>> we are live in bloomberg's asian equities. -- headquarters. separateific stock incident after more strong earnings lifted u.s. equities. the dollar slipping, the focus will be back on china as the shanghai composite racks up its biggest three-day game in more than two years. global bloomberg's headquarters, it is just past 7:00. markets worrying about a trade war. they are seeking to dodge president trump's threats. the tariff battles are starting

to affect the global economy. there is growing anxiety. ♪ ramy: a very good morning to you. at what was driving u.s. markets today, it was the tech and they with parent company of google blowing things out of the water. what islso looking at happening with chinese fiscal to pushending support the u.s. markets up. yvonne: we have not seen the chinese market like this for some time. ahead to more earnings coming through in the u.s..

the nasdaq rally stayed out of it as well. ramy: it was up as much it as 1.1%. let's bring up our boards. we can show how that ended there. the dow and s&p 500 still managed to say higher. the s&p 500 above the 2800 level. still let its highest since february 1. the leaders, telecoms and energies. let's flip up the boards here. i want to show you the currency story as well. the bloomberg dollar spot was down a 10th of a percent. the euro was flat in u.s. trading. that is not move. the british pound had been moving higher. because of theresa may taking over brexit talks, giving some leadership there.

one interesting thing in emerging markets was the turkish lira, look at the actual number. hit record weakness of the past few hours or so. 4.93 or so is what we had after the central bank did a surprise stay in terms of the interest rate. unchanged when the expectation was for a rise. this calls into question the independence of the central bank. yvonne: is going to be a big story. we are feeling more of this optimism in the markets. let's take a look at the index, still flat right now, we are seeing green when it comes to equity futures in australia. same goes for cost be as well. we are looking at chinese stimulus measures getting some juice into the markets again. in equities and

currency spaces. we will talk more about bonds later. we saw dollar-yen, more consolidation here. we are snapping out of five days of gains for yen. aussie, $.74. they are saying it is time to short the aussie against the dollar given that these trade fears, the worst might yet be to come. trade balance numbers swinging back to the deficit for the month of june. offshore again at 681. marketernment bond taking a bit of a breather today. basis yields down by one point. the japanese 10 year bond at nine basis points. that remains unchanged. gain ofbeen seeing a it, we didn't but the percentage there. we have seen the stimulus

measures in china few leading -- fueling. up with theu caught first word news. jessica joining us from new york. jessica: you can't prime minister theresa may is taking control of brexit talks, sideline in her new chief negotiator. as investors interpreted the move towards a shift towards a soft divorce from the eu. leaders are planning for the ok to crash of the single market next march. the fallout from last week's talks with president putin's into a second week. mitch mcconnell is warning moscow that more sanctions could be on the way. he said russia has been meddling in american elections and must not do it again. this is in stark contrast to the president who stood next to the russian leader and cast doubt on u.s. intelligence.

facebook is setting up an operation in china. .hat is despite its absence on july 18 with register capitals $3 million. the registration notice appeared to be removed from the later thatwebsite day. hundreds of people are dead or missing after a dam collapsed. between loud and thailand as well as several south korean companies. it was still under construction. much of lower has been hit by seasonal heavy storms in the area had seen three times its normal rainfall. a day onws 24 hours air and at tictoc on twitter. i'm jessica summers. this is bloomberg.

ramy: let's take a closer look on wall street. trading began with a strong pop for the holes. that is thanks to strong earnings. we saw a record on one of the tech indexes. what actually happened? we got some good numbers at the top and at the bottom. >> big papi from google as expected. we saw the tech heavy index hit a record. that is when you saw the market pullback. let's go to the snapshot. bonds went on a bit of a ride. the russell 2000 measure has been your record, also lower. earnings are the driver. earnings benefiting

from the crusade to help farmers. and jetblueits goal spooking the entire airline industry with the forecast for rising expenses. let's look at how google or health -- health or didn't help. i am mixed. there was a thought that their outperformance with the momentum back in the trade. it is the limits picture. let's find our library of charts. the purple is the semi's. there is a big capital management company running to a quarterly shareholders. he thinks it is time to pull back. ramy: interesting. turning to commodities, oil rebounded.

what is the story? >> a weaker dollar helped gold. the big inventory data is coming out. you see a bit of about backs -- a bounce back. that is now an expectation we are going to see a decline in supplies. that is not unusual. this is the height of the summer driving season. let's look at gold. we have blackrock saying, it looks cheap. saying forbes magazine bitcoin could replace gold if there's a trade war. bitcoin supporters getting excited. we're back above 8000. stay tuned, there could be an etf. tumbling on shares that revenue missed. there are questions about its merger with time warner. the first report

since the merger. they were down more than 2%. the story is that they are integrating the merger well. time warner will be called warner media. they took a disappointing number on their domestic wireless subscribers a pair the losses in their pay-tv and that is what the merger is all about. we will see how it plays out on wednesday. yvonne: joining us from new york. trump administration is throwing a lifeline to farmers caught in the crosshairs of the trade war. a $12 billion package. he spoke in kansas city and asked primary producers to be patient. >> they're all coming. they don't want to have those tariffs put on them. they're all coming to see us. the farmers will be the biggest beneficiary. watch. we are opening up markets. you watch what is going to happen. just be a little patient. yvonne: let's go to our congress

editor. we were talking about how this was more of a self-inflicted problem. is this likely to offer some aid for some of these farmers will be potentially hit by tariffs? >> it is certainly going to help come the fall harvest season. for these farmers were looking at stockpiles growing in their silos and commodity prices for things like soybeans and talks dropping. -- hogs dropping. it landed with a thud in washington. a lot of republican senators view this as an expensive been and-aid for a self-inflicted wound. the senator from wisconsin said farmers want to trade, not a.

-- aid. they are concerned about the long-term, whether u.s. farmers will be losing market share to alternate suppliers. china is searching around for its agricultural products. yvonne: we also saw the president tweeting that harris of the greatest. it sounds like he is struggling -- doubling down right now. is there any hope for deal when you meet with the european commission president? >> it would seem that it is rather out of reach at this point. we told there are a couple of proposals. , thel about auto producers other would be industrial trade agreements between the eu and the u.s.. the president has indicated multiple times that he does not like multilateral deals.

he prefers the u.s. to deal one-on-one with individual countries, getting the best deal possible. that goes against the trend in trade talks. and whether or not would be agreeable toward something with the european union as opposed to something with germany or written. it remains to be seen. there are quite a bit of ways to go. not the only are one being hit by the tariffs. how are they rippling threat the rest of the economy? >> there are trade hearings going on in the u.s.. companies are going to testify against the tariffs. that companies are reporting the effects of these harley davidson -- these. companies like whirlpool are costsng -- citing higher

and costs for consumers as things go along through the supply chain. those are going to be passed along. impact is not yet deep in the u.s. economy but it is beginning to be felt. thank you very much. coming up, rough seas ahead for global bond markets. we will look at where the smart money is at. jim lowell tells us why his focus is on the fundamentals. this is bloomberg. ♪

yvonne: this is "daybreak: asia ." stocks closed higher,

led by technology and health companies.es -- let's bring an advisor investments chief investment officer. he joins us from massachusetts. good to have you on the show. on one side, we have earnings. that is trumping the tensions we have been talking about for the past few months. what is your reason on where we are going -- read on where we are going? looking beyond earnings, we are going to enter a volatility. the midterm election is going to be vitriolic it best. for investors, it is going to be a time where gets more nerve-racking. whetherknow more about the trade war actually manifests

itself in terms of what kind of scale it can manifest itself. between now and then, we continue to have optimism. whether we are looking into second-quarter earnings, we see reasonable levels of past growth cautious optimism for the outlook ahead. is policy and agenda as opposed to fundamentals. ramy: in terms of best and worst to sectors to go into in orders for investors to figure out how to get through these next months, when you advising? -- what are you advising? >> we like the short end of the bond market, especially for buffers in equity portfolios. we think that the health care remainis likely to

tosonably well equipped defend against markets wounds. we are have missed and of the overall market is 10 years long in this recovery. it has been very good for investors. the flattening of the yield curve suggests that the bond market is signaling that it thinks for this agreeable future -- the foreseeable future, slower growth is coming. yvonne: you mentioned some of the sectors. what about tech? we saw a rally on the nasdaq what did you make of that? we take much from the? 9 -- from that? seeing fairly lofty

valuations near peak levels in the market. investors are likely going to need to be cautious about technology writ large. that is stillet priced to perfection, despite investors being nervous. the fundamentals continue to reward them. has only oneally way it can go from a peak. that is either a little bit tune of amaybe to the 10% correction based on nothing more than a rumor driven selloff. we have been talking about how we have seen the u.s. outperform the likes of em, global equities as well. we see a change here.

i have a chart. the daily changes we have seen there. given the divergence between the u.s. and the rest of the world, is it sustainable? >> probably not. sold offing-market heavily relative to our on markets on all of the worst-case assumptions about a trade were being inevitable. our way are negotiating through to baseline definitions of what a trade war maybe. oversold in markets the near term but they remain vulnerable. if we see some sort of correction in the u.s., it will reflect as that pattern suggests. willnternational markets likely selloff even more on the assumption that the u.s. core driver of global growth is beginning to slow. yvonne: we have seen this kind

of synchronized pick up in yields thanks to some of the speculation around the boj. you think stocks are still rallying when yields are ticking higher? where do we hit a point where we have higher rates and a stronger dollar weighs on stocks? >> i think it is closer than it has been for many years. the reason the markets continue to rally is that when you look at the economic data, the strength of the u.s. consumer youfull employment wages, look at the manufacturing, the service sector. it suggests that slow growth remains the road we are on. be on theng we can road with the trade war looming over us, i can't say. it is a cloud on the horizon and it is coming closer. piggypicking backoff --

backing on that question, looking at the blue line here, we can see that it is correlated against what is happening with the yield curve and white. it doesn't herald well for equities in the united states. what are your fears in terms of overshoot? is going to remain very cautious, especially given the political overlay in the u.s. and the midterm elections. got --ll be as i accommodating as it can. knee-jerk reaction to what was a rumor about what the bank of japan was going to do with its interest rates swept through the market. we will see days and weeks like that.

ramy: we will have to leave it there. jim lal in massachusetts. users can use the chart that you see they're using g tv . for theecent charts analysis. this is bloomberg. ♪

ramy: this is ruth: --. this is "daybreak: asia." chinese regulators have been taking part over the past few days. the deadline for the deal expires at midnight wednesday. full cons interest was announced in 2016. other governments have artie

given the go-ahead. ramy: u.s. traded chairs jumped .% after international is considering an offer for parts of the belgian company. that will be there oldest -- boldest move yet. there talking to advisers about teaming up with partners or increasing its current state. a 50% jump in first-half profits as its operations benefited from higher crude prices. that would mean that earnings of over $6 billion. says its midstream and downstream segments maintains a good level of efficiency. ramy: up next, it is getting real. the trade war is finally showing up in numbers across the world. we will take a look at the fallout so far.

this is bloomberg. ♪

yvonne: sunny hong kong here. getting sun for a break from the rain. we are 30 minutes away from asia's first major market open. these rallies continue to build up thanks to the stimulus plan in china. ; 30 p.m. here where markets closed up nearly half of a percent. not as clear or as beautiful as where you are. did see a pop. the s&p 500 closing at 2820. its highest since february 1.

i am remy in new york. yvonne: i'm in hong kong. you are watching "daybreak: asia ." let's get to the first word news now. jessica: tariffs returned to the headlines. president trump needs a delegation from the european union. he tweeted that tariffs are the greatest. that is a warning to trade partners if they do not agree to what he thinks are fair deals. they sounds nice but they are rough. they are coming in to see me tomorrow. they are all coming to the white house. i said, you have to change. they did want to. we're going to terrorists are cars. jessica: u.s. airlines are set to be complying with beijing demands about taiwan and will revise their websites. foreign airlines were told they must refer to china taiwan.

maps should display the islands and hong kong in the same colors. will update their website over the next few days. pakistan votes wednesday in an election seen as crucial to u.s.-china ties. there is a slight favorite yet none of the main parties are expected to win a clear majority. that paves the way for a fraction coalition talk. whatever happens, the next leader much work with the military on control of nuclear weapons and national security. 74 people are now known to be have killed by wildfires in greece. flames have struck to coastal resorts and injured 187 people. 11 people in critical condition. thousands of people were forced to escape the fast-moving flames

, many taking refuge in the sea. greece has declared three days of national mourning. news 24 hours a day, powered by more than 2700 journalists in more than 120 countries. i'm jessica summers. this is bloomberg. ramy: we are counting down to some of the major market opens right now. here is -- asian stocks are .racked -- tracking asian games what is the set up so far. >> we have asian markets set to embrace risk. caused theese stocks biggest three-day gain in over two years. that is the line in white on this chart. the rally looks set to continue with acp futures edging higher. checking on the futures board,

you have contracts pointing higher. aussie futures climbing ahead of inflation data. shares in new zealand marginally higher as the country posted a trade deficit in june. the earnings season rolls on for korea. motor posted in the first quarter. the cfo likely not agree with trump that tariffs on the greatest, saying they may raise u.s. car prices. fanuc advance. in may.res hit a low they have investing in new strategic businesses. theng a crypto play with opening of the big exchange in singapore this month. yvonne: bitcoin having a revival

this month. what is the latest? rallied 40%,s bringing the price back above $8,000. talks of a crypto etf. naysayers do not expect approval given the reasons for rejecting other etf applications. they cited volatility and valuation as concerns. back to become its own worst enemy. yvonne: thank you. beijing hint and at resumption of trade talks, chinese officials are concerned about getting burned again by the trump administration. our correspondent has been following the developments. >> that is the weight is being

perceived. it was hailed as a victory as they pledged to buy much more american product. trumpater, donald announced that he would slap tariffs on chinese imports of up to $50 billion. that was just the first salvo. we have subsequent threats as well. adage, onced bitten, twice shy. chinese officials are afraid of getting played again. ?here is a trust deficit going , are they going to get back deficit going, are they going to get back into talks? they don't have a trump administration say, actually, we

are going to go ahead. ramy: are we getting any clues that china could of done more to avoid such a confrontation? we are getting clues from the propaganda organs in china. toy are being instructed tone down the rhetoric on the trade front. some of the tensions with united this comes as we're hearing from academics and economists that there is a rumbling within the leadership about the president's handling of the united states as his united states,-- has his foreign-policy been overarching? we may seeat compromise from the chinese is in intellectual property. european officials said that toneadopted an unusual

in the discussions that included softer tones on intellectual property rights. said to us that it could be attributed to the trump effect. organs we are hearing are being told to tone rhetoric, tothis not antagonize the trump administration. they are saying to tone it down when it comes to language. >> still, steady as she goes on china 2025. trump's tradeent battles with china and the eu are starting to show up in the global economy. the latest signs of follow-up -- growing anxiety and international companies. we will discuss this.

tell us what the numbers are telling us at this moment. we are hearing it from some of the ceos. >> it is happening on both tracks. in the numbers and in the corporate side of things. some signs of softness, japan's manufacturing activity in the lowest since 2016. that the hints activity is starting to respond to the trade tensions. we have companies such as harley davidson, phillips, others it will impact profits and prices. there is a sense that we are signs of howee these trade tensions will drag on activity around the world. yvonne: you mentioned the fears

that corporate might have. the pricing power, have you gauge that right now? >> that is going to be one of the critical issues in all of this. not just in terms of the impact on the companies, but how much they're willing to absorb and pass on to customers. will they have to relocate supply and manufacturing bases? how will they skirt these trade tariffs? there is a world of complications. painthey absorb of the early on or will they have to respond by shifting production, even cutting staff? these are critical questions as we go forward. ramy: what could be the next development in the trade war tensions here? >> the most obvious one is the eu delegation visiting the white house today. we will see if any progress comes out of those talks.

the overall sense among the market lockers is that they are not expecting a major breakthrough. you have the u.s. domestic beitical cycle, expected to an ongoing complication in terms of when any breakthrough could be reached with china. hopes for ame resumption of talks between china and the u.s. but i'm not sure if anyone is breaking -- banking on a breakthrough. the market is where we are right now. anyone isink expecting much of a breakthrough in the near term. those political elections are going to be all-important. yvonne: thank you. just some earnings coming through from lg display. the company actually reporting an operating loss wider than estimates.

a loss of 213.2 billion. range -- it is in the middle there. we will see the lcd prices, continuing to remain under lower profit margins and these new supplies and vendors as well. we will see how the stock trades. they are missing on their earnings. coming up next, a rough road bond for global model -- markets. we will look where the smart money is headed. bloomberg.d --

yvonne: this is "daybreak: asia. " clouds are building over global bond markets. from turkey's unexpected decision not to raise its key rate. our global economics editor is here. let's start with turkey. the president apparently influencing central-bank policy now. he was pounding the table before he gets swept into a mighty reelection about the central banks being too aggressive on rate hikes. the markets were geared up for a hike of another 100 basis points. the central bank held steady. international say this confirms fears about the loss of independence of the central bank. shows you what they

have done and what inflation has done. inflation up to 15.4%. it was down around 10%. that is why they had that big rate hike. another one. but with inflation so high, more was expected. this is the first decision for the central bank since she won that reelection, gave himself new powers. made his son-in-law economy the are -- czar. this is something that has concerned investors because they are afraid he will let inflation go higher and higher. we are concerned that this means more capital flight and even weaker lira and inflation rising higher. this is what is hanging over

turkey's bond markets. that lira at a record low right now. u.s. treasury market rallied on the back of a decent 2-year note auction. when you make out of this outlook for bonds right now? the federal reserve not going to raise interest rates at the meeting next week because they will wait for the next time there is a press conference. we put that on the table. jay powell has his this testimony, he sees more rate hikes are appropriate for now. people are cautious on bonds right now. let's listen to what she told bloomberg television earlier today. >> there has artie been a rise in interest rates at the intermediate and long end.

yieldattening of the curve has not been good for fixed income portfolio investors unless they have been very careful and cautious, trading around him looking for opportunities in credit. i think it will be increasingly difficult for fixed income investors to do well. >> bank of japan meeting next week. speculation they will tweet their policy. another thing pushing up global bond yields. the two-year treasury note auction went well. after the longest in two-year note yields in three decades, people are seeing value there. a measure of demand rose at that auction today. yvonne: thank you. joining us now is ubs asset management. he joins us here in hong kong. speculation of the boj

tweaking policy. you see the yield rising from seven basis points. that? -- significant is >> it is a real surprise. the economic numbers in the backdrop have been quite week. you have trade tensions looming in the background as well. why would you start thinking about tweaking your yield curve here? the market is trying to interpret what they are doing, they're not going to make a change. they were signaling that they are thinking about what they are doing next year. they need economic data to get better. once it is better, they will think about the yield curve. yvonne: one you think we saw this synchronized pickup and yields globally? is it japan? if that money ends up going home, is this about a change in regime that everyone is betting on? >> we really had a big issue around em.

you are touching on that with turkey. that is symbolic of what was happening and a lot of other places like argentina. china was just about to go off of a cliff last week in terms of the bond market. in effectively shut down. the pboc saved it. when you put that whole picture together, the market started to stabilize. that is why we saw a rise in yields again. still hiking rates and economic numbers and the west a look strong, so yields are trying to rise. if you want to talk about that 360 at was just talking about, need to get through this in the 10 years. get confirmation we are breaking out of that range and are in a new trend. otherwise we are trending sideways. ramy: interesting. of what is on was yvonne wast now, --

saying right now, hop into the bloomberg terminal. this, i'm about curious about what your thoughts are in terms of how short-lived where long-lived this could be. -- or long-lived this could be. >> what we are seeing is that the fed is putting the blinkers on like it normally does. it is being attention to the domestic economy. biggest risk is what the fed can do to the rest of the world, whether that can come back and bite them. bm was giving that signal until next week. i think that was quite important, that the pboc came out and put a net under the economy, under the stock and bond market. that is what the market was getting hyped up about. onto theing back

yields, we are still in the trading range. we have not seen a big breakout. a couple of closers there. we are into a new trend. that is higher yields. ramy: let's switch to china. you say that the smart money is moving into china fixed income. tell us about this. china had aa -- >> yieldless the at present are of the problem. they were not able to get funding am sure. that is what the pboc targeted. is people big plays switching back into chinese high-yield. it will be under a lot of pressure. the last high-yield spreads have not moved that much. chinese high-yield spreads are at 200 basis points higher than what you are getting in the u.s. market today. we are seeing switching going on. see a lotomplex, we of switching going back into the chinese high-yield market.

that is the key opportunity right now. how far down the risk spectrum can you go down now? this does not feel like the aggressive stimulus we see from china. it seems like we will be -- seymour's -- see more failures. the financing the pboc gave was only for 12 months. bonds to those property where fundamentals are very strong. the chinese housing market is really strong. maybe the best i have seen it in the past 10 years. --panies are making mark money. all of that is positive for creditors in a chinese high-yield market. we are adding the securities and for portfolio. yvonne: when you make of this ball of money in china? risk appetite is going to the spot market. could this impact the sovereign bond market? , they of the days we saw

were piling into money market funds. we saw a huge spike coming in. the market is starting to stabilize now. the behavior of the investors on short is to take time. they're going to need to wait until september if we are going to start to see a substantial move here. this was not a blanket easing. this was very targeted to one specific sector. the message is deleveraging. they have not moved off of that yet. comes to easing, is this supportive are negative? >> -- or negative? >> is going to stabilize. this has come back down into this 93 level. recently, we have been up at the highs around 97. coming back in there, that is

where we spent all of the time in 2016 and 2017. it is starting to ease again. the tension has gone off there. where does ago relative to the u.s. dollar gekko -- dollar? it is the third time we got there and been rejected. that the u.s. dollar is still consolidating. will be stable here. yvonne: thank you. asian-pacific head of fixed income. this is bloomberg. ♪

yvonne: we are counting down to the market open in japan. looking pretty positive here at the get-go. take a look at the risk assets here. set to maintain the aid -- gains thanks to china's a. -- eight.

korea is the one to watch. display with an operating loss bigger than expected for the second quarter. this is bloomberg. ♪

>> it is not just the central bank. the central bank was running out of tools. it was already pumping more to lendy and asking more. it could not do much more. the statement that we had on monday night from this goal authorities said they are ready

to spend more and increase infrastructure spending. all that will boost the economy and improve domestic demand, which has been the key risk for traders. that is what we are focusing on. of ae seeing a little more sustained rally this week. >> what are analysts saying about the prospects for stimulus and reasons for caution? -- we doe not really not have the stimulus yet. things could still go wrong. china did the same thing in 20, which is when it kicked off a rally, when everybody was worried about china slowing the economy. you still have deleveraging in the background. while it seems that authorities deleveraging as a priority, they are focusing more on domestic demand.

people are still concerned about the levels of debt in the system. have the tradeso cloud that isuge still not going away. it might get worse in the coming months. least this week, one of the two factors, the domestic homegrown factor has been dedicated. >> thank you. joining us now from singapore is our next guest, head of asian macro strategy. tell us about what you make of iss stimulus program that from the fiscal authorities in china. how big of a game changer is this? a lot of what the chinese authorities have been doing in the recent few days, they have done a lot.

it goes beyond that as well, to support credit, promote long callh and finally, i would it a mini fiscal stimulus measure. it is not a huge amount. it is apparent that the chinese authorities are playing close -- paying close attention to growth. partially coming from the ongoing trade tensions. to use they would buy this terminology or not, i would say that china is finally easing. that is supporting the over risk sentiment. i do not think the risk would be boosted because we still have all of the negotiation etc. that would be affecting and boosting market volatility from time to time. call this a shift in policy? we talked about how these are very targeted measures. thatis the first signal

perhaps this deleveraging drive is over? >> i think it signals that they tried to go on a more gradual path of deleveraging. quite obviously, they still have direction to go to deleverage the economy. to straighten out the shadow banking. the formal banking sector needs demand.ve the authorities need to prepare the bank for that. we can argue that it is actually part of the due leveraging campaign to provide banks with the necessary liquidity for them to have stimulus funding. the only external pressure, but domestically, the credit environment has been very tight. by trying to promote the demand from this credit product, hopefully that would ease the pressure. anduspect that the measures

incentives are not really that effective. even if they are willing to provide banks with liquidity, banks are well aware of the credit risk. they must be reluctant to buy into those bonds. the market is wondering if the authorities would get even more aggressive in trying to revive the credit market. >> that is interesting. the formal credit expansion idea is now being floated. especially to compensate what is happening in terms of the crackdown for the shadow banking arena. what are your thoughts on this? >> looking at the shadow banking, it would actually be quite interesting to see the deleveraging has been quite effective. over look at the june data financing, it was soft primarily due to the trust loans.

bankingnd of shadow items. however, at the same time, it would be very slow to try to make informal banking sector to take up all the slack. there is a lot of consideration, including credit and the few cases of making banks a little lighter on that. i guess, china might have to do even more. linked back to the downside risk from the trade side because we all know that china does not know -- does not import that much from the u.s., so china is difficult to try to match the tariffs by quantity. it is prudent of them. at the same time, if negotiation on the trade front is going on. there forill leave it now. you are coming back after the break. but next, we will turn the

discussion to trade as companies around the world start to feel the effect of president trump's tariffs. yvonne: pakistan's election and how it could shape relations with the u.s. and china. this is bloomberg area -- bloomberg. ♪

asia.l this is daybreak: macro head ofa strategy, we are talking about china in particular. the opportunities we are saying right now when it comes to the chinese markets in his first rally that we have seen, where are you looking for to value now? we have seen some sectors like industrial bank be dealt quite hard, surely give a fresh look to the? now?at

>> i think the sentiment has been boosted by the management but as we mentioned, the earlier that the two leveraging will continue, markets may still stay . we still believe that although china's government bond yields the rules nowng, allow some buying of the credit assets. that due toieve some safe haven flows, the lawful so we supported. are stillthink there a lot of questions you mention about trade and the currency as well. how much weaker does it have to get to disrupt this rally? especially, with the broader market and these equity benchmarks in asia rattling -- rallying? frances: when it comes to the higher u.s. dollar yields, we do

expect some upsides. i guess the market would be comfortable enough if it does not move to rapidly. overnight,are it to china does not appear to be trying to deliberately weaken the yen. some days, they were actually higher than market estimates. however, unfortunately, it is always kind of a one-way bet although, authorities would very much like to avoid that. if the move is to rapid, please may step in to try to move the market and that would provide risk assets some comfort. trade tensions are ongoing and we do not think the market would be comfortable before the negotiations really come to an

agreement. already, we have seen the june data. june was before it materialized in from across the region, they are a show some softness. into the bloomberg terminal, i want to show you my chart. we can see what has been happening in terms of offshore trading going weaker. further, little bit seven to the dollar, to see the happening and when? with the market, it is usually more reflective of the foreign investors sentiments while onshore, there's his belief that authorities will try to smooth things. although, we do see some white widening, i would say

that the spread is still relatively narrow. more eye-catching would be points that have been falling rapidly both onshore and offshore. that is also, some indication for us to gauge if the authorities are in the market. yvonne: this week, is this going to the wood is wayne on asian currencies? does it affect currencies? does it get held hostage at this point? a stable yen is able to stable other asian currencies. seems to have a higher likelihood. that may in turn be affected by

the risk. if they continue to be a little bit volatile which, authorities may want to see the two-way volatility, then we would expand it would appear to follow sentiment more closely. >> and the time that we have left, let's look ahead to be a lid here for the second half of 2018, what do you expect for growth as well as in 2019? the outlook is very fluent because it depends on the terrorists -- tariffs. we are not only talking about the trade between china and the u.s.. it will affect the whole supply chain and all the production see taiwan,that, we korea, and japan has relatively high exposure to china and more than half of the exports to china are actually machineries.

thatare providing input so in so that is definitely posting some downside risk as well. especially, when we are closely watching july and august data and hopefully, we'll see some actuallythat would weaken the negotiations for besides. yvonne: seen the shanghai composite both of 2900. see north of 3500 there, do more upside there for equities? what is your year and target now? frances: for equities, we are only looking at a very micro-effective. i think one thing we can look at, one perspective is to see which products or which sector has a higher or lower .. even with the tariffs, not all trade with the loss. it really depends on the

consumers and also the competition. it comes with how much vertical integration is. take up thisg to list of they want to trade directly with the u.s.? yvonne: thank you frances appreciate your time. do not forget our interactive tv function for bloomberg subscribers only and shigella tv . -- check it out at tv . this is bloomberg. ♪

yvonne: this is daybreak: asia. ramy: let's do a quick check of latest business flash headlines. qualcomm is said to be in china for less money talks. chinese regulators haven't an taking apart for the last few days in the deadline for the

deal expires at midnight on wednesday. qualcomm's interest was announced back in 2016. other governments have artie given the go-ahead. yvonne: shares in asia have jumped 6% after sources told bloomberg, international is considering an offer for the belgium company appeared it could be the conglomerates bulls move it. yet talkingove about keeping up with the buyers and keeping its current 3% date. a 50% jump is estimated in the first halves profit as upstream benefits from higher crude prices. that would mean that yields over billions of dollars. the company formally known as china, petroleum, and chemical corporation says it's downstream segments maintain good levels of sufficiency. story, following the

taking over according to reports. is it a try -- sign of china's appetite growing again? this is bloomberg. ♪ this isn't just any moving day.

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every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. yvonne: were half an hour away from trading. ramy: i in new york and you are watching daybreak asia. first news now with jessica summers. u.k. prime minister theresa may is taking control of brexit talks. sidelining her peace negotiations just eight months ago. movetors interpreted the is a softer voice from the eu. this week, they are already planning for it to crash out of the single are march. there is no deal on future trade relations.

sergio almonte says there is no need for a trade war but things will get worse for they get better. he spoke to improve yesterday and posted second-quarter earnings that beat estimates. shares jumped in zurich's rising the most in a month driven by a jump in banking profits. escalating trade tensions could triple or -- trigger market escalation. also, there is potentially, it would for the markets group to correct. we believe that these tensions will eventually be resolved but things can get worse before they can get better. reporter: facebook is setting up an operation in china. that is an spite the platform still be blocked. south ofat knowledge shanghai. it was approved in july.

a sign of the problems of working in china, the registration notice appears to be removed from the government website later that day. ivanka trump is pulling the plug on her fashion line. in two months after stepping back from the company after claims of conflict of interest,. most of her products are made overseas even if the president criticize outsourcing. many stores have got the line. line.p the global news 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries, i'm jessica summers. this is bloomberg. yvonne: asian markets are shaping up. it is pretty good so far but of course, before china opens. reporter: we're expecting that rally to continue for chinese stocks and when it comes to what

is happening earlier in the session, u.s. gains for tokyo and wellington stocks, we are soul ease somewhat in shares. estrella is a outlier here down. -- australia, is the outlier here. futures are pointing slightly lower. getting closer to the january high overnight. when it comes to what is going on in the currencies base come i want to highlight what is going on in the aussie dollar, it could be bracing for a breakout. inflation numbers, looking ahead, the top or for the aussie, that is cimb bank. shorten theo currency against the japanese yen. the yen is falling -- funding support although, it is no retreating someone after a five-day gain just ahead of trump's meeting in washington dc. tweeted which, trump

that the u.s. and eu should drop all caps and barriers. the one is resuming games come on the cosby a set for a second day higher. i want to highlight green consumer shares, lg households are under pressure. this is the doj's gauge of consumer confidence back in july. escape delivery is falling. they are major shareholders of engineering. a $100 billion i go dan which collapsed and left hundreds of people missing and several dead. when it comes to their earnings points, lg gaining ground. that it is is saying continuing to accelerate and shift. 5%,hemicals leading about this is after second-quarter earnings profits met estimates.

sophia young the markets there. thank you so much. have jumped shares 6% after sources told bloomberg sources that it is considering an offer for all of the belgian company. this is a sign for the overseas expansion. joining us now is our asian conglomerates in tokyo. what is he actually looking for with a massive deal? it looks like the company's largest deal yet. >> this would be very large for them. done about $1.6 billion in deals. this really bring their total of for the year. it would make it their biggest deal since, at least for the past five years. it is quite a game changer for

them if they end up taking up the entire company. strategy wise, they have not talked about this deal to us. they have not made any statements about it come from and what their plan is but if you look geographically, this would give them every strong position within europe. sinces a company that 2016, and turns of the enlisted unit, they have been getting more than half of the revenue from outside of china. this is a rapidly globalizing company. a lot of people have compared the chairman to warren buffett. there's this idea that they use insurance as an engine to generate capital which they did not invest in. establish companies that have good value going forward. that has been a model. this would be a big geographic center for them into your. -- europe. yvonne: it is interesting to see them expanding overseas ball a

lot of their companies arrivals and china are shedding assets. what about the crackdown on overseas investment/ >> it has been surprising to see them plow straight ahead. they've been doing overseas deals. not another rapid pace. what we saw earlier in this decade was some of the major chinese conglomerates really going gung ho on buying up a lot of overseas assets in rapid fashion. diversifying. they seem to be a little bit more careful in staying within the balance of what they would define as the balance and areas of interest. they are somewhat modeled on warren buffett's empire. they have got an injury in space and well within. thatss the logic would be these kind of deals can be approved even though, they are overseas.

a lot of are overseas deals of the blocked in china. another point is that this is a company that has been getting overseas since 2016. they have a lot of assets overseas and they have a lot of capital that they are generating overseas to help pay for these deals. they will not be shipping a lot of money out of china to pay for this. this is potentially, a $10 billion deal. it will require some sort of financing and could actually result in some chinese money going overseas. we will have to see how this all pans out as the company confirms if this feels online. yvonne: we will see how the regulators do it. joining us from tokyo. become thelooking to dominant player in china's e-sports arena. they are have about $150 billion a year into the lane dollar industry. going back to beijing this morning.

we know that useful it is really a new hot thing now. what does tencent see in the industry? reporter: and since he is the potential of basically, making the games more popular for longer yvonne: able tors are participate in an entirely new sporting arena, companies like tencent stand to make huge amounts of profits for much longer than they normally would. yvonne: we see the other gaming companies like ea, disney, looking very much into this kind of space and promoting the industry. fluff and tencent due to differentiate itself? >> tencent can be tencent in china. like them make huge game franchises but that is largely overseas. as soon as they come to a country like china was very

strict censorship controls, they need to partner with somebody like tencent in order to get into the market. tencent also understands the market in china will better thanks to their long history here as well as, their partnership and shareholding stakes in china. it has got a better grasp of what chinese consumers want and what they watch when they go online. ramy: what are some of the risks with e-sports is an investment? i would say one of the key risks is that tencent despite being so huge, has been for the chinese government in the past. especially, for honor of king's come videogame that we really center around in our story. like any risk is that other video game, it is going to have a shelf life.

what you end up having is a huge of the investment for a game that is no longer popular. your game becomes yesterday's news. ramy: asia took reporter, from beijing, thank you very much. pakistan has into a crucial election which could shape the future of ties with the u.s. and china. we look at what is at stake. this bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. ramy: pakistan goes to the polls on wednesday in an election to shape the future of a nuclear armed nation's to the u.s. ,nti-terror efforts as well as china's global infrastructure.

senior associate for south asia, michael thank you for joining us. let's start with the expectations here. going into this with the polls, it feels like it is very and that -- you can connect. -- neckand neck. >> this is one of the closest election races i can remember. there are only two main parties competing here. , i thinkthe pt iparty it is really going to come down to one of them. they each have their stronghold in the biggest province in pakistan but essentially, if you when there, you win the election and they are about battling it out there. it is going to come down to the wire when it comes to u.s.

relations in china relations, is there one person over the other that would push the country towards both of them? the way that the political dynamics work in pakistan, the election will not necessarily have much of an impact on pakistan's relationship with the or with china. that is because in pakistan, the army is a most powerful player. ,t actually manages policy foreign policy, policy towards the u.s. and china. of course, the army is not going with the civilian in charge after the election, the army will still be there calling the shots. they have taken a bit of a and has beenroach particularly critical of the united states and the campaign trail that he wants to shoot down u.s. drone strikes.

interesting. civilians turned the military for foreign policy regulation. yvonne: this is a time when foreign investors are looking at it with a little bit of nervousness. do you think that there is actually a clear winner here that actually insure a civil to learn -- a stable government? ini think whatever happens the selection, it is going to be a close fight and i think that whichever party emerges the have anthey will not absolute majority. they will have to form a governing coalition which will probably be several factions. i think that will probably be a. of significant volatility in the political complex. the military is able to use its influence when it comes to a weaker government but in pakistan, it is the majority not

the civilians that are trying to bring about the right conditions to allow things to stabilize and allow for more investments. it is actually stabilized in pakistan over the last two years. been brought down significantly over the last figures. generally speaking, the security situation has not improved in the country. t.j. get about this economic crisis at pakistan faces right now? current account deficit just continues to bloom. what do think they need to prioritize when it comes to the economy and is it has that is it looks right now? >> "bloomberg markets: asia i think it is that-- >> "bloomberg markets: asia that the first big difficult decision for the next governor will be what to do about the economic crisis. it will need to decide, if it goes to the ims.

this is what pakistan tends to do when it faces a sense of problems. it is been five years since pakistan filed last. i think of the rate in control and the risk there could abrogate -- aggravate china. they of all of the funds coming from china as part of this china pakistani economic court or. -- court or. -- corrdidor. i think the fact that the economic court over is extremely opec. -- opaque. i do think that the next government will indeed go to the imf. that, in termson of possibilities of that, how much do you think they are going to need here moving ahead? what is the likelihood that they are going to get it? it is hard to come down to

the numbers but the bottom line that the debt is rising. in some ways, it is surprising. pakistan is one of the number of countries that china is investing in. countriesaling with that lack capacity to sustain a maintain a sense of investments. i think the what we could see wasening where pakistan china for some sort of bailout. i am not sure if china will want to go there because the president will not consent. it is like putting a bigger problem. this court order is before china and pakistan. i think both countries will try to do what they can to move things forward. ramy: yvonne: why do think relations

between pakistan and china are so strong/ china basically had a store relations with all of its neighbors, what makes this relationship so unique? >> it has been defense from for many years. pakistan looks to china as a push back against india. this is a particularly important relationship i know for pakistan given that its relationship with the u.s. is really falling apart. pakistan really has very few powerful friends. saudi arabia is one of the only other powerful front of pakistan. i think they will want to do whatever is possible to maintain this relationship. china really solidified this partnership between do countries. the economic that court are continues to face challenges and china continues to worry about pakistan being

able to pick up the loan, that could have an effect on the broader relationship. there could be some modest tensions that will have to be looked over in the coming months. riske: could it be more at if it is the obsolete are the ones? opposite leader that wins? >> there is a be -- deep political consent across the board in pakistan. whoever is heading the next government is going to want to continue working with china in a big way. they have suggested the need to look into some of these new laws which will be very interesting. i'm not sure what china would think about that but then again, many times a politician on the campaign trail say something. isot of times, the messaging changing altogether.

to hisd certainly go name of focusing on anticorruption our transparency. i do really know if he'll really go in the direction if push comes to us -- should. shove. yvonne: to the director of asia programming and senior assistant for south asia features. facebook's beacon of hope this year. this is bloomberg. ♪

yvonne: this is daybreak: asia i am yvonne man in hong kong. ramy: to techno and facebook has its problems but it may also have a solution. it is under scrutiny for data privacy. user safety could prove expensive. it could weigh on the numbers when facebook post second quarter earnings later on wednesday. /2018 should have been a year of reckoning for facebook. question election meddling, the social networks problems continue to follow. is been embroiled in a data privacy battle. there is a constant controversy over the company placing content on its site.

user seem to like what they see. in june, according to the analytics company, instagram has spent 53 minutes of day on the android version of the app. that is just five minutes less than what facebook users use. instagram is drawing in new younger users and new markets like asia and latin america. it is no longer just about sharing photos. anybody to produce and

post longform videos. in the past, instagram used to rely on facebook for its success. now facebook may depend on incident for its own future growth. bloomberg news, san francisco. ramy: before we hand over to bloomberg markets: asia, let's take a look at how markets are trading right now. it seems like we have a mixed start with the markets that are open. the 225 is up about a quarter of a percent. is very similar to the sectors that led gains here in the united states and also in the s&p. the cosby looks like it is down about a 10% there. display forth from lg in the asx 200 is down. yvonne: it is all going to be on

china with what happens here in the open. we are seeing futures in singapore, taiwan, and malaysia. heading into the opposite direction from the green, we have seen upwards of measures from china and certainly pumped a bunch of jews back into the market. we will see how things play out here. that is it for us on daybreak asia. ramy: standby for bloomberg markets. this is bloomberg. ♪

rishaad: asian-pacific markets are rising. another round of strong earnings. the dollar and the offshore yuan. the shanghai composite racked up its biggest three-day gain in more than two years. investors are still worried about a trade war. top european figures are heading to washington with growing anxiety in the business community. in hong kong, i am rishaad. haidi: chinese conglomerates may be the king abroad once again. this forces them to doing attend a linoleum of in belgium. this is bloomberg markets: asia.