enjoys a boost from the banks as investors weigh the effects of tariffs on growth. jumping afterbet the bell on the back of better-than-expected revenue and improving ad business. after talks, two sides remain far apart. >> president trump turns up the again. trade once

he says the era of surrender is over. >> welcome to "bloomberg daybreak australia." >> good morning. i'm kathleen hays. we will be following the action on wall street. and of course we will look at stocks in just a minute ,haidi, kind of a narrow day for stocks. had quite aies have day -- news out of the doj that there may be a curve control and majorre thought of the large central bank doing anything that might remotely of course, you-- have u.s. bonds trading in tokyo. this carried into europe. we saw the 10-year yield posing a 2.95.

that yield is now at three point 09. 0.5.0 year yield rising 0.6 basisually up to points of the worst level. the two-year note yield also losing a bit of ground. the yield is up 2/10 of a percent. so, as it comes to the stock market, you get a different picture. stocks are not a big gain in the s&p 500. banks helped. microsoft helped. the dow jones industrial average did not quite managed to get again. the s&p 500, half those stocks were winners. half were losers through the nasdaq rallied ahead. notgoogle, of course, did disappoint. kathleen., it was meandering in the

equities market. the boj the speculation might be tweaking as policies. we have the 10-year aussie benchmark as well. ?here's what $2.5 trillion overseas. if some of that money goes home, there are going to be the big yields. we are looking modestly higher is how i would characterize it. sydney futures are looking a little bit rider, a quarter of 1% and the aussie dollar falling. we see that decline weighing again on the aussie, and of course, we have the strengthen the dollar debt -- the all or index as well overnight. kicking this off, i'll bet is

jumping as much as 6.1% after a strong second quarter. google is still raking in marketing cash helping the company move past its regulatory troubles. for more, let's get over to emily chang in san francisco. what is the biggest take away from this set of numbers? emily: big surprise from google, revenue growing 26% year-over-year, despite that $5 billion fund from the european commission, which google is appealing. despite regulatory concerns in europe, this is a business that is continuing to grow by leaps and downs. i did have a phone call with the cfo of alphabet, ruth porat, and she strongly attributed this growth to mobile. the valuable point is focusing on innovation. can it be enhanced across

platforms? what is interesting, we saw capex jump again. last quarter it jumped because google bought a huge property in chelsea, in new york city. this quarter we had the capex rise again. i asked if that was something that would continue and she said to me, basically, yes. growthe supporting across the business. and we are looking for additional compute capacity given the outlook for growth. i think what is expected with google and the businesses they believe is growing, continued investment. however, the moon shots, we have back they arell continuing to invest in things like waymo and self driving cars where they see potential, but we will not see them invest as much in things like google fiber, for

example, where they have pulled back significantly. emily: -- kathleen: i have to give google a big thumbs up on the pixel. i got my first one and i love it. the android software does surely that was discussed on the call? billion fine $5 the european commission levied on google for the way they say its dominance on android phones like the pixel. handset makers may, as a result of this ruling, start charging google to preinstall google apps like chrome or browser apps. google is appealing the ruling. they would not get into how it would impact the business going forward. however, they are going to accrue this over the quarter. google ceo sundar pichai talked

about where they stand right now. take a listen. we will always take constructive approach. we will appeal the decision and take the process available to us, but we look forward to finding a solution that above all preserves the enormous benefits of android users and so on. there is more work to be done, and i think it will become clearer as we go along. but i'm confident we can find a that android is available to use at scale for users everywhere. course, at the level of revenue we are talking about, the fine and self really would be significant -- really would be a drop in the bucket. what really would be significant, if the rules change the way that google does business. kathleen: what about the impact

of general data protection regulation on the company? emily: this is really interesting because we had potentiallyr to have a negative impact on google's bottom line. they have been working for several years to become gdpr compliant. in fact, it appears that it has helped their bottom line because it has become more difficult for smaller organizations to become pr compliant. in our phone call, ruth porac, did talk about that. -- ruth porat, did talk about that. we are interesting, seeing many of these regulations coming from europe, perhaps as an effort to spread the wealth a little bit, but in this particular case, it has concentrated the wealth in the hands of google.

emily chang, thank you so much. she is the host of "bloomberg technology" in san francisco. we will speak with chief analyst bob o'donnell in about half an hours time. todi: jump tweets managed rock the markets. su keenan is joining us to put it all in -- to put it all together with bank earnings. beent probably would have a down day with the market hugging the line throughout the session. let's go to the snapshot. we did see dollars gain. the 10-year was lower. financials.e s&p that was the strongest index in the markets today. the s&p 500, you can see, was up better than 1%. the nasdaq also showing a bit of strength. there was an etf tied to that that was up a good half of a

percent. let's go to the big movers. wells fargo, the bank, one of the strongest, along with hasbro, the two company. those shares apparently shrugging off the collapse of as egg rival, toys -- it's big rival, toys arrest. amazon at one point was down 2% as trump took on its founder jeff bezos, and "the washington post." trump raising antitrust concerns. that hurt amazon initially. papa john's, very interesting tug of war with the former founder. he has been ousted after making a racial remark, racist remark, what was perceived as such, and now trying to get back on the board. the board trying to keep them from buying more shares in the company. investors concerned. you look at tesla's rough ride. you can see how it has been

defined. it is down for the year by 2.5%. it was down by 6.5% earlier in the session. this is tesla's free cash flow. it is in the negative .ncreasingly it started asking suppliers to rebate, give back money retroactively. that raised cash flow concerns. it certainly is not helping the stock, and again, the only hastive for tesla is it been a heavily shorted stock going into this month and it looks like some of these smart money on wall street has been their short positions, in other words, reducing the bearish bets on tesla. that could also be a factor of the stock being fairly beaten down at this point.

we had a little bit of a jump in oil. how much of this was playing into president trump's sharply worded tweet on iran? tweete sharply worded again sunday night. it was a typical tweet from trump. capital letters. raise prices 1.5%, but it did not keep oil from closing lower, below 68. the big concerns on oil are supply issues, our demand issues and the trade war concerns. tough talk.retty he said to iran, be cautious. you do not threaten the u.s.. the arena leader had last out of trump, saying they were not happy -- understatement -- with attempts to block their exports. let's look at gold real quick.

hedge funds are now running from gold. the latest trading data shows the bearish bet has reached a record. we talked about the head of gold. it looks like that is being played out in the futures market. haidi: talk a little bit about result. after the bell does it trade into the faang trade generally? u: many could say that google could give the mojo back. this is the after hours trading. look at facebook, which reports later this week. it is up after hours. amazon is up your it as his, which had a difficult week last week. let's go into the bloomberg one more time. this is google versus the faang s. reallyetflix earnings did disappoint last week, investors have really been looking for alphabet to give

a push.up of stocks in purple here -- we have netflix and red, amazon, facebook, google, and apple have really lagged netflix and amazon. amazon the next stock expected to deliver a big push. , thank you so much. su keenan with a wrap up of wall street overnight. >> president says the u.s. no longer accepts of bad trade deals because "the era of economic surrender is over." house,g at the white uses the u.s. has been taking advantage of for too long. this is two days before a senior eu delegation arrives for trade talks. the president has led to with allies and opponents across the world.

theresa may says that top diplomats are preparing for a new deal on brexit. talks have stalled. heartland toe silver plan for keeping close ties with the single market. meanwhile, jeremy hunt said that britain will step back. >> there is no a very real risk .f a brexit no deal by accident and this is because, i think, eu areny people in the thinking they just have to wait long enough and written will blink and that's not going to happen. no wish toys it has boost exports by devaluation therehe u.n. beijing says will be ups and downs. of eithertrade at 2%

side of the daily fixed rate determined by the eeoc. to the people were killed and 13 others were wounded when a gunman fired into restaurants and a busy café. the dead include an 18-year-old a 28-year-old woman. the victims range in age from 10 to 59. they include eight women and girls and seven men. global news 20 hours a day and on -- global news 24 hours a day on twitter.c i'm jessica summers. this is bloomberg. jessica, thank you so much. still ahead -- put on the little guy. how the trump terex already hitting businesses hard at home. plus, market volatility means fragility. we get a closer look with mark

travis. this is bloomberg. ♪

haidi: we are counting down to the sydni open. looking at the futures picture ofwe see an upside at 3/10 1%, but asia and equities broadly looking like they have a stronger start to these session. of course, we have a live picture of the sydney rigid there. -- sydney bridge there. it's absolutely beautiful. hey, i am kathleen hays in new york. you are watching "bloomberg daybreak australia." guest says more volatility as the fed tightens means more opportunity. joining us, mark travis. mark, let's get right to it. i know you say the fed can create volatility, but what if the fed slows down the echo what of trade tensions and china's

causes the chief of the fed to throw up his hands? mark: i am more interested in volatility than which way the fed is moving. they stopped and the chinese currency comes unglued or something else happens, that is when we can find a discount between price and value. when we have had an experience like we saw in 2017, with volatility below 12, is very hard for people to be scared enough to throw something away that might have long-term merit. kathleen: i love your point that a crowded trade becomes everyone being on the same side of a canoe. eventually everything tips. you see that white line that shows the russell 2000 extending -- blue line.

if things are overextended, where do people go next? kathleen,, i think, fee,u look at the trailing you have a dividend of, i believe 1.8. the treasury markets become competition for that. two years at 260, 10 years at 290 -- people are going to reallocate, whether they are aside an insurance company or pension company, they will start fixedllocate toward income. as far as small caps, historically, the russell 2000 will be more volatile than the s&p 500. and there's a large part of the russell 2000 in the u.s. that does not make money today. i think about a third of it,

frankly. find businesses that generate copious free cash flow. kathleen: you are a fan of international small-cap. you say it has outperformed international large-cap, etc. a lot of people are worried about inversion. what is it about international small-cap that you like? we are agnostic. investor..s. based we will not look at markets and iran or north korea -- not yet anyway -- or venezuela or cuba. in the eurozone, there are high-quality companies that pay very attractive dividend rates -- two that are frankly bigger by. we would typically one that has been in the news a

lot is wpp. well-known founders. mentioned earlier in the show alphabet/google. they are a big buyer of ads produced by wpp. customer.he biggest that is a cheap way to play google. they are paid north of a 5% dividend. and you know, we think that will work out longer-term. it certainly has in the short run. another would be world mail group. a little bit smaller than wpp. it is the privatized postal service of the u.k. the ceo recently stepped down.

you're getting more parcel delivery just like in the states with amazon. again, you are paid a dividend 4.5%somewhere in the range. those are the two british examples. there are others. haidi: mark, i want your views on the discrepancy between the risk and we have the vix settling lower. that the latter is not particularly accurate when predicting risk, but when you look at that divergence, what is the difference? mark: it is underpriced. sarcastically earlier in

the year, when we had the dustup etf's u.s. with the blowing up, people, in my opinion, were selling what they should have been buying in volatility and to add insult to injury, they levered up there positions. you had etf's disappear overnight. it's a fairly cheap way to ensure yourself by buying some volatility and whatever the prices today -- i'm guessing it's around 12? i have not looked today. mark, you said international small caps as a class have gotten a bad rep generally. i know australia is on your list of picks. mark: there are some probably to show inut on a tv australia. i will pass on them. there are a few, for example, in

france, again that are businesses that we like. dennis is a drug therapy. that is one. there's a veterinary company. we think they will trade eventually higher than they are today. mark, we appreciate your time for us. from intrepid capital joining us. we will get a look at your latest business headlines. a stop of work having lost a potential senior colleague. of -- heture of afraid

will try to study the ship following the sudden loss of the executive. kathleen: and cars have been valued below a potential listing. sources say the carmaker is worth between $12 billion and $18 billion. we are told that there is a figure as high as $30 billion. they were leading to sell shares in stockholm and hong kong. haidi: analysts raising new questions about the future of tesla as they ask suppliers to give back cash. tesla insists the model three will go into the black, but some see this as a sign that something has gone wrong. numbers mayquarter yet be disappointing. ating up next on3," a look -- coming up next on "bloomberg daybreak australia," why

prevailing trade tensions may affect the little guy. this is bloomberg. ♪

init is half past 8:00 here up thered futures are with asian equities looking modestly higher after what was a modest start in wall street. >> there is some nice earnings report. i am here in new york and you

are watching daybreak. let's get to the news with jessica summers. >> mexico is said to be stepping a naftats to clinch agreement by the end of august. trump says that he is having fantastic conversations with the mexican president and the mexican president says he is not aware of any deal, but is open to talking about one. called for legislation to cool inflation and spread wealth and power the on to the capital -- beyond the capital and called for tax reform and constitutional changes to establish federalism, continue his to

violent crackdown on drugs. >> we will not the sidelined and andill be relentless chilling, if you will, as when it began. a a compromise in chile as company prepares the final offer and the labor union races for the fight. the position of the company and the union remain far apart after weeks of talks. the first offer was rejected and included no real pay rise. friends and fans of guardians of xy are urging a reinstatement, saying that he was targeted by conservatives.

there were tweets that resurfaced about the holocaust and jokes against women. day,l news, 24 hours a powered by journalists and analysts in 120 countries. this is bloomberg. much for that. we have a little bit of weakness and this is trading flat, at the moment. we are seeing the sydney futures are up after the session withrday and it fell volatility and concerns over ghing on the broadly-stronger u.s. dollar. garth, we always think about

currencies following rate moves. facets to this story and it is and what we expect. had the reaction to the commentary and the reports and what reacted strongly was ieldsand the bond yeild that followed and it was a good guide to where the bond and part ofll go the reason is because the rn andcy is a key conce we're showing you the blue line has the hedged yield and it

been coming down and gets is low as .4, the yield might rise further than 10 basis we get treasury holdings in japanese investors are coming down further and that is part of why, overnight, we saw the german yield rise and the treasury yields really spike. there were other reasons, the japanese gave real motivation to get that going. >> i agree with you. and thee the yield exchange rates and they do different things at different times. let's move on to the mexican peso. trump says he is talking about trade and nafta. >> yeah.

trump's twitter feed is having a very large say on markets and you look at the emerging markets universe and friday, everything said thecause trump dollar should go down and up the currency came. markets fell. the exception was mexico and it donald trump and he said there would be nafta progr ess and that mexico was making progress. went. peso you don't expect any follow on that. au see the australian dollar,

good proxy for the emerging-market currencies and the advantage it has is that it youes 24 hours a day and can see that the australian dollar and the mexican peso moved together and they broke when the aussie had news and you had the aussie dollar coming surged on theeso comments. it could go higher with substantive news and this is likely to follow what the australian dollar is doing/ -- doing. host: thank you for joining us.

check for some of the charts you just saw their. trump is thinking about revoking the security clearance of , jamesennan, james comey clapper. het is his complaint and can do this? >> nothing specific was cited, just that there had been politicized national security clearances and there was no allegation they had leaked information or disclosed it, but they have been critical of donald trump and john brennan has been biting in his criticism. the president wants latitude in granting clearances and there

isn't supposed to be, in the clearance process, the way for fortical views -- leeway political views and it shouldn't matter, if you are up for the job. several people named by the president have said they don't get briefings right now and that they have just simply been speaking out and the clearance or lack of it does not change their feelings about the president. >> why do they have clearances? >> it isn't clear that they do. james clapper says that it is urtesyf a of co and people who have been involved in discussions with foreign policy have been brought

in discuss what they know and views on things with the current administration. mccabe,esman for andrew the former deputy director of said that is clearance was suspended and so was james comey's. so, it isn't clear how many of them actually have its and how useful it is. -- have it and how useful it is. hitsll, the tensions may the little guy. we spoke to a small business hisr who said that 70%'s of products will be affected by the trump tariffs. we are talking about the macro picture and we are looking at

this hitting tariffs the hardest. >> there is no secret that american manufacturing depends on china and there has been prospering, despite competition from apple because there is a supply chain and products and the ability for them to quickly iterate on the prototypes. it is hard for small startups who do not have the ability to offset costs and this can be for theirmental business. i spoke to a california-based company that said they would be theyted by the tariffs and could get priced out of the markets. to saidstartup i spoke

that everything they make is manufactured in america other than the automatic thermometer. they have had a stockpile on inventory and they are hoping to see what competitors do before they increased prices and slow sales. >> what can they do to minimize impact? stockpiling given to worry and do not want to deal with the price increase and they are looking at what other competitors do. prices, theyes will raise prices, but the category will slow. costple decides to eat the and a tiny company cannot, they will be out of the market and toy have to devote resources stockpiling resources and fast

tracking plans they are not ready for when they should be spending on other immediate resources. >> those who support the trump tariffs say that pain will be if theyit, but i wonder expected small business to be said to big part of that. >> up next, out of it, facebook, amazon, twitter, all are reporting this week and we will dig in.

in new kathleen hays york. "we have the strong earnings report out of off the alphabet.of is this sustainable? analyst hereech

now. does this give us an indication on the strength of the report that the investor pessimism on the company was overdone? doesthink it kind of because the mobile advertising has been growing and there is plenty of growth, despite the smartphone market slowing. the use continues to increase and the usage of advertising is growing and this clearly says to me that we are seeing google taking advantage of the mobile growth and there is plenty of room for them to grow the mobile advertising. >> it isn't surprising that you are continuing to see revenue growth strong. what about the spending and the for the investors looking for payments? >> they have a lot of that and

they have the capital expenditures that are high, but they are making bets in important areas, cloud, ai science, and th they have placed big and important bets. we know this will not generate revenue for a long time in the is a + for google to make these investments because we know the things they are making will be expensive, the resources that are necessary and that leveraging across advertising and additional services and across the cloud computing infrastructure. this is an expensive long-term bet and i think there is a long-term opportunity.

>> they just shrugged off the line and the global protection regulation. revenue anything with and the dominance of google that something could trip it up? >> you have to think about what happens to amazon or other companies that are trying to grow the business and if they and wee into the high will obviously have facebook said this week and they that it is too early to tell and that there would be more impact and there wasn't. it suggests that there isn't much of an impact on them and it is good for google, alphabets, facebook, and other advertising companies. >> i want to bring up the bloomberg library and that shows

netflix along the top and the next one is a red one and it is amazon and it runs off of that facebook,int is that laggingapple, they are google and amazon. how about amazon and don't from talking about the washington for getting investigated antitrust. was that a one-day wonder what mark >> it was. -- wonder? >> it was. positionedery well and they are just going to get into the advertising business. there is a lot of opportunity for growth there and they came off of the strong amazon prime day this quarter and that shows

you the momentum and the interest in the products and the echo speaker and their services will do well and we saw growth from microsoft and strong numbers from google in the cloud and we will see that with amazon and we have a number of sign that suggests that amazon looks very strong and they have international growth a look at. >> i want to talk about the s by facebook and google and this is an extraordinary charge. in terms of the impact, does of the ade to all targeting and the negative headlines with data and privacy and still has a good report?

think that it will, despite all the issues you just raised because the impact is minimal am a but it could be that it is too early to say for sure and we will not know until the next quarter. from what we saw from alphabet today, my guess is that the facebook impact of the gdpr is is minimalthe gdpr and they will have a robust quarter. >> elon musk, tesla, they are asking partners and suppliers to ise back money and this uncommon in the industry. tesla has had a tough week. it has been tough again. what is musk doing? what are the prospects for them? don't know how common it

is and it doesn't position them in a point of strength. despite all the concerns and everything that musk has tweeted, he is teflon and the company seems to be covered in teflon and it will be interesting to see what happens. my guess is that it will be reasonably strong model 3 sales, the key metric people look at. what we are starting to see is other carmakers getting stronger's in electric with the porsche challenging them on the high end and the notion of them doing the $35,000 model has gone out the window and that is where the mainstream car market is. there will be a challenge out there, long-term. i don't understand the valuation

and i am a lot of -- one of the many who does not. it is hard to say when the reaction hits. never gives up and it is hard to give up on tesla. thank you so much for joining us. you can get around up of the stories on bloomberg daybreak. this is also available on mobile and you can customize your settings so that you only get news on the industries and the assets that you care about. this is bloomberg.

host: a check on the latest business headlines. the latest iphones are coming up short against rivals. they are trailing the latest devices from samsung and google. lags.says that the iphone

users,e created by the not a lab. pay of is raising the workers around the world, % across salaries of 10$ the globe and they are changing how they determine bonus payouts, based on company-wide success and not the performance of individuals or teams. bankeaking in india, the withdrew, but we are told that they are rebuilding through digital channels. they reopened in april after walking away two years ago. >> that is it for daybreak

australia. and kathleen will be around. talking about the japanese bond market and the enminbi and the trade war spat is evolving into this sppace. who saysobert hormats that, if there are no conversations going on right now, this gets increasingly dangerous and he does not think that china has the desire to devalue the currency right now and they are trying to stem market forces right now. for the trade war is, if you are a chinese brand that wants to sell a product in the united states or a company that wants to get into china. rior does just this by

helping customers figure it out and we will look at specific axamples with huawei and jc motor trying to move into the global market. but you have to wonder if there is paralysis i some of the companies. that is to come over the next couple of hours on daybreak asia and this is it on daybreak australia.

frome: we are live bloomberg's asian headquarters. i am yvonne man. welcome to "daybreak asia." asia-pacific markets to open higher after financials gave wall street a lift. a lot of attention turning to the bond market. google's parent may give tech a boost. improving at business. -- ad business. kathleen: i am kathleen hays in new york. pushed the u.s. has been around for too long. china rejects the president's