yvonne: it's 7 a.m. here in hong kong. we are live from the asian headquarters. i'm yvonne man. welcome to daybreak asia. asia-pacific stocks look for a gentle decline after a mixed session. wait trade tension and said policy. tesla winner after hours. learning through less cash and elon musk intends to focus more strongly on the model three. ramy: from bloomberg's local i'm yvonne manvonne yvonne: beijing condemns what it calls the u.s. blackmail. the reserve tank of india raises rates and warns of new threats.

fears of a currency war. yvonne: kicking off earnings the the singapore bank, first to report for the second quarter and we are seeing a miss when it comes to net income for dbs. atgapore dollars coming in $1.74 billion. we thought we would see it more of an improvement. that could potentially offset some of these mobile trade tensions according to some analysts. some of the lines we are seeing, loan growth regressed -- reduced. incomelking about the maintained at low double-digit

growth for the rest of the year. also talking about the singapore property measures to have impact on loans. we saw that surprise curve that came into place a couple weeks ago that will weigh on the city's -- the city states lenders. fallen 10% each since the end of april. this is not a good sign for some of the banks in the second quarter. let's go ahead and get a check on the market close in the united states as we set it up for your asia-pacific trading day. the s&p 500 down by a 1/10 of a percent. did weigh onnitely the market for it most of the day. that is because of conflicting lines from the trump administration that they are in talks or talks for talks and then pulling out the possibility for a rise in the percentage of tariffs. 25% from 10%.

look at that. the nasdaq in the green, that is thanks in large part to apple because of the earnings beat there. taking a look at what is happening in terms of the bond complex. you can see the move rising above the psychological 3%. take a look down at the japanese 10 year. 0.1 3, 7 basis points. you can see a big move out of the bonds. yvonne: right. it really seems to the boj that is driving bond markets. not so much the fed. as you mentioned, the mild pullback in the u.s. session could play into the asia session. confirmation that u.s. is looking to possibly double chinese tariffs at 25% on 200 billion in goods. futures down for 10th of 1%. nikkei futures also pointing negative and down 1/10 of 1%.

we are still seeing levels of 111 64 slight strength coming through. the odds -- the aussie and qe3 pretty much flat. we saw initial declines on reports about these tariffs. we have stabilized a bit at 682. no formal decision on the remaining $16 billion. perhaps it was not as bad as we thought. to our top story, the trump administration confirming that it is considering raising tariffs on $200 billion of goods , boosting levies from 10% to 25%. beijing accusing washington of blackmail to force negotiators to the table. joe, tell us the seriousness of this latest development. putt is clearly designed to

pressure on china. the trump administration has left itself a little room to see if talks can get restarted. the next round of tariffs would not take effect until early september. second crunchthe of the $16 billion worth of goods has not been formally imposed or it could come anytime in the next days or weeks. there is no sign the trump administration is backing down nor is there any sign from china as far as we can tell that they are ready to be pressured into talks. they have said any additional tariffs will be met with retaliation in kind for whatever the trump administration does in fact impost. in terms of the latest round, what could be hit the most? >> this is where the tariffs would be felt more in the u.s. than the earlier rounds.

it would cover pretty much anything else with the traits like handbagsings to baseball mitts, television components and seafood. it would have widespread effect rippling into the u.s. economy in terms of higher prices if producers choose to pass those along. it could have some implications for the u.s. a politically but also it puts a great deal of pressure on china if they go through with this. that is the intent of the administration. concessions is what the administration wants. all they are getting our verbal reply said they will do something, but they haven't done anything yet. there continues to be word out of the treasury department that steve mnuchin, his representatives are meeting with representatives from china trying to get some talks

restarted. fruit sonot borne any far. they are still in the stage of talking about talks rather than actually negotiating. they have a long ways to go. to both sides seem to be hardening their positions publicly on how far this will go. ramy: our bloomberg congress editor, thank you very much. off of that, let's cross to boston and bring in chief economist of -- chief economist vince reinhardt. at thesetalk, looking conflicting lines. one on one side sang talks for talks and one of the other saying we will raise. it's almost as if it's not just a stick and a carrot, but at the same time. >> in some sense, the biggest surprise is that there is more dispute on our side of the table than across the table. on which highs

official in the administration you hear talking about the chances for compromise. , the issuent thing was laid out very well. it is the compound of ifs. if they go with it. if they impose it. if they stay in place for a while. then, we will be talking about the macro economic consequences. what is hard to understand for investors to come to grips with, are we just midstream in the art of the deal and these are just threats and counter threats or, is it really going to happen? ramy: one interesting thing is has beencomment period extended into early september, as if they are saying tell us what you think, but we know what businesses think. what do they expect? i think they had to do it because they are talking about a

higher tariffs are there was some responsibility on the part of the ustr to give people more time because it is much more consequential. but, that is the dealmaking part of it. are we just in the phony war where they are saying, please don't let me do this? stop me before i have to do this. , yes, take is significant china is talking about tit-for-tat retaliation, but in previous international disputes the entire country can get mobilized against the opponent. i.e. it is not like tourism is suddenly stopped into the united states and that media is inflamed. it is actually pretty moderate in terms of dealing with this. yvonne: what do you make of just see poor guidance that we have heard from u.s. businesses already in this earnings season?

we talked about the likes of caterpillar and tesla talking about raising prices on cars due to tariff concerns. what does that tell you about the pricing power of u.s. firms right now and whether they can pass on these costs to consumers? >> we have also seen it in some of the surveys. the prices paid, there is more of a sense of pricing power. there also seeing more cost pressures. employment cost index earlier posted the largest annual change in 10 years. they are seen more cost pressures in terms of some important commodities including consumers probably are going to see higher prices. the fed reserve thinks and still does that they will overshoot their inflation target of 2% here it more price pressures

down the pike. a little more pressure on earnings. earnings growth slows some over the next three quarters. yet when we look through the statements of this fed meeting, the fomc did mention inflation is close to 2%. this doesn't sound my k-fed that is too worried about and overshoot or to separate approach? believes thell committee is communicating pretty clearly that investors have bought into the idea that they go a quarter-point at every press conference meeting. toit turns out that it leads a modest overshoot, that is something they can deal with by also modestly overshooting what they think the long run federal funds rate is. they are willing to keep it steady. remember jay powell's favorite

phrase, let's stick to our line. this is more about communicating live withvershoot, that rather than try to do anything complicated. yvonne: stay with us. we will talk more about the fed in the next. vince ride mark -- reinhart. let's get you caught up with first word news. thank you. president trump is back to saying the best way to gain funding for the border wall is a government shutdown before november midterms. radio host rush limbaugh that many republicans disagree, but he thinks raising the pressure before the election would force democrats to support the plan. senior republicans fear a shutdown would help them at the ballot. the fed's decision raises the betting for a hike in september. aonomic activity is rising" strong rate and unemployment remains low. from juneanguage

about further gradual rate increases consistent with a strong labor market and with inflation near its 2% target. the reserve bank of india raised rates to the highest in two years to tackle inflation and shore up the rupee should a global currency war erupt. it is the first back-to-back rate increase since the monetary policy committee came into being in september 2016. moreovernor hinted at tightening ahead to maintain economic stability. google is set to be preparing a version of search for china that will block results beijing deems sensitive. it is codenamed dragonfly and is one of several options for returning to china. earlier.cing the stock had seen a premarket rise of more than 2% after beating revenue and profit forecast. global news, 24 hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more

than 120 countries. i'm jenna dagenhart. this is bloomberg. thank you very much. still ahead, tesla jumps high on lower cash burn and higher target. we will assess the company's hot prospects. yvonne: up next, no change for now. more analysis on that policy and the wider economy. vince reinhart continues our conversation. this is bloomberg. ♪

ramy: welcome back. this is daybreak asia and i'm ramy inocencio in new york. yvonne: the carefully worded policy statement cementing at expectations it will hike again in september. by contrast, the reserve bank of to raise not hesitate

its rate. and now the threat of currency wars. let's get to kathleen hays in tokyo was a recap of what happened. absolutely. when you just take a look at what they said in the statement, it was not dramatic but there was nothing to alter the sense the fed was ready. the word strong being key here. let's read it. information received since the federal open market met in june indicates the labor market is continued to strengthen and economic activity has been writing at a strong rate. in the last statement that was a solid rate. it is simple and a small tweak. it sends a message. that's what this does. job gains strong. unemployment rate has remained low per people have been concerned about the yield curve and the fed is watching it

closely. i want to show you a chart that says the fed might feel relaxed on that. just in the last few weeks we have seen a steeping in the yield curve. maybe a sense of getting help from two things. new bonds coming that have helped push up rates. the bank of japan allowing a 10 year jgb yield. that also helps. one more thing to remember, by next year, because of jay powell's decision, there will be a press conference after every meeting. even in once like this week there might have been more opportunity if they chose. ramy: great stuff parent let's go to the guest now that we have in boston standing by. vincent reinhart. picking up where we left off there. we were talking to kathleen hays. bringing in the asia-pacific angle. we know that asia and emerging

markets cares but with the fed does but it seems to be a one-way caring street. with what has been happening with equities and currencies you think that jerome powell needs to change his mind? vincent: he's not going to do it anytime soon. reality a little -- the of the u.s. is a very large economy. it is open to trade, but not wildly open. denominated inis dollars anyway. so, those sorts of currency effects may have local problems but they don't really touch the united states. the federal reserve a pretty domestic centric organization. with a domestic goal given to it like congress. tight raising rates. they will be raising rates because the unemployment rate is

a 4% and falling. 4.1% growth really is a strong. it is probably twice the rate of growth of potential output. and have a domestic problem they will deal with it as best they can. it still have fallout to the rest of the world and only when it gets significant enough to come back and touch the u.s. will use the the alter its policy path. yvonne: richard koo who i interviewed yesterday pointed out in his latest book that right now, capital lows are overwhelming trade flows. this is another reason this has become an important issue for emerging markets. what is it about capital flows exchange rates and trade in the next five months, september is a done deal. for the december hike camesa anything that could deter the fed? vincent: two different points.

what could slow up the fed, inflation. if inflation does not pick up as the forecast, they will have a hard time raising the federal funds rate. interesting observation for later this week, what will average hourly earnings do? will they continue the increase in a 12 months change, then the fed is on course. if we get a string of downside inflations of rights is like to get last year, it will be harder for the fed. and i have written a number of papers on caps off flows around the world. it is certainly the case that national capital lows are more sizable and more consequential the smaller the relative economy they are influencing. flowsredictor of capital is interest rates at the center.

rates, it willes be associated with less capital going out. ebix the question, what is normal now for the bed? to 75eems let when it is or three. are we getting closer to neutral? vincent: i think the fondest hope of jay powell is that he will have a better sense where normal is as they get closer to it. the great thing about economics is you can name something that you don't observe and then base your decisions on that. what if the term premium? what is the equity premium? what is the natural rate of unemployment or the neutral funds rate? we don't know that. we think it is important in driving economic behavior, but where it is estimated, it is estimated with a wide range of uncertainty.

i think jay powell is a estate as you go kind of guy who will hope thatng rates and when you are in the neighborhood of neutral you will get signaled to stop. yvonne: hmm. i wonder what that signal will be. some will say that's the only way you know when you get there is when you keep hiking rates and you hikes too much and you slow down the economy. and there is the yield curve. vincent: a couple things to there, yes. recession risks are more elevated and 2020 as a consequence of the fed it to liberal -- the feds deliberate strategy. as a real risk. however, slowing the economy doesn't look like such a bad thing when it is growing at twice the pace of its potential. from the perspective of the federal reserve official view, they're trying to do a hard thing.

actually create monetary restraint. they're going to get to a point where they are no longer just removing accommodation. they actually envision putting the funds rate above its rate. that's hard to do and hard to get right. but, they will hope they get enough signals in terms of exchange value of the dollar commodity prices and indicators of inflation and expectation to know when to stop. ramy: let's leave it there. thank you so much, vincent reinhart. as well as of course our global economics and policy editor kathleen hays in tokyo. an alert to tell you about in terms of so knows, the wireless speaker company. we've been waiting for a pending listing on pricing. what sonos isis now pricing at. this is below the range, the offering range of $17 to $19

there. we will see how that pans out once they start trading. there had been cut -- had been sayingiticism about this a great product is not always make for a great business. it appears that investors in terms of what they are -- in terms of what their appetite is for these shares is now in a bit of a question. plenty more to come on daybreak asia. this is bloomberg. ♪

yvonne: look at the markets here, a tipsy turvey week start to the market here this morning after the u.s. session. didn't do enough to alleviate concerns when it came to japanese bond markets. chinese stocks still the ones to watch here on more tariffs coming through. we did get dbs posting a 24%

gain of profit but still somewhat missing estimates. plenty of earnings in the pipeline. this is bloomberg. ♪ ♪

yvonne: 7:30 a.m. thursday in hong kong. a cloudy picture out there looking at the peak area this morning. we are expecting showers here throughout a couple hours or so. we are minutes away from the major market opens. ramy: 7:30 p.m. wednesday here in new york. down a 10th of a percent. the nasdaq was the one that saw a pop higher thanks to apple earnings that beat estimates. we will see how that trickles out into tomorrow's trade. test also rising as much as 10% after hours. most of the numbers surprised

investors and made them quite happy. in new york.encio yvonne: and i'm yvonne man in new york. -- in hong kong. jenna: the trump administration has confirmed it is debating on increasing tariffs. raising pressure on beijing to change trade practices. two senior official told reporters president trump has asked the trade representative's office to seek public comment on a rise from 10% to 20%. the duties could be imposed as early as next month. china's telling the u.s. to stop what it calls a blackmail and pressure over trade. the foreign ministry says it will back should president trump go ahead with his threat to raise tariffs on more chinese imports. the ministry repeated that the should be resolved through talks. the dialogue should be based on equality and respect as well as established rule.

for the first time, germany has vetoed a chinese takeover of a german company on the grounds of national security. purchasethe potential of the machine tool manufacturer even though the chinese group said it would withdraw its offer. it is one of the world leading producers of high-strength metal. automakers paid the price for pulling back on discounts for the first time in more than four years. almost all reported sales declined last month led by a 15% plunge at nissan. the drop in sales capped a rough month. big names all lowered their earnings guidance. the carmakers also faced the challenge of good deals on used cars. global news, 24 hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i'm jenna dagenhart. this is bloomberg.

yvonne: thank you. tesla sort in late trading after second-quarter revenue beat expectations and the cash flow. yuan muska setting new targets. the goal is to produce 6000 per week by the end of this month. musk took time to apologize for his behavior during last quarter's call. listen. for would like to apologize being impolite on the prior call. honestly, there is no excuse for bad manners. have no reason for it, but i got no sleep. -- 120 hourrking to weeks. nevertheless, note excuse. my apologies for not being polite in the prior call. let's go to auto reporter dana hull. she has a story in san francisco for us. she was on the earnings call to listen about elon musk.

your biggest take away was the town from mr. muska. dana: earnings report is all about the earnings. it was extraordinary that you want let that conference call by allowing the two analysts who he had been rude to its first question and directly theogizing to them both to call set a good tone are you saw shares go up even further once he did that. he showed the contrition and that people expect of a ceo of a publicly traded company. yvonne: cash burn seeing that pe progress per to what extent will the third quarter a turnaround for profitability for the company? dana: there's a sense that tesla's own inflection point. a lot of the production problems that ball to the company down in the first half of the year are largely behind them. musk sounded optimistic and

talked a bit about china and funding that largely with debt. they reiterated they expect to hit 10,000 cars per week. they hope to hit fairly large numbers by 2020. asking lot of people are whether tesla is getting closer to being that real car company. they are pushing to other things like china and europe. have a very aggressive growth plans. they need to fund at that growth. but they are going to build a second factory in china and hope to announce another factory in europe by the end of the year. an energy division that doesn't get as much information as the cars. they have their fingers in a lot of different pods. right now the focus is on the model three. they need to get the production ramp up to get money in the door.

it doesn't sound like demand is a big problem. they are saying they will be cash flow positive in the next quarter. ramy: dana hull in san francisco for us. thanks very much. dive with danper lives. there is clearly in a lot of optimism from this contrition. in terms of any concern you are seeing, what is the one at that we really need to hone in on? dan: sustainability and profitability and what that trajectory looks like. ultimately, the fears and cash raised. big step innitely the right direction. the way they handle the call, some of the details, profitability and model three

production. now it is just about sustainability and what they could show in the profitability. it's about a cash burn story and model three production. those are front and center. ramy: over the next two years analysts are coming out saying tesla needs to $.5 billion but elon musk says he will not go back to raise equity. free cash burn -- cop into the bloomberg terminal. free cash burn better than anticipated. that is still not chump change. that's the bolt bear argument. can it go from a significant cash output and inflow. if you look out over the coming the bear to beat on tesla. it's a feather in the cap of the

bulls. but it's a long, winding road ahead. it's an execution story going forward. yvonne: everyone has been talking -- anytime anyone talks about tesla stock, elon musk is priced into the stock price. thehat still factored in stock or do you think people are still losing face a bit? dan: it still improving story. this quarter was definitely a step back in terms of the way they handled the street. something that needed to happen this quarter. but to take out the personality of muska, it terms -- it comes down to model three production, profitability and what the cash burn looks like. the musk factor has been

contained in the stock. there are a lot of skeptics out there and that is a key variable , if you are bullish or bearish it is a key variable in that. yvonne: howdy view tesla and the prospects in china? musk says he wants to start building cars in china and he will tap into the local debt markets to fund it. do you see that appetite from investors to step in at a time when we are seeing such fraught relations in the u.s. and china? trees, chinah the continues to be a fertile market in terms of where tesla is looking. near-term, i don't think it's as much of a concern. the bigger concern is investors want to make sure that model three, but the cap backs look like.

sure the housee is fixed today. adamanton musk has been saying they will be profitable here. take a listen to this and get your thoughts on the backside. this a severe portion, that's not always possible. that preventing the economy roughly where it is good, -- iasonably anl comfortable achieving income positive quarter every quarter from here on out. ramy: gap income positive and cash inflow positive and 15% growth margins. your thoughts? dan: there's a lot of caveats in there. to give investors confidence to

really execution. fundamentally, it comes down to what that profitability picture it looks like and what are the external capex drivers. i think it's a proof meet stock. this is definitely something that is a positive quarter and the way they handled the call. it's still a lot more wood to chop. yvonne: i want to switch on to other tech. we have been seeing choppiness when it comes to the faang trade. apple has switch the sentiment of the bit. we have to look at this acronym a little differently now. fork inwas definitely a the road on the faang names. caught themnitely by surprise. that is one longer-term streaming. that is what i view as a massive opportunity. social media, they spoke is a

proof meet situation. that is one, you saw it spread to twitter. there is some containment there to social media at risk. ifle is so important because you're getting even to the trillion dollar market cap, it speaks to the product cycle and the service business. ultimately, that multiple starts to expand. investors needed some good news and apple gave it. now, it starts to be a little more stock specific growth or challenges versus just grouping them together and i think you saw that this quarter. yvonne: you're saying this is more of a reset, you think when it comes to the faang trade than a rotation? dan: i think if you look at it, you have to separate. netflix i continue to think is a speed bump on the international.

only 10 percent penetrated there. but, i think when you look at facebook, it is an execution story. a lot of company specific challenges owing on their in terms of just products and engagement on the platform. ,mazon, that is about as strong not just for the quarter but in terms of what is happening on aws and the secular cloud trends. that is a just massive as well as what is happening with 100 million plus prime consumers. i'm glad you brought in cloud here. it's a different segmentation between hardware software as well as services. breaking this into growth, would you say it is the services as well as the cloud especially as we see the downward trend in terms of iphone and samson devices being sold less -- samsung devices being sold less? dan: the secular theme right now is transformational. it's not just microsoft, amazon,

and google. look at cybersecurity names that could benefit from the cloud. you look at some of the big data names. there are major ramifications on cloud. today, you have 35% workloads will be 55% in the next four years. clout is a transformational opportunity. you saw that earnings season and something to keep an eye on as multiples expand further. ramy: the growth is headed into the cloud. thank you for that as well as for taking apart tesla for us. up next, more on autos as car sales shrivel up with discounting in the u.s. and fueling fears that demand has peaked. this is bloomberg. ♪

yvonne: this is daybreak asia. i'm yvonne man in hong kong. ramy: and i'm ramy inocencio in

new york. joins me here for that. a lot of after hours movers on earnings. in thehave when and em spotlight. when in particular down. it was a bad day all around for the casino. particularly, the disappointment has a lot to do with unevenness in the macau casino. there is what is being called a tough environment from the eyepiece. a lot of junk coming in and pulling away the big whales in the casino business. earnings,f second-quarter net revenue missed the lowest estimates that chairs had been down as much as 7%. some of the better news is coming out on the conference call just ended recently, what we are seeing is a caltrans are up 20% in july.

the fourth quarter in las vegas is expected to be up. what they have had in vegas is a lot of competition and lower room rates. if we go to caesar's real quick, you can see that stock was down in a huge way. on negativeraday news in vegas mainly and that infected the entire industry stocks. , disappointing same-store sales. this has been spun off from the larger international brand. we are seeing having trouble attracting some younger diners to pizza hut and other companies. reporting earnings and wins. a bad day for casino stocks in hong kong as well. to the autos. it seems like the question of what would happen if they cut back on incentives has now been answered. how bad was it? su: pretty bad.

what you saw was a lot consumers put the break on auto buying. let's go to the regular session performance of some of the big names in automaking. all in red. rough month all around july was for automakers. many of them have reined in. -- fortis talking about a restructuring that could take up to five years. let's go one by one through some of these. all of them missed the estimate. some more than others. .ord under pressure you can see it wasn't just a rough month, but that chart is so of his it difficult year far. if we go to gm, sales were said to be down more than 3% of the stock down 2% on the day. that pasted the performance we saw. fiat chrysler was a rare bright spot. shares were down slightly more than 2% intraday but they did see a surge in sales of the sport-utility jeep sales. think therelysts are great deals on used cars and

leased cars are coming back on lots here at is creating a huge area of competition for the new car sales. these incentives have been , 55red for some 4.5 years months and this is the first time they have cut back on them, thinking their sales could stand up and it looks like they really did not. the biggest the glider was nissan. their sales down 15% for the month. yvonne: we will see how those trade in the japan we are down to the major market opens. let's bring in sophie kamaruddin. it looks like the setup is pretty dire when it comes to the fed and the doj. sophie: aside from the central bank focus we have this latest trade headlines that we are keeping an eye on the yuan given some of the concerns. the offshore rate has been under pressure. down 9% against the dollar since hitting the year high in march. u.s. chinahe

showdown, the u.s. has added 44 chinese companies that make post national security risks. taking a look at the intraday moves for offshore yuan, after reaching 684 handle overnight it has recovered somewhat overnight with tariff headlines not as bad as they could have been. formalizing yesterday's rumors. no official decision on levees of $16 billion of chinese goods. light kaiser saying u.s. remains open to further negotiations. i want to jump in the terminal to check in on the 12 month yuan and f market. eddie much pricing in no expectations for further weakness in the currency. trading at a slight discounts. yet, with trade risks still looming large. the euro and production to 680 from 655. from trade, the

earnings trade in asia is also going forward. who's up to that next? dana: this morning we had on --s -- we had devious the singaporean bank did miss estimates. from japan, among the heavyweights are it's a be she financial group. financial group. we're watching from reaction to japan vacco lowering its outlook and kddi missed estimates but it did slightly raised its net income outlook. the stack hasn't got the hold at deutsche. also keeping a close eye on asian carmakers as su pointed out. we saw a drop in u.s. delivery for july. 15% nissan plunge. honda had a drop as well as a six-point drop for toyota.

fromas they delve back discounts for the first time 55 months. ramy: think you very much. some of theok at stories trending across the bloomberg universe. we are reading about fidelity investments dropping some fees 20 and some of the stories trending across the bloomberg universe. a stoking a price work with rivals. on bloomberg.com, a look at how house prices are falling from beijing to new york and on tictoc, a feature about a university in california that offers an mba in wine. but you will have to pay almost $50,000. turningt those stories on bloomberg online or on the terminal. this is bloomberg. ♪

ramy: breaking news right now crossing the bloomberg terminal. the japan tenure bond yields has

climbed to its highest since february of 2017. looking at something on the order of 1.5 years or so. this is talking about futures because trading doesn't get underway for a few more minutes. you will remember that this had risen in the previous day to 0.13 one a rise of nearly seven bits. 0.145 is what we are looking at in terms of the futures. the highest since february of 2017. let's do a quick check of the business flash headlines. square fell in late trade after giving forecasts that were short of analyst expectations. earnings per share this quarter of eight to $.10 what analysts were expecting 13. for the full year square is predicting 42 to 46. square has almost doubled this year, raising the pressure as it confronts increasing competition

from paypal and others. japanese beauty company should shade of is giving itself a makeover. the 140 six euros company is overhauling its entire lineup and scrapping about 100 products. they are targeting 20% sales growth by 2020. that is around $11 billion. the ceo told us it is vital to attract new, young customers. we're counting down to the market open in japan, south korea, and australia. a couple in its to go. bond futures dropping like a rock right now. it doesn't seem like the market -- it continues to go down. continuing to tax the possibility of how much higher the bank of japan is willing to tolerate. we are seeing a weak start when it comes to equity markets, futures down 7/10 of 1%. assetl have jpmorgan

bojgement to talk about the bond volatility coming out and how it will affect the rest of asia. this is bloomberg. ♪

yvonne: 8:00 a.m. here in hong kong. welcome to daybreak asia. look setfic markets for declines after a mixed session in new york. investors weighing trade tensions and fed policy. the trump administration confirms it is considering higher tariffs on china. beijing condemns what it calls u.s. blackmail. ramy: in new york it is just a clock -- share sales soften in hong kong. the second high-profile ipl to dial back expectations in a month. they slumped in london despite a

fine first half and cash windfall for investors. we ask what happened. yvonne: ramy of course we had been watching trade tensions, watching the boj and the fallout from their meeting. we continue to see bonds falling off a cliff. the 10 year yield we have a tracking. 0.14% now. this is what we have seen the last five days. the bond markets open in tokyo as well. seems like we have awoken from the slumber we had in the jgb market. the boj is willing to let the 10 year jgb yield rise to 0.2% before tapping the brakes.

mucharkets testing how flexibility there is. perhaps the boj is going to have to step in quicker. ramy: and of course depending on how this goes, we will also want to watch what happens with japan's banking stocks. if they continue to move higher, that may have an impact on that sector as well. yvonne: that's right. on u.s. 10 year as well is certainly giving a boost thanks the boj appeared -- boj. sophie: let's kick it off with what is happening in tokyo. jgb market towards that .2% ceiling. we have banking stocks gaining ground in tokyo. financial statement -- segment up a little.

watching for results from heavyweights. move catalysts could spur in the japanese banking space today. also watching tech shares. keep an eye on what is going on elsewhere. surplus expected to have expanded to $665 million. the yuan very much in focus after the latest tariff headline. on the commodity space i want to highlight oil trading. beenmetals have also enduring a slump, dragging on the bloomberg commodity index. metals market maker -- may get hurt from news out of china. a check on asian carmakers after a drop in u.s. deliveries led lower by nissan saw a 15% plunge

in u.s. deliveries for that month. nissan off by 9/10 of a percent. for itstor sliding first-quarter earnings, down nearly 2% early in the session. panasonic on the radar after elon musk rejected profit is around the corner for tesla. batteryc is a lithium supplier for tesla. yvonne: thank you. let's bring it back to the jgb. take a look at my bloomberg terminal. you can find this in our library. kurodasee governor talking about this new yield range they are talking about. able toxibility and tolerate more yields from the previous range of 0.1%. now we are seeing the market continuing to test that to see

how much higher the yields can go. let's bring in our economic correspondent for more. the speed of these declines are quite drastic. >> it looks like they are testing the comfort zone and how much flexibility will be allowed. this is a key point that would -- came out this week. some even called it a quiet sigh tightening of sorts -- a quadi-tightning. let's see if they keep a ceiling on the yield or whether they allowed to push up. yvonne: the premise of the minor tweaks were for the sustainability of the easing. he has said consistently they are absolutely committed. they are not even halfway towards hitting their 2% inflation target. they have given no indication at all. what it has done is taking steps

about easing or offsetting the negative impacts of the qqe with curve control. perhaps that is why what they are doing is allowing flexibility to offset the pain, rather than -- ramy: trade definitely was one of the biggest weights on the markets here. looking to what china has been saying, that it will not be blackmailed by the united states, this is the latest line in a verbal volley back and forth. how serious is this? we have had very consistent language from the foreign minister. they had used the phrase blackmailing several times. , they stopped short again of detailing just how they would retaliate. they made it clear yesterday that they are willing to negotiate their way out of it as

long as they are treated with equal respect. there is a view that china is still willing to come to the tole, certainly at least negotiate a deal out of it. you have to say movement right now indicates a deal seems a long way off. ramy: let's say these tariffs were imposed. what might that mean in terms of inflation for the fed? enda: well, obviously it depends which kinds of goods you are targeting. if we go down the road of these $200 billion worth of goods, 25%, then every chance you are starting to cover a reasonable portion of consumer goods. point prices will start to trickle through to inflation, and that is what observers are concerned about, tariffs on goods coming from china, with $200 billiopn

plus, will inevitably have an impact. and that will pressure the fed to respond in kind. but we are not there yet, either. it seems to be a rapidly changing picture. stories change every week. we have to wait and see just how steep the ultimate tariffs will be and just how many goods in terms of the -- in terms of dollar value it will cover. ramy: the hearing for this is set for three to four weeks from now and then comments into early september. so if you weeks left. thank you very much. let's get some other news right now with the first word news. trump is back to saying that the best way to gain funding for his border wall is a government should down before the midterm in november. he told radio host rush limbaugh that many republicans disagree but he thinks raising the pressure before the election would force democrats to support the plan.

senior republicans fear a shutdown would help democrats at the ballot. the fed decision to leave rates unchanged raises -- the released a statement saying economic activity is rising as quote, a strong rate and unemployment remains low. it repeated language we heard in june about further gradual rate increases consistent with strong labor markets and inflation near its 2% target. the reserve bank of india raised rates to the highest in two years to tackle inflation and shore up the rupee should a global currency war erupt. it is the first back-to-back rate increase since they came into being in september 2016. the governor hinted at more tightening ahead to maintain economic stability. preparing aid to be version of its search engine for china that will block sensitive things from beijing.

it is one of several options google is pursuing for returning to china. it erased earlier gains. the stock has seen a rise of more than 2% after beating revenue and profit forecasts. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. back to you. ramy: still ahead, the fed see strong growth that sets the stage for a rate hike next month. we will have a view of jpmorgan asset management in a moment. yvonne: later we are going to talk trade wars and tariff tactics. china's position is deteriorating. this is bloomberg. ♪

yvonne: this is daybreak asia. a very bighas been

few days for central-bank policy. we had the boj tweak language and the r.b.i. hike again. the fed hinted towards september timeframe. now we wait a decision for the bank of england on global economics. a busy time. classde it clear it is on -- on track for a september hike. looking to december. i think it is time to look ahead to december because it seems the september rate hike is baked in the cake. worried changes here and there but they are in the direction of this economy is at thought,trong as they certainly doing healthy enough to do the september rate hike, as is so widely expected. the question about december, just a few months until then, what happens to the yield curve, inflation.

is, isresting question the fed risk raising it to much? -- too much? this looks at a key measure of the neutral rate, the white line across the top. underneath is the blue rate, the thunder it. -- the fed rate. look how close they are. if you move above that neutral rate, that the fed has said it intends to, do you risk doing too much? we spoke to vince reinhart, chief economist, this is what he said about the risk he sees rising this year and next. >> they are trying to do a hard thing. actually create monetary restraint. they are going to get to a point where they are no longer just moving accommodation.

they envision putting funds rate above the neutral rate. that is hard to do. but they are going to hope they get enough signals. goingen: i think we are to hear a lot more questions from the fed on this as fed officials are talking about the neutral rate and why they will not go too far. ramy: two rate hikes closer if that goes ahead. looking to india, the reserve bank of india's rate hike was not a surprise to most. on the governor warning exchange rate was more unexpected. kathleen: key rate of 25 voices -- basis point, the second hike since late april. this is a study move towards rates. it is well above target. the worst-performing asian currency right now, down 7% year to date.

he had thiseting, to say about why he is concerned, in fact laying the groundwork for maybe more rate hikes. >> we have already had a few months of cuts behind us. that this islike likely to continue. for how long, i do not know. skirmishes evolved into tariff wars, and now we are possibly at the beginning of currency wars. kathleen: i think that is strong words for the central bank. they speak very carefully. it is important they maintain a neutral stance, but with the door open. yvonne: of course a rate hike expected at the bank of england today as well. why, given all these brexit concerns?

kathleen: isn't that amazing? we're at a point where brexit concerns have heated up. theresa may -- many concerns continue to hang over the economy. because inflation has been high, maybe there are enough signs the economy has recovered from a first quarter slowdown, they are expected to hike the key rate 25 basis points, however, in a split vote. it is interesting because this 25 basis point hike will be only the second since the financial crisis. just to give you a measure of how much brexit has hung over policymakers. reluctant to move because they know the economy is so vulnerable. another closely watched policy meeting that we will know the answer to just hours from now. markout it looks like carney is determined to go run more rate hike and he would happens next. -- see what happens next. yvonne: kathleen hays watching

all the central-bank action for us. asian stocks facing moderate declines. the fed did little to alter expectations for two more rate hikes this year. we have seen u.s. china trade tensions continue. joining us now is ayaz ebrahim, co-head of the asia-pacific regional team. we talked about all the central banks but it seems like it is one central-bank driving bond markets, the boj. if we continue the steep declines in the bond markets, is there a sense that perhaps there will be more volatility in the bond market? ayaz: the thing about the japanese, bank, the widening of the band allowing bond yields to move, it has more or less moved in expectations. although have seen decline, i don't think it is i think to get too worried about. other announcements might be more interesting. services,from the etf

that could actually have an impact on certain sectors in the japanese equity markets such as financials and autos and so on, which actually complies a large amount. i would not be too worried about a yield move. i think the bank of japan has kept it in a tight range for a while. they said they are widening in the markets are reacting. yvonne: you see the u.s. 10 year at 3% right now. i guess the boj was boosting it at that rate. at what point does the start to derail what we are seeing an equity markets as well like what we saw in may? yvonne: i think the movement in the 10 year -- ayaz: i think the movement in the 10 year in the u.s. is not too concerning. the fed rate we believe will see another three or four rises over the coming year, but it will be gradual. historically, 10 year rates go up to 350 and so

on. it is really not a concern. and respecting the fact we have a strong economy. it is not because of high inflation or anything. it is a strong economy driving it. the other thing to bear in mind, is i think with the easing of issue on liquidity in the system's, i think bond yields have been artificially kept down. marginal increases is probably to be expected. yvonne: so, can you say that we can keep them labeled when it comes to allocations? do you think asia corrected enough to focus on fundamentals? ayaz: earnings in asia are still very much intact. looking at all the earnings coming out from asian companies -- countries, still looking at growth. we have not seen any material decline to those forecasts. if you look at valuations today, asia for 2019 and 11.6 times

forward and earnings growth into next year just about double digits. and asia have been impacted by a stronger dollar, and also by trade protection fears. the dollar, we still believe it is on a medium-term. it is still going to go on a downtrend. there are certain reasons for this short-term upward movement. but we have got to see what happens on the trade front. valuations, weof have been talking that now is a good entry point to get into asia. do you think we continue to wake of the low bit longer -- little bit longer, or is now a good time? ayaz: it is always difficult to say exactly when to get in. just look at the fundamentals which we talked about. valuations are very much below their long-term average. it is not ultracheap, but it is below the long-term average. earnings are coming through.

we do not see anything coming out that impact global growth significantly at the moment. is ifwe would say yes trade protectionism issues continue to escalate. that will have an impact on earnings growth and that is where we would say one of the major rifts are. outside of that, we certainly believe the fundamentals are good. multi-period for growth and asia still. we look at all the statistics coming out, there seems to be a long position on the dollar. certainly those twin deficits we have on the dollar we still believe will have a dollar decline, which is always been good for asian equities. ramy: the fiscal cliff definitely coming up. in terms of china, let's focus in all more -- a little more in terms of china saying they will not be blackmailed by the u.s. and vice versa. what is your outlook for china? ayaz: ok, barring any major

issue in terms of trade, if we look at chinese growth today, about 6.5%. looking at earnings growth and corporate valuations, china is now trading at a two-year low. if you're looking at p.e. into 2018, about 11.2 times. earnings growth well above 15%. again, you're looking at a whole post of corporate in china is certainly been growing. health care, tech and so on. if you turn back 15 years or so, talk to portfolio managers in asia, we all loved india and so on. today you can say that for china. the whole market has grown extensively, the breath and depth has grown. yvonne: but we cannot sustain these rebounds. we are not really seeing this turnaround as any kind of long-lasting issue.

it is going to take much more to change the sentiment. ayaz: i feel a trade issue is hanging over it. and that is something to be wary about. is that a sensible negotiated settlement should come about, but there is a risk no doubt. but these are good entry values if you look at the pricing. we have to is -- put this in context as well. if you look at asia as a whole, last year asia was up 33%. despite all the issues coming out this year, trade protectionism and so on, the market is essentially flat. so, you know, that is not too bad. yvonne: all right. i love the optimism. forget our interactive tv function tv . watch us live and catch up on past interviews. that is all on the right side of your screen.

this is for bloomberg subscribers only. this is bloomberg. ♪

yvonne: let's do a quick check of the latest business flash headlines. million byd $208 pricing its ipo at $15 a share, below the $17 marketed range. this is music streaming services and voice assistants would be a business but lost $40 million last fiscal year on revenue of $993 million. they are due to start trading thursday on the nasdaq. ramy: facebook's top security executive is leaving just one day after claims of a new coordinated attempt to so political division. but will now2015

teach full-time and carry out research on cybersecurity. more coming up. this is bloomberg. ♪

we are now just half an hour away from the open of trading. u.s.ble tariffs that the is looking into. big central-bank action. >> you are watching daybreak asia. administration has confirmed it is debating whether it is increasing $200 billion of chinese goods. two senior officials told

president trump they asked to see in public comments had arrived. u.s. to telling the stop blackmail over trade. the ministry repeated that disputes should be resolved through talks and added dialogue should be based on the quality and respect. takeover onvetoed a the grounds of national security. they indicated that the last minute it would withdraw its offer. priceutomakers pay the

for pulling back discount. almost all sales declined led by a 15% plunge. all lowered their earnings and the restructuring plan. face the challenge of deals on unused vehicles. this is bloomberg. back to you. they asiansee how >>kets are shaping up to it lower.up, marginally they are seeing banks lift that. percent.bout 8/10 of a

bank giving a boost in japan we are seeing. highlight what is going on with the offshore yuan. this morning's headlines were not as bad as expected. some otherok at movers in the region. we have done falling the most 2017.october 7 the maker of wires and metal proctors -- products. 3.3%.falling about

lastly, a look at panasonic rising after sales the estimates. increasing model three production. are also checking sydney right about now. a slump in london despite -- what is spooking investors here? >> it has not been enough to halt a slide in the shares in there are trading and a couple of dark clouds on the

horizon that are potentially worrying investors. something that is lori full. impact fromaterial trade issues. of course, any impact on global like base things real metals.is the these things starting to nibble and the trajectory in

china. he was talking with bloomberg tv ad what he said was there is >>ght weakening your it we'reare entry points and seeing those as expected and forecast. >> there are a few issues for rio to maybe deal with. >> what does this mean for growth and priority. >> i guess some people are tempted to see that this is an

evidence. >> there is a focus on giving them cash back. it doesn't mean that growth is off the table. this is not a company that will get big for the sake of it. m&a is not off the table, but it m&a.o to be smart right now, that is going to be particularly difficult. >> some investors are beginning to question the grip that accounts for more than half the earnings.

>> it is an issue because of that reliance. it is a business that has generated longer-term. >> thank you. watching when the shares opened in an hour. lisa has the story for us.

the resort hosted sales.ecrease in palace rose one 57%, giving years of a newer resort maybe cannibalizing the business.

even though it grew, it they'll short of estimates. now and i.s. auditors believe early trading is also down. you for joining us from tokyo. highester the second sale in a month. >> in terms of the ipo's, it is

highly unusual for that high of a price in august. the receptionist definitely have wind down a lot. really of the fallout is to fund 5g. 50% of the proceeds is supposed to the used for capital expenditures. it definitely will have a little bit of an impact. even at the low end, they will cost.nough to cover the

the still have some time way they bring the money and -- their money in. look withthe pipeline the seemingly soft market? expecting a few deals to go through premarket. it is highly unusual, but the rest of your will be very busy. deals on theeral radar such as a potential listing on the vehicle and those are things we watch closely. confirmation from the trump administration that it is considering hiking proposed tariffs.

bloomberg.

>> welcome back. this is daybreak asia. >> the trump administration has confirmed it is debating raising increased tariffs from 20% to 25%. joining us now from washington, always great to talk to you. think a 25% tariffs could bring beijing to the table? say.think that is hard to

clearly, the trump administration's move has shifted. we have seen a much different tone from beijing. humble.e i think in terms of signaling, the trump administration is doing a fairly effective job of letting beijing know that the escalation will continue until beijing shifts away from some of the policies that has raise the ire of the trump administration. the economic adviser has been burned before when it comes to trade talks. we hear they are opening the door once again. how are they approaching it this time around? >> there is open discussion on

how they misread the u.s. and failed. i think if these reports are true, i only thing that is going to happen if china has a new strategy. i don't think they will offer the same. i suspect they will come with a more aggressive package in china which will satisfy the investor community. offerings.ere may be is time to china, it go big or go home or face the

headwinds blowing their way. >> why have we not seen any action to date? wordss only tone and right now and it has been ever since. signed a level of omniscience to the party. attack it tried the three months ago. that is not working. there is politics in china and so you see the real market. tohink beijing is trying walk the line without dismantling how our economy is

structured. has a difficult road ahead. >> i'm hearing it is impossible concessions. looking back, we know they are deteriorating a little bit. opportunity for donald trump to kick them while they are sort of down? >> absolutely. one thing the administration knows is the party likes stability. it is a real forward looking into the. about vaccines right now which are swirling around china. there are converging factors which from china's perspective are not looking good.

i suspect beijing will likely adopt a new strategy. to make said let's try a deal. how does that factor in? >> not much. i think china recognizes that replicate a bull pattern. i think they are looking to make inroads. youhave to have the eu with . this has to be a united front against china. sign.a positive

seen, thatwe have could change with a tweet. mentioned about how it is calculated. there seems to be such a stigma .bout this nationalistic policy itself hasecord in only been successful if you look at public infrastructure for example. >> undoubtedly, you're right. various plans for and industries. one thing i should notice is that even when china is unsuccessful, it still changes entire market. if you look at solar and look at

there is a significant impact on the global economy. i agree we should not overestimate the parties ability to plan an economy. i think in some sense, these concerns are warranted. to have you.great for breaking news, we have teamed up with twitter. it is the first global news network offering live video coverage. if you on twitter, he sure to follow tictoc.

>> this is daybreak asia. quick check on the latest business flash headlines. -- they are targeting 20% sales to around $11 billion.

shares have soared, but the ceo says it is vital to attract new customers. how we are going to approach is project innovation. we should be having a younger generation of users. >> the digital tennant company square they'll after falling short of expectations. $.46.ts were expecting

square has almost doubled this year increasing competition from pay paul -- paypal to others. they raisedys output by selling one of the models. look at how quick the markets are trading. it seems to be a done deal, possibly from traders. china is certainly the one to

the tradeding 2% on concerns. president trump considering 25% tariffs. at asia futures, we see it is mixed, up nearly half a percent. >> 12 basis points for japan, that is it for us on daybreak asia. this isn't just any moving day.

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