yvonne: it is 11:00 a.m. here in hong kong. i am yvonne man. welcome to "daybreak asia." the top stories this tuesday, asian stocks face a shaky start. chinese markets set to return later. akenodities weekend on -- we on protectionism. mike pompeo calling beijing's claims of openness and joke. hyman in new york. this hour, oil climbs as opec considers a compromised output plan to head off an iran- led rebellion. to san francisco.

a lot of concerns about trade arsisting and really causing divergence in stocks in the united states, so not everything selling off, but certainly groups and companies that are seen as being affected by potential china trade tariffs. they are the ones taking the brunt of it. that isit seems like the case. interesting, despite the rhetoric we have heard. president trump is watching this right now. is this giving more of a push to double down on trade? that will be a key focus for us when china markets reopened today. julie: potentially some traders hoping for an 11th hour of

things going into effect. who knows? if you take a look at what happened during the u.s. session, the dow is still down .4%, and we saw a decline in the s&p 500 again. interestingly, consumer staples selling off quite a bit over the course of the session. the nasdaq, after flirting with no change most of the day, slightly in the green. we see strength in large-cap technology. the dollar going sideways, but really maintaining its uptrend. if you take a look at the bloomberg, without a look at the u.s. currency along with the 10 year yield, not changing much on the day. reassertion seeing of the correlation between the two. that seems to have broken down once again as the dollar continues up and yields do not. they go sideways to down,

yvonne. yvonne: you see these bouts of volatility. that plays at how out into asia. the set up so far looking mixed for asian stocks. a pretty ugly day yesterday. the benchmark drifting to the lowest on these trade tensions. new zealand down .3%. aussie futures pointing to decent gains. pretty muteds today. career really has been taking the brunt of this e.m. selloff in the region. , .1%e poised for losses lower. yen catching a bit of a haven did. some of these risk sensitive currencies like the aussie taking a leg lower. we are flirting with the lows for the aussie. the offshore yuan is want to 6.45.on, holding at

commodities.t oil rising overnight as well on news opec may be aiming for a modest output hike. we are hovering around 55.78. 65.78. corn weighing on the index. julie: the u.s. senate has passed a defense bill that could see penalties imposed on china's zte. president trump plans to lobby lawmakers to allow the company to get back in the business. let's bring in joe. what does this bill mean for the future of zte now? joe: it is the subject of some negotiations. the senate bill was much more stringent than the house

version. hadcommerce department placed this on it. the house version would penalize zte in a much less of a broadway. prohibit the defense department or government agencies from buying zte equipment. the white house is bringing lawmakers, republicans, into the white house, hoping that eventually, these two different versions will have to be reconciled, and that is where the white house is hoping they can get some changes made. yvonne: the president is meeting with lawmakers on wednesday. is there anything he can do to change course here on what congress is planning to do? probably got a lot more look in the house. house members may not be as willing to defy the presidency. the senate was a pretty wide margin, veto-proof.

cannot bese version reconciled with the senate version, that means it does not go through. everybody wants this defense bill to go through, and it may be that the senate has to back down on these additional sanctions, on zte. that is where they are counting on the negotiations leading to. julie: joe, you mentioned president.fying the we have not seen that very frequently. why on this issue of zte? what have we been hearing from congress as to why it is so important to them? joe: it is a national security threat, the contention of senators who backed this. that was the original reason for the congress apartment's imposition of -- department's imposition of the sanction.

particularly when it comes to national security issues, hacking, whatnot, and this is a symbol a lot of lawmakers have eased on. julie: thanks, joe. let's get the first word news with jessica summers. jessica. jessica: thanks, julie. theresa may has suffered a defeat on her key brexit legislation setting up a battle with the house of commons on wednesday. lawmakers passed an amendment to ensure parliament can erect the final stage of negotiations. leaders are considering issuing a formal warning following a summit that the u.k. risks crashing without a deal. south korea's defense ministry says a joint military drill with the u.s. planned for august has been suspended. if the filter commitment made by president trump -- it fulfills a

commitment made by president trump. that is too brief president xi on the summit and discuss negotiating tactics. it would be his third visit to beijing in three months. president trump has called for a new space force to be added to the u.s. military as part of an arms service separate from the five traditional uniformed branches. the proposal faces resistance from the air force which oversees military ran's. the administration says it wants to send robot explorers to the moon as early as next year and another human lunar expedition in a decade. it will also guide and stabilize market expectations. a statement on the pboc website is china's economy is currently sound and will be in reasonable range in the rest of 2018. a report $10.3 billion in corporate bonds.

that is .39% of issuance. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. julie: let's get back to the u.s. market close and take a closer look. stocks did you race earlier -- erase earlier gains. the nasdaq ended up in the green. however, tech just cannot be stopped. su keenan has more. pointed out, even though it looks like we are closed unchanged, we came well off the lows. a 1% move. technical strength and sets up for a positive open on tuesday. a relativelyng narrow move. we did not see a risk-off kind of day here even though stocks did not move much. gold -- there is a seven-week

high on the wall street t that gold ise going higher. a lot of bullishness in the outward position. let's take a look at the stocks. amd at an 11 year high as they come out with more competitive chips. analysts are talking about their gain being intel's pain. are dominant for those memory chips. kimberly-clark is one of the consumer companies under pressure because of concerns about trade and check out the bottom stock, gevo. they make a gasoline additive. they got a big approval from the epa. the stock was up 500% at one point. gamestop is our next chart, a videogame brick and mortar company. reuters says a big private equity company, sycamore partners, is interested in a buyout. investors jumping in. into the bloomberg, gtv is where

you can find our library of charts. the chart says it all. it looks like a lot of the professional traders are net short on the vix. despite the trade war concerns swirling about, they are betting volatility stays low for now. .ulie: let's turn to oil oil looked better in today's session. it looks like, not the worst-case scenario. boost isillion barrel what the russians are pushing for. check out the chart. there is talk of perhaps a compromise. let's talk about some of the headlines, because headline risk is what traders are concerned about going into this week, and there was a lot of that. first, there was a $1.5 million push -- 1.5 million barrel push. there was talk that iraq in venezuela will block any move to put production. buckle your seat belt.

this will be the most interesting. opec aims for modest output. red is the line that russia want to bring production up to. white is a compromise. the more we talk about 300,000 bullish, the more we talk about 1.5 million euros. -- barrels. we'll see how the week progresses. thene: the merger in making. volatility shooting up in those three stocks. su: a lot of action. let's go right to the board. comcast, disney, fox. comcast made the $65 billion offer. bonds are now jumping. people are trying to sell because disney may be coming in quickly. take a look at the headlines as we talk about comcast and disney. we know that fox, their board will discuss the bid on wednesday, how to proceed. everyone is looking to see if their cash, as

there is some report they may do. yvonne: su keenan there. we will examine the impact of trade tensions on business ties between the u.s. and china. china joins us from beijing later on. up next, a look at how u.s. markets are behaving as the trade war looms with l the partner -- with a capital outflow partner joining us from new york. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. julie: i am julie hyman in new york. saw majors close lower on concerns of a trade were with china heating up. one exception, energy stocks, which rose along with oil prices. our next guest says we are locked in a bad place on trade for now. joining us from washington is a managing director, james. thank you so much for joining us.

we have seen pockets of reaction, mostly in u.s. markets, to trade rhetoric. a lot of it having to do with the industrials. do you think the reaction has been enough? and do you think it has been too narrow? what do you think? james: i think the reaction is just about right. here in america, american investors and american businesses have learned that with the trump administration, you have got to ignore the circus, it more the circus, it more than fireworks, and concentrate on what they actually do and say. in this case, with regard to trade, we are in the new normal. there is nothing really different, and nothing will change for months now, because we failed to get a reservation on nafta, failed to cut a deal with the e.u. and other trade partners on tariffs president trump would in place. i think in time we will be able to get it and get these off, but the reality is that given the

mexican election cycle, the u.s. election cycle, the publications in europe, it will be very hard to resolve -- this is, as i said, the new normal. companies largely going ahead with capex plans? should they act business as usual? james: that is very clearly the case when you look at the capex numbers, the business confidence level, consumer confidence level, consumer sentiment about the economy. people are assuming that we are really going to extend this economic run, and we are breaking out of that pattern of 2% growth towards 3% or higher. putting businesses are their money where their mouths are and growing here. when you look at what the market is doing, the market's main

focus has been repricing asset valuations to correspond to the policy. we are rolling out of of qe environment, coming into a more normal pricing environment for the fed. we have had two price hikes so far. we may have another two rate hikes. investors are wondering how much more the fed is going to hike, how fast they will hike, what is the fed thinking? that is dominating u.s. financial markets right now. trade is a headline issue. , not whatfterthought you was investors are primarily focused on. frankly, if you look at where the movement is in u.s. sectors, you see strong performance year-to-date in industrials, strong performance in cyclicals, energy. it is the interest-sensitive areas like real estate, for instance, or electric utilities that have been underperforming during this period we talk about trade wars. yvonne: james, is there such

thing as a -- is that what the market is worried about, that there is not one anymore? james: i did not catch the question. yvonne: is there such thing as a powell put? the fed put? feds: clearly, we know the is concerned. the fed is being careful. that reassures the market. there is something like a bernanke put, where steady support is there. marketst is though that are focusing on the fed in the u.s. more than on international trade and markets are much more concerned with where the fed is going precisely because we are normalizing interest rate policy, and that means valuations, which have been built up over time in a low interest rate environment need to adjust, at the same time taking into account the very strong earnings growth that we see. we are basically seeing a daily symphony of yin and yang about

questions for the right valuation. that is not a trade war we are talking about. yvonne: james, i know you have been focusing on the energy markets. there is the rebound in the price of crude. what is your take on what is going to happen in vienna? are we heading closer to a compromise on raising output? do you think it will be a pretty contentious meeting? james: no, i think we are heading towards a compromise in raising output to some extent. it is the power of the presidential suite and the fact , the nationals security put, is maintaining a strong relationship with the u.s. nowident trump is becoming, believe it or not, one of the stronger figures on the world they'd, given that angela merkel has immigration issues, theresa may has brexit, justin trudeau lost a major election in the province of ontario, and trump, meanwhile, has a strong economy and 90% approval rating

among republican voters. i think allies are taking notice of what trump tweets and believe it or not, trump sweeting has a signet -- trump's tweeting has a significant impact on oil production. julie: it does not seem like the u.s. administration is getting its way in how much opec may raise, even though it is going the way the u.s. might like, but not to the amount the u.s. might like. james: that's true, but you have to remember u.s. shale producers have some skin in this game, too. it is a thumb on the scale, in a positive direction. julie: james, thank you so much. james lucier talking to us about u.s. policy and energy as well. you can get around up of the stories you need to know to get your day going in today's edition of daybreak. blooms are -- bloomberg subscribers can go to dayb . it's available on mobile in the bloomberg anywhere app. from new york, this is

bloomberg. ♪

>> the two leaders meet in scenes that would have been unimaginable to months ago. it is an historic document. pres. trump: this is complete denuclearization.

yvonne: -- julie: "daybreak asia this is "daybreak asia." i am julie hyman in new york. yvonne: i am yvonne man in hong kong. last week, the online marketplace became the first japanese start up to eval -- devalued at over $1 billion. david ingles is at the tokyo stock exchange is morning for us. good to see you. we talked about the background of this company, more like a app.e sale-type of it's interesting. why do you companies ipo has been so successful -- company's ipo has been so successful? david: not to take anything away from management, who have seen that gap in the market and executed the plan beautifully, it is an untapped part of the market.

you walk around japan, the neighborhood, there is a lot of junk lying around. what the company has done essentially is given people and avenue through which they can be clutter their life -- declutter their lives. it is useful stuff. reason is part of the why it has been successful. the other part is they have executed this beautifully, and you look at where revenues are in japan. they are making money here. it is really outside where the growth is. i am being positive. or where the problem is, if you will. yvonne: is this just a one-off? do you think this is the start of a reviving startup scene in japan? is one-off in it a sense in that it is one of two unicorns out there. not a lot of people will no with the other one is. not a lot of people up until today know what mercari was.

it does give a lot of the startups year something to aspire towards, not just entrepreneurs, but also investors. it pays off. while the path of entrepreneurs in japan is a lot more risky than a 40 year career at a stable japanese corporate, it pays off. company,nder of this his valuation is over $3 billion. yards about one third of the shares, so this makes him a billionaire. it changes that mold in a tech savvy society. i followed to the category of people who had not heard of it until today. what does it say to mercari's

prospects in the united states, because they want to expand, right? david: they do. what is different here is in the u.s., they have well entrenched competition. ebay, amazon as well. this is an app that has over 100 million downloads so far. a lot are in the u.s., 37 million downloads, but they failed to gain traction. we really have to wait and see. part of the proceeds will be going into bolstering that business outside japan. julie: any indications of how the stocks will do? david: yeah. markets are pointing up. you look at what happened yesterday. the ipo price is 3000. we will have to wait and see. i would have to go and we will head inside for that opening bell. i will see you guys in a bit. julie: thank you so much. david ingles in tokyo talking about mercari. coming up next, tesla bus is elon musk's call on his

employees to be paranoid after a brief fire hit tesla's assembly-line. this is bloomberg. ♪

yvonne: 7:30 a.m., tuesday, and hong kong. the dragon boat festival holiday. it will be interesting to see how hang seng and the shanghai composite react to these trade tensions that escalated during the weekend. 30 minutes away from asia's first major market opens, julie. see some level of reaction here in the u.s., mostly in the dow, although consumer staples also selling off pretty sharply. i am julie hyman here in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." let's get to the first word news with jessica summers. crude has rallied after two weeks of losses on news opec

is discussing a relatively modest production increase before its key meeting in vienna this week. sources tell bloomberg a rise of 300,000 600,000 barrels per day 600,000 barrels per day is on the table. that is backed by iraq and venezuela. a $700. senate passed billion defense bill that could see penalties reimposed on china's zte, something the white house opposes. president trump plans to lobby allowican lawmakers to the company to get back into business. mike pompeo has amplified the tough u.s. line on tariffs. ofcalled china's claims greater economic openness a joke. hard're taking a really line on foreign practices that harm america. whether that is threatening our technology and leadership theft, we arelogy

ensuring that we protect american property. everyone knows that china is the main perpetrator. it is an unprecedented level of larceny. president trump's policy of separating immigrant children from parents who illegally cross the mexican border threatens to balloon into an election-year headache for republicans. the administration is struggling to defend the zero-tolerance approach first adopted in april. the u.s. would not become what he called a migrant camp, attempting to blame democrats for his own policy. pres. trump: immigration is the fault, and all of the problems we are having, because we cannot them to sign legislation. we cannot get them even to the negotiating table. and i say it is very strongly to democrats -- the democrat's fault. jessica: the world health organization says compulsive video gaming qualifies as a

mental health disorder. it will help governments, families, and health care workers be more vigilant. cases are rare, with no more than 3% of all gamers affected. say this maygists unfairly stigmatize some people. global news, on air, and that , in more thantter 120 countries. i am jessica summers. this is bloomberg. yvonne: just crossing the bloomberg right now, we are getting a statement from the white house, from the president, talking more about these trade tariffs they have slapped on in china. has no intention of changing its unfair trade policy. must be taken over beijing. it seems like they are doubling down on the tray terrorists, and also here, julie, it's interesting that we are getting a line saying the president has

directed the u.s. trade representative to identify $200 billion of chinese goods for tariffs. we could be seeing a second trend here, potentially. a third. i am losing count. subject to would be additional tariffs, $200 billion of goods. this will happen if china refuses to change its practices. really interesting. he says once again, and this is something the president said many times, that he thinks the trade relationship should be more equitable, even as he is making this comments. have an excellent relationship with president xi, and we will continue working together on many issues, but the united states will no longer be taken advantage of by other countries in the world." sort of trying to say the relationship is still strong, but we are going to be tough. coming on from what we heard from the secretary of state, mike pompeo, earlier

as well, talking about how these moves china has made to open up its market has been a joke so far, so they are ramping up the rhetoric. we will see if we get any response from beijing. let's get you more on what we should be watching as trading gets underway in asia. adam haigh. you have been carefully monitoring the recent retreat in asian markets. we have seen some alarming signs despite the fundamentals. yvonne, what is important about what is happening now in emerging-market equities, especially in asia, is the magnitude of the declines we are seeing. money is starting to flow out at a pace we have not seen for years and equities in the region. let's have a look at it in your gtv library on the terminal. this shows you the magnitude of the decline. we are approaching levels going back to 2008 in terms of money yanked out of emerging markets. it's really down to a double

whammy at this point as to why this is happening. we heard last week from the federal reserve, the pace of u.s. monetary policy tightening is ramping up, and it has not been factored into the risk assets like emerging markets. been on a bull run for more than two years now. in earnest, this will run started at the beginning of 2016 for e.m. assets, and now, bonds and equities are being hit in tandem at the same time as the policy u.s. settings. you're getting the ramp-up in escalations of tensions between the u.s. and china in terms of trade and the implications there that might have an impact. very export-dependent economies in asia, those kind of e.m.'s we have here. so it is a two-pronged attack hurting e.m. at this point. as we heard from people such as ones sullivan, and jpmorgan

the research side at the u.s. bank yesterday, this is not a great set up for e.m.\ julie: 10 at -- e.m. back: china traders coming today, and not only to the trade rhetoric, but the headline we got that the trump administration wants to examine an additional 200 billion dollars of chinese goods for terrorists. we are seeing some reaction in the markets already. you see the drop in the u.s. dollar versus the yen, a pretty sharp one. what are we likely to see in chinese trading as a result of this? i think that kind of move we saw in the yen was a bit of strength that speaks to this idea of an incremental risk these escalation of tensions between the u.s. and china ramp-up. in the past way for hours and indeed from when the news broke first late friday, we have seen moves lower in commodities both soft and hard, and equities have been under pressure as well. .hat is what we will be seeing

hong kong equity futures and mainland chinese equity futures both pointing lower this morning as we are seeing with the strengthening of the yen. it's putting pressure back on risk assets at this point. i suppose the light at the end of the tunnel, if you will, if we play this through was an observation made by a chief economist at deutsche bank overnight. what you may have here in their view as a result of this is a potential for looser monetary policy in china as a result of these tougher, more stringent tariffs from the u.s. they are certainly of the view that if this actually happened and ends up being set in stone, we may have two more additional in china andrr loosening of loan requirements and the housing markets and some of the tier two and tier three cities in china. in the short-term, bit of pressure remaining. julie: taking the long view. interesting one with that's over lining. adam haigh.

all forget to check our gtv library for some of the charts adam talked about on the bloomberg terminal. bloomberg intelligence says it expects google to push even deeper into online commerce after its $550 million cash investment in china's jd.com. the two companies plan to explore retail opportunities in southeast asia, the u.s., and europe. joining us from san francisco is alistair barr. why did google make this investment? alistair: the filament and logistics. basically, google operates almost exclusively online when it comes to e-commerce. when you order something through google, it is usually to another retailer's website. withhave very little to do getting you that product from a a warehouse. google's archrival, amazon, that is really their bread and butter. they have the prime service.

they get you things in one day or two days. google is bulking up. when it comes to e-commerce in asia, jd is very notable because it does its own logistics and to foment. it has been -- and the filament. it has been doing it for a wild. julie: does this mark a change? alistair: it's a change in the last 1.5 years. 2010, google took its search engine out of mainland china, not really trying to engage with the company. it started taking a two-pronged attack. one was using artificial intelligence capabilities to set arm and partnerships in china. the other one is making investments and doing partnerships. it already did an investment

with tencent, which is so huge. the jd one falls into that category. i guess it is another reentry point for google in the china market. does this narrow the gap or the fight with amazon? alistair: it looks like an expansion, really, outside of china. it was notable that google gets a stake in the chinese company. about 1%. in the joint press release, they said this was focusing on southeast asia. jd's point of view, this will help them on the online customer acquisition point of view, so google is a specialist. they want to get people who are searching for products and wanting to shop online. you go online, and they are usually in those regions. jd wants to be in the mix along with amazon. getting some of the online

traffic. barr, fromstair bloomberg technology, joining us from san francisco. let's get a quick check of the business flash headlines. a disgruntled employee broke into the companies manufacturing operating system and send highly sensitive data to unknown third parties. in a memo, musk says the employee did expensive sabotage. he is asking staff to be on alert after a small unexplained fire on a manufacturing line. only the paranoid survive. julie: volkswagen failed to pick a new leader after the arrest of the longtime ceo. he was detained without charge because prosecutors said he may their with evidence in investigation into the diesel cheating scandal. his phone was wiretapped. volkswagen shares extended this year's decline to 6%. yvonne: fujifilm shanking more than $1 billion damages from

xerox, accusing it of caving to the whims of -- fuji is suing in manhattan federal court, saying the change of heart was due to external pressures. xerox says it's extremely confident the former board acted correctly in terminating the transaction. julie: coming up, we will have more on the president's plans just announced where he directed the trade rep to identify 200 billion dollars of chinese good for tariffs, upping the ante in the back and forth on trade. the pompeo calling claims of openness a joke. we will look at that, next. this is bloomberg. ♪

julie: this is "daybreak asia." i am julie hyman in new york. yvonne man in hong

kong. president trump directed the u.s. trade representative to find 200 billion dollars of chinese goods for tariffs, and talking at a rate of 10%, according to a statement we got from the white house, it seems like the u.s. doubling down on the trade rhetoric right now. let's take a look into how u.s.-china businesses will be impacted. joining us from beijing, the chairman of amgen china. william, that's so much for joining us. given this latest headline, what is the feeling from your companies now? is there a sense -- from u.s. companies now? is there a sense that there is a threat for a trade war? william: we have had the real threat of a trade war for a while now. announcement come i do not think, will make a big difference for most of the companies in amgen. yvonne: how so? you have been talking about the white house council of economic advisors chairman. he said if we are going to talk

about trade frictions, we might as well do it now while the economy is strong. more than 4% growth. do you think u.s. companies and the economy can take the hit? william: you know, the way the ,ariffs have been constructed ustr has tried to minimize any andon the economy, depending on if there is a next $200 billion, depending on what those products are, i think ustr will continue to try to minimize the hit. having said that, companies are concerned. companies are diversifying their supply chains. and that you have seen in the markets, for anything, before any tariffs on china, there has already been a bit of a softening of the market. besides this sort of stated tariffs that are out

there, are we going to see china and --poken or on which or underwritten pressures to make business difficult to do for u.s. companies in china? a practice thes chinese have used for a long time. guardr companies are on for such a practice. they can domuch about it except to try to be prepared, whether they have something in customs that is being delayed or they are waiting for certification of a just to make sure their taxes are in good shape in case there is a surprise audit. this is definitely a concern. julie: william, is there any sense that there could be a positive outcome here? the picture you are painting does not sound like it. even if these tariffs go into effect, do you think it will be temporary?

do you think that will force the issue and bring the two sides to the negotiating table? companies are our guardedly optimistic, believe it or not, for the medium term and the long term. the crux of this issue is really reciprocal treatment for u.s. companies, those that are exporting to china, those that are trying to invest in china. to get an open market, which is somewhat equivalent to the u.s. trade and investment markets. this is really the goal. and even bob lighthizer, the the chineseid system seems to work well for china, and the u.s. system over the years has worked well for the u.s.. and they are very different. over the next few years, and i am hoping it will take less than a few years, we will be able to

reconcile these two systems, because there is so much at stake for both countries. yvonne:, the focus of reducing -- william, of course, we have seen the shift. if the aim is to stop china from moving up the value chain, is restricting exports the best option? wouldn't restricting u.s. products like semiconductors be a more effective strategy? william: i think that part of the strategy is going to be to limit chinese investment, limit licensing, limit joint ventures of these high-tech technologies are in thes. sees national economic interests. china 2025,made in it should not be the goal to try to limit china. made in china 2025 is actually a

very interesting and well thought out strategy. major flaw is that china needs to open it up. is done globally. open up the innovation globally so open up the investment that both china, the u.s., and other countries can really benefit from those made in china 2025 strategy. go for it, julie. julie: i was going to ask about mike pompeo's comment that the openness that china seems to be may be making some gestures toward is a joke, in his words. is china getting that message? even if they made some sort of gestures in that direction? use the i would not term joke, because it is much too serious. but i do find it quite ironic that china is touting into

protectionism and so forth -- anti-protectionism and so forth as it is such a protectionist economy as you well know. so i think that there had been some moves made, some openings made, some gestures made by the chinese. we just have to keep in mind that the party maintains control once they continue to maintain control. they don't want to feel like they are losing control of the economy. openings will be slower than the u.s. thinks they should be, and that is one of the areas of friction. have 30before we go, we seconds left. do you think big business as any sort of child to the white house after gary cohn's departure? william: that's a very interesting question, and i

think that the white house is making decisions not necessarily always with the input from others, and that would include big business, although you did see that some of the products that were on original tariff lists have been taken off. and i am sure that's because different businesses have shown that it is not in the u.s.'s interest to put tariffs on those products, but i do not know how much big business has the ear of the president. havee: william, great to you on these moving developments we are seeing in the u.s.-china trade front. the amchan china chairman joining us. you can watch us live and catch .p with past interviews this is for bloomberg subscribers only. make sure to check it out at tv . this is bloomberg. ♪

julie: a quick check of the latest business flash headlines. singapore's ocbc aims to double profits from china's greater bay by 2023. the bank wants to boost technology spending and stuff in the area income that in hong kong, macau, and nearby cities. foreign banks are expanding their presence. beijing wants economic output from the region to exceed that of greater tokyo, new york, and san francisco. the indian government wants to -- the relevant department is said to be finalizing the size of the slice to be offered this financial year two speed up asset sales after a disastrous attempt to find a buyer for air india. prime minister modi aims to raise money from asset sales. the ceo of a bank is going on leave.

the head of the banks insurance unit will step into the top post. andvacates her position investigates allegations about her dealings with borrowers. any are conducting inquiry into allegations of nepotism against kochhar. yvonne: just a couple minutes to go. a shaky start. the latest science from the white house with president trump telling the u.s. trade representative to identify $200 billion of chinese goods for terrorists company -- for tariffs. well.futures down as a rebound in crude. still to come, we have the head investment strategy from singapore to talk about markets and tell us why he thinks oil prices will go lower the end of this year.

why he expects a rally and plenty more. us aboutes talks to the success of the online marketplace. and the potential for more unicorns in japan. this is bloomberg. ♪

-- yvonne: welcome to "daybreak asia." to hundredning billion dollars in chinese goods and bowing to double that if beijing retaliates. taiwanhong kong and returned to trade later. bloomberg pass global headquarters, i am julie hyman in new york where it is just past 8:00 p.m. monday. we are live at the tokyo stock exchange. they're not quite casinos, but pretty close.

♪ yvonne: we do see the u.s. ramping up with trade tensions once again with that threat from the president here on identifying more tariffs possibly on $200 billion worth of chinese goods. take a look at this chart. there are a lot of options, but maybe not when it comes to more terrorists for former retaliation. retaliate andctly do a match to match $200 billion when it comes to those tariffs. as we were talking to william in beijing has to come up

with more unconventional ways to throw back the punch. julie: to have a history of doing so. it is interesting that we have seen some level of resistance to reaction in u.s. markets. as the rhetoric heats up, we shall see if that continues or if we do see more of a spreading alarm as we get closer and closer to tariffs actually being enacted. yvonne: let's see. we have a pretty interesting opening from hong kong returning from the holidays. sophie: it looks like asian markets are on shaky ground with trump doubling down on tariffs. china saying further action must be taken. on -- weaknessng for the aussie. 47.ing at 81 spot

while we do have these trade spats very much in the focus, let's take a look at the offshore yuan. that is testing a 200 day moving average while the dollar is at an 11 month high amidst this u.s.-china trade spat. the you one sliding. -- yuan sliding. i want to highlight what is happening with chinese stocks ahead of that reopen. shanghai shares at nearly two-year lows. take a look at what is going on with japan. watching for reaction in fujifilm shares after the company sued xerox four $1 billion. for $1 billion.

thanks, sophie. it looks like there is strong demand for mercari. they begin trading in tokyo any moment now as the online marketplace becomes the first valued atartup to be $1 billion after raising $2 billion in last week's ipo. david, it looks like we are set for some pretty brisk action. when it gets trading, of course. i'm just looking at the board here. down.l, the markets are if we had this conversation 60 minutes back, i would've said they were up. when you look at shares of merck ari, i'm looking to see if we are getting a trade. not yet.

it is quite to be useful to look at these boards are the overall market reality today. ipo price 3000 over 43 million shares were offered. takes $1 billion, valuation at $3 billion. top end of the range of 3000. in green market prices, we are already north of 4000. i'm checking right now. no price just yet. let me just check the board. nothing just yet. say, we can safely assume that this stock is going to get positive when these orders match. julie: we have been talking about this as a sort of online fleamarket. why has demanded been so high? there is a lot of junk lying around in japanese households. i think that is the simplest way to put that.

what the company did was they saw the gap in the market, executed it beautifully, and here we are. in timing was also quite line with what we are seeing across normal space here -- mobile space here. we have yahoo! japan, but that is more on the website -- it is a fairly dominant auction site. demand for this app and usage here is making money here in japan, it's the business outside that is actually a problem. it is one of the first, it is the first unicorn in japan. i guess that speaks volumes of how successful the management team has really been in executing and seeing the gap in the industry. julie: what do they plan to do with the money? is it more toward outside of japan as they try to expand overseas? david: they didn't really breakdown with their plan is in

terms of the pie of cash. to deployare looking some of that into their operations abroad, where they are still losing money. they are losing so much money abroad that it is actually jolting the overall financial results of the company total toward the net loss. the other thing they're going to invest in is the financial services or payments arm. how much actually enables them to gain traction abroad. place in tech, you are either one or two or you go home here at -- home. yvonne: thank you. david ingles there for us in tokyo. let's get to first word news with jessica summers in new york. korea -- if the

phils a commitment made by president trump at last week's summit with north korea's kim jong-un. kim will visit china as soon as tuesday to brief president xi on the summit and discuss negotiating tactics. president trump has called for a new space forces to be added to the u.s. military. that is as part of an armed service, separate from the pentagon's of five traditional uniform branches. the proposal faces resistance from the air force, which currently overseas military space programs. the administration also says it wants to send robotic explorers to the moon as early as next year, and another human lunar mission in a decade. u.k. prime minister theresa may has suffered a defeat on her key brexit legislation. that is heading up a battle with the house of commons on wednesday. the unelected house of lords passed an amendment to make sure parliament can direct the final state. of negotiations

meanwhile, eu leaders are considering issuing a final warning following a summit next week that the u.k. risks crashing out of the block without a deal. tesla bosse says a disgruntled employee broke into the company's manufacturing operating system and sent highly sensitive data to unknown third parties. in a memo, he says the worker did quite extensive and damaging sabotage. he has also asked staff to be on alert after a small, unexplained fire at a mini fracturing line. he quoted former intel ceo saying only the paranoid survive. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. i'm jessica summers, this is bloomberg. yvonne: thank you. president trump has widened the -- wartour putting a further $200 billion

in tariffs on china. it seems the u.s. is not blinking you when it comes to the site. -- fight. certainly going to take the chinese policymakers by surprise. the chinese are going to follow suit with their own list of tariffs. also some of the commodity producers. this $200 billion that trump has threatened with an additional potential 200 billion, you combine it with the 50 billion that was already announced, you have close to $450 billion worth of tariffs. the u.s. imports about $500 billion worth of goods. you're talking about harris on almost all chinese goods entering u.s. markets. if you will follow me, they have

duty fees of 10%. they are soft or terms of the level of tariffs, but these are going to hit consumer goods for sure. these are goods that are going to end up on the shelves at walmart. there's going to be concern around the inflationary impact of that. that is why you're looking at a 10% duty rather than a 5%. it was interesting that these lines from trump come following what we heard from one of the key advisors on economics, the economic council in the white house. one of their advisors saying the u.s. economy is on a good enough footing to be able to whether these pressures now at the time -- now is the time to really issues.na on these trump also saying that it was clear that china had no intentions to change its policies around intellectual property. the allegations in the u.s. are that the chinese have been stealing ip and in gauging in tech forms, something china

denies. yvonne: we will see if u.s. consumers have a sanguine reaction, if they think the u.s. economy can withstand it. all of this rhetoric being matched by secretary of state mike pompeo. he called the openness of that china has recently expressed a joke. is this part of the negotiating strategy, particularly when you couple it with these new threats of tariffs? tom: it's interesting. there has been a lot of discord within the white house about how to approach the trade situation with china in the last few months. you have steve mnuchin on one side and navarro on the other. maybe they coalesced around this idea that they going to take this off-line.you have this announcement from trap and then you have mike pompeo giving this speech. this was shortly after he made a visit to a seeing where he did call it fair and balanced trade between china and the u.s.

he gave china quite a ton lashing. chinese leaders, over these past few weeks have been claiming openness and globalization. it's a joke. let's be clear. it's the most predatory economic againstnt that operates the rest of the world today. businesses will tell you and what the europeans will tell you is that pretty much they are great with what pompeo has said. with the don't agree with largely is the approach that the u.s. administration has taken toward tackling some of these issue. china will say that it is pursuing measures to open up its markets, whether that is the financial sector or the auto sector. that would be the refrain from china in response to pompeo's allegations. julie: thanks so much. mercari'sd, following success, will other unicorns

come up in japan? up next, standard chartered's head of investment strategy joins us for reaction. this is bloomberg. ♪

julie: this is "daybreak asia." yvonne: let's check in on the market action now. president trump canonically raise the stakes in the tariff war with china. joining us from zynga four is -- joining us from singapore. in tradese escalations tensions, china has to be surprised. in your world of fixed income, where are we likely to see the most pain and where is it likely to persist the most? i think some of the pain may

be in more trade oriented areas. dollar.tching the u.s. we think that is one of the most credible pairings in the u.s. trade space at the moment. a lot of that speeds back to the dollar itself. behink that is really where are seeing potentially one of the sources across credit and equity markets. if we do see some of the trade dollar e.m. isd, where we will be looking for signs of any further escalation. yvonne: is a trade were going to be dollar positive or negative? i think the market is still in contention on what really leads to the dollar to actually go higher here. manpreet: it may be a bit unclear. you expect the dollar to be

stronger.i suppose from an interest rate perspective, it would take that lens. the u.s. economy domestically is in good shape. part of the reason we have seen a strong dollar is because the u.s. has kept moving higher and they haven't in other major economies. i think that is one area where we could see some repercussions. if we step back and look across assets as a whole, we have very positive equities in most regions, but most of the u.s. that is another area, as long as we are in this negotiating phase, i think we may not see significant fallout, but we do see much more escalation. your equities, global corporate credit, em currencies, that is when we think about picking and choosing our risks a little bit more than we do today. julie: how are you gaining out the possibility? what sort of probability are you giving to that scenario, because one would imagine you would then see in the u.s. potentially that

long-awaited inflation? not making aare trade war a central scenario. what we are seeing right now is very firmly in the realm of negotiation. no surprise that we aim to get some sort of repercussions. i suppose would matter is that this doesn't get out of hand. from a financial market perspective, we are ultimately more focused on some of the basic growth and inflation fundamentals because the nature of geopolitical risk in our view is that you won't get a significant reaction in markets for a long time until you get a good tipping point need to get a big reaction. in other words, that would be a more external shock. the question is for us, inflation creeping higher not a lot, we would rather focus on that and keep trade risk as the risk factor. right now, very much focused on

the central scenario of positive equities, and picking about whether we have the right risk. yvonne: i want to turn toward the oil market. down --irrationally rationing down. do you think of a more modest production boost and we see a little bit of a link here for this run we are seeing for oil? -- reet: some of the early indications is for the buyer to boost production, the question is how much. i think that feeds into a lot of projections that if you go into year and an early 2019, the demand balance they begin to ease up a little bit. i think that really feeds back to our view on oil prices. you can very well get renewed short-term spikes back to $80 if the right production. at the end of the day, a lot of

oil positive news is in the price already. we think the market at the moment may be biased to look for oil -- lower oil prices rather than hire from here. julie: it's interesting. countering what you just said, is there a sense that the saudi's can actually bypass this note? they were expecting that they are actually going to change or even going to get a separate to munich a -- communique? manpreet: if that is the key question. what is interesting in history is the saudi ultimately has been one of the big producers. what has been unusual about the most recent episode of production cost is that discipline around that has been unusually good. history, itck in hasn't necessarily been quite as widespread as it has in the current space. what saudi does in terms of

actual production, that will be possibly the most important factor for oil prices, more so than what everyone says. that usually is a good way to look at the space. yvonne: you are thinking things to go lower from here? $65 seems to be the support for oil prices. should we expect that to break the oil level in a meaningful way? oilreet: we are looking for to show $65-70 five dollar range. below $65, it is actually possible, but i think we did space.need the demand it seems to suggest we are going back to a roughly balanced market aioli 2019. for oil prices to go below that, we need demand to swing down.

when you growth to slow, which is really not a great scenario, or began upright surprise. if we get big show producers priced to the upside. happen,ither of those we think a range of behavior between seven -- $65 and $75 is what we're looking at. so much.ank you it will be interesting to see how the opec meeting turns out. some headlines just crossing. a north korean plane has departed pyongyang for beijing. that is the news we have right now. -- said to a visit beijing this tuesday. this coming on the south korean confirmation that south korea and the u.s. are going to suspend joint military exercises. right.

for china, that works in their favor as well. they want a reduction of the u.s. nuclear umbrella, also less of these military exercises in this part of the world. interesting. this is probably the third trip now that kim jong-un has made to beijing. we have been talking about after the singapore summit, what came out of it, especially for china. it seems like there is a little bit more of a break between the u.s. relying on china now to get north korea into the negotiating table. it seems like now, the u.s. and north korea have established a little bit more of a direct channel here. perhaps, that leaves china hanging a little bit more. we will see what comes out of this. this recap of the singapore summit. plenty more to come here on "daybreak asia." this is bloomberg. ♪

julie: quick check.

volkswagen sport has failed to pick a new leader for its audi line. prosecutors say he may care with evidence in their investigation into the diesel cheating scandal. the german newspaper says stadler's phone was wiretapped. yvonne: alphabet and jd.com gained after google announced a $550 million cash investment in the chinese online retailer. the company says they plan to explore in more regions. last week, google struck an alliance to sell groceries online in france. bloomberg intelligence says it's retail investment may widen as it battles amazon. joint military drill between the u.s. and south korea scheduled for august is suspended. we look at the latest. this is bloomberg.

♪

julie: 8:30 in singapore. julie: you are watching daybreak asia. let's get the first word news with jessica summers. president trump dramatically raised the stakes in the trade tussle with china. put another $200 billion worth of goods. he is threatened to double that to $400 billion in china retaliates. he says beijing has no idea -- no plan to change its trade practices. earlier, mike pompeo had harsh criticism. >> we are taking a really hard

line on foreign practices the harm america. whether that is threatening our technology leadership to a naloxone -- intellectual property transfer, we are hard at ensuring that we protect american property. everyone knows today that china is the main perpetrator, it is at an unprecedented level of larceny. jessica: president trump's policy of separating immigrant children from parents who illegally cross the mexican border, threatens to balloon to an election-year headache for republicans. the administration is struggling to defend the zero tolerance april.h first adopted in the president says the u.s. would not become what he calls a migrant camp, and is blaming democrats for his own policy. >> immigration is the fault, and all the problems that we are having. we cannot get them to sign legislation. we cannot get them even to the negotiating table. i say it is very strongly the democrats fault.

banksa: china's central have set up a team to closely monitor international and domestic economic and financial changes. it will also guide and stabilize market expectations. a statement on the pboc website says china's economy is currently sound and will be in ine -- reasonable range 2018. the world health organization says compulsive video gaming now qualifies as a mental health condition. the u.n. agency says classifying skimming disorder as a separate addition will help governments, families and health care workers be more vigilant. raretes that cases are with 3% of all gamers affected. psychologist says the classification may unfairly stigmatized said young people. global news 24 hours a day on air and at tictoc on twitter,

powered by more than 2700 journalists in more than 120 countries. i'm jessica summers, this is bloomberg. yvonne: thank you. time to see how the asian markets are shaping up so far. let's get an update with sophie. sophie: suffice it to say, it is risk aversion for asian markets. the yen is jumping. july 6 is on the horizon, that is in the first race of u.s. tariffs against china are to take effect. sometime for negotiations yet. we are seeing softness for the nikkei. i want to highlight the aussie dollar. they knocked down to around 74 after trump's latest comments. aussie stocks are the one bright spot. the aussie dollar thing like a major loser in this trade war.

trading at a one year low ahead of the meeting expected to highlight concerns around waste growth and high debt. those are obstacles to it a rate hike. we want to highlight what is going on in korea. set to extend a four-day drop. filling up the board, the want to highlight a bright spot in seoul. these are logistics companies leading percentage gains. 30%, rising to a three-year high. much.: thank you so take a look at some of those logistics companies in seoul. we have been talking about reports from local media in south korea, talking about kim jong-un said to the in-flight now heading to china. this is marking perhaps the third trip that we have seen with kim jong-un heading to meet with beijing officials. we will get the latest from stephen engle.

you have been watching the app, the flight radar. stephen: i am in aviation geek. app, it is notis a scheduled flight. we are getting reports earlier that kim jong-un was going to beijing today, likely to do brief xi jinping on the summit with donald trump. we are tracking this flight that is heading straight for beijing from pyongyang. un.s not air force it is all speculation. it is not sure that he is on this point, but it would make sense that he would be heading for a third visit with xi jinping before the summit to get their ducks in a row, and now to deep race. yvonne: what does china want to

get out of these talks? there were reports earlier that after the singapore summit, perhaps president trump does it really need china to get north korea into any kind of negotiating table anymore. they have a direct link with them. is that the big concern with them? n: i think beijing got a lot out of the summit, even though they were not part of it. they were definitely the hands behind the scene on the north korean side. with a one it a de-escalation of tensions, and they got that. they also got the news that donald trump has suspended the upcoming wargames with south korea. that was due to be held in august. if those two big wargames that are held in the spring, that is still a ways off. those are faulty and also maxed provocativeare very according to the north koreans and president trump has used that term. i think that was one of the biggest takeaways that press

conference. usually we hear from the north koreans us saying these were games between the south korea's and the americans are provocative. they have suspended the guardian military drills this august. no word yet on whether those max thunder or follow eagle will be suspended. know, in the wake of the singapore summit, there were a lot of questions in the u.s. about the lack of detail in any concessions from north korea or any plans to denuclearize, even if the intent is there. do we have any more from that? could we get any information, any leaks out of this meeting in china? stephen: again, what is interesting about this, at least on the surface of things, donald is telling us that we need to trust him. the his approach is different from last regimes, even i've been covering this for 28 years or so in asia, and north korea

has made many promises in the past and not necessarily kept those promises. again, donald trump is saying we need to take his word that the north koreans have a short him that they are on a path to complete, not necessarily verifiable yet or irreversible, but complete denuclearization. the devil is going to be in the details, and we don't have the details. julie: of course, we are getting and upping of the rhetoric over trade at the same time that kim jong-un is perhaps on his way to beijing. how does that fit into this whole scenario? stephen: i don't know how xi jinping and the chinese are going to necessarily fit their recommendations to kim jong-un into what they are doing on the trade front, because the trade front there are in a fight with the u.s. people don't want to use the word trade war, but this is a tit-for-tat trade war. it is growing into one. donald trump has tried to

connect the north korean pressure on beijing, linking the trade details. the right now, i think they are completely separate issues. yvonne: perhaps not to china's advantage in this particular case. thank you. covering this for quite some time now. up next, it's overwhelm offers for japan's overall startup. to see if back there there are more japanese unicorns on the way. from new york, this is bloomberg. ♪

yvonne: this is "daybreak asia." coming up tomorrow at the ecb forum in centra, president mario draghi speaks alongside his counterparts from the fed,

rba, it is moderated by stephanie flanders. listen on bloomberg radio, or watch on life go. yvonne: let's do a check of the latest on business flash headlines. the indian government is planning to offload part of its stake in coal india. the relevant department is said to be finalizing the offer. it is a fresh attempt to speed up sales after disaster to attempt to find a buyer for air india. the prime minister plans to raise $12 billion in the current year. the ceo of india's ici bank is going on leave. the head of the bank's insurance unit will step into the top post. the government is separately conducting an inquiry into allegations of nepotism against kochhar. yvonne: the axis management unit may cut 110 divisions as part of

its restructuring. are planning on cutting 10% of its workforce in the u k and france. julie: ercari is said to rise above its ipo price today. the company is the first japanese startup to be valued at $1 billion. the big question is whether it can execute an ambitious overseas expansion plan. that is something no the japanese tech startup has yet managed to do. let's cross over to tokyo were david english is standing by. david: when he talked about how there is a lot of pent-up demand 1. this idea, 3 to success elsewhere, that is another thing. with james who is

the head of 500 startups in japan. vicki for coming on the program. valuation of the company, it is massively successful in japan. when you look at growth, it is probably out there. about $3 billion. james: i'm a public investor, one thing i will say is that mercari is its own leader in japan. we have over 50% of the flea market in japan. they will do well in that nick and probably be profitable just with that. they are expanding into the u.s. the other point i think is interesting is the ameripay. it is simpler to alibaba's alipay. payment.extending into

if we look at some of the other growth levels, that is interesting. the parts that are also not really measurable is the fact that they have this gravitational pull for some of the best talent in japan. some of the smartest people i know here work at mercari. that is a really strong factor you can't read in any of the material. david: do think they are well entrenched in japan? james: there are some competitors coming out. we will see how they do with their rebranding. has a prettyri unassailable position in japan. david: you are still losing a lot of money in the u.s. should we be prepared for this company to burn through crash and that see years. james: yes. if you're getting on the bandwagon, you have to be prepared for the long haul. they have made a priority to expand into the u.s. obviously, there are a lot of challenges.

many other startups that are very similar, have raised a lot of money from top-tier investors. it will be a long, hard battle. tooke flipside, amazon maybe 10 years to really start to pick up in japan. investors in mercari need to think similarly that investing in the u.s. will take time. david: why has it taken so long for a company or a startup to get this big? when i think about japan, a lot of people think of it as a very tech savvy place. not so much a startup place. those two things don't match. of a: the definition unicorn is a private company valued at over $1 billion. there are many examples of companies that have gone public multiple hundreds of billions and then grew to become billion dollar companies in the public market. is thatpens in japan because there is that because there's not as much capital available in the private market, companies will lift a lot sooner. with that means is they will go

public, and it won't really see that unicorn valuation. in some cases, what happens is because they go public, it actually stunts growth. the reason it stunts growth is because when you are a public company, a shareholder in short-term. there is and is that lot bigger private round in the japanese market. we are actually expecting to see a lot more unicorns humming out of japan over the next five years or so. david: is it because of this is the poster boy? james: mercari is definitely a symbol of success in japan. what they did was it showed entrepreneurs that within a very short amount of time, you can create a unicorn. and you don't have to be in silicon valley to do it. you to be right here in tokyo. and build a unicorn i'm hoping that this will set an example for other entrepreneurs rate here in japan. david: in terms of the overall environment, give us a few other names.

james: the don't want to give any specific names, but there are, japan is a big market for cryptocurrency. there are some potential players that could go public in cryptocurrency. david: if i am a global pe from, why would i allocate some in japan?esources china is one allocation, and japan is a completely different allocation. i think the story for japan is that even though at a macro level, it might not seem as have a relative to china, on a micro level, we are seeing many more startups emerging. you need to remember that china

is still the third-largest economy in the world. if you can build a substantial business in japan, those are going to deliver pretty respectful returns. david: the biggest challenger for the company moving forward? james: i think it's biggest challenge will be whether public investors will have the patience for the team to focus on the u.s. market. that is a weighted challenge. to keep amazon was able shareholders happy, even no it wasn't exactly extremely profitable in the beginning. can managemercari expectations in the same way, that seems very promising. david: or like tesla. thank you so much. mercari, by the way, actually business,ayed, do markets, in other words him on. yvonne: thank you. speaking of ipo's, discovered line crossing from chinese regulators.

regulators saying the company plans to list in hong kong first, then at least chinese depositary receipts in china. there was a lot of speculation from our bloomberg sources saying that they were planning to raise $10 billion in the ipo with the shares split between hong kong and shanghai.the seems to be the , case but they will be listing in hong kong first. half of that stock has been confirmed will be sold to mammon investors. solidifying that this ipo is really the biggest vote of confidence yet that perhaps china's push to bring all these tech companies that, seems to be in fruition right now. for breaking news, we have teamed up with tictoc on twitter to launch tictoc by bloomberg. it is the first mobile news ified by twitter.

this is bloomberg. ♪

yvonne: a good day for europe. winds to england, belgium and sweden. for the latest results of for bloomberg subscribers, be sure to go to wcup go.

i know you missed out on this bracket, that might has pretty much been shattered given some of these upsets so far already. it was just as well that i did not get my picks in i guess. at least five resorts in the tropical island of hig ainan, company's are betting that the island known as -- theseawaii entertainment bars are sort of a creative way to avoid some of the regulations, perhaps on gambling. dave: yes. what they have been doing is anding up baccarat tables, allowing the guests to gamble at them. the only difference is if they win, they don't get a cash

prize. they get chips or coupons that can be spent at bars or restaurants, nightclubs around the island. it is a helpful tool for them to promote tourism, rather than money laundering. that is the way they are presenting it. they had those a set up for years until 2014, when the local government said wait a minute, this is actually a violation of gambling laws and shut them down. the casinos took that to court in beijing, the core actually settled in their favor. it looks like they are going to be opening this up again and creating this non-gambling gambling arrangement. is there any chance the actual rules when it comes to gaming in china will be altered? dave: there was a lot of talk about back in april when they had the forum there, you had a lot of people coming in and talking about making big to buildts in hainan

up the infrastructure in the hope they would legalize gambling and give china a second alternative to macau, which is become the world's largest gambling hub.the no demand for gambling is there , they know that when you do allow gambling, you can bring in a lot of money, a lot of tourism. however, we haven't really heard anything concrete on the government plan to legalize gambling. it looks a lot more like they are going to take incremental steps, like allowing these baccarat tables to be established as a way to increase tourism in hainan which has failed to live up to its potential. you have a beautiful tropical island the size of switzerland right of china. it seems like it would have massive appeal for tourists, but a lot of the building hasn't yielded that forget. they still have a ways to go in terms of making the revenue pour out of their in the way you see in macau.they have a lot of development to do, and this is one of the ways they are betting on doing it. really has a up to the

height of being china's hawaii, as they call it. dave: it is interesting. there was a push several years ago to cut down on so-called extravagant spending. that had a huge reaction in macau. obviously, that was interpreted as including gambling and spending on luxury hotels. that led to a decline in tourism to macau. they took a big hit there, but they have since recovered from that. the interpretation has been but that policy is nothing and the government is quite happy to see people going out and spending money on things like luxury hotels. this does seem to be consistent with the kind of noise is the government has been making about developing the area, and the kind of investment. when you look at the type of tycoons the are putting money into hainan, these are people

who have their ear to the ground in beijing. they do know what the national government is up to. its a very strong sign that this is going to be happening, and there is going to be some increment so movement toward legalizing some types of gambling on the island. yvonne: we will see what type of appeal these cashless casinos have. for a look at what his comping up in the next few hours. : $200 billion worth of tariffs being slapped on. we have got markets selling off on these trade concerns. that is it from "daybreak asia." what's a gig of data?

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trumpd: president widening the tariff war, no threatening $200 billion on chinese goods and down to double that of beijing retaliates. and the escalation, the yen up, the aussie dollar down, chinese stocks returned, their reaction next. and the japanese unicorn making its debut, a 36% jump in the gray market. in hong kong, i'm rishaad salamat. >> coming up, a cautionary text tale from china, how the company's biggest screen maker lost almost a third of