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 to spin off

its music arm. the latest sign of a comeback for the recording industry. ♪ yvonne: we see the trade war fallout was relatively contained. we see a rebound in risk assets. there are a lot of positive signals we're getting out of the u.s.. report. it is a mixed bag but lots of news over the weekend to digest what came out of the harsh words from pyongyang on mike pompeo trip.to -- and davis quitting is a big blow to the prime minister. reactionare seeing the

in sterling right now. here in the u.s., we definitely ended last week in positive territory. . want to show the board the s&p 500 up nearly 9/10 of 1%. we talked about jobs, tech stocks trumping the trade war that has been happening. we will be looking ahead to see what happens on top of the $34 million. will trump pull the trigger on another $16 billion of tariffs on china? $550 billion, says trump. i want to show you what is happening on the board. the bloomberg dollar is paring some losses. it had been down three hundredths of a 1%. the british pound had been up 3/10 of a percent and now it is

up 1/10. crude is slightly on the up. the biggest line you need to know is that oil explorers deployed more rigs in the u.s. this week. yvonne: focusing on oil trade war, that is pretty much the headline. we are starting off in wellington on the backboard here. aztec is downd one third of 1%. there is a lot to reflect on when it comes to the north korea situation, given that mike pompeo left with an awkward stance. there were some -- there was some progression.

the dollar softened a bit. we saw decent gains come through in commodity currencies. the kiwi at 6834. get you caught up with roslyn for the first word news. david davis has resigned over theresa may's plans for a split from europe. may secured overall cabinet backing for her plan but is under attack. at least one minister might follow davis. mike pompeo has shrugged off north korea's pessimistic appraisal of this weekend's talk.

they describe u.s. demands as cancerous. the american side said the statement was a negotiating tactic and that mike pompeo is not discouraged. i am determined to achieve the commitment that president trump made and i am counting on chairman kim to be determined to follow through on the commitment he made. we were gangster like, the world is a gangster because the feelings were unanimous about one needs to be achieved. officials say for boys have been successfully brought out of the cave in thailand. the recovery will continue. players and their coach were trapped two weeks ago. the number of people killed by

floods has risen to 76. 48 have died and another 28 are presumed dead. 92 are unattended -- unaccounted for. officials fear this could be japan's worst weather related disaster in years. and former brazilian president has been told he must stay in jail. the appeals court is split with one justice saying he should be allowed to take part in the presidential election. 12 year sentence for accepting gifts from a construction company. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: china says they will

stand firm in the face of trade bullying from washington. mackenzieo tom joining us from beijing. is the sum of the weekend? tom: reaction quickly on saturday and a summit of business leaders in beijing. we heard from the vice conference minister, a man who has been at the center of negotiations between the u.s. and china on trade, calling all business leaders to push back against what he calls u.s. protectionism. underscorestores -- the feeling in china. putting so much pressure on the that theyommunity will then leverage their position in washington to try to change. we heard from the chair of one

of the massive state owns -- state owned conglomerates here. he took to the stage and pour scorn on the trump administration, which he described as crazy. he also said chinese businesses would be able to adjust. they would not be badly impacted, he said. he said it would be the u.s. it would be the biggest victim of these actions. take a listen. 25% and $50 billion. i do not think the tariffs are going to have a major impact on chinese companies. it is merely a stance. most of the tariffs will be levied on foreign companies that major -- manufacture products in china and sell them back to the u.s. tom: an editorial in one newspaper said china will sections ofopen up their economy, pushing back against concerns that the trade

tension would see a slowdown. ramy: what impacts are we seeing so far? economists are crunching numbers here at bloomberg on how this will play out. the number they are looking at is a reduction in gdp of 0.2%. if the first round of tariffs, that's what we get from both sides. reduction of zero point 2%. further down the line if trump tariffs onith 10% all different countries and they respond with matching that, you could see a reduction in u.s. gdp of 0.8%. in terms of the real impact in the first round, you have to teslaer companies like are facing 40% tariffs in china. soybeans up 28%. u.s. whiskey, 30%.

it will start to happen impact. we will watch this closely for how it plays out here china. the chinese side have said they will be putting in measures to support chinese businesses. something we will be watching for. china is keeping this focused on trade. at least for now. mackenzie there with the latest out of beijing. another developing line coming out of the bloomberg terminal. from the u.k.er has quit. let's see if we can bring this up. brexit minister steve baker. in the past 10 minutes or so, we

said one minister would follow david davis. we are now seeing that you kate brexit minister steve baker is following suit. two out of the recent deal theresa may said she was being to the government for the soft brexit plan in order to keep trade going between the eu and u.k.. byre joined from washington the senior fellow on the council of foreign relations. she was the state department's first chief economist. haidi, $550 billion is what donald trump is talking about. what is your initial reaction? >> we have seen the first step in the opening gambit to the trade war. so far, the initial impact will

be looked at at and industry but industry basis. in the u.s., it is the farmers and ranchers your hearing from first for the potential fallout. a lot of the other components that were part of supply chains that individual companies had been depending on, it is going to be industry by industry response. it is harder to actually play up, as weis will end have not seen further escalation yet. that additional $60 billion. it is hard to figure out where it is going to go. we do not know if this white house knows what the endgame is yet. there have been discrepancies between different positions within the administration. i think until we have a good sense of where this is going, we cannot really figure out where it is going to hit from the macro basis. biggest is that the

longer-term hit will be general uncertainty. marketsnt confidence in , general uncertainty about where this is going to end up going and who might be next. for our viewers, i want to put this into context in terms of the u.s. china trade difference. the blue line in your terminal is $506 billion. china'sthe total for annual goods export to the u.s. were talking with tom mackenzie in beijing, and he was tariffif there is a 10% across all countries and they respond, economists think there would be a 0.8% hit to gdp. do have any calculations?

>> this is on the agenda of the .ed to pay attention this certainly has the attention of u.s. companies. i do not know if we are really , at this stage in the game, to come up with the macro implications are for a trade war that has not escalated to where the president said he could take it. yvonne: we see the trade war as a headline risk, but in china we see simmering tensions when it comes to the credit side. the debt situation seems to be getting worse. corporate defaults continue to pile up. it has more to do with credit been president trump. goodu think there is a handle on the deleveraging situation? >> i think they have the a-team

in place and as good a handle on it as one could hope for. there ands been out done the beginning of article seems to china, which be flagging the issues, particularly the extent to which deleveraging needs to occur. mind itthey are of the is within the capability of the leadership. yvonne: you have said extensively that china needs to change the way it lends. why is that important to the ims? chinan i talk about how lends, it is too low income and developing countries. expansionn part of an of chinese state and state owned

lenders in the developing world. beginning, inthe its quest for resources. after that, it built into developing road initiatives. what we are lacking right now from china is transparency on the loans and of real sense that they are looking out for the sustainability of the debt of the countries they are lending to. we are starting to see fragility in many low income and emerging markets, many of those have borrowed significant amounts from china. china is not a member of the paris club. if we have instances, and we are seeing them now where countries come to the ims, we do not know how china is going to behave. we continue to see trade tensions, do you see them backtracking on the deleveraging campaign and further reforms? >> i think the deleveraging

campaign and reforms they are undertaking have the commitment at the highest level. we could see trade tensions build up. i would expect to see that in the next couple of months, because we are at the opening stage right now. my guess is the commitment to reforms is more about what china needs, rather than what it needs to do to retaliate in any way against the united states. yvonne: we will leave it there. thank you for your insight. up, the fed is confident about the u.s. economy, but warns the escalating trade war is at risk to grow. ramy: and shall meet prepares for public life. we will look at the issues it faces ahead of cop -- ahead of

hong kong. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." the u.s. june jobs report was a classic case of good news bad news. businesses are still hiring, despite what could be a nasty mobile trade war. but they are not boosting paychecks in what remains a very tight labor market. kathleen hays is here. is the fed breathing a sigh of relief? kathleen: i expect. even though the trade war has not officially that in june when they met, there were concerns people would be stepping back and wondering with the would be doing about hiring workers. employment rose steadily even the wages stayed flat. let's look at the bloomberg library.

you see the turquoise line, back from the bottom, 3.8% up to 4%. 4% is really low. jobs are growing but unemployment is rising. more people are coming back to the labor force. the participation rate rose. market, but more people coming back in. what does it mean for the fed? portugal heaid in was concerned about trade spirit, pulling back on investment and hiring fewer workers. one look at a chart looks at how difficult it might be for the fed to hit the inflation goal it wants to meet with the average

hourly earnings. that is wages. the bottom line, the turquoise line, running at 1.8% in the latest month. average hourly earnings stalled at 2.7%. it is a relief because now they do not have to worry about speeding up the pace of rate like -- rate hikes. war seems totrade be a reality now. is there any sign of the latest data that this could impact hiring? kathleen: if people are cutting back, they cut out manufacturing jobs. some any jobs go through factories. manufacturing up 36,000 in the latest report. i want to show you a chart that shows how vulnerable the u.s. is on this score.

we have had the most manufacturing jobs added in 12 months since 1998. that is a stronger part of the u.s. economy we are seeing now. one area to keep an eye on. by 21,600s were cut workers. most of the goods they sell from china. if they have to raise their prices, what does it mean for demand? a lot of places have to watch the u.s. economy now in the midst of a trade war. yvonne: that's a great point. thank you. next, escalating trade tension might hurt business confident -- confidence. this is bloomberg. ♪

ramy: ecb executive board member says the bank is not complacent. he spoke exclusively to

bloomberg at a conference in france. >> what is important for us to gauge is the impact on business, which so far has been limited there it we see the de-escalation process. we start with skirmishes and could turn into a full-fledged war. that would be bad for business confidence. so far, there is strong growth in the eurozone. seen doesat we have not have the potential to derail recovery? >> scioscia the ecb just sit back and watched the trade war happening? >> where he never just sitting back and watching her we have to understand what is going on. -- just sitting back and watching. we have to understand what is going on. see people holding

back investments because of the risks? >> that might happen. we are not complacent on the possible risks. u.s., by thethe way, the victim first would be u.s. jobs and u.s. workers. the ecb plans to exit the eu i the end of the year. what could derail this plan? >> it could be data dependent, as is everything we do. mid july, i see no reason to change expectations. there is confusion that the ecb is keeping rates on hold at least through the summer of 2019. can you explain to us what this means? summereast through the it means at least for the

summer. that sosed on guidance far we have not done. it is a step forward. at the same time, he gives us enough flexibility to adjust if we need to.

kong, 30:30 in hong minutes away from the first major market open. kicking off the week with a lot of news. there was an awkward trip for secretary of state mike pompeo. the latest breaking news with brexit secretary david davis resigning. this is daybreak asia. i am yvonne man. ramy: i am ramy inocencioramy:. you can see a picture of freedom tower in the financial district of new york. you can see on friday the s&p 500 was up .9% where technology tensions.de war we have $34 billion triggered

against china from the united states and $16 billion more sometime in the next two weeks possibly. yvonne: potentially things will get ugly from here. let's get to first word news and get you caught up with the investment world. rosalind: asian equity futures are pointing to a generally positive open. they are assessing shock for the u.s.-china trade war. mainland stocks have taken a beating in the lead up. president trump has threatened to extend the tariffs to cover half a trillion dollars of imports. the chinese premier said the trade war benefits nobody. >> we are not complacent on the risks. proof that the trade war would be back for the economy, starting with the u.s. by the way. the first victim would be u.s. jobs, u.s. workers and we hope that doesn't happen. rosalind: one of the two people thought of being poisoned by the

russian nerve agent has died. they think they were exposed to the chemical along with a man who remains seriously ill. the couple fell ill miles from where the former russian spy and his daughter were exposed months ago. the australian securities regulator taking correspondence from west factor that followed a court ruling that the bank engaged in unconscionable conduct affecting a key interest rate. the judge noted questionable actions of attempting to influence yields. xiaomi will begin life as a public company in hong kong monday on the defensive. it has been struggling to do justify its listing, making it more expensive than apple and tencent. but hong kong stocks are in

decline and a trade war breaking 11% the bids are up to below the offer price. 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. yvonne: thank you. we are counting down to the major market opens in the asia-pacific. more with sophie kamaruddin. set to kick off on a slightly positive note, a lot to come with brexit. we see the pound erasing its gains. sophie: we did not want to sing the monday blues, but things could get ugly. we are seeing losses for sterling after the u.k. brexit secretary david davis has resigned and there are reports the brexit minister is heading for the door with him. this is dampening the cheer from theresa may winning a softer brexit plan. you can see the pound against the euro taking a hit.

we have cable the low 133 and 88.euro-pound now at i want to check in on the yen, keeping fairly steady after .osting a weekly gain another warning to the u.s., an article of the people's daily said the tariffs will make american companies lose the china market and could expect headwinds around mike pompeo's visit to north korea. the yen's advance is not boding well for the outlook of japanese exporters area we are looking at japan's current account balance for may and less than half an hour, expected to remain surplus. the stronger yen not going to do so well for the export outlook. ramy: on the corporate front, what are you watching? sophie: watching more information from japanese companies affected by the flooding over the weekend, toyota, mitsubishi, halting some operations.

also watching for reaction in honda and panasonic shares since they are tying up in the lithium battery game. we have more from japan ahead of komatsu results, the construction equipment maker reporting asian -- reporting an 18% increase. this moderating ahead of the chinese trade data due out which will soften as well. ramy: checking the markets, thank you. the week ahead on wall street will bring a fresh round of earnings. it puts banks in the spotlight. president trump will attend the nato summit in brussels as we await the next moves in the u.s.-china trade conflict. su keenan, let's start with what to watch. su: there is a lot on the plate because we have earnings, the banks come also a lot of possible deals in the works as we enter merger monday. let's go to the board. bp has emerged in recent days as the front runner to buy bhp

illiton in the u.s. that is according to people familiar with the matter, numerous reports. groupon looking for a buyer, a lot of focus there. a mini -- a lot of u.s. health care companies in the spotlight. the administrator of obamacare is freeing -- will spinthat tencent off its music business, then moving to biotech's because this will put the music industry back in the spotlight and let you see streaming. bio jam has brought a big bump to the industry, 19% gain, 20% friday, had to do with promising results from a drug that had disappointing results several months back. there is a number of companies in the same space moving higher. it is a chance a lot of analysts

are saying for those involved in biotech to get back into the group. these are on the upswing through the week. and then there are the banks. j.p. morgan chase, we have got wells fargo, citigroup, all of them kicking off inc. reports at the end of the week. -- bank reports at the end of the week. how they manage off it by lessng costs in a charitable trading environment for bonds. yvonne: we will see how supportive the earnings story will be. on the ego front we have a fresh round of data, watching for more on trade finance. how important is u.s. inflation? su: that is a key piece of data the fed looks at very what we are getting in the consumer most likely an acceleration of the data, 2.9% is what is asked active. that is well below -- above the

target rate the fed has. there is a number of other eco-data that will be coming at us, getting consumer confidence. we will also be getting a look at some of the jobless claims that will be out new the end of the week. in terms of trump headlines to watch for, in addition to the expectation that there will be a ratcheting up of the tariffs be-for-tat, trump will attending nato, then heading to the u.k. to meet with the u.k. prime minister theresa and possibly a meeting with the queen. that may be on tap. then oil will continue to be a headline grabber. oil is continuing higher and higher. there were blame games going back last week trump is to blame for higher oil. we also have predictions according to one agency that oil could go to $100 a barrel, so big focus on that as we kick off

the week and wall street. yorke: su keenan from new and now a look at the stories trending across the bloomberg universe. it is breaking news on the death of a british woman poisoned with a nerve agent. the early victims of trade war getting attention, german cars in american states coming luxuries? stories including news about north korea reminding trump's nuclear weapons will not come cheap. updates on the situation in thailand and the cave rescue of the football team. check out those stories trending online or the terminal. life xiaomi prepares for as a public company with skeptical investors in the gray market. we will look at the challenges it faces. this is bloomberg. ♪

past developing in the

hour, u.k. brexit secretary david davis and his deputy quit the government and what threatens to be a major blow to prime minister theresa may's authority. let's bring in the dartmouth college economics professor and former bank of england monetary committee member. thank you so much for joining us as we look through these developments. it comes down to their concerns about keeping the u.k. tied to this soft brexit, the e.u. rules for good. your initial reaction? >> he started out thinking about what the bank of england would do. they made it clear brexit represents one of the biggest, probably the biggest downside risk to the economy. what we have had in the last couple of days is the tory government trying to sort out the plan that will reconcile the eurosceptics with reality. they came out with a proposal that looks soft brexit, and the

hardliners wouldn't go along with it. we have seen david davis who was supposed to go and negotiate this deal leaving, his deputy leaving. this really looks like chaos going on just before trump goes over to talk to theresa may. the reality is it may not survive until next week. this is obviously a big piece of evidence this is ongoing kind of chaos. the party itself is tearing itself up and the reality is the hard brexiters have become visible to reality. you will have to deal with people and goods and services and how can you do any of that? ramy: theresa may, how much does this hurt her? danny: i have said this on bloomberg several times. you look at this government, it

is like watching ferrets fighting in a sack. it really is. the reality is a soft brexit is the only thing that is viable and doable. the bank of england made it clear. the brexit secretary, ports johnson and others, made it clear none of it is acceptable. so it looks like something has torn the tory party to pieces in the past is about to do that. keeping in mind there is the irish question, what will you do ? will you do about free movement of people? what they agreed is there will be no free movement. the other members of the e.u. 27 are never going to agree with that. this is literally politics being mired by the reality of what will happen on the ground, what can you practically come through with, and do you hold all the cards when the other 27 really

are the ones holding the cards? this is a reality check for the government through may saying hard brexit cannot come. it will have to be softer, and the eurosceptics and nigel farage, the people pushing for the brexit are unhappy. what you have is basically chaos , and reality is maybe may will not survive through the week. quite possible. yvonne: what is the likelihood theresa may can push this through the u.k. parliament? what does she need to do? danny: it is hard to answer that. the two sides are completely irreconcilable. one side wants to go, be able to be -- britannia can rule the waves but have nothing to do with the e.u. businesses have made it clear that is not going to happen. the last few days we have seen

jaguar, land rover say if you don't sort this out, we will leave. bmw did the same. the reality is coming from the economics, from the business saying you cannot be a little island on the coast of europe without reconciling these difficulties. the politics of the tory party that are dependent upon a series of irish protestants holding this together, so i think the likelihood they cannot be held together, the question is whether there is a collapse, a new leader, a general election -- but this is really -- it is sensible to be talking about it very we don't know what will be happening. the reality is she cannot pull this together and we will probably see a push for a new leader, a general election. i don't think we will see 25, 30, 40 years of discontent being resolved in a week.

looks like more fighting is coming and chaos reigns. yvonne: before we let you go, is august still live for the boe? danny: they have said so but i will listen to mark carney this week. i thought may was not lying because of the data. -- they have made some suggestion. carney suggested a rate rise will come but the data doesn't support it. the u.k. economy, maybe we will see a point forward for the second quarter. how can you raise rates? no raising inflation, there are weaknesses in manufacturing and construction. all the stuff we talked about, brexit represents a major downside risk to the economy and a trade war does as well. everybody in their right mind would not be voting -- if i was on the community i would be against it. i don't think it is live given what we have talked about.

chaos from the government is not a situation where you want to raise rates when you said the biggest risk for the economy is brexit and those risks have become great in the last hour. ramy: we will have to leave it there, dartmouth college economics professor. you have said chaos the number of times and that is ringing in my ears and the u.k. to recap the lines, the u.k. brexit secretary david davis as well as his deputy have resigned from government, due to concerns about a soft brexit. initially they had supported it but after continued incineration decided to change their mind of leaving it and as you heard danny saying, this may call into question theresa may's longer-term authority being prime minister and danny said maybe she won't survive the week. yvonne: that is going to be the key question here. to thesee the reaction

pound. we will see once the fx traders come to work if things get more pronounced with sterling. let's talk about a big ipo today , and isomi's rocky road in hong kong. so far the market indicates it may not be a very sparking debut. this man is in singapore this morning. also joined by the senior analyst. brian, valuation has been cut in half. we paid a shares price at the bottom end of the range. confusion what this company is about. why are investors confused? brian: if you look at them from the outside they are a smart phone company. there is degree of truth to that. 75% of their revenues come from smartphones. themselvessitioning as an internet company or they call it a triathlon model of

.etail and the iot ecosystem the thing to boil that down and make it easier to understand is it comes down to having a big user base. they have tons of smartphones, but they pull all the users together. they do quite a unique user engagement model where they cultivate a lot of loyalty by engaging these users, take their feedback, put it in their products. they then get a platform of users with which they can sell other products. it could be things like scooters and air purifiers but also services including advertising and games, other sorts of things rates.avel, roaming so that is really where the interest, at least from an optimistic point of view, may live because you have the big base of users with which other things can be sold rather than low-margin smartphones. yvonne: it seems they are trying

to do a similar model as what am of -- as what apple is doing. they want people to join their ecosystem. but they are doing a lot of third parties to drive up the volume of products. is this model sustainable? >> it is a new model, but i would argue the major difference is xiaomi -- apple gets a lot of margin when they fell hardware but xiaomi is very thin business model. 5% of profit margins. so that makes it vulnerable when their hardware product doesn't sell. not only that you don't capture the large user base that you want, but also you don't make much of what you sell. the leverage they take is higher, the state they put in is higher. ramy: that is right. they want to operate on made -- razor thin margins, but their software they want to grow into

-- do you think they will make up this difference anytime soon? can they push into the $100 billion valuation they were aiming for recently? anthea: in the near term most of the user base still comes from china. it remains to be's and how this can bring success in emerging markets. in india a lot of users are still using feature phones even though xiaomi has a successful market share gain in smartphones. how much these users are willing to pay and also bringing in the fact that they have google play as an option and other emerging markets. the huge challenge they have when they go overseas. ramy: i saw you nodding your head. talking about this valuation, it is more of a hope, the potential possibly. what are your thoughts? bryan: exactly.

that is one of the questions investors need to consider. to the earlier point, if you look at the services model or platform of selling services, it works in china today. they have had success. the question is, does that translate easily as they expand overseas? services, you have got to be very local specific. i am not sure it is that easy to copy and paste and put into another country. that is one thing we need to consider in all of this. yvonne: how loyal are xiaomi customers to their products? they have been talking about -- volume low-margin play. are they sticky, these customers? bryan: i am glad he raised the question because on the surface it looks like they have got a loyal user base. you have people who pay money to go to their launch events. you have big me fans, they call

them. they are like quite a big following of this brand. we have done some surveys as well. checking to see what loyalty rates are like as they move to their next smartphone, whether they continue to buy another xiaomi phone. it is not as compelling. it is not as sticky as apple where apple users or the vast majority of apple users move on to the next apple phone rather than defecting to's amazon -- defecting to samsung. we need to be cautious on this loyalty story. there is validity, merit behind it. they get and are able to cultivate loyalty beyond the other smartphone makers outside of apple but all the same it is not completely, not a solid wall. there is the possibility of those who say as they migrate, maybe they will migrate to apple or some other flagship phone.

one of the others is huawei as they have been doing well with flagship products. ramy: that would be a big jump because a phone from xiaomi is like $150 but the median price for apple is like $800. viva,g about competition, how does that give xiaomi a run for its money? bryan: to your point on the different price ranges, opo and vivo are in between xiaomi and apple. if you are moving from the lower end xiaomi phone into the midrange, not necessarily apple, but they could move into the opo and vivo range. xiaomi has developed products that come in at the premium range to not only entice users to move to those phones but demonstrate, we have got credibility and technology.

we can do stuff apple can't including these screens and that. they are trying to, they are building products to get the users to keep them from going to vendors like apple or even opo and vivo, but that is why you have got guys like these companies doing quite well, particularly in india where xiaomi sells a lot of low-end phones. now users are getting ready to graduate over to a $200 phone from opo. yvonne: the last word to you now, we have seen ipo's in hong kong fizzle out quickly. what are you watching out for? anthea: the major flow would be from institution investors, more stable and anchor investors. i think for investors they should pay attention to how the flow of institution investors are for those who subscribe, and

if they stick to it. retail is more volatile. in terms of the long-term outlook, it depends on how sticky the institutional investors are. they got allnk these backers, and it shows the confidence at least, the outlook. us at thefor joining xiaomi roundtable. ramy: great interview and chats. don't miss our interview with the xiaomi interview -- xiaomi ceo himself. that is 9:50 hong kong time, 11:50 in sydney. yvonne: let's take a look at markets here, how we are starting off monday morning. a bit of downside when it comes to new zealand, down .4%. we are expecting a rebound in risk assets to trickle through to the rest of the monday session. equity futures are still pointing to decent gains, nikkei futures up .2%, gains on the

kospi. things could get ugly is what the market strategists are saying. david davis resigning. this is bloomberg. ♪ is bloomberg. ♪ 2, down. back up.

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8:00 a.m. here in hong kong. welcome to "bloomberg daybreak: asia." asian markets are starting to week -- starting the week and positive fashion, despite president trump's trade war with china. davis has resigned. proposalheresa may's is unworkable. ramy: mike pompeo says his latest north korea trip was productive, but jong -- but pyeongchang slams the united states is gangster like.

yvonne: we will up to calm when it came to the trade front, despite the rhetoric we got over the weekend. there are a lot of moving parts in the u.k. in the last 48 hours. we heard there was a soft brexit plan and then david davis resigned. they.k. is now announcing will announce a new brexit secretary monday morning. in the last few minutes, theresa may's cabinet is in theresa -- is in chaos right now. ramy: and there is speculation that theresa may say -- that theresa may might not last this week herself. with what is

happening with the trade war or whatever you want to call it between u.s. and china, we are looking ahead to see if another $16 billion in terrace will be pushed on china from donald possibly $550told billion. it seems that the -- that it is not that bad right now, but this is a newly developing, volatile situation. markets, at least for now, what terrorists? -- what- terrace tarriffs? perhaps investors are taking some hope from the economic fundamentals. quicker pace than expected.

earnings estimates continue to climb, which makes it more compelling to get back in current valuations. we are seeing gains for the cost up.p -- kospi and the yen risk barometer is looking steady. we are keeping a close eye on pound crosses. cable fell below 133. bulls are nervous around what is going on around the resignation of david davis. said theresa may's policy is more likely to break the manifesto pledge. the labor leader is weighing in, saying may is incapable of delivering brexit. there is a decline in the pound. watch,cks of note to companies affected i the severe -- by the severe flooding in japan.

for plants will be closed until at least july 9. mk -- i am keeping an eye on komatsu. downgraded to sell at ubs. watching for reaction in honda and panasonic shares. they have been down so far this morning. sophie, checking the markets. meantime, more breaking lines crossing the bloomberg terminal out of the u.k. 'resignationis letter has been released. he says the u.k. is more likely to stay in the customs union in the single market. more likely to break the manifesto pledge. we are also getting reactions. the labor leader is saying the davis resignation shows that

theresa may has no authority left. scathing words. and one of the main brexiteers who could be a candidate to replace miss may is -- says this is a serious mistake that has led to davis quitting. is still developing. i expect we will still be parsing what is happening over the next few days. let's get the first word news. a lot of news today. roslyn: more on the brexit story. and steve baker have resigned over theresa may's plan. after saying the plan is unworkable. may secured overall cabinet backing but it is under attack by hardline budgeteers. mike pompeo has shrugged off

pessimistic appraisals of the weekend talks, saying north korea has not want up its nuclear plan. u.s. said pompeo is not district urged -- not discouraged. >> and counting on chairman came to be determined to follow through on the commitment he made. were gangstersts like, the world as a gangster, because there was a unanimous decision at the un security council about what needs to be achieved. to save trapped soccer players in thailand continues. four boys have been rescued. wereys and their coach

trapped two weeks ago when heavy rains pushed water levels up. the number of people killed by record floods in southern japan has risen to 76. the government says 48 people have died with 28 presumed dead. 92 people are unaccounted for. more than 26 centimeters of rain in three hours, the most to since records began in 1976. officials say this could be japan's worst weather-related disaster in years. and the rolling stones are finding a global deal with universal music. details of the agreement have not been released but they will the bands some of classics. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

ramy: thank you. now to another story we have been following. china saying it 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 its biggest victim. tom mackenzie joins us in beijing. tom, what has been said over the weekend? on saturdayreaction at a business summit following the decisions on friday. we heard from china's vice commerce minister speaking on saturday, who called on business leaders in particular to push back against what he described as u.s. protectionism. the byline in china is that the business community could play a role in helping to change the catalyst in washington. we also heard from one of the heads of the largest state owned

it wouldates, who said be u.s. businesses that would pay a higher price. chinese business might feel some volatility in the short-term, but they would be able to adjust. take a listen to what he has to say. billion.d $50 i do not think the terrorists will have-- tarrifs major impacts on chinese companies. it is merely a stance. editorial in this morning's people's daily says u.s. firms could lose out on market share as a result of these ongoing tensions. that is a longer-term concern for u.s.'s noses is, when you talk to them about their operations here in china. yvonne: hiring and investment. have we seen any impact so far?

tom: this is what we are watching so closely. we spoke with some business leaders on saturday at the no justso far, they say a change in our strategy, we are see how this plays out. bloomberg expect a moderate impact on growth. we are looking ahead to the two weeks where potential you get additional $16 billion. you will likely feel it impact in sales. electric vehicles like tesla are tariffs.g 40% soybeans, 28%. addeds with new tariffs on. so we're looking at sales impacts in some companies. on the chinese side, they made it clear they will put in measures to support chinese businesses. we are waiting to see what that might mean. this morninglines from people talking about the

fundamentals of the chinese market. that could be the national team writing the rescue of chinese stock markets. we are waiting to see how the equities play out. they have been under pressure. there is a dynamic around it geopolitics and the trade picture, this view that china is trying to isolate the trades that with the u.s. from the broader political relationship. that could change. we have to look beyond the next two weeks. we have to look to how things will play out if trump looks at the additional 500 that he talked about. yvonne: tom, thank you for us in beijing. still ahead, more on trade with aia group. ramy: us in beijing. membernd former board hans joins us from the top -- stock exchange. this is bloomberg. ♪

ramy: this is "bloomberg daybreak: asia." more on the markets. the new trading week kicks off. breaking news, david davis resigned in the last few hours and the u.k. spokesperson says they will be appointing someone new monday morning in the u.k. group chiefs aia investment officer. there seems to be a soldier -- softer tilt toward brexit. how much volatility can you expect? is getting down to the wire in terms of what it can take to the eu for negotiation and holding the cabinet together proves to be extremely difficult. it this is a setback for theresa may and the government. yvonne: does this change you think about european assets

overall? anseem to be seeing acceleration in growth in that part of the world. how are you viewing the market overall? >> the u.k. economy has been surprisingly strong very overall in europe, we have seen some disappointment in growth this year as the speculation that we .ould see a pullback we are seeing a tightening in monetary conditions. overall, this is about the u.k. and how it goes back to the eu and negotiates its exit. it will be a bumpy ride and i would not read too much in just yet for where this ends. sayne: is it too early to if theresa may will survive this? will imagine that she will be able to hold things together, but it is a setback. ramy: i want to bring in our other big major story, what is

happening between the u.s. and china. billion amount, in terms of double -- in terms of donald trump, threatening and posturing against china. posturing.lot of if it continues like this, this war of words and actions, the u.s. has more to play with. it has a bigger range of products it can put tariffs on. that is the whole point. this is a bilateral trade imbalance and china has a limited number of options in which to retaliate. so at the moment, is about china trying to be effective in stopping the escalation. it really seems this escalation will continue. companies ing for this region and china, and back in the u.s., as well. ramy: there are a semi-things coming together in terms of a perfect storm for china.

deleveraging, that, slowing d debt, slowing of the gdp. what are you seeing here and what would you caution? >> the lock of clarity around this is what is dominating investors minds. be theok at what might outcome. typically, as we see reaction in aremarket, companies that part of long supply chains, that is where the lack of clarity exists. there is a pulling back from that. and there are companies that are the at the center of some of these targeted tariffs which are being hurt. investors are pulling back from those economies, which tend to be more export driven. economies and markets such as korea and taiwan. it is difficult to read exactly how this will play out. i suspect we are moving into a post wto trade world and it will

take time for this to settle down. ado not think this is purely tactical move. it is speeding up structural applications that were on the table anyway. yvonne: do you think the rebound we are seeing is short-lived? >> i think the market and china has had a poor run. we are seeing tightening, trying to rein in the credit. i would expect towards the end of the year we will see some loosening. china could finish the year much stronger than anticipated. the export sector in china is not the most profitable. it is the domestic economy that really drives growth in china and that is where we are focused. bewe will continue to turbulent. you will see short-term reaction. right now you are seeing a little bit of recovery from a little bit of an overreaction to some of this rhetoric. it does not seem like

this is a central bank that is going to stop anything is tracks at the moment. does that make the u.s. a more compelling story for you? >> the u.s. economy is extremely robust. fiscal stimulus has helped things significantly. more people register for work, which is positive. but overall, the u.s. does not have the capacity to pick up the tariffs terrorists -- happen. if you are working in services, service costs have to come down. the sector could be hurt inadvertently. ramy: i have a bloomberg chart i want to show up. equities holding up the developed world. the yellow is the usa index.

it, it the u.s. and turns to blue. we are expecting something to .it the fan next year people are talking about a recession in 2020. to what degree can we start to see these lines start to move further, lower? what is your fear with the united states? >> i don't have a fear. coming into 2018, there was an expectation of synchronized growth and i think investors have been somewhat disappointed. the u.s. market has been holding up the ms co. i think we will continue to see some narrowing of that gap. we are not seeing a major correction. we're not seeing a major economic slowdown. upcould just see growth come

slightly, but not significantly. that is what markets are telling us at the moment we look at the shape of the yield curve. to the u.n. inck terms of what that pvc might do, we have been saying, what would happen if they come in to push this lower? to what degree do you think they might do that? analysts earlier were saying 6.7, 6.8 is when they might come in. >> the range of goods to the can target is much larger than what china can target. so the speculation is whether they will take it on themselves to provide ammunition to hit back. speculation is around the currency and what can be done to weaken it. pboc has been very mature about

it and parted from previous practices suggesting they will stand firm. but they are ready for a little more weakness if that is what occurs in the market, and relying on the market. i think that is what we are likely to see. the pressure will be on the but i don'tthe rmb, think we will see a concerted effort by the authorities to potential eat weaken it. it is two-sided always with china. a weaker rmb suggests more money will flow out of china and china is sensitive to that. they took significant administrative measures years ago to shore up the capital sure we do to make not see a significant and continued at flow from china. so we will probably see a slightly weaker rmb and a little more outflow from china, but enough measures in place to

ensure that it does not gather significant momentum. yvonne: it provides pockets of opportunities. how attractive does the valuation play? earnings perspective or a valuation perspective, it looks like they are cheap right now. domestic player in china and overseas player in china. i think they a pullback from emerging markets. these situations where you see a sharp selloff in market, china year. 16% this this is an opportunity to come back in. our sense is it is the domestic plays that will lead the charge. credit will ease towards the end of the year and that will support domestic plays. there are opportunities to come back in and build long-term positions. yvonne: what is the most unduly punished? >> anything that is dependent on

trade is stealing the headlines. hong kong market, as well, being the way it many international investors capture. hong kong has come under a lot of pressure. to,aps they will continue but that will create some opportunities here. yvonne: mark, it is great to have you. forget our interactive tv function tv . watch us live and catch up on past interviews. part of the conversation. you can send us instant messages during our shows. this is for bloomberg subscribers only. check it out on tv . this is bloomberg. ♪

ramy: this is "bloomberg daybreak: asia." a quick check at the latest business headlines. tencent plans to spin off online music's nest.

-- music business. growth in china mirrors the u.s. growth in spotify. -- told the the hong kong stock exchange they are still working. -- soson is has followed most has filed for an apo. giantsh janet -- tech could and collaboration at any time. labelsup, north korea america has disarm and and claims the u.s. is gangster like. we will look at the u.s. reaction, next. this is bloomberg. ♪

yvonne: good morning. happy monday. it is 8:30 in singapore right now and we are half an hour away from the opening of trading. ramy: i'm in new york and you are watching "bloomberg daybreak: asia." let's go to rosalind chin for first word news. >> the u.k. will name a new brexit secretary on monday after dave davis and steve baker quit, in a major blow to theresa may. it is two days since she has secured back in -- backing for her plan. in his resignation, davis said her plan has lost sway with the

u.k. economy to europe. asian equity futures are pointing to a positive open. the u.n. hadks of already taken a beating. president trump has threatened to extend the tariffs to cover have a chilean dollars. china has said a trade war benefits no one. extend the terrace to cover $1 trillion. the first victim would be u.s. jobs and u.s. workers. i do not want that to happen. british police say one of the two people thought to be poisoned by a nerve agent has died. a woman was exposed to the chemical last week, and the man remains critically ill in

hospital. the former brazilian president has been told he must stay in jail, hours after another judge said he should be free. should bee said he allowed to take part in october's presidential election, and the other saying there is no legal basis for that view. he is in jail for accepting gifts. and disney's latest marvel movie -- ticket sales of $67 million. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

yvonne: let's look at how the asian markets are shaping up with sophie. it seems there is rebound with legs. >> asian stocks are mostly higher and the yen is looking steady. there is enthusiasm stirring up for japanese stocks. health care tax and utilities are leading gains in tokyo. the british pound is sticking below the handle. markets are rocked by what is going on with david davis resigning from the u.k. cabinet. checking it stocks we are inching, eastside is rising tokyo. korean peace stock is slipping

after mike pompeo left pyongyang without announcing any breakthroughs. looking at other korean stocks, nominate chemical losing 10%. yvonne: sophie, thank you. u.s. secretary of state has fired back after north korea issued a statement calling american demands gangster like and cancerous. >> i am determined to achieve the commitment president trump made, and i'm counting on chairman kim to be determined to follow through on the commitment he made. so if those requests were gangster like, the world is a gangster, it has it was a unanimous decision at the u.n. security council about what

needs to be achieved. yvonne: let's get more from david joining us in hong kong. gangster like. what were these demands? >> it seems like both sides are talking at cross purposes. it is something that was discussed as a risk before hand the trump would go into the singapore summit with a different set of assumptions about what denuclearization made -- means. this is at the heart of the issue. pyongyango arrived in hoping he would be able to flesh part ofdenuclearization the agreement from singapore. that part of that agreement means the north koreans would give up their bombs and the rest of it. john bolton saying last week it would take a year. pompeo saying it could take as long as the first term of donald trump. if you look at the statement, the north koreans talk about how

the americans have not addressed some of the major issues that were agreed in the singapore armistice and peace deal, and that denuclearization would be dependent on achieving the goals that were set out in the agreement between president moon and president kim. so the americans are not talking about security or peace. they're just talking about denuclearization. this is the crosstalk we are seeing. ramy: the rhetoric is getting ramped up on both sides. wasphrase maximum pressure also revised hear from pompeo. how would that work if this did come back? >> it is interesting that he used this phrase. donald trump said he has been avoiding using it because he did not want to stir things up. so you think about maximum pressure, what is it? it is a campaign to really

squeeze north korea on two legs. one is the economic sanctions the u.s. has been led with the in thed a squeeze economy. the other half is political isolation. that was done through diplomatic isolation. and that is over. we are seeing three meetings with the chinese president, with moon. summit possibly coming up in october. there is a potential that kim will meet with vladimir putin. he might even end up at the u.n. giving a speech. that is not diplomatic isolation. so it is very difficult for the u.s. to actually squeeze and get support for its position that north korea should be immediately when it is apparent the u.s. is not doing the other part of what it agreed to in singapore. and is the view of china

south korea. they need to be talking about peaceece part of that -- part of that declaration. yvonne: so what another summit achieved anything? it is unclearge where we stand. we have to wait and see what happens. but there is a lot of communication that is taking place through the back channels. one has to wait and see. yvonne: pompeo did not even meet with kim jong-un this time around. >> that does speak a lot. but it also speaks that this is a signal that there was not going to be any major change going into the talks. we do not know what happened behind doors. there is a great story on the what exactlyt happened in the guest house where they were staying. i recommend everybody check out the story. david, always good to

have you. a roundup of stories you need to know to get your day going. go to tv on your terminal. you can customize settings we you only get news about industries and assets that you care about. ramy: are you excited? less than an hour to go before show me big debut. a look at the challenges it is facing, next. this is bloomberg. ♪

ramy: welcome back. this is "bloomberg daybreak: asia." is preparing for life as a public company but investors are skeptical that millions of shares could be in

unprofitable territory from the outside -- outset. tim, good morning. wise is so slim for those who came in later? ran investors who came in on this new business model had a good rise up until today, ipo day. many of them made hundreds of percent returns. around 2014, when they did a few more rounds of bc investment, you might remember, if you look back, their valuation skyrocketed from low billions up to 50 billion. those who came at that time, they have not seen much upside. 18% for the f one round in 2014.

18% is not bad. investor four years later, it is not considered a real winner. they bought in at the top of the investment round. today,f the stock pops will they be able to finally cash out? good point. it is one of the issues they have to face. they are locked in for six months. we could talk about today's price and if it goes up or down. for those who came in during the ipo, that matters to them. but for the bc, what matters is six month later. where will they be trading in early january? that is the price the vc's will be able to get out. dump 6%d not be able to of your stock in a short amount of time. but they have to wait six month or longer to be able to cash out. about buyingis all

in and then liquidating your asset and sending your money back to your original investors. so it will be a long wait for them. tim culp in with a great story on the bloomberg about if investors could be underwater. we're counting down. within the hour, xiaomi is going public. live at head of the debut. gong is behind me that they will be ringing shortly at the stock exchange. celebrating the lifting day of their big ipo. this is an original early investor. , for joining us. it has been a long road to this

ipo, especially in the last couple weeks. are you a little disappointed that they scale back the ipo? >> not at all. the company has exceeded every one of their expectations since they started. it has beenly beyond everyone's expectations. >> are you disappointed that the pricing was lower and that as a shareholder, you might be underwater? >> we are not underwater. you cover many ipos. alibaba,ncent, facebook, when they first ipo, the price compared to the investors is not special. you?at is xiaomi to

is it an internet company like facebook? 80% of revenue comes from lower margins. it is not quite apple. at the end of the day, it is a company that will continue to go well. when you first by the company's phones, you do not expect how good it is, but then you end up buying other products. that strategy is very unique and people have not seen it. another is room for ecosystem beyond tencent and alibaba. that is what xiaomi wants to do.

is there enough space for another ecosystem for the consumers to get there i oc and internet services, music videos, etc.? inere is definitely room your phones, your cars, and in traveling. seen alibaba and tencent grow. more and more companies are building this is the system. their up and questions about complaintsion and that this is bad timing. do you see this ipo as bad

timing, giving -- given the trade war that is brimming between the u.s. and china? >> ipo is less relevant. globalized internationally. a publicly traded company helps spend in other countries. they going to break the u.s. market when there is so much skepticism for chinese markets? you have done well in india, but the u.s. is a tough nut to crack. with alibaba, everyone in the u.s. thought was crazy and 13 years later we all drive a prius. the world has changed.

in another year, another 2 billion people will get on the internet. not in the u.s.. they will eventually have more smartphone products. as more people use them, you will end up using internet the comes with them. they will be in every country. , we startedrun covering this in 2012. it has been amazing to see them grow. there is more growth ahead. >> back then, did you know this would be the bullet that hit? strongne could see how

xiaomi would get. looking at old investor memos. we were talking about it. it exceeded everyone's expectations. you see them promoting younger people in executive positions. it makes most sense. veterans mixture of and new people. system.it is a new it will work through in its own way to get there. i think in the long run, with tdr in china, it seems to be a great way to tap into the string of global r gets. that could be an interesting model to look at. markets opened 11% down.

there's an indication that this will be a sound day for xiaomi what else will be the capital -- what else will be a catalyst to turn around? >> [inaudible] we're waiting for the executives to come on so we can ring the bell. it is good to see you again after all of these years. years ago at the offices, you only had a few desks. congratulations. ramy: a great interview in a party atmosphere.

interview later on in bloomberg markets. that is coming up 9:50 hong kong time. 11:50 if you are watching in sydney. more breaking news in regards to resignations in the united kingdom. braverman is now saying she will be resigning. that she has resigned. that puts the number at three, following david davis and his deputy, steve baker, resigning in the past hour. this throws into question the authority of theresa may. her critics are already throwing on this and questioning her authority. she could find result having to replace the entire brexit department if she can cling to power. we spoke with analysts saying she might not last this week. yvonne: look at the panel.

we have erased all of the gains we made over the weekend. we also teamed up with twitter to launch tictoc bike there. you get the latest on brexit. we have been talking about the first global news network designed for social be a. .- social media if you are on twitter, follow us on tictoc. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." business's look at the headlines. bp has emerged as the front oil ando buy onshore gas operations in the u.s.. we are told they made the highest offer for the asset, which bhp wants to sell in a single package. the miners received offices two months ago. the value was up to $9 billion. a state owned company signed a national security agreement with the u.s. that spoke to a long beach facility. it is the creation of a caroline that would be the world's number

three by capacity. ramy: groupon is looking for a buyer and has spoken to several companies in the last month. the 2011 ipo was the second largest for a company at the time, giving it a valuation of $16 billion. shares are down 83% from that debut, but up 20% over the past year. potential buyers might include alibaba, which took a 6% stake two years ago. a quick look at how markets are trading. they are pointing to mixed pictures when it comes to equities. nikkei 225 is up 9/10 of 1%. we lost a little momentum in telco -- tokyo. kospi is flat at the moment, despite we saw talks in pyongyang with mike pompeo.

optimism has fizzled out. looking ahead, it will be about xiaomi and but it does with the hong kong market. ramy: let's check asian futures. we are seeing a mixed picture. .ook at the index down more than 2%. taiex futures are in a green. looking at kuala lumpur, up 2/10 of 1%. that is it for now. continuess coverage with rishaad and haidi. standby for bloomberg markets. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.

>> asia-pacific starting off in a positive mood. investors shrugging off the trade war. big story here, the u.k. government turmoil. david davis says it's simply unworkable. that forces us to look at currency markets. sterling down, but since recovered. we'll get you details later on. in hong kong, i'm david ingles. haidi: i'm haidi lun. tencent plans to spin off its music arm in the