rising trade tensions send wall street down. the s&p 500 fell the most in two weeks while the dollar fell saw its first rise and a month. tariffs willra hurt demand for commodities. tension is in the air as nato leaders meet. president trump says u.s. allies should spend twice as much on defense. a leading tesla investor has weathering advice. he says it should put down a

focus on the job. where it isydney just past 8:00 a.m. on a foggy morning area this is daybreak australia. it is just past 6 p.m. here in new york. over this next hour, we will look at how the action here on wall street will lay into your asia-pacific trading day and of course what was often trumps rhetoric now turning into reality in terms of the global trade war. that ravishing the markets, and a coming across the terminal right now. we have a white house aide saying china must address long-standing u.s. concerns and the u.s. -- trade war. you can see how we closed the day. the dow down, the s&p down as well. the nasdaq down the worst in just one week. still seeing a bit of resiliency

but still definitely down in the red here. in the monthighest because of these trade frictions. that also having an effect on what is happening with commodities. for example look limber commodity index is following -- falling. crude in the u.s. session both falling by five to 6%. you can see at least for wti catching up a little bit but brent crude falling just a little further. let's have a look at some of the impact there. the japanese yen this is how it has been weakening against the u.s. dollar. not much change to the euro versus the u.s. dollar. is chinese offshore yuan down the most sense devaluation back in 2015. the turkish lira continues to

take a pounding as the u.s. dollars climbing to a record against the lira. trading in new zealand is just getting underway. off to a rocky start. aussie dollars are finding a sea of red. let's see how that pans out. let's talk more about trade. that is a big story of the moment. high-level talks between the u.s. and china have ground to a halt as the trump administration threatens to escalate the trade war. we're joined from washington. china and the u.s. have seven weeks to pull back from an all-out trade or. there doesn't seem to be any movement so far. what are the chances we can avoid? of aey are at a bit standoff. there happens low-level talks but there is nothing going on in any formal or high-level

negotiations to come to some agreement. just nowse spokeswoman coming out of the statement saying the u.s. stands ready to talk but china has to agree to address some of the issues the u.s. is raised. that right now does nothing to be happening. both sides are digging in and going toward the end game and where that will be is some a clear. tariffs on both sides will begin fighting the economy of the u.s. and china. itthe next weeks and months, will take some time to unwind all of this if there is no clear vision of what a breakthrough will be. congress is also challenging president trump on trade. is saying tariffs may not be the way to go. >> china does deal in intellectual property.

they engage in unfair trade practices which violate not just the spirit but the letter of the wto standards of they agreed to play by years ago. i don't think tariffs are the right mechanism to do that. encouraged the president to sit down with xi jinping and that is the right thing to do. congress should have a say in national security tariffs so that as far as the two of them are going to go? >> certainly right now. , hee words from paul ryan is spoken that before. everyone is talking about how they don't like tariffs but the republican party does not challenge trump. the senate did pass a nonbinding resolution saying congress should have a role in the national security tariffs but it does not have any force of law. it does show that there is interest in this issue in congress.

it can be that as we go down this path the terrace and the trade war take a deeper bite into the u.s. economy. that could change significantly as the senators and members of the house are looking toward reelection in november. that is when the effects will really be felt. nato, president trump singled out germany in the summit. is this a significant threat to the alliance? he said germany is cap does russia. their disagreements among nato members in the past going back to the vietnam war. the president seemed to be theing a wage in their over north stream gas pipeline from russia saying that germany is helping finance russia but they

are ones in the u.s. to continue to pay the bulk of nato expenses. defensee issue of nato spending has been a long-standing one between the u.s. and nato/ trump is turning up the pressure and he has singled out germany which is the powerhouse in the nato alliance. it's a key player should there be any additional competition with russia. it is unclear whether -- where this all ends. some behind-the-scenes are saying the meetings are little more, on the surface there is a lot of dissent. . >> the talks between mr. trump and ms. merkel were something to see this morning. tensionsalating trade did have a big impact on commodities and particularly

oil. west texas intermediate tumbling by the most in two weeks. >> without the dollar spike higher. we saw commodities take the kids across the board. let's go into the bloomberg gtv. drop onws the dramatic pace for the worst day since 2017. yes it was a backdrop on a weekly basis of the worst drop in almost two years. pretty major. let's go into the price chart into the dramatic size of the drop. you have to consider that oil was up at one point toward 74 then dropped down five and have percent. a very dramatic move. energy and material producers funds at least 2%, you can see the commodities casualties golden nickel down in a big way then down some of the stocks, energy stocks taking very big hits.

4% to 5% some of them. that thes the concern imbalance and uncertainty about the trade war could take a hit on global growth and demand. >> with mining and machinery stocks taking the biggest hit were there any companies in particular that were the more invest -- most impacted? member -- makers and steelmakers. it's pretty significant. also we saw airlines taking a hit across the board. this is been a concern about energy and the global conflict that is going on. after hours we have big news. reaching the chipmaker an agreement to purchase cm technologies. that would be branching out into a software to diversify the business and also we have

comcast after hours coming in with a sweetened bid for sky plc valuing the company at 34 billion. it beats the bed by its rival things in complicates terms of fox and comcast. stay tuned. >> thank you, sue. not the first world news. pushedident trump chinese markets to the biggest selloff in three years. beijing said it would be forced to retaliate against proposed tariffs. stop felt deeply into a bear market. in the past month so-called chinese investor in society risen the most in the world. closedmodities a deal is

for the world's gold deposit. they are expected to sign an agreement thursday with indonesia. the deal relates to crawford which is a giant gold and copper mine. although the counts of not been released. for more than a year the two sides of been discussing the long-term presence in the country. new world bank data shows india has overtaken france to become the world's sixth biggest economy. it is now worth $2.6 trillion. the imf says it expects india to be the world's fourth-largest economy by 2022. back to the world cup news, croatia will face france in the world cup final after dashing england's dream with a next her time victory in moscow. england's of the lead in the fifth minute and held it for more than hour.

it was one with just six minutes left. has won three extra time matches in a row to make their first world cup final. global news 24 hours a day. powered by more than 2700 journalists and analysts in more than a hundred and 20 countries. this is bloomberg. come when will look at how trade tensions escalated to this point. whether trump's terror targets can be justified under wto rules. up next market saw that knee-jerk reaction to the latest trade news. we will get the outlook with riverfront investments. this is bloomberg. ♪

welcome back. you are watching daybreak

australia. but get more on the markets. u.s. stocks fell as crude plunged the most in two years. we also have the dollar spiking higher amidst renewed tensions. riverfront investment chief market strategist kevin nicholson is here with us. thank you for joining us. lead to the scene here. the trade war escalating, tariffs potentially more on $200 billion of goods. you are bullish on equities. why? >> let's clarify that. we are bullish long-term. in the short-term, we are tactically cautious. what we have seen with the potential outbreak of a full-blown trade war is markets across the globe actually fall. we think that until you get resolution, the trade talks what you will see international

markets underperform relative to the u.s.. in the u.s. we think that we are range bound. we're in a decision box between 2600 and 2800 and the s&p and he will stay closer to the top of that range because of good earnings however anytime you have the headlines read anything about the trade war's it miss you more towards the middle of the range or closer to the middle to bottom of that range. if we have a full-blown trade war with think that in the short term you're going to dip below the 2600. >> you mention earnings remaining strong that you also gets out that the s&p about half of its earnings coming from overseas. so far we have seen markets learning -- looking pretty resilient. tariffs don't look is targeted as the first. they include things like fish and handbags. it seems to be getting broader and uglier.

there has beened interviewed complacency up until now? >> yes. terrace look at the that have been announced so far in than in the next round that they are talking about, when you look at it you are only talking about in total if they do the goods450 billion worth of that they are talking about, 52 and a half billion dollars with the tariffs. in the grand scheme of things it is not going to have a large impact on the economy and when i say that on gdp growth where it's going to have an impact is going to be in the s&p for instance here in the u.s. because of the fact that we get this multinational companies that get half of their earnings from overseas. adding these tariffs is just creating inflationary pressures. >> we are seeing that pressure

in the u.s. dollar. hopping into the terminal here this is in the gtb library -- gtv library. 14, bloomberge commodities index its worst day since july of 2015. three years ago. in terms of where we are headed from here, further rises in the dollar you are expecting for the pressure on commodities? >> definitely. commodities are going to be a loser and a trade war. when you look at the dollar, the dollar has a lot of things lined up for it. the fed is in an interest rate raising mode right now. pce is in there sweet spot.

to keep themng from hiking rates to more times this year. when you look at that relative to where yields are in the rest of the world, it puts the wind at the back of the dollar. that will cause the dollar to rally more and especially if you look at the way the market action was today, the dollar was basically the safe haven. >> what other sector that we saw pressure here was in the metals complex. i'm hopping into the bloomberg terminal one more time. looking at the s&p 500 which you can see is staying fairly afloat but the london metals index you can see falling ever since early june or so. on the order of 10% or maybe a little more. to what degree is the sort of knee-jerk over the past few weeks or is this something more than we need to stay away from

maybe a buying opportunity? >> from my perspective i have commodities orom any exposure that you have to commodities. when you look at complex today the commodity complex, you saw a red screen everywhere. that has also played into emerging markets being under pressure. it's goingtariffs, to cause china to swell -- slow. with that, it will put downward pressure on commodity prices and so forth. at this point, i'm being technically positive. taken ourwe have exposure down in our portfolio for the near-term and you were going to have this timeframe of

probably record for the midterm elections that you will have these trade discussions going on but it is our belief that president trump wants to get a elections the midterm therefore we think that he is going to heighten of the rhetoric, and get people to come to the negotiating table. whether that be china, or if he gets a win in nafta or in the eu with the autos. it is more likely to be nafta at this point because it is easier to get done. >> we will have to leave it there. that was kevin nicholson. thank you very much. users canloomberg interact with these charts using gtv . analysis, and key save charts for future reference as well. this is bloomberg. ♪

you're watching daybreak australia. business flash headlines right now. one of tesla's biggest investors is telling them to keep your head down and focus on performance. is the company's fourth-largest shareholder. he wants to see peace and execution. partner james anderson told bloomberg the tesla should concentrate on its core task. shares fell about 1%. >> i think there are execution issues. i'm not trying to walk away from the questions but we are fighting a quite complex at the moment because we think that a time of quiet in peace is what is required to work through the issues. we are confident that we should give.

we tend to be very loyal investors. there are challenges. tumbledcan airlines after paring its estimate for closely watched measure of power. cousin earlier forecast by one half percentage point on both ends. the measurement is widely used as an estimate of carriers ability to raise fares. singapore airlines is splitting aircraft orders between boeing and airbus. this is an effort to expand abroad. minersll buy six three -- dreamliner's. they currently have a fleet of 21 single aisle airbus planes.

u.k. broadcaster is heating up. reporter joins us now. soundscalates the global off between the media giants doesn't it? >> it does indeed. it was expected after fox increased its bid for sky. this is a tangle in a chess game. you have fox, disney bidding for fox and fox bidding for the rest of the shares of skied doesn't own. also biddingast .or sky today what we have seen is after an increase to fox's bid to sky over the past 24 hours, now comcast is coming in and it has to 14 pounds bid

to 14.75. that is an increase over fox's improved bid for sky. the cable company is pursuing to increase scale and its international business and a big question is does this mean by increasing its offer for sky that it's just going to put its chips behind that offer and maybe let all other assets like 20 century fox go to disney? >> another question, will rupert murdoch have the stomach to actually increase his own bid? it puts thenute, ball back in his court and it comes down to strategy if they think that comcast will settle

on sky. >> still to come, a divided opec . ♪

it's 830 a.m. here in sydney. markets are opening up just in 90 minutes time. futures pointing lower by a 10th of 1%. in new york it's just past 6:30 p.m.. you're watching daybreak australia. >> as the trump administration steps up its trade war, u.s. trade just china are said to have ground to a halt. we are told there have been three rounds of formal negotiations since may but treasury secretary steven mnuchin.

communications have dried up and there are no immediate plans to resume contact. china said president trump's disregard for rules could have catastrophic consequences for the wto. situation is an issue. he said the wto collapses the world economy would decline by two have percent and 60% of global trade could that disappear. president trump also has his eye on nato. not content with parading his allies about defense spending being 2% of gdp, he is now proposing doubling the target. he made a suggestion in a closed-door session in brussels. it is described as not the most pleasant atmosphere. solvent wealth fund is said to be approaching its

first ever loan. sources the public investment fund is discussing a multi-billion dollars loan to become the largest sovereign fund in the world. global news 24 hours a day on air and at tictoc on twitter. powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> we have some breaking news on the bloomberg terminal in the area of mergers and acquisitions. offerom has confirmed an for ca technologies. this on the order of $18.9 billion in cash area broadcom says it sees the deal immediate adding to eps. $44 $.30ers will get

per share in cash after hours you didn't stop falling by nearly 6%. broadcom confirming an offer for ca technologies of nearly $19 million in cash. onlet's get a quick update the markets now in new zealand. nowhe way for half an hour it's been steadily sinking. kiwi dollarnd the are heading south. futures here are off 1/10 of 1%. let's check on other currencies. no surprises, weakness across the board. year,nge to the u.s. 10 s&p 500 finishing 7/10 of 1% lower. let's get more.

is trading gets underway in asia. china's stock market has been the highest hit -- hardest hit, how much lower might go? >> certainly as you were saying let's look at what we should be watching. china is what we should be watching. is the center of the trade dispute in the center of the route that has been going on. you can see, if you want to keep score in terms the stock 1.2 $4 this year trillion has come out of china's stock market capitalization. the u.s. stock market cap has gone up by 1.3 5 trillion. if your donald trump and the u.s. government you say trade war's are easy to win in market terms. hand, the on the one pressure from the trump side is

going to be unrelenting and investors have shown that they are very worried about that. we got chinese stocks and fairly critical level. we have a big drop down the bottom doubt the tariffs came in. little relieff rally. it now we are heading back down. ,t would break the previous low i think we could go a very long way down very fast because we had some optimism, we had some people who stayed in staying there were glad they stayed in. other people came in and now they have been handed their shirts. you'll get a fresh wave of selling. surged during the market turmoil. who have been the biggest losers and what should we be looking at moving ahead? the biggest mistake you can make at the moment if you are a policy maker or a government

official is to draw attention to any weaknesses. if you see what went on with the turkish lira overnight, that is the one of the biggest losers. third and reasons for the turkish lira to lose out. the current environment we had some japanese retail traders get hit with margin calls or something or fear they were going to be hit by margin calls. the lira dropped to a record low. that is something to keep an eye on. g10, you saw a big drop in commodities and kiwi and looney under pressure. the loonie has been helped out by the fact that rates were raised as expected. the aussie and kiwi, they're tied to china and commodities they both have central banks that are telling us that the economy's fragile because they're keeping rates at record lows or near record lows. the aussie and the qe need to keep an eye on them and also on

tanking which has been and to be honest as long as things that are going to go on politically and economically the way they are, is probably in china's best interest to let it butown maybe not so fast there's not too much they could turn it around. >> we just saw that it is at the mark.rk -- 6.7 forget to check our gtv library. that is on gtv on the bloomberg terminal. tradeile there is going tensions are rattling the commodity markets. this even though u.s. crude inventories saw their biggest drop ever since 2016. interesting stuff here. america's energy editor for

bloomberg news is joining us. talk about how all these very walls are affecting the trajectory for oil. >> where do we start? there's a lot going on. is definitely became the biggest concern this wednesday. and china areu.s. the biggest economies in the world. they are the biggest consumers of crude. how is that going to affect demand? we don't really know. it is the biggest unknown right now for the world market. we have no idea how far as his trade war going to escalate? how bad is it going to be for the global economy? how bad is it going to be for demand? we don't know. there is a lot going on on top of that. same time, when u.s. president

escalating this trade war was china, he is also asking allies to stop buying from around and that is huge. when oil was trading above a hundred, that had a lot to do with china on the one hand noting demand and iran supplying as much as it could. it was a big deal of supply side. then china slowed down, i ran started selling again, oil fell. there were other things at play these were two important factors. now, we're worried the china might buy less and it ran -- iran talking about trump that makes the equation very complicated. there are shortages in libya canada venezuela.

there has been a lot going on. >> how about opec throwing that into the next? affect the picture for oil prices? >> it does. that is not a new concern. opec has been concerned about what shale is doing for some time now but this is the first time they are giving a clear 2019.k for they are saying there is more but alsog from shale players like brazil where altered the water prospects are increasing outputs. there is lot of oil coming from other parts of the world outside opec. that means more supply. opec has to be cautious.

>> we have to leave it there. thank you for joining us. we're going to be talking more about commodities. later have a conversation today that will be coming up at 2:00 p.m. sydney time. midnight in new york. >> up next, here why the peterson institute's mary lovely says the u.s. china trade spat has gone beyond any initial justification. this is bloomberg. ♪ welcome back.

in sydney.len

for the latest trade tensions threatened to sink a fragile thevery, tim smith says immediate future is increasingly uncertain. >> is definitely a bit of a mixed bag. in the u.s. among the leading the charge, we want to talk about the protectionist moves and sentiments that may put a cap om group aspirations. it is hard to call. but thereiness people are some mixed signals right now. >> there are potential products that may be added to the terrorist list. and otherust steal heavy metals. it is consumer products. it is products ago in the cargo boxes they go on the ships. did seeget enacted, we

a slowdown because third quarter is traditionally a very strong. shipping. is howother question much will the tariffs be and what cost increase does that eventually lead to four consumers? exportersmporters and absorb them? it could clearly have a dampening impact. the u.s. is a big part of trade also on thend transpacific trade there are other small markets like canada and mexico and south america doing quite well. it is something that needs to be managed and looked at carefully from our point of view and running our businesses. hope the common sense will prevail and more trade stimulating measures will eventually prevail. >> how does this affect all the terminals and businesses in asia? hong kong as well.

does a reach now into singapore and elsewhere? >> yes. the impact has been very limited so far. america is just one part of a global trade. trade extensively with europe and the emerging markets in the middle east and africa. those traits have been growing quite well so even if there is a constraint on the pacific, there is growth elsewhere. speaking there to tim smith. bloomberg thel trade talks between the u.s. and china have now come to a grinding halt. u.s. threatens to increase the traits that even further.

mary, good to speak with you. let's get to the heart of this. you say that new tariffs go beyond the section 301. explain. is a very this important point about the latest round. the first round tried to stick to the remit in the sense of we of thee that 80% products that were targeted .ould be considered we'll look at the new list, we see things like fish and furniture and processed foods. clearly those are not what were at issue in the initial section 301 intellectual property policy investigation. .> it has broadened out can you see any logic in this? i am bringing up one of our charts which shows something

that is clearly not i.t. sensitive or national security sensitive. u.s. laundry equipment. the prices have soared. story, ifading the expensive to to buy from china, is the logic of maybe we willhat start making some of that stuff within the united states and create jobs as i have promised on the campaign trail and from the white house? >> clearly that is what the but as with so many things in the trump administration, it is hard to get a straight read on what is the attempted here. , the u.s.tial list was clear to point out that they tried to avoid products for which china was the only source. imported the we same goods from other countries.

it is unclear if these new tariffs or the original tariffs will push multinational firms operating in the united states to move to other countries say purchasing led lights for malaysians that of china. rather than bringing production back to the states. >> do you expect tariffs to be inflationary because people will say have to pay more or will becausecontractionary it will make people pay more for goods that they need and they will be of spend as much on other goods? how will this affect the u.s. and global economy? inflationarye both and contractionary. in terms of hurting economic growth. what we expect to see so far is a very modest impact on the consumer price index. since we're in a. of healthy growth in the united states and low unemployment, we

don't expect this to create a huge amount of headwinds for the u.s. economy. on the other hand, it is clear that it will have a depressing effect on investment. investors dislike uncertainty. this is created a huge amount of uncertainty. more businesses are operating in the u.s. and trying to sell abroad but also throughout the global economy. who will be retaliating on what next? i think that medium-term and longer-term these tariffs have or could have a serious consequence of the u.s. economy. that doesn't seem to be factoring into the trump administration's thinking. follow-up up about that point about retaliation. china is getting to the point now where it can't retaliate dollar for dollar. what sort of response to you expect to see from china? >> this very important question. china has been very keen to be

seen as responding moderately and measure for measure. know, they have not retaliated until the united states have implemented tariffs even when they have announced what products they will be targeting. they have kept the dollar amount to the dollar of the u.s.. they want to be seen as being moderate here. however, when they run out of room what do they do next? domestic political constituency within china that wants to see the chinese government respond at least tit-for-tat to what they see as u.s. aggression. where they go next is the big question. my own view is that china is determined to be seen as a terrific place for investment, a good place to invest in high tech sector as we saw yesterday with the tesla announcement of beginning to build a factory in shanghai. i think they're unlikely to do was some advisers said they

could do which is to retaliate to u.s. businesses operating in china. i see that is some that would be way down the road. there have been reports are ready of a grease and slowdowns of sports. i think the more that could happen, but i don't see it as widespread. to ase china is playing wider audience. the u.s. is a very important country but it is not the only country in china has as was hasioned other commentators deepened its trading relationship throughout asia with europe and other parts of emerging markets. >> china's vice minister of commerce has said that the wto could unravel. we haven't seeing them play in this yet. when will he? >> the wto is not built to put out fires. it takes time. investigation01

was outside of the wto purview. that was outside of international law and the response of china as the response of other trading outside of wtoen rules as well because any kind or in wto speak take back of concessions would have to be authorized before it is implemented and none of these and none of these have gone through any type of wto process. filedhough countries have at the wto their cases. >> eight nations and counting. you can get a roundup of the stories you need to know in today's edition of daybreak. on mobileso available on the bloomberg anywhere app.

this is bloomberg. ♪

were almost done for daybreak australia this morning. daybreak asia is up next. let's take a look at what we have coming up. town,y the big story in the trade tensions between the u.s. and china. the list that the u.s. has come out with on $200 billion worth of chinese goods. professorking with a of economics at the chinese university of hong kong. we will talk more about what is it stake here. china maythat retaliate on some countermeasures but it is not going to be seen as an escalation of the trade frictions. also he's is the most likely notome is perhaps it will

do a whole lot when it comes to trade deficits. this is just going to force them to work with other partners like vietnam and bangladesh. to get their imports from. >> in addition, we're going to talk to chris zack rally. will see about market reaction in the winners and losers. we will look at what he is interested in buying as well. semiconductors, the biotech space, what will he be avoiding as well. >> we are circling back to the broader theme of trade wars and brexit and other risks as well. we will be joined --

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yvonne: it is 7:00 a.m. in hong kong. the brake asia. the top story this thursday, asia-pacific markets face an uncertain day after raising trade tensions. the dollar saw its best rise in a month. oil the most in two years. there is a concern that extra tariffs will hurt commodities. and i am in new york, where it is 7:00 p.m. on wednesday. billion confirms a $19 -- the stock is slumping in extended trades. tension is in the air as nato