yvonne: we are live from bloomberg's asian headquarters. i am yvonne man man and welcome to daybreak asia. trade tensions rattled markets. trading and its major partners face off. tech shares were hardest hit on wall street. the dow down almost 2% and the dollar also weaker. trump administration officials tried to play down plans to limit chinese tech investment on national security grounds but some american icons are feeling the pain. harley davidson and jack daniels are among the losers.

kathleen: trade turmoil bites. every time we think it has called down, something gets heated again. now it is not just driven by donald trump and his team. stories that they were targeting a new plan to specifically chinese investment in the u.s.. now they are perhaps dialing back. but eu officials and chinese officials meeting about trade and pushing back in that direction. it seems clear the rest of the world is fighting back. like the eu and china are pretty much aligned when it comes to fighting back, but we did see markets climbed

back toward the close but it adds uncertainty. you have trump administration officials not on the same page. let's take a look at how much damage we saw inflicted on u.s. stocks. averagejones industrial with a decline in the past 10 sessions. the s&p 500 dipped below the 100 day moving averages. a 2% loss.with over market, if the fund want to go away from the 10 year note yield which was traded away down to percent at the close of trading to this yield curve. spreade the two to ten down to the lowest since the great recession. this becomes a bigger concern as we see more of this move in bonds. yvonne: we will talk more about

those moves in the bond market. it looks like we will see more turbulence ahead. you can see in new zealand we are down about two thirds of 1%. the nikkei futures unchanged. drop at the a 0.6% open in tokyo. we are also watching the movie in the won. currencies as well. we are seeing a lot of this buying into the yen. we have been talking about how there aren't a lot of places to hide these days. that is down for the aussie, the worst performer among the g10. continue to watch the offshore renminbi, weakening for the ninth day. that is the longest losing streak since 2016. here is the bond market.

we see a little bit of the atasury by into the 10 year 2.88, the aussie tenure unchanged at 2.63. new york crude continuing to digest the opec trade over the weekend. kathleen: it has been a rough ride for asian markets particularly after a rough ride in the u.s. markets. it kicked off with a wave of selling for the steepest drop since early april. su keenan is here with the latest. that did not seem like the most encouraging sign in the world. su: the fact that tech got hit seenhas to do that it was as insulated from the trade concern and look at the market snapshot. off who were writing this as a part of the deal negotiating strategy are now concerned that this really isn't going away. that is what not going away

looks like. it has been down six of the last seven sessions. it remains in a downtrend. let's go right into the chart of the day. gtd is where you can find these charts, this one is called tech troubles. the purple line is the semiconductor or the sox index. even to the downturn is much sharper than we see for the s&p and other index. let's go to the stock charts themselves and look at the size of the moves. that was significant for netflix, the biggest drop in two years. amazon was pacing the decline we saw in the fang stocks. technology is down in a big way. it is down 8%. interesting that this particular stock has been around 300% in

the last two years. how analysts talk about momentum was being sold off, recent ipos like spotify. .hese all have exposure boeing at the top, harley davidson which has made headlines, they have said it is costing us $2200 per byte and we will have to offshore production. u.s. steel you think would be up but it is lower because of concern about higher prices. there are many believe that what we could see is the makings of another wedge. muchwedge is looks desk is bigger. thisdifficult a time when spike will happen. >> pretty tough for this short volatilities.

on new are following now concerns. >> let's go to the chart. see how we have a striking distance of $70 in this latest session. i'm concerned that the saudi's and russia are signaling a much bigger production increase, we are looking at closer to a million dollars per day more than what was originally thought. this will probably pressure brent more than west texas intermediate. g tv is where you can find these charts. here you can see the big one -- a big run-up in west texas intermediate and the spread between west texas and brent is significant. brent will be hit the most by this production increase. west texas is taking a hit as well. kathleen: the white house traded

pfizer is seeking to ease investor concerns about trade policy. he says the report on foreign investment that is due later this week will not be left sleeping as markets are anticipating. let's bring in our bloomberg editor in washington. the trump administration again sending mixed messages. to do think they were walking back from some of these comments? while markets were rattled, likewise the trump administration was taken aback by the response from these markets. there is a battle going on in the administration itself, treasury secretary mnuchin wanting to take a softer line with china to work out diplomacy, but that had the effect of suggesting that the u.s. would look at broad limits on investing. trying to walk that

back and say this is really about china primarily. that was what the order originally came out, directed at china and their acquisition of companies and technology that the u.s. considers important. signaling they are china or not -- who else is facing restrictions? the statements are fairly broad, this is prohibiting investment or companies that are about a quarter own from chinese companies from investing in u.s. companies that are considered industrially significant, robotics and cars. there possibly are other countries that could be targeted is not a bigthere threat of intellectual property theft from the eu, canada or mexico. this still looks primarily pointed at china.

kathleen: stories over the weekend suggested that steve mnuchin has been working on this plan about restricting investment and technology in the u.s.. we were expecting something this week. i wonder if they will revise it. friday.y have until there are several days for pushback votes from trading partners and members of congress. a number of people have been voicing increased opposition to the president's trade policies in congress. they may want to dial this back the presidentere would like to go. he would like to take a hard line against china and what he says is intellectual theft and against other u.s. trading has beenwho he says

treating the u.s. companies unfairly. this is what trump has wanted and what he said he would do. dialback mnuchin might be able to get is up in the air. thene: i wonder if president is watching his bloomberg screen. he likes to see the stock market rally. we will see how that balances out. now we will get right to the first word news with jessica summers. jessica: the turkish leaders attempted a rally after erdogan's election victory proved short-lived. concerns about the central bank and policy direction saw concerns erased gains as -- by as much as 1.3%. this quarter as erdogan urged his central bank not to lower interest rates despite double-digit inflation. asked arights group has

u.s. judge to order the trump administration to reunify more than 2000 immigrant children. the aclu filing calls for a halt to all future separations of families crossing the border to seek asylum. trump's executive order from june 20 has "explicitly polls," they said. the european union has promised to oppose trade protectionism. beijing, talks with the vice premier said they both oppose protectionism. he said sucks -- such actions and evengger tribalism a recession. trump has accused both beijing and brussels of unfair trade. head of the asian infrastructure investment bank says he hopes there will be no trade wars between the u.s., china and europe. leadersbloomberg that

need to negotiate to work out differences. he also said that the bank has no plans to raise more funding than anything -- raise more funds anytime soon. >> getting the aaa ratings from the rating companies is very important for us because we are recognized as a multinational bank with high standards, which is very good. even though we do not need to soon, the aaa rating is crucial for market recognition. jessica: global news 24 hours a day on air, tiktak and on tw more than 2400by journalists and analysts in 120 countries. yvonne: gimli forest joins us forest joinserly

us to talk about how traders should navigate these waters. we discussnd later the further inclusion of chinese shares into global indices. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. kathleen: i am kathleen hays in new york. trade is causing turmoil across global markets. we are joined by kim forrest. a lot of back and forth news wise. we know that by the end of the day, the national traded pfizer to donald trump is saying we are not going to single out china for specific -- trade advisor to donald trump is not saying we are going to single out china for specific restrictions.

do you think this will cause further trouble for tech stocks? kim: i think that tech is a leastl case because -- at whenever i was a software engineer a long time ago -- anything that gets exported to any country has to go through a technology and defense review. this is an area that i think investors have to pay attention to what the product is and can another country actually invest in a company? cases, even if it were some he we were not in a trade skirmish with, the answer was no. i think that is going to continue. there is plenty of technology that has nothing to do with defense issues or defense contractors. i think that is still open. i think this is all a very complicated negotiating tactic

with, not just china but the rest of the countries with whom the president thinks we need to renegotiate. yvonne: want to call up our bloomberg chart. what you are seeing is the s&p 500 tech index -- the white line down sharply and the s&p 500, the turquoise line is also down sharply and the semiconductor index, the purple line. i want to start where are the good tech investments that might not be hidden so hard but at the same time, it doesn't matter what type of tech company you are, you are getting hit hard. them i think that is an icellent opportunity for -->> think that is an excellent opportunity for investors.

it is as if these companies are on sale. have to have time on your side. we take a position, we go in for three to five years. this is an excellent time when volatility is back in the market to go shopping for your favorite tech items on sale. yvonne: that is a great way to look at it, but it feels a different kind of selloff this time. drag onre the biggest the market. is there also a question on whether these safety haven trades are getting too overcrowded? i think so and it is not just safety but there are a lot of traders looking at how they have done this year and the market has done remarkably well.

they are taking some profit and there is a lot of that going on. it is the summertime so whenever the sentiment of the market is, it is magnified because there are fewer participants. there are fewer people like me who want to go shopping on down days. there are slightly more people -- if there are slightly more who want to sell, there goes the market. yvonne: we have been talking about this world cup lull for a week. this gene keady shot shows the latest trade salvo testing investor states but we continue to see earnings estimates trudging higher. do you think these are still ?etting too high is that going to be a risk? kim: i think it is a risk.

this is the better half of the year. investors really do have short attention spans. when the year-over-year gains are trailing off, we will see how robust their relationship is with these highflying stocks. kathleen: we have been seeing here from asia, the bear market in shanghai and korea breaking down -- do you think u.s. stocks are still the place to be? kim: as an investor with a u.s. mandate, i would say yes but overall i think we do have some growth remaining in our economy. is goingeel as if that to continue for some time. we keep getting leading economic us thatrs that show there is still growth in the second half of the year. a couple of are

specific companies that you hold or like in spite of trade tensions? let's look at microsoft and then intel. kim: these are special situations. these are not the thing stocks even though microsoft -- fang, stocks even though microsoft has got a boost and so has intel. these are the last bubble da rlings. i think that microsoft with its cloud platform azure has a long way to go. they have finally shaken off the more consumer-oriented pc revenues and have woken up and said -- microsoft is a business-to-business software company. so looking into the future i am a real bull on microsoft. they have a lot of challenges from great competitors, but i think that they have talent and they own the fabs.

they have been going for them and we still like them and think they have room to run. yvonne: kimberly forest, thank you for joining us. it is nice to hear optimism on some tech stocks. bloomberg viewers can interact with the charts featured on gtv . yvonne: you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. to bloomberg subscribers go gtd go on your terminal -- g tv on your terminal.

yvonne: -- kathleen: this is daybreak asia. i am kathleen hays in new york. yvonne: am yvonne man in hong

kong. harley davidson shares slumped after it said it is shifting workers from the u.s.. harley had already announced plans to close the factory in missouri and build one in thailand. kathleen: another iconic american brand is in the firing line. jack daniels bourbon says they will have to raise prices in europe once the 25% tariff is imposed. says that retaliatory tariffs will cut earnings for the company 45% this year and next. pain in europes where car stocks fell to the lowest in nine months as proposed u.s. tariffs prompt downgrades. president trump has threatened cars ifffs on european the eu does not take down trade

barriers of its own. warning ofhere is a a pullback from the u.k. -- the german automaker has plans for the u.k. and says the ongoing uncertainty over negotiations is not helpful. of comments echo those airbus. we are counting down to the open in japan and korea. let's go to japan. we are expecting to fly across the board here in asia. a -- after dropping 0.8% yesterday. seeingyen, we are still strength in the yen but we did see a spike in the dollar after peter navarro's comments saying there was a misunderstanding of trade policies and there are no plans for investment restrictions. next, we will speak exclusively with ftse russell ceo mark

makepeace about which sectors are most exposed to trade tensions.

away from are minutes asia's first major market open that could be said for decline after a brutal session on wall street. on monday10:30 p.m. -- 7:30 p.m. here on monday in new york. the nasdaq down more than 2%. all about concerns that the trade war and the u.s. -- china getting more specific. i am yvonne man in hong kong and you are watching daybreak asia. let's get to the first word news with jessica summers. jessica: escalating trade tensions sent u.s. stocks to the

steepest decline since april. the dow and s&p 500 index fell more than 1.3%. losses were paired after the national trade council director peter navarro said there were no plans to impose restrictions on chinese technology investment. treasury secretary steven mnuchin denied that china is the main target of plans to use emergency laws to protect sensitive industries. eight people familiar with the plan have told bloomberg that the white house plans to declare chinese investment a security risk in areas such as new energy vehicles, robotics, and aerospace. mnuchin says it would apply to any country planning to steal u.s. technology. a government lawsuit accusing american express of thwarting competition by preventing merchants from steering customers to cards with lower fees.

blow to retailers looking to reduce the $50 billion in fees that they pay to credit card companies each year. amex shares jumped in new york while visa and mastercard fell. they assigned a settlement with brazilian prosecutors over the dam disaster at their samarco mining venture. a greater say in cleanup and reparations through a foundation created by the companies. it is races outstanding lawsuits worth $46 billion lifting samarco's chances of resuming operations. global news 24 hours a day, on-air, taikiktak and on twitter, powered by more than 2400 journalists in 120 countries, this is bloomberg. for thewe are waiting major market open here in the asia-pacific. ofan markets brace for more

the pain that we saw on wall street, it seems like you are wearing the red color to work. your matching nicely with -- the right color to work, you are matching nicely with the map. >> didn't mean to do this. -- most stocks, asian stocks excepted are continuing this three-year decline -- a move below might be in the offing. let's pull up the futures board and check the mood. a lower open could be shipping. tos might prompt investors buy in. ubs looking for a big emerging-market rebound in the second half, forecasting a potential 15% gain, partly due to expected dollar weakness. ubs is sticking to its original call for now. chinese investors look like they will be tested and

a-shares may be the canary in the coal mine. >> we do have this one extending its downward spiral. losing streak since october 2016 and wiping out 2018's gains. haveurple line appears to inadvertently dented confidence. most analysts are recommending to short the yuan after reaching that 650 support level. we are a winter away from bear market a-shares. and depreciation is that helping matters. tried various measures to try to encourage market confidence. a shares have lost $1.7 trillion since january, but looking ahead, a bloomberg survey of analysts indicates that a rebound for chinese and hong kong stocks could be on the horizon in the first quarter, given how cheap valuations have

become and you might see more monetary easing on the mainland. yvonne: investors remain cautious as the threat of trade restrictions in the u.s. triggers heightened tensions. we speak with the ftse russell ceo, mark makepeace. thank you for joining us. take a look at this chart that sylvia highlighted. there is a lot of turbulence in china. does this change in any way the further inclusion of a-shares? >> it doesn't. we don't look at the market performance, it we are looking at cannes international investors get into these markets and can they get out without restrictions? ? are you --yvonne: are you worried that this could actually stall further reforms? there are a lot of restrictions

that we see. we are always concerned that the improvements in the market will not continue at the pace they have in the past. in the past i don't think we have seen the changes continue over a number of years. kathleen: we did speak with henry fernandez from msci shortly after their decision to include a-shares into their indices and he was quite optimistic as well. i wanted you to take a listen to what he had to say. >> there is no question in our mind that they are intent on opening the country. it is not an "if," it is a "when." itis simply a way of doing in a stable and measured way so

it doesn't create upheaval or instability. i personally believe and our company believes that the faster would actually be than we thought about a year ago. yvonne: are you encouraged like henry? guest: oh yeah. when we first moved five is ago we give people the chance to invest through the china of theon index and one biggest marketing funds did take that opportunity and has already invested in the hr market. i think he was absolutely right. the regulators and the chinese authorities are committed to change and we are seeing that. but it is a huge market. for us to bring the a share market into the global benchmarks, we have to do that .arefully

create anant to impact. yvonne: i want to look at this turnover,lling chinese market equity exchanges are the lowest since 2014. you had such a long and successful career creating indexes that build up markets. how concerned are you when you see this? >> we are seeing low levels of liquidity around the world. it does give us some concern but we take liquidity into account in how we would introduce a shares in to global -- a-shares into global benchmarks. in saudi arabia we are phasing in that country into our benchmarks over four quarters. i don't that we are concerned it is just another factor to take

into account. yvonne: you were also pointing out that stock suspensions continue to code -- to prove problematic. investors are currently suspended. how big a problem is this and will you forge ahead anyway? in thes an improvement past. that is a good thing. it is still very high. if we compare it to other international markets it is extremely high. these companies seem to self suspend so they are making the decision themselves. there are ways in which we can overcome this because we can identify -- not all but many of these companies because they are doing this more than once and therefore we can remove them potentially from the indices. there is something we can do but

it is a practice we would like to discourage. kathleen: we have seen these brokerages increase their research teams to make it more about the a-share market's. do you think you want more transparency when it comes to making the sound decisions? --if we include a shares, a-shares, more analysts will include the stoxx. institutional investors will engage with the company's. practicesgovernance are low compared to international markets but they will improve when included in the global benchmarks because international investors will engage directly. kathleen: you mentioned that the rollout could be gradual. how do you see that playing out?

is it a large number of small inclusions? >> the volumes going through stock connect are healthy. we did watch carefully the recent msci inclusion. it was a very small amount, but system.ested that as we consult with other investors, for us to decision is, we may go faster than we were originally thinking and we are currently testing that. about cbr --t cd-r's? >> at this case we are not including the cd-r's. we will take a look at them and keep them on the watchlist but we will not include them to start with. yvonne: i want to switch to

india as well. we have seen a lot of controversy surrounding india exchanges. respond if this goes through? then i was disappointed with the india action. is protectionist and he is trying to prevent international investors having the tools to invest and trade in the country. it doesn't benefit india in any way so we would discourage that type of action. having said that, we tend to engage with the exchanges all over the world and try to build good relationships. kathleen: is there a move you are leaning toward specifically? msci is threatening a downgrade.

>> we would not threaten a downgrade over -- these are commercial actions. we would discourage the exchange from acting in this way but these are commercial actions so we would not downgraded company reasons.rcial yvonne: at the outset you said you believe that the chinese government would like to move. it ahead. if you are going to give advice on what they need to do next or what they need to do to show investors they mean it -- because you do see back-and-forth, what would you advise them to do? them thatld advise the qfii and the are qfii schemes -- if they can bring those in line with the stock -- the stockting

the way that national investors are investing in that country, it is easier and benita expand the qfii and are qfii programs -- rqfii programs. yvonne: when you compare where in terms of encouraging more domestic and global investment, if you compare it to a situation you worked with in the past, what does this most remind you of? unique. is quite the sheer size of that market makes it unique. talking about the chinese economy, what is the largest and second largest economy in the world? china is unique. there has been other large

that have come into the indices that would most recently be saudi arabia. in comparison to the a-share market -- there isn't a comparison. think ofwhen i can back many years was probably japan. just the first step that will be important, it is going to be increasing the weight of china shares. we don't want to do it too quickly because international investors will not be able to match the weight, but we don't to spend the next 10 years gradually increasing the china asian market. trying to do this in reasonable --ps

from china you have the saudi inclusion earlier. what else is on your radar? at theontinue to look map. saudi and the middle east has got our attention. the government coordinated itself to bring in changes through systems and market practices. they really did set the model for other exchanges. mark makepeace, ftse russell's ceo speaking exclusively to us. the investment bank is gearing up for the massive initiative but uncertainty over trade could derail plans. this is bloomberg.

kathleen: this is daybreak asia. yvonne: for a look at the stories trending across different platforms right now, our top story is about these china-u.s. trade tensions as beijing begins to question whether it is ready for a trade war with washington. the no surprise trade risk tops speaking about-- -- six to calm investor concerns and trump trade policy. teams competing in the world cup, americans are staying away. the team did not make it to russia. that is understandable. check out that story online. i have been doing my share of watching the world cup games.

the investment bank increasingly worried about global tension as well. than $4ested more billion in projects across asia but it breakdown in relations could possibly derail its plans. >> my wish is that there would be no trade war between china , no tradeited states war between europe and the united states. i hope people will be sitting down and will do their best to work out their differences? >> do you see a rising political risk? the increased investment in infrastructure projects in the country. >> for us, china and malaysia

are the founding members. we help the problem will be resolved. we are keen on promoting infrastructure investments in malaysia. reporter:irl speak -- speaking of members, you currently have 86. at one stage you are looking at 100 members. >> you can see the policy is clear, the bank is inclusive. the decisionately making of the sovereign governments.

credit rating last year from moody and finch, any plans to raise money? there has been talks about u.s. to nominated fundraising amounting to a billion dollars. >> getting the aaa ratings from the three rating companies is certainly very important for us, because we are recognized of -- for high standards and sound governance. even though we do not need to borrow any time soon, the triple rating -- aaa rating is crucial for market recognition. we don't need to go to the market right now, but we believe that in due course, it is ourssary to establish presence in the international capital market. asiae: that was the infrastructure investment bank's president. you can watch us live and catch up on past interviews. can become part of the conversation and send us instant messages during our show if you have a question for our guests throughout the morning. this is for bloomberg subscribers only.

this is bloomberg. ♪

kathleen: time for a quick check on the business flash headlines. they are trying to revise merger they called fujifilm's lawsuit a desperate negotiating ploy. he says that they made the deal and possible. fujifilm denies the allegations and accuses xerox of breaching the deal for ending it without motivation. instagram may be worth more than $100 billion. is a 100-fold return to the social network. they reached one billion -- 100 billion active users -- they reached one billion active users this month. reachram is expected to faster than facebook and the younger audience is attractive to advertisers. hbo's website is down after john

oliver criticize xi jinping. is censorship of the internet and references to winnie the pooh. blackstone is nearing $5 billion for its first round. able marked the third biggest initial close for first round across any investment strategy, that is behind the bank $100 billion vision fund. they got a big pledge 13 months ago from saudi arabia. apple is going to pump up the volume on its device strategy. studio quality over your head -- could be coming next year. they are planning water proofing, biometrics. expect a higher price tag. yvonne: water resistant -- i am

ready to use those on my swim. we are counting down the market open. we are set for some declines here today. the u.s. stock market really selling off overnight. they could potentially be restricting investment from china. we heard from peter navarro as well trying to calm some nerves out there. we are seeing declines across the board. down 0.75% right now. looking at china markets right now, the chief of investing partners at capital international. we are a breath away from reaching a bear market. his views on the renminbi as well. we have seen nine days of selling. 6.53. sliding to

the market open is coming up next. this is bloomberg. ♪ what's a gig of data?

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in hong kong. we are live from bloomberg's asian headquarters. look into daybreak asia. tensions rattle markets. yvonne: the u.s. and is major trading partner. is china up for the fight? why an already slowing economy can sustain a tariff battle. >> i am kathleen hays in new york. n: american icons are feeling the pain. harley davidson and jack daniels this the losers from

trade. of course, trade is still front and center here. they are trying to ease investor angst. they say there is a misunderstanding about the trump trade policy but there are no plans of any investment restrictions. it will be a very interesting day as we count down to read it. that theret seems were no trade restrictions on specific countries. report suggested the steve mnuchin prepared a report since december that might have two in tracking nationalist sensitive kinds of investment.

the question that seems up is is it that was the stock market volatility. was this for a president that looks to see a rising stock market that made them think that is doing too much? markets in asia are not feeling that so far. sophie: it's like navarro's comments are not providing relief here. they saw the s&p 500 fall below the 50 day average. trade war risk is in a higher in japan. they got marginal gains on monday. i on theeping and canary in the coal mine here. this is continuing to see weakness year after overnight

bridging. 2018's gain. that is according to citigroup. ,hecking on the korean yuan their edge in 2011:15 handle. south korean bonds have been offering an unlikely refuge. exceeded $14 billion. that is illustrated by this white line here on the chart. asianakes korea the only bond market outside of china where they are still buying. bond investors are finding comfort in this economy which gives them some room to hold

rates. >> let's talk more about how investors are taking to the potential trade. fromis mark joining us singapore. a lot of back-and-forth and forth on the live blogs all day long. mark: i am the short if it is a turning point. i think the whole point is that this trade story will ebb and flow. all investors cannot dismiss the store. everyone is aware that trade will be this year. up until couple of weeks ago, there were a lot of investors going that it is just rhetoric. ignored, it is not a relevant story. to continue to get negative headlines and positive

headlines. we are in a negative right now. it seems like one thing that might be tougher for markets is that there is very little conciliatory talk on the other side. quite the contrary. china and european officials are meeting beijing and pushing back against all of this. cutting the reserve ratio for bank did not really do much. mark: people are not compromising on the other side. that is not a good or a bad thing. you could argue that it is perhaps a good thing. all of tried to bully the other countries and kept on getting wins, what would convince trump to stop? this might not last as long. i'm not sure if it is a negative. as for the triple archive from china, people are being very

quick to dismiss the effect when it hasn't happened yet. kathleen: we have been talking about oil. this has been the focus. goldman is saying that this is forbiggest dramatic event opec itself. what is the impact there? >> they are dead by to emphasize the store. there is an understandable focus on opec. opec sent this message. they cap oil prices. we are seeing this large disruption in the u.s.. we may see stockpiles erode in the u.s.. the overall impact to these economics of opec putting low-pressure on the supply disruption in the u.s. means we will see a continued narrowing of the spread. i think that it might suggest that there is some kind of

upside potential for put prices in the weeks ahead. the bearish news is the pricing of the market. the bullish news is not in the market at all. kathleen: thank you, it was nice to have you, mark. you can follow all of our trading. you can get a market run down and commentary and analysis from mark and his fellow expert editors. you can find out what is affecting your investments right now. let's get you caught up with the first word news. jessica: the turkish leaders attempted rally after president erdogan's election victory proved short-lived. they saw the currency arrays gains as much as 3.1%. erdogan urged his own central bank not to inflate rates.

a civil rights group has asked the u.s. -- a u.s. judge to order trump to unify more than 2000 undocumented children taken from their immigrant parents. the aclu calls for a halt to all future separations of families crossing border to seek asylum. it says that the june 20 executive order reporting to reverse the child separation policy has explicit loopholes. the head of the asian infrastructure investment bank says he hopes they will be no trade was between the u.s., china and europe. bloomberg was told that leaders need to be negotiating to work out their differences. plans tohe bank has no raise any more funds anytime soon. that is after securing aaa credit rating. >> getting the aaa ratings from the three rating companies is very important for us. with highognized

standards. not need towe do borrow anytime soon, the triple rating is crucial for the market recognition. >> they have signed a settlement with brazilian prosecutors over the disaster at their money better. say have local and greater in reparation. lawsuitss outstanding with around $46 billion. global news, 24 hours a day on air and on tictoc, powered by twitter. i am jessica summers, this is bloomberg. steven mnuchin has denied that china is the main target of his plan to use

emergency laws to protect sensitive u.s. industries. eight people familiar with the plans have told bloomberg that the white house was to declare that some chinese investment is a security risk. shanghai for us with the latest. what is going on? >> what is happening is that we are getting a lot closer to some deadlines. --ot of these strategy negotiating strategies are coming to fruition with deadlines. they could potentially be tariffs of $44 billion worth of chinese exports. this friday we're hearing from -- emergency act economic powers act. it can restrict future chinese investment or any other country investment in sensitive areas like robotics, new energy

vehicles, aerospace. as we get closer to these deadlines, you start discounting the fact that it might be negotiating bluster and you start thinking this might actually have a tangible impact on markets and the global economy as we heard from the eu and the chinese yesterday. we are getting mixed signals as well. steve mnuchin has long been regarded as one who favors negotiations to solve these things. these people are telling us that maybe he has been convinced by the more hawkish members of the white house. they may need to use more blunt tools. navarro waspeter backing away or trying to calm. when the market was selling off. investors are saying how long am i going to keep on listening to this rhetoric without saying there might be some tangible negative effects? >> that was an interesting twist.

this is maybe the biggest trade out in the white house. he tried to dial it back on a day when stocks got hammered. it makes me think there may be a live debate going on in the white house. the european officials are meeting with the chinese. this may be another slightly different flavor. it might be stronger push back. we are not going to take it -- that kind of thing. >> these are the two training blocks. china and the eu are saying that we oppose unilateralism and protectionism of course. they came out with that statement yesterday and they are saying that the global economy could be heading toward the session. xi jinping told a group made up of u.s. and european multinational ceos late last week in beijing -- he said that china will strike back against the united states. we was his paraphrase what he

told people that were quoted in the wall street journal story. in the leicester are taught to turn the other cheek. in china he says we punch back. reasonn: that is one that i always thought donald trump and xi jinping would get along. they seem to be cut from the same cloth. stephen engle. this is why the escalated dispute is coming at the worst possible time. later on, we are on bear market watch with the rout in chinese equities set to continue. this is bloomberg. ♪

♪ this is daybreak asia. i am yvonne man in hong kong. kathleen: i am kathleen hays in

new york. peter navarro tried to ease concerns over asian trade policy. he said there are no plans for investment restrictions on china. beijing and brussels are wanting that this could cause a recession. joining me now is larry hathaway. let's start with the news of the day. steve mnuchin is preparing something that could apply specifically to restricting chinese tech investments. peter navarro dials it back. is there some disarray in the white house? always aere is question about who speaks for the white house. bottom one is this, this is about politics. the voice that speaks loudest right now is the voice of the voter. at least those were staunch republicans who supported this president supported now more than ever. perspective, it is

difficult. it seems to be playing well where trump team's to have it play. from that perspective, i think that is the key to watch. >> i understand what you are saying about trump's agenda and midterm elections and ultimate run for a second term in the white house. i'm i threw a little bit of a curveball to our control room. i have a chart from our gtb library. this is how much bigger u.s. exports to china are then u.s. imports from china. three times is they. china can't match these tariffs. they can only take this trade was so far. it shows my donald trump is serious. how big of a problem is this? is there some justification in

pushing the chinese on this? >> i don't think there is a great deal of justification. even a chart that you will portray is more than a misleading than an accurate picture. the trade is very complex. supply chains are going in both directions. the arithmetic portrayed here is only part of the story. much of the rhetoric around trade these days from the white house, it is very dated, very 19th century. moreover, what is true in terms of merchandise trade, there is also a capital account transaction. -- companies are all slated also closely interlinked in terms of investment in the u.s. and china. there are all sorts of other ways in which the chinese and u.s. economies have simple trade measures that don't capture. i think it is a fairly false way of trying to portray the relationship.

we heard a lot of these companies speaking about harley davidson moving production and daimler. is this the beginning of a trend? have whent does this delaying and hiring? >> i think you touch on two important issues. firms, you much harley davidson, jerk -- german automakers as well. they will have to think about where they want to be located production. the perspective of the broader economy, the bigger that the direct impact on the economy may spill over from those associated with trade alone to broader corporate

decisions around business investment and hiring. that is terribly important because the underpinnings of corporate been about willingness to hire workers and drive down unemployment and that household incomes. also, to support demand on one side. in the last 12 months there has been an increase in capital expenditures. note the decline in global equity markets. they may rain and some of those plans. that is where the adverse spillover could be much greater. is going up three or even 4%. do you think they could absorb the uncertainty? we are coming up to something close to those numbers, powell but just shy of 3% growth. that is as high as it will get. not because they may be some longer-term trends that they are

in permanent a growth rate of the u.s. economy. we are at a point of full employment. we are probably stretch in terms of other forms of capacity. i think the market for an issue for capital markets is that european growth is not bouncing back for the first quarter soft spot. we are seeing some recovery in japan but it is not clear if it will take place in the emerging complex given the high cost of capital that. global growth looks like it is peaking. that makes it auspicious time, a risky time for us to be engaging in trade war if not outright trade war. capital markets are cognizant of these things. inflection points matter. if we see some declines in the growth of gdp, it will mean a more serious obstacle for earnings and valuations. that is what we are confronted with a demonic -- confronted with at the moment. mind, i: i read your

have a chart depicting what you're talking about for europe. it is really simple. the white lines show inflation at 1.9%. this is right where they want it. look on the right-hand side, there is that small bar. we all know it will bounce back. what this means for central bank, doesn't slow down mario draghi at the ucb? loses one of the reasons for tightening, doesn't slow down the fed? the ecb perspective, they have set out a plan here to reduce purchases. then an indication by middle of next year, perhaps in the third quarter they would begin to lift interest rates. if the growth does not bounce back, it inflation plans out at these levels, i think the dovish stance will postpone the rate hikes next year.

with respect to the fed, they spoke a very plain english about raising rates to more times this year and maybe three next year. that is pretty well in the marketplace. i think from here the risk is that the fed can't deliver on in fact, growth globally as well as the united states does not accelerate nor does inflation. i think from the markets perspective right now, the risk would have to be that we get looser policy for longer than what is currently expected. it is all very data dependent. today's words will probably become tomorrow's actions as far as central banks are concerned. i'm sure they're hoping the rhetoric will cool down. they were desperately like to normalize policy. to do so ife driven the conditions don't want those actions. the pressure could

slow down the fed. what happens if the fed can't deal on -- deliver on that rate hike? >> if we look at recent moves of aunt yields, 10 year treasury yields and the dollar value against the yen or the euro, it has been more stable than the turbulence and equity markets would suggest. that theelling us market still believe the fed has to continue along this path of normalization. it also means no other central banks are beginning to take his concerns -- i think the bond market looks to be relatively stable. we do have a u.s. economy at full employment. one that needs a tighter monetary policy provided that there are no shocks. with oil prices coming down, that is a good thing for the world economy and it should give us some are spied in terms of

any concerns about purchasing power. there is a slight tug-of-war going on between underpinnings that was just bond deals or as a bit higher against the risks we were talking about. why howanother reason the next few days -- few weeks turn out. it will be very important for bond yields and currency. >> thank you very much. plenty more to come on daybreak asia, this is bloomberg. ♪

♪ kathleen: let's do a check of your markets here. equities, to asian the japanese nikkei 225 is down. we continue to see some respite here in the currency. 109 .59overing around

this morning. there are reports that the u.s. treasury will propose limits on chinese technology. 20 more to come here on daybreak asia, this is bloomberg.

♪ it is 8:30 in singapore. yvonne: we are just a half hour away from the opening of training there. take a look at my bloomberg year. we are on correction wants. on the brink of that 10% fall from the matrix we did see, this brings us to the lowest level in nearly nine months. singapore is a trade dependent nation. they are caught in the trade spat. on -- all on a list other markets. >> certainly, conversation among

central bankers as you know has been about the impact of federal reserve policy. that is where a lot of the downturn started. we have the trade tensions piling on. doubt about it, it doesn't just hit asian stocks, it hits asian emerging-market ons as well. that, let's get to the first word news with jessica summers. jessica: steven mnuchin has denied that china is the main target of plans to use emergency laws to protect sensitive u.s. industries. people family with the plans have told bloomberg that the white house wants to claim that chinese investment is a security risk in energy, robotics and steve mnuchin says any country trying to steal u.s. technology is.

they have began to question sustain aey can showdown with the u.s.. this is around the chinese heavily censored internet. they push the bounds of a separable public debate in a this can lead to jail time. china and the european union have promised to oppose trade protectionism. they said unilateral actions and push the world into -- they say it could push the world into recession. china and the eu are firmly opposing lateral is an and protectionism. triggerions could turbulence and even a recession. president trump has accused both aging and brussels of unfair trade. hasu.s. supreme court thrown out a government lawsuit. they prohibit merchants from steering customers to lower fees.

it deals a blow to retailers looking to reduce the $50 billion to see if that pay to credit card companies each year. global news, 24 hours a day on air and on tictoc on twitter. powered by more than 2700 journalists in more than 120 countries, i am jessica summers. this is bloomberg. kathleen: let's get an update with sophie. see the nikkei 225 up by .5%. profitability improves, -- elsewhere, we are seeing u.s. futures tick higher there. this in the days

early. back to $75cked about. goldman sachs is highlighting the outage of a canadian oil facility which could put a dent into u.s. stockpiles. that could narrow them and it could place upward pressure on oil prices. let's check in on movers across the region in tokyo. this is most japanese auto stocks. this winter inevitably increase production. given wall street, checking it on heavyweight chip stocks, we have samsung. we want to highlight the report on the economic daily.

samsung's second-quarter profit may drop by more than one trillion won from the first couple of months due to weak mobile business. this would be the first time for samsung to post lower profits since the third quarter of 2016. >> the next guest says tight liquidity is everywhere while external and internal factors seem to be challenging. joining us now is the party's capital and its national chief executive joining us here in hong kong. do you talk about this credit crunch? >> we have seen the leaders in micro and macro data come out with china. it means that the chinese market is slowing down for the time being.

this could have an impact on hong kong and other asian markets as well. >> why do you think this trip archive wasn't enough? basically, the market has been dropping and cut itself. a lot of the banks do not want to do that. busywork, a lot of them have been worrying about that. ronald, it is kathleen hays in new york. whateen: as you look at

the pboc has to now, they cut the reserve ratio. liquidity.rovide on the other hand they have to try to keep credit from growing too quickly. how will they manage this? ronald: this has been a unique mix of policy. at one point of time, they basically try to maintain a very tight credit policy. these two factors are conflicting factors. they had get to see how the companies can benefit from that. at the same time, i have been talking to a lot of companies in china. also, they are facing very tight liquidity. risk of them are taking a of bankruptcy.

>> these trade battles make it much harder for companies of export. for chinese scope companies to push back to say president she must do anything about this? a chinese coming theye manufacturing front, had investment into the state. there is nothing they can do about that. of course, the government may try to smooth the problem a little bit. all these measures need to be -- in order though

to not create a panic effect on the economy. it is interesting, you're seeing chinese regulators tell brokerages to gain government approval. at one point does this resemble a 2016 scenario to you? ronald: back in 2005 when the government tried to be in the market and maintain a strong liquidity, that is a particular shift, particularly three years ago. they had not been successful in doing that. at the same time, what they can liquidityide more in and try to count down the do start aanic and try to

trade wawith the state. >> i want to come in with some breaking news. this is a french company that those outdoor advertising. they are agreeing to buy the outdoor poor sick -- six australian dollars. this is per share. this comes out in the midst of trade tension. that is the breaking news we will have. we will be following this later on bloomberg. let's bring it back to ronald when it comes to asian stocks. it seems like we have seen some major industries and parts of asia. in terms of the relative strength index, shanghai is

certainly one of them. i actually adding onto risk at the moment? the stocks have to be very low. the problem is that the people in investment don't like uncertainty. the u.s. trade war with china is a very serious threat. a lot of new things are coming up. we need more than that. peoplbuying into the asian market. basically we have yet to see that. >> what is still safe at the moment? are you focusing on investment demand stories? certain factors still have

certain advantages over the others. given the u.s. and china trade war, the chinese government may do something more in support of policy and technology sectors. basically, they will be stabilizing. i think these two factors and sectors, we should look at them for the time being. >> i do have a chart here that shows a falling against the dollar. what is the outlook for you? i think this is good for the manufacturing sector. of course cup of the government did not control that. we can create this factor as well. when we look back three years

ago, this will create an impact on the liquidity. >> they will not use it as a trade weapon. >> we will leave it there. this is the partner of -- a quick check of the latest business flash headlines. softbank may be looking to list is japanese mobile units. the application may be headed in as soon as july. list a raiset will in capital. than $19ay raise more billion. to data, this will mark the third biggest official" a first-time fund a costs -- across all investment strategy. those behind division fund and structural reform fund. the blackstone fund got a big pledge from saudi arabia.

is down in china after john oliver criticized xi jinping on his show. he called that the chinese mapping political power and centering online dissent about him including banning references to winnie the pooh. chinese authorities appear to have blocked hbo.com but hbo programming licensed to tencent has not been affected. up next, china's ipo seen is red-hot with giants like shelby on the docket. the startup pipeline might be just as impressive. we'll hear from one of the largest investors next, this is bloomberg. ♪

♪ >> silicon valley may no longer be the capital of early-stage financing. china has tripled the u.s. periods.

the asian nation is also making the unicorns at a faster pace and united states. one of china's largest angel investors has played a part of that. they have funded the other 100 billion dollar companies since 2010. hannah told us what she looks for in her investments. >> we have about ultimate points since we started seven years ago. they are across many different sectors. in the early stage it is not as much about the idea as the person. ideas can change. we're looking for people who we think can create billion dollar companies. that has always been our method. that has not changed. we have of sectors, been disrupted in the past year. they came out with many programs. basically, instead of downloading an app, you can imagine people are using a mini program.

that creates a whole new ecosystem. whether it is e-commerce or gaming or sharing, there is a lot of application. consumer trends continue to be interesting. this is like a new concept grocery store. that is completely disrupting retail. it is all about operations. there has been a lot in blockchain as well. local chinese founders as well as people who relocated to the u.s. and singapore to start a whole newhat is disruptive technology that we are watching very closely. it is certainly very interesting. >> in terms of some of your how is this changing the e-commerce sector? what impact is it happen clash -- is it having? a threest closed

dollars -- $3 billion valuation from alibaba. their motto is introducing chinese customers to luxury or mass luxury items from abroad. the ason it is famous this year's because a lot of celebrities are going out to it. you can imagine it is becoming like an instagram. what does this tell you about the disruption they're seeing in the education space? >> it is the darling. everyone wants to get into this. i think there is going to be huge room for growth. >> does the involvement of tencent and alibaba as major a challenge ornt an opportunity? them, theythe two of

mix of, cloud, finance. they are so many different subsectors in the overall industry. it is becoming more important that companies pick a side at a later stage instead of arriving with them. they don't have enough power to compete event -- compete against them. >> is your preferred exit an ipo? with some exitng so far, something acquisition. times, they want to buy one or 2% of our state. it is a great way for us to take some money off the table at a billion dollars valuation. i can sell 1% and get some money back to my investors. i have a little bit more possibility to get my money out.

>> that was the ceo speaking to tom mackenzie. we have some breaking lines coming through here. this is a french electricity company speaking out and saying they are not preparing a bid. this is the renewable unit of portugal's edp which is quite interesting. there was some speculation that they were considering a bid for the renewable unit. pay theentially could way for the gorges. this could actually acquire this renewable energy unit. 733 units perred share. they are not preparing for a bid at the moment. we have teamed up with twitter to launch tictoc by twitter.

can get reports verified by us. if you're on twitter, make sure to follow tictoc. this is bloomberg. ♪

♪ this is daybreak asia. i am yvonne man in hong kong. kathleen: i am kathleen hays in new york.

president trump accused harley davidson of waving the white flag. the motorcycle maker, once a trump favorite laying eu tariffs because of t president's own levies on alumina. announced plans to close a factory in missouri and but one in thailand. another iconic american brand is in the firing line as well. itk daniels bourbon says will have to raise prices in europe once a 25% tariff is imposed. expect a price hike of 10% at the retail level. goldman says retaliatory tariffs will cut earnings for the company by 5% this year. >> our stocks are the lowest in five months. volkswagen and daimler but the losses. president trump has threatened a 20% tariff on european cars imported in the u.s. that this -- if the eu doesn't take down

trade barriers of its own. bmw is warning of a pullback in investment in the u.k.. if the final phrase it does not ensure free flow to the eu. uncertainty of negotiations is not helpful. customer arrangements reveal a cause for concern. that is it from us on daybreak asia. time to look at what is coming up on bloomberg markets. heidi: -- i: we are washing this go into this market in hong kong. as will be the day that we see that 20% decline. theill be speaking to greater china economist about the implications of this doubling downthe that we saw.

will be key.yuan we will see potential for the weakening on account of a declining cross-border investment. take a look at that and also a preview, we are getting a check for pmi's over the weekend as well. we will be speaking to the morgan stanley chief of asia and emerging marketing equity strategist as well over the next couple of hours. morgan stanley recently flashed their outlook when it comes to hong kong implying in 18% to climb the january high. that will fall 10% from here. that's because to a bear market as well. don't bother even buying it. ahead,further weakness pretty there should across the rest of emerging markets as well. finally, sticking with the china theme, catherine will be joining us from infidelity international and looking at the 40 cap -- for the catalyst therefore it potential bearish signal for the chinese markets and chinese

economy. >> you have all the pieces in place to cover if very dynamic 24 hours. before we hand over bloomberg markets asia, is look at how markets are trading right now. you can see the nikkei has lost almost .5%. it is in the bear markets territory now. it is down about seven point. about 2.5osing points. a pretty big move so far in trading. yvonne: we also watching singapore as well. this is bloomberg. ♪ retail.

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♪ asian stocks extend, the global slide of trade. speaking of global sentiment the worst first half in eight years, and a slump comes despite senior -- theficials siding risk is pushing the road into a recession. i am ramy inocencio you in hong kong. haidi: and i am haidi done in sydney. -- haidi lun in