yvonne: 7:00 a.m. in hong kong. we are live from bloomberg's asian headquarters. welcome to "daybreak: asia." a mixed start for asian start ahead of a global rally on wall street. broke long losing arabia winsudi status. >> opec moves closer to a new output deal with iran moving away from high production and putting their heads together.

talk on trade and inflation as they gather in in portugal. haidi: not much has changed in terms of fundamentals or messaging from the white house, but it seems investors are more thankful when it comes to this trade battle. the u.s. close, the snapping of the three-day losing session for the s&p. this was largely driven by tech, yvonne. yvonne: we really saw the nasdaq reach that record, up 7/10 of 1%. netflix also reaching record highs. this is a good set up for asia, better than what we saw much of this week already. looking at equities, perhaps a pretty lackluster start so to

speak in asia, given what we have seen in new zealand. new zealand first quarter gdp numbers were as expected, but the slowest since 2014, 2% year on year growth from new zealand. sydney futures points to some moderate gains. pretty unchanged, the nikkei. seoul futures, south korea continues to be in the front of this em selloff. stocks poised to lose 4/10th of 1%. u.s.s ticking higher, the 10 year at 294. 0.40.ollar-yen 11 the pound raised slightly after theresa may won the brexit vote. continuing to watch the offshore yen at 6.48.

in the meantime, let's get you caught up with first word news. >> economist say u.s. threats to impose tariffs on another 200 billion dollars of chinese imports could cut half a percentage point from the nation's economic growth. the first round of tariffs on $50 billion of chinese goods by --lower trade gdp escalated to an all-out trade war, there would the implications on market activity, on investment, on activity vote in china and u.s. clients. people are interested in seeing how this unfolds. everyone is hopeful there will be a constructive solution. >> the eu in the first phase of retaliation against the u.s. in tariff imports.

a duty of more than $3 billion of u.s. products, including kentucky bourbon and levi jeans. the key measures will hit republican constituencies ahead of midterms. saudi arabia and stocks have climbed in late trading after a misty eyed gave -- msdi gave the two countries emerging-market status. joining nations including india, china, turkey come and brazil. now in the rear position of getting an imf credit line and index upgrade in the same week. u.k. prime minister theresa may has fended off a rebellion from within her own conservative party to win a crucial brexit vote. the fight was over whether may should have the power to take the u.k. out of the eu without a deal. the rebels wanted a meaningful

vote on how to move forward. is diplomat says brussels fearful of what he calls the brexit soap opera. xiaomi has set tentative terms for an ipo in hong kong that could raise up to $6.1 billion. sharedrg is told it is at price shares of $17 to $22 apiece. china mobile and qualcomm are said to be in talks to become cornerstone investors. 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. yvonne: let's take a closer look at the u.s. market close. tech saved the day for stocks, pushing trade concerns to the back burner. facebook rally above the $200 mark.

a big boost. su keenan is here with more. haidi: su: we talked about how the ceo of goldman sachs, all this back-and-forth between the u.s. and china is a negotiating tactic. let's go to the snapshot. we have the nasdaq hitting an all-time high. the market also less exposed to the international markets --that also at a new high. the dollar holding steady, and 10 year yields edging higher. alliances -- as g.e. i s kicked out, huge surge of volume, five times more than average. facebook back to above 100. have not seen that in a while. [laughter] hose privacy concerns may have started to fade.

this is a microcap, what we call a penny stock, don't normally pay attention to it -- but look at the size of the move. self-definition for its kind of therapy. look at the big move there. also a china-based infotech company jumping enormously, coming out with a positive revenue growth indication. that thing is up and away. g is where you can find these charts that tell you interesting stories. this is about the gyrations you see the opening bell. what has happened is you normally don't see gyrations of 4% in the first opening. there has only been 32 incidents of it in the last 35 years, half of that this year alone. and a lot happened in this past

week with trump and china throwing threats and tariffs at each other. haidi: we are also watching this media drama continue to play out. fox, disney, comcast. disney could be on government fox'sal to get entertainment assets. this could be bad news for comcast. su: do they raise their bid? does it harm their credit rating? stocks were moving higher on this news that came out earlier today. according to a person close in the matter, walt disney is close to winning antitrust approval for its deal of 21st century fox's assets. the justice department is said deal.sibly approve the within two weeks a $65 billion bid for fox.

disney has raised the bid, and has been welcomed into the arms now what does comcast do? fox has soared in the most recent round of two bid companies vying for it. if you look at comcast, they have to respond. do they escalate the bidding w ar? would it saddle them with more debt? net sellers may be concerned they have taken on too much debt. if they take on more with a bigger bid, does it threaten their credit rating? one analyst told me, if comcast has gone aggressively after fox, does it raise the question thta t the -- question that they can no longer survive as a cable company? disney has been moving higher in this latest round of

developments. ondi: su keenan for us trading action in new york. let's get more on the markets. our guest joins us now in new york. what kind of change overnight, we saw investors in a better mood when it comes to these trade concerns. >> on the day-to-day, i don't want to say changing sentiment, but we are seeing a lack of follow-through from the previous day. rather than reacting to bearish for bullish news -- or bullish news on any given day ,it shows the markets are not fully convinced of either market regime. i believe the market design transition. we have plenty of news and negative headlines that would argue for a correction lower. clearly every day, to see that

correction happen, it is not there. there is still some transition in the marketplace, and it is is clear the risk off trades ready just yet. haidi: it is hard to see momentum in either direction. does the smart investor that wants to be cautious but opportunistic do? alessio: it is an interesting question, because it is something we have been struggling with ourselves. we have moved our portfolios towards a more defensive stance for the last few months. in other words, what we are doing is expressing a somewhat conservative bet, or a bearish bet, for lack of a better word, through different venues. one clear theme that is taking place is this divergence in

growth from the last of the world and the -- rest of the world and the u.s. that story we had in q1 of global synchronized growth is not there. global markets are slowing while the u.s. is accelerating. it --s. is when winning small and mid caps rather than large caps. we have been dynamic in hedging exposures in our local em debt locations. more broadly, another theme we have expressed -- we have done somewhat of a u-turn from underweight to overweight today. in small increments, but we believe at this stage, while the fed will continue to raise interest rates, enough seems to

be priced in bond markets that being able to extract profits f rom this short duration becomes an increasingly difficult proposition. we believe the overweight duration built into the performer you -- into the portfolio that way looks attractive. haidi: we mentioned the policy divergence within these global economies. i want to get your views on this long anticipated curve inversion. we are back to zero for the first time since the global financial crisis. in the turquoise, you are seeing the u.s. dollar in the one year space has gone from flat to inversion. if you look at things like the sevens and 10's, it is a matter of when, and not if. if you get inversion, does it

necessarily indicate we are about to get a recession? alessio: that is one of those eternal debates. the focus we have had is mostly on longer-term structures. if we look at the treasury curve, we prefer looking at three-month rather than ten-month interest rate -- 10 y ear interest rates. we still have a positive slope of about 100 basis points. the inversion is worrisome when that will take place. just like central -- despite central bank buying in the pricing of the yield curve, i believe in the price that the debt give us. it tells us from a bank lending, standpoint, the incentive is to borrow on the long end. when credit gets restrained and

sses will have ahtened, difficulty enrolling over their debt. that is what typically triggers a recession. those remain some of the best indicators for turning point in the economy. yvonne: do you think jay powell sees it that way? he is something a lot more bullish -- sounding a lot more bullish than other fed chairs in years past. it doesn't seem like the fed is willing to stop it from being inverted. alessio: i think they will continue. it is how we like to say in economics, an endogenous problem. ae yield curve will result as result of the yield curve --

result of the fed continuing on this path. the fed today is reacting to the fact that credit is still ample, monetary conditions are still accommodative, the yield curve still has an upward slope, and we still see credit creation. leverage is building up in the system, and typically leverage builds up to excessive levels. that tightening process is part of the containment of that excessive credit creation. i would say the fed is in the job of managing price stability. we can never really kill the business cycle. recessions are part of the economic cycle. they need to exist. they provide a function over the long-term in terms of cleaning out excesses. i don't think the fed needs to assist hillary -- needs to

necessarily worry about a recession in the years to come. yvonne: next we talk about the fed and central bankers. live: still ahead, we are at the apex japan summit in tokyo with the u.k.'s largest active investment firm joining us. this is bloomberg. ♪

>> with unemployment loan and expected - -low and expected to decline further, the case for continued gradual increase in the federal funds rate is strong. >> we drove this confidence by the advertiser labor market -- ever-tighter labor market, by the continuing ample monetary accommodation, also by

the disappearance of what we ca lled tailed rate of deflation. >> japan's economy has improved significantly over the past five years since the introduction of quantitative and qualitative monetary easing in 2013. longer seeing no a sustained decline in prices, however wages and voices have havenued -- and price continued to show relatively weak development. yvonne: that was some of the world's most powerful central bankers speaking on a panel on policy. let's bring in our portfolio manager alessio de longis. what we got was a coordinated effort on tightening policy.

it seems like the backdrop has changed dramatically since then. alessio: much more of a mainstream meeting. sense, we are today in that tightening environment they suggested. what i find interesting is powell did not allude to any concern that we are seeing in emerging markets, the tightening of financial conditions caused by rising interest rates in the u.s. yvonne: i know he has mentioned that before in previous speeches. the federal reserve, aren't they supposed to be overlooking conditions like em? it is a federal mandate. alessio: for us market participants, it was something we were putting close attention on.

if the fed powers through with their interest rate projections and delivers these situations for some of these external markets, we will continue to be challenged, almost their own growth rebounds -- unless their own growth rebounds. clearly and rightly so, the fed is not worried about it. yvonne: at what point does the fed start to worry and at least pause their rate hike cycle? how sustainable is that growth when tax cuts and wages could wane later in the year? do you think we have reached peak growth in the u.s.? alessio: not yet. we have seen evidence of peak growth outside the u.s. inside the u.s., we have seen

some momentum. it is difficult in the current globalized world to really have sustained growth divergence. either one of these two things will happen -- the u.s. will lift the rest of the world, or the rest of the world will drag the u.s. lower. i think you are highlighting the -- whatssage, which is will change the path of the fed at this stage? i think only a surprising decrease in growth momentum. some u.s. asset prices are sort just --he highs, not credit spreads are in a minimum widening tone. bedi: should the fed

reacting to the real macroeconomic implications of tariffs, which would be short-term inflationary, and a rule drag on growth? how do they balance policymaking when there is a concern about that? alessio: it is interesting, because powell as well as draghi have indicated they have not factored in the current level of tariffs that have been implemented. only draghi said the current tariffs implement it are marginal in terms of their impact. they have both hinted the new round of announced tariffs, if implemented, would have higher impacts on growth projections. powell eluded to this survey that businesses are beginning to postpone investment decisions. i think that is what the next

important thing to watch will be. haidi: president trump saying today he thinks u.s. gdp will grow higher than 4%. clearly he is not expressing any concern there. [laughter] great to have your views, ale ssio de longis, portfolio manager in new york. you can get the info you need to start your trading day for looser -- -- trading day for bloomberg subscribers in new york. markets on the trading and assets you care about. this is bloomberg. ♪

yvonne: we are counting down to the opens in japan and korea. going over to japan, looking like a modest gain at the start, pretty lackluster after that. ikkei.of 2.224% on the n

dollar yen seeing stabilization. as the u.k. prime minister fends off her latest challenge to her brexit strategy, we speak to our guest economist. ♪

yvonne: breaking lines coming through with xiaomi and its ipo settings terms, and taking orders for that numbers. this according to some reports we have received in hong kong. we have learned some details perhaps they are delaying that cdr listing. we will see if that will affect their hong kong listing. kong, minutesong away from asia's major market open. haidi: in sydney, 7:30 p.m. in new york wednesday night.

better move them earlier in the week. check in a recovery. -- tech in a recovery. this is how we are shaping up in new york in the early evening, a beautiful day over ther . i'm haidu lun in sydney. >> in new york, crude places climbed the most in more than a week, as opec ministers work behind closed doors to heal a rift overproduction the next. it was production following a little -- u.s. production following below estimates. been encouraged we are converging towards a good positive decision.

not only the stakeholders within the oil industry, but our consumers. >> president trump has reversed course on his policy separating immigrant children from parents across the u.s. border illegally. signed in executive orderh ordering homeland security to house families together on military bases. trump has been under intense criticism from the public, business leaders, and lawmakers under this separation, which saw children placed under federal custody. president trump: the families being separated is a problem that has gone on for many years, many administrations, and we are working hard on immigration. it has been left out in the cold. people haven't dealt with it, and we are dealing with it. >> republican lawmakers say they have made progress on zte in meetings with president trump,

but there has still been no deal. senators want stronger penalties for the telecom company, which they view as a security threat. president trump once to remove -- wants to a remove -- the new zealand prime minister entered a hospital for the birth of her first child. the 37-year-old will become the second elected world leader to give birth while in office, after the late pakistan prime minister. she plans to take six weeks maternity leave. no word yet on the baby's gend er. global news 24 hours a day on air and on tictoc on twitter, powered by 2700 journalists and analysts in 120 countries. is bloomberg. as we count down to the open of the major markets in asia, i am joined by bloomberg's global market editor.

>> australia being this haven from some of the turmoil we are seeing in global equities. australia has been under a lot of rusher. the banks and financial sector has been under a lot of pressure from what has happened with the royal commission. earnings are slightly more cloudy given the housing market possibly slowing. banks have been enjoying a bit of a rally. there are many in the market that are willing to pick up these markets on very discounted valuations, both to the sector's history itself but to other markets in the world. slightly restrictive earnings growth in the next few years. australia is the in one of the havens. one of the other havens in global equities in these last few weeks of turmoil is the u.s. . tech continuing to get a bid.

we have seen facebook, the nasdaq powering in. eu and. is outperforming emerging markets. it is interesting to see the global markets wanting to allocate money to the u.s. given everything happening on the geopolitical front. certainly people are using the u.s. as a haven in which to allocate more to equities. yvonne: you have been writing more about emerging markets, too, adam. we are close to a bear market when it comes to some of these em assets. as we see a shave off in valuations, people coming into buy on this dips? adam: the thing about emerging markets, how do you play that valuation story? have valuations got to the point

now where people want to take the risk to come back? there is a lot going on on the political front. turkey with elections going on, mexico before long -- there is a lot of risk on the geopolitical side of things. trading at these discounted fevels, given a slide o emerging-market stocks, it is forcing people to dust off those models of em allocations, and choose tactical overweights within their em portfolios, which ar a global basis only a small portion of that. one market that is particularly interesting at the moment is indian. -- is india. we have heard from htc securities looking into the cap.et, wanting to raise political risk growing into elections next year in india,

basically protect your profits this year at this cycle and buy the dip if a selloff comes. politics coming back into the fore of emerging markets, turkey, india, and the likes of mexico. haidi: don't forget to check out our gtv library for some of the charts you just saw. it is on gtv on your terminal. goldman sachs president says worsening trade tensions between the u.s. and china could hit investments. he expressed hope both countries would find a constructive solution to the dispute, sated -- saying is in their interest to do so. >> hard to predict at this point. to the degree it escalated more significantly, it would be bad for both china and the united states. my hope would be the rhetoric

gets put aside and a constructive solution is worked through. we have to see how it all plays out. >> what are you getting from your chinese client? i am sure this is at the top of their concerns. >> everyone is talking about it. the implication that this could escalate into an all out trade war, implications on investment, both for clients here in china and the u.s. everyone is hopeful because this relationship is so important that there will be a constructive solution. >> we heard just yesterday, that this is more of a negotiating tactic perhaps from the white house, and either signs will not be conducting -- sides will not be conducting mutual suicides. >> is in the interest of both parties to find a constructive solution. oure conduct business in

long-term interests, we can get something done. >> how concerned are you that this will spill over into public services? have a 33% stake -- i assume you would like to get up years, perhaps in a few up to 100%. is there any potential for this happen? -- this happening? >> we are excited about liberalizing markets. we are moving forward -- we will continue to invest in our business. we see the opportunities for investment in china to be significant. we announced a partner hire in our banking business in china. we continue to grow our business. we have been here for a while. we will be here for a long time. if you put things in a broader

perspective, we are confident this will move forward appropriately. haidi: that was the goldman sachs president and ceo david solomon speaking to our own stephen engle. up next, saudi arabia and argentina winning msdi emerging markets inclusion. more on investment opportunity, if any. this is bloomberg. ♪

haidi: this is "daybreak: asia." yvonne: the asia-pacific investors cooperation summit kicks off in tokyo today, bringing together investment directors from international tension and trust funds. let's go over to the event, where we are standing by with the joint ceo of the u.k.'s most active investment managaer.

> 24 coming on the program -- thank you for coming on the program. let's start with trade tensions. it is unproductive for market sentiment, but it is more than that? are we talking transition into markets? >> it is not surprising that we are going through a bit of a pause. the truth of the matter is he's kind of trade tensions every now and again create an air pocket in the market. it is only if we get a substantial follow-through, and those tensions turned into something that comes a strongly -- that becomes a strongly protectionist policy. have seen this happen before. very often what happens is

markets take it into account, they have a pause, and further down the track they recover. >> we heard from daimler, they have cut their forecast because of these trade tensions. what they are essentially saying is they may not be able to sell their luxury cars in china. they have to revisit those projections now. do you think that is a one-off? it is starting to creep in now. keith: earlier we were looking at an extended period of synchronous growth. what we are seeing now is differentiation in growth in different bits of the world. that doesn't mean you're going to get a slowdown. i think we are in a strange period where the main tensions in the world are global. byyou have trade exacerbated liquidity. in the crisis, there is an awful

lot of resilience in underlying economies. i think the critical thing is, i don't see yet these trade tensions triggering a recession. i think you will get a pause, a slowing of economic activity, not something that is going to do massive damage yet to corporate for the ability, which is pretty robust -- to corporate profitability, which is pretty robust around the world. i think you will see more volatility during the rest of the year. that will create value for the long run. forward, i can see my way to quite strong markets in 2019, once we get through this period of turbulence. >> it is if you are telling me equities may have peaked in january. keith: it is not unusual.

peak earlier in the year, the market goes through a pause, this discounts some of the turbulence before they take a breath and move on. on the assumption that the world does sort itself out, i think we are looking at a better 2019 th an 2018. >> an end to qe announced in about 100 days. were you surprised? short-term economic data in europe was affected by whether -- they were convinced activity will resume. if that is the case, it is absolutely right to start the

technical withdrawal of qe, but they are given a strong signal they are keeping interest rates flat for a period. we are moving from monetary policy that is super accommodative to a monetary policy providing some accommodations to economic growth. >> when i look at fixed income in europe, i look at the bond on the 10 year --that does not tell me that the central bank is about to pull liquidity out of the system. does it seem more expensive for you know because of what they said, or do we meander? keith: they are taking their lead from growth and the inflation front. europe, and to some extent the u.k. could learn lessons from japan here. it takes a long time to really generate any inflation expectations. we are working with the old

rules of thumb that central banks have worked with. my view is that inflation around the world will remain lower a lot longer than people think, and in turn interest rates will remain lower. does not mean it is going to rise, but he thinks a terminal right the long end of the cycle will be lower than people expect. >> that affects what you do. what do you tell your clients in terms of one, five-year returns? i would imagine the nominal rate you pitch to clients is not very high. keith: we are operating in, and will do for some time, a compressed return environment. i think when we are talking to saying, thinke about those long-term risk premiums. where you can capture a risk

premium, set your portfolio and your risk budget appropriately. strategically, just like short run turbulence, we think value will be created. we still like global equities. we still like elements of the private market, where we can take a liquidity premium. the place we are just beginning to spot the end of the cycle is in real estate. you have a lot of money move into real estate, and yields have been compressed. i think it is pretty flow dependent. i think we are moving into territory -- what i would be nervous of the moment is real estate. standard investment ceo. sending it back to you guys in sydney and hong kong.

much, inank you very tokyo for the apic forum. you can catch up on the day's conversation on tv as well as dive into the securities or functions we talk about. send us instant messages during our shows. this is for bloomberg subscribers only. do check it out at tv . ♪

haidi: this is "daybreak: asia." yvonne: big news in emerging markets. india, saudi arabia and argentina have won emerging status in the msci, bringing fresh investments to the two country.

gary has been investing in emerging markets for over 20 years. i think it is timely to have you on the show today given the msci decision. do you think this softens the blow, given that we have seen a big boost of confidence from the international community? gary: it's an interesting milestone from both countries. it is technical. breaking into what it means -- it is several billions of extra liquidity, moving from frontier to emerging. it is also limited to liquid securities. yvonne: i want to start off with a chart for our viewers to see. we have started with an investment of flows into saudi arabia from foreign markets. how crucial was it to have this msci inclusion for the saudi aramco provider? gary: interesting point, because

saudi is not known as a robust investment market. this is in anticipation of the aramco ipo. yvonne: do you think we could see dual listings? gary: yes. it is too early to say. we think they will work hard, because it is such an enormous offering. yvonne: talk about the potential liquidity squeeze we could get out of a saudi aramco. there are not that many big names known for foreign investors. could that be a big concern for someone looking to dabble into this market? gary: this is a case of the concept ahead of the reality. itskingdom is not known for choices. with reforms in leadership, there will be more overtime, but there aren't many options today.

captureoes argentina your imagination more than saudi arabia's inclusion? gary: yes. we have a history in argentina. it is historically difficult to make money. for argentina, this will be interest -- will be a boost. an absence of sentiment, a falloff in the local currency -- these are all bad things.don't forget argentina was in the penalty box for markets. it is an inefficient market for capital. this will be a boost, but they're only -- they are only a limited number of options in argentina. haidi: this throwing out the baby with the bathwater scenario we are seeing with equities, bond markets, this exodus --

tracking emerging-market equities, we saw on monday $1.4 billion outflows, the most since the u.s. election. that follows $2.2 billion flowing out last week. you look at argentina, looking acropectrum of em's, is the risk of pricing and wading in too high? gary: now there is a value play in multiple markets that we are ing and excited about. there is more opportunity on the private side. haidi: what are you opportunistic about particularly, when it comes to asia? gary: we have talked about urbanization in china. housing opportunity -- we talk about aging opportunity in china, that is senior living,

which seems to be socialized and getting traction. logistic property continues. sectors thatging retail,arly like, utility related. yvonne: real quickly, we are just about 1% or 2% away from a bear market, dogged by these trade tensions. could we see a spark of reversal in the market now? gary: good question. it is hard to see if this trade tension, at least on the u.s. side, is very much a transnational, not deep-seated policy driven. we will see where it goes from here. it feels like the consumer, particularly in the u.s., is most going to be hit.

yvonne: that is it for us this hour at "daybreak: asia." we have the open from korea, japan and australia coming up next. this is bloomberg. ♪

yvonne: 8:00 in hong kong, we are live at asian headquarters. i am yvonne man. the top stories, asian socks set for a -- stocks set for a muted open. markets battered by trade tensions. as trade deals coming soon economists for site -- see of for sizable threat. haidi: i'm haidi lun in sydney. it is past 10:00 a.m. xiaomi is taking orders as hong kong will raise $6 billion. qualcomm could be part of their investors. and hikes for a second straight

month in the philippines. ♪ yvonne: i think patty is the right word today -- patchy is the right word today. we are pretty lackluster on what to look for in terms of direction when it comes to trade. at least we have this tech rally overnight and the msci inclusion of saudi arabia and argentina stocks, a boost for em throughout the session. haidi: lukewarm, getting a vote of confidence from the news of the saudi aramco ipo earlier than expected. the next big event, did we get a consensus agreement at the opec meeting in vienna? very much focusing on oil and energy markets. yvonne: let's get you caught up with the open.

haslinda: it is a mixed -- sophie: it is a mixed start. the nikkei is down by .2%. what the bojok at governor had to say regarding the calls to boost wages 3% a year. the kospi is adding .1%. the rise we saw wednesday, investors digesting the latest export numbers. we saw the last 20 numbers of june, 4.8% fall in june. that is the chart. i want to look at stocks in wellington as well, adding some percentages. data,as first quarter gdp confidence takes a hit. in australia we have stocks up .2%. a decade00 trading at high thanks to the rise in banking stocks which make up a

third of the benchmark by the asx 200 does remain nine -- but the asx 200 does remain a bit low, still trading around the five-year average. there is more juice to be had, citigroup putting and 6500 by year's end. let's check in on one potential stock, ap and outdoor in sydney. this has advised shareholders to take no action on the bid, and that is starting to look at the unsolicited offer for $1.1 billion australian for the specialist to keep an eye on there. haidi: thank you so much for that. the early market movers, pretty good news. positive this time, saudi arabia and argentina have officially won promotion to be status at the msci. this could bring fresh investment to those countries.

let's get analysis. the bloomberg mliv strategist. you know, our last guest was really pretty alert when it comes to saudi arabia. what are the actual implications of these additions? complete neither is a surprise, so you might not get a huge move, particularly with the saudi. argentina have got a double miami because the imf has agreed to a $50 billion credit line. argentina has a lot more to gain from this. if you look at the situation with their currency, the peso in argentina has had a terrible year. it lost so much value. now the confidence boost come from going into the index plus the imf as well, it has more of a chance of having an impact in argentina then it would in saudi arabia.

the fact that argentina has been such a beaten up place and a lot of people would have been ignoring it completely as an investment destination, so more likely to see a decent rebound in the currency, big upside for the stock market. saudi arabia maybe was priced in already, so not much of a move in that particular market. em, youhen it comes to look at rising dollar, rising rates come all of this really producing the question we are seeing across that young space. you have to be brave to get in and try to price situation. reporter: definitely, particularly as u.s. rates are not going to stop raising for a while yet. that will keep pressure on the currencies. we are seeing pretty significant outflows from en this year. we reported that on bloomberg, so there is no immediate turning point in that direction. it will have to get to a stage where currencies in particular

will need to be seen as being pretty cheap across the board and that investors will start flooding back in. it is usually a play where they want to see the currency at a soft level in conjunction with the stock market which is underperforming. when you get those criteria together, you get the serious funds start coming back in. for the time being emerging markets might have a short-term rally, but the outlook is not great as long as u.s. interest rates are rising. yvonne: we continue to see the u.s. equity market still a bright spot compared to the rest of the world. when it comes to tech stocks, how much further momentum is there behind this rally we see overnight? unbeatable.ms to be there seems to be a perception that the major tech companies are probably the most protected from any potential trade war going on. they somehow can avoid some of

the tension between the major countries, so they are an island from all this. they see that reflected in the fact those stocks are outperforming the rest of the index. what it does say, if you look at the broader market, it is not a great sign. when just a few stocks are driving the market, that is not healthy for the long-term strength of the market. yvonne: we will leave it there. our bloomberg mliv strategist -- go to mlivm go to get a rundown in one click. there is commentary and analysis from expert editors. you can find out what is affecting your investment this morning. first word news now, jenna joining us from new york. trumper: economists say proposes $200 billion on chinese imports which could cut half a

percentage point from the nation's growth. ubs said the first round of couldists -- taiffs alone lower gdp growth by .1%. charlie's -- today's policymakers will intervene to significantly reduce volatility in markets. >> the purpose of this is to get to an end game that is much closer to free trade that anything the world has seen before but the tragic fact is historically we are the least protectionist country in the world. we have the deficits to show for it. >> has this escalated to a trade war? the implications on investment, in china and the u.s. clients, so people are watching it. people are interested in seeing how this unfolds and everyone is hopeful because this is so important that there will be a constructive solution. reporter: the au has triggered the first -- e.u. has triggered

the first retaliation against the u.s. $3 billion of american products. that includes kentucky bourbon, harley davidson's and levi's jeans. his countermeasures will hit republican constituencies -- these drivers will hit -- lawmakers have made progress on zte, but there is still no deal. senators want stronger penalties for the telecom company which they view as a security threat. the president wants them to remove part of a defense bill that would reimpose bans on zte doing business with u.s. suppliers. president trump has reversed course on policy separating immigrant children from parents who crossed the border illegally. he signed an executive order directing homeland security to onain families together military bases. he has been under intense

criticism from congress and is this leaders over the separations which saw 2000 children place in federal custody. mr. trump: didn't like this site or feeling of families being separated. it was a problem that has gone on for many years. many administrations, and we are working very hard on immigration . left out in the cold, people have not dealt with it. reporter: global news 24 hours a day on air and on tictoc at twitter powered by more than 2700 journalists and analysts in more than 120 countries. jenna. this is bloomberg. haidi: thank you. xiaomi is gearing up for the public largest initial offering in two years. they set terms for their impending hong kong ipo. stephen engle joins us now for more. what details to be have? updated we got an

perspective, updated terms on this. the founder and chairman, not going to be as rich after this ipo as initially expected and all of those flights, that looked to this ipo as being gangbusters. they are scaling it back. was, or the beginning of this week, they decided to temporarily scrapped the china depository receipt listing in shanghai because of various reasons. i will get to that. the valuation now for the ipo is $6.11 billion u.s. instead of the expected $10 billion, and that puts the valuation at 55 to billion -- $55 billion $70 billion. it was expected to be about $100 billion. they are going to price it at

$17 and $22 hong kong each, 2.1 8 billion shares, and several investors have been identified including china mobile and qualcomm as the biggest. snapdragon chips are in the phone. each of those companies to nvest $100 million u.s. others include the poly group, china development bank and china merchants bank. the total of the cornerstone investors to invest $500 million u.s. they opened the book to investors. as of today that book will close june 28. for a beginning of trading in hong kong on july 9. this will be the first ipo in hong kong under the new rules allowing the weighted voting rights structure. yvonne: what more do we know

about xiaomi pulling their listing? this boost of confidence was supposed to bring chinese tech companies home. will that affect the hong kong listing? stephen: it could affect sentiment even though it is a highly,in demand. there is some various different reports. regulators in china, still fine-tuning this feature because this is a new process. what we are hearing from sources is there was a difference in valuation. regulators in china wanted a lower valuation for the ipo, whereas xiaomi wanted higher, so there were differences. they have pulled it for now. $6.11 billion u.s. instead of what was expected to be $10 billion. it was expected to be divided cdr'sn hong kong and the in shanghai. right now they are just going hong kong. yvonne: thank you, our chief

north asia correspondent joining us. still ahead, trade tensions simmer, a scathing white house report accuses china of hijacking u.s. intellectual the warninga haidi: of volatility. he joins us next. this is bloomberg. ♪ this is bloomberg. ♪

haidi: this is daybreak asia. i am a haidi lun. yvonne: a quick check of the markets, gaining more momentum now to the upside when it comes to asian equities, shrugging off trade tensions after we saw a mixed picture with u.s. equities. tech really led the rally overnight. the nikkei 225 is up .1%. , ande the kospi with gains the asx 200 in the bright spot of the asia region like safe

haven amid the trade tensions. new zealand also up more than 1%. joining us now is the cio of multi-asset solutions of east spring investments, managing $88 billioets. thank you so much. the dust has settled when the trade -- with these trade frictions for now. is it time to think risk on? >> at the moment we want to be cautious. we may get some performance at the start of the year, and we think that overall goldilocks is still alive and will be fine this year, so risk assets are going to form the safe haven assets, but we will see more choppy returns this year. forprovides the opportunity managers to generate performance. yvonne: how are you doing this whole trade spat? there are questions if this is a trade war.

are we not going to see the real reaction until the things are put in place? we are not seeing the suicide pact? colin: i think these effects are longer-term effects. i think people scrambled to try and price these in. we have been discussing this ,ecause of how we should react top-down is very difficult. it is all about supply chain. analysts look at the supply chain so you can have a company in the same country or sector where they will do well under these tariffs and another will do badly. [indiscernible] just then terms of breadth of these markets, it seems we are staying the same with asian equities, the biggest bounce in volatility with headlines, but are we going to see any catalyst in the near or medium-term to turn things

around to reach highs again? we are getting long in the tooth for this cycle. what are your potential triggers? colin: the dollar is one. we have seen a tight dollar outlook. you look at the libor rate in the u.s., rising rate, dollar, appreciating, whereas people thought it would continue to weaken. that has caught everybody off guard. so weaker dollar and any announcement out of the fed that , we want to slow down the pace of tightening, will help asian markets and emerging-market currencies. this: i want to throw out chart. i was thinking about the remarks earlier this week saying it is remarkable the level of complacency we are seeing in market participants. if you look at volatility, this week it jumped to the highest it

has been -- highest it has been in a month or so. investors fell short when it came to these positions. does it show you not much has changed with the february selloff? colin: i think i am looking at this chart, there is a little bit of complacency in the market, but there are some key drivers behind this tech sector, where investors feel comfortable investing. we have seen when there is a selloff, people are willing to come in and by the tech sector across the globe. investor wantan to exercise caution but also act opportunisticly, what would be your preferred hedge? to be underway in emerging markets as a whole but look at specific areas that have incredibly cheap sold off.

you look at the markets, some of them are down. look at the equities and currency. there are opportunities, but maybe not just the headline level of the overall regional indices. haidi: where within the asia-pacific -- if you see you are avoiding emerging markets, that is pretty broad in scope in terms of the wildly different fundamentals most of these places have. in latin have been america we closed up because we see things are improving. the outlook is improving, and markets are cheap. one area in asia we like is the china equities but also taiwan equities. you look at the philadelphia semiconductor index, prices have really suggested there is

concerned about the prices of semiconductors, and taiwan is a beneficiary. markets within asia, some of the idiosyncratic risks, not that high within that country as well. yvonne: how do you play the chinese market? it has been nonlinear with msci and asia, starting to worry about whether we are entering into a bear market this moment? a lot of companies are using stocks as collateral to refinance. how concerning is that? colin: it is a concern for the underlying clients because they can get close to that. one of the things we see about chinese equity market is it is very tech heavy. therefore that story that we think will continue to run. yvonne:: graham joining us -- m joining us.

you can browse recent charts it on bloomberg television and catch up on the analysis and save charts for your future reference. this is bloomberg. ♪ this is bloomberg. ♪

haidi: this is daybreak asia. i am haidi lun. yvonne: i am yvonne man. take a look at live pictures real quick from this rally the president is embarking on into minnesota. duluth, he's talking about the immigration. this is on the back of him signing this executive order overnight to end his policy of separating undocumented immigrant children from their parents. lines coming through say voters should back the gdp if they want humane immigration policy and the border wall. he says it is still happening. covering a pretty broad

agenda over the last couple of hours or so, reiterating his stance on trading relationships. he is saying other nations are not sending their best people to the united states and immigrants are however needed to help fill the labor market but should come on merit. he said earlier he expects gdp growth to go higher than 4% from now on and touched on denuclearization in north korea following that summit, saying americans are so safe now following his meeting with kim jong-un. we will continue to watch that for you with president trump there energetically speaking in minnesota this evening. let's get you a check of the business flash headlines. disney is close to winning and antitrust approval for its $71 million deal for century -- 20th

century fox's entertainment section. the justice department could approve the deal in as soon as two weeks after disney agreed to sell off assets to address competition concerns. yvonne: australia billboard specialist apn outdoor said shareholders should take no action on the unsolicited bid, worth $10 million. the board is assessing the offer which would be the french inpany's biggest acquisition two decades. $6.52 australian 11% above their wednesday closing price. haidi: tesla is suing a former employee for hacking confidential and trade secret information. former technician is accused of transferring several gigabytes of data to outside entities along with a list of photos of production line. elon musk has warned employees to be on the lookout for sabotage.

it won't stop tesla from reaching his goals. the trump administration accusing china of intellect draft -- theft, we are live next. this is bloomberg. ♪ ♪

yvonne: it is 8:30 in singapore. you will see her from the lion city. we are half an hour from treating there. i am yvonne man. enda: haidi: i am haidi lun in sydney. you are watching daybreak australia or asia i should say in australia where i am. first word news with jenna. jenna: thank you very much. stocks have climbed in late trading after msci gave the countries emerging market status. they will be added to index is in about a year, 20 nations including china, india, turkey and brazil. this could boost the argentine peso when trading returns thursday.

they could get an imf credit line and an indexed upgrade in the same week. hasu.k. prime minister defended off a rebellion from within her own party to win a crucial brexit vote. the fight was over whether she should have the power to take the u.k. out of the e.u. without a deal. the rebels wanted parliament to have a meaningful vote on the way forward. they say brussels fears uncertainty will continue out of the threat of soap opera. chinese smartphone maker xiaomi has sets tentative terms for an ipo in hong kong that could raise $6.1 billion. bloomberg has been told it plans to $22e shares at $17 apiece. and xiaomi has started taking orders. china mobile a qualcomm have agreed to buy stocks as cornerstone investors. climbedices in new york

the most in more than a week as opec ministers worked behind closed doors to healy rift over production limits. u.s. data showed crude inventories falling last week by more than double the average estimate. opec prepares to meet in vienna friday, the saudi and iranian energy ministers indicated they are moving closer to agreement on the state of supply caps. >> we are converging towards a good [indiscernible] not only the stakeholders in the oil industry, countries and companies but also our consumers. jenna: 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.s here's a look at the morning this so far. pretty mixed, we see south korea losing steam this morning.

let's get the latest with sophie kamaruddin. sophie: stocks are losing steam, joining japan, the kospi up -- off .4%. this was sparked by moody's upgrading of the credit rating in the first time in 13 years. that could help lift the mood for -- mood for chip stocks. see good demand continuing thanks to demand from customers such as carmaker's, but that is not enough to lift the movers has done and others. samsung and others. the second week reading this data iner the job february. that is what we are paying attention to have is a leading indicator for training. checking the korean won, much weaker, retreating from the 11 .05.t -- 11

ramsey health care funding the most in 17 years after cutting its earnings, guidance and announcing [indiscernible] on its u.k. operations. thank you so much, checking our asian markets. president trump is renegotiating trade deals left and right but concern is mounting about the impact of his threat to impose tariffs on additional $200 billion of chinese imports. tom mackenzie joining us. does this signal a change of stance from the president? tom: who really knows. it is donald trump we are talking about. it is only cases like nafta he ztehad the change of heart, a flip of heart. change his mind on north korea, several times on the trade discussions with china. it is a possibility. we talk about business operators

in china, chinese businesses and foreign businesses there is the hope they cling to that this is a negotiation tactic and trump will walk back some of these threats. if they are determined in the white house to affect concrete change around china's industrial policy, with very few sites china is likely to budge on that and where china has been making some concessions around the market open this and increasing imports, those areas and agreements that now particularly between the u.s. and china have been shelled. china has made no signs or, with none that it will be changing or concessionsadical around these trade tariffs yet. so we are waiting and operators hope there will be a change. trump wants to see reciprocal change and trade between the nations, and the trade issue has to be dealt with. haidi: with all this

uncertainty, how is this plang out when it comes to investment woes from china to the u.s.? group have been crunching the numbers. they say in the first half of the year chinese investment in the u.s. totaled $1.8 billion u.s. that is more than 90% down from the same time in 2017. that is the lowest amount of investment from china into the u.s. in seven years. in fact in the first five months sold18, chinese businesses $9.6 billion worth of assets. it is a result of trade tensions and the policies around de-risking the economy and hna and will wonder, but it is having an impact. haidi: i want to bring in the chief asia correspondent and the current -- enda curran. how much impact is there from the tariffs possible?

enda: economists have been log at a scenario. if mr. trump goes ahead with tariffs on $250 billion worth of goods, they are talking about half a percentage point of growth. it is quite material. thingtimates vary and the comes down to the exact volume of tariffs that are executed and the detail in nature of the tariffs and the products they target. at the same time there is a feeling that the initial batch of tariffs were manageable. with the figures now spoken about, economists are saying we are heading into new terrain where if these go ahead, there could a sizable impact on the biggest economy. tom: we heard from the chinese minister on tuesday talking about tools at his disposal. what don't you think china can do to protect its economy? enda: i think he came out very

timely and made it clear the central bankers, and looking at the economy, we know they have massive monetary firepower if they have to. economists are already expecting some market -- what is targeted easing to make sure these are getting it. he said that in a speech last week. the fiscal side of things could increase public spending overnight if they had to. that is apart from the other retaliatory measure they can take and shift. they can move production and sources. there are plenty of options china has to counter a trade war. it is interesting because you mentioned the pboc governor. it is rare to hear from the central bank usually, but for him to go and do this interview and post on the central bank's website, is this a different pboc from the other era?

tom: i don't know if we have seen radical shifts in stance. they wanted to have continuity, and the minister has worked for the central bank are long time and is trusted as well not just in china but amongst foreign business leaders and policy makers. he is seen as a stare -- steady pair of pants. -- hands. it is interesting that he has come out and make these comments . maybe we will see communication from the pboc. that is what you hear from chinese economists, they want to see the central banks being more up front about policy decisions. maybe they should do that. they had the stocks at their disposal and this was the message from the minister to say don't run it just don't panic. investors, stay rational. many are still mom-and-pop investors even as the institution plays a larger role in china. haidi: a lot of those investors

are watching zte and the fate of that company. are we getting more details as to whether trump is managing to garner any more support you are back his initial decision on that company? met with senators and those in the house and remote inside at least in the white house to talk about this controversy over the zte, and there was progress coming to a deal with he does stay in business but where national concerns of republican lawmakers are addressed. it was trump who stopped this or end of this ban on zte to ensure the company could remain in business. he said he was doing as a favor to president xi, and that caused backlash among members of his own party and democrats who are concerned about this telecom company which has been accused of violating sanctions. we are getting a conclusive deal

on that but the share price showed some improvement yesterday. yvonne: we are tracking all the big central bankers. they seem to have a similar note when it came to trade tensions how it is getting confidence. how does that complicate their job? the key takeaway, not just the data today but the risk going forward and how trade tensions will show up months from now. it does complicate things for central banks. somewhat want to move towards a higher interest rates or reduced want to save easing. looking at potentially attractive trade dispute, it would show up in the economic data by slowing global growth. that would put them in the back. it is the last thing they need now. yvonne: our chief asia

correspondent and also tom us frome, joining beijing. while we talk trade, don't miss our interview with wilbur ross. he joins daybreak america's at 9:20 p.m. sydney time. that is 7:20 in hong kong. this is bloomberg. ♪

haidi: let's get back to the fx summit in japan. david ingles is standing by with our next guest who leads the fintech division at the bank of japan. it is something you don't really expect. we will talk more of course with him. had of thefintech bank of japan. tell us exactly what you do. payments.charge of in 2016, bank of japan

established a fintech center in my department and now we are promoting fintech and science innovation. my department is in the center of this. david: you talked to a lot of big banks. what is the biggest challenge? you get these traditional large japanese banks that are not known to be very quick adopters of new technology. hiromi: yes. but japanese megabanks are so eager to those new technologies but at the same time japanese banks including the megabanks, the huge networks of the branches and japanese people, every people [indiscernible] betweenhey profit [indiscernible] for existing networks and promoting new technology? that is the most difficult for japanese banking. david: a lot of them are used to the way they bank and is an old

population as well. how do you get over that because i cannot think of a solution to that problem. hiromi: at the same time by adopting a new technology japanese banking industry can modify or innovate their business procedures and strategies. at the same time they try to create a new business strategy thein some senses export business strategy to overseas and try to [indiscernible] across the border. a cross savings element. talk to us about the existing technologies that you are working with big banks on adopting. hiromi: doing a bunch of experiment and initiatives, introducing a on, robotics and [indiscernible] there is a lot of technology.

they are doing the work now and bank of japan is supporting the airport at this juncture. david: is there another central bank that has contact? has fintech? [speaking simultaneously] peers.you have hiromi: many central banks are not so interested in fintech. in my understanding of course [indiscernible] promote so eager to fintech. this includes european central bank, so eager. the bank of japan is doing it, doing research with the european to invest in technology. our project is called project fair. we already issued to reports -- two reports.

we tried to apply new on the wholesale payment. david: the ledger. hiromi: the latest technology to business payment and halter payment. david: it seems when you talk about these technologies, a lot has to do with cost savings. is there a revenue generating part? hiromi: at this juncture [indiscernible] major technology and many airport are in the process of experiment. a bunch ofs potential. the japanese banking industry and finance as a whole are based localized technology. they have a huge computer center. by applying new technology, they can use a bunch of pc's instead of huge computer center. at the same time they need to

modify their business strategy and the structure in order to maximize the new technology. david: is china more advanced than japan in terms of either a cashless society or payments dispense? you have big players there. hiromi: maybe lots of big players in china. one billion.om of china has a huge population living in china. they definitely need a new financial services. so there is room for big progress in china. [indiscernible] have a huge market now. japan is one of the headaches in japan because the market is not

advanced. the same time japanese market are major and talent services. have to speak for the upside of market? it is a big challenge. david: i think what applies to the micro economy. thank you very much. the head of the fintech department at the bank of japan talking about hopefully where we go from here when it comes to applying technologies to a fairly well entrenched banking system in japan. back to you. yvonne: fascinating discussion. david ingles with a man from the boj. we have launched tictoc by bloomberg. it is designed for social media offering live video coverage and hourly updates, top news reports verified by us. if you are on twitter, sure to follow us. this is bloomberg. ♪ is bloomberg. ♪

yvonne: a quick check of the business flash headlines, the fed is downplaying concerns the u.s. economy is overheating. they emphasized continual gradual interest rate increases. the governor said no need to hold back the economy for now. speaking of the forum, he said it was particularly robust in the jobs market, citing wage growth as an indicator the

market is not tight. >> was on implement low and expected to decline further, inflation close to objective and risks to the outward balance, the case for continued gradual increases in the federal funds rate is strong. haidi: the bank of japan is looking for a 3% increase in wages to meet its inflation target, but the pace of japan's wage gains picked up in 2018. there remained a were missing -- a missing link. the governor of the bank that labour party activity has increased, making a 3% wage increase necessary. >> japan's economy has improved over the past five years because of quantitative easing. longernomy is no [indiscernible] butained decline prices, wages and prices have continued

to show relatively weak development. yvonne: minutes from the r.b.i.yvonne: meeting show that the indian central bank should gradually raise rates. they show all members of the ratesetting panel agreed the economic recovery is strong enough to boost inflation area the possibility of higher rates added to distract the bond markets where yield is at the highest in three years. the rbis hiked rates for the first time in 2013. centralhe philippine bank has raised its benchmark for a second straight month. the governor said the bank is ready to take further action. southeast asian correspondent joins us now. what prompted the second in quick succession rate hike? reporter: good morning. theave really seen

inflation outlook in the philippines has been the main concern of the central bank. the group yesterday marginally reduce the forecast for this from 4.6% but.5% that is still above the tolation target which was 2% 4%, so we have seen inflation pick up strongly this year mainly because there was tax adjustments made at the beginning of the year. higher field taxes, higher taxes on sugary drinks and vehicles. the has been exacerbated by peso down more than 6% against the dollar this year, that one of the worst performers in asia. that is worsening the inflation dynamics. that is the main reason for the central bank raising its interest rate again yesterday. haidi: are there any signs

inflation could soften? reporter: like i mentioned, there was a marginal revision to the inflation forecast by the central bank yesterday, but -- they do expect a slowdown. we had the finance minister speaking this week in tokyo, saying the inflation picked up this year, improving. the central bank is expecting a slowdown next year and are forecasting an average of 3.3%, so that is brings it back into the target. i think the main concern is the second round effect. the central bankers watching the wage demands. in thethe wage boards philippines starting to fit the minimum wage increases and the big concern there is the big we have seen in the oil prices that is going to boost high wage

demands. yvonne: we may have to see more rate hikes to try to reverse this market area thank you. our reporter there in singapore. looking at what is coming up next, what are you watching? rishaad: looking at japan, investment strategy, back with david, talking to aberdeen standards, the ceo for japan. that is neil slater, joining us in an hour or so. then mark franklin coming in 10 minutes' time to talk about prospects for trading and the trading month i had as well. that is all to come. this is bloomberg. ♪ what's a gig of data?

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♪ go intoou wanted to technology banking. tim: in the land of the blind, the one eyed man is king. david: were there technology opportunities? tim: very few. david: what propelled you to start your own company? tim: very few software companies are efficiently run. david: you became involved in philanthropy. tim: philanthropic endeavors are part of my family dynamic. we have to ensure our society is a just a society. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪