haidi: asia-pacific markets set to start for a positive session as they shrug off the falloff from the trade war. ramy: china will defend itself in the face of tariffs. the premier says there can be no winners. xiaomi begins life as a public company, struggling to justify its valuation. tencent plans to spin off its latest music arm.

a.m. it is past 8:00 this is daybreak australia, 12 hours -- a few hours from the opening of asia's major markets. ramy: i'm ramy inocencio. to the viewersng across the asia-pacific. looking back where we were over the past 48 hours, we got great non-form -- nonfarm payrolls. the bigger issue here is donald trump really did go ahead to clinch those $34 billion in tariffs on china. he is saying another $16 billion could come through. all told, $550 billion. those are big numbers that investors will be wondering on how this might impact them. haidi: the psychology of the market reaction is interesting. you had a session of gains, the tech sector dominating.

asian stocks bouncing off the lows, but i like this quote from j.p. morgan saying the whole traits verio is like chronic back pain. you might forget about it for a while but sooner or later it will come back, and investors will be reminded of the situation at hand. ramy: let's get a quick reminder of the markets. the back pain wasn't so painful if you see the close on friday. look at the dow, up .4%. the s&p was up nearly .9%. on the week these were the best weeks in the past month or so for the nasdaq, up 1.3%. that was its best week in two months, in large for because of what happened in the pharmaceutical space. biogen said an outsider's drug showed good results. we will talk with our markets reporter su keenan on that. those were in the green. let's go flip the boards and look at currency.

the bloomberg dollar spot, down .3%. that was off of the mixed jobs report we had friday. wage growth was not as strong as people were expecting. 0.2% versus 0.3%. that has a knock on effect in terms of the rate hike path for the fed. the euro, seeing flatness, but british pound up a quarter of a percent because theresa may and her soft brexit plan getting some confusion and support from her own cabinet. haidi: watching sterling again this week. looking at the set up in asia we had a buoyant friday despite all of that. the asia-pacific stocks were still nine out of 10 worst performing markets for most of last week. a fourth straight week. we have kiwi stocks looking like .aggards, off .4%

we are looking for an upside in sydney, half a percent in the green at the open. the kiwi dollar 68.41 and the cents.dollar above 74 we have key numbers this week including chinese trade. the breather in the dollar rally will come as good news when it comes to some of the currencies in em. we saw a four-week losing streak for the yuan. we are seeing pretty steep losses across the end of last week for the korean won as well as the indonesian -- the indian rupiah -- indian rupee. a lot still coming across the em complex. let's get to first word news with rosalind chin. state mikecretary of pompeo has shrugged off the

impact of the talks, saying kim jong-un has not abandon a commitment to want up. programs. nuclear the american side said that segment was a negotiating tactic and pompeo is not discouraged. >> i am determined to achieve the commitment president trump made and an accounting -- am counting on cameron -- chairman kim. the world was a gangster because it was a unanimous decision at the u n security council about what needs to be achieved. thehe operation to free thai soccer players will resume. been- four boys have brought out successfully. the rescue will continue. 12 boys and their coach were trapped two weeks ago with heavy rain pushed water levels up. the number of people killed by

record floods in southern japan has risen to 76. the government said 48 are known to have died while another 28 are presumed dead. many are also unaccounted for. the prefecture sought many inches of rain in three hours, the most since records in 1976. officials fear this could be the worst weather-related disaster in years. the former brazilian president has been told he must stay in jail hours after another judge said he should be freed. the court is split with want justice say he should be allowed to take part in the presidential election and another saying there is no legal basis for that. he was given a 12 year sentence for accepting gifts from a construction company. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am rosalind chin. this is bloomberg. haidi: thank you. china will stand firm in the

face of what it calls trade bullying from washington with business leaders and state media predicting the u.s. will be the biggest victim. tom mackenzie joins us from beijing for more. apparently we are in a trade war. what has been said over the weekend? tom: reaction from the state media but also have a business summit that was held in beijing. we heard from the vice commerce minister who was instrumental in the talks between the u.s. and china when it comes to trade. he took to the stage and called on businesses to push back against this trade action from the u.s. and said he hoped the business community would uphold globalization and the multilateral trading order. critics point out china's claims that it supports globalization do not stand up to scrutiny but those were the comments from the vice commerce minister. we followed him out of the meeting and try to ask if talks

were going on between him and his u.s. counterpart because that would be key. he remained tightlipped, so we don't know if there are any official or unofficial talks. we also heard from one of china's biggest industrialists, a guy called frank, who is the chair of sinochem. he said chinese businesses would not be badly impacted by the first word of tariffs. 25% and $50 billion. i don't think the tariffs are going to have any major impact on chinese companies. it is a stance. most of the tariffs are going to be levied on foreign companies that manufacture products in china and sell them back to the u.s. china would said find ways to get around the impact of soybeans. they would find alternatives because they have slept 25% on soybean imports. they said it would not have much

of an impact. he quoted strangely michelle obama who once said when they go low, we go high. that is how he ended his speech. the people's daily said this was an example of u.s. trade bullying. an interesting article saying china would continue to open up despite trade tensions. ramy: what are the next steps? tom: we know there is a countdown now to the additional $16 billion worth of tariffs trump has said are being consulted on. he said they could be imposed in two weeks. china has said it would match those. then as we have been discussing, trump has added a number of $500 tariffs, whichf is pretty much slapping tariffs on all of chinese imports. the question comes down to how china response. china has talked about

quantitative as well as qualitative measures. those may be the issues we have discussed around licensing and regulations, inspections to do with u.s. businesses operating here in china. in terms of market reaction, markets have behaved pretty positively in the u.s. but in china, the shanghai composite is heading for the longest losing streak in six years. the yuan has been hit by that. there is market pressure and questions about how this impacts china's deleveraging campaign further down the line. initially of course we will look very closely to see what impact are going to be on u.s. businesses and if we see additional measures being put in place by china. ramy: the opening salvo. tom mackenzie, thank you. the latest jobs figures indicate there is still room to run in the u.s. economy. we will look at what is ahead with the former s&p global vice chair just a little later.

next have markets already priced in an impact from trade tensions? this is bloomberg. ♪ ♪

ramy: very good morning coming out of sydney. you see the live shot of the harbor bridge. sydney futures looking positive today. .4% up to especially as we see knock on effect out of the united states, the s&p 500 up. mixed but positive jobs report. i am ramy inocencio in new york. haidi: i am haidi lead in sydney. you are watching daybreak australia. let's get back to the market. a trade war as well as child's report. -- as well as jobs report. it is an interest in place the

fed must find itself because that mixed jobs report especially with earnings and the gives doubts a little more. on the other hand how do you price in the impact of the the monetaryse policy can't really speak to the impact of a trade war. >> i think on the fed funds, it will focus on inflation. the trade wars are impacting markets, but not to the extent where it will have an impact on what powell will do. if it gets more announced more oned, and you see tariffs, that could affect interest rates. haidi: short-term bump in inflation, long-term rise in growth. raymond: i think the trade wars are more of a long and rates the fear. i think trade wars have stopped where u.s. can go. it has capped around the high 2's.

it is not 3%. it will be more inflation and wage as opposed to anything else. haidi: let's talk about how it will play out in asia. analysts are looking at the earnings projections for asian companies. part of this will be the dollar effect, the currency effect with aps being priced in very we have seen the decline in asian currencies the past couple of weeks. this, are we passed peak earnings when it comes to the vulnerable parts of businesses? raymond: they have been looking strong the last 12 months. they might rerate a little bit. in terms of the trade war side of things, but fundamental impact has been quite mute. those numbers cap on friday. i think for it to have a fundamental impact on u.s. markets, this has to keep going on for longer and bigger dollars involved. we are not seeing that.

there could be results in the short time. haidi: what affects the environment as we wait to see another round? raymond: we like short and rates. -- end rates. buy lessons rate bonds, you will get 3.5% in a two-year debt, which is quite attractive to the s&p 500 trading on the order of 5%. less volatility and less duration risks. in fixed income there are some risks. you have to be selective what you buy. ramy: i think it is fairly optimistic, the range of $50 billion in terms of tariffs versus the $550 billion all told trump's threatening. walk me through why you think it will not go further. raymond: when with think about trade wars, it is like wrestling. it is more fear than reality.

all of the rhetoric back-and-forth, it is political posturing. trump is posturing himself or the mid-term elections -- for the midterm elections. so the trade war situation, our base case is a lot of the talk is positioning himself for a higher or better bottom position. then the outcome will be reached. i don't think the trade war gets to the $200 billion range. right now it is $34 billion. to $10050 billion billion is where they will reach a compromise and get a deal that works for everyone involved. ramy: i know one of the sectors you are looking at, we have looked at that, the auto sector. hop into the bloomberg terminal. i want to show you in our gtv library house the u.s. has auto surplus for china. you are saying china could also retaliate with tariffs there as

well. talk to me about this in terms of what investors need to know. when we think about trade, whether it drags out or not, you need to look out for whether big-ticket items start to get put on the table. orders are one of the biggest out there, not just from china but in japan. a lot of things go into china and europe. we start to see big-ticket items put on tariffs where there is 25% or more that can change the whole trade war situation quite substantially. i think that is a topic people are talking about in terms of strengthening negotiation positions, but if you get a big items, orders, aircraft, it gets interesting. yuan --. talk about the got to talk about the yuan. 6.8, there might be some intervention from the pboc, you

say. raymond: potentially. if you look at it, it has weakened a lot the last couple of months. .own 3% since q1 it is not just the magnitude but the pace. it happened quickly. that is mostly natural forces. the u.s. dollar has been going very strong given the situation with the fed. the chinese economy slid the last couple months. that has not helped, but the pboc will want to see the currency not we can too much too quickly. 6.8,ink around kind of 6.9% is when they get involved and try to put a stop to what is happening. haidi: do you stick your neck out in the em space, or do you think everything will continue for a while long or short? raymond: the u.s. rates are going up higher. that will keep going another

three times next year. there is no rush getting into em . there will be a lot of capital from em to the u.s. to chase the shortened interest rate move. we are not active in that space. one thing we look out for is india. the fundamental is doing well, but there is no rush to jump in. haidi: the rupee is getting slammed. thank you for joining us, raymond lee, kapstream capital portfolio manager. you can get a roundup of the stories you need to know to get .our trading day going bloomberg subscribers can go to dayb on their terminals and get it on your mobile in the bloomberg anywhere app. tweak your settings so you only get news on assets you care about. this is bloomberg. ♪ is bloomberg. ♪

haidi: i am haidi lun in sydney. ramy: i am ramy inocencio.

you are watching daybreak australia. u.s. secretary of state mike pompeo has fired back after north korea issued a statement calling american disarmament demands gangster like an cancerous. to achieveermined the commitment president trump made and counting on chairman kim to be determined to follow through on the commitment he made. if those requests were gangster like, the world is a gangster because it was a unanimous decision to the u n security council of what needs to be achieved. ramy: let's get more from bloomberg editor ros krasny. what should we make of the statement because this is a walk back to the rhetoric we have not heard since trump and tim met in -- kim met in singapore. is this a serious impasse or is it a bargaining tactic and how much of the statement and we see yesterday really affected a

domestic audience or was it aimed at president trump? we think in washington it was more a bargaining tactic. really showing the u.s. regardless of what happened at the singapore summit, kim jong-un is not going to bargain away his nuclear arsenal. it will take some time. as you say, mike pompeo, secretary of state, pushed back against the statement and characterization of the meeting and was like, i was in the meeting. he would certainly suggest this is political theater by north korea, and there is an element of truth to that for sure. haidi: the singapore document was short on specifics. this time do we have details what comes next? ros: not really. we know from the two day meeting in pyongyang there is another

lower level meeting this week about the 12th of july where lower-level officials will meet at the freedom village on the border of north and south korea to try to iron out some of the details about the nuclear deal, the denuclearization. we don't know who will be at the meeting. we know mike pompeo might be there. he is off to europe with president trump. .e don't know beyond that time it will be interesting. analysts in the u.s. are saying the summit between kim and trump was eat dessert first. and now comes the broccoli and the spinach and the really hard work. i think you could expect to see after the meeting there will be further meetings scheduled with the various lower-level workers and functionaries because to put

some bones on that 1.5 page statement. haidi: the fun part is over. thank you for that update. ros krasny, our bloomberg editor. let's get you an update. tencent's plan to spin off its music business and list it in new york is a sign they believe the recording industry may be staging a comeback. their growth in china mirrors the advance of their partner spotify in the u.s. music sales growing at the fastest rate since the 1990's. they told the hong kong stock exchange they are waiting on the size and value of the spinoff. ramy: wireless speaker maker so no's has filed for an ipo with billion. around $2.5 competition from amazon, alphabet and apple has forced so no's 2 -- sonos to integrate voice technology. they acknowledge a risk that the

tech giants could end collaborations at any time. they warned the u.s.-china trade is your good damage is business. begin life aswill a public company on monday. it has been struggling to justify valuation that is over 23 times projected 2019 earnings, making it more expensive than apple and tencent. hong kong stocks in decline and the trade war breaking out. market business up to 11% below the price for xiaomi. ramy: there is more on xiaomi and tencent music coming right up plus what the trade tensions mean, $550 billion if donald trump's words ring true and the latest job numbers for the rate hike outlook. what does this mean? we will answer questions. this is bloomberg. ♪ . ♪

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off, and free shipping, too. go to buyleesa.com today. you need this bed. haidi: it is 8:30 in sydney where the markets open in 90 minutes time, but futures looking optimistic. we have asian stocks bouncing off the lows of last week, friday at least. putting the concerns of a trade war on the back burner. i am haidi lun in sydney. ramy: i am ramy inocencio in new york. you are watching daybreak australia. let's get the first word news with rosalind chin. rosalind: equity futures are pointing to a positive open as they assessed shocked for the u.s.-china trade war. the yuan has taken a beating,

but trump is threatening to extend the tariffs to cover half $1 trillion of imports. speaking in europe, the chinese premier said the trade war benefits nobody. >> we are not complacent on the rate. a trade war would be fairly bad for the economy. victim would be u.s. jobs, u.s. workers. we hope it does not happen. juliette: one of the two people thought to have been poisoned by the russian nerve agent has died . they think the woman was exposed last week along with a man who remains seriously ill in the hospital. it was miles from where the former russian spy and his daughter were also poisoned months ago. the australian security regular seeking records of correspondence from seniors at westpac. that after a court ruling that they engaged in questionable

contact -- conduct to influence a key interest rate. the judge noted questionable actions attempting to influence. movie's latest marvel talk to the north american box office with ticket sales of $76 million. --could easily have been their stable of marble films has brought to mr. sales of $2 million this year, despite the underwhelming performance of solo, a star wars story. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am rosalind chin. this is bloomberg. haidi: thanks for that. let's get you a quick update on the markets as trading is underway in new zealand. looking at a bit of downside with kiwi stocks, like one of

the laggards in what is looking ahead like a fairly optimistic day for the rest of asia as we head asian stocks off the nine-month low. the kiwi dollar 68.40, the aussie up. nice rally. it follows a pretty mixed tag of jobs report friday. sydney futures up .5%. the yen holding steady at 110 and sterling 133.14. the u.s. 10-year yield largely unchanged at 2.82%. lots of questions how this fairly confused jobs number, lack of earnings growth will play into the dovish fed. the firstspite missiles being fired in the trade war between washington and beijing, u.s. stocks holding their chin up. -- gainsined close to

for the s&p 500. let's look at trading getting underway. our markets editor adam haigh with us, earnings season later this week. is it possible we will switch to looking at fundamentals again? adam: maybe, but it is a double-edged sword because people want to be looking at what companies are saying about potential of trade war related impact to the bottom line. there will be focus on lots of other things as well that go on irrespective. look at how they are doing from the earnings perspective. we are going into the next earnings season, growth doing very well, very robust. this chart shows it very clearly. this is what the bulls always come back to during this phenomenal run for equities going on for many years. ultimately earnings continue to deliver. that is certainly what people are hoping for in the next quarter as much as they have done in previous quarters. we have j.p. morgan, wells fargo

on the backend of this week and local players in focus. investors in india. it starts to become the global theme somewhat. if we can get a little bit rumba -- little bit away from that macro things, there is no reason why you can't see markets kind of pick up if we get decent news. but it does -- with the bar pretty high, these numbers will have to be pretty good to push stocks higher. , but we aresm there seeing substantial levels of caution in asia's junk bond market. why are the spreads widening, and what does this tell us about investors' current tolerance for risk? adam: in a sense the junk bond market in asia is feeling the full force of what is happening on the trade tension front. but in asia it is a lot of

idiosyncratic reasons why economies are performing in a certain way. clearly the spreads have been widening quite significantly. take a look at the chart on your terminal. it is interesting from down at 2.77% in january to 5.7% in percentage points last week, shows you the significance of the change in six months. this is what you are seeing in some markets where the tolerance for risk has been higher. people have said it has been harder to make returns. they have gone further and further looking for where they can make money in global markets, given how tricky the return outlook is. this is one example of how far people have gone. you see a quick change in sentiment. you see spreads blowing out quite significantly.

this will be an important chart to keep your eye on to see how this plays out, especially with so many unanswered questions nextthe way the u.s. does and what china does next and how this plays out in the next few months and how it continues to affect fundamentals. ramy: interesting to see it is up highest since march 2016. we will leave it there, adam haigh, thank you. don't forget to check out our gtv library for some of the charts you saw. that is gtv on the bloomberg terminal. switching gears, let's head into the ipo world because xiaomi's does: arld -- road a-shares begin to trade. so far the market indicates it will be a sparking debut. stephen engle is following this. what went wrong with xiaomi? stephen: what didn't go right is

the right question because there were a lot of questions just as they were finalizing the ipo. the biggest question is how do they justify such a lofty valuation, valued xiaomi at twice that of apple? a lot of investors were asking what is xiaomi? the founder said we are an internet services company a la facebook and others that can justify it lofty valuation but a lot of investors go, you get 80% of your revenue from smartphones. you are a lower margin smartphone maker that deserves a lower valuation. it is something the regulators in china questions. they had 84 very strict questions of xiaomi as xiaomi tried to have a corresponding kind of depository listing along with hong kong. that has fizzled out. at the end of the day, the ipo

came in below expectations. they are expected to raise $10 billion u.s., came in at $3.1 billion. so it is coming to the market today to trade on day one, bit of a wounded bird. this is a company that did have quite a dramatic turnaround. but day one of the trading on the hong kong stock exchange, not likely to be good. you mentioned at the top, the gray market indicating shares could be trading down 11% or so. and when will we hear more on tencent's plans about the music business? stephen: we got a filing to list in hong kong. they did a filing yesterday on the hong kong exchange that they plan to spin off their music ipo.ess is in a new york we don't have the details. they are figuring out when and how large.

people familiar with the situation think that could raise one billion u.s. dollars. a bigger question about what they will raise in the united states and the streaming music is this doing quite well. they have had a dramatic turnaround. spotify is a key investor in tencent music, but it tencent music is going public as well as they are, try to bring in a western influence to chinese viewers, they could have a chief competitor. we will have to see. haidi: watching him for more details, stephen engle, chief north asia correspondent. don't miss our interview with .he xiaomi cfo that is 50 minutes past 11:00 in sydney, 9:50 in hong kong. ramy: david davis is said to have resigned.

he is the brexit secretary in the yet it kingdom. this just crossing according to the telegraph. the secretary has resigned from the government. this is according to the press association and comes quickly off of the news prime minister theresa may has consolidated support for her form of a soft brexit plan to keep trade ties with the e.u. not sure the reason why he is resigning, but we will get those lines to you as more details become evident. the brexit secretary david davis has resigned, according to the press association as well as the telegraph. let's keep going because up next we have the threats to global growth, and we will be speaking with a former s&p global chair giving us his view. this is bloomberg. ♪ is bloomberg. ♪

ramy: what just happened, the u.k. brexit secretary david davis has quit the government of theresa may. this is the brexit secretary quitting three days after the agreement coming into force talking about the soft brexit plan. the latest line crossing the bloomberg terminal. according to the press association, now bloomberg news is confirming this. you can see it on your screen. let's pave it a little bit as we -- pivot as we talk about last friday and the global trade lens. the u.s. june jobs report was the classic case of a good news story along with a bad news story. businesses are hiring to white what could be a nasty global trade war but they are not boosting paychecks in what remains a very tight labor market. policy editor kathleen hays is here. is the fed breathing a sigh of relief? there is some good stuff and bad stuff. kathleen: good and less than

good third let's start with what is good because we did see jobs jumping a bit more than forecast. inroll were up some 213,000 june. july was revised to 244,000. we know unemployment jumped to 4.0 from 3.8. let's take a look at this chart. it shows how payrolls are kind of a very sweet spot, above 200,000, but unemployment going from 3.8 to 4%. this happened as more people were coming into the labor force. participation rising in the u.s. last month which is something everyone wants to see because so many people have been sitting on the sidelines. when we look at the next point, with this tighter u.s. labor market, still very tight, what you see is a situation where wages are not yet rising. here is another view of that

unemployment rate up to 4%. average hourly earnings, 2.7% for two months in a row, they cannot break out of this range they have been in for months and months, which is surprising. if the labor market is tighter, why not rise of? if more people come in because they are getting confident about getting a job, that is positive but it means there is slack in the economy as people thought, and that will continue to put a lid on wages. in terms of the impact of this coming trade war or it has already started from friday, has that had an impact on hiring? kathleen: what is interesting is u.s. manufacturers hired 36,000 new workers in june, the most since december. the fact of the matter is i think it shows full ability of the u.s. economy because so many tariffs will go on manufactured

goods, appliances, vehicles, computers. that shows polar ability for the federal reserve and economy. 21,000 workers in june. you can blame the internet but you have to ask yourself will the tariffs hit retailers, walmart, most of what they sell comes from china, will that impact their business is and the economy? ramy: you will stay here for more. let's bring in all sheared, a former -- paul sheerd. keeping very busy. i want to get your initial reaction to the breaking news we have heard. david davis resigning as brexit secretary. the british pound is pairing some of its gains. earlier it was up to 1.3325, now it is 1.329.

so clearly investors are not happy. paul: when in to see the details of what was the stated reason for the resignation. i am guessing coming out of that very important meeting on friday which essentially, the prime minister attempted to bring the whole cabinet on board and have cabinet unity, so there was a very important turning point for the whole u.k. approach to the brexit negotiations but presumably the minister has decided he cannot buy into that cabinet unity and is stepping out. news threeke bad days after the cabinet meeting, but perhaps it means we will get a more unified cabinet. yvonne: please explain because the checkers meeting led to theresa may putting out a plan for a soft brexit. so if we can control migrants in

our country, we still want to trade freely. this is a big sticking point between the u.k., not only theresa may and her cabinet but the u.k. and the au -- the e.u. is supposed to have been negotiating with the e.u., yet the common observation is it is negotiating with it all. they were trying to put that behind them and come to a position they could take to the e.u. i suspect a lot of the commentary will be cherry picking or wanting to have their cake and eat it because they want something accustomed to the union and close in some ways on the good side of things. retaining some of the sovereignty. my guess is the e.u. will come back with a fairly hard stance here, play hardball. if there is any increasing

fractures in the cabinet, that will raise the stakes even further. haidi: how much time do you assign to worrying about disorderly brexit and the effects on the european economy? paul: that is one of the tail risks right now. year, into march next either there will be some kind of agreement, transition arrangement for the best part of a year-and-a-half and some sort of other -- orderly brexit process or the u.k. is poised to crash out of the e.u. that is a tale risk for the global economy. brexit is not just about the u.k.. itself.out the e.u. the e.u. have to decide what kind of configuration and architecture it really wants to end up with in terms of how they share various dimensions of sovereignty. even if you get through brexit, you still have a lot of

questions about where is that e.u. 27 headed? kathleen: coming back to federal reserve, trade, i think it was striking we saw the knife, healthy increase in manufacturing jobs. but seems to me that is backwards. what is your concern when you look at the u.s. economy, the global economy and the trade war which looks like it could get uglier before it gets better? paul: on the trading front, this could go well or very badly. i am hoping it might go well. if you look at what the trump administration message, the message coming out from a slightly different angle, it is the idea of free trade, but it needs to be fair and reciprocal. so there is the sense in which you could turn that on its head and say the president and administration could become a force to push -- brief new life into the

trade agenda that is pretty much dead. very badly of course is the attempt to do that, the rallying cry for free but fair trade ends up being escalation of tit-for-tat and fully fledged trade war. i think people should take a step back, take a deep breath and say, what are the key underlying fundamental issues and address them in a way that turns out to be a win for everybody rather than potentially going down the trip -- the tit-for-tat trade war. kathleen: is china ready to do that? what works for us, when we were so strong and had a big economy, it doesn't work, and we have to make changes the way we deal with intellectual property and other aspects of free trade? paul: it is interesting behind this, without getting too technical, these actions against china, then the actions on steel

and aluminum, both of them are all roads to deftly to china. that is telling us china is now a big economy. it is on some measures the largest in the world at least the second. china has come to look at the whole international order from the viewpoint of saying the u.s. cannot carry all of the weight in terms of being the global policeman but also the consumer of last resort. that conversation, i don't know if it is taking place. i hope it is rather than the reciprocal tit-for-tat. ramy: the conversation about the hegemon has been happening for decades. when i was living in china, that was one of the first words i learned learning about china relations. what degree chemchina pushback on the united states? i want -- 10 china push back on the united states?

than $500ulls in more billion in terms of trade with the $550d talk about billion china -- trump is saying. paul: china needs to be quite adult here and resist the temptation i think to do the traditional kind of retaliation if you would like. we need to look at some of the underlying issues. on the china's position allegations being made in the section 301 report? it is a couple hundred pages long. china should lay on the table where it agrees, disagrees. most people would come to the conclusion that if china has made claims loose and fast with intellectual property, they can tighten up that area, that would go a long way to assuaging the u.s.

china has had tremendous economic development of -- after entering the wto, but that has had consequences for middle america, the industrial heartland. china could take the u.s. that but the.s.' problem, magnanimity, saying we are in a sense grateful for the fact that the global economy and the u.s. economy being open to us has allowed literally hundreds of millions of chinese to come out of poverty. so let's see if we can approach it in the same spirit rather than going into adversarial kind of world. in terms of what policymakers in the u.s. can do to counter a trade war if things escalate, if you get this phenomenon of short-term inflation followed by long-term drag on growth, can the fed do anything?

paul: the fed can only deal with one sort of issues, trying to get the economy at full employment and keep inflation around 2%. had a trade war, you had impacts on the real economy, they would show up on the fed's radar screens and they would react. if the economic growth waned, you would have a fewer rate hikes. if inflation picked up, they would have to react in some way. but i think the real desk on which these issues land and emanate is the present. ramy: this has been a terrific conversation, pulling in so many angles. our policy editor kathleen hays and former s&p global vice chair paul sheared. we have more breaking lines from the u.k. brexit secretary quitting theresa may's government. according to what is dropping

now, the man is taking at least one minister with his departure. this is signing the bbc. david davis taking one minister with his departure. what has been happening the past few minutes or so, david davis, the brexit secretary says he is resigning from government. haidi: we have the pound giving up gains, short-lived optimism that we had consensus on the way i had pre-brexit. we are getting more on that. that is a lost it for us, but ramy upoining ramie -- next. yvonne: the countdown to the xiaomi ipo, looking disappointing before shares have even started trading. we will talk about the valuation cut in half, the shares price targeted at the lower end of the range. we have used from brian from idc. talking about how it was factored and valued. pretty volatile time to

be coming to market. looking ahead to the xiaomi, we think of the cfo as well. that is it for us. all the action coming up. this is bloomberg. ♪ ♪ phones have made our lives effortless.

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yvonne: it is 7:00 a.m. in hong kong where i am live from bloomberg's headquarters. welcome. the top stories this monday, a eight pacific markets are set to start the week in positive fashion. david davis resigned from the u.k. government. york where am in new show me00 sunday night becomes life as a public company . it will be viewed in hong kong, struggling to justify its valuation. and tencent plans