yvonne: 7:00 in hong kong. i'm yvonne man. welcome to daybreak asia. asia-pacific markets facing a mixed start and stop entering the second half. oil is following -- falling and the euro is under pressure. investors are looking forward to friday for tariffs and the latest payroll numbers. ramy: i'm ramy inocencio in new york, past 7:00 p.m. on sunday. says it has now become a real car company. mexico shakes up the system with the first is eventual victory in decades for the left. we are live in mexico city.

♪ ramy: good morning. welcome to the second half of the year. it could be a time to celebrate. taking a look at the eco-data over the weekend, china pmi lackluster. south korean exports missing a tad. trade tensions and trade war, the snowball is causing investor concerns. a busy first week of the second half. yvonne: it's interesting because we see a sentiment change on friday a positive. a big week. jobtwo biggest eco-events, stay in the u.s. and tariff day

on july 6. ramy: not something we usually look forward to. let's take a look at how the u.s. markets closed to get you a reminder. those were positive. the dow was up .25%. s&p 500 and the nasdaq marginally higher. will beahead, we watching to see if these gauges go negative because of what happened and because of tariff day. let's take a check of currencies. this is on the negative side of things. .5%.nally lower, by about the euro falling more today off the .4% decline friday. the mexican peso, 19.82%. it had been stronger by about .6%. it's pared back a little bit. the mexican peso has been strengthening for the past two weeks as we been getting towards

the elections that are happening as we speak. usd and brazilian riel heading toward a .8, 3.9 mark. we have a look at this through the dollar. this is dollar dissonance in your gpd library. the white line is the u.s. dollar index, relatively higher than the media forecast. now --happening right what's happening right now is p could see that bn this falling as 11% by the end of 2019. hold onto your hats. yvonne: let's take a look at how we are set up for asia so far. we are hoping to build on the optimism we saw friday. the index 50 up about .33%, futures pointing positive. we have the rba meeting on tuesday. nikkei futures are the other

direction. the country next end line to talk about business sentiment in this hour and features flat at the moment. currencies, we're watching dollar weakness. the aussie is pretty much flat and the kiwi is seeing decent gains rebounding from the two-year low. we watch the offshore remnant be steady after tumbling more than 3% the last two weeks. we'll see if we see intervention. bond markets are pretty quiet, yields ticking higher. it closes at 286. president trump's weekend of oil diplomacy we will talk about later. commodities index up. polls are closing and mexico after a dramatic presidential election. it looks like the left could win for the first time in decades.

let's cross into mexico city. tell us what the mood on the ground is with this election. >> the expectations are growing slowly here. are closingpolls and most of the country. the eastern part of mexico is voting for another two hours. the mood is pretty calm. there was a few episodes of violence, but it's a normal election. we're awaiting these results. we expectsoon can results then? >> it's important to distinguish. here, we have nine races for governor's in the states. these races, the results are coming out. exit polls are coming out soon as we speak. the presidential race, we need to wait two hours because the

eastern part of mexico is still voting. around 8:00 p.m. local time, we'll be seeing the first presidential polls results. around midnight, we expect a rep account of the official electoral institute to arrange a good estimate of where these results are going. ramy: in terms of market reaction, we've been looking at the peso. it's been strengthening over the past few weeks. i'm curious about that, and also what traders are watching in addition to the peso. >> maybe that's the surprise of the election so far in terms of markets. everyone was saying, as soon as we get closer to the election date and the idea that the leftist candidate will win this election, we'll see the peso depreciating quickly. what we saw was the peso appreciating, getting stronger even today. ramy: really interesting stuff.

as the polls continue to close, we'll have the latest out of mexico. thank you very much. you can also turn to your bloomberg for more on this. go to tliv to get commentary and analysis from bloomberg's expert editors. let's head to washington because the white house is appearing to back off a tweet sent by president trump claiming he persuaded saudi arabia to produce oil production to maximum capacity, which could fracture the opec truce and stoke the rivalry with iran. let's get more withdraws krasny in washington. is washington feeling the heat from high oil prices? they are up to past four days in a row. have we learned anymore about trumps conversations with the saudi's? >> i think it's not what happened in the past four days, but the bigger trend in oil prices and gasoline prices in

the united states seem to be have getting under the skin of the white house and they are certainly aware the u.s. is such a car culture, many regular people feel the heat when prices at the pumps go up. we saw president trump trying to job on saudi arabia -- jawbone saudi arabia's leaders with a phone call, but it looks like he didn't quite hit the mark. saudi wants to stand firm with its open numbers and won't -- opec members and won't raise production unilaterally. it's definitely something that plays into the midterm elections in the united states as we go into the summer driving season. that's what's behind the latest out of the blue push by president trump. yvonne: we seen when it comes to tariffs, automakers are united in their optimization --

optimism. the gm ceo talking about how this could lead to job losses. has there been any response in the illustration? -- administration? ros: executives from auto companies across the board from hyundai to south korea to bmw have been reading some of the letters to wilbur loss and they are not mincing words about the impact this will have on their companies, on the auto industry, totality, auto-parts makers. so far, the trump administration publicly isn't caving in. they're not buying this. donald trump said in an interview on fox, this is not going to be negative for the u.s. because companies will make more cars here. we've got bmw saying in its submission to the congress department, we make millions of

4 millione states, since 1994, they said. asit remains to be seen comments continued to roll in and a process by the commerce department and as secretary wilbur ross and other members of the trump team get together to talk about what the companies have said, if there will be any backing down. we also heard president trump today indicating as he looks to finalize nafta renegotiations, that he sees the potential for auto tariffs as a linchpin for the united states. and definitely on his mind no sign he will back down at all. navarroi think peter said it was all smoke and mirrors with what these automakers are saying. president trump spoke on fox this weekend. talk more about harley davidson and how they should not move production overseas. >> we just propose this a few

days ago. we made this deal years ago. they made a still at the beginning of the year. i don't think they should do it. i think harley is an american bike, and american motorcycle, and they should build them in this country. yvonne: seems like trump is doubling down on all this. ros: he really is. the president tweeted about harley davidson on three different days last week. he's really pushing it. he says they are ungrateful for all they've done for the company. he does talk about moving reduction overseas, but as my bloomberg colleagues have reported this week, harley has been producing motorcycles outside the u.s. for 20 years, but none of the ones sold in the u.s. come from overseas, so they are using these offshore plans to produce for the european markets. i'm not sure that's clear to president trump.

when he talks about how harley davidson voters or harley ers, they all voted for him and are angry with the company. i'm not sure that's the case. he also was asked, do you think it's right to single out companies for chris's him when you don't like their policies? he says it's fine. it's good for me to do that. i don't know what the next step would be for the white house in regards to harley davidson, but we'll wait and see. yvonne: it will be the sum of all the parts why it comes to car manufacturers, including harley davidson. now for some first word news. we are looking ahead and talking about the weekend, the world's biggest trading block is a step closer after a deal could be signed this year. the economic partnership

includes china and india, but not the u.s. japan says it's vital that they fly the flag of free trade. our staff would cover one third of the world economy and half its population. >> we are being flexible in our discussion while maintaining high standards. includese tpp, ours different stages of development, and we have to be flexible in taking this into account. the final agreement we want to achieve will take this into consideration. yvonne: china's official separate gauge fell last month. the two biggest economies face the trade war. manufacturing pmi index stood at 51.5 in june versus 51.9 in may, and a forecast of 51.6 in a bloomberg survey. a rose to 55. china and the u.s. are threatening tariffs of billions of dollars of trade on friday.

ramy: the hong kong government says the city's future is bright, as protesters demand more democracy on its return to chinese rule. demonstrators announced one-party rule on the mainland but failed to strike the flag raising ceremony. i have even greater confidence in hong kong, as long as we remain focused and stand united. i'm sure the best is yet to come for hong kong. ramy: to sports and penalty shootouts, i decided the two latest matches of the world cup. russia pulled off a major upset, sending spain packing. the matched finish level at 1-1 after extra time and then the russian goalkeeper triggered wild celebrations in moscow by saving two spot kicks. the host will face croatia in the quarterfinals after their

3-2 shootout defeat of denmark. global news 24 hours a day on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ yvonne: silla had come up more on trade, likely to reflect the impact of tariffs concerns. ramy: as em stocks react to their worst order since 2015, we asked the bank of singapore how much further the selloff could go. this is bloomberg. ♪

yvonne: this is daybreak asia. i'm yvonne man in hong kong. ramy: i ramy inocencio in new york. the first trading day since global stocks launch their worst half. currency has posted their worst quarter ever since 2015. all of this battered by escalating trade war concern and

weakness in china. let's get more with james chino. thanks for joining us. heading to equities, i see you are going to be slightly underrating into the second half of 2018. think things will get worse before it gets better. this week, we're going to have 26, --, trade tariffs on july 6, which will create choppy conditions. i think investors have to brace for much more turbulence, at least in the weeks ahead. i think it's sensible to be cautious now, still underrate markets and these choppy conditions in the weekends to come. ramy: let's parse this a little more and hop into the bloomberg terminal. shares,ntioned, e.m. they have fallen the most its

2015 this quarter. do you see this finding any respite for those folks in the em space or as a strategist, which you provide -- advice folks to get out and go summer else? james: to put it in perspective, e.m. as a whole is doing healthy economically, especially em asia. there are signs of slowing down in china, but e.m. is still healthy as a unit. think over the last two years, e.m. economies have improved in terms of fundamentals. with that in mind, i think you are going to get more uncertainty. it's still too early to tell em equities as yet. stay invested, but i think we still have a few more weeks and months to come to see where we get in terms of the bottoming

out of the markets. i think the big uncertainty is the u.s. china trade tensions. unless we get clarity there, it's very difficult to take aggressive bets now. yvonne: judging what we saw on friday, it seems like it was a sea change when it came's to sentiment. without risk assets across the board. what changed? trade tensions, we haven't seen too much clarity yet. there's also fed tightening and balance reduction. these things are likely to intensify. what will change friday? james: it's a combination of a few things. uncertainty with regards to trade tensions, but ultimately earnings growth picture is still fairly solid, a little bit of slowing on that aspect. i think by and large, the conflict of these uncertainties

as well as good fundamentals, are clashing with each other. you're going to see periods of markets bouncing up, markets going down from a day-to-day basis. a lot of choppiness in markets, it's hard to get a real discernible trend in the weeks to come. yvonne: it's interesting, too, got to focus on china given what we've in seeing, the volatile session leading to a bear market. the pboc sent a clear signal they are trying to fight this after the recent round of volatility. does this work? we see valuations looking cheap however way you slice it. could the signal be a game changer for china stocks? chinese areems the trying to come into the market in terms of stimulus for the economy, because economic data is slowing down. will it be a game changer?

i think not really because a lot of it is already in the price. they need to, if they want to cause the market to rebound, there has to be even much more action from their, something that well catch the market unaware of. generally,e, i think there could be much more uncertainty in the chinese market, at least in the short-term, before we find a bottoming out there. ramy: in terms of the u.n. and the trajectory, as well, we can hop into the gte library to show viewers. we can see the forwards haven't sold off as much, but the question here is, when do you think the pboc might actually intervene on the u.n. here? here, people say the 6.7 mark is a threshold. level,it's hard to put a

but it's clear the recent weakness in the chinese yuan is market infused rather than a serious policy intention of wanting a weakness in the chinese currency. really because the chinese knows stableefit of keeping it outweighs the cost of having a weakening path of the yen. i think the chinese want to stay at this stage rather than use it as a tool for this trade retaliation. there could be perhaps and the short-term, we might see much more volatility with chinese yuan, but i think going forward, you could see a more stabilization there because i expect the chinese authority would want more stable yuan in this fairly unstable market conditions. yvonne: i think you're still staying cautious. how do you prepare for the second half?

you are looking at hedging positions, as well? james: yes, that's right. i think going into the second half, we want to be more cautious. we want to hold more cash because there could be opportunities that might pop up, for sure. we are keeping our a la try and monitoring situation. that's going to be good for investment opportunities in 2018. forwhile, stay cautious these weeks and see how trade tensions will play out. yvonne: thank you. singapore, bank of joining us from the lion city. bloomberg universe -- uber users can interact -- bloomberg users can interact with the chart. save the charts for future reference. this is bloomberg. ♪

yvonne: a quick check on the

latest business flash headlines. musk said tesla became a real car company after hitting its target. they said the company produced 5000 of the markets last week and could hit 6000 next month. they built a third production that ismove described as surprising. insanity, i'm sorry. ramy: insanity indeed. motors joined general and urging the trump administration not to impose tariffs on importing cars. wilbur ross pointed out it's $9 billion investment supports more than 12,000. american jobs hyundai says it would be devastating and jeopardize plans to expand production in the united states. up next, factory flaws in china.

we look at how the trade war is having a real and negative impact on growth. this is bloomberg. ♪

yvonne: 7:30 in hong kong. it is a holiday in the city as we mark establishment day. we are 30 minutes away from the major target open. ramy: 7:30 p.m. sunday in new york. markets are closed ever so marginally higher. we will look to see how the trade tariffs and tensions shakeout the market. i am ramy inocencio in new york. yvonne: i am yvonne man. you are watching daybreak asia. let's get first word news. president trump has repeated his demand for higher oil production, saying opec is manipulating the market. he told fox saudi arabia will

have to raise output even as the white house backed away from his earlier tweet saying he had persuaded the thing to pump more crude -- the kingdom to pump more crude. the saudi news agency did not make any reference to new levels. new mexico voting for a new -- mexico is voting for a new president. andre manuel lopez seems to be heading for a landslide victory in a popular revolt against entrenched corruption, crime and poverty. they could have a majority in both houses of congress. there was 100 politicians murdered. yvonne: chancellor merkel's fragile coalition is under new pressure with the leader of her coalition group quitting. the man is at odds with merkel over refugees and has turned

away asylum-seekers at the border. they raised doubts about the coalition's of elegy to survive and function -- ability to survive and function. areijing and london group teaming up for a billion dollar technology fund. this will be china's answer to billion vision funds. a state owned conglomerate, cng and other chinese groups have pledged $6 billion. 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. ♪ let's get more on what we should be watching as trading gets underway with bloomberg's global markets editor adam haigh . with all the discussion around the decline in china's currency and intervention, there is one indicator suggesting these declines will not last long. yes, this is a useful

indicator in the fx markets which shows a difference between what is happening in the scott rate and the forward market. let's dive into the chart. it is in the gtv library. it shows the difference between the forward rate and spot rate really quite noticeable. people have been understandably very cautious on the currency. it has been under pressure the last couple of weeks. those declines have not played out as much in the forward market which much -- might give a little bit of comfort to people who are looking and yearning for things to stabilize in china given the negative sentiment. a lot of this story is around domestic slowdown. we had more data pointing to a slowdown in the manufacturing sector. that comes on the back of retail sales and industrial production data, fixed asset investment data. there is that domestic story but also this kind of escalation and

global tensions on the trade front, brings a whole other level into play. what is key is the level of intervention if any from authorities. as we heard from our guest this idea ine is the market that policy easing is fairly likely, certainly in the back half of this year, be tweets -- tcut, weaks in other places. there is a sense that if policy intervention comes in, we could be in a tricky situation where the equity market had a decent bounce on friday, some stability in the unsure currency. clearly chinese assets even with hong kong close today continue to remain volatile. yvonne: i think goldman said we could expect that once per quarter to the end of the year. now what about the stock market?

the sentiment is bearish. poor.it is pretty it is a tricky place to be getting back into the market given how much we have seen in declines recently. let's look at one aspect of this. that is the fact this emerging markets space is setting off in the last few months. a lot of it has been the answer to china itself. have a look at the chart. this looks at the msci index of emerging markets with the .hinese component taken out if you take that out, e.m. assets have done relatively better on kind of a relative sense. but what becomes more of a play now is the valuation argument with chinese equities, they have a bit of a history of trading on a discount to some of the other developed markets, but also to the e.m. markets. they have sold off significantly

now. there are quite a lot of global money managers looking at this space and thinking, you can still get decent earnings growth in a number of these sectors across the mainland market. msci is for on the earnings to grow 15% for the remainder of the 2018 financial year and financing further growth in 2019 and 2020. the valuation discounts, they are going to lower. the question is how quickly it comes, if we don't see intervention from the authorities. yvonne: a lot of talk there from that. like a kid in a candy store when it comes to focusing on valuations. our global markets editor. don't forget to check the gtv library for the charts you saw. it is gtv on your bloomberg terminal. we are counting down to the major market opens in the made -- the asia-pacific. we are counting down to the

tankan survey from the boj. it will be about trade tensions on how this will weigh on sentiment. sophie: the survey will see a dimming of rice is particularly among larger factories. you can see how it did in the last reading, expecting a drop to 22 among big players. what is key to this survey, the plan being affected by trade tensions. autosriffs on japanese would amount to a levy of $9.1 billion annually. these tariffs would hurt u.s. consumers as well as the industry, plus the japanese government said tariffs will affect 1.5 million jobs created by auto companies in the u.s. let's check in on japanese futures. overall looking like a mixed start to the second half of 2018. the nikkei contracts are

signaling a lower open. ramy: asian investors are trying to recover from the summer bruising, but political shenanigans may be dampening the mood. what are you watching? sophie: we are keeping an eye on the mexican peso, waiting to see the elections. this affects currencies with low liquidity conditions likely a key driver. it has appreciated 5.2%. also watching the euro-yen, given the german political headlines. it has moved this morning, as merkel's party voted to back and deal onl -- an e.u. migration. there could be upward revision in japanese earnings, so the yen's performance did help the topics -- the topix rebound. it is a rebound from the 5.6% lost in the first three months

of the year, so there is hope. we can maintain this meant -- maintain this momentum going into the second half of the year. ramy: looking at the asian open for the first day of the second half. china's official factory gauge fell more than expected for june as the world's two biggest economies head towards a potential trade war. kathleen is here with the details. trade uncertainty appears to be finally settling in a little bit. are starting to see signs. when you look at the biggest economies in the world squaring off against trade and going further and further down a road, neither one really wants to, but can't back away, it is because businesses are watching, consumers. in china take numbers, china purchasing manager indexes. let's look at a chart and see how we can look at the white line, manufacturing pmi, down to may.from 51.9 in

it is still above 50, signaling growth, but the question it raises, is it starting to cool off? the services and construction, pretty much steady. june. the focus on manufacturing increases because new factory orders, export orders got weaker . so did order backlogs, all-important. on the positive side, people think of china, central-bank not ignoring this after their meeting some of the policy statement suggests they are ready to support growth more. we can only assume trade is on the radar screen as well. ramy: something else weighing, south korea's exports, posting a tiny decline in june. kathleen: it is a tiny decline but small increase as expected. if you look at this chart, you can see exports have been so much stronger.

an increase of 2.2 that was expected. you can see double-digit increases for south korea's exports is no surprise. that is what it usually is. what you see in this white line, in south korea's export weighted trade partners pmi, still looking pretty healthy at 53.5, but down from the high here. the question is, when this is weakening, this is weakening. this is considered a global bellwether for demand, not just asia but around the world. this is why it is being watched. chip production held up, but down from the peaks of last year, important for south korea. we saw the bank of indonesia's surprise last week with a bigger than expected rate hike. are they trying to stem what they are seeing in the rupiah? kathleen: it worked last week.

the bank of indonesia is going to have to hike rates even more. let's get into a chart while i tell you the story. this will show was in pictures as our charts do. .ere is the rupiah you can see how it has been getting hammered for most of this year. you can see how back in may we got two rate hikes. here is the first 25 basis rate hike. here is the other. then last week, 25 not enough, a full 50 basis points, 100 in just two months. the problems for bank of indonesia, the experts are trying to support from trade tensions under pressure, the fed hiking rates, but people are saying even though they have pledged to maintain a preemptive monetary policy, and even though they are still saying their hands could be tied by weak growth, subdued inflation, they will hike rates more and continue to have a tough time

with the rupiah. i think everybody would say they are heading in the right direction. yvonne: that is true. kathleen, thank you. duebank of japan's tankan in a few minutes very whether trade wars are sending business sentiment. this is bloomberg. ♪ ♪

asia.: this is daybreak i am yvonne man. ramy: i am ramy inocencio. the bank of japan's second survey is likely to show concerns about u.s. tariffs putting a dent in business sentiment very let's bring in ad rodgers from rogers investment advisors. thanks for joining us. as we go towards those numbers, what is your take in terms of the trade tensions, the tariff fears that are expected? , then biggere u.s.

and double between china and the united states on friday? >> good morning. thank you for having me back on the show. this is really interesting. it is an interesting time. certainly our view as portrayed view as portrayed to our investors is the general climate seems fearful. there are problems in global trade. you can talk about u.s.-china, nafta breakdown. we think the situation, boots on the ground in japan, is better than sentiment, if you will, might indicate. there is room for surprise to the upside if the survey comes out better than expected, and equities have been punished, if you will, for bringing in that expectations. ramy: before we get to the actual numbers in a few minutes, let's talk into the bloomberg terminal. i want to show you our outlook in the gtv library. the top half is the large manufacturing outlook expected

to fall to 20 from the current 24. the large nonmanufacturing will 20 from 23. are these the clause -- claws we are seeing digging into sentiment, and if we can pull that out to the largest race, the u.s. and asia? so we think there is room to surprise on the upside. in general, what affects the survey? let's start with domestic. it is fairly good. things continue to rise here. there is 1.6 jobs for every job elegant -- job applicant. we see a moderate rise in gdp that would seem to indicate things are going well. then you move to the regional aspects. it is concerning, the trade war issues. north korea is concerning.

but we feel the global media sentiment, if you will, is more negative than the boots in the ground -- on the ground reality. companies are hiring. wages are increasing. all these things are good for the japanese economy. in a regional sense we have not seen the breakdown in trade that has been discussed. there is more posturing, economic skirmish instead of economic warfare. so we think there is room for things to be better than expected. vulnerablejapan more than the rest of the regional countries because the effects are damning -- double whammy. we have the yen as well as the overseas supply chain. chaint is a great supply -- a great question. as they move forward with the tpp minus the usa, we see greater regional cooperation,

integration. that will benefit the large smallcturers in japan and and medium-sized manufacturers who have looked at local markets to potentially fill gaps created by a u.s. trade conflict. yvonne: what do you make in terms of plans? six straight quarters of which have increased, and we see large firms increase in the second quarter. is this sustainable given the fact there is uncertainty on trade? another great question because we look at as a true determinant. that is putting money at the mouth at management level. in japan, the government is concerned letting in 500,000 immigrants on an annual basis. if japan moves to solve the

immigration issue, which is a labor issue now as much as anything else, this is fantastic for the japanese economy. it is fantastic for manufacturers. there are multiple sectors were there are 0% unemployment. 0%where there is unemployment. we think there is room to surprise to the upside and will go hand in hand with an increase in immigration if the japanese government sultry. pauselet's take a quick because we are getting breaking news on the second quarter tankan survey. it is a mixed picture. the number has missed, 21 of the actual survey against 22. we are seeing slippage. in terms of the manufacturing outlook, that is seeing positivity.

the actual is 24 -- 21, the survey was for 20. looking at a large businesses, that is seeing positivity here that is an actual 24 versus survey of 23. for the nonmanufacturing outlook there is negative and he. 21 is the actual but the survey was 22, so next picture. of --: i see you kind what is your take? looking at the monitor to see the actual numbers. it is not so bad. the end result is, it is not so bad. there is no glaring weakness. we see everything above 20. that is very positive. you look at historical numbers going back 4, 5, six years. moderate growth increased potential for growth with an increase in immigration, more focus on how you phil empty jobs

in japan, manufacturing sector. these are important points regardless of trade wars. the boots on the ground numbers are not that bad. yvonne: i think the one highlight i mentioned that is positive, the, large industry. they say 13.6% rise which is quite steep. economists were expecting 3% increase. so it is sustainable for another quarter. when it comes to the boj, do you think anything can happen? are there any terms of fine-tuning the policy this year? ed: no. [laughter] ed: watching paint dry. the goals are clear. firmly in control. the ldp is firmly in control. prime minister abe seems to be

emerging unscathed from recent turmoil. suspect no reason to the japanese government will do anything other than what they have promised, continue to keep interest rates low. that will force cash back into the system. that will force. that is a fantastic number. that is putting your money where your mouth is as far as sentiment goes. so good for japan. yvonne: [laughter] i want to ask you about earnings as well because we have seen the likes of these car manufacturers, toyota one of them saying costs would be passed on to consumers through these tariffs, if we get them. it could take a hit on sales. at what point will does not just hit confidence but also earnings, given the fact the topix is in correction territory? ed: tariffs, trade wars,

skirmishes, whatever you want to call it, it will have significant impact. of reason for being here, the search for alpha, this is why you should be investing in hedge funds imagers that can go along and short. this is why etf's in general will come screeching to a halt. acrossseeing dispersion sectors of returns. we are seeing dispersion of earnings momentum on a sector by sector basis and some will be dramatically affected, others not so much. yvonne: the positivity. ed: the winners and losers. yvonne: the ceo joining us from tokyo. we reflect all these survey results. seems a mixed bag when it comes to the large and small. we will continue to watch the reaction out of that when japan opens in about 10 minutes, five

minutes. you can watch us live, catch us on past interviews and dive into securities and functions we talk about. this is for bloomberg subscribers only. this is bloomberg. ♪

yvonne: less than three minutes to go, countdown to the market open in japan, south korea and australia. it seems mixed, japan seeing more of a negative direction given the fact we are seeing the trade concerns, heightened tensions leading up to july 6. sentiment seeing a sea change friday, risk assets catching a bit here. soul futures are flat, but the asx will rally .5% at the open. we will analyze the latest data from china ahead of the opening salvo of a trade war. our chief asian economist

assessing the lower than expected readings. and the pboc policy. and then why the two sides are farther resolving. this is bloomberg. ♪ this is bloomberg. ♪ ♪ retail.

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♪ asian headquarters. facingcific markets mixed stocks, oil is falling in the euro under pressure from germany. investors looking ahead to friday with the latest u.s. payroll number and president trump's tariffs on china. i am ramy inocencio in new york, it is just past 8:00 p.m. on sunday. we are looking at a landslide presidential victory in mexico. cd-r showsof

ambition is ahead of reality in china. ♪ yvonne: new trading week, new quarter. we are hoping for a fresh start for the second half, it has been of 2018,e six months but a lot hanging on this week, as we count on the u.s. jobs report in the tariff announcements from the u.s. ramy: that's at the end of this month, $34 billion in what the u.s. says it will throw on china. that is just a tip of the iceberg in terms of tariffs. today, we are seeing $16.6 billion in tariffs canada is throwing on the u.s. all of the eco-data we are seeing, a bit of a mixed picture, that as ed rogers said, nothing to be too nervous about, but china and south korea, ego

data numbers fell over the weekend, causing concern. yvonne: sentiment is waning. we are seeing a mixed picture when it comes to equities as well. have losses resuming in tokyo as well as solve the nikkei off about a quarter of a percent. looking athe asx 200 little changed, but stocks and wellington are up. eye on the commodities space, oil under pressure, brent off about 1%, this as trump puts pressure on saudi arabia to boost production. keeping and eye on currencies, the yen keeping above 11075. interestingly, a key line around capital spending in the survey, for smaller firms can above historical averages. keeping an eye on the euro, we are seeing moves with german

merkelal headlines, trying to avoid a government crisis. the drama is unfolding in munich. the mexican peso is leading currency gains as we wait for election results. there is a sense that the economic reality will catch up with the currency and it could be in for a bumpy ride. the most pessimistic forecast is for a 47% drop by december 1. ramy: we are looking ahead to what is happening with those mexico elections. meantime, let's get the first word news. paul: president trump has repeated his demand or higher oil production, saying opec is manipulating the market. he told fox's saudi arabia will have to raise output even as the white house backed away from his earlier tweets saying he had persuaded the kingdom to pump more crude. the saudi news agency says that the two sides have discussed rises and supply but did not make any reference to production levels.

the world's biggest trading block is a step closer after asian ministers say a deal could he signed this year. the 16 nation regional conference of economic partnership includes china and india but not the united states. this is free trade in the face of growing protectionism. it would cover one third of the world's economy and almost half its population. >> we are being flexible in our discussions while maintaining high standards. stepe the tpp, our includes countries at different stages of development, and we have to be flexible when taking this into account. the final agreement we want to achieve will be a package that takes us back into consideration. paul: china's official factory gauge fell more than expected last month, just as the world's two biggest economies faced a trade war. the manufacturing pmi index stood at 51.5 in june, this is 51.9 in may, and a forecast of

51.6 in a bloomberg survey. to manufacturing pmi rose 55. the chinese are threatening tariffs on billions of dollars in trade from friday. the latest matches at the world cup, russia pulled off an upset, sending's been -- sending spain packing. goalkeeper triggered wild celebrations in moscow i saving to kicks. now they will face croatia in the quarterfinals. onbal news 24 hours a day air and on twitter, powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. mexicoolls closing in after a dramatic presidential election and it looks like the left could win for the first time in decades. let's go to our mexico bureau

chief. looks like we have one hour left in terms of polling, what is the latest? >> right, we have just close the polls in mexico city, we are waiting for the polls to close along the west coast, and then we start getting exit polls from media. again doen we will know what everyone is expecting, it will come about, which is , thethe leftist candidate front runner, does end up winning. that will come in close to one hour. ramy: in terms of what we can expect a when we can results, when can we expect those? nacha: it will take a while. the wrap account will be announced at about 11:00 p.m. here, 12:00 in new york. that will be an official rep account from the electoral authorities, but that is just a

survey, it is a production and a range of points. it iseliminary count, much more official, will not come until tomorrow. this year, they are taking their time because we have a historic election. we have never had so many offices indices up for grabs, more than 3000 this year. yvonne: if we are about to see some type of regime change, what will this mean for business? of course, this is a government that has been leaning toward the left. i would likely to see more of the populist economic measures in place? it is what everybody is wondering, this is the big question. there are a lot of big businesses in mexico concerned about that. we are also seeing the peso rallying extensively, i think just on the fact that things have run smoothly so far this election.

there has been violent elections in the past and so far we are not seeing that. if things run smoothly, we will continue to see the peso appreciating, but how long that the last will depend on post electoral statements look like. economic advisers say he would rule similar to brazil, but there are concerns that he would perhaps bloat the deficit and do some other, cosmo the problems -- caused some other problems for investment in areas such as oil and construction. yvonne: we will check back with you later as we get those results. thank you. our mexico government and economy reporter joining us with the latest. it's take a deeper look at reaction to the vote. we have a strategist joining us from singapore. mark, some observers have felt

that the victory was baked in to the peso in the past quarter. what are traders watching for now? mark: the could be a bit of short-term relief if the result confirms the front runner becomes the president. it is not a surprise, he has been leading for some time in the polls. once the with turkey, result finally comes out, there is a bit of relief for the currency. we're also likely to see [indiscernible] come down on the peso, which has been high leading up to the elections. what the reporter was saying, there is still a lot the play out, some of his policies on the surface look as though they could be disruptive to the business community. he may also affect the deficit in mexico as well. some people would like to know a lot more about what he is actually going to do should he get into office. may initiallyeso right, it might hold those gains

and night -- and not go further into we get more information. and of course the nafta situation is hanging over mexico as well. there is a lot more to be digested in the coming days and weeks. the election affects won't be as big as it might have been otherwise. yvonne: plenty of headwinds in em. are we likely to see more pain? it's been called a critical week not just with these elections, but as we look ahead to friday in the deadline for tariffs. mark: the good thing for emerging markets is valuations came down so hard in the second quarter, at least we are starting the third quarter on a much more interesting basis. from that point of view, a lot of bad news is priced into emerging markets. going to get the first of the trade tariffs coming through between china and the united states this week, and will probably take a long time before it plays out in economic data. major economic data is still strong.

the economy is expanding well, even though china pmi was lower than expected, it is still above 51, showing an expansionary pass. avestors might see there is trade were going on, but what it does to the economy on the ground is not that severe yet and it might take a long time before it plays out. taking that into account, maybe a lot of the bread news -- the bad news is priced in. ramy: shifting to europe, and merkel's fragile coalition under renewed pressure with that the head of her partner group threatening to resign. what might that mean for the euro? well, people are reluctant to price in bad news against angela merkel because she has escaped sony times -- escaped so many times. but this one looks serious. this is a very senior member of ,er coalition, he leads the csu

a key partner, and if his resignation goes through, that would put merkel in a tough position. resume --alks will talks will resume on monday. if he leaves, he could become a nuisance to merkel, staying in parliament. european traders were probably look at that and think it is not good use of the euro. but we probably need more information and european markets have not even started yet. but certainly mrs. merkel looks to be in a tart -- in a tight spot. ramy: certainly does. thank you. you can follow more on this story and all of the day's trading on our markets live walk on the bloomberg at mlive go. there is commentary and analysis from our expert editors seek and find out what is affecting your investments. still ahead, trade war threats turn to tariff reality this week. and analyst tells us why

washington and beijing are fall from -- are far from resolving differences. yvonne: but next, declining currency in china. we get the outlook on policy. this is bloomberg. ♪

♪ yvonne: this is "daybreak: asia ," i am yvonne man in hong kong. ramy: i'm ramy inocencio in new york. fears of a trade war are casting shadows across asia today, hong kong business survey shows sentiment is taking a hit, following signs of a deceleration in chinese manufacturing and an unexpected fall in south korean exports. our global economics and policy editor is here. talk about how that of these signs appear to be. kathleen: take it easy, nothing is that big yet, but this is the kind of thing we are watching for, when the two biggest economies are heading for trade war, you know the will be fallout.

these are early days, that let's look at -- but in the last couple of days, and a survey in the last hour, from the bank of japan. of boj talks with all kinds companies, and this is what we see, the most important number did edge back in june, the large manufacturer index. let's jump into a chart now, i will tell you what it did. it was at 24 and may, it is down to 21 in june. it is still above zero by far, it is not ominous, but the trend looking a bit weaker. commodities, one more thing, the outlook for large manufacturers in the survey asked up a little bit. it's not on this chart but when from 20 221. let's move on to south korean exports. that is something the cut people by surprise, a little bit weaker than forecast, let's jump back in here.

0.1 year-over-year, it was supposed to rise 2.2. look at how much healthier. concerning because the white line is south korea export weighted trade partners managing traded index. you see how it was coming back up again, it is leveling out and that is a concern. one of the trade partners is china. china's june purchasing managing index for manufacturing fell more than expected. let's go to the last chart. it shows manufacturing and nonmanufacturing pmi. manufacturing from 51 point nine in may, to 51.4 engine. it is still above 50, signaling june -- signaling growth, but it has fallen. one good thing to think about, the people's bank of china coming out of its last meeting easyling targeting expense, supporting the economy,

they did not talk about manufacturing and trade. tilting in aady direction to offset trade and whatever else might come down the economic road this year for china. yvonne: thank you. kathleen hays looking dieter -- looking deeper into the data. we have an economist with us in the studio. great to have you. it seems like things are in big trouble, but what you make of these contractions, whether it is south korean exports, export orders in china -- is it volatility are are we seeing fading global demand? the escalation of the trade were between china and the u.s., we are going to see more recent signals from asia, the close all this global supply chain story is. economies like japan, south korea, they are on the same

global supply chain. a higher risk of a trade war with the u.s., and other countries are going to get affected, and export orders have to climbed from china's pmi index. that trade warty risk will start to affect china and other asian economies. this is going to continue for quite a while because it's so far, we have the signal that china and the u.s., they are going to not going to find a way to solve the trade war. yvonne: especially when we are the first round of cap to go through, it doesn't seem like they have found time to negotiate before july 6. the pboc is signaling policy shifts. it was settle in terms of changes from the advisory panel when it comes to liquidity management, but they changed from stable to sufficient.

have you think they are going to follow through on this? a very interesting point. in china, they are fighting to battles. they are trying to use financial to ensure financial stability. but they have the problem of the u.s. on the external front. i'm not going to say they are going to go to the easing side, but they are going to shift to that site. strongve a very tightening on monetary policy steps. that thetry to ensure growth [indiscernible] because they have domestic and internal pressure. ramy: in terms of what is happening with the currency right now, there is talk from several analysts saying this could be used as a weapon in the fight against the trade front.

to what degree do you think this might happen, and when might it with us heading toward the $34 billion tariffs from the u.s. and china? dr. le: a good question, but frankly, i don't think the character differentiation is suitable for the trade war risk. you remember in 2015 and 2016, china was doing a lot of things rigidity.n if it appreciated too fast and too sharply, it could cause large-scale outflows and pose real threat to chinese stability. i don't think they want to repeat that, so i don't think they're going to use the strategy, because it will go to hurt china first before they could have some kind of impact on the trade war. ramy: guests we've had have billion is still a drop

in the bucket, but how bad does it need to be for rhetoric to turn into reality, for the $200 billion donald trump has said he will throw on top of china if there is a tit-for-tat? how bad does it have to be for you to say we need to pull back from the brink? this is a trade rhetoricyone is using to threaten each other, no one wants to back down first. but i think with time going on, both sides will realize this trade war is going to hurt both of them. i think at some point, they are they to negotiate, maybe will our research to renegotiate, but we don't know insider information. definitely, they're going to find a way to solve this kind of a problem through negotiation rather than fight the trade war. the trade war will hurt both sides. i expect after the midterm

election, the u.s. will see some [indiscernible] on the side. now the u.s. in china, they have political considerations. the u.s. midterm election, i think both sides can get back to the negotiation table. yvonne: is the current moretural approach targeted policy tweaking, to focus on more targeted areas, do you think it is enough? or do you think it needs to be more broad, the broader economy? moree: i think we will see easing, especially on the fiscal side, but so far i don't think that pboc are the regulators that want to rework the direction. thefinancial we leveraging, containing financial vulnerability is the direction for china. the monetary policy, the

regulations, they are quite dependent on the eve pollution -- the evolution of the trade war with the u.s. if we are going to see some solutions soon, i think maybe the pboc will stop there. yvonne: we believe that there. thank you. our asia chief economist there. get today's edition of daybreak, bloomberg subscribers can go to your eternal -- your terminal or mobile apps. this is bloomberg. ♪

♪ ramy: a quick check of the business flash headlines. political and social uncertainty and home and abroad could hit results at a bank. the crisis in catalonia could hurt business in the region and across spain. could affectbrexit a restructuring process underway in the u.k.

the bank is also concerned about currency volatility and u.s. trade and migration policies. yvonne: reports from china say the government has begun merging to chemical giants. sources say officials from the state watchdog and the commonest -- communist party has approved a consolidation over the weekend. washead of the new company appointed. ramy: and hna group is exploring the sale of radisson hotels. the conglomerate has been gauging interest from rival change and -- chains and other buyers. they have been selling assets to pay down heavy debt incurred during a multiyear buying spree. it has already sold stakes in hilton worldwide in deutsche bank. yvonne: we are just five days away from president trump's new tariffs on china. we look at the likely effects it will have on growth.

plus, with the trade in tariff announcement, beijing has said they will retaliate that -- retaliate in kind. we will look the likely effect on growth next. on growth next.

♪ 8:30 in singapore, happy monday, we are half an hour away from the opening of trading in the lion city. i am yvonne man. ramy: and i am ramy inocencio in new york, you are watching "daybreak: asia." let's get the first word news. mexico is voting for new president was signs that the left could win for the first time in decades. the leftist candidate seems to be headed for a landslide victory. polls suggest the left could also when a majority in both houses of congress. the campaign was marred by violence, with more than 100 politicians murdered. the head of germany's junior

coalition partner says he has offered to quit the government in a split. he says he would resign as interior minister but once one more round of negotiations. the dispute revised doubts about the coalition's ability to survive and function. he has threatened to turn away asylum-seekers at the border. the hong kong government says the city's future is bright as protesters demanded more democracy on the 21st anniversary of the return to chinese rule. demonstrators to announced one-party rule on the mainland, but failed to disrupt the annual flag raising ceremony. carrie lamtive attended along with others. i have even greater confidence in hong kong, as long as we remain focused and stand united, i am sure the best is yet to come. says chinat merchants group is teaming up and a london based group

beijing-based group to launch a tech-based fund. it will him to become china's answer to softbank's vision fund. a conglomerate and other identified chinese groups of already pledged $6 billion. global news 24 hours a day on with twicetwitter, 700 journalists and analysts in more than 120 countries. asnne: a mixed picture here we start a new trading week and quarter, next for equities. on some movers in tokyo, nissan is halting a four-day event. this company has canceled the sale of its battery unit to a chinese firm, which said it doesn't have sufficient funds to carry out the deal, valued at about $1 billion. in seoul, hunting -- hundred motor is losing some ground.

it is saying a buyout rumor is groundless. forgo pressed the u.s. to tariffs, saying it would be devastating for u.s. operations. in sydney, sigma thinking the most in eight years. there are week trading conditions. it is one of the biggest farm wholesalers in australia and set to lose a key supply deal next summer. next, the company is bracing for the impact of a government pharma subsidy plan. ramy: thank you. this is our first trading day of the second half. traders are also counting down to two major economic events this friday. one is the u.s. payrolls report, as well as president trump's tariffs coming into force on chinese goods. first to the jobless numbers, a surprise in the june jobs report would validate hyatt petitions for growth in the -- validate

high expectations for growth in the second quarter, but it could also exacerbate anxiety about trade. the white line here is the official number coming out of the government. right now, it has not filled in for the next month, but may 31, it came in at 223,000. expected for june, you can see the survey. be whispered number could cost for concern, twitter users are saying it could be at a low not seen since october of 150,000. we are seeing a gap of about 50,000 jobless claims. yvonne: interesting. talking about tariffs, president trump due to impose the tariffs on $34 billion worth of chinese goods at the end of the week. beijing says it will retaliate. what we have been seeing here when it comes to markets, it ares like u.s. equities still the place to become a given that a lot of people are

placing bets that perhaps president trump has the upper hand, given that the u.s. has a trade deficit with china. impose more tariffs, china will have to get more in conventional -- unconventional. on the dollarturn context, and compared the world equities. that continues to move higher. direction, when it looks at the msci china. we will see if we see any cut of upside here given the pboc signals, but certainly one to watch as we get closer to friday and where the returns are really going to be. let's get more on the looming tariffs now, with our asia managing director joining us in hong kong. always great to see you. is a trade war unavoidable at this point? is there still a way to back out from the tariffs? now, there is no backing out. the reason is that this has gone beyond a fight over dollars and

, over-- and cents commerce and trade. i think the relationship between the two countries have gone to a aree where the americans seeing china not just as a spending competitor but an all-around threat in terms of wanting to push their own sea,as in the south china freedom of navigation, in terms of currency. suddenly, the relationship has really bubbled over, boiled over. yvonne: your headline was we are not heading to a trade war cold war, but an ice age. worse, saying that is because tariffs have a dollar amount, but when you're talking about restricting investments

from china, it is harder to measure that. it has to more uncertainty about where the talks are going to play out and what will come out of it. auline: yes, i see this as confrontation between two major dominance. so this is worse. but because relationships between economies in countries now are so different. globalization means everybody is targeting everybody else. you cannot have the old-fashioned cold war trade war. you're just going to have this, this ice age, and you are going to be awful to each other. no corporation. in exchanges and everything else. ramy: in terms of what china is trying to do, i am just going to

be devil advocate, can you blame them for actually trying? the colonial powers in the past, the u.s. with its dominance here, it is kind of an economic colonialism, trying to make sure its own might is pushed ahead. to that extent, do you blame them? pauline: i never take a moral position on when countries do things. mainly, all countries want to do the best for themselves. they say nice things or may say let's all be fair and equal, but at the end of the day, all governments want the best for their own people. reasonablew, it is that both countries should be wanting the best for themselves. naturally, everybody says it is the other guy who is being bad. the $200 billion in tariffs that donald trump has threatened, if there is a tit-for-tat retaliation from beijing, it is a lot of money, do you think it is enough to

move the needle for china? chinae: i think actually is in a very bad place. this is a very that juncture for them to have a trade war, any kind of confrontation in the economy. the economy itself is already going through a bad patch, iswing growth, and that nothing to do with everybody else, it is the fact that even when everything else is fine, they don't have a growth driver. exports are suffering. yvonne: aren't the talking about that, shifting the economy that way? pauline: that's what they would like to do. comparedeality is that to the old days, when everything was firing on all cylinders, , and not just with united states, they have been

rumbling, the eu, the japanese. everybody is saying that everybody else is not playing fair. exports growth will be more difficult. i've always argued that consumption in china taking over as a driver of growth, that is a bit of a fantasy supported by cherry picking the numbers that support the idea. so that leaves good old investment still going, but only just. it is a bad time for china. they don't want a fight right now. yvonne: perhaps beijing's advantage is political. the president doesn't have to worry about a midterm election or being reelected, how important is the political capital? pauline: there is always this misconception that if you are in an authoritarian government, you can just about do anything you want. actually, it is not true.

they are constrained that in a different way. not constrained by the ballot box, and they are not go onained by having to one knee to the opposition leader and say please pass a package. because are constrained this approval of the government cannot express itself at the ballot box. so when things buildup, it expresses itself in demonstrations, in -- yvonne: occurring right now. pauline: yes. the point is, ironically, and authoritarian government has to ,e more sensitive to the things the red line they cannot push unless they are pushing people toward some kind of resistance. they too have constraints. right now, the difficulty with

giving the americans a new war is not because they cannot do it economically, i am sure there are still things they can do, but at some point, they cannot be seen by the people to be giving in to the americans. pauline, we had a guest on and i asked him if the yuan could be used as a tool to push back against the u.s.. he said he did not think so. do you agree or disagree? basically,agree given the trump administration. i think multilateral organizations, which are based ,n willingness to corporate that is not having much of an effect anymore. i wouldn't be surprised if the trump administration jump up and down and say maybe we should

redo the whole wto thing. yvonne: you mention this is not just about agreed that fear, the anti-china intimate we are seeing bubbling up in washington. how do you change perceptions, what is the solution for both of these countries to come out and still save face? pauline: i don't think they can. basically because the fear, the mutual fear is real. in the old days, the greed kept everything ok. china is a huge market, 1.4 says theyople, china want to become part of the global financial system. the greed kept everything going. now suddenly, fear is taking over. only three days ago, the chinese ambassador to britain wrote a piece in the guardian about the chinese take on freedom of navigation, that naval ships to not qualify for innocent passage.

that is the kind of thing you can't really negotiate over because you have a very different view of national security. yvonne: we will leave it there, but it is always great to get your perspective. analytical director. -- sellingsharing shares on the low end. this is bloomberg. bloomberg.

♪ welcome back, this is "daybreak: asia," i am ramy inocencio in new york. yvonne: and i am yvonne man in hong kong. exports are estimated hit a record 226 billion aussie dollar's according to a government forecast. reporter in our milburn. -- in melbourne. earnings from mining in into

exports are rising, what is driving the gains? >> morning. that is right, the earnings are having risen about 11% in the 12 months that ended on june the 30th. earnings from mining and energy commodities, they are from a couple of things. we are seeing rising volume, things like lng products -- projects coming online. but maybe more significantly, we're seeing higher prices. australia's government says in this report that a rebound in commodities price is more robust than expected and they are continuing to see some bright spots across asia. they see continued strong infrastructure demand, places like indonesia and india are both rising him a lifting imports of commodities. they interesting as well, see a long predicted slowdown in chinese commodities imports, it has not happened as sharply as

projected. they continue strong demand and it is keeping prices and earnings robust. yvonne: what is the outlook for the medium to long-term, especially given the trade tensions between the u.s. and china? any indication that prices could begin to fall? david: absolutely. the trade tensions, it is something at this stage, the aussie government must have factored into thinking, but exports should be holding steady. key,they are increasingly they think prices will moderate is more supply comes into the market this year and next year. prices on things like coal will also decline. most important, iron ore, the top export earner for australia, about $59 per to

ton this year and continue to drop lower. that will start to eat into export figures. ramy: indonesia looks set to complete a long negotiation with to controlrio tinto mine there. when will that be concluded? david: it could be as soon as this week. that's according to indonesian government ministers. we heard this weekend from the state enterprise minister. that is a long-running saga. talks have been going on for at least year, a three-way tussle between indonesia's government, company, a giant mine, it's also a key source of gold. we should see it wrapped up this week for about $4 billion, and see indonesia take majority ownership of that asset. yvonne: thank you, david.

our reporter from melbourne. let's look at the stories across the bloomberg university bloomberg.com has a story about how the president trade war with china has moved from tweets to the real world. the latest pmi data showed export orders from china tumbling into contraction. bloomberg subscribers also reading about elon musk's latest in l2 employees, -- latest email to employees, declaring tesla a real car manufacturer now. out on tictoc, check jaguars promise of a chinese made electric car soon. those stories trending right now online and on the terminal. ramy: meantime, the much-anticipated low end ipo is positioned ahead of reality. the phone maker is set to raise $1.4 billion, that values the company at half of its initial

goal. let's check on the impact of this. why was the ipo priced at the low end? essentially this is a story about mismatched expectations. there were a lot of ambitious plans for a dual listing, a big splash, but ultimately what xiaomi could deliver in terms of chinese regulatory requirements and what the chinese government demanded in terms of the requirements for listing ctrs -- cd-r's were not quite the match, and from an initial 10 billion dollar goal from raising money, we are down to half of that. xiaomi has promised they will eventually seek a listing on the mainland, but for now, it looks like that is on hold. ,amy: you mentioned the cd-r's

chinese depository receipts, what happens now? think xiaomi is in a position that they have to deliver concrete numbers to investors and the chinese government. they also have to really sit down and come up with a plan to list in china. you have to remember this is the first time, so they are in a sense breaking new ground. they probably are going to be under close scrutiny, and therefore it will be a process, but at some point you should expect them to list. probably a bunch of other tech companies to follow. yvonne: apart from the ipo, how is xiaomi doing operationally? we were talking about the impressive turnaround story last year with the company. reed: indeed. if you look on the face of it, xiaomi has done an impressive

job of having dropped from first all the way down in the rankings in china for smart phone sales, but what they identified successfully was a growing market in india for smart phones. and are aggressively there, that has essentially provided the story for the ipo. when you have to remember is that it is still a money-losing company. their promise essentially is to operate on razor thin margins in as far as the hardware business goes. what they are saying is that will make up the difference in the future through services. it is a lot of promises for a company that is facing a lot of competition and has declared it is going to be a low-margin business. and so i think the scrutiny on the earning results is going to obviously be a factor going forward.

people are going to be looking at operationally held company fares. in turn, that will eventually impact the chinese depository receipt performance, and timing as well. yvonne: not a lot of clues on the timeframe yet. thank you. our bloomberg asia technology editor in tokyo. for breaking news, we have launched tictoc by bloomberg, the first global news network designed for social media on twitter. we have updated news reports verify for us. be sure to follow tictoc. this is bloomberg. ♪

♪ ,"my: this is "daybreak: asia i am ramy inocencio. yvonne: i am yvonne man. what is coming up? there is pmi from china, the trade issue which we will continue to debrief the next few days. july 6 is the next deadline we are looking out for. have the head of greater china research joining us. he doesn't think at the current level and rate of change merits the chinese central bank to come in and intervene in the markets. we will also get his thoughts on the latest pmi, which was surprisingly bad. yvonne: export orders contracting.

it is smelling like trouble, but lot of of trouble -- concern yet. david: we will see. ramy: before we headed over to bloomberg markets asia, but look at how markets are trading. flat to negative, the nikkei 225 down a quarter of a percent, you can see the asx 200 slightly slipping into the green. checking asian futures, singapore at taiwan and malaysia, a mixed picture, seeing a bit of green. .hat is it from "daybreak: asia retail.

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host: asia-pacific stocks are and thel is falling, off ofs under pressure i news from germany. we are watching the mexican fed inching higher with the country taking a turn to the left. z-obrador is heading towards a landslide victory. with japan,ser china,