns of everything we mentioned. one said their wealth management unit was in big decline. let's look at other batterings

of the banks. 3% and 4% declines. deutsche bank down more than 6%. the concern is that said rate hikes, which had been a pillar for profits built in, is now being eaten away by this concern, and a real question mar k. david: talk to us about oil. where have the levels gone? we were talking about the 10 year, a few weeks ago closer to 3%. westech -- west texas intermediate, the lowest close in three months. take a look at the chart -- or at least the selloff -- you can see we have been running toward $72 a barrel. big drop in the past week. just close in on the one-week chart, you can really see the decline.

mrs. is the fifth straight decline for texas intermediate. it had a loto do wh russia and saudi arabia talking about boostingcaps. let's go to the one-week chart if we have it for oil. that has brought oil chances down, more than a 3% drop in the latest trading session, which is the biggest one-day drop we have seen in a while. back to you. david: su, thank you so much. busy monday morning across the region. one last look at italy. yesterday there was a bond auction, ahead of a fairly bigger one today. look at how it is collapsing. there is your bid to cover, 1.9%. it takes you all the way back to 2010. it is one to watch on your gtv. yvonne: we talked to our guest

ecb maytant, said the have run out of ammunition on how much they can come to the rescue of italy. italy'seady own 1/4 of debt. he says mario draghi losing a bit of steam on that front. could be an interesting meeting once we do hear from mario draghi. political uncertainty in italy sending shockwaves through markets across the globe. let's look at the rising eurozone volatility. thank you so much for joining us. we have been talking about how italy, no stranger to political crises, but how do you assess how bad the situation is? another day and italy, or are we on the brink of a crisis that brings it back to 2012? >> despite its reputation for somewhat tumultuous politics, italy has had a relatively stable government

over the last several years. that tradition has broken abruptly over the last couple weeks. you have seen is, on the one hand, the populists of the igae-star movement and la l raising the stakes of an antihero finance minister. the president called their bluff and rejected them. they raised the stakes yet again. it is a crisis point unlike we have seen in italian politics for over 20 years i would say. david: help us understand what is next the next few days before we talk longer-term, a few months? jeff: you're right to separate those. candidate,t-term the cantarelli, if he can put together a, he would be in power the next three to four months.

unable toe has been do so. it has been a fluid situation in the last few hours, things changing. we may have elections as early as july, or we could wait until september. itly elections seem to be -- is a matter of whether it happens in two months or four months. yvonne: what do you think will be the next move for matteo salvini, the leader? with the five-star movement as an alliance in the or willction campaign, he need the help of silvio berlusconi to have more of a center-right lean toward his philosophy and stance? jeff: that is a big question. rella, by saying he would not allow italy to leave the eurozone through the backdoor has really made the euro and italy's future in the e.u. a central point in the

upcoming election campaign. lvini and the five-star movement will want to play the victim. they will say the people gave them a mandate and the president rejected it. by the same token they will be at a battle, each one wanting to come out on top and have control over the formation of the next government. ni mayk that means salvi want to rely on berlusconi. he has been eating berlusconi's lunch. he can feel fairly confident he has that situation in hand and try to hold out the lead he has overpublic opinion polls the five-star movement, but it will be a battle between two populists again. david: let's look at the opposite. when i look at markets they do not seem to be embracing the two populist parties. help us understand how they

could lose support over the next few months, or is that at all plausible? jeff: it is possible. you saw comments today by the european commissioner who made the point may be the markets and the reaction to this uncertainty chasten italian voters. when peoplepositive from the outside, especially from brussels, deliver that message to itali vers. of threehave a period to four months before the election and the markets: down after this initial reaction of calmr -- and the markets down after this initial reaction of horror, what is likely to be dominant is asserting italy's

sovereignty and say that italy should be free to choose its own election -- direction. dominant,at will be rather than sobriety and prudence, which italians feel they have had a lot of four the last eight to 10 years. the result has been a stagnant economy. david: asserting their own destiny. this sounds all too familiar. thank you. let's get you caught up to date with other things happening in the world. here is first word news. >> china says it is quote, surprised a president trump's decision to move ahead with tariffs, and will protect its interests. $50 billion worth of imports -- tariffs on china. this is days before the commerce secretary is due in beijing for

more talks. targeted imports list will be released soon. a rising dollar may trigger another financial crisis. he says the uncertainty around the iran nuclear deal and the weakening of the u.s. alliance poses a negative affect on the e.u. economy and threatens the bloc's existence. warning -- >> and existential crisis is no longer a trigger of speech, but a harsh reality -- figure of speech, but a harsh reality. europe needs to do something drastic to escape it. if it is to reinvent itself. >> authorities in belgium say terrorism is a suspected motive of a killing of two police officers and a civilian.

they kill the passing driver before dying in a police shootout. he was a belgian national in his 30's with a history of petty crime. he was on day release of a risen sentence for drug offenses. the on store u.n. says the key psychological levels fueling concerns of faster depreciation. in shanghai.o 6.42 the 6.40 mark has not been reached since january and is ane as a he resistance level. the yuan is headed for its biggest drop in both domestic and overseas markets. 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 just the summers, this is bloomberg. yvonne: still ahead, we speak to morgan stanley's chief china

economist as a trade battle between washington and beijing heats up again. advisor paulobal sheard weighs in on what is happening in italy. this is bloomberg. ♪ this is bloomberg. ♪

david: this is "daybreak asia." yvonne: traders the getting to unwind four rate hikes as political crisis in italy keeps markets on watch across the world. kathleen, take us through the damage of what we have been seeing in the bond markets from europe to the u.s.. what a move, you can

start with treasuries. a few weeks ago the benchmark was that 3.12%. everyone was talking about the end of the secular bull market in bonds. we looked at italian bonds, german bonds, the government 10 year benchmark, that yields a spread blowing up 190 basis points at the end of last week to just about 300 on tuesday trading. it has been quite a move. all these moves raise questions about the stability of the euro area have hit fed rate hike expectations. you are looking at a chart of euro options. markets were looking at maybe four rate hikes. that is down to just over 2.5. they are not even sure the fed will hike three times. what is going on with the ecb?

if someone has to step in, it will not be the fed. the european central bank will have to do something, as mario draghi pledge in 2012. hesaid he will do whatever can to support the euro area to push back against the greek debt crisis. there the complications, is so much uncertainty about what type of government will be leading italy. will they be deficit busters? they would have to go to the ecb and request an extraordinary bond purchase program. another big question. david: of course there is a stigma for asking for help. kathleen will be staying with us. i want to bring in our second-guessed, paul sheard joins us live out of japan. good morning, thank you for joining the program. kathleen was talking about the

ins and outs of global policymakers. do we know enough that would make us rethink whether the ecb is thinking about doing something? i do not think we are at this stage of the ecb coming into play in any serious fashion. to put context on this italian situation, the first point i isld emphasize, the eurozone very much a half built house and european policy makers understand this. years since draghi gave , talking about how to six the somewhat dysfunctional eurozone. a monetary union that did not have a banking union or fiscal union attached to it, which is a normal situation. there hasking union been a lot of talk and very little action. the markets were

waiting for the elections of 2016, which spilled into 2018, to get through before they were hoping to for the foot on the accelerator and accelerate the completion of the banking union and make steps. that is been very, very slow. other question on economic context, i will give you numbers. the result of a problematic architecture of the eurozone, italy, where its real gdp is level itto the peak attained during the financial below, it is still 5.5% the level. if you look at germany, it is 12% above. unemployment, 3.4% in germany, 11% in italy. behind this political turmoil, let's not forget the fact there are economic realities driving these challenges.

we have seen remarkable moves in the bond markets. you think spreads can continue to widen further? most of the local debt in italy is held by italians. perhaps the moves forward will be limited. depend onink it will how this plays out. the spreads of course at one point in 2012, before president draghi said it had blown back fairly dramatically in italy, we are well aware of the peak spreads of government debt versus bunds. the omt has been mentioned.

there in mind that lifeline president draghi through the in 2012in 20 child -- was contingent of the ecb would do whatever it takes if the governments concerns did whatever it took to bring the fisc hse in orr. momt isare seei the a peetual government going in the other direction and saying, we have had it with all these constraints. we need to move back to some form of expanding fiscal policy. that is understandable from the viewpoint of conditions in the economy. languageif you had gdp , you would be talking about the monetary easing and further fiscal easing. the problem is, given the architecture of the eurozone and that architecture has not been fixed, it is not something you can do with impunity in the current framework. you have painted how

the ecb's hands will be tied unless italy changes its ways quickly. let's get to the federal reserve. into 2016, the fed was dead set on three rate hikes. they only made one, that had to markets blowing up, volatility, questions over the euro area. will this affect the fed's great path hike this year? come a butuld whether it does or not depends on how much global turmoil we markets, how that developments, and how it comes back and effects the economy. that is the lens through which the fomc will be looking at things. change theem to dynamics. it depends on how the u.s. economies and markets respond to the rest of the world.

another one or three hikes, it depends what happens with economic activity. looking at the fed, they must be the envy of the central bank world. they have had six rate hike, they have began the process of unwinding their balance sheet area the economy is doing quite well. --id: that begs the question paul, you are staying with us -- thater we are ending business cycle. we are closer to the end, if you will, but we are not seeing inflation rollover from the peak. vicewas s&p global president paul sheard. kathleen hays will be staying with us as we turn the conversation to the boj later in the show. yvonne: we continue our chat with paul and talk about em. plenty more to come. this is bloomberg.

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yvonne: 7:30 p.m. tuesday night in new york. feels like summer coming through in the city. turmoil insing with italy, down 1% in the s&p 500. also seeing the rush to treasuries. david: including bunds. have a look at what is happening in hong kong, down 200 points on hang seng futures. also talking about summer. 33 degrees celsius is your temperature high for the day. that is the forecast as well.

in other words, you do not have to wait for august for burning man. 30 minutes away from the market. i am david ingles. yvonne: i am yvonne man. you are watching "daybreak asia ." let's get first word news with jessica summers. >> italy may face new elections as soon as july. that is after the prime minister cottarelli left the meeting with the president without an agreement. he will be meeting sergio mattarella later. it could force the president to dissolve parliament and call elections within 60 days. are calling for a new vote as soon as possible. israel has released pictures of air strikes in gaza, following a barrage of mortar shells fired over the border. arming --ry says the bombing was the heaviest since the war of 2014. israel says no one was hurt and

most of the mortars were intercepted. they had killed more than 100 palestinian protesters. tony fernandez under investigation in india for allegedly paying bribes. we are told the central bureau of investigation named him and other officials in the inquiry. they say fernandez and others paid officials to gain influence. they denied any wrongdoing and said they are cooperating with authorities. abc has canceled its hit reboot of rosanne after a racist tweet from the start. jarret accused valerie with the words abc says are of poor and, repugnant, and inconsistent with their values. the show was welcomed by some for its contribution to political debate. bob iger said canceling was the right thing to do.

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 jessica summers, this is bloomberg. lots happening in the world of italy, renewed trade tensions. futures ahead of the open down. we have these fears, look at the futures for for asia, signaling pain as much as a drop of 1% for the nikkei potentially. volatility on the rise. the question, whether this will be brief -- grief 2.0. in all theng boost how it will play out in

the region. set for a ninth session of declines. let sick a closer look at the euroyen on the terminal. this will show was how much asia actually cares about italy. more downside seen until it hits the 1.22 handle. cottarelli's meeting with mattarella this wednesday will be key. we have these trade tensions as well. >> we have u.s.-china renewed tensions. and key milestones trump wants to unleash against china with those tariffs. and on the data calendar and asia, japanese retail sales, aussie building approvals, and thai manufacturing data. neglect, an

unscheduled policy meeting. this could be the central bank governor's first rate hike potentially. yvonne: certainly one to watch. sophie kamaruddin checking the market. let's ring back s&p global chairman paul shared and our global editor kathleen hays in new york. paul, this speech, how we may be headed for another major financial crisis. the termination of the nuclear deal with iran. it is causing not just dislocation in the economy, but other parts of the world like em. are we at risk of some sort of crisis after what we saw in turkey and argentina? certainly the background

is one of a lot of jitters, things to worry about in the global economy and markets. , italk about crises in em is important to talk about crises hitting specific emerging markets, like turkey, and others. stresses amplifying to become global event. i do not think we are there yet. if something is likely to move the global markets it is likely europe, asg out of we have been discussing, rather than em. kathleen: let's go down this path further. some have expressed concern that compared to 10 years ago when the last financial crisis started, some emerging markets do not have the big accounts they used to have. they are tending more toward smaller surpluses are deficits. , the formerense

head of the reserve bank of india express to this concern. are you concerned maybe emerging markets are vulnerable -- more vulnerable to these global stresses them they were -- than they were? individual ones. some of talked of the fragile five or fragile seven in the past. i do not think the economies will move the dial on global growth in global markets. if you are going to worry about a fully fledged crisis coming from emerging markets, you would be looking at china, india, as potential sources. at the moment i do not think anyone is looking at china or india and saying they are going into crisis. i would not put the smaller .mergent -- emerging markets

the listg it high on of things to worry about, i would not put it at the top of the list. david: the fed immediately comes to mind. i look at the recent minutes from the fed. beyond this next meeting, there does not seem to be a dominant consensus between them, which tells me, despite everyone saying the u.s. economy is doing why cany cannot we -- we not see beyond the next few months? shouldn't it be more obvious across metrics that we have more consensus beyond a few months? paul: certainly if you look at the dot plot, there are a couple outliers. especially a couple years in both directions. there is a bit of a consensus on the fomc that the economy is doing well, the labor market is

doing close to full employment. where there is uncertainty is to ad the responsiveness tighter labor market. there are people still questioning how close the labor market is to full employment. we have a three handle now on u.s. unemployment, but we are not seeing signs of wage pressure as we would have in the past. there is uncertainty on the reaction function of the economy before we get to the policymakers themselves. but i would not overstate the dissension among fomc members. yvonne: i think we should talk about the boj. we do have a conference. we are expected to hear from governor kuroda himself. it was two years -- three years ago around this time, he told

everyone about this peter pan mentality, go off and believe in it and things will work out, uny positive attitude and conviction. what do you make of this years later as we wait on any signs of normalization? i am a big supporter of what governor kuroda has done the bank of japan. i was a fan of the timid approach under the previous governors. horns, heull by the is done everything right in terms of the communication of monetary policy. the challenge in japan is that withad an economy inflation the last 15 to 20 years. anis difficult to take economy like that and adjust monetary policy alone. this large deflation expectation 2.5 percentage pointsndriy anchor them.

a an has not really had period of sustained, coordinated monetary policy. the big question for japan, the looking veryis tight. i think the prospects for success are pretty good. but you have now the second .onsumption hike it is little more than a year away. are we going to repeat the same of the foot on the monetary accelerator and the other foot tapping on the fiscal brakes? conducive to getting japan on the 2% inflation path once and for all. kathleen: quickly, i want to get one in, and a quick answer, if you can. is governor kuroda going to soften the 2% inflation target so he can back away and declare victory more quickly? i do not think so, and it

would not be a good idea. kathleen: thank you for the quick answer. [overlapping voices] yes, i think they will. they will achieve their inflation target at one point. but it is a long way off. david: paul sheard, thank you so much. and of course, kathleen hays. catchoomberg subscribers, 's speech.or coverage starts before it :00 a.m. hong kong time, about 20 minutes from now. the morganhad to stanley china summit where trade is a sharp focus after trump's latest terrorist threat -- tariff threat.

this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man. i am david ingles. jpmorgan kicks off its conference in beijing. china's economic growth and things happening globally. let's go to the event where our correspondent tom mackenzie is standing by with our first guest. david, yes, thank you. it is the fourth summit were morgan stanley. great china economist, thank you for joining us at the summit. let's start with political rumblings in italy. europe has been a key source of demand for chinese exports.

how do the political rumblings in italy and the chance we are going to see another path to the eurozone, how will that improve the demand picture for china? [indiscernible] in view of the increases, we think chinese policymakers are facing deleveraging. [indiscernible] i think it is not a reversal of deleveraging.

i think g first the pace of deceleration and growth in china will be louder. it will cushion the impact. by doing that [indiscernible] if the pboc could change the benchmark rate, it is the sustainedchaos, more [indiscernible] i think it is more about the , and whether they

are cutting benchmark rates. callve already removed our of benchmarks. increasescking modest by liberalization of the market cap. heighten not peyton -- it. fs onwe heard about tarif $50 billion of chinese goods. does that change your outlook? >> [indiscernible] there is resilience consumption in china. i agree with you on the risks about the trade tensions between the u.s. and china.

we see areas of china and the making progress. to meet china's own demands on consumption. they simply want to keep that. there is a consumption of natural gas from the u.s.. by widening market affects -- , they and coverage -- we feel over time the two can reach a deal. is potential of $90 billion of increasing purchases from china. agriculture and

equipment. what about the yuan? went to the 6.4 level yesterday. will we see the renminbi piling up? >> no. it is a function of the dollar. it haslook at the yuan, been quite stable. the pboc is focusing on thantability rather [indiscernible] going forward they will likely promote liquidity by increasing the opening up of capital market . by doing that we see an inflow into chinese markets.

more than two edge of potential inflow. the risk of devaluation of the renminbi is small. tom: thank you, the chief economist at morgan stanley for china. yvonne: tom, thank you. great conversation with morgan stanley's chief china economist. miss ourdo not exclusive interview with morgan stanley chairman and ceo. tom will bring you that interview live from the summit in beijing. it :00 a.m. hong kong time -- 8:00 hong kong time. david: retail sales, 1.4% month on month. much better than expectations. for april.e, 1.6%

we have a chart which puts everything into context for you. look at the bloomberg. the past 30 years or so, for a country like japan, not the best demographics in the world. 0.5% is your 30 day average. nomics working its magic. as yvonne said, peter pan and pixie dust. yvonne: don't forget our interactive the function. you can dive into securities are functions we talk about. become part of the conversation. have a guest question you would like to ask, send it our way. this is for subscribers only. this is bloomberg. ♪

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david: welcome back, you're watching "daybreak asia." users can interact with charts on the program. you can look at our chart library, gtv is the function. have analysis, you can save charts for future reference. yvonne: a good tool to check out. starbucks says some investors have questioned the cause of the decision to close stores for racialias training. they closedn response to an incident in philadelphia where two black men were arrested for

no apparent reason. it will cost starbucks at least $60 million in lost revenue. david: reports from hong kong -- the southaker china morning post says the are no longer performing their usual duties. entertainment ruling out a tie up of wynn resorts. galaxy chairman says he does not plan to increase the holdings. of $38had a market value million. value of $21market billion, has gained 15%. theo long as they win largest shareholder, we are

confident nothing will go wrong. after all, it is only 4.9%. we are just here to receive dividends. david: we're just getting warmed up here on "daybreak asia." a lot of good conversations you will not want to miss. by an advisor, 50 minutes from now, to talk everything from europe, msci, shortselling. lots to discuss. yvonne: plus we are back for the morgan stanley china summit later in the hour. :40exclusive discussion at 8 hong kong time. plus, the market open set up for turbulence here. this crisis politically in italy.

we are waiting for some type of government to be formed. a lot of questions. david: looking at futures, 20,000. the open is next. this is bloomberg. ♪ his is bloomberg. ♪

♪ david: it is 8:00 a.m. in hong kong. we are live from bloomberg's asian headquarters. yvonne: i'm david england. yvonne:i'm yvonne man. geopolitics stocks down. rallying and uncertainty ripples across the globe. david: we are looking to italy as the catalyst. nerves across the market as they failed to name a government. a new election in july. yvonne: president trump turns up the heat on china by pressing ahead with tariffs. the final target will come in about two weeks. david: no deal is better than a bad deal. nafta will be allowed to die

rather than accept hardline demands from washington. ♪ yvonne: trade is certainly in the frontline. we have to focus on what has been going on in the euro situation. in italy, we thought we would see a list of ministers. there is another meeting coming up on wednesday. it looks likely that we could see some snap election. more uncertainty plaguing the bond market. i am focused more on this chart, a default risk we are seeing in europe. it seems to be going ever higher. it is what we are seeing in the u.s. credit default swaps on investment-grade companies. that's trading the highest in more than a year for europe.

there is some suggestion that we are edging closer to some type of eurozone debt crisis. there are a lot of moving parts to assess that. david: the fact of the matter that we are looking at a european measure, and not an italian one speaks to the potential for contagion. we did see a little bit of the spread into the periphery, greece, portugal, spain. elsewhere, portugal has cleaned out since the crisis. with yields pushing up, u.s. 10 year yield pricing and further o 2.76%. t we will check the markets in a moment. let's get the first word news with paul allen. paul." paul: china is surprised with the president's decision to push ahead with tariffs, and will defend its interests. the u.s. will impose on $50

billion worth of chinese goods. the news comes days before commerce secretary wilbur ross is due in beijing for more talks. the white house will release a imports by june 15. george soros said the rising dollar and capital from emerging markets may trigger another financial crisis. it's uncertainty around the iran nuclear deal and the u.s. europe alliance posing a negative effect on the eu economy, and even threatens the very existence of the block. italian bond yields climb to multiyear highs on the political gridlock in rome. >> an existential crisis is no longer a figure of speech, but the harsh reality. europe needs to do something drastic to escape it. it needs to reinvent itself. authorities in belgium say

terrorism is the suspected motive for the killing of two police officers and a civilian. the attacker stabbed the two officers, shot them dead, and killed a driver before dying in a shootout. he was a belgium national and had a history of petty crimes. he was on a release from a prison sentence. ell,uelinge yon concerns of appreciation. after thed six currency traded at 64229. the 640 marker has not been reached since january. key resistance with the exchange rate. biggest monthly drop since november 2016 in both domestic and overseas markets. hours a day on air and at tictoc on twitter powered by more than 2700

journalists and analysts in morei than 120 countries. 'm paul allen, this is bloomberg. david: we take you back to tokyo, where the governor of the boj is speaking live at this annual conference called central world. in a changing he is speaking there, following him is the former r.b.i. governor. speaking,t started talking about the global financial system and how it has, compared to previous bouts of stress, become more robust and enhanced. he says we need to explore prices and wages. they are sluggish, inflation still remains well below where they needed to be. yvonne: at least they got recent detail sales data that came out for april. wages picking up. perhaps people willing to spend more. definitely one to watch. three years today since we heard from his peter pan speech. we will see how things change.

you can go to live go to watch the rest of the speech for what's happening in tokyo. we will be watching that. an eye on the markets, let's get a check on the open. the latest with sophie kamaruddin. >> it looks like a gloomy start for asian markets. bankers have a lot to a jet -- digest between tensions of the u.s. and china. u.s. e-mini futures pointing lower. stocks fighting with japan. have theinvestors also latest retail sales figure to digest, rising 1.4% on a monthly basis, higher than expected. we do have some bright spots in tokyo. easy time climbing on the back of the retail sales number. in australia, we are waiting on australian building. -- holding permits.

the aussie is back below 75. the yen is rising against the dollar, five-week high hit on tuesday. a recovery to 19 54 the dollar-yen could happen if the italian bond market stabilizes. we had the blowup in the italian debt market, two year yield spiking over 100 basis points as we wait to see if a government can be formed. the euro-yen is falling, trading at june 2017 lows. on the calendar today, highlights include the first policy meeting with the new government at the helm. david: a ton of data out of europe, core pce coming out, thank you so much for the update. a lot of this comes down to italy, facing new elections. what we do know is a changing and developing story.

the prime minister designate left the meeting without an agreement in the cabinet. yvonne: let's bring in jenny schneider, joining us in hong kong. we were thinking we would get more clarity. it seems like we are still confused. another meeting in place on wednesday. what is the holdup? >> the prime minister delegate once to form -- wants to form a government. it is not off of the table. opposition party, that anti-immigrant league, and antiestablishment five-star movement have no incentive to help him form a government. they want elections as soon as possible. yesterday we were talking about elections may be in a september, it could be as soon as july. if they have to dissolve it, they have 60-70 days. that would bring it to july,

which is when the other parties want to see a vote, which would essentially be a referendum on leaving the eurozone. david: an earlier guest essentially said that in this limbo, whether it's july or september, we could see him practically be the man in charge of the economy there. the markets have more than wobbled, i have tried to figure out the best case scenario which would bring risk back into the market. >> some sense of stability, some sense of what might happen. will we see elections, is it a referendum? what could they do in the meantime? what is the state of the government going to be? and this question about the euro and leaving the euro is weighing on everything. we saw george soros say it is an

existential crisis because of the third-largest economy in the euro looking at a real referendum on leaving it. and also this antiestablishment feeling, this anti-immigrant feeling, as well, that the parties were not able to form a government. that is why they are pushing for the vote. yvonne: could it get as bad as what we are seeing based on 2012? >> it certainly echoes. it does bring this up. we also have turmoil in spain. you can see this wave, that's the concern. on the other hand, there is a technocrat. inhe is able to do something the meantime and able to not get enough support to some kind of government in place and some kind of plan on the table, that could perhaps give us something

that didn't happen in 2012. it seems to have echoed to that. that is why we are hearing from people like george soros, saying the turmoil is real and could cause market turbulence. yvonne: and what this means for the central banks, with the ecb. 2019 was supposedly the timeframe for policy, we will see if that is the case. jodie snyder, thank you. fromrs on four rate hikes the fed, as the political crisis keeps bond markets on full alert. let's get to our global economics and policy editor kathleen hays. it is kind of global how things have spread. from europe all the way to the u.s. kathleen: let's start, taking a look at this risk off friendly we saw in the u.s. treasury market in trading on tuesday. yield. for 3% look at what happened, this

gigantic rally, the 10 year note dropping 15-16 basis points in one trading session. it was a couple of weeks ago at 3.12 on the 10 year yield. people saying the end of the bull market in bonds was over. it is alive and well today. let's look at how this is playing out. there are some anyways to look at this. italy's yield spread over germany, another one that was blown out in the last few days. you really see comparison to what was going on when the european debt crisis was getting started. let's look at this big move. today, april 24, this is it was down to about 190. a huge move, in terms of this spread. it is another red flag. people are getting caught wrongfooted. traders were sure, there were

looking for yields to keep rising. italy's bond market liquidity dried up pretty badly today. people moved into treasuries, risk off, stocks, a lot of things happened at once. crisis andlian bond charts like this are drawing comparison to the days of the euro area debt crisis. it seems so obvious that they are similar, even if it is not the same event. david: even the yield premium that treasuries had over italian debt, this time he has disappeared -- it has disappeared. it takes us to the fed. does this change the map for the meeting, and also for the ecb? >> let's start -- kathleen: let's start with the federal reserve. they have guaranteed this june rate hike. it is a question of the rate hike past over the rest of the year. there we do see movement. here is another chart from the bloomberg library. if you look at options on eurodollar futures, look at this

move. just a couple of weeks ago traders said you couldn't have 3.5 rate hikes. maybe we will have four in 2018. now, they are not even sure if there will be three. what will happen past june? that is the question for the fed. let's move on to the ecb. if someone will rise, it will have to be mario draghi, it would have to be led by the european central bank. people think about mario draghi saying back in 2012 whatever it takes to shore up the euro area, to prevent the crisis, that is what he would do. that led to the massive bond program. we see questions hanging over italy. one thing about this situation is if the government wants an outright monetary infraction, it has to do two things. ask for it, and promise new reform. global wasair of s&p

on in the last hour. he says everything is moving in the wrong direction. let's listen to what he said. ecb would do whatever it takes if the governments concerned did whatever it took to bring the fiscal house in order. is the are seeing potential government going in the other direction and saying we have had it with these fiscal restraints, we need to move back to some form of expenditure he policy. yvonne: if i am an italian voter looking at this turmoil around this change of government and the populism, if i see what is happening to the bond markets of the world, i wonder if person doesn't follow marketsa will think twice about the coming votes. that is another question people will be asking. david: when it hits government purses that's when people start to feel it.

thank you so much, kathleen hays out of new york. let's have a look at these live pictures. president trump is speaking to supporters, posting a republican rally in nashville. go to follow what has been happening. there is also another ongoing even in tokyo, the governor is speaking. coming up in the program, we are eaking with the o of china's largest private logistics. we talk about how they are faring in this very competitive delivery market. yvonne: up next, oasis management advisor is live to share his thoughts on shortselling in hong kong and china inclusion. what's to come in at. plenty to come on "daybreak asia." this is bloomberg. ♪

♪ yvonne: this is daybreak asia, i'm yvonne man. the best wayg is to describe what is happening in japan, down the seventh straight day. investors getting turned off on what's happening for the euro, italy especially. let's discuss the risk off. --ernly flee is with us martin illegally is with us. -- martin leafly is with us. i have to ask you about europe. should we be worried? there is nothing new about political turmoil in italy. change in italy happens all the time. what is more worrying is the move to euro skeptic politics, which has been happening.

that raises questions about how strong the european foundations are. the u.k. position has always been they need reform. it is a difficult club to be a member of and you need reform. yvonne: most of the brunt will be focused on the italian banks, which hold a lot of that italian debt. is there a sense from the lenders that perhaps we have eliminated the systemic risk? perhaps they have cleaned house enough for them to whether these crisis? >> i think we have made banks stronger, they hold more assets andeir liabilities are understood. they have always had a quirky way of recognizing bad debt. they don't write them off in the same way as other european banks. that is what people are realizing. how long david: do you think people will be having this conversation david:? --david: how long do you think people are going to be having this conversation?

italy, the u.k., so on and so forth. >> you have to remember that the u.s. took 70 years in a civil war before it consolidated on the dollar. these things are long-term. the fact that it has been 10 years with a few hiccups, you expect that. yvonne: are there any threats to the eurozone? >> i think the u.k. position is partly a trigger for that. i do think there is a threat, but that will be really triggered in a strong political movement to eurosceptic governments. there has been some movement, but not a lot. david: speaking of nudging along, nci china, friday is the become part of the global indices. do you think that nudges along corporate government standards? >> i think that is a big change, not a nudge. msci inclusion becoming a must hold to attract major world indices. it puts china in a different space. this is a big change. everybody will have to hold whatever their weightings are,

depending on allegations -- depending. china has been running for a good 10 years. it will be nudging corporate governments, it will be getting standards along to what you would expect companies elsewhere. yvonne: what else needs to be done? is there much more to do? >> it is less about integration, than maturity in china. the systems are mature, but you still have an investor base that is retail and sentiment driven. you need an institutional base within china, not an external. valley stocks and put pressure on come -- value stocks and put pressure on companies elsewhere. it is not about the technical part, it is about institutions that will make up 70% of the market. that is moref a pre setting mechanism. david: do you think that is forcing regulators to be more risk-averse? they want more institutional money to open up and allow more

institutional selling. >> if a market is exposed to retail, the natural response is you are risk-averse. retail tends to come in last, five points in waves -- at high points in waves, and take to protest. we have been talking about this. shanghai london stock link, as well, which is set to happen sometime this year. how should we ensure this will be well received? is msci china inclusion going to be the guinea pig? >> it is quite pivotal. you have a closed market, until now, that would allow allegations -- allocations into china. i think the msci inclusion makes everything necessary. not just nice to have people to play around with, but a necessary part of the infrastructure. inis a significant move opening up the chinese market.

david: martin wheatley, advisor joining us to cover a bunch of topics from europe to hong kong. plenty more to come, stay tuned. this is bloomberg. ♪

♪ of the a quick check latest business flash headlines. galaxy entertainment is blowing out a tie-in with wynn resorts. two months after its surprised stake, the the chairman doesn't plan to holdings. galaxy has a market value of $38 billion, it has risen 11%. onn, with a market cap

the largests shareholder, we are confident nothing will go wrong. our investment will not affect their operations. it is only 4.9%. we're just here to receive dividends. claimed charles gifford wants to face demand, she listen to him. there is no complaints filed by the national amusement. the fate of the u.s. debt work. conduct, itbout the never got a response. cbs calls the allegation a faceless, personal attack. yvonne: some investors questioned the cost of starbucks decision about racial training. 8000 cafes are closing in response to an incident in philadelphia, where two black men were arrested for no a pair reason. bloomberg estimates the closure

will cost starbucks at least $16 million in lost revenue. david: coming up, canada's prime minister has a message for donald trump. no deal is better than a bad deal. our interview on nafta is coming up. this is bloomberg. ♪

♪ is 8:30 in singapore, half hour away from the open of trading. i'm yvonne man. david: i'm david. you're watching daybreak asia. let's get caught up with things going on. paul allen is your. -- paul allen is here. paul: italy may face new elections as soon as july after the prime minister left a meeting with the president without an agreement on a cabinet. he will meet again on wednesday. the government could force the president to dissolve parliament and call elections within 60 days. most parties are now calling for it as soon as possible.

a released pictures of air strikes in gaza following a barrage of mortar shells fired over the border. video shows the bombing of a tunnel. it was the heaviest since the war of 2014. no one was hurt and most of the infected.re tensions are high after is really forces killed more than 100 palestinians in protest. allegedly paying bribes. the central bureau of investigation has named him and other officials from air asia. fernandez and others paid officials through middlemen to gain influence. asia-india denies any wrongdoing and is cooperating with authorities. rolls-royce holdings is expecting a sharp rise in the number of dreamliner's being grounded. the spike will come ahead of next month deadline of mandated

inspections to power units due to durability problems. the number could reach 50. 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'm paul allen, this is bloomberg. the open minutes from of major markets in asia. let's get an update with sophie. sophie: markets certainly getting a reminder not to get comfortable or complacent. check out the losses in japan. set for thep 1.8%, longest run since july 2012. that would be eight days in the red. up.tility is picking the yen is rising for a second date.

treasury yields are under pressure. we see a pickup about 2.79% on the benchmark. the drop we have seen of late, it may have sparked a rally, but that is certainly not the case this week. offshore yuan trading at a four-month low. it is bumping up against the 643 handle. chinese market blues, they have further to run. writing credit concerns are also headwind for china. yvonne: let's take a look at all of things markets. what could be hanging on to this is trade tensions. president trump turning the heat on china, saying he is going ahead with tariffs on $50 billion of imports. the white house will release a list of targets, making it its most specific threat. david: let's bring in stephen engle to talk about what we are making of the timing. key, wilburg is

ross is heading for another round of negotiations in beijing. it is also just ahead of the kim-trump summit. xi jinping has something to say in those stocks, as well. the timing --ho talks, as well. the timing is interesting. didn't steve mnuchin recently say the trade war was on hold? this is just another salvo. perhaps donald trump is strong by the criticism -- stung by the criticism. especially with the flip on zte and other issues, as well. what we know are firm dates. he will impose tariffs on $50 billion worth of chinese imports and curb investment in sensitive technology. no word on the additional threat of another $100 billion. this is the original threat of $50 billion, now becoming a real

thing. final list will be released june 15. tariffs will be imposed shortly thereafter. this is their most specific threat on timing for tariffs on china. also, new restrictions on chinese investments and enhanced export controls will be announced june 30. we have another date, implementation will be shortly thereafter. china's commerce ministry within hours of the announcement did respond. they said the move was surprising and within expectations. surprisingly expected. capable,confident, and they have the experience to protect its interest. let's bring up some comments. tom donahue is the u.s. chamber of commerce president. putsid the use of tariffs all the burden on american companies and consumers. we can change the page.

democrats praising donald trump, the top democrat in the senate, chuck schumer, applauding donald trump's move. it has been needed for a long time, he says. president trump must stick with it and not bargain it away. that has been one of the key criticisms of donald trump and his negotiating tactics with china. we got a story saying the white house is also considering restricting chinese visas, in particular students going to the u.s. to study in a key areas like robotics and artificial intelligence, aviation, tech manufacturing. key areas china is focusing on. yvonne: take a look at those really states, june 15, -- release dates, june 15, june 30 this is after the suspected singapore summit. is a contingent on whether it happens and how successful it will be? >> it is interesting, the white

house is ramping up reparations for the summit. there is still 13 days before the summit. xi jinping good have another summit in which china is sitting. he could get the ear of kim jong-un and throw a monkey in the range -- wrench. shinzo abe is headed to washington, d.c. june 7. man will meetnd america's former spy chief mike pompeo. meetings will be ahead of the summit. sarah huckabee sanders, the white house spokesperson, says north korean officials have been engaging since donald trump's letter last week. even donald trump tweeted " solid response to my letter, thank you." sarah huckabee sanders basically said the u.s. continues to actively prepare for the expected summit.

two advance teams already. looks like it will happen. 13 days is a long time, though. david: thank you so much, stephen engle with the latest on trade. donald trump is speaking at a rally in a natural, tennessee -- nashville, tennessee. he said mexico will be paying for the wall, because they do nothing to help us. we are talking about nafta next. justin trudeau says canada would rather see nafta die, then accept certain hartline u.s. -- hardline u.s. decisions. he will only sign a deal good for canada and also is looking to comprise. >> we continue to believe there win-win-win opportunity for canada, mexico, and the u.s. on improving and modernizing nafta. we're continuing to work

constructively with the u.s. and mexico. powerful lever to create opportunities and jobs, and growth in our economies. we understand there is anxiety about trade out there in large segments of the population that don't feel it is work -- it has worked very well. that is what we have been pushing hard to make a case and demonstrate that we can find that weive trade deals demonstrate issues like protection of the environment, gender equality, workers rights, they are integral in creating the success of a trade deal to create growth. >> how do you think it will affect the summit if the u.s. is -- has just slapped tariffs on canadian deals? friday is the deadline. >> taking a step back and what

the actual summit is focused on. it is fundamentally a gathering of the world's most advanced economies to talk about the economic challenges we have in common. there is one big challenge that is shared across much of the developed world. that is how do you reassure people that all of the changes we are going through in our workplaces, from automation to a deals,ater trade globalization, in general, how will the factors ensure the growth we create is fairly shared by everyone? in any rate -- in every trade deal, there are ways to look for compromises and understand that we can get to a win-win-win. that i willsaid stand up for canadian interests. i will only sign a deal that is good for canada.

no nafta is better than a bad deal. i have been clear with the president. david: that was the canadian prime minister justin trudeau speaking with our head of economics, stephanie flanders. yvonne: china's biggest private logistics provider talks about competition with internet giants, using drones for deliveries and how the escalated trade tensions could affect its outlook. hear from sf express ceo, next. this is bloomberg. ♪

♪

david: needless to say, that across markets. i'm david england. yvonne: i'm yvonne man. china's largest express delivery firm, sf holdings, is setting up a fund to invest in drone technology to bolster its position in online shopping delivery. let's go back to morgan stanley's china summit in beijing. tom mackenzie joining us from their. take it away. i am joined by grace ng, the chief financial officer of sf holdings. the group's cfo, thank you for your time. the logistics business is undergoing fundamental changes. you are investing heavily, you are a major player. how much value do we expect to

see generated in this sector? >> maybe i can speak about what is happening. it has been growing at a rate of 40% or 50% each year. that is the e-commerce. we see a turning point that industry growth rate has been slowed to around 24%. we see the reason is customer needs turn more high-end. driven by the middle class or higher spending. onthink sf has been focusing a premium. we think we are at a very good turning point that we can capture the growth going forward. the first quarter of our business growth is around 33%.

up thealready picking momentum. >> you are investing in four new divisions of business, specifically international, intracity, heavy load side of the business, vegetables, pharmaceuticals. give us an update on how the progress is coming along, d also what they will add to the bottomine. let me explain why we go into that area. for 25 been around years. for the first 20 years, we have focused on purely high-end. .hink about our customers we felt we needed to extend into different areas, such as heavy cargo, to satisfy a more complex

need of the customer. it is natural for us to go into that area because this new policy can assist in that. it will increase our network usage. it makes sense for us. investment, we try to maintain a very flexible cost. a goodto maintain balance in terms of shop process pressure with long-term growth of the community. moment, our the heavy load is a test. make positiveg to margins. it is around 80%. that is very tremendous growth rate.

it is going around 40%-50%. because itw gently takes time for us to collaborate . in two or three years time, we expect it to go up. >> have you lined up corporate customers for your heavy load business? >> yeah, but we cannot disclose the name at the moment. approach, it is to make sure we maintain growth sogin at around 20% or so, that we have healthy growth. we expect in a few your's time that all of this will be able to contribute to healthy margins. we are now actively looking into company's second.

cargo, and also new technologies coming in. [indiscernible] together with the new ability and delivery capabilities, we can provide a solution for customers. >> final question on the u.s.-china trade tensions. have they affected your business? >> i would say not yet. i hope to see nothing is influenced. we help customers import goods from u.s. into china, including fresh produce. if we increase -- if it is increased, it is good for us. at the same time, we help customers export to china. we would be gauging sentiment

and adjust our investment in the term. >> thank you, very much. grace ng, ceo of sf holdings. back to you. david: a lot more coming up. tom mackenzie with the cfo of sf express. this time tomorrow, don't miss this exclusive interview with the chairman and ceo of morgan stanley, live from there. it takes place 8:00 a.m. in hong kong, 8:00 p.m. eastern out of new york. yvonne: we are awaiting the big announcement from pokemon. it is said to have a press conference in tokyo. let's look at the nintendo shop. it is already popping on the chart. there was some speculation they

might be revealing some type of switche, nintendo collaboration, we will see. david: this is on twitter, the actual tweet. unbridled optimism already. we will have to wait for more details on that announcement. as far as stocks are concerned, up,up anda away more coming we will be back in a few minutes. this is bloomberg. ♪ ♪

♪ yvonne: a busy day in the markets. you can interact with the chart to track what's going on through the day. catch up on key analysis and futureose charts for reference. charts library on your terminology tv . david: let's get caught up on your business flash headlines. zte reports coming out saying the chinese phone maker had

executives as part of the response to a tech match in the u.s. we are hearing from the south china morning post that the cto are no longer performing the usual duties. the trump administration then and companies from using tech on national security grounds. fears of more regulatory tightening. gauge tracking developers listed in shanghai fell more than 2%, lowest since january last year. it came after hang lung a bit more than doubled a $760 billion asking price. david: in india, jumping settling this dispute of the minority shareholders. it has also been urged by a court to resolve the case. is seeking to reduce $7 billion of debt by selling

assets. yvonne: now for a look at what's coming up in the next few hours. >> definitely looking at what is going on today. a big event in hong kong as the conference kicks off. we have the chief investment officer and founder of oasis management in about five minutes. had a big conference last year, it was up 30%. a good one. we will see if he can repeat it. he will not tell us who his bidding for. -- who he bidding for. heading over to beijing, we have the global chief had of economics -- head of economics for morgan stanley.

cfo.so have the 3sbio's i was reading the description. the company focuses on cell-based biopharmaceuticals in the biotech industry, as opposed to have telling. reptilian.ed to two men flock david: we are also watching italy. a lot of things coming up. have a look at our calendar on italy. what a time to be raising money and hitting the bond markets. massive options coming up. 10 year bonds, five-year bonds, what happened yesterday you had a six-month bill option. was negative.

look at the collapse. 1.65 was the previous bid to cover 1.1-1.2. it will be interesting to see how they come out. before we hand it off to "bloomberg markets," let's take a look at how your markets are trading this morning. japan seemed a bit of pressure, shares -- seemed a bit of pressure. have key division markets coming up after the holiday yesterday. plenty more to come on "daybreak asia," and "bloomberg markets. ♪

rishaad: geopolitics once again dominating. they may have an election in july. trump turning up the heat on china while pressing ahead on tariffs. sendingl combining, investors fleeing to the havens. i am haidi lun in sydney. bond markets on alert as well as yields a surge. unwinding debts on the number of fed rate hikes.