yvonne: it is 7:00 a.m. in hong kong. we are live from bloomberg's asian headquarters. welcome to "daybreak: asia." cb winds up- the e purchases by year's end. mario draghi with a promise to keep interest rates low. markets shift toward the boj, looking at the tone of corona's exit -- or kurdoa's exit strategy. >> tech is said to be a target of trump's tariffs, as the white house issued its latest hit

list. on physicians to take netflix. on netflix. to take a very good morning to you, yvonne, to all of our asia pacific viewers. taking a look at the ecb and the knockoff effects happening in asia, it is interesting to connect the dots. the dovish-ness from the fed. we are going into treasuries and bonds in europe, and see that rate dependency hit utilities, hit real estate, and the financials as well. the s&p 500, on the face of it, was quite higher, but next once you got -- but mixed once you

got into the individual sector. yvonne: dovish guidance. kuroda is hoping to pull off some of that project as well. ramy: it was a bit of a mixed picture. s&p 500 up 0.25%. that ecb dovishness is percolating through. the nasdaq at a record high, some of that to do with the m&a we are seeing. of course with the interest rate differential, let's take a look at currencies. em is not doing well. the euro, you can see a weakening there. now,e me, strengthening

but was weakening earlier. the australian peso and brazilian real weakening. the australian peso, this is at its weakest point ever. the central bank blocked it. the brazilian real at its highest in weeks. let's take a look at how we are set up for equities. we are set up for some modest gains. 5%.sies futures up 0. oil rising for a fourth day. nikkei futures are flat.

ofpi futures also up 4/10 1%. we look at the dollar strength, head ofl had of -- well a the central bank meeting. look for the possible tone from kuroda on exit strategy. we have china property data out later this afternoon. holding onto those losses. kiwi.for the bitcoin stemming the bleeding. perhaps a sign this 18% plunge may be off. take a look at your bond markets. that rally in bonds seems to be underway. the u.s. tenure at 394. flattening at 24 basis points. yields ticking lower overall.

france back into negative territory after the dovish ecb meeting. no trading in singapore, malaysia, indonesia, or the philippines. ramy: from mildly hawkish fed to qe exit.ly dovish mario draghi announced the plan to wind down its bond purchase program. yet ec move was expected, unexpected at the same time. >> leave it to mario draghi. we all knew he would say something about the bond taper. when he announced all the announce- would he all the details, weight until july? first of all, we know that they were going to start tapering bond purchases after september. no rate increase.

he said until the middle of 2019. he said this tapering will be contingent on incoming data, another dovish element. let's take another list at the risks of the ecb. the underlying strength of the economy, while overall appropriate for achieving the physicians taken today, doesn't want to underplay the existing risks. yvonne: let's look at this gtv chart. unemployment growth has been steadily going up. gdp growth was about 3% year-over-year.

now it is down to 2.5%. not a big deal, that is still growth. don't forget trade tension concerns around the world. don't forget about the italian politics, another source of uncertainty for businesses. let's look at inflation. mr. draghi, you have headline inflation on the latest estimate right after the target, isn't that great? you can see how a certain extent energy prices are the reason you have this move up. if oil prices come down, what happens to that headline number? it is interesting mario draghi said significant stimulus is still needed. he pulled off a hawkish step for the bond market. european bonds rallied across the market, carried over into the u.s., as mario draghi managed to threaten this needle

in a thread this needle very effective way. yvonne: ecb removing stimulus. the fed signaling for a speed up in rate hikes this year. >> if anybody can carry it out, kuroda.urhiko in an analysis, 45% of economists say they cannot change their situation. what is particularly vexing for governor kuroda, inflation down to 0.9%. now the key measure, 0.7%. what is going on? one thing we can say, policy divergence. wider, divergence gets that could be good, because it

strengthens the yen. inthing that boosts exports the second quarter, grows the economy and inflation. the press conference after the meeting -- certainly reporters will say, what do you do next? this will be the big focus, even though no policy change yet. our global andn, politics editor from new york. >> the u.s. economy has become the world's bright spot, as china and europe cool. it likely to rack up 4% growth in the fourth quarter spurred by many retail sales. christine lagarde says u.s. treasury secretary steve mnuchin has criticized the fund's u.s. forecast. >> it is clear he regards our medium-term outlook as too

pessimistic. and frankly, i hope he is right and we are wrong, because that would be good news for the u.s. and would be good news for the global economy as well. >> secretary of state mike pompeo says the u.s., china, south korea and japan agree the sanctions on north korea will not be lifted until kim jong-un's regime cap show full disarmament. it is a push back against pyongyang's claims that penalties would be relaxed. onr ministers were briefed the trumpflation can summit. -- trump-kim summit. >> we are clear that sanctions relief will only happen after the old denuclearization of north korea. >> the u.s. securities and exchange commission says ether tokens are not subject to securities rules. months of speculation weighed on

the second-most valuable currency. it jumped to 10%, while bitcoin had it biggest rally in most of the month. the richest are getting richer. the global personal wealth reachedd -- well almost $202 trillion this year, the strongest growth in five years. millionaires and billionaires hold among half of all global wealth. china now rates second, after overtaking japan in the last five years. global news 24 hours a day on air and on tictoc on twitter, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. lines comingsome through your terminal, donald trump is said to have approved

tariff on chinese goods worth $1 billion, according to people familiar with the decision. we have seen movement in the past few hours, with sarah huckabee sanders saying they have made decisions on trade to announce these tariffs. perhaps we are hearing this is a more refined tariff list that focuses more on technologies where china wants to establish itself as a leader. no date has been set so far. let's bring in our bloomberg tech editor from d.c. tell us more about this trump tariff hit list, and what they are targeting this time around. >> it follows largely along the lines what they announced before, about 300 products with $350 billion into the u.s. the focus is on area and industry, and technology, where

china said it wants to become a world leader by 2025. they are trying to hit at areas where china feels like it is getting a competitive edge. this goes to the question that trump has been hammering china on, which is theft of intellectual property. that has been the impetus behind some of this. it will likely be ruled out tomorrow fully, and implemented probably by the end of june, first of july. there is still time for negotiations. china has threatened to give up any compromises it has already announced if trump goes ahead with this, and retaliate in kind. ramy: joe, on zte, the saga has not wrapped up, because trump and congress seem to be headed for a conflict. joe: indeed, this complicates the entire situation.

the president had revived a relationship with zte, what he said was a personal favor to president xi of china. the senate is about to pass a measure that would essentially reverse that decision completely. a lot of the republican senators, in a arrare sign of defiance to the president, have joined with democrats to hold firm and pass this. the house has a slightly modified version. it would prevent the was government from buying any products -- the u.s. government from buying any products dealing with zte, slightly less restrictive. the white house hopes it can head off the senate action before the time the negotiations between these two chambers take place with a final bill emerging. there is a chance he could veto

an entire defense bill if the measure is included. senators say they are holding firm, although others like lindsey graham of south carolina say they will try to mediate a compromise that can get by both the senate and signed by president trump. ramy: the latest out of congress as well as the white house. more on the rising trade tensions between the u.s. and china. guest tells us why he thinks tariffs are necessary. yvonne: from the fed rate hike to the ecb bond buying, what we can expect for the rest of the year. this is bloomberg. ♪

ramy: welcome back.

this is "daybreak: asia." now to the ecb's curveball plan to end bond buying while keeping interest rates low. it avoided a repeat of the so-called taper temperature -- taper tantrum. in asia, the boj reduced its bond buying for the third time on thursday, keeping its rates unchanged. thomas murphy joining us from sydney. thanks so much for joining us. let's start with the ecb. we saw a mixed picture from mario draghi, dovish when it came to raising rates. would you call this tightening, considering what we have seen in the past year or so?

>> a very modest version of tightening. it flags to the market, yes, it is time to taper the qualitative easing. at the same time, letting the market know, don't expect between june and next year any interest rates. it is smart, because what it does is keeping the pressure on the u.s. dollar, thereby enabling exporters in europe to get a little bit of a retreat. this is a positive for europe. it could boost growth slightly at the expense of u.s. growth. yvonne: there is talk from draghi on functionality, on plan to raise rates in -- when to raise rates in 2019. how much flexibility does draghi really have ? looking at 2019, this is a period where projected growth in

the u.s. seems to be slowing as well. thomas: yes, and u.s. growth will slow, but at this time in the second quarter, i think it comes out in the low fours. currency will take its toll. we have to continue to watch the shape of the u.s. field curve. between now and the end of the year, we will likely get two hikes in the united states, nothing in europe. what that does to the shape of the curve is quite significant, because the two-year bond yield versus the 10 year bond yield, which will tell us a lot about policy, is probably going to invert slightly. that will tell us we will get softening growth in the u.s. next year, and the reinforcing shows that.gth ramy: i want to hop into the

bloomberg terminal. this is in your gtv library. 30 billion euros now through september, 15 billion by the end of the year. thom, you are saying you do not think it would have a huge impact on the euro. we saw the euro fall 10% year-to-date. where is the trajectory going beyond? seeas: it is quite easy to in the next 12 months, the euro going to the 110 level. a dramatic fall, but it should continues to move while the u.s. dollar moves upward. emerging markets around the world are already feeling the strength of the u.s. dollar in a big way. policy response to the united eye onhas to have one the dollar as well. 2018 will look nothing like 2019

for the u.s. fed policy, because there is no way they can do three or four hikes. they cannot, because their trade partners will be softening. ramy: we are also looking ahead to the bank of japan. we know in terms of the numbers, nothing is really going to happen, but it will be the tone. looking ahead, what are your expectations? anything to be on the lookout for? thomas: later we will hear what the today bank of japan meeting delivered. japan is the complete exception to what we are seeing in other markets. japan is the last of the quantitative easing takers. they have followed the united states, the ecb, and the bank of england. i expect for the full next year, a continued qualitative easing effort by the bank of japan. remember the amount of quantitative easing they did was

not quite at the 80 trillion level. the funds rate to support the equity market was about 50 billion u.s. dollars, not quite what they forecasted before, but they are still embarking on regular purchases, both on the bond and equities side. i don't expect that to change. in six months time, they will be the only major economy in the world involved in quantitative easing. that is significant. yvonne: we were just talking to kathleen about this. these interest rate differentials will weaken the yen, which will help the boj. thom, you talked about how you are focusing on the long end of the curve. we see this flattening in the 2 -10 spread. are we really in for a treasury rally now? thomas: no, not a treasury rally. i think the 3% level for u.s.

10's may be near the top. in the next six months, i don't expect anything more than 325. i expect it to average 3%. i expect it to be lower, causing a slight version of the curve, but only a slight diversion. remember, the policy of the united states has been very market supported, and that is not going to change. we have to keep our eye on the emerging markets. from turkey to resume to argentina -- to brazil to argentina, we are already seeing problems. emerging markets are what we have to watch. yvonne: thomas murphy, esala partners joining us from sydney. you can get the roundup of stories to get your day started for bloomberg subscribers on your dayb terminal. this is bloomberg. ♪

yvonne: a quick check of the latest business flash headlines. further turbulence may be in store for the yen as companies prepare for a bonanza of payments abroad. offshore chinese firms will list dividends through august. some conversions of yen will be needed to meet those payments trip into volatility. bought ng kong cks has $5 london headquarters for million. abu dhabi's sovereign wealth fund dropped out of talks earlier this month. a $2.9 billion approval of an iron ore project in northern australia, at a time when high-grade material is

selling at a premium. production is expected to start at 2021. ramy: up next, apple's silver screen ambitions. the tech giant is headed to hollywood. this is bloomberg. ♪

yvonne: happy friday out of here in hong kong, three minutes away from asia's first market open. ramy: the sound of happy thursday doesn't have the same ring. p.m. eastern in new york. yvonne: you are watching "daybreak: asia." let's get to the first word news. >> bloomberg sources say president trump has approved tariffs on around $50 billion of chinese goods. a refined list of targets will hone in on technologies where

china wants to establish itself as a leader. ,he list will be implemented but no date has been set. some tariff taking effect within weeks. chinese regulators have approved an acquisition by he was semi-conductor company qualcomm. china was reported it would approve the $40 billion deal if they got assurances the u.s. would lift a ban on zte. disapprovalnators president trump's decision. mario draghi announced asset purchases will be phased out by the end of december, but will keep interest rates at current levels. that definition is caught -- that dovishness caught investors

by surprise. >> the european council included that progress toward a sustained adjustment and inflation has been substantial so far. >> economists see no change in policy at a friday's boj meeting, leaving governor kuroda increasingly out of step with the u.s. and central european banks. the divergence in policy may ad downside pressured on the yen, helping japan's exporters and assisting the boj campaign. eu officials have discussed whether the u.k. may need to ify in the block past 2019 the brexit negotiations don't accelerate. talks are stalled on the irish border. officials have questioned whether they can finish on time. prime minister theresa may ay faces a showdown next

week with pro-eu lawmakers. >> we cannot let the government instruct its steps on international conversation. such a move would be constitutionally unprecedented. >> global news 24 hours a day on air and on tictoc on twitter, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. ramy: thank you very much. thes do a closer look at u.s. market closed. that was offset by declines in financial and industrial stocks. su keenan is here with more. su: rate diagnostic and trade war agnostic. they are eking past these major issues. we also had big focus on media stocks. let's look at the big movers,

and the size of the moves is significant. at&t time warner merger has cleared. we have another big deal front and center -- 20th century fox is in the focus as comcast makes a $65 billion bid, puts pressure on disney to do the same. let's go into the bloomberg real quick. gtv is where you can find our family of charts. blue is fox. disney is down in the white. comcast yellow. all ticking higher. anytime you have a push for mna, it tends to favor the groups that have been consolidated. outside moves across the board for twitter at a three-year high. etsy, which is an online retailer for full made and special crafts products, they gave toe fee they

vendors, aggressive projections. smart sheet is a software company, riding high, as is facebook. tech unaffected by these crosscurrents we are seeing in the market. yvonne: we talk about this big focus on treasuries, the flattening of the yield curve. there is concern this will threaten the banks. ramy: it really took effect in this latest trade we saw in the market. gtv is where you can find these charts. this is the u.s. treasury 10 year yield versus the two-year yield. we see an extreme flattening. nks that is, important, ba lend onn the short end,

the long end. go to the list of banks stock. you can see they were under pressure from much across the board. take a look at his next start, the vanguard financial etf. it had almost 160 million of outflows on tuesday alone. that is the most since september 2016. investors pulling out of any vehicle where you've got this extreme flattening of the yield curve. yvonne: thank you, su keenan, on what happened overnight. let's watch what happens as trading gets underway in asia. marioked about super doing it once again. what is the outlook for the euro now? >> the outlook for the euro and

other currencies against the u.s. dollar is looking pretty grim. he smacked down the u.s. dollar the most since brexit. that gives you an idea. even though he announced an end keep, and that they will interest rates. discharge -- this chart highlights how dramatic this was for the euro and the dollar. the bloomberg dollar spot index is continuing to go higher, and the euro is continuing to slide lower. that happened with a number of currencies, the aussie and the kiwi. , the kiwi,he aussie they were all starting to set a new uptrend, but now they are back down.

that will ripple through risk assets in asia, especially anything that isn't tied to ins.e tech ga taiwan and korea will go well today. the rest of asia, not so great. ramy: on to the dollar surge, enhancing the selloff in emerging markets. so.ield: very much the msci emerging markets index is down. wednesday.n there are a whole bunch of idiosyncratic concerns from argentina to turkey to elsewhere that are being exacerbated, investors saying emerging markets no longer a good play, where should i get out? in asia, the biggest concern is

china. gtv library on the shanghai compass it. it has hit the lowest on the year overnight. it is struggling to hold on the 3001. the same time it is struggling is do that, the market risk breaking down on the lower end of the chart. the momentum is shifting to the downside, as it is struggling to hold on. that says to me a very likely outcome, either because of the trade wars or recent data out of china, you will break through the lows that have held through 2016 and 2015. that is a grim outlook for china and a grim outlook for asian. .

ramy: it will be interesting to see if we can see any consolidation or if it will continue to break down. thank you very much. to forget to check out our gtv library for some of the tribes you just saw. -- charts you just saw. apple is nearing a deal for its first feature film. we have our bloomberg media reporter joining us from los angeles. this first movie i understand is going to be an animated one? >> we understand apple is close to finalizing a deal with an irish animation studio called cartoon saloon that made about three oscar-nominated films, including most recently "song of the sea." a deal might not have been in the final stages, but it is close to being done.

while apple has acquired some documentaries, it has not made any kind of public acquisitions lifeature films, i think more information. live or, either animation. ramy: i am curious about animation, why not go into live action? anousha: we can only speculate at this point. when it quite cagey comes to talking about what is doing about with its partners. for more than a year or so we have been picking up on reporting about their plans. people are generally unclear about what they want to do, but they have been buying tv projects and looking at movie projects. i can suspect something like animation is easier to sell to a

global audience. at bloomberg, we have stories from bloomberg businessweek, where some of my colleagues wrote about issues they had with tv content that was perhaps a bit too racy. animation is a popular growing genre in hollywood with a lot of competition. apple has a long history in animation with pixar. steve jobs created exar to some degree before it was -- created pixar to some degree before it was owned by disney. that is just speculating to some degree. yvonne: it seems a lot of entertainment industry officials ont to talk with apple developing that sort of content as well. if i were netflix or amazon, should i be worried? anousha: for sure.

i think netflix already has increased the demand for content and pushed up the price for content. the whole landscape is changing in hollywood, not only with the emergence of the likes of apple and disney, but increasing consolidation of power of disney and fox, or comcast and fox. we have six major hollywood studios. people expect that to be radically changed, maybe four or three. they will have a lot more power. we know amazon is in the space. apple, people talk about facebook and google. there seems to be interest from silicon valley in getting into content. yvonne: how are we going to see this movie, then? anousha: that is a really good question. so for what is being reported, when apple has bought a

documentary, like they did with , some tv shows have been available through their music service. there is some speculation they are planning a separate video standalone subscription service. we don't know. could it be through itunes download? it is not clear. ourne: anousha sakoui, media reporter out of los angeles. lines coming through with the at&t merger. seems like they have completed the purchase of time warner. there was a court case today where a judge ruled in favor of at&t and allowed the merger to go through, rejecting the government's claims that this would lead to antitrust issues. coming up next, president trump set to release his final target

list, as he amps up rhetoric on trade with china. our next guest says why his strategy won't make american manufacturing great again. this is bloomberg. ♪

the fifa world cup in russia officially kicked off. the host of a dream start, demolishing saudi arabia 5-0. we have been talking about how marketseet and asian going into that lull. some of you not getting much shut i to watch this -- shut-eye to watch these matches. don't forget you can watch the results on bloomberg using wcup . i filled out my brackets yesterday.

certainly it is going to get pretty heated. ramy: maybe i missed the boat on that. i will be watching with baited breath on my side, but i do like my sleep. let's get back to one interesting thing we have been covering, this news out of qualcomm. we are taking a look at shares, because they are up in after-hours trading by almost 9.7%. this is based off news that china has allowed this tie-up between these two companies, between call clung -- between qualcomm and an xp; there's. $40 billion is the value for this. -- and nxp semiconductors. dealwere betting that this would not get approval and that shares would fall below $100. after the close, it is now rally

in to almost $124, so a bit of a surprise here. the question is how this will play out with the new announcement from the white house, or the confirmation i should say that the trump white house has pulled the trigger on $50 billion worth of tariffs. will something negative, out of this in retaliation? that is still to be decided. yvonne: it is interesting they are going through with this. if the u.s. would slap tariffs on china, they may use it as collateral to reject this deal. it seems china -- calmer heads may prevail here when it comes to better trade relations. we will see what kind of retaliation we see, if in fact we see that list come out on

friday. ramy: let's get more input, because we are on the line with robert scott, senior economist and director of trade and manufacturing at the economic policy institute, which is a nonpartisan think tank. i want to get your thoughts right now. what is exactly happening between nxp and qualcomm? this was not expected. please this china -- is this china throwing an olive branch to the united states? robert: this may well be in china's interest to let these two companies combined forces to capture more market share. i think it may well be a strategic from decision in this case. ramy: i understand you say that tariffs are sorely needed.

we just heard that the white house says they are pulling the trigger on $50 billion. what do you think about that number, the effect, as well as any possible retaliation? robert: i think the number is appropriate. the down payment on the costly impacts of china's unfair trade in high-tech, the theft of intellectual property, which has given china and enormous surplus in high-tech trade with the united states. we have a surplus in trade with those products with the rest of the world, but a huge deficit with china. the tariffs themselves will have an infinitesimal effect on the u.s. economy. $20 billion in a potential intel economy. less than a

noticeable. well is what fed chair poe said today. he said there is no indication these tariffs are having an effect on the economy. yvonne: that is only is we do not see any retaliation. if china pushes back on trump's up tos, could the lead the midterms be in trouble as well? robert: the u.s. has major leverage in these trade disputes. we import four times as much as we export. china is much more independent overall -- more dependent overall on exports. u.s. exports to china only make ofseven tons of -- 7/10th our gdp.

china is much more at risk. this is always the case when you have a country that has a huge surplus. is hitting the heart of china's industrial policies. how close do you think china is on catching up with the u.s. on innovation? nothe case of a.i., the u.s. one ever has the advantage it did when it came to building aircraft carriers. robert: whole industries have moved to china .the united states for example has lost more employment in semi conductors and integrated incuits than we have even auto parts and industries like that. china is aggressively moving into tech sectors, and they are catching up with r&d.

these are the 10 major industries that they have targeted. yvonne: isn't it hard to cultivate innovation in a controlled society like china? a lot of reforms like education is tough to bite for china. robert: i think that is an issue. there is a question whether they will have enough incentive in the economy for individuals to innovate. china does it in a different way. they will apply 10 or 100 engineers to solve a problem few could result by a engineers in the united states. they are using brute force, and they are acquiring a lot of skilled scientists and engineers through these r&d programs. yvonne: robert scott, economic policy institute senior

economist. more ahead on "daybreak: asia." this is bloomberg. ♪

yvonne: three minutes to go before the market opens. we wrap up the trading market. still adjusting to the dovish announcement from the ecb. we saw treasuries rally, the dollar on the rise. we are seeing some moderate gains across the board in asia. of 1%.futures up 6/10 areng a look at what we covering ahead, the bank of japan's policy meeting today. of course no change expected, but there could be a change of tone from kuroda when it comes to his exit strategy on qe. as the world cup kicks off in brewershow tv makers to

are cashing in. this is bloomberg. ♪ retail.

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asianare from bloomberg's headquarters. i am yvonne man. welcome to "daybreak asia." stocks set for games at the friday open after strength in u.s. tech and media and a dovish supplies from the ecb. focus shifts to the boj. i am ramy inocencio in new york, where it is past 8:00 p.m. on thursday. trump trade target, the president approves tariffs on chinese goods with tech said to be top of that hit list. and a crypto comeback? fccoin gets a boost as the

freeze arrival from federal securities rules. yvonne: we have been following the week that was supposed to be the biggest in the year. we have seen a little bit of fallout when it comes to asian equity yesterday with the fed. the ecb delivering that dovish announcement to end qe. little bit seeing a of fallout when it comes to em effects. a look ahead to china trade as well, ramy. ramy: it certainly felt like that. all talking about something, but we are also looking at divergence from the fed. , nothing majoran is supposed to happen, but we will be looking ahead to the

time. all of this also impacting emerging markets, yvonne. yvonne: let's look at your major markets when it comes to equities. take a look at the function on my terminal. japan up .6%. the dollar-yen move. hovering around 110. the kospi up .4%. focus on these tech heavy benchmarks. we saw strength on the nasdaq overnight hitting another record. em effects once again, dollar -won. are furthering losses we saw overnight already, and yields following what we saw when it comes to treasuries in the bond market in europe as well. seeing a bid for treasuries as well as bonds across the region here today. we could be seeing a little bit more of that curve flattening on

those. we talk about the broad dollar strength and we saw the gain about 1% if not more. we are continuing to engage this morning. hovering around 115. it seems like the euro bears .ill be intact confirmation that perhaps things are looking better with the economy. the rate hike at summer of 2019 certainly led to a bit of selling. 27.98. muse overnight of a new central bank chief. we will see if that can stem the bleeding in the currency. the brazilian riel falling another 2%. 4%, as ithe road to were. stockst often you see and bonds rally after the central bank announces the end of a massive stimulus program.

that's exactly what we have seen in europe. for more, we are joined by chris. walk us through what the ecb did as well as with magical mario. what they are saying is that it is essentially tapering without that him from. trantrum.the people have been lauding mario draghi's performance. they have a plan to start raising rates next year. thatay he presented it was we are not out of the business of providing accommodation to the economy. we recognize that there are risks. trade tensions are one of them. the ecb cut ita growth forecast. yesterdas -- its growth forecast yesterday.

he emphasized that this is a gradual process. this is an incremental process. and they are not going to be rushing to shrink the balance sheet and indeed, they will be raising rates only from the middle to later part of next year, which was later than many in the market had anticipated. what this did was stoked to a rally.stoke it's at the euro down. that actually carried through into the treasury's market, where u.s. yields came down as well. yvonne: what do you think is the biggest concern for mario draghi? the boost we had seen was due to oil prices. italy or the trade uncertainties? draghi's biggest concern is how does he, you know, essentially restock, you know, the ecb's armory for when

the eurozone faces its next potential recession? that's why they are essentially phasing out quantitative eating and -- easing and a roadmap to borrowing costs. they want to resupply the quiver so that in a few years, you know, if and when, presumably when, the eurozone is facing another recession, they have enough firepower to act, you know, decisively. but he wants to be very careful in how he calibrates, you know, the easing back, the normalization in policy to prevent wider disruption, so essentially, it's a tough task, and certainly come overnight, market players applauded how he performed. ,vonne: thank you, chris anstey joining us from tokyo.

of course, we have to shift the focus to japan. no changes expected. further out of's that with the fed and the ecb. investors will be keeping an eye road is buyinghe plan. joining us is the goldman sachs vice chair and cohead of macro research. thank you for joining us. we talk about the ecb. the fed ramping up its balance sheet in a couple weeks or so. does this give the boj more or less pressure to think about an exit strategy? think so, butld the reality of japan's domestic situation is such that their has notn since april been as strong as i think the central bank would have liked them to be, hence we expect the boj probably will not be able to do much in terms of tinkering

with the current qe framework for at least another several quarters. of course, there is speculation tweak the aspect of the framework, but when it comes to full-blown tapering process, until the inflation approaches something closer to what the boj's on target is, 2%, we are looking at continued central bank divergence for quite some time. that we haveber the government committed to raising the vat mask year. -- last year. what the government wants to avoid is a double punch negative of tighter fiscal policy alongside tighter monetary policy. matt is not to say there's absolutely no tinkering possibility of the qe framework at all in the next several quarters, but i think it is not

also fair to say that because the ecb nsaid have moved, the boj must follow. moved, the boj must follow. so, you know, does that give them more flexibility at least to continue on tapering and could go as far as dropping the reference? kathy: i think we have already seen movements like what we saw yesterday cutting back the operations. frankly, over the past year or two, if nothing particularly new. i think the challenge that the central bank obviously has is on the one hand, they want to maintain an easy monetary framework. on the other hand, they need to drop hints that this is not a permanent fixture of the environment. ansome point, there will be

end to this program. there will be a normalization class. i think, dropping these hints here or there keeps those expectations in the market, but this is not to say it is signaling an eminent step in that direction necessarily. ramy: in terms of critics for negative interest rates, people thesaying this is damaging financials bottom lines. to what degree will this start to be a valid concern that could try to tip the scales in terms of removal? not voice of concern has certainly been around for as long as negative interest rates have been around, and i think the pain, when you look at bank earnings in the regional banks sector is particularly acute, frankly. you look at the restructuring announcements in the last few quarters, it reflects some of the pain inflicted by the fact

that negative interest rates persist. the question is how much pain tolerance really does the central bank and government at large have versus their campaign to really boost or get the economy out of deflation once and for all. remember, the boj date taper twice in the not too recent and 2006.00 pretty harshly criticized both times both prematurely tapering. you keep that in your mind, the boj does not want to make the mistake three times in a row , so i think again, just because external environment is moving towards tapering does not necessarily mean japan will follow. again, i also think the negative interest rates are having locations across the bank does have to strike this balance, right? walk this fine line between

.anting to continue at the same time, not completely destabilizing the banking sector. ramy: in terms of the core inflation problem, which has zero .7% for april, a long way off target. i want to bring in the possible support of oil. in terms of calculation or support, what are your thoughts in terms of the inflation number? if you look at the headline inflation print, which includes energy, that definitely should help boost the headline core inflation principle going forward if indeed that are cast is correct. the problem as you know is the bank of japan's preferred measure of inflation excludes energy as well as food, so that's why, if you look at the new core inflation, which is the preferred metric, it is very

muted. that's another issue, right? as long as that is the preferred metric, if they exclude energy, it's not really going to have a huge impact. i think the core driver of inflation of the court metric is going to be things like wages. the good news is the job market remains tight. we are seeing employee incomes grow at a nominal pace of excessive 3%. i think it is just a matter of time before we start to see that measure finally see the light of day and get to a reasonably higher number. ramy: kathy matsui, we will have you back and a little bit. our goldman sachs vice chair and equity strategist. that's good the first word news with jenna dagmar. bloomberg sources say

president trump has approved tariffs on $50 billion of chinese goods. refined list of targets will hone in on technologies where china want to establish itself as a leader. duties willuse says be implemented after the release of friday's list, although no date has been set. iniffs could be applied stages, with some taking effect in weeks. the south china morning post says chinese regulators have approved an excuse acquisition by u.s. semiconductor company qualcomm. bloomberg reported china would approve the deal if it got assurances that the u.s. would lift a seven-year ban on homegrown telecoms giant zte. trump'sain opposed to decision to allow it back in business. the u.s. economy has become the world's bright spots as china and europe cool. it is likely to wrap up growth of at least 4% in the current quarter.

maybe tell sales beat expectations on thursday. christine lagarde says steven mnuchin has criticized it. was clear that he regards our medium-term outlook as tomb toomates the -- as pessimistic. i hope he is right and we are wrong, because that would be good news for the u.s. and global economy as well. secretary of state mike pompeo says the u.s., china, agreekorea, and japan sanctions on north korea won't be lifted until kim jong-un's regime can show complete disarmament. it is a push back against pyongyang's penalties that it will soon start being relaxed. he met with china's president after breeding foreign minister is on the trump-kim summit. global news, 24 hours a day, on air and at tictoc on twitter,

powered by more than 2700 in 120ists and analysts countries. i am jenna daggett. this is bloomberg. yvonne: a look at how advertisers are looking to cash in on the action as well. ramy: japanese stocks open higher. matsuit with kathy continues, next. this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. ramy: i am ramy inocencio in new york. from the u.s. as well as european markets. still with us is kathy matsui, goldman sachs japan vice chair, cohead of macro research in asia and chief japan equities strategist. kathy, let's go into equities now because as we are seeing the

markets open, i'm curious about foreign investment in japan. i want to go into the bloomberg terminal. bloombergon your own library. you can see foreign investment in japan is nearing it flows ever since 2016 and then back in 2009. smith has been falling for most of 2018. how much do foreigners have to buy for equity to rebound? where does goldman sachs think this should actually be? predictt is hard to foreign flows from here, but you are absolutely right. our metrics also suggest long only in japan, investors in the united states of america, relative to the benchmark wait they should have in the market. as 800 basisuch points below benchmark, so this is actually a larger underway than at the beginning of abenomics, so a lot of factors

driving this or driving foreigners out of the market, including domestic political uncertainty. until recently, the yen was strengthening. more mixed member data. conservative guidance issued by japanese corporate for their outlooks going forward. factors.tion of these frankly, some more attractive alternatives outside of japan, namely in the united states and places like that, have distracted i think the foreign investors that typically might look within the japanese market, but going forward, we are actually not pessimistic about the outlook for the japanese stock market. we think earnings opened to new grow. we are basing our estimates on the dollar yen which is conservative. it looks as if abe's support rate has stabilized. it looks like he has a very good chance of getting reelected come this september. the global economy in goldman

lookss you looked -- view to be stable despite the tightening of the banks we talked about. the market is one of the cheapest in the world. and corporate balance sheet. finally evidence that japanese companies are buying back shares, so corporate governance reform is also gaining traction. put this all together. although we think the market rangebe rate down -- bound, we are looking for the nikkei to hit around 24,500, which compared to the full forecast we have at goldman's brother markets around the world is pretty good. we are still recommending a 12 month overweight position for japan. hence, we expect some of those foreign under which will start to get close. in terms of fed stabilization, u.s. yield stabilization, now that we are through the ecb and coming into said if ittsubishi

hit 3% or more, investors with a away from equities. 2.93% for the u.s. tenure. do you think there is stabilization here that investors can find some calm? if that is the number one concern of those investors, sure, but in our view, we think rates are not going to stop at 2% in the united states, and number two, we think there will .e enough if we look at the s&p my colleague expects it to offset the higher cost of , the u.s.o net-net market is a bit pricey in terms of valuations, but as long as the earnings continue to come through and of course a tax cuts are really hoping that, we think that will offset the rise in the cost of capital and will not prevent the s&p from rising higher.

frankly, that is the same tune we are singing and the rest of the world. rates are rising off of extremely low levels. again, in tandem with the higher growth and inflation pressures we are seeing. we have to talk about trade here. it seems like japan was one of the few countries who are not exempt from steel and aluminum tariffs. we talk about the threat of u.s. auto tariffs as well. how big of a concern is that for the market given the fact we are seeing these escalations come through between the u.s. and china now? kathy: absolutely. athink if you had asked me couple months ago, the biggest risk to japan's market would have been domestic political uncertainty, but now, it's been taken over by exactly this, trade protectionism. as we have seen from the white house yesterday, there is a threat looming, not just over japanese autos, but european autos as well. but if push comes to shove and

the u.s. government decides to increase that import tariffs on 25%, or's 2.5% to that would deal a huge flow from japan's auto sector. if you look at bilateral trade between the two nations, japan and the united they, of japan's exports to the u.s. economy, roughly 37% is comprised of autos and auto parts. on my steel and aluminum, which pie,ally tiny in that big this thread of tariffs on the auto sector would be the biggest risk, i think, that japan would face. that's something to keep an eye out for. yvonne: we have seen this decreasing correlation between corporate earnings and yen weakness. do you think that will last? kathy: yes, because as we pointed out in the past, we have contributiong of domestic oriented sectors to the overall profit picture in

japan. initial phase of growth is driven by exports. handed from exports to the domestic side of the economy. that more balanced growth is what is leading to a declining correlation between the overall stock market and the currency levels, so again, even though we are not anticipating a significant amount of yen weakness, that does not prevent us from being constructive on the market over the six month to 12 month horizon. yvonne: kathy matsui, goldman sachs japan vice chair. chief japan equities strategist. plenty more to come on daybreak asia. this is bloomberg. ♪

yvonne: let's take a look at your markets trading in the asia-pacific. pretty mixed picture. we are seeing the likes of australia and japan leading those gains. this was on the back of this

u.s. rally of course. we are watching this uneasy backdrop when it comes to e.m. with the dollar continuing to strengthen. valueup next, ether's surges. it is not subject to securities rolls. how the ruling may affect other cryptocurrencies. this is bloomberg. ♪

yvonne: looking to be a happy friday today. we are looking to see a bounce back from equities, given the tech rally in the u.s. overnight but certainly a lot with trade when it comes to the president approving terrorists -- ta riffs. you could see that. it -- ramy: when it comes to anything that is yield dependent, rate dependent, there could be turbulence looking ahead. let's get to first word news with genentech heart. -- jenna daggett heart.

reporter: asset purchases will be saved by the end of december but pledged to keep interest rates at current lows at least through the middle of next year. the dovishness caught investors by surprise. the euro tumbling 1% against the dollar. >> the council concluded that progress towards a sustained endorsement -- adjustment in inflation has been substantial. reporter: the economist seeing no change after the boj meeting, leaving governor kuroda out of step with the u.s. and european central banks. investors will be focusing on how he explains the recent weakening of inflation. the divergence in policy may add downside pressure on the yen, helping exporters and assisting the inflation campaign. senior au officials have whether the u.k. might

need to stay in the block past march 2019 if negotiations don't accelerate. talks are stopped on the irish border and future trade deal and officials have questioned whether they can finish on time. theresa may faces another showdown in parliament next week with the pro-e.u. lawmakers. >> we cannot accept them to allow parliament to instruct government on international negotiation. that undermines one of the outputs, and such a move would be constitutionally unprecedented. reporter: the rich keep getting richer, they are doing it faster. boston consulting says global personal wealth reached $202 trillion last year, up 12% from 2016 and the strongest annual growth in five years. millionaires and billionaires hold half of all global wealth from slightly less of 45% in

2012. china ranks second after overtaking japan in the last five years. 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. this is bloomberg. thank you. let's see how the asian markets are shaping up. let's get the latest with juliette saly. it is finally the end of what has been a very wild trading week. a lot has focused on the ecb. the fairly dovish commentary from mario draghi. you're seeing australia and japan leaving the game in the region. we had focus on the oil market, the saudis say they are confident oil will increase. you see a lot of commodity producers getting a boost in the asx 200 and the nikkei with the fluctuation in the yen. the south korean market is flat.

yesterday we saw heavy selling in the kospi as it play catch-up to wednesday when it had been closed. taking a look at the commodities space, you see a lot of shanghai futures lower, illumina down .9% . if we look at the movers, we are expecting a lot of tech players to rally today following the record high from nasdaq. you can see a quite a few of the tech players that are open so far doing quite well. tdk in japan is higher. barack the manufacturing is one of the front runners. its biggest one-day gain in a year, and we are seeing a comeback from more of the tech stocks. to the downside, really interesting to see that you have seen weakness in a lot of the samsung players today and machinery makers that were on

the list. they appeared to have dropped off in japan, off 4%, giving back gains from yesterday. we are watching tech players when taipei comes on in half an hour's time. ramy: thank you very much. a check in the markets before friday open. to cryptocurrency now. a sighnvestors breathed of relief. the second-most valuable digital currency is in fact not covered by federal securities rules. that is sending ethers value survey and gave bitcoin at needed bump. the fccto us what actually set about ether and why was it under scrutiny in the first place? worried etherere was labeled as a security. it means a lot of security laws would be applied, not just to either but similar tokens like ether. this ruling, it clears up a lot.

it kind of gives a lot of positive feedback. there is three main things to focus on. the commission showed it is quite well informed. one of the most important things williams said yesterday was that if something can become a security at the outset and over time it will evolve into an asset. that doesn't really exist right now. for them to make this kind of statement, it shows regulators are informed and open-minded, which is what you could want. the us.r big thing was -- the ethereum, the blockchain has been used for ico's that have lost people money. there was scabby coins out there. the government could have taken a hard stance here to end a lot of that. but they decided let's look ahead. let's see what can really evolve

security, a new instrument that has never existed. as we see a willingness from the government at a high level to give these things a chance, and so this kind of paves the way for a much easier adoption, especially among institutional investors. a lot of changes needed to register with the sec no longer have to do that. it clarifies things for tokens as well. the other thing, the third thing he clarified was if something is decentralized, as long as there is no central party that dictates whether their project succeeds, it is not a security. this gives a door opening for projects that want to raise money. as long as they are decentralized, they will be able without that sec overlooking their shoulder.

ramy: looking at through the rent -- the lens of investors, ether was up 14%, and is maintaining most of those gains. i am curious if this tide from cryptocurrency will stay in or if it is like bitcoin, it has lost something on the order of 66% since it hit that high in december. yeah, whether this stems the bear market, it is a short-term positive. i think people would be scrutinizing it, what it means. but -- happy, positive announcements. we can see the price, support it based on this announcement, but whether it is the end of the bear market, that is quite skeptical. one of the main reasons why crypto went up last year was because the general public was seeing it on tv every day. prices are not going up sustainably now.

if you look at google trans, bitcoin crypto is down 80%, in terms of interest. the mass population has lost interest in crypto. that is a meaningful thing because their money is not coming in and supporting the price. that leaves investors to be the ones that pick up the demand, and i don't think they are that excited right now. this really helps clear up regulatory uncertainty, but are we going to see pension funds, teachers'putnam, your pension fund, are we going to see them in crypto? no. the short-term is very positive, especially for ether. yvonne: really quickly, what were the main takeaway in terms of how the regulator might distinguish between cryptocurrencies as securities and other aspects? yuji: you know, i think as long

as is something is decentralized and what there good chance it will not be labeled a security. if something evolves over the lifetime of its existence, the sec is willing to look at that in a very open-minded way. even if it begins as security, it could become an asset overtime which is positive. for a lot of people in the crypto space and projects. yvonne: thank you. our asian tech reporter joining us from tokyo. bloomberg says president trump has approved tariffs on $50 billion of chinese goods. a fine list of targets will hone in on the tech sector. tom mackenzie joins us from beijing. what more do we know? tom: there was this initial list published in april of 13 hundred products the u.s. wanted to impose tariffs on. that would be $50 billion of

goods. that may have been adjusted. it was put out for consultation with businesses and trade groups. the administration was also put forward an amended list that focus on high-tech. we will get the final list, at some point friday. then of course further down the line, we know the administration in the u.s. is considering additional restrictions on chinese investment. the tariffs were well telegraphed by president trump. he gave the interview where she , thate would act strongly china was likely to be upset, but he seems to have brushed off concerns from the imf that these will lead to a spiraling tit-for-tat action and a trade war. yvonne: it is interesting. reporting earlier this morning that china regulators have approved this merger between qualcomm and an xp, so it seems like [indiscernible]

is prevailing, but what should we expect? tom: that points to the unpredictability of trump told chinese telecom makers that despite the protests in washington, he saw it as a favor to president xi. then we got is approval of a billion, soer, $43 that issue has been put to one side, but china is clear. they will, once it is officially enacted, because they could be faced in, when it is official, china will respond in kind, targeting things like u.s. pork, soybeans and steel. for the corporate operating here, the longer-term concerns on whether or not some of their imports around pork in china, licensing, some of those get held up. that will be an additional concern for the corporate. there is no obvious offramp in

terms of the trade disputes. president trump has said if china retaliates, he could look into an additional $100 billion. it does not look good. ramy: tom mackenzie, thank you for that update. up next, the world cup kicks off in russia with a big win to the host but businesses are also hoping to score. more in a moment. this is bloomberg. ♪

yvonne: the fee for world cup in russia officially kicks off. the post, look at that store, demolishing saudi arabia by 5-0. as the tournament unfolds, you can play on the terminal. check it out, the results on bloomberg, using our function.

certainly you can compete with everyone on the network, which is what we will be doing. businesses and, tv makers, advertisers and brewers, looking to score a win. more than one billion viewers tuned in for the final between germany and argentina in 2014. we are joined by bloomberg intelligence analyst tom here. you are trying to stay up to see a, but this -- you were trying to see it, but this will be about more than just eyeballs for tv. reporter: historically in the years where we have a regular big sporting event like the winter olympics and the fee for world cup -- fifa world cup, you see a bigger boost in tv sales.

we will see a bigger increase in tv sales versus 4% decline in 2017. it is not just about the favorable towards schedule. it is about lower pricing for the lcd panels, allowing retailers to offer better discounts and encourage consumers to upgrade their tv's. yvonne: yeah. we have been talking about that, tv makers could benefit the most. talk about the matches. it will be about ad spending. tom: absolutely. if we look at this world cup, we are likely to see $2.4 billion in incremental ads spent versus $1.5 billion in 2014, so a substantial jump. what is interesting is we may see a bigger jump not a participant nations but in china. you had 200 million individuals watch at least 20 minutes of the game in the 2014 world cup. a more favorable viewing schedule will help as well.

we have got quite a bit happening in china where companies like the major sponsors are trying to draw attention to premium products and drive double-digit sales. ramy: are there any markets where advertising spending could decline? absolutely. the u.s. failed to qualify for the world cup, so we could see 10% or greater incremental decline in advertising for this event. this could be problematic or challenging for a company like fox who paid $200 million to broadcast the games. we expect probably for the coverage, auage bigger drop off. telemundo, we have spanish-language coverage that could hold up because of their alliances, further beyond team usa. all of i can't imagine

those watching that they won't be drinking a cold one. the brewers, how are they likely to get a boost? tom: anheuser-busch in bath could see it -- inbev could see a boost. they have more than 50% of the market, the 10 largest people -- fifa world cup participant nations. they have the leading position, eight, 10 markets with companies expecting volume growth through 2022. that should help them. ramy: all right. i hate to be the debbie downer, but in which scenarios could beer sales disappoint? if someone loses, that could also be a reason to drink more. tom: yes, but we have countries where exploitations are really built in. brazil, germany, france, germany

and france are two of the bigger markets. but is what is problematic in brazil given the weak economy, brazil had a history of long runs. so they were to get an early exit, we could see some trading down or some smaller consumption . that could hit sales for the market leaders, maybe i, heineken. yvonne: thank you, appreciate your in analysis on this world cup, all the excitement. rumors see what kind of will win. -- brewers will win. both get a quick check of the business flash headlines. at&t has completed its $85 billion acquisition of time warner. earlier the justice department agreed it would not take a court order temporarily blocking the deal. deciding to appeal the decision to allow the takeover. it at&t has agreed to manage

turner network until february 2019 under agreement with the government. ramy: nintendo's biggest shareholder has boosted its stake in the gaming company for the first time since 2015. capital group increased its inding from 9.45% to 10.39% purchases from april through june. a vote of confidence is welcome news for investors who have seen a quarter of the value wiped out since it hit a decade high back in january. yvonne: the operator of tokyo disneyland is investing $2.3 billion in the biggest expansion to the resort in two decades. oriental land will expand to include a hotel and areas based on movies like frozen and peter pan. the company said the areas are set to open mid 2022 and will add 450 million dollars in annual revenue. ramy: further turbulence in store for the yuan as chinese companies prepare for a dividend

abroad. they will hand out almost $20 billion of dividends in overseas currencies in the three months through august. market players say conversions an will be needed and that will contribute to volatility. follow breaking news wherever you are very we have teamed up with twitter to launch tictoc. this is the first global news network design for social media offering live video coverage and hourly updated top news reports verified by us. if you are on twitter, follow us at tictoc. this is bloomberg. ♪ this is bloomberg. ♪

yvonne: this is daybreak asia. ramy: list of a quick check of the business flash headlines. thebilliton has approved $2.9 billion development of a project in western australia. that will allow the minor to increase the quality of iron ore when high-grade material is selling at a premium. production is continued in 2021, which will replace depleting minds rather than adding new supply. joined elon musk has

rahm emanuel to begin a high-speed rail service from downtown to the airport. he said a boring company is approved for the startup whose ideas have yet to be proven. >> it is a difficult thing, hard, new thing. that you cheer us on for this. if we succeed, it is going to be great for the city. if we fail, i guess we will lose money. ramy: apple is taking its foray into hollywood one step further and into feature films. sources tell bloomberg the tech giant is nearing a deal for the ,ights to an animated movie part of the upcoming slate of original video offerings. cartoon saloon is said to be the studio behind the movie which is

yet to be made. apple has not announced how it plans to distribute the new material. yvonne: now for a look at the next few hours on bloomberg television. what are you watching? rishaad: trade wars, trading gains. a good turn in beijing. we will have the asian trade, the founder of that group as she was involved with the tpp, the regional comprehensive as well. and has great person really interesting insights. having a look at what is going on into that space. she will be joining us. she is talking about [indiscernible] another acronym which is mania. yvonne: i have seen that. rishaad: we'll find out what that is, the other a. [laughter] rishaad: having a look at what mania is, then looking at home prices down out of china.

we have julie away from hsbc along with bloomberg markets as well. we will count you down to the trading day in shenzhen, shanghai and hong kong. ramy: thank you very much. let's do a quick check of markets before we head over to bloomberg markets asia. you can see a mixed picture this friday morning for investors. the nikkei is up a quarter of a percent, mirroring what happened at the s&p 500. the kospi is down. the asx 200 is up 1%. yvonne: several southeast asian markets closed, so we could see some low volumes. that is it from this here. daybreak continues next. this is bloomberg. ♪ ♪

rishaad: a bit of a struggle for asian shares despite strength on wall street, a dovish surprise out of the ecb. trump said to approve tariffs on $50 billion worth of imports. we are watching the boj meeting, governor kuroda falling out of step with the u.s. and europe. that and more. in hong kong, i am rishaad salamat. ride: the yuan's bumpy could get worse as companies cash in on $20 billion of dividend payouts. this is "bloomberg markets: asia." ♪