>> it is 7:00 a.m. in hong kong. welcome to "bloomberg daybreak: asia." says thefic market global rally on optimism that an all-out trade war can be avoided. ramy: and i'm in new york where it is just past 7:00 p.m. on wednesday. fears of trade war is racking up . jpmorgan says the tension has cost investors more than $1 trillion. we are on countdown to

singapore. five days until the summit. washington keeps the pressure on and says north korea must make the first move. good morning to of on and are asia-pacific viewers. on wall street there seems to be icemism that the trade war is fracturing with give on the u.s. and china sides. we will have to see where that goes, especially as we look ahead to what is happening in singapore and ecb possibly normalizing in europe. yvonne: it will be an interesting summit. this is more of a family quarrel right now.

is optimistic. this is a very dysfunctional family, based on what has been happening so far. up can see the s&p 500 was 9/10 of a percent. is above the 25,000 mark and the nasdaq gained a record high for the third time in a row. let's take it interest rates. the u.s. ten-year and two-year both coming off a little there. the euro is still in the ban. getting some hawkishness out of the ecb. the brazilian gray owl is heading towards four to the dollar. let's look at asia. slow going in new zealand.

australia futures pointing to about half a point -- half a percentage point gain. in japan we are expecting 140 point pop on the nikkei 225 at the open. we are seeing things down for tenths of 1%. see when it comes to the euro-yen we are seeing a rise for the sixth day in a row, 129.39. dollar-yen holding. the aussie continuing to hold onto gains at 7669. as far as the bond markets are concerned, we talked about the

treasury close to the 3% threshold. let's get caught up with the first word news. aretney: chancellor merkel is warning of this let's at the upcoming summit, saying she will challenge president on tariffs. she told lawmakers that serious problems as leaders prepare to head to quebec. say thef compromise group may fail to agree on a final statement. she said she will speak directly to the president about trade. says fears of a trade war have hit u.s. investors in the pocket. analysts found that weeks of back-and-forth policy changes have pushed stocks down by a net 4.5%.

north korea watchers say the regime is destroying its missile testing facility. it is the only known site that land-baseded for missile launches. the report comes days before the summit between kim jong-un and president trump. it is unclear whether the destruction of the site is temporary or permanent. headsesident trump towards the summit, insisting that north korea make some moves first and commits to a timetable for abandoning nuclear weapons. one u.s. official tells us the president is being advised not to offer came any concessions to put the onus on the north to make the meeting a success. other officials say the president will walk out of the talks are not going well. global news 24 hours a day, powered by more than 2700 and analysts in more than 120 countries. this is bloomberg.

ramy: more on the u.s. markets where stocks rally for the fourth day in a row as bonds fell. remain.ing in apple and microsoft hit records. tech is doing well. if you look at the nasdaq 100, you had 16 stocks an index that closed at all-time highs today. apple, microsoft, and intuit were among the names. microsoft and apple hit record highs for four straight days. tesla upable movers, 10%. it made a huge run over the past month. and twitter up over $40 a share, that is the first time it has been at that level since 2015. one reason we talk a lot about tech is the nasdaq was the last

of the major indexes to enter the correction. it is the first to exit. if you want a sensitive the momentum will continue, look at line we have on the nasdaq here. look at the trend line of the past few weeks. it has gone straight up. the level is the highest since 2008. this gives you a sense that the number of advances we are seeing continue to outpace the number of decliners and not suggest the momentum we have had could continue. large cap. all a lot of it is small cap, reticular lee biotech yvonne: aired yvonne: what happened -- biotech. the smallactor out tax, you look at the nasdaq 100 relatives straight index and it gives you a sense of how much

the large caps are playing in this. only 20% of the nasdaq 100 components are above the key level that we would consider to be overbought. if you go down further and look , look at thendex basket of 10 stocks. that is the -- the nasdaq 100 is the line below it. that gives you an idea of how much these big cap names like alibaba, how much they are contributing to the gains we have seen in the tech indexes of the past few weeks. yvonne: it is like deja vu. back to what we saw last year. thank you. the white house wants north to an leader to commit timetable to surrender his country's nuclear arsenal when he meets president trump next week in singapore. let's bring in joe sanchez with

the latest. the countdown clock has started. fingers crossed. his the u.s. offering any hints? the president is being counseled by his advisors not to give any concessions going into the meeting but to stick with the idea that the u.s. wants a firm timetable from the north koreans to start dismantling their nuclear program. the north koreans have bristled , they wantthe past to do step-by-step, we will dismantle this, you lift these sanctions. president trump is known for his improvisational style. it will be interesting to see what transpires. is trying to make a hard patch that trump is willing iswalk away if kim jong-un not cooperative and things do not go his way.

he is also dangling the possibility of inviting kim to the u.s., which would be an unprecedented step and it would confer a degree of legitimacy on kim at the north korean government has long sought. yvonne: it seems like the president is softening the state leading up to the summit, but we heard from rudy giuliani, saying kim jong-un was on his hands and knees begging for the summit to take place. how are those remarks likely to play in? koreans have usually been pretty sensitive to any sort of indication that they are being dismissed. it is certainly not much of a charm offensive on the part of u.s., giuliani saying those things. ramy: i want to bring in some sound from larry kudlow. it seems he wanted to play down the coral that has been happening -- quarrel that has

been happening. >> they are talking everything through. there might be disagreements. as much like a family quarrel. i am always the optimist. i believe it can be worked out. ramy: the word that comes to mind is dysfunctional family, especially when talking about the u.s. laying the groundwork saying it is an issue of national security. >> that has really irritated justin trudeau who will be the host of g7. it is clear from merkel's remarks earlier today that she is ready to confront trump over his stance on trade and multilateral relationships, so it might be a family argument, but it might be like a family dinner where everybody gets away from the table quickly and in a half. the president will be getting an earful based on statements that

have been coming out of other members of the g7, particularly in the eu and with canada. this is a real irritant in the relationship canada has long been a strategic partner. trudeau has a bone to pick with the president. the meantime, even as we are talking about this, there is a headline saying daimler are going toriffs increase u.s. truck production costs, putting further pressure not on the u.s. allies, but u.s. consumers themselves. joe, always a pleasure to speak theseou as we analyze developments. more on trade policy later in the show. we will speak with max baucus and ask about the prospects of a

trade war and find out what part beijing has to play in the upcoming summit between president trump and kim jong-un. vonne: we will talk about protectionism and why it is a bigger risk than investors might believe. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." u.s. stocks gained for a fourth day in a row while bonds fell as this week's risk continued. asian stocks look to extend the rally on hopes of a full-blown trade war will be averted. joining us is david stockman. he was the director of the office of management and budget under ronald reagan. full-blown trade war averted?

based on what we talked about, you have a bunch of headwinds against positivity. >> that is wishful thinking about the trade. we have a market that is irrational and on steroids based on the false premise that the business cycle has been abolished. we're in month one a weight of the weakest biggest -- business expansion in history. we are facing three headwinds that can only mean trouble for the economy and market going forward. an unhinged,e crazy man in the oval office when it comes to trade. he is a lot worse this year than last year. last year, he wanted to do taxes, getting rid of obamacare, that were -- that required congressional action.

he barely got it through. is this year, like a kid, he discovered the matches in his mother's pantry. the matches are trade policy in investigationss under section 302. he is running away with this. he is triggering the action and counter reactions and political repercussions around the world that he does not even remotely appreciate. steelry idea that we need as a national security issue is ridiculous. in 500ld is drowning million tons a year of excess steel. there is no issue. same with automotive. they are ready to do an investigation on automotive on national security grounds when the cars come from mexico and

canada. this is ridiculous. this is not settled by any means. i think the balls will be bouncing all over and this is a real headwind. more portly is the fed. it is pivoted -- more importantly is the fed. it is pivoted. -- rate four rate hawks hikes is immaterial. year and anion a annual rate beginning in october, they are saving into it and people forget -- phasing into it and people forget that balance was 580 billion. they are going to be shrinking to a magnitude that is greater than the entire federal reserve balance sheet that took 94 years to achieve. ago the central banks were lifting two point four

.railing -- 2.4 trillion in qt by next year, it will be at the monthsne and within 20 they will actually be shrinking their collective balance sheet. the third thing is, you have the federal government launching into a massive fiscal stimulus in the 10th year of the business expansion, and they are going to fire 1.2 trillion in the year ahead. ramy: i want to make sure that yvonne gets some questions and. david, let's go back to the markets. it seems we are back to entities -- exuberance we saw at the beginning of the year. think weense do you are seeing a return of animal spirits after trump's tax cut?

there is a sense of renewed investment activity. i think that is temporary and minor. almost all of the tax cut is going back into stock buybacks. the numbers i see are that doing -- during 2018, the corporate trillions. spend that will not cause the economy to grow. the market pot to be rational enough to see through it because it is not sustainable. and it is being funded with borrowing, which goes to my point before that 1.8 trillion of paper will be heading for the bond pits, looking for a home. 1.2 that the treasure -- treasury is borrowing. we have never had anything like this before. there is going to be a massive yield shock.

it is not priced in. the rubber is going to meet the road. this is a daytraders market. it is the most insanely overvalued market since march of 2000. it is just a matter of time before people wake up to the fact that there is a recession coming out of this. yvonne: let's talk about the chart and the earnings sector. haverofits on the s&p risen for 15 months. isyou think earnings itself growing fast enough to further justify further upset? this is a round-trip from an earnings cycle reduction that was driven by the global energy commodity cycle, the dollar going from strength to weakness

which isttom in q1 already reversing. in septembero 2014, earnings on the s&p 500 were $106 a share. the quarter just ended in march and they were $150 a share. only thing that happened is that in between the way down to 86 and now they have come back to $115. they are better find from a once it -- they are benefiting from a one-time tax cut that will not be repeated. no one is factoring in the cost to the p&l of companies as

interest rates rise on the two or 3 trillion of debt on the s&p and the 8 trillion on corporations. i have calculated that compared on the, even a 4% yield would result in $50 a share after-tax of reduced s&p earnings. factor that in, factor the strong dollar, the one-time tax cut, the fact that we have gone in a circle and we are not really increasing on a trend basis tells me the whole earnings growth story is typical wall street propaganda. great stuff. we have to leave it there, but thank you for that terrific analysis. looking ahead, we would love to have you back to see where this goes. thank you very much.

plenty more still to come on "bloomberg daybreak: asia." this is bloomberg. ♪

is under fireok with u.s. lawmakers after revealing data sharing partnerships with for chinese companies. let's go to sarah frier who is covering this story for us. no surprise we are seeing a debate from capitol hill over what mark zuckerberg and what he did and did not know. long-standingre partnerships they have had with device makers, including huawei which the u.s. government considers a security risk. case noneays in this of the data wish share on huawei servers.

while a confirmed that. we are at this public trust crisis with facebook where senators do not quite believe that facebook can't say enough to assuage their concerns. not come up in 10 hours of congressional testimony. there are questions about how forthright the company is being about these types of data moves around the echo system and -- ecosystem. ramy: how has facebook responded? sara: a say they do not share any data on the servers. they needed to have the huawei servers because so many people around the world use huawei phones. so interesting, the diebold ching of new information --t -- the diebold ching divulging of new information.

on a surprisee resignation, just ahead. this is bloomberg. ♪ retail.

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yvonne: it is looking wet and dreary outside. it is 7:30 p.m. wednesday in new york. markets closed up nearly 9/10 of 1%. fears of a trade war has foraged for now -- ebbed now. yvonne: you are watching "bloomberg daybreak: asia." let's get to the first word news with courtney collins. courtney: first up, paul ryan is

contradicting president trump, saying there is no evidence the fbi spied on his election campaign in 2016. ryan says he agreed with trey gowdy that russia was the target of the bureau. fact that two people loosely connected with the trump campaign may have been involved does not mean the president's team was infiltrated. >> where waiting for more document requests. we still have unanswered questions. it would have been helpful if we got this information earlier. --ly got the information we if we had gone the information we were looking for, we could have wrapped this up faster. courtney: the new italian prime minister is seeking to reassure markets with a pledge to gradually reduce the country's debt. -- former law percent for professor had unnerved people

with a two-tier flat tax. but he told the lower house he respects the principles of a gradual reduction of debt. the latest wage data in japan hopes that the pay will be driven higher. the earnings in march raised expectations and was the biggest in years. april rose a more moderate amount. gold imports in india are said to have shrunk 39% in may, a fifth monthly decline as the world's second-largest consumer demand. week era of

our data shows inbound shipments are 42% lower. june through august are often slow for gold mines. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: we're counting down some -- we're counting down to some major markets opens. we are seeing gains but it comes to equity bonds. we are seeing a rally in asian currencies. over the past two weeks, asian currency has bounced back as crude prices have fallen. the line in blue is the jpmorgan asia dollar index. a move by opec could be a

negative for india. the philippines are particularly vulnerable well -- vulnerable. when it comes to malaysia, i that he ishlight feeling good about the country buying stocks even as foreigners have dumped them for five straight weeks. says, this year is difficult but it is interesting says, this year is difficult. ramy: we have been looking at the brazilian rahal. could it be the next domino to fall? >> it could be.

it could join currencies in argentina and turkey. rahal is on the road. brazilian policy makers are in a tricky position little room for error yard the question is how long can the central bank stay on hold? ramy: the weakest in more than two years. beot of people will concerned and has might be rolling. europe, the european central bank is ready to discuss taking the big step toward less monetary stimulus while the reserve bank of india is jumping in with its first rate hike in four years. kathleen hays is here with what

is driving the steps towards tightening. the ecb has not done anything yet, it is what something -- someone has said. kathleen: absolutely. they are on the verge of a pivotal discussion, the first one to seriously say, we know we are going to end the bond purchases, let's talk about when. forr pray it has been there six years and is a close ally of mario and has confirmed what is going on. let's listen. >> next year the governing council will have to make this assessment of whether progress so far has been sufficient to warrant a gradual unwinding of asset purchases. in making its assessment, it is important to consider the underlying growth of the economy and to what extent the growth

isessment that we make passing through to wages and price formation. kathleen: european bonds, even though this news was out there, they were hit hard in trading today. investors are bracing for the ecb to end up with bond purchases by the end of this year and start rate hikes by 2019. ? why are they taking the step now -- why are they taking the step now? inflation. they have a window to act now at the june eating. -- meeting. another reason why they might -- instead ofs is

waiting until the july meeting. maybe ease the way for a calm her reaction next week that the r.b.i. rate hike hit indian bonds. wereeen: even though there 29 people saying they would not move and 14 saying they would, it was a surprise when they announced the rate hike. they are doing it because of inflation. membersof the policy are voting for this. helping to push up cbi inflation to 4.6%. they gave it ae dovish tilt. neutral stance of monetary policy.

people are saying we're not on a series of rate hikes. -- itb.i. said oil price seems like they made the move and now they are going to sit back and see what happens. it is a significant move by the r.b.i.. yvonne: thank you, kathleen hays joining us. another central bank to talk about. central bank governor has resigned as prime minister continues to investigate alleged embezzlement and money laundering. let's take a look at what is behind the resignation. do we know what role he had? said he was stepping

aside to protect the angst reputation. the backdrop is all about the among thevestigation allegations of corruption. there are allegations of impropriety. i think it is a signal that he is deadly serious about the investigation of 1mdb. the latest to be embroiled in this is the central bank. yvonne: we have seen the ringgit holdup strong. sensitive time. oil prices are pushing higher and policy uncertainty in

malaysia. we do not know what projects will go ahead and what impact they will have on the growth going forward. investors are sitting it out to see where it ends up. they are not too concerned about the near-term impact. ramy: investors really do not like that kind of uncertainty. ,n terms of the response today you said they had been sitting on the sidelines. how long until they get back in? wille key point is who replace abraham? they will want to see a techno appointed,nker get not politically connected. that will reinforce the double down on the central bank and reinforce investor confidence.

then perhaps investors will get a picture about where policy is heading near-term. will is a view the policy change direction anytime soon, but it would be a vote of confidence. we will leave it there. up next, analysis of the simmering trade tensions between washington and beijing. we will have the former u.s. ambassador to china give us his views. this is bloomberg. ♪

ramy: welcome back. this is "bloomberg daybreak: asia." washington and beijing continue to have all over trade

ahead of the midmonth deadline for tariffs on chinese products. the trump administration is said to be finalizing a deal to let -- the next guest has seen trade issues from both ends. max, thank you for joining us from montana. chinatest headline about buying more u.s. goods. i know the dollar amount itself falls short of what the u.s. is saying, but these products like soybeans and coal seam to hearken into trump country. to think this is a big enough offer for them to avoid a trade war? >> part of the offer from the chinese perspective is that the chinese will buy all of the stuff from you but on the condition that you do not pursue your section 301 action. i think that is going to cause a

stalemate. there will be a pause in the action anyway because the administration has to prepare for singapore and g7 in ottawa with our allies in section 232. i think there is still a stalemate between the two countries. yvonne: you have talked before about how tears need to -- tariffs need to back down. i want to bring in a quote from michael pettis. that the u.s. should probably relax its pressure about high-tech china and the threat of has. he was saying that the fear of china is a form of paranoia. washington,iends in yes, step up pressure, but china is not the threat you think it is. it will not become the dominant superpower. seems to be political

will, but in terms of reforms, that might be scary for a country like china. is the u.s. over estimating the ability for china to dominate future industries? breeds fear. and a lot of americans are chinese 2020 five program because they do not know what it is about. it is important for china to be more transparent and tell the world what it is all about and find ways to share. all of this comes down to trust. distrustful of chinese technology and aspirations. for that to be resolved, there cannot be a high-tech war. andpe that they sit down begin to find ways where they can mutually find ways to

cooperate so that each country is a beneficiary area. hard work,a lot of curiosity both ways, but that is the essential focus. ramy: ambassador, i want to get a little bit more detail. it seems there is a carrot and a stick. the care is the $25 billion and the stick, on the bloomberg terminal we were just talking panels.tting solar plunged today. based on your experience, who is going to blink first? >> i think generally americans do not sufficiently understand, and tend to underestimate, the strength of china, china has a stronger stomach to deal with these tensions than americans.

china is authoritarian. wind at your back. the united states is a democracy with different congressional district. i think it is important for the united states to not underestimate china's strength and willingness. and havere very strong more resilience than most americans realize. yvonne: ambassador, there is talk on capitol hill about bte. do you think the u.s. should lift sanctions? i think zte and major tech companies in china are so important to the chinese. they are very fearful that they are too far behind the u.s. in

terms of major technology companies. himself --ping himself days ago. serving from china as about that are, i saw the transcripts. they are bad actors and should be sanctioned severely. i think we are talking about a fine and suspending bonuses to top officials. that is a little light. i think it should be a little tougher with continuing to sanction zte. china will do whatever it takes to kate -- to keep zte operating. i want to live in our countdown to the north korean summit in singapore with china. we have been talking about trump

and kim, but in the background, china lurks, seeing the biggest trade partner. where do you see china trying to 12?r these talks on june >> china wants stability. they want the peninsula to be stable. china would justice in see the peninsula the nuclear rise but they would like to also see u.s. presidency diminished, the missile system dismantled, u.s. troops in south korea to minister -- diminished. strongoes not want a u.s. base in the peninsula. kim jong-un could be a leader of a country that china could be --

that china could deal with. ways toll look to find maybe even prop up kim. in the meetings they have had in the last couple of months, that is an indication that the two of them are getting together, which could make it more difficult for the united states because they are playing south korea off of us as well. ramy: what do you make of the assessment of donald trump handling north korea? ini think he is right drawing more attention to denuclearization and missile technology in north korea. i think he is wrong in trying to punch came in the nose, thinking that alone will solve the problem. he does not really have a plan b that i can tell. i think he has to work with other countries and that is a problem here. it is not just japan on china

and south korea. it is also helping european allies put more focus on kim jong-un. we're not doing a good job of that. he is causing consternation among our allies. you have to be steady and strong, and overall he started off on the wrong foot because he is inexperienced, he is too much of a disruptor, and now he has to fall back a little bit and be much more careful and comprehensive in what he is doing. yvonne: we know the president likes personal relationships. do you know anybody in g7 who could actually convince the president to change course? >> i might be wrong, but it is the president, issuing the 232 against our allies, is more of a tactical

matter and once he gets to ottawa he will back off a little bit and do what he should do, get our allies working together to focus on the real problem, in this case, the glut of steel and aluminum caused by china. only if we work together will this be addressed. yvonne: ambassador, we appreciate your time. on "bloomberg daybreak: asia." this is bloomberg. ♪

ramy: welcome back. a quick check of our headlines. jobss said to be cutting to focus on china and sustainable investing. we've been told the division has eliminated at least 100 positions in recent months am a about 30 of them in the u.s. and mostly in new york. they missed forecasts in the

first quarter after lowering their midterm profit target. an issuancenounced on trading of local depository receipts with the aim of persuading tech companies. they say companies are required to have standard accounting and healthy internal control measures. directors and executives must have good reputations and no significant criminal records. we are minutes away from the market open in japan. take a look at how we are set up when it comes to equities. we are seeing half a percent gain in that nikkei 225. soul is heading in the other direction, city -- sydney is seeing moderate games. we will discuss what is next for

malaysia. have a chat with haslinda and a surprise rate hike from the r.b.i.. the market open, coming up next. this is bloomberg. ♪

♪ yvonne: 8:00 a.m. in hong kong, we are live from bloomberg's asian headquarters. i'm yvonne man. to stemific market set a global rally on optimism that trade war can be averted. the dollar falls again. fears of a trade war are racking up. jpmorgan says tengion has already cost investors more than -- tension has already caused investors more than aliens of dollars. in new'm ramy inocencio york. signs of a split. germany says the g7 will tackle trump on tariffs and may not issue the traditional unanimous statement. countdown to singapore.

five days to the summit. washington keeps the pressure on and says north korea must make the first move. ♪ yvonne: planning the watch out when it comes to the trade front. concerns of a trade war are easing now that we see the u.s. and china playing bollocks -- playing well. these ecb comments heard we see yields continuing to pick up higher. ramy: we are looking ahead to next week to see what happens over the european central bank. if they do decide to wind down the bond purchases. it is a bias toward optimism. not much has really changed, in terms of the trade escalation ere, but in terms of

investors, they are ready to hang onto any positivity. the fourth arise in four days for the --fourth rise in four days for the s&p 500. yvonne: in february that was in concern. it seems like it has become another day. let's have the latest with your market check on asia. sophie: asia stocks striking off those concerns. s&p 500 rose for a fourth straight day. nikkei up 6/10 of a percent happening as the dollar yen is trading. bond market will be in focus, given the surprise rate hike from india, it could have impact on regional rates. comments from the ecb's chief economist playing into the bond space. the nudge towards 3% for the u.s. tenure yelled not giving us as much anxiety -- 10 year yield not giving us as much anxiety is earlier. the aussie dollar is giving of gains early in the session. trading near 65 ahead of the trade balance data do this

morning. the trade surplus for australia is expected to narrow in april. let's look at what is making moves in south korea. the market is back online. materials and financials leading sections. kim summit the trump is not feeling so positive about south korea. partly because he sees the talks are doomed to fail. but also given these corporate government concerns that have been looming. the asia cio is not changing his view on south korean equities. let's look at heavyweights. in an is ensnared investigation into chip price rigging. if wrongdoing is found, they 10% ofe fined from 1% to revenue. it is in early stages and could drag on more than one year.

thank you very much. what's get the first word news with haidi lun. optimism that the u.s. and china can avert or we aken trade spats. america sent about 330,000 barrels a day of crude to china through april. that is up from about 120,001 year ago. a trade war has already a u.s. investors in the project in the pocket -- in the pocket. weeks of back-and-forth policy changes have pushed stocks down.

president trump heads towards a summit insisting north korea make the first move and commit to a timetable for abandoning nuclear weapons. one official tells us the president is being advised not to open any concessions to make the meeting a success. on official said the president will walk out if the talks don't seem to go well. the latest trading data in japan giving hopes that the tightest labor market in decades will drive pay and inflation higher. cash earnings in march was the biggest in years. it raised expectations. april painted a moderate 10th of 1%. in addition, spending fell for a third straight month. gold imports in india said to have shrunk 39% in may. this is the fifth decline as the world's second-largest consumer enters a weak period for demand. 77 metric tons from 126 tons one

year earlier. inbound shipments of 42% lower year on through may. the month of june through august are in a slow period for gold buying. [applause] -- global news 24 hours a day powered by over 2700 journalists and analysts in over 120 countries. i'm haidi lun, this is bloomberg. yvonne: washington is upping the pressure on pyongyang days from the historic trump-kim summit in singapore. the white house once kim jong-un to make the first move and commit to a timetable in surrendering his nuclear arsenal. let's get to stephen engle. he will be in singapore for the summit next week i'm a as am i. a lot hanging on here. are we really going to see any concrete agreement next week? >> it is interesting, as heidi gave the headlines, this chess match that is starting to

develop. interesting the different tactics that donald trump is trying to take ahead of the negotiations. learning he is willing to walk away if things do not go well in the opening minutes. aey want pyongyang to give timetable first to surrender their nuclear arsenal, and apparently donald trump has been advised not to offer concessions ahead or at the summit. let's put the onus on pyongyang to make the first move. we also your donald trump is open to offering -- we also hear donald trump is open to a second summit, perhaps as early as the fall. that would be quite significant. some have said that approaches like what other u.s. leaders have done in the past. you can't really go down that path anymore. >> do you go down as far as

giving face to what a lot of people have said is the leader of a pariah state? we do not have diplomatic relations with them and we have significant international sanctions. there is still a long way to go to repair that reputation and relationship. we are hearing that this could take upwards of five meetings to reach any kind of denuclearization agreement. what we do know for next tuesday is the schedule. a.m.,ill meet at 9:00 mike pompeo will be there, john bolton will be there, no james mattis. that is interesting, he made some very sharp comments last week. he was talking about no relief of sanctions unless you have complete and verifiable denuclearization. >> before we even get to

singapore, we have to get through the g7. president trump has that over in canada. his top economic advisor, larry kudlow, has made headlines. dismissing sanctions on american allies as a family quarrel. it seems he was downplaying it. when it comes to national security issues, that doesn't sound like something you can make up very easily. they willanctions place on canada, mexico, and the eu will be very front and center at the g7. perhaps -- mr. trudeau is the host of the g7 this year. he has been perhaps the greatest critic, calling it an insult to what donald -- canada. the former ambassador to china said perhaps this is another one of donald trump's tactics in negotiation ahead of the summit -- the g7.

when they do get around the will be in thers crosshairs, but maybe donald trump will be able to reach something. yvonne: i like this quote about how you should just mute the sound and see what company he prefers, whether there will be breakthrough in trade, or an agreement on north korea. said they areders willing to perhaps walk away from it. donald trump indicating that perhaps he wants separate bilaterals with mexico and canada. yvonne: thank you. steve engle joining us. indonesia central bank governors quick action on rate. he would do it again. our exclusive interview is later on. ramy: next, asia is leading a revival in emerging market assets. we are joined by an

economist. this is bloomberg. ♪

♪ yvonne: this is "daybreak asia, i'm yvonne man. ramy: i'm ramy inocencio in new york. the reserve bank of india's surprise decision to raise the rate hike hit indian bonds overnight. the market recovered a bit as traders looked at not only what r.b.i. did, but what it said. kathleen hays is here. how hawkish was this move? kathleen: you always look at what the central banks say. they do something, then tell you about it. a surprise, maybe a third of economists surveyed on this question. said yes.hird or less that is why everybody was off-base. people said there is a's policy

-- a policy statement. about theese concerns r.b.i. getting ready to go on some kind of steady rate hike path. the decision is consistent with the neutral fence. that means you're not going to tighten or go towards easing. is the objective of achieving a medium-term target for consumer price inflation of 4% within a band of plus or -2% while supporting growth. why did they take this step? inflation is the main thing. see the firstto rate hike in four years. there is oil prices going up sharply. no surprise that inflation has turned higher again to 4.6%. here is the r.b.i. target at 4%. this was a unanimous vote. everybody was on board. the question is what happens

next. done -- andone in done for growth is probably going to peak. the fact that they are looking in the policy statement. oil price, volatility, development in global markets. ,t is in all parts of the world things are clouding the outlook for the r.b.i.. maybe bloomberg economics is right. this is a move being made, they are going to watch the markets and their own economy to see what to do next. for now, i think they are done. yvonne: kathleen, thank you. as investors return to the risk on mode optimism over trade, it seems like a emerging market assets are leading the revival. let's look at this chart we have been highlighting. we see the em stocks in asia are bouncing back and leading in the past week. we talk about how asia continues

to be the haven in the midst of these developing nations. -- is texasith senior a.m. asia economist to talk about r.b.i.. were forecasting it in this meeting, was it a surprise? was it enough to send it? >> we were having an inkling they would tighten even chilling -- eventually. the key reason was it was the worst performing year to date. growth was theis best in asia. it grew by 7.7%. why it isnk about doing so badly, it is because india is a current account deficit country. when growth is rebounding, you have a rebound in flux. moreover, what has happened is the fact that oil has risen. it means paying much more for

oil. the oil deficit rose 3.2% from only about 2.6% in 2017. yvonne: the reaction function of the r.b.i., last year it pushed back on the pressure to cut rate. inflation was brought down. this time, now that it is back up, oil prices hiked. is there a policy framework? >> last year it was dealing with the demonetization shot. -- shock. the economy suffered significantly. we are looking at a favorable basis. there is a lot of pent-up demand happening. if you look at gdp across the board, everything grows. consumption government. we are facing a situation where demand is higher. demand for dollar is higher because of oil.

investors are becoming more discriminating. the u.s. growth momentum is ticking up. u.s. rates are picking up. for investors to stay put in india, they would need better valuations, returns, and comparisons of the risk return calculus. as a result, the r.b.i. centralist bank will help with that by raising rates 25 basis points and leaving the door open to stay neutral. it means the next move will be a hike. it is also essentially communicating that we are very cautious about inflation. we care about inflation. to really read the conversation, it is about the rupee, it is about making sure it does not depreciate so significantly that it filters through importing inflation. yvonne: you don't see this as one and done? >> no, it is leaving the door open. yvonne: what does it mean for the ricky?

in em, you don't typically see currencies strengthened after a rate hike. they don't have the capital mobility like you do in markets. is that just an india story? is the rest of em going to have to face more pressure to hike? >> it depends on whether or not it was priced in or not. this will be positive for rupee. the first quarter was likely the worst, because oil had stabilized. in india, particularly emerging-market currencies will also be supported. the dollar will not be the only game in town. in the first quarter the dollar was only game in town, it's growth was very strong. it is outshining many other factors such as china growth, even eurozone growth was decile rating. as a result -- decelerating. if you listen to what the ecb

policy makers have been saying, they are becoming more hawkish. data out of china has become more positive. been very strong thanks to supportive policy on the consumption sector. as a result, we will see the dollar be supportive for emerging markets. in particular the the rupee and oil stabilization. ramy: i want to bring in the fed. notier we spoke about looking at interest rates, we have to look at the drawdown, in terms of the fed balance sheet. , inwill this impact em terms of what your coverage is? first nominalng interest rates rising in the u.s., which we expect to have a 25 basis point hike in june, another one in september. what people should pay attention to, the fact that reinvestment rates for u.s. treasury is rising per month -- per quarter.

by the end of this year, the fed will reduce about $30 billion, the balance sheet is declining at an accelerating rate. that means that we think u.s. treasury's, the 10 year yield will rise, which means investment in the u.s. is becoming more attractive. there is more juice in the yield. it is only doing so from a position of strength because the u.s. economy is accelerating. that means corporate earnings are likely to be relatively strong. this puts a lot of pressure on emerging markets. also offers attractive returns. it's one of the reasons why the central banks from india to adonesia are making preemptive move. they need foreign capital to fund current deficits, they want to ensure the return is there for investors to stay put. it has been very effective. ramy: we have seen that

pressure. you mentioned indonesia, we do have sound from the indonesian central bank governor. talking aboutt, the interest rate rises. >> there is a possibility of a hike. upon ourepend calibration of newer information. has notdonesia really benefited from the global trade uptick just yet. talk to me about this and the need for another hike. twondonesia and india are asian countries that are not very trade exposed. of below have exports gdp percentage. sector is much more

imported. in indonesia, what is positive is they have recovery. investment is on an upturn. consumption is still sluggish. one of the reasons the central bank cannot do much about it is because the credit market is shallow. whether it is a cut or hike, it doesn't impact the sector very much. it is job creation that really matters. the central bank will be cautious in hiking more. it will doy says absolutely everything necessary to make sure that the indian stable ande remains matches words with actions. after hiking by 25 basis points by the previous governor, markets were not so sure. is it a filipino story, where you have a 25 basis hike with

100 basis cut, or will it continue to hike? immediately. -- immediately, you have a new governor calling a meeting, hiking by 25 basis points. he said he will do whatever it takes, even if growth slows. that is a great reassurance for markets and clearly the idr loves it. yvonne: fascinating discussion. we will talk more on indonesia later on with a senior economist of emerging asia. plenty more to come, this is bloomberg. ♪

♪ yvonne: a quick check at the headlines. ubs is said to cut jobs at its

asset management unit to focus on china. they have eliminated at least 100 positions, at least 30 in the u.s., mostly in new york. they missed forecast after lowering its midterm profit target. will deutsche bank probably report another quarter of declining revenue for the it scales june as back investment banking operations and cuts jobs. it is accelerating its focus on europe and a retreat from wall street. it has announced plans to slash 7000 positions. they have failed to deliver desired results. yvonne: despite continuing uncertainty over brexit. is creating 2.5 thousand british jobs in areas of machine learning to customer service. with nine months until brexit, traditional retailers have cut

thousands of staff. amazon remains committed to the u.k. ramy: still ahead, beijing automotive has big plans to shakeup china's ev sector. are exclusive interview is coming up. this is bloomberg. ♪

♪ yvonne: 8:30 a.m. and sunday --sunny singapore. i'm yvonne man in hong kong. ramy: i'm ramy inocencio in new york. let's get the first word news with haidi lun. chancellor merkel is warning of deep splits of the upcoming g-7 summit, saying she will challenge president trump on tariffs and america first. she told lawmakers it is problems as they had to collect -- quebec. speakancellor will directly to the president about

trade. destroying watches its missile driver and testing facility. it's only known site that is used for land-based mobile missile-- meeting launchers. it comes days before the summit between kim jong-un and president trump. it is not clear whether the destruction is temporary or permanent. house speaker paul ryan is contradicting president trump, saying there is no evidence the fbi spied on his campaign in 2016. he agreed that russia was a target of the bureau. people looselywo connected with the campaign don't mean the team was infiltrated. >> we are waiting for documents, we have documents to review, we have somebody answering questions. it would have been helpful if we got this earlier. the information

we are looking for, we can wrap this up faster. i have seen no evidence to the contrary of the initial assessment that chairman gowdy has made. >> a new italian prime minister is seeking to reassure markets with a pledge to gradually reduce the debt burden. he had unnerved investors with promises including a citizens income and a flat tax that could cost $120 billion in the first year. he told the lower house he respects the principle of gradual reduction of debt. the number of people killed by guatemala's volcano has risen to 99. authorities say at least 200 people are still missing five days after it erupted without warning. had been simmering for years, but it is not recommended to evacuate on sunday, as the activity was beginning to weaken.

global news 24 hours a day powered by over 2700 journalists and analysts in over 120 countries. i'm haslinda -- haidi lun, this is bloomberg. yvonne: time to see how the asian markets are shaping up. asia seems to be joining the party on this global equity rally. >> it is risk on asian stocks extending the rally. clocked a fourth day of gains, the nasdaq almost eight record high. the nikkei is up a tense of a percent. higher by materials and consumers. in seoul, korea, steelmakers are among the best performers. bonds are feeling the pain as india jumps on the global tightening bandwagon. policye is the r.b.i.'s is a one and done misstep, as it

could hurt the recovery and economic growth. --the eagle agenda eco-agenda. are sliding ahead while the currency is looking study. australian gdp growth is looking firm, which is pumping differing views. on one hand, credit agricole saying there are few excuses for it to not go towards hiking rates, while cba doesn't see anything to convince it to do so even that the labor and housing market strand are consistent with a hold for the rest of the year. let's go back to south korea, counting down to the trump-kim summit, korean steel stocks are climbing likely on expectation that steel demand from the north could get a boost for projects like a railway link. the north korean still market could see annual growth of 11.9% by 2050, should the north open up. gaining. -- histeel

percentage jumps in advance of that meeting on june 12 with donald trump and mr. kim. chinese regulators are doing their best to lure big listings back home. the securities regulator announced rules for issuing and trading chinese depository receipts and is said to have approved six cdr funds that could raise nearly $47 billion. let's go to sydney, to garfield reynolds. why does china want to lower the likes of alibaba back to the mainland to begin with? >> a number of reasons. the most obvious is for stage. world's some of the most respected companies in their field. they had some stunning share returns. with those share returns, why don't you want to give your own

people the chance to buy those. imagine if americans couldn't by apple or amazon. we have a chart. that picture tells a lot more words than i have time for about why you would want to do this. if you look at what is going on with alibaba, that is one of the companies that the chinese investors could be able to get their hands on. compare it to what is going on. china's stock market is being left behind because it is following state-run companies, energy, materials companies. it is part of this shift china is doing. it wants to be more about dynamic, new economy stocks and less about old economy stocks. i'm curious, in terms of the significance creating the cdr market. going through the rules, are they odorous?

one interestingly, no significant illegal dishonest records from its corporate directors. there is always plenty of regulation when you do anything in china. these ones are not particularly onerous. there is a concern about how it will square with the tech companies. they have been set up using some fancy footwork in order to be -- beat out the companies and list abroad. that should be manageable. as terms of how big a step it is, it is a baby step. we are talking about $47 million. the chinese stock market cap is over $7 trillion. yvonne: you are also dealing with a regulator that likes to bend the rules when it comes to the ipo markets. there are still a lot of risks. in terms of incentives, what

benefits may there be for chinese companies going back home? the obvious benefit is that there is a big and deep market demand for the shares. you think that could infect drive up the company's overall market capitalization. also time to diversify their shareholder base. chinese domestic investors might get some of their strategic decision-making a little bit more readily than those in the u.s. initially, u.s. and international investors will have a much stronger sway. i can't really see too many downsides to going back home to at least put a foot in the water. yvonne: thank you, garfield reynolds, bloomberg's cross asset editor joining us from sydney. bloomberg users can interact with the chart shown. you can browse the recent charts

featured on bloomberg tv. catch up on some of the key analysis and save those charts for your future reference. this is bloomberg. continuing our conversation on s.ina and beijing automotive one third of chinese auto manufacturers will be out of business by 2022. the chairman spoke to bloomberg about its electric vehicle plan and opening up the world's largest auto market to international players. of the chineseup auto sector came faster than expected. the level, i expected of opening up to take place in 2020. the government introduced the new policies in the spring of 2018. the local manufacturers will certainly face short-term challenges in the next couple of years. however, this is not necessarily this thing, given that

situation will probably help optimize the structure of local players, pushing them to grow faster and stronger in the increasingly fierce market competition. as a result, some will survive, some will be consolidated, some will be eliminated. least oneion, at third of chinese auto manufacturers will be squeezed out of the game at some point between 2020 and 2022. >> how is back responding? all, going to integrate beijing automotive's internal assets and resources, this will happen very quickly and will be finished by the end of the year. next, the group will take on some big joint venture projects. apart from a project in electric cars, beijing automotive will introduce other joint ventures on auto parts and easy industrial supply chain. that announcement will come very soon. >> you produce a brand in the electrical space that is one of

the best-selling electric vehicles in the chinese markets. what is your target for electric vehicle sales, and how seriously do you take the competition from startups? aim to guarantee the sales in150,000 electric vehicles 2018, striving to sell 170,000 units. is 500,000.or 2020 as you know, the government is to put in place tighter regulations on new energy vehicle investment in china. the new rules would pour a lot of cold water on those hotheaded investors. i have made such an argument that the newcomers will be doomed as soon as they step into the car manufacturing business. money is not the solution in this case. the right approach is to collaborate with traditional carmakers and have veterans handle the mass production. these newcomers

have recently approached us over such responsibilities. we are happy to be there oem. ramy: that was beijing automotive industrial company chairman xu speaking with our china correspondent tom mackenzie. rupee, andving the word of warning for the fed. our truce of interview with the new indonesian central bank chief. this is bloomberg. ♪

♪ asia,"his is "daybreak i'm ramy inocencio in new york. yvonne: i'm yvonne man in hong kong. indonesia's new central bank chief joined us, and called on the fed to be more mindful of politics at policy tightening. let's go to haslinda amin, who spoke with him in his first interview with international media. warning from the fed, but this is the new guy in town that is

taking whatever it takes approach. >> he is the new guy in town, but he has been with the bank for more than 30 years. he has gone through several crisis. the impression is he knows what he is doing. he is saying the pace is a key issue for central bankers. just like r.b.i. governor, he is urging the fed to slow the pace of stimulus. he says that will support not just indonesia's growth, but global growth as a whole. even though every country must decide policy themselves, you have to take into account the impact of the actions on other countries, especially em's which are vulnerable to that. the market is anticipating another big rate hike next week. em are bracing for a further selloff. indonesia has anticipated that, it raised rates recently in an unscheduled meeting, increasing

its policy rate by 25 points. let's listen in to what he had to say. lessons --he key [indiscernible] >> you talk about preempting, is there a need for another rate hike? we can effort to the likes of goldman sachs saying you probably need one in the third quarter. calibrate the to

economic. and domestically. [indiscernible] is a possibility of rate hike. the timing will be measured. they will depend upon the calibration of new information. you talked about being ahead of the curve. are it -- what assumptions you making about the fed next week. how closely are you watching it? how closely will your policy decisions be linked to that? reason --s no

[indiscernible] >> you touched on the rupee, talking about it wanting to be stronger. is always a dynamic. [indiscernible]

we are seeing the development. >> how deep is the pocket? how much can you intervene to prop up the currency? >> we will stand ready if there is pressure in the market. like the one that we are seeing. this is beyond normal. the thing the markets are in the process of adapting. they need to step in. not to intervene the market, but to ensure the adjustment is small. get a sense he is a

man in charge and knows what he is doing. he wants to see -- stay ahead of the curve. ramy: it definitely comes across in the exclusive interview. i understand that he also is a fan of clear communication. with that, he has taken issue with communication at the fed? yes, in fact, he says communication is very important. he is looking for the fed to communicate more clearly the intention of its policy so the market can understand clearly. and saul the central banks can thecipate considerate in policymaking. policy choices bankers are being forced to make to respond to this, driving the currency. the south african central bank governor has acknowledged the fed is communicating its intentions better than 2013.

it is being complicated by u.s. fiscal policy. to top all of that, we have to consider policy normalization in europe, japan, more uncertainty. where does that leave the rupiah? >> it is really hard to say. all he wants is for the currency to be stronger. he has used up a lot of their reserves to prop up the currency. he has used up $78 billion. of a hundred 32 billion dollars in january, the question is whether it needs to be pumped up. i asked earlier whether the pocket was deep enough. if he has to go deeper, he will.

he will let the market decide. chief correspondent joining us from singapore. coming up, don't miss the next was of interview with ken jacobs at 7:00 p.m. hong kong time. this is bloomberg. ♪

♪ this is "daybreak

asia,." i'm yvonne man in hong kong. ramy: i'm ramy inocencio in new york. let's get a check of the headlines. taliban monte pacific says market volatility is behind the decision to postpone -- delmont a pacific says market volatility is behind the decision to postpone. it is in the best interest of the company to defer the offering until conditions improve. del monte philippines has planned to price the ipo today. sources say it was seeking as much as $257 million. yvonne: walmart told bloomberg it answered questions about its acquisition of flip car. it is responding to the country 's competition authority. the u.s. retail giant announced it wants to take a 73% stake in the indian etailer. they aim of wrapping up this year, but it may be ambitious. celebrating its

entry into the start market big leagues by selling $1 billion of bonds in its second debt offering. it comes as the company joined the s&p 500 index on thursday, forcing index funds with trillions of dollars in assets to own it. shares had more than doubled from last year lows. the platform pushes into live video, as more -- as well as personalize content. yvonne: baby goods and personal retailer cofounded by jessica alba is getting $200 million from private equity firm. it will bolster supply chain and global reach. a funding round valued honest company at around $1.7 billion. it was said to be working on ipo plans. a quick look at what's coming up next on bloomberg television. what are you watching? >> looking ahead to the 12th of june next week, d-five days --

d-five days -- t minus five days. let's look at the symbolism, it is taking place between trump to kim, it is halfway sorting things out. after that, dbs bank chief economist will be looking at the rate hike in india yesterday. are they one and done? there are commentators suggesting that. we will put the question to him. last but not least is cimb. looking ahead to this meeting taking place between trump and kim. also looking in malaysia and where we are with the new administration. is it being affected, does it mark a new beginning for the country? all of that will hopefully be answered. that's a look at what we are watching.

ramy: before we hand it over to you and bloomberg markets: asia, let's take a look at how markets are trading. and he 200 kospi, all up. some tailwind out of the u.s. with the s&p 500 up four days in a row. yvonne: checking asian futures. belooks like we could continuing this party. singapore may be heading the other direction, futures down about .5%. we are also looking ahead to malaysia. and the fallout when it comes to one mdb. this is it for us on "daybreak asia," our market coverage continues later -- next. ♪ two, down, back up!

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