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 leaders meet.

president trump says u.s. allies should spend twice as much on defense. good morning. sentiment across the markets today as markets digested the $200 billion in terms of tariffs the u.s. is thinking about unleashing against china. dollars spiked and modded a spell. -- commodities fell. yvonne: this is market psychology. how will they adjust. it goes to show how sensitive the market is to any kind of headline when it comes to tariffs. we see some choppiness in the

asian session. ramy: let's get a reminder of where we ended the session today in the u.s. the dow and s&p are both down. two was the biggest fall in weeks. the nasdaq is down a little bit more than half a percent. let's take a look at what is happening in terms of commodities. a lot of it was dictated by the dollar. was seeing its best day in a month. right now it is flat in asia trading. new york crude starting to trade. you can see the close for brent down nearly 7%. the bloomberg commodity index was down 2.7%. that was the worst day since three years ago. yvonne: commodities taking a dive, a lot of concern over the trade war.

take a look at what we are seeing when it comes to chinese markets and how they actually closed. a mixed picture when it comes to equities but it looks like we could see more losses today. 1/10 of 1%. the dollar is raining. gning. the aussie and kiwi plunged about 1% across the board for commodity currencies. $.73 for the aussie. drop ahead of the bank of korea decision. down. the psi hundred

the offshore renminbi, we talked about 672 right now. it is falling the most since august 2016 devaluation. let's talk more about trade. high-level talks between the u.s. and china are at a halt as the trump administration threatens to escalate the trade war. joe joins us from washington. we have until the end of august for any chance of a deal, or we will see if these two nations can see this through. what comes next? joe: the absence of any high-level dialogue is an indication that the impact could go on. discussions at lower levels, but nothing in the way of ending negotiations to bring this to an end. the white house statement earlier this evening in washington said the u.s. is

willing to, but that china has to acknowledge and address the demands in terms of trade and intellectual property. we are at a standstill as far as talks go. sidesms likely that both will at least remiss to the brink. -- bring this to the brink. whether we go ahead with a trade war, we will have to see, but there is no sign of it abating anytime soon. yvonne: congress is challenging trump on trade, with even paul ryan saying tariffs might not be the way to go. does steal intellectual property and engage in unfair so i think wes, are right to point that out. but i do not think tariffs are the right mechanism to do that. i think chairman brady put it right, which is that he

encouraged the president to sit down with president g and work this out. nonbinding resolution was passed, saying congress should have a say in national security tariffs. is this as far as the two of them will go? >> certainly for now. they have been unwilling to take any action that would defy trump and impose restrictions on his ability to impose tariffs. the senate bill today was symbolic. it is nonbinding. but they sometimes take these votes to see if they can build momentum to something more substantial. the sponsor of the legislation this woulded indicate there is an appetite for congress to rein in transit authority on imposing doris and take it -- imposing tariffs and take it back for congress.

from congressval before imposing levies on national security grounds. toward europeking , turning to nato, trump really put angela merkel live in the spotlight on television this is an attempt to try to promote unity and harmony, but it was really anything but. joe: hardly. this is trump's rhetoric on germany, suggesting they are forrolled by russia dependency on russia natural gas has driven a wedge in nato and serviced other disagreements within the alliance. for instance, the foreign minister said he agreed with trump on germany's funding of the north stream pipeline from russia. turkey chimed in, complaining about germany withdrawing patriot missile batteries, and

suggesting they were not a very good ally. so this is not just between the u.s. and germany. the u.s. has fanned disagreements within the and i alliance.thin the there is a public spot going on. ramy: there sure is. we have to leave it there. joe, thank you. let's get back to the markets. as we were talking about trade tensions having a big impact on ,ommodities, in particular oil tumbling by the most in two years. su keenan is here with details. sue: even though there are positive factors for oil, the concern that this global tension could disrupt growth and the demand equations has directly impacted oil. is's go to the chart, which -- we have one called on pace

for the worst days in 2017. here is the drop in oil. let's go to the price chart, where you can see oil traded in new york. it took a genetic drop. at one point it was down 5.5% after being up 1%. was within striking distance of 80, also coming down. the concern, how this impacts demand going forward. let's go to the stocks that were hit. copper, gold,ies, nickel, these are being impacted by terrace concerns. when you look -- tariff concerns. has fuel prices increase, there is a concern. we saw mining and

machinery socks -- stocks take the biggest beating. , mattsaw this in boeing caterpillar, you see a case deal which you think would steel, -- you see a k which you would think would benefit. an airlines are getting caught. they have seen a 50% increase in fuel in crisis -- fuel prices. american airlines had the biggest drop in two years, down 8%. we had interesting news. confirming they have reached an agreement.

they made a $19 billion bid to , which wouldlogies further diversify them. and comcast, increasing the takeover bid, beating an offer from 21st century fox. that escalates the standoff between media giants. abc is also impacted. they are trying to buy fox's assets. these are the after our moves. we are expected to see followthrough on thursday and wall street. thank you. let's get to jenna with the first word news. >> trump's trade barrage pushed chinese want -- chinese markets into their worst trade selloff beijing saids. they would be forced to retaliate against imposed new tariffs. mainland stocks slid. in the past month, chinese

investor anxiety has risen the most in the world. giant gte isom another step closer to resolving the tech ban in the u.s.. gta is currently operating under a temporary waiver that expires august 1. the ban will be lifted as soon as the money is deposited. world bank data shows india has overtaken france to become the world's sixth biggest economy. it is worth $2.6 trillion, which is ahead of france. the ims expects india to be the world's fourth-largest by 2022. inatia will face france sunday's world cup finals after dashing england streams with a next time victory in moscow.

england took the lead in the fifth minute and held it for more than an hour. but mario one at all with six .inutes left croatia has won three x or tie matches in a row, to make their first word of -- world cup final. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ramy: still ahead, trade fears spurred the biggest slump in emerging-market currencies ever since may of last year. we will assess the outlook. review of the market action on wall street. we will talk more about at what point this will stop. this is bloomberg. ♪

yvonne: am yvonne man in hong

kong. ramy: more now on the markets where new -- u.s. stocks fell ended tensions over trades. our next guest think they full-blown trade war will be avoided. overseas $200lly billion in assets and joins us from charlotte, north carolina. i am curious about the numbers. you think we will pull back from .his people have been saying for the s&p emma 2600 or 2800. where are you want us? >> by the end of the year we will be at 2800. the trade war is beginning now in terms of the way the trump administration is putting pressure on china. but i think by the end of the year, things will be resolved one way or the other. willr china will be --

step back or trump will come to some sort of agreement. to look at trends to go shooting style. he states out a position that is very far from the norm and work his way backwards. when you look at president trump, he cares your he much about how the stock market reacts. this is one of the first presidents that actively comments on it and cares very much what happens. if we go into a trade war and china doesn't pull first, the stock market will get hit hard. that will be the wake-up call for the trump administration. it as a popularity poll, looking at the numbers for the market. we are looking ahead to the new earnings season. of in the terminal -- up in the terminal, taking a look at the first quarter. .t put a dent in returns

we are curious about where the trend is in the earnings season. second quarter, not sure where it is headed. ,s this the new normal especially in the third and fourth quarters? >> i think for the entire year you will see this trend of 20% or more earnings growth over the prior year. the tax cut has a large part to do with that. the economic momentum is there. gdp growth will be above 3%. the u.s. economy still moving along. as long as we have economic growth, it should help earnings. as you saw in the first quarter, bottom-line growth was up a lot, so was top line. tax cuts and growing topline revenues. s are thehe big winner ones most exposed to the trade war.

energy, material, tech. you think that is a -- is sustainable? >> i think it is not. all sectors will be hit. energy materials are coming off of a low bid. technology you are seeing increased earnings growth. a finger earnings will go higher. if we have a trade war, it will have an impact on energies. themes,in terms of key decoupling we have seen of u.s. while the rest of the world seems to be rolling over. do you think there is an outperformance that can continue? we have a hawkish fed and stronger dollar. will these be likely headwinds for the rest of the year? >> i do not know if they will be headwinds for the rest of the year, but short-term,

absolutely. the fed is working hard to keep inflation in check. they would like to raise rates three or four times. if you have a trade war and things slow down, that will do the fed's job for them and their less likely to continue raising rates at the same pace. for now you will see potentially rising rates. the u.s. economy is strong. if you look at the recovery the financialof crisis and moving forward, the u.s. is the furthest along when you look at developed economies in europe and asia. with emerging markets, they are further behind. the u.s. is farther along in terms of recovery. that is driving momentum. cannot lastnce forever. if we go into a recession, the u.s. will go down with it. quickly, as we head to the financial reporting, what are

your expectations? financials will do better than expected. there has been pessimism the last few months about the financial sector. the yield curve is flattening and they are looking at the economy potentially slowing down. that is what some people fear. i think the economy is still getting stronger. yield curve has been flattening but that has to do with the relative value trade in terms of people buying u.s. tragedies. i think that will reverse it self. -- u.s. treasuries. i think that will reverse itself. much.thank you very remember, bloomberg users can interact with the charts shown using tv . and catchowse charts up on an analysis. you can save the charts for future reference. check them out. this is bloomberg. ♪

ramy: this is "bloomberg daybreak: asia." a quick check at the latest headlines. broadcom has confirmed it $18.9 billion purchase of ca technologies. trade.ed in extended transformed broadcom through acquisitions into the world's top chipmakers. one of tesla's biggest investors is telling the carmaker to keep its head down and focus on performance. baillie gifford is the fourth largest shareholder. they remain supportive but would like to see peace and executions. -- execution. shares fell 1% in new york. broadcaster u.k.

sky is heating up, with comcast raising its bid. us.reporter joins the credits have not rolled on this fight between these two media giants. >> not at all. companies inajor the u.s., comcast and disney, vying for sky, the u.s. broadcaster which has international opportunities for comcast and disney. as well as a chunk of fox assets. comcast has raised its offer for 14,000, which is 5% up. fox's leadings,

-- fox's lead has evaporated. the question is what does this mean for a potential bid for comcast? it is complicated. it is unclear and investors are scratching their heads to know what this means for what comcast really wants. does it want sky, or fox, as well? four fox, the 5.4% that they were outbid, any insight into whether they will bit higher than that? the earlier proposal was 14 pounds a share. >> we do not know yet. ,t the core of this strategizing behind the scenes and who raises their bids first, is a u.k. rollcall the chain

principle. the u.k. has strict roles -- rules to protect shareholders. this chain principle applies. that means that fox has to make the offer yesterday because disney had improved its offer for fox. so as a followthrough, that meant sky shareholders should get more money, according to the u.k. regulator. it is unclear whether fox is going to wait for disney to allow fox to increase its offer for sky, or whether it waits to see if comcast increases the offer for fox. among matt, we will have a 27 --older vote on july among that, we will have a shareholder vote on july 27. it is about to get ugly.

in a moment, trade tensions and oil plunging. we will check the outlook for crude and other commodities, that. -- next. ♪ retail.

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hong kong. blue skies out there. 7:30 p.m. wednesday in new york and markets closed down 7/10 of 1%. that was the biggest fall in the past two weeks. we are seeing the ripple effects of the white house's new list of tariffs against china in the order of $200 billion. yvonne: you are watching "bloomberg daybreak: asia." let's get to the first word news. >> talks between the u.s. and china are grinding to a halt as the trump administration steps up the trade war.

sources tell us there have been three rounds of formal negotiations since may led by steve mnuchin, wilbur ross. we are told communications have dried up and there is no immediate plan to resume contact. china says president trump disregards international rules and it could have catastrophic consequences for the wto. we were told the situation is an extensional issue. the world economy would decline by 2.5% and 60% of global trade would disappear. president trump has his eye on nato. not content and breeding his allies for japan -- defense spending. inmade a suggestion brussels. the odyssey was described as

unpleasant. trump accused germany of being captive to russia over gas supplies. a deal might be closer to the world's biggest gold deposit. ideal relates to a giant golden pop -- gold and copper mine. details have not been released. two sides have been discussing freeport's presence in the country. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: we are counting down the major market opening in the asia specific. sophie, renewed trade and political tensions. the big question is, how much more follow-up could we see? grapplee seeing markets with the latest headlines.

we have a lot on her plate to look forward to. we will be hearing from the bank a of korea. when it comes to the auto sector, we have a meeting with the korean carmakers with the trade ministry to discuss the potential u.s. auto tears. keep an eye on hyundai and kia. dealroadcom has struck a with ca technologies. we have a earnings lineup in japan. we will see how the yen atformance -- take a look the currencies we are keeping an eye on in the back of yen trading at a 10 -- at a low. that smacks down other currencies considerably. we have the offshore yuan trading at 672.

good that further feed the sellout and chinese stocks? back belowdollar is 74. the wan is not far off from an eight month low. -- korean won amy: the dollar surge created meltdown in metals. >> copper crashed, slumping to a one-year low. tariffs includes 120 copper products. copper is a key component for other electronic products that might be affected. when you look at the index, you have materials getting hit hard. it is the worst performing sector this year, down 9.5%.

this could hurt demand for raw materials. we try to figure out what trade war we are getting. metals are tumbling that oil is peaking. crude up.ar there was a plunge overnight in the oil market. yvonne: sophie, thank you. ramy: let's go over to kathleen hays. we are looking at what is happening in terms of the two big central-bank meetings being done. one more to go. there is a common thread. how are policy it decisions affected by the intensifying trade war? kathleen hays is here with three caps. malaysia's bank holding the key rate steady as forecast.

negara, one of the big stories is they have a strong currency, unlike the philippines and indonesia. other central banks have had a boost rain -- rate. ringgit sidestep the interstate selloff. let's go to the bloomberg library of charts. to january rate hike, up 3.25 for the last six or seven months. look how they were hiking. 1.8% versus the 3% to 4% target. 5%. see growth above inflation is flat and sometimes negative. that will give them room to ease. their gdp drivers are good.

but there is fear of trade wars. they are standing back and saying they are good for now. ramy: the bank of canada did not mention anything about trade concerns, but they raised rates. kathleen: strong growth despite the trade war. byy hiked their key rate 0.25% because of inflation. let's let the chart tell the story. 2% target, inflation above that. months the last seven and not showing signs of receding. this is why the bank of canada felt comfortable going for the rate hike, and not worry about the economy. there july monetary policy reports high oil prices. they by the weaker currency.

and they see more business andstment offsetting trade certainty also noting the canadian exporters doing better than expected. in april, they saw flat exports. .5 percent gains in exports, even as the trade wars rage. 75% of canada's exports go to the u.s. a lot of optimism. yvonne: they answer a lot of these questions. had he response to mounting uncertainties? mike they take a different approach today? kathleen: the unemployment rate fell more than forecasted. to sway the beng ok. it is unanimous in our survey. all economists say they will keep the key rate at 1.5%.

in the terminal, you will see the official key rate, 1.5%. is belowan see the cpi the 2% target. they have plenty of room to hold it steady. they have concerns. they have seen export growth stalling. and china is a big trading partner, the u.s. as well. they have reason to sit back and watch. yvonne: kathleen, thank you. we have been talking about commodity markets. if you are getting rattled by escalating trade tensions, brent tumbled to a two-year low. joining us from calgary is carlos, america's energy editor for bloomberg news. lots to talk about. tell us about the variables

affecting oil prices now. we've gone from the trade war to shortfalls across the globe. >> the trade war is the big one right now. and the u.s.,ina the biggest buyers of oil in the world, the biggest economies in the world, slowing down as a result to the trade war in the long run, it will obviously affect demand for oil. that is the biggest concern at the moment. but you have other factors. less producing a lot because of the conflict. iran facing u.s. sanctions. on both sides, on the bearish side and the bullish side, you have lots to look at. yvonne: what about for opec? the outlook for next year. how does that change the picture for oil? >> that has been an ongoing

concern for opec. how much shale is affecting the balance of the market. on the one side, they are cutting their production, now boosting a little to offset declining demand, declining production in venezuela and iran. the thing time, you have u.s. producers pumping oil at a record rate. so it affects their decision going forward. they have to be very cautious not to cause the oversupply we had a few years ago. ramy: how will all of these variables affect opec's strategy going forward? affects them a lot, because they have to wait and see. the bottom line is they have to wait and see. we do not know yet how bad the impact of the trade war will be on-demand. bad theo not know how

, how bearishing in it will be for the market going forward. so they cannot do more than they have done already, which is increase output by one million barrels a day. carlos, thank you very much. , off the back of the biggest emerging market since 2017, we will look at things -- if things will get worse before they get better. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." president trump's proposed a new tariffs and it spurred a spotsf in emerging market

and currencies. let's look at that with the -- manages the emerging markets debt portfolio fund. good to have you. the big question now is, have we reached bottom? i want to look at the terminal. i want to show you what has been happening since january. it has obviously come off. mark says he sees an additional 10% in declines. do you agree? >> there has been significant value created. there are opportunities for assets to rebound. we think there will be continued volatility in the market but selective assets can do really well. ramy: what is one of them they can do well? >> assets that are pricing and a lot of risk or positioned to

withstand volatility. yellenna local, brazil -- brazilian head local debt. the middle east has been favorable on. and african countries. political and economic risk in turkey. we saw the lira has been weakening with the number rising higher. talkedmark on earlier we specifically about this. let's play that sound. can go ahead with the big programs. they are going to build a canal which will be a huge project. there will be a lot of construction in that country. the currency is in trouble and the trade balance is not very good. but i think it will pull through. ramy: let's go to the library.

the lira has been slumping, almost near, will now it has crossed the 4.9 barrier as we have been speaking. where do we go from here? >> we are negative on turkey. we were looking for signals from the president about policies he will pursue postelection. this is not the sign we were looking for. we are concerned and we think themore orthodox members of cabinet have been removed. that is not a good sign. voices ofnot many reason to caution the president. so we expect to see a deterioration in policy, which the country cannot afford. yvonne: what does that lead to? what if the government continues to dismiss warnings that the market is sending right now?

are you talking about a full-scale currency crisis? that thingssible could deteriorate to an extent where the country might have to be forced to contemplate capital controls. it is possible because the president has done so before. he pivots his policies before then. but things could get worse before they get better. yvonne: can a central banks stay independent? >> it seems unlikely considering the composition of the cabinet. some statements he made today talks about lowering interest rates. what we areou think seeing in the em space is video socratic -- idiosyncratic? are we seeing a spillover? i will point does this have a contagion effect? >> emerging markets are that are

positioned today. the fundamentals have improved for e.m. as a whole. but certain countries are outliers. turkey is an example. they are being disproportionally impacted. we believe the risks are idiosyncratic. i know you have not talked to much about asia. i know it is not your focus. but we get a lot of central --ks tilting to the hottest hawkish side. is there a risk of a policy error, given that financial conditions are tightening to quickly? a lot of the central banks are forced to move to stem the flow we are seeing in currencies. currency has an impact on monetary policy. there is room to withstand a tighter monetary policy in many of these countries. central banks in

emd you think every to maneuver? had aariety of them have good situation with respect to being able to tighten monetary policy. brazil has had the ability to ease. rates are looking attractive. ramy: on the side of the world, in mexico, they just had their election. the peso has been strengthening after a low. aboutors are concerned the presidents promises. 9% stronger over the past three weeks. >> we were expecting the team to -- weower and make thought election promises were just promises. but we think the market might have been overly optimistic. aboutnot have specifics his plans. how will he finance the social program?

the energy sector is of concern. going stash state own oil factory is in bad conditions. yvonne: how much do you have watch china when looking at e.m. ? a bellwetherhina for you? >> china is always important when taking on risk in general. we're watching this carefully. andimpact of the trade war the impact on currency, and how china retaliate to the trade war escalation. yvonne: can the renminbi weakness be bailed out? >> it is the trade war that is causing the renminbi weakness. it is unlikely to be bailed out by dollar weakness. the purpose of the trade war is to reduce competitiveness of

china. that affect is mitigated by the weakness of the ribbon be. -- renminbi. ramy: we have to leave it there. thank you so much for your thoughts. don't forget our interactive tv function, tv go. you can watch us live and catch up on past interviews, and dive into any securities or bloomberg functions we talk about. become part of the conversation by sending us instant messages during shows. this is for bloomberg subscribers only. check it out at tv . trump's comments against nato allies are seen as helping russia. pretty interesting as we look ahead to the meeting between u.s. and russian leaders in helsinki. buy caught cons deal to

technologies for $19 million in diversify into software. and imagine a plane that lands on a runway, takes off its wings, and turns into a train? check out those stories trending online or on the terminal. this is bloomberg. ♪

ramy: a quick check at the latest business headlines. the credits have not rolled yet in the m&a war. comcast has raised its cash they'd for sky to 14 pounds 75 pence per share. that it's the latest offer from china's -- 21st century fox of 14 pounds. sky is a pond in a wider fight between comcast and disney.

american airlines tumbled and dragged other carriers down to. each seat flown per mile rose 1% to 3%. the measurement is widely used as an indication of a carrier's ability to raise fares. singapore airlines indian affiliate is splitting aircraft orders between boeing and airbus and it seeks to strengthen local info -- local operations and expands abroad. the combined order is valued at just over $3 billion. that is before the usual customer discounts. one-time italian soccer giant is

one of $66 million payout from elliott management. the hedge fund is stepping in after the former club leader missed a loan deadline. elliott had been expected to sell the club. but they have taken full control and say fixing the clubs finances is a core focus. yvonne: three minutes before the market opens in japan. we are seeing futures trading firmer and turning toward the positive side in the last hour. we indicate futures up half of 1%. expecting the bank of korea decision later today. we will hear from the governor about the economic outlook when it comes to trade wars. the currency is taking it on the chin. .sx futures are flat the plunge and commodities is the focus throughout the sentient.

renminbi hitting 672. this is bloomberg. ♪ 2, down. back up.

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yvonne: 8:00 a.m. here in hong kong. we are live from bloomberg's agent headquarters. i am yvonne man. welcome to daybreak asia. an uncertain day after trade tensions sent wall street down. chinese stocks hit a key level in arounds. oil dropped the most in two years on concerns tariffs change commodities demand. ramy: i am ramy inocencio in new york. it is just past 8:00 p.m. on wednesday. no sign of a resumption. beijing says washington's attitude is catastrophic for the wto. reviving -- they agreed to

pay $400 million in escrow. yvonne: there only seems to be one story in town, which is trade. we side come full circle with the global equity route. we are all watching china and how things react here. not just with the stock market, but the renminbi, once again resuming the slide. ramy: crossing the 6.7 barrier. last time we checked it was 6.72. in terms of u.s. markets we did see equities take it on the chin, after they were able to digest of the $200 billion in extra tariffs from china.

be watching ahead to see what is happening in asia-pacific, to see if it continues that trend. yvonne: let's go to sophie kamaruddin. looks better than yesterday for sure. better than yesterday. u.s. futures also on the up. atength for the yen, trading 112. this after the worst drop in the currency for three and 1/2 months. rising 0.2. on investmentn seeing a recovery. the likes of ing, bank of america, merrill lynch disagreeing. checking in on the offshore renminbi, losing around 6.72.

following the most since august the devaluation. certainly having an effect on currency markets. 0.7. adding metalsheck in on commodities flash a distress signal for the economy. . we do have recovery for copper and nickel prices, sank lower by 2.5%. copper trading at a two-year low. forman cutting its forecast copper, aluminum and nickel, given uncertainties are significant. they say there is no denying global growth has lost some of its momentum. ramy: as you are talking about have breaking news on the bloomberg terminal regarding indonesia and free ford max regarding indonesia. giant grasberg mine

in indonesia. they will sign in jakarta. , freeportking across to sign on the grasberg mine. joining us is mark cudmore. in thee saw price action oil complex despite a big drop in american crude inventories. you would have thought this would have supported prices. then of course we have something called a trade were going on. when you put it together, is unwarranted? -- is it warranted? mark: i think so. it was a perfect storm for oil yesterday. because of the drawdown in inventory, most were expecting if there is any major move in oil this month, it would be

higher. there is a fear we might break the resistance. that made the market vulnerable when we suddenly got a negative shock. partially it was the return of libyan supply and the opec report saying an increase u.s. supply in the years ahead would fulfill increasing global demand. there are two supply stories that came in. and you havetiment a narrative about trade war's killing growth, hurting demand for commodities and oil got absolutely destroyed yesterday. yvonne: what should i be watching out for in china today? a few things to watch. most importantly the yuan level. we should expect the onshore level. go above the the level theis

pboc would look to defend. we saw that last week with the offshore rates went above 6.70. there is speculation in the market it will happen because the pboc came in to defend the onshore yuan. overnight we see the offshore yuan change. the offshore rate is way above 6.70. when i it was above 6.72 came into the studio. that will make the market more nervous again. perhaps this capital outflows story and how badly trade wars are squeezing china. the long-running deleveraging story as well. i am taking a look at the fallout. the south korean won seems to be spilling over. we see it weakening and other 0.7%.

-- another 0.7%. is now the time to buy the korean won? mark: it may be a little too early. generally across many assets there is the versions that global growth is staying strong. the trade war story is scary, but not yet hurting a lot of growth or exports. korea is one of many countries seeing strong data, yet people are getting increasingly worried. a few other things helping the korean won. haveollapse in commodities helped many asia and countries. japan, and major commodities importers. as long as there is a stress on chinese assets, that will continue to impact the region. it will remain volatile in the days ahead. i do not think we have seen the lows yet.

cudmore,hanks, mark joining us from singapore ahead of the policy decision. you can follow more on this story and all the day's trading on our markets live blog. you can get a market run down in just one click. there is commentary and analysis from mark and his expert editors to find out what is affecting your investments right now. the trump administration said it is open to talks with china on trade. they addressed concerns what they call unfair practices. the white house commented after we said talks between the two sides has ground to a talk. tom mackenzie, is this a potential opening? that depends on the parameters of any talks between beijing and washington because of course we have had three sets a formal talks in beijing and sidesgton between the two

which came to nothing. but they did get traction initially around china's agreement to increase imports with the u.s.. what theyms to be on say is i.t. theft and forced transfer. that is an area china says, what do you want to do? uphave already ramped regulations and we do not think it is a problem. that is the chinese view on that. there are glimmers of light if you are looking for them. the vice president of president and talked emanuel about u.s.-china trade talks. it is possible if he takes a bigger role, you could start to see positive movement on that. he is something of a firefighter -- xi.sident she

there is also the call from the ways and means committee saying trump and xi should meet for talks again. if it did come to pass before on $200ust 30 deadline billion worth of tariffs, you could see positivity. president trump has shown willingness for concessions. ad china will take part in senate vote. even if it is symbolic, to curtail the president's power. are looking for glimmers of optimism. of course, nothing official yet when it comes to talks between the two sides. ramy: in terms of the line of fire, u.s. tech is vulnerable. which firms are vulnerable? tom: there was an interesting note by deutsche bank which said if you take into consideration imports, you are looking at a

trade surplus for the u.s. of $20 billion. in terms of big names that could he impacted we are talking nvidia, apple, broadcom. all three get more than 20% of their revenues from the chinese market. potentially vulnerable if china was to put in place regulatory hurdles or tax inspections, but mary from the peterson institute says she does not think beijing will play that card in the near term. take a listen. >> i think they are unlikely to do what some observers said they could do, which would be to retaliate against u.s. businesses in china. i think that would be way down the road. of a dental pushback from mary lovely. is workinglaim china to put in place nontariff barriers. but china also has another card it could play, which is around

mergers. you have a potential megadeal between broadcom and nxp. julyneeds to be done by 25. they need china to give them the green light. it is unlikely that will happen among trade tensions. -- many need to talk have faced pressure from china in terms of economic sanctions over political disputes. they have that playbook they have used before. they could dust that off again. ramy: great analysis, our china correspondent tom mackenzie. let's get first word news. >> a deal is close for the world's biggest gold deposit. we heard you break those headlines that freeport is set to sign an agreement later thursday with indonesia. it relates to grasberg, which is a giants gold and copper mine. for more than a year, the two sides have been discussing

freeport's long-term presence in the country. zte onetelecom giant step closer to resolving their band in the u.s., having signed an agreement. zte is currently operating under a temporary waiver that expires august 1. the ban will be lifted as soon as the money is deposited. they met most of the white house's demands by sacking their entire board and appointing a new chairman last month. new world bank data shows india has overtaken france to become the world's six the biggest economy. trillion and2.6 could climb the ranking. expects india to become the fourth-largest economy by 2022. in football news croatia will face france in sunday's world cup final after dashing england's dreams.

they held it for more than an hour, but ivan forced extra time before mario won it all with just six minutes left. croatia have won three extra time matches in a row. 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 jenna gagging heart -- i am jenna. ramy: we have more with an economics professor lawrence lau. he says china will not escalate the battle further. markets on risks investors should be watching out for. this is bloomberg. ♪ this is bloomberg. ♪

ramy: welcome back. this is "daybreak asia."

i am remy inocencio in new york. yvonne: i am yvonne man in hong kong. asia-pacific stocks saw a mixed start. the trade war shows little sign of abating. crude oil plunged the most in two years. joining us now, a macro strategist. you are avoiding all the trade tensions at the moment. is that how you adjust to these positive pullbacks? wethere are multiple risks need to face. it is not just the trade war. that is in the headlines every single day, but other things affect asia and markets. the dollar movement remains key. we have seen the dollar back again -- rally back again the past few days. and bonds.for fx the second half of this year we will see much less liquidity from central banks. the fed is already mentioning

they will buy less and less. -- they will sell more and more. boj are turning to quantitative timing. when you are in an area where you have a trade war concern and the dollar of fact and less liquidity going into asia and markets after being such a good market for many years, that remains to be an issue for us. that is why there are multiple conflicts in the asia market. yvonne: earnings season just around the corner, ben. we see analysts cutting their earnings projections. double-digit growth expected here. do you account this mostly on the currency change we have? is there a worry on how positive earnings season will be? ben: i think fundamentally earnings are still positive. that is not just for the u.s.. many of the em earnings are relatively ok. coming the guidances

through our relatively decent. whetherneed to see is or not there is a change in the risk sentiment that will affect these slower investments. yvonne: the fundamentals? ben: i do not think fundamentals matter. it is about market sentiment. that is the major concern we see -- people just selling broadly now. , you were talking a little bit about what is happening with of the dollar. i was -- i will pull up this gtv chart. let's focus on the white line. up 0.7%. that was the best day in a month. where will it be going with trade tensions going and no end in sight? ben: the dollar is a view that we hold short-term favor in terms of looking at the dollar. a lot of things still benefit the dollar. it is too expensive to short the dollar.

if you run a negative carry on the dollar it is -2% payout. that is expensive payout. in general we are looking at how investors have been positioning. moderate positioning in the dollar. we are not seeing much overweight in the dollar. if the trade tensions re-escalate further, the global growth will continue to hit. the oil price factor, it is a bit of an overshoot now. the china story does not play much into the oil story because china is not a heavy importer of oil, as opposed to iron ore or heavy metals. given the risk sentiment is thel pretty negative, i see dollar will continue to rise and hurt the commodities market. ramy: with economic policy happening in -- and the way tariffs are affecting the pad -- fed, jay powell says they might oking thated, relo

possible fed rate hikes. when should we say now is the time to take this into consideration? ben: i think the 2018 story is well priced in. i do not think the fed will change rate hike expectations this year. a 2019 storyll be where they see more hard data rolling over. as many economists and strategists mentioned, the hard data is ok. those are still decent. i think the fed is raising rates in order to prepare for the next recession, as opposed to raising rates on looking at the overall u.s. economy being superstrong right now. wage growth is still anemic. participation rates are still at a high level. they are defending the next recession, but also if the trade war becomes much more concern, i would expect 2019 dots to go

lower and remain to be at a relatively accommodative stage. yvonne: for china, what we found last week -- does not seem the case. oreresting how the pboc government is taking more of a hands-off approach when it comes to equities. maybe less so when it comes to the currency. why do think they are letting the equity market go like this? ben: i think the equity market is a domestic-driven market. 2% of ownership is foreigners. 98% is domestic. the play is much more concentrated on what is happening in china. the won story is more important for regional peers. the most important thing is, because the won will kick into the capital outflow story going forward, that is something they need to defend going forward,

because we have seen previously in 2015 where they drained $1 trillion in reserves trying to defend it. they do not want to repeat the same aphis -- repeat the same episode. the daily fixing is relatively strong to send a signal i am not going to devalue the currency. asiae: you are avoiding fx. where do i hedge? ben: in terms of global portfolio you are still positive on u.s. equities. that remains to be where the fundamentals are. earnings growth is still number one in terms of u.s. equities. we are more defensive going for the small-cap, more domestic-oriented sectors. that remains to be an area we see bright spots. unfortunately emerging markets are not going to look good going to the summer. years, seven of

the last 10 years, august has been a negative month for all emerging-market equities. as we going to august with all these concerns, the trade war zenda won issue, i would be advising clients to avoid the markets now. yvonne: we are watching the south korean won, continue to see it free fall, can the bank of korea do anything? does the rally justify the fundamentals? see the bank of korea defending the currency, given it is a broad-based selloff. yes, i think the magnitude is bigger in korea. there are a lot of tools the bank of korea has. other than china, they are the number two, number three in terms of reserves. having a weaker won does help boost the exports side when the domestic side is still

recovering at a moderate pace. i would not see this as a worry yet. i think it is the bank of korea following regional peers and letting the market sort itself. .vonne: thank you plenty more to come on daybreak asia. this is bloomberg. ♪ is is bloomberg. ♪

ramy: a quick check of the latest business flash headlines. softbank shares shot up. taking a stake more than $1 billion. they think the japanese conglomerate is -- has too steep. nikkei news says walmart plans to sell off its subsidiary to a group of logistics companies. $2.7value the deal between

billion.nd $2.4 they have been investing in e-commerce and india and china. this is bloomberg. ♪ china. this is bloomberg. ♪

yvonne: 8:30 in singapore, half an hour from opening of trading. i am yvonne man in hong kong. ramy: i am ramy inocencio in new york. let's get to first word news. >> thank you. talks between the u.s. and china have ground to a halt as the u.s. stepped up its trade war. there have been three rounds of formal negotiations this may -- since may. we're told communications have a dried up and there is no immediate plan to resume contact. fora says disregard international rules could have

disastrous consequences. chinese minister says if the wto collapses, the world economy would decline by 2.5% and 60% of global trade would disappear. his eye onrump has nato, not content with berating defensees about spending, he is now proposing doubling the target. he made the suggestion n/a -- suggestion in a session in belgium. he also accused germany are being captive to russia. trade barragep's pushed chinese markets into the worst selloff in three years. beijing said it would be forced to retaliate against proposed new tariffs.

so-called chinese investor anxiety has risen the most in the world. global news 24 hours a day over the air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna, this is bloomberg. thanks. asia markets are shaping up so far, let's get an update with sophie. a little better after the selloff we saw. years, therop in two dollar holding gains and u.s. futures pointing higher after the worst drop for the s&p 500 in two weeks. again moving further above, the nikkei is adding .9%. stocks are on the rise in tokyo, led by health care and utilities but tag are -- tech stocks are

retreating. the korean won has weakened to the lowest level since october, head of the policy decision expected to hold its key rate. a softer one in the second half of the year. on the back foot off .2%, it had been fairly range bound compared to losses injured by regional peers. given the commodities downturn, i want to see what is going on with stocks in sydney where they are heavily pleated toward energy -- heavily weighted toward energy. drop wes the biggest are seeing among sectors. that sector down about 1%. taking a look at base metals

under the gun, prices of copper trading near a one year low. we saw that metals may have over night extended. this has goldman sachs undercutting price forecasts on and zinc. aluminum distresseing this signal being raised and what that could mean for the economy. metal,ontinuing on from thank you. korea set to hunker down and hold policy study. that as concern over the trade war is outweighing a bigger than expected drop in unemployment. economics editor kathleen is here. caught in the trade war crossfire. kathleen: china a big trading

partner, sells a lot of exports to the united states. they are at odd. donald trump has made noise about korea's surplus with the u.s.. this has got to be in the discussion at the bank of korea today as they get ready to issue policy decisions. bige war, exports, jobs, a interesting mix. they have seen stalling export growth and drilling trade war clouds hanging over the economy. let's jump into the bloomberg library. korea'ssee, look for average, it is nothing out of the ordinary for them to have around 20%. is unanimous in the bloomberg survey to follow the bank of korea that they will keep the key rate steady at 1.5%. show what i said in

pictures. it helps make the point. now you can see as i move on, my chart. now, theicy rate right white line is at 1.5%. there was one rate hike at the end of last year and inflation still had been above target. i guess that is why they hiked the rate. this will have plenty of room to sit back and watch. the policy statement and the press conference, they will be watched for any sign of weakening confidence in the job outlook, gpl look, anything they have to say about inflation. there was some hawkish comments about the last meeting. we will see what they have to say about the trade war in full force. yvonne: we saw korean unemployment fall more than expected in june. is that reassuring for future growth? kathleen: the word is, it will not be enough to sway the the ok. bok.will --to sway the

job creation is only one third of what it was a year ago and youth unemployment remains high. becausea terrific chart it tells the story of why this is so important not just for the bank of korea before president moon. granted back a couple of years ago, south korean unemployment was 15-29 years old up around 12%, almost as high for the 20-29-year-olds. you need a job at that age cohort. it has improved under president moon. 9%, of those remain around higher than the rest of the nation which is now down to about 3.7%. people said maybe they will have to cut their jobs growth target, will be see that in the statement? president moon recently cut -- his three senior

aides overseeing the economy and jobs. this is a very important aspect of what was going on and a big aspect of why with the trade war lower exportsve and other reasons to be cautious. yvonne: thank you, kathleen. tellico giant is he ge is one set closer to resolving a tech ban in the u.s., having signed an agreement worth $400 million with the department of congress. let's get to david engel, digging into this right now. step if a significant is he ge wants to get back to business in the united states and get the bands lifted on getting u.s. technology the chips in needs for tellico equipment and phones. donald trump did back off on the initial threats, $1.3 billion in

fines, a seven-year ban. of course the commerce department coming out with this agreement that they signed today to allow them if they meet these , the ban could be lifted but the commerce department is not saying they're going easy on them. they are saying it represents the toughest penalty and strictest compliance regime the department has ever imposed on such a case. it is a three-pronged compliance regime. order, suspended denial $400 million in escrow they will be completed within the next day or so then they have to select a monitor to make sure that is he ge does comply. numberve complied with a of other requests. they are trying to build back that trust. out ofhat degree is zte the woods?

david: they are not quite out yet because lawmakers in washington are as of wednesday ,estarting negotiations introducing new legislation that would introduce harder penalties on national security concerns. stocks 61% down and that is just weird today. we will have to leave it there. thank you very much. still ahead, we'll trump's latest tariffs against china actually work? our next guest seems to think they might not. this is bloomberg.

yvonne: this is "bloomberg

daybreak: asia," i am yvonne man in hong kong. ramy: i am ramy inocencio in your. the deal is close for the world's biggest gold deposit. any are said to sign agreement later thursday with indonesia. for more, here's our asia mining reported in melbourne. walk us through the details here. this was something we happen waiting for. absolutely. this has been dragging on for at least a year. negotiations between three sides , a indonesian company, freeport , and the majority owner of gold holder.arge those talks have been dragging on. we are now expecting a resolution to that this

afternoon. the indonesian finance minister has said there will be a ceremony to sign the agreement. we are expecting this to draw the process to a conclusion. it is the, we have been looking .or a $4 billion deal yvonne: tell us a little more about the terms of this agreement. we have seen indonesia ponting to ask foreign investors to break down their stakes but what cannot of this -- but what came out of this agreement? david: we are waiting for details later today. we are still yet to see the fine detail of the value of the deal and exactly how this will work but you are right. tunisiaall down to in

-- this is all down to indonesia to take ownership of key natural resources. it was part of a platform that him to power. essentially, indonesia has been looking to have at least 51% ownership of key natural resources and they have come more important than grasberg. just a little irony that this is happening on a day when the bloomberg commodities interest is falling. i'm talking about copper. it is the world's copper mine. to what degree is the mine moving ahead or do you think if they had the wherewithal, they might want to hold off on this, looking at possible slumps in demand for metals? right in that

copper is really -- base metals generally have borne the brunt of the sentiment we have seen around the u.s. decisions on tariffs. that is a short-term reflex. for copper especially, the demand -- there is broad consensus that it is strong. of news a real lack copper projects, a rise in demand for copper and that means medium and long-term, having control of the world's biggest and most important asset is a safe bet. to this no real risk process from what we have seen that, copper has had a few difficulties. long-term, the outlook is still good. yvonne: thank you, our bloomberg asia mining reporter joining us from no one. trade concerns remain high the talks between u.s. and china grinding to a halt. from some white

house officials saying perhaps there is room to negotiate. let's look at the mission -- it's a giddy situation with a former member of the national and china's main severed fund. -- main a sovereign fund. is the trade war feeling more real to you? but think it is always real we have to put it into context. chinese exports to the u.s. are 3.5% of chinese gdp. what we're talking about is terrorists potentially on $250 billion worth of chinese exports. we are talking about -- even that $250 billion would disappear altogether -- about

1.5% of gdp. if you think about what happened in 2009 as a result of the crisis, chinese exports to the world declined 13%. this is manageable. it is not something you would like to see happen but it is manageable. list hashis targeted had a lot of goods. electronics and whatnot. when you go through these pages, how can you actually gauge the effect it would have? lawrence: it is hard. you are right, the people who were suffering at the beginning of the trade war would be consumers in the u.s. users of chinese products and consumers would be the first line. chinese exports have already been paid for. the tariff would have been borne by the importers and be passed

to the consumer. i think that is the first part. be americant would importers might try to diversify their sources. maybe import from bangladesh and so forth. that will take time and indexably, consumer price in the u.s. will rise. i've done some research and we have shown that the inflation down by been held chinese imports. about 1% per year for the past 20 years. ramy: the question now out of beijing is how they retaliate? they have met with words and said it is unacceptable but in terms of real pain, what would they want to do? beijing'si think

response will be quite measured. we really have to think in terms of tit for tat. i do not see any sign that beijing will escalate. i think it will be quite measured. i think the impact on the u.s. of the decline in some exports would not really be large. important, might be for example some people in china might be affected. people in major export regions. if you look at the u.s., iowa would be affected because of soybeans. it would have an impact but in the aggregate, both countries will come out ok. they will not be seriously hurt by trade war proposals.

i'm not supporting the trade war and i think it is much better to increase exports from the u.s. to china to close the trade gap. ramy: it is selective, in terms of where those targets maybe, both in the united states and china. analysts who have been on the air over the last few days have been saying they do not think this will escalate beyond what we have been seeing. granted the two injured billion dollars is new but do you think this will get resolved by the midterm elections in the u.s.? the $200 i think billion, if you look at the schedule, it will run until august. it will not take effect until after august. is that it probably would not be a settlement until after the midterm elections. difficult forvery

the president to step back and say this is it. yvonne: larry, one second, we have breaking news from the bank of korea. leaving their key interest rate at 1.5%. the big key thing to look out for is the press conference later on today talking about economic growth outlooks. there is speculation that they may have to cut the 2018 growth estimates. that will dim a lot of the speculation out there that perhaps we could be seeing a rate hike in the second half which is what markets are pricing in at the moment. we are not seeing a huge reaction from the one. we will continue to hold on to a we have seen, given the dollar strength overnight. we will continue to see the fallout when it comes to the one. korean banks are divided amongst

international banks on where the one will go. now holding onto eight-month lows for the korean currency. it is interesting look her from nato. president trump lashing out on germany in particular saying, you are being held hostage to russia. is the u.s. being held hostage to china, given the fact that they are getting a lot of imports? is there a limit to say how much they can target his tariffs and what they can do to harm china? lawrence: i think what i want to u.s. point ofe view, opening up the market and allowing u.s. firms to invest in china is a reasonable demand. think the chinese

government is going quite a long way in the last few months to meet them. toomobile manufacturing used -- you have to have a try -- have a joint measure. in fact, general motors can buy off a spiral. there isprogress, complaint about intellectual property rights and i think it has improved quite a bit. people do not realize it but, about three years ago, i worked with a group to publish a study which advocated many things but one was to establish special courts for intellectual property rights. china did that. there are no special courts

specializing in intellectual property rights and the have jurisdiction over the whole of china. they are now beginning to actually impose meaningful fines. i think you have to give it a little time and progress has been great. yvonne: larry, thank you. professor of economics joining us here. big guest coming up on bloomberg. we will about the commodities selloff. that is on "bloomberg daybreak: middle east." later on, on "what'd you miss?," we hear from softbank coo. do not miss that interview at 4:30 hong kong time. this is bloomberg. ♪

>> before we hand it over, let's look at how markets are trading right now. japan, and others up. >> a little bit of a turnaround though the cosby is pretty much fluctuating right now. take a look at taiwan and malaysia. singapore could be down about 175%. this is bloomberg. ♪

david: let's talk about how you came up -- became a very famous ato.to -- a very famous vibr your performing in carousel which is a broadway play. wow, it wouldght be really exciting to do something new. famous sopranos are sometimes labeled as divas or prima donnas. renee: i just couldn't do it, i've never been good at it. >> ♪