yvonne: here in hong kong, we are live from the asian headquarters. welcome to "daybreak: asia." president trump heads for helsinki as he bashes allies again. he will be meeting president clinton after also attacking the u.k..any and observers ramy: observers wonder what is next. -- observers wonder what is next. it is noting says afraid of a fight.

jay powell prepares to deliver his testimony to congress. good morning and happy monday to you. taking a look at where we ended last week, it was in the green. every time there is a pause or lack of intimate coming out between the u.s. and china, investors see that as an opportunity. we are beyond that, looking at a busy week. summitf meetings and between heads of state and a lot of regions, specifically china and the european union. yvonne: you talk about all that event risk.

also, jay powell's testimony later on this week. plenty in the pipeline for investors to digest. be sustained for now. we will see how long that will last as gdp slows in china. ramy: let's recap where we ended the day on friday before we get any further. the dow is down .1%. the s&p broke past the 2000 mark. you would not think it would hit a record, but that is a record. about howen talking technology shares have been resilient. let's take a look at some currency and safe havens. dollar, we cannot see that just yet.

the bloomberg dollar sparked flat. it was a little lower on the day on friday. the british pound, slightly higher. we are looking ahead to see what happens with traders. waiting for theresa may's white paper and inflation data. we will figure out what will happen with the rate hike. now 1241.s right breaking.e s&p take a look at how futures are setting up. we are looking at a mixed bag. down about one third percent. futures down about 1/10 of 1%. closed for a public holiday. futures slightly higher today. heading lower here as well.

take a look at currency world. we see a stalling in the dollar. could we see a more breakout in greenback strength? we are still hovering around those january high. the aussie is flat right now. the kiwi is one to watch right now. the inflation number could be pretty big on tuesday. the renminbi, we continue to see volatility. , still hovering around that line in the sand. let's continue on. president trump is heading for a summit with president to. -- president putin. havings style thinking created a string of longtime allies. 7 i think the year --

trump: i think the eu is a photo -- foe. economically. it means that they are competitors. ramy: let's cross flow to washington. tell us about the president's view of the world right now. think this shows about what his doctrine is. he ended that clip by saying it does not mean that we do not that wem, it just means are competing. we will continue on with her when we get her back.

let's move along and crossover to beijing. reform of the and wto are likely to top the agenda. a very busy day. tom mackenzie is on top of this, watching for us. are we expecting any significant movement on any of these issues? hoping, or at least the expectation is that we might concrete action out of this annual summit and we have in the past few years. the comment you are referencing from trump. trying to get something material out of these conversations with their chinese partners. both sides of signaled that they want this to be an attempt to stabilize the international system. they are going to come out with a joint statement.

easewant to be able to some of those concerns in the market and in the global economy. we are expecting some movement and reform. say thathe europeans they oppose the measures by trump around tariffs, they share these concerns with the u.s. when it comes to china's industrial policy, when it comes to the regulatory environment and market access. to addresso push those concerns. there is also a bilateral treaty that they have been working on for a number of years. they might get some more movement there, pushing in the right direction. then there were issues around climate change. also, the discussions around the iran nuclear agreement, both sides trying to move forward to address those concerns.

certainly, trade and the trade war will be a key focus. europeans are keen to strengthen their alliances with the chinese but also trying to betray the message that this is not an example of them gaining up on the u.s. they are heading off to japan on tuesday to sign this free trade agreement there. what are we expecting from the gdp later? they are forecasting a moderate that,n, be -- but beyond what should we be looking for? it is beyond the headline numbers that we should be focusing our attention. particularly, which sectors and areas are most vulnerable. marginally below the 6.8% that

we got in the first quarter. the government target is .5%. we are also going to be getting industrial production and a terminal chart that is showing us what has been going on from 2006 up until now. you saw this on the back of this massive stimulus. production will be interesting when we dig through that to see what has been impacted by the $34 billion worth of tariffs. the retail sales, we saw that may number come in low. retail sector and consumer spending starting to soften. it has been a key part of driving gdp. they will focus on the sales. spending.

if that starts to switch up, it could suggest that the government and policymakers are pushing them to step up to support they -- the economy. they will be watching that data point very closely as well. tom mackenzie in beijing with a look at what is happening in china. now for some of the other stories making headlines. theresa may is defending her plan for leaving the eu, calling for voters and politicians to rally behind it or face no brexit at all. she insisted she will not compromise the national interest in negotiations. davisjohnson and david resigned.

president trump is being advised not to use america strategic petroleum reserves in his word -- war of words. he is pressing opec members. said tappingutive it would be a mistake and merely push oil prices higher. chinese investors will be barred from trading shares in dozens of company you, including xiaomi. companyas the first with rice in hong kong. issuing cd-r's due to sluggish market conditions. countryd cup gives the a much-needed lift. france beat croatia 4-2, giving them a second world cup success.

the bank of france not expecting much of a boost. it barely affected gdp. still ahead, geopolitics with president trump meeting his counterpart in helsinki. a look ahead at the trading week. looking more to come on daybreak asia. this is bloomberg. ♪

yvonne: this is "daybreak: asia." geopolitical tensions have been driving market, but our next guest says investors might be missing something. that is the impact of a trade war on u.s. to on d. joining us is carol.

for joining us. i want to get your read on where we are in the markets right now, especially with all these trade tensions showing their teeth here. strangely up on friday. the s&p going past 2500. >> markets are acting like a trade war -- if it comes to war -- that the u.s. markets should come out in a stronger situation been much of the rest of the globe because the risk on trade is still playing. technology stocks are still doing well. some of the industrials have suffered. overall, they are focusing on how strong be u.s. economy is. people areaid missing the impact of a trade war. when you look at the tech sector in general, it gets a disproportionate amount of earnings overseas. if we go into an extended trade

war, those companies may not suffer as overtly because they distribute aarily physical good. places like china can make life miserable for technology companies. ramy: right now you're looking at a chart. at nearly 4%. i will show you another chart. this is in the library. i want to show you what is happening with the s&p because it has gone past its 200 day moving average. do think we have much more to go here? where do you think we will be by the end of the year? necessarily put from year and targets. we will probably be a little higher than where we are right now. opposed to a single point in

time, the issue to analyze is the underlying economic environment. there are great things going on in the economy and to the extent that saner heads will prevail. we think things should continue to progress. what should i be looking at for earnings season? we have seen the dollar strength and rising oil prices. is the market going to be on the earnings call with these ongoing trade tensions? investors will be paying particular attention to all the earnings calls. you could get day-to-day volatility because of that. asestors will not be looking much of the earnings report as they will be for signs of cost pressure, signs of how companies are able to -- or are looking at

accommodating the potential for trade war. what are the cost from a standpoint,mport -- employees standpoint. they will be looking at what companies have to say about that, not only in the current earnings, but what they are looking at for the next quarter. it was the cyclicals that were outperforming the industrials. they have out performed quite them up -- quite a bit come suggesting we might see some rotation back into that sector. d focus more on the cyclical? -- do you focus more on the cyclical? inyou had a quarter end here.

some stashing the cash and rearranging it back into growth segments. the growth trade is really off. especially when it comes to tech. we are seeing a little bit of a divergence here than what we are seeing in the semi conductors as well. is that going to be a warning sign for you? do you think they will actually catch up a bit? >> a lot will depend on what comes out of trade talks in the next couple of weeks and months. hopefully we get it settled so that the threat of an additional 200 billion is pulled back. with two months of negotiation to go on between here and there. hopefully we stabilize some of that. hopefully they are able to continue to perform. we also have the

congressional testimony. what should we be looking at the most? they communicated broadly that they intend to communicate broadly. the soft data, the confidence of the lastout flattening in early 2016. it was the soft data that turned first. in conference calls, they talked about how is this owners are expressing concerns, but they have not seen it come through the data. we will be looking at how the fed -- if they have any more indication on how businesses are actually translating the potential for trade war is. yvonne: it is a question of how much hawkish jay powell can get.

every cycle we have seen for the past five decades has led to the stock market. at what point will it really start to hit the u.s. equity market? >> the important thing to keep in mind is that we have had unprecedented intervention for a decade. this is a different period that we are in. the fed has been adamant that they are still accommodative and doing more normalization been tightening. 2019 will be when we start to analyze. by the end of 2019, it will no longer be accommodative. right now, we are still in normalization, which means that things are nicely balanced between growth pressures and non-growth pressures in the economy. deputy chief investment

officer joining us from minneapolis. bloomberg users can interact with the charts. we can catch up on the fun analysis and save the chart for future reference. ramy: let's get back to president trump's european trip. trip as branding the eu as a foe of the u.s. president'st the view of the world. >> it seems like the trump doctrine is tied in with his idea of the art of the deal. he is not big on multilateral agreements and he really does believe in a combative approach. something that upset

establishment figures in washington and beyond. it is hard to predict the long-term impact, but that is the way president trump rolled at the moment. ramy: we are starting to get some response from eu leaders. >> we did hear from the european council president. he was out quickly after president trump made between about anybody thinking that europe and the u.s. are foes are peddling fake news. one of his favorite expressions. likely to hear later from the commission. we think that he will probably have something to say about this later in the day. i would expect the lawmakers, even some republicans might address president trump's comment as they become aware of it going into the work week. yvonne: the president has talked

about how his helsinki trip of thee the easy part last couple of days. is there a clear idea how he will declare victory in this summit? >> he made an interesting comment saying i will tell you what my goals are when i have a follow-up interview on when they. that might be one way. his foreign-policy advisers were out today saying it is not really a summit. it is just a meeting. do not expect any concrete deliverables. more of a chance to tear down some of the tension between the u.s. and russia. if he will raise election meddling. one thing that we do know is that it is for sure that the leaders will have 90 minutes of one-on-one time with only the

translators on hand. that is an intriguing possibility. we will get a download from president trump and vladimir putin after the meeting. that will give us some sense. meeting orfree-form get together without any specific targets about what to hit. much like president trump declared victory during the kim jong-un summit a month ago, we can expect him to come out on this one pretty confidently as well. yvonne: thank you. joining us from d.c.. you have plenty more to come on daybreak asia. this is bloomberg. ♪

yvonne: take a look at your markets on this monday. we are seeing a mixed start to the week. don about one third of 1% right

now. sydni copper futures heading lower by .1%. japan is closed for a public holiday. this is bloomberg. ♪ 2, down. back up.

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monday in hongm. kong. very rainy weekend. markets looking pretty damp also. looking ahead to china gdp. if we get any kind of reflection in trade tensions actually impacting things with gross numbers coming through. ramy: it is 7:30 in new york. markets closed marginally higher, up .1%. that was the highest in a few months actually because of what is happening in terms of the lack of negative headlines surrounding the u.s. and china and trade tensions there. the nasdaq closed at a record high. interesting stuff that more data

moving news coming up from the next few hours as you said. china gdp coming up. i am ramy inocencio in new york. yvonne: i am yvonne man. you are watching daybreak asia. here is a roundup of the first word news. trump rounded off the second leg of his tour by naming the e.u. a foe of the united states. he said he considered the bloc a competitor and named it alongside russia and china has potential enemies. the past few days he has lectured germany about buying gas from moscow and chastised the u.k. over its brexit strategy. china has reiterated opposition to a trade war saying there cannot be any winners in a fight between the top two economies. said chinaouncilor does not want to fight but will not be pushed around. president trump plans to impose tariffs on $200 billion more, and beijing has said they will

respond blow for blow. >> there will be no winner from a trade war. only a lose-lose outcome. china doesn't want a trade war. china is not afraid of it. when its legitimate rights and interests are treated unfairly, china has every reason to take necessary countermeasures. ramy: the billionaires index says asia has a new number one. the alliance boss tops the regional rich list, overtaking the alibaba founder. $4.3 estimated to be worth billion, tops his rival by $300 million. he made more this year while jack ma has lost. novak djokovic ended his grand slam drought, beating kevin anderson in straight sets.

he took an immediate lead and withstood a late challenge to 7-6.-2, 6-2, this is his fourth major trophy. federer'snly roger 20, rafael the doll's 17. this is his first since he won the french open. let's get back to the markets because this week on wall street the banks in the spotlight as goldman sachs, morgan stanley and bank of america prepared to report. citigroup and jp already announced strong revenue, raising the bar's for the companies that follow. su keenan with the details. i got your name right. [laughter] j.p. morgan chase and citigroup came in far stronger than analysts expected. there was concern earlier investment banks would be under pressure, but they outperformed

eerie let's take a look at the board of friday's results. city shares in particular split after the banks, traders underperformed jp rival -- the biggest rival. they came in strong but it was behind their rivals. let's take a look at the headlines before we go into the individual stocks. j.p. morgan chase going to bump up large deals that close. the ceo jamie dimon warned clients are worried about trade with china.tes he said creating uncertainty. the city ceo also talked about this but that it is not impacting client transactions. let's go into the numbers for j.p. morgan. they had the strongest result, the biggest bank by assets. year-over-year on strong trading revenue and the growth. addingans expanded after $200 billion in just three years.

let's go to citigroup your the treasury business generated record revenue as trading slipped and the bank business abroad have been warning investors preferred -- investors. this incomew revenue fell more than expected. they reported 90% increase in stock trading but that trailed j.p. morgan. let's go to wells fargo which unfortunately continues to have the title of ugliest bank on the block. they have had a lot of challenges. it was another up quarter, tough for the bread and butter product which is mortgages. declined,t homeowner and they did have a positive in terms of the focus on net interest margin. that is the difference between what a bank charges borrowers and pays. they reported increase for the second quarter two beef analyst estimates. gtv is where you can find these charts. big bank profits, you see the in early 2018.up

they are all writing high particularly j.p. morgan as we head into the week. that was a high bar for the banks that follow. hard to meetll be the bar, especially with concerns about the flattening yield curve for the banks. but it sets the stage for goldman sachs and morgan stanley reporting this week. su: big focus on mergers and acquisitions because morgan stanley and goldman sachs are the leaders here. let's take a look at some of this. you can see how their performance has been. for goldman they are protected to boost revenue more than the other firms. analysts expect 58% jump from equity underwriting. that counters the decline in the debt capital business. investors, let's look at morgan stanley. they are considered one of the top advisers on the street. analysts will see whether the

dealmakers can outperform goldman, their key rival. advisory revenue at morgan stanley estimated 14%. that is the biggest jump among five banks. that's now bank of america. a different story. even though they are number six in advising globally, the concern among analysts is revenue tumbled 15%. that would be the largest such drop predicted among the top five u.s. banks. the big question is risk-taking. in this current environment, what risks can they take? that is something everyone listen for on the conference call. a report on monday. yvonne: su keenan from new york. jay powell delivering his twice yearly report to congress. it will be an update -- upbeat message, stronger growth, rising inflation underpinning his view more rate hikes are needed this

year. the release of the monetary report friday. our economics and policy editor kathleen hays is here with key points. kathleen: this is a very important testimony. under law twice a year the chairman is required to go to congress, the american people and report on the health of the economy, monetary policy, what is expected. having said all that, jay powell will deliver an upbeat report. we know because the fed released the report friday. we get a sense and in fact he is doing this, so congress is prepared to ask smart questions and have it absorbed by time they get there. andeconomy is set to grow accelerate from the 2% in the first quarter. stronger business investment, more jobs, tax cuts, an important part of this. he touches on the impact of the trade war and is clear he and the fed are watching this

closely, but it is not taking the economy yet. he presents a global economy growth aiding in recovery. let's look at the key phrase which suggests more rate hikes are coming. the gradual approach for the target rate will be consistent with sustained expansion of economic activity, strong labor market conditions and inflation new the committee symmetric objective over the medium-term. -- the gradual approach, that is what we see. let's put it in the picture from the library. you can see the dots. this is your function. go. oflooking for a consensus four rate hikes and we will see if jay powell reinforces that. on the other hand he will be facing a lot of questions after this testimony. he testifies to the senate banking committee tuesday, the house financial services wednesday. we will have two days of the

barrage of questions. i think it will be safe to say no economy stone will be left unturned. ramy: no doubt will he have questions with trade. everything is rosy with the u.s. past august 30, the next fed hike could be as soon as september, we have been tutored billion dollars in tariffs, he will have to be ready. kathleen: he will get tons of questions. we can expect he will say what we have heard before. businesses could slow down plans. they are not yet ready to back away from the view the u.s. economy can withstand. in his report, they anticipate the impact of rising oil prices. he says because of expanded u.s. production, the economy can withstand this, consumers as well. baking of inflation, this will be an issue because the fed as you can see from this chart, the

core inflation rate the fed watches closely, the headline is above 2%. inflation rate has gotten directly to that point. is he willing to let it move higher as many colleagues have said they are willing to put overshoot after that rate undershot for so long? the big one is the flattening yield curve. what will jay powell say about that? none of these are experts on yield curves. will staff -- their staffs brief them. this latest report finds al qaeda reasons why it is not a recession indicator but you can see the red bar is recession. yield curve widens, it goes negative, you get a recession. here we are in 2018. this is the narrowest spread between two-year notes and 10 -- 2007 andince 27 some people figure it could go below that.

it is something he will have to deal with. economics is saying because inflation is not rising as fast, because you have a yield curve the fed will take a rate hike pause, but i think it is early for jay powell to signal that. ramy: economics is saying because traders are prica different set versus the fed itself. we will see if they update that or if jay powell gives any inkling on that. our global economics and policy editor, kathleen hays. is the trade war weighing on china's growth? second-quarter gdp numbers provide clues in a few hours time. this is bloomberg. ♪

asia.this is daybreak i am ramy inocencio in new york. yvonne: i am yvonne man in hong kong. china will release second-quarter gdp figures and the numbers could show the impact of president trump's

trade war. let's look at that with endocrine. -- enda curran. forecast is 6.7% but at what point do they look for cracks? enda: we are still in early stages. industrial output might give some indication where you could see it. you look at the initial batch of tariffs, it was electronics and communications, good sectors. there could be something in those numbers today which are expected to slow down to 6.5%. the economy is slowing, but the real pain from the trade war will show up as the year goes on later this year and into 2019. ramy: looking at other numbers in terms of retail, fixed asset, retail is expected according to bloomberg economics to rise 8.8% versus the prior 8.5%.

is that silver lining we should look stronger into? enda: you could argue it would be, but it is coming off a fairly weak month for retail sales. if it does rebound, it indicates the consumer side of things is holding up in terms of confidence. or of the big unknowns unquantifiable of the trade is sentiment. if we see china bouncing back from a, it would perhaps show that it is showing that it is holding up. yvonne: let's bring in our next guest, associate professor at peking university who joins us in hong kong. thank you for joining us. when we talk about trade tensions it seems economists are confuse whether we will see the $34 billion or if it will go up to $505 billion. how do you go through the noise and why do you think it will hurt china?

christopher: one thing that is important to recognize is president trump basically has proven credible on his threats to implement these tariffs. even though right now we are only looking at $34 billion, you have to take seriously the idea he might implement up to $500 billion in tariffs, and on the same side you have to respect the same idea the chinese will start increasing their tariff levels and cracking down further on u.s. companies behind the border type of various, slow , crack healthries inspections, these kinds of things. there is more room for this to ramp up because we don't see anybody actively looking for an offering. yvonne: how else can china withstand this fight? you talked about the sectors with deleveraging.

christopher: i think they are starting to see sprouts china is turning to ease restrictions. what i mean by that is land sales are up, retailers -- real estate, consumer credit is ramping up and growing upwards of 20%. that is feeding into the retail sales number from earlier. i think there is evidence beijing is girding for a longer fight. yvonne: are trade war's easier to win if the u.s. economy is growing as strong as we are forecasting now, close to 4%? does that make the u.s. a can -- a likely competitor? enda: certain things are going well area at the same time china is suffering from volatile markets. the yuan has had a month and the economy is slowing down. that could complicate overall efforts to slow down the pace of credit. so china is on the weaker foot

at thento this war, but same time china has made clear they are ready for the long haul and will fight it out. ramy: i want to piggyback off of that. what do you agree they are desperate for to find another outlet for trade, especially with this week with china as well as the e.u. summit? is there a way that jean-claude juncker can try that open a bit wider than they might not have been able to if the u.s. and donald trump had not in their? ere?een th you have seen the making and signing deals. we saw them in tokyo and seoul. the e.u. seems to be the only major center that is essentially entertaining additional talks on this issue because most of these other countries are very concerned about chinese

protectionism. trump has been reading this and made enemies with canada and the e.u. and japan but they recognize the same issues about china president trump is talking about. what you have seen with the e.u. is they are willing to tie one-off deals but not a market opening access the e.u. fundamentally wants. i don't think beijing wants to give that. the likelihood of a bigger deal people are talking about remains relatively remote. in terms of possible deals, maybe not something huge, but what would success look like after all is said and done, something along the lines of technology, agriculture? christopher: i think china would be willing to open up their agricultural market a little because in ae.u.

lot of areas china remains a rapidly growing food market. they lack some of the agricultural technology, and especially specialty products. i think there is opportunities. i don't think you will see even in agriculture the wider market access issues the e.u. would really want. enda: we saw some deals last week, investment, bmw talking about investment. china mightal that give the e.u. preference? christopher: on some deals. i don't think on what say wider market access or some type of investment treaty. those are much further down the road. in 2025?hat about made the e.u. has voiced their concerns about -- a similar fashion with the technology sector because there has been

talk of whether we can actually reach out a hand and have more partnerships between foreign companies and chinese? christopher: a number of countries in the e.u. have actually started adopting chinese technology. you suck huawei components in the u.k.. you have seen grace -- greece and full -- and romania actually bring in huawei, so i think there is a split. you will see european companies be very concerned about the same security etc. -- concerns, so i think there is a split and china work on that. they could say let's get the highlight that hardliners from telecommunications markets. ramy: why is it easier for huawei and its peers to gain access? they don't see it like a national security risk, or is

the white house making too much drama? christopher: there is actually very valid national security concerns by zte and huawei both. why huawei was so welcomed into the u.k. when they are a very valid national security concern. with these companies are linked these companies are linked to. it was hard to say what was going on in the british regulators' minds. ramy: thank you so much. now for a look at the stories trending across the bloomberg universe. one of the most read stories on the terminal, why a $139 billion australian fund is buying 7 -- 30 year treasuries as a hedge.

they say the best of growth is probably behind us. how world leaders congratulated france on their world cup win a couple of hours ago. they beat them 4-2, and a 19-year-old became the second to score in a world cup final. is not a claims he conservative. after donating $40,000 to a political committee that supports house republicans. he contributes to both parties to maintain dialogue. you can find out the stories trending on bloomberg online or on the terminal. this is bloomberg. ♪ this is bloomberg. ♪

ramy: quick check of business flash headlines, chinese maker phone -- phone maker zte can operate in the u.s. again. the decision came after they deposited $400 million in an

escrow account. billion. total of $1.4 they replaced their senior management and lets inspectors inside its operations. the 5g race is heating up with huawei locked in battle with samsung to provide technology for the mobile carriers. the contracts could be worth as much as $9 billion. samsung winning the race after a series of political controversies. huawei is in the game despite the u.s. claiming it is a security threat. yvonne: minutes away from the open, japan is close for holiday. hard to gauge the direction for markets given the fact japan is closed, volumes close. -- we see the kospi down and new zealand. unchanged when it comes to aussie futures. we could get more direction here. barclays chief china economist saying china's gdp went down in

the second quarter but growth is still likely to hit the government targets this year. the government -- this is bloomberg. ♪ is is bloomberg. ♪

>> 8:00 a.m. in hong kong. welcome to "daybreak asia." market space a mixed start ahead of eco-data from china. the yen little changed. president trump heads for helsinki having bashed his allies once again. he said the european union is a photo of the united states. >> just as it :00 p.m. on a sunday. wara warns about a trade saying it is a lose lose situation. beijing says it is not afraid of a fight. we are expecting second-quarter gdp data from china.

it should reveal the impact of u.s. tariffs so far. yvonne: much like the weather we are seeing, a soggy start to this monday morning when it comes to market. .ard to find direction volumes are going to be thin. a lot hanging on this. the event risks we are seeing near letter mayor goodman president trump's summit, the eu-china summit, and the countdown to china gdp. >> not just what's happening in europe and asia, we are looking into fed chair jay powell talking about semiannual reports. you're going to see signs of maybe some concern with trade, perhaps in the

next quarter or two trying to kick in. all of this starting off a busy week. china gdp, the big one coming up. yvonne: with earnings as well, it is going to be jammed pack -- jampacked. key questions about this relief rally last week. >> we are seeing a mixed start of the week after that relief rally we saw last week. the kospi marginally lower at the start of the session. we have stoxx in sydni rising 0.1% after a lackluster close on friday. japan closed. we have the yen trading fairly 112.31. aussie losing some ground after a two-day rise, but staying in a tight range. blog, a small boost for the yuan coming through as china

blocks mainland investors from investing him across hike on -- investing in hong kong. a finance minister met with the governor to discuss the outlook as local media are reporting the finance ministry is considering lowering its 2018 forecast from 3%. risk to economic growth from issues such as trade. taking a closer look at stocks that could be moving him across korea, i want to highlight retail players, convenience stores in particular after after the -- we're .2%, this wage hike macy's sluggish growth for the convenience store industry. president trump rounded off the second leg of his

european to her by naming the eu a foe of the united states. a said he considers the bloc competitor of america alongside russia and china. donald trump has lectured germany about buying gas from moscow and chastised the u.k. over its strategy. pres. trump: i think the european union is a foe, what they do to us in trade. russia is a foe in certain respects. china is a foe. it does not mean they are bad. it means they are competitors. reiterated itsas opposition to a trade war. a stateuncilor -- councilor said china does not want to fight, but will not be pushed around. to imposemp plans

tariffs on additional chinese goods and said it will respond blow for blow. >> there will be no winner from a trade war. only a lose-lose outcome. china does not want a trade war. china is not afraid of it. when we are treated unfairly, china has every reason to take necessary countermeasures. defending her is plan for leaving the eu, calling on voters and politicians to rally behind it. , she said the mail she will not compromise u.k. national interest. boast --nson and davis both resigned. france's triumph at the world cup gives the country and must needed lift after years of

introspection brought on by terrorist attacks and lackluster economy. the team beat croatia, giving the team a second world cup success. the bank of france is not expecting much of an economic. it says victory 20 years ago did lift consumer confidence, but barely affected gdp. >> certainly a very exciting -- excitement in that game as well. we have been talking about china. beijing has moved to bar retail investors from investing in what they call risky foreign stocks. new rules will affect those using the nations stock links with hong kong. joining us is bloomberg's asia markets managing editor. tell us the rationale behind these moves from beijing recently. is there an element of chinese money should support chinese companies? >> this is still a developing story, but that does seem feasible.

chinese stocks are having a terrible year. what this change what effectively do, because the hang seng index compilers were looking at -- are going to include foreign companies, securities, and stocks from this quarter. china has essentially said, not so fast. we will not include them through the stock link. that will keep chinese money within the chinese stock ecosystem as it pertains to foreign companies. it will also stop chinese investors from investing in the likes of xiaomi. yvonne: this looks like another setback for the likes of xiaomi, who has the dual weighted structure, also cbr issuance. >> it has been a very contentious ipo and a failure to launch when it comes to the cdr's. cdr's were meant to be a high-profile program with china attempted to bring tech

companies back to china. what we saw instead was -- with xiaomi was regulators are not the issue would be in the interest of chinese investors. talks fell apart. we're seeing them ipo in hong kong. chinese investors will not be able to participate through the link in owning that stock. also,it is interesting with china's stocks at their billion lows $941 -- whats no applied for opportunities are they seeing their? i think valuations are a big one. we do not know when they may get approval. valuations on chinese equities are at multiyear lows versus global stocks and also when you

compare them to chinese stocks in hong kong. it may look compelling. but also, as we know, chinese stocks are now in msci indexes. any money the cic has parceled out to foreign fund managers may will be benchmarked in msci. they need flexibility to hold a-shares even if that is not their primary strategy. ramy: we will leave it there. sarah mcdonald in singapore. says ahead, barclays beijing's deleveraging campaign may have harmed investment. we will look ahead to china's gdp figures. plus, a strong u.s. economy could embolden president trump to continue his aggressive stance. this is bloomberg. ♪

yvonne: this is "daybreak asia." potential 12 punch for

emerging markets this week as investors brace for another jaye war blowout and powell's twice yearly testimony to congress. editor is here. emerging-market volatility is at its highest since 2011. intensifying trade war also swirling. >> it is no surprise. the trade war tensions have piled on for months now. the federal reserve pledges to keep hiking rates. bonds, you stocks, name it. people are more concerned about the tit-for-tat on tariffs accelerating and how that is going to create a vicious cycle for emerging markets, fueling risk aversion, leading emerging-market currencies especially vulnerable to the u.s. dollar. where worrying about outflows,

etc.. another element is goldman sachs writing that asian currencies like south korea's you one and taiwan's dollar are set to weaken further. thele are looking at resumption of negotiations between the u.s. and china. on the meeting between president trump and vladimir putin. emerging markets have been buying from russian any meeting is better than none. we're talking about the federal reserve earlier. the policy was released by the fed, it signals an upbeat view from the fed on the economy. more rate hikes. this is something else that is expected to be key for the dollar. we see the dollar strengthening again, which will hit emerging-market currencies. asia has already proven vulnerable.

that is why indonesia's central bank has had to raise rates. it is a perfect storm potentially for emerging markets this week. that is what is being braced for. trade war at the top of the list. yvonne: thank you. let's head to singapore and speak to the ubs wealth management cio office. good to see you as always. i have a chart to highlight what kathleen was mentioning when it comes to volatility among em currencies compared to the g7. it appears we are seeing volatility highest since 2011. how are you gauging the em space? >> i think if we were primarily talking about the trade space, there are two factors influencing the em space.

one of them is trade. more recently, the ratcheting up. it started when rates in the u.s. rose. in february, everybody was worried if inflation went up with the stimulus package, the fed has to do more than what they currently indicate. those were the fears. that at least we can put to rest given that during the summer, it did not look like we are seeing inflation shooting out. if it has not happened by now, the likelihood is straining. the fed going even faster than they say they were, that's good news. especially in the asian markets. this time around, the central banks have been proactive, coming out early with rate hikes for tightening to different degrees. itself, wee site

will have to see of course. if we go more to the equity space, and turns of first round impacts, we have analyzed this. if it comes to pass, if we see additional trade tariffs, it is very difficult to actually link this to earnings in the first round. is 2%,ld say msci china all its revenues out of north america, and the risk -- the list we have seen very little. it has to come by the second round. i think china not going out and retaliating massively, the u.s. saying they are open to negotiate, we are not seeing the worst-case scenario, that would be helpful. yvonne: the real impact on earnings we will messi in this latest season -- well and not to really see in this latest season

. they tend to move in tandem to external factors. it does not seem we are reacting to fundamentals. at what point do we start reacting to corporate earnings. are think the fundamentals -- that's what everybody tries. when some measure comes out or something seems to be shaping up in terms of impact, first you see it on the valuations. later people think about the fundamentals. -- inluations try to terms of first round impact, even on japan as an example, the 25% tariffs on cars, we have estimated around 2.5% earnings for the japanese index. zero, butaying it is even when the whole terrace -- tarrif comes, it is limited.

seeing thebe delegation from beijing flying to washington or some signs of talk, like we see with trade , the two sides, the eu and u.s. talking about zero tariffs, not that it's a done deal, but whatever negotiations -- direction negotiations are taking, it does not get better than that. ramy: you were talking also about the emerging markets space. one interesting thing is that longer middle term, you are still bearish on the dollar, which would help em. talk to me about what you are looking at. we are sort of in flux. the dollar down in today's trading. >> on the dollar, it is true, we

believe the fed keeps hiking every quarter and continues to hike next year. you could say, isn't that dollar positive? by itself it is. looking at emerging markets, especially the big currencies, the chinese yuan, it is managed against the basket. the basket a big currencies is what matters. we have predominantly the euro, we have a lot of yen in there. at how theseok central banks are behaving. the ecb is going out by year end out of qe. japan has yet to announce anything, but we think in q4 they take the first steps. believe the non-u.s. dollar side moves stronger and moves him a crowd over the second half the second over

half. that is still valid for the second half, we think. you suggest tod the fed looking ahead to the next rate hikes? one piece says the janet yellen fed would hold on september. what do you think? >> maybe we get more color after tomorrow from the fed with the testimony. we do think they are on track and also recently giving that signal, even though it was just sort of a small change, but given that signal that every quarter is due for a hike, it would also be strange. tiedhave understandably the risk of trade to the downside on the u.s. economy.

we do not think at this point it is a enough to justify backtracking from it. we think they are on track for the next to hikes. yvonne: how important is the chinese gdp today? a chart here shows the split outlooks we are seeing when it comes to the economy. versus what we are seeing in the shanghai composite, heading to a bear market. have we seen the worst of the chinese equities selloff? it seems like there are signs of resilience when it comes to the headline number. what should we be looking out for? >> what i do think we should look for, gdp overall, but certainly as one component, the exports. exports are not week in that sense, but they have peaked already. trade talkardless of happening, that would have happened anyway, that happens independently.

what you could also take as a lead for how much incentive there is to take a stern response on the chinese side now , versus these 200 billion u.s. dollars, if we see more weakness than the market expects, you could argue the incentives to retaliate very strongly also probably drops a bit. in equity terms, the have a different logic. that could be read as a sign that if that incentive falls and china has not said much, how are they going to retaliate, may that response is going to be more muted. a weakergh we may see number, it would probably be good news for the equity market. ramy: i want to follow up on gdp a little bit. we are expecting retail numbers as well as fixed asset investment. chart this gtv terminal you can find. as ai in the yellow. retail is expected to rise to

8.8% from 8.5%. these numbers from bloomberg economics. what to these tell you? a negative, slight positive. >> we should expect -- of the general softening trend we see in the gdp among other things, but primarily the result of the deleveraging campaign that is happening. we need to think about how the numbers influence this. on the one hand, the deleveraging campaign, very serious. we are also seeing signs it is successful. some of the disarray on the debt side, at least cooling. you have to give the authority some credit for that. we need to also watch the export side.

is exports drag too much, there will be incentive also to -- not to take deleveraging off, but tighter regulations, they will still come. we would expect them to be more mild. more drawn out, perhaps, to fine tune it. these are the key focus points we are watching. newse: we just got the about regulators in china barring retail investors from trading stocks like xiaomi or any company that has voting rights through the stock connect. what impact could that have on the market when these key stocks are inaccessible to chinese investors? >> i would see it as marginal, or the stocks traded on the international markets, you still think they have free supply and demand. marginally maybe they can prevent an overheating, but i would trust the international investor community finds at any

given point in time with the information available, finds the fair value for the stock. it is not a large impact, i would say. yvonne: thank you. ubs wealth management cio office managing director, did not have time to talk to about the world cup. you were getting it wrong when it came to germany. this is bloomberg. ♪

ramy: a quick check of business flash headlines. air asia is near a deal with airbus. the carrier is the second biggest customer for the a320 and it may order more of the new jets. airbus is close to clinching a deal. talks are said to be ongoing. yvonne: boeing is rewriting its own reels -- rules.

the plan has been to make its planes fly further, but now boeing's styling back its ambitions, designing an aircraft that will service eight to 10 hour journeys. this is bloomberg. ♪ this is bloomberg. ♪ retail.

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yvonne: 8:30 in singapore. looks to be steamy out there. i'm yvonne man in hong kong. ramy: you are watching "daybreak asia." let's check the top stories in our first word news. chinese investors will be barred for trading in shares of foreign whoanies, including those have waived voting rights as regulators seek to strengthen protection. xiaomi was the first company with weighted voting rights. president trump is being advised not to use america's strategic control he him -- petroleum

reserves in his war with iran. he is pressuring opec members to fill any supply gap that will arise when u.s. sanctions curtail surpluses. the bloomberg billionaires index says asia has a new number one. reliance boss tops the regional list, having overtaken the founder of alibaba. they are now estimated to be worth $4.3 billion. he has made $4 billion just this year alone. hisk djokovic and that grand slam -- and did his grand slam drought. he took an immediate lead and withstood a late challenge to 7-6.-2, 6-two,

federer andly roger nadal. this is his first since he won the 2016 french open. yvonne: let's take a look at markets. we are lacking direction. goinglot of clues what's to happen when it comes to trade tensions. plenty of event risks with that meeting between president trump and vladimir putin. backdrop, that relief is petering out. stocks losing ground in sydney as well as wellington. the cost be edging higher as we have heavyweight chipmakers edging higher. the korean yuan trading at an 1130er low, back at the low against the dollar.

with the bank of korea on hold from the rest of the year, more weakness expected for the currency given the negative yield gap with the u.s.. isck movers will show what boosting the kospi, korean carmakers climbing. have bloomberg intelligence expecting second-quarter profits for one company delivering stronger chinese sales. ,lso looking at hyundai motor the company is expected to hold wage talks with workers after last month -- last week's strikes. marbled dropping with no significant growth, the company has become outdated and labor costs are rising due to system,ntly implemented which has also weighed on the outlook for convenience store operators.

that is under pressure this monday in the wake of the government setting 2018's wage hike. after years of double-digit growth of salaries, that trend seengher wages, that is denting convenience store profits. signs of weakness in the jobs market. retail sliding nearly 11%. ramy: a lot of red there. thank you very much. to china, and trade tensions are likely to top the agenda at an annual summit between chinese leaders and eu counterparts. our china correspondent is watching this. how does president trump actually factor into all of these meetings? he looms large, even as younger and the president of the european council touchdown ahead of these meetings.

trumptions of president casting a shadow, but also giving an opportunity over the summit, there is an irony. you are likely to see the eu and china with more integrated economic ties. part of that is because they has been forced to confront the chinese. the u.s.s that both and european concerns they share around forced tech transfer, around market access, the subsidies. you are likely to see, and the eu will be pushing for this, moves to reform the wto. europeans want to get the chinese on board because they think if you get the reforms to the wto that will address those concerns, you can have a multilateral system that will be in play, and that could play to washington, easing concerns.

there is also potential for more traction on this bilateral investment treaty the u.s. and chinese have been working on for years. there's a number of other issues from the european side around human rights, around the iran nuclear agreement, and climate change as well. both sides want to show there is stability with two of the three largest trading powers on the planet coordinating more closely is trying to portray a message of stability for the global economy. yvonne: you want to continue this theme of a united front the eu and china have tried to maintain. what is beijing hoping to get out of the summit? >> number one is the symbolism of china trying to portray this image of being the mature player, the mature actor thea-vis washington and trade concerns they are

continuing to work with allies around the globe to build up their economic side. china will be concerned about anti-dumping measures that are in focus from the european side. they are likely to highlight that. there are also concerns lawmakers in europe are stepping up their call for increased screening of chinese investment. there is not an equivalent in the european union, but there are lawmakers pushing for rules that would create more oversight. that would be a concern for the chinese side. but also to push the europeans to acknowledge or sign up for their initiative. that is unlikely. europeans have concerns about transparency, about the bidding process. they're going to meet this morning. then the europeans are off to sign a free-trade agreement with japan. they're trying to portray this

visit as an example of the european union forging close economic ties in asia. --nne: tom, thank you, are our chinese correspondent joining us for major. -- from asia. ours look at that with correspondent. >> the chinese economy is moderating or slowing down. the question is how deeply entrenched will that be today? the gdp numbers are not expected to surprise us too much. -- thederlying component underlying components are more -- industrial output is expected to be softer. that may reflect trade tensions. electronic goods and communications components. the first batch of terrorist targeted that sector. -- tarrifs targeted that sector.

we are not expecting to see too much of a hit from the trade wars. that is going to become more pronounced as the months go by. yvonne: it seems like they are still trudging along with this deleveraging campaign. how much longer can they do so without waiting on growth? >> they do want to rein in the reddit story. t story. there are facing a slowing economy domestically. they are facing headwinds from the trade war with the u.s.. there is no doubt chinese authorities are under pressure to put their foot back on the gas a little bit to ensure there is money floating around the economy to keep things on track. ramy: looking at the yuan right now, it is at that threshold we have been talking about the last few weeks. do we think there might be the wherewithal to get to 6.8? or maybe even lower than that?

that begs the question. on the flip side of this, capital outflows which beijing has been trying to control as well. >> there are two ways of looking at it. an wasuld argue the yu fairly strong given the signs the economy was slowing down given the headwinds from trade. there is a view out there the yuan is reflecting where it should be no, the market is pushing it lower to reflect the chinese economy. at what point did the authorities moved from being comfortable with weakness to being, as you say, concerned because of what it might do for capital outflows? accounts,nk by all the signal from the pboc has been they want to keep the yuan stable. tolerate flexibility in moderation, but they do not want to cause an outright panic and

trigger savers trying to get money out of china. the overall movement will weaken further given the macro backdrop in trade tensions and where the dollar is going. we will be keeping an eye out on that. right now 6.7 to the dollar. bloomberg's chief asia correspondent. thank you very much. let's bring in barclays chief chinese -- let's talk about the headline. we are expecting that second-quarter print to come out. 6.7% is what bloomberg economics is affecting. what are you expecting? gdpur forecast is also for slightly lower than last quarter at 6.7% on a year on year basis. ramy: the reason for that, is it

just deleveraging working here, impacting bottom lines? at the monthly data in second quarter, has been holding up well. particularly on the supply side. production has been coming in quite solidly in april and may. we do expect further moderation in the month of june. on the back of this continuing structural deleveraging and particularly as we see credit growth has been slowing significantly. we do see more downside risk in the second half of the year, particularly if the trade tension escalates further and if the 200 billion, which was announced last week, will take effect as early as september.

yvonne: you mentioned in previous stories the 6.5% growth target for china is now at risk. what scenarios has barclays factored in right now? it seems like economies are all over the place, whether we are going to see 34 billion of chinese goods, or the 500 billion president trump has threatened. indeed. our view has been president trump's threats on tariffs on china could well be credible. we published a report on the 20th of june right after his $400 billion threat about the timeline for this to happen. we do see if you risk scenarios. few risk scenarios. we see a 30 basis point downward

pressure on chinese growth in q3 and q4. that could drag the overall europe gdp growth down to 6.5%. that is assuming the chinese government would continue on using monetary-- policy, but using fiscal policy to support infrastructure investment and to offset the currently downward trend in growth. we have a worst-case scenario which we could discuss next week. tell us more about, what can china do when it comes to policy support? everyone thinks they are committed to maintaining that 6.5% growth target. what is the risk china will revert back to old playbook's, whether it is throwing money at the issues of credit, investment back measures, what does that mean for reform? >> i think you are absolutely

right. we can see on the policy side, the past two months there have been huge debates in china about , what should the government do? the view of this escalating trade tensions, but also the previous government tightening policies in the past year, also a number of regulatory policy announcements that were ,nnounced in march and april restricting local government debts. the crackdown on credit have been more visible. moment, monetary easing has already started with the pboc in the second quarter. some of the more targeted. there is a need and a strong calling from both markets and

policy to the fiscal take its share. that has been concern because the government's top risk for the next three years is managing financial risk. on top of that was the local government debt issue. we see the government maintain the financial regulators, like see,hairman of the cbc i and it shows the government would remain committed to the so-called structural deleveraging. we do not expect a reverse course as we saw in the previous downside. particularly we do not expect huge stimulus like 2008 and 2009, should the chinese economy slow more significantly. yvonne: how much further could they ease?

does the pboc resort to more aggressive measures? >> we do not expect the pboc to cut the benchmark rate, especially in view of the fed rate hike cycle. of more the potential significant pressures on the chinese currency. we think there is room for more -- to continue the targeted cuts to provide an easier liquidity environment and also support market confidence, especially in view of the continued -- the likely continue rising default in the credit market. there is a consensus that the monetary easing will not address the problem of this credit growth. they need other measures. somewhat of the more clarity and the new asset management, with

the announcement of the -- which shall provide more clarity to the markets. we see a continued contraction in the credit components of the credit expansion. part of that needs to be addressed. easing liquidity is going to play a small role in that. yvonne: stay with us. we will have more with barclays chief china economist. you can also turn to your bloomberg for more of this. commentary and analysis from bloomberg's expert editors. ♪

ramy: welcome back, this is "daybreak asia." yvonne: china is scheduled to release gdp data. front and center will be the

industrial monetization program that sparked criticism abroad. in our weeklong series, we look at the nation's priorities and what they are going to be for the next seven years. >> the phrase made in china has changed meeting over the years. it was synonymous with fast and cheap. beijing wants to raise the bar to dominate the shift from west to east. the focus is on new and high-tech industries. robotics, aerospace, artificial intelligence, and cars. there are 10 sectors in which china wants a leading edge by 2025. the has provoked alarm in developed economies. president trump says it and it isu.s. growth built on "unfair practices." voices promoting the plan in chinese state media have grown

significantly more faint. the question is whether beijing will listen to its critics. will beijing listen to its critics were pullback? let's answer that question with barclays chief china economist. what you think about that? at the heart of what is happening between the u.s. and china is trade tensions, it comes down to trying to stop made in china 2025. one of our analysts said this was unstoppable. the u.s. might slow it down. your thoughts? indeed, with some discussions, we were talking the tradequestion, it war, is it a technology were? i'm not an expert on the subject. recognizedis clearly

and some of this agenda or ambition china has sacrificed for itself to transform the domestic economy into a more higher value added, a more innovation driven economy. leading to some of the issues to its trading partners. there is some argument that every country, including germany, including the u.s., there is a certain amount of industry policy, but it is more the details, how do you ensure fair and equal opportunities, particularly for the domestic firms as well as the foreign firms. i do feel there is a lot of discussion in china among policy circles that the government is not in the best place to pick up the industry, which industry will make up profits.

with a lot of the government money potentially being -- could well lead to resource misallocation. it could lead to overcapacity, as we saw in many other cases in china. there is a clear recognition of, what's the right policy? disputeis rising trade or whatever you want to call it here, obviously the u.s. is targeting chinese tech. china can also target u.s. tech. for example, with apple. how does that figure in terms of retaliation scenarios? china imports around $150 billion from the u.s., with president trump threatening to impose tariffs on 500 or 400 billion, china would have no t

measures torrace ariff measurest to counteract. we do sense a likely shift in the chinese government strategy moving from the previous strategy. the two are likely more controlled retaliation, even keeping in mind, no retaliation could be more economical option for china to avoid the economic focus and also shift the more opening up, more developments, improving market access. what is to try to avoid the potential for further escalation. two is also more in china's long-term interest. , which is to apple

also raised by overseas climates, that has been some , that has -- client's been some discussion. particularly under large multinationals, the chinese government is -- they are contributing to the chinese economy, they hire chinese employees, so there should be a clear -- be very mindful in investment.geting yvonne: it is interesting, a lot of these multinationals that operate in china work with chinese partners as well. is there a limit how much china can retaliate? does that give multinationals insulation? >> is this a reason that would make multinationals -- from the

terrace -- insulated from the tariffs? is one factor. we talk to the potential loss from the further retaliating measures very -- measures. barclays chief china economist joining us from beijing. let's look. where expecting a big picture here when it comes to asian markets, currently trading at 10th of 1%.

>> a muted start for asia-pacific markets. japan taking a break. investors awaiting a string of economic data out of china and a trade war,st saying it is always a lose-lose situation. beijing is not afraid of a fight. president trump heading for helsinki, saying the european union is a faux. i am rishaad salamat. this is "bloomberg markets." ♪