yvonne: it is 7:00 a.m. and we are live from bloomberg headquarters. welcome to "daybreak: asia." president trump reiterates his liking for tariffs, saying he has the upper hand on china. holding onto gains as the pboc raised the price in asia-pacific stocks. from bloomberg's global headquarters, i am remy innocence you know -- ramy. the weekend's virus will get the business, but it takes production as normal on monday.

we will check into the oldest registered company in hong kong. good morning and good morning to all of our viewers. it was really interesting what happened on friday. we had really great numbers coming in from earnings, as well as the job rate. somethingking about coming out of china. , welly, over in the u.s. have been waiting for something to happen. a lot of it has been verbal. trying to match some of what donald trump has been throwing at china in terms of the $200 billion there. yvonne: the $60 billion from china is far from this tit-for-tat retaliation.

tensions of these the rhetoric flaring up once again. we mentioned about the yen. key on whethere the renminbi can sustain these relief rally, especially when it comes to em. ramy: we did see some em, butening in the meantime, let's take a look at what happened on the friday close. looking at the boards, you can see prior to that $60 billion headline, the s&p 500 and nasdaq were in the green. for the dow and s&p, it was their fifth straight weekly gain. we have seen the volatility in the nasdaq. let's get you quickly caught up in terms of currencies. bloomberg dollar spot 11.79, we

saw that follow little bit over .7%. bit underg a little the 3% mark there for the yield. crude on the move. iran,were sanctions on looking to kick back in. we will watch out what is happening. for asia as well, as we mentioned, a slightly positive side when it comes to equities and what we are seeing so far. modest pointing to some gains when it comes to australia, japan and south korea. we talk about currencies and the dollar. at least stalling in weakness. pretty much unchanged for the last week or so. the aussie andor

kiwi. -- chinesehow you markets open in about two and a half hours time. 685 for the onshore. we are seeing these relief rallies after the pboc set up measures to support the renminbi. on friday. index futures. we did say he -- we did see .8% but those gains were cut in half after we got that list of chinese tariffs. continue to watch what happens with china today. ramy: we have some breaking news across the bloomberg terminal. the bank says the second-quarter net income has beat estimates.

the estimate was for 1.2 billion. in addition, their second quarter has risen just a bit. something that investors and shareholders will like is that the first half is the $.20 there. 1.4% would be of interest here versus 1.3% year on year. beats $2.1 billion. let's get more news with the first word news. haslinda: racing to complete a string of deals before your competitors impose new sanctions. public resentment has been building as tensions push the rial.

the government says they will act later monday to hold the currency decline. the trade secretary says brexit negotiations are more likely to end in failure than the sundayeaking to times. he said there is a 60% chance of a no deal outcome. he blamed the european commission for a lack of possibility. the prime minister's office offered a statement saying the government remains confident in securing a deal with the eu. security forces in venezuela have made a wave of arrests after a military parade with expensive drones. the president was unharmed. c4 drones were carrying explosives. six people have been arrested, including one man allegedly involved in an attack last year on a military base. the number of people killed in a

powerful earthquake in indonesia has risen to 82. the magnitude seven tremor struck a week after another quake killed a dozen people on the island. the latest quake triggered a temporary tsunami warning. both bali and the other airport remain open. 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. this is bloomberg. yvonne: president trump has defended his use of tariffs, saying playing hardball on trade is his thing. amountng an additional of goods that could be hit with retaliatory tariffs. let's go to tom mackenzie. the president claiming to have the upper hand on china. tom: that's right.

the president saying the tariffs are working big-time. he also said they were the measure that were going to take action and make an impact on china. he hit again at the deficit. take a look at what he said at this rally in ohio. trump: $500 billion. we have really rebuilt china. we rebuild -- it is time we rebuild our own country now. if the president is talking about the deficit, it is not quite $500 billion. it was interesting to hear from him pointing out that the u.s. equity market is weaker. he said that was a point of leverage that showed that the u.s. had some pressure to bear on china.

he suggested these measures were starting to work. the lines out of china on friday evening, outlining this list of retaliatory tariffs. in ine both sides digging terms of these trade tensions. ramy: beijing has responded with some kind of number. what are the details? this is targeting $60 billion worth of u.s. goods. they would kick in after the u.s. imposes its $200 billion around augustfs and early september. $110e talking a total of billion of u.s. goods coming to the chinese market that would face tariffs. $130 only imports about billion worth of u.s. goods. at the bottom and you have small aircraft that will be hit with a 5% tariff.

.t the higher end you have 20% some of the products are less consequential. are importedcells in small numbers to the chinese market. , that is a lng growing export industry for the u.s. where the tariffs could have an impact. kudlow, we heard from him. trump was not going to back down and that the chinese thoughtaken if they adding and publishing this list was going to change the direction of travel for the u.s. president. both sides ratcheting up the pressure. theill be looking at markets. particularly, given the actuals from the pboc to make it more expensive. we have economic data out that

will give us a clear indication as to the impact of the trade tensions. the fx reserves will give us some implications as to what degree the are burning through the fx reserves, if they are doing that. ramy: indicators to look at during this ongoing dispute. thank you very much. still ahead, an exclusive interview with hong kong and shanghai ceo. the company's first-half earnings and the outlook for the hotel and travel industries. yvonne: higher volatility. chris tells us how they position themselves against rising trade tensions. this is bloomberg. ♪

yvonne: this is "daybreak: asia." ahead to the week

on wall street, the s&p will be kicking things off within striking distance of its january record and coming off its fifth weekly gain. let's start with how the fairly mediocre jobs number cap the goldilocks narrative alive. but nots not too hot, too cold. many say it is just what we need to keep the fed just where we needed to be. you can find our library of charts. this was named steady as she goes. below. little bit the job rate fell back below 4%. let's go into the headlines. analysts had expected a gain of 193,000 jobs. some economists think there is a yellow caution flag here. we did not see wage growth pickup.

many thought it was a solid performance. let's go into the market snapshot. descent, strong earnings. -- decent, strong earnings. we are now 1.1% within striking january of the s&p's high. we also saw the dollar slightly higher with oil in the highlight . let's take a look at the big earnings ahead. related economic earnings. you have media in the spotlight. disney and 21st century both takeover drama. they just announced 700 million is the benchmark for their black panther franchise in the u.s. alone. that is a record shattering number. disney also looking to give us attempt to beits

in on the fox action and other related issues are you the point 3s is for 15 billion in revenue. let's look at some of the other numbers. snap will always -- also be reporting. michael course is taking a hit. it could -- michael core is -- is taking a hit. our topck to one of stories, which is trade between the u.s. and china. continuing to escalate with china outlining an additional tariff of $60 billion on u.s. goods. expecting more pain for equities. joining us is chris weston. good to see you again. now come inon hold terms of the total tariffs coming from china.

i think you could make a positive case from this. saying this is not an attack. the rebuttal is fractured. you could make a positive comment that it could have gone a lot higher. at the same time, they are coming back with something. that this tension is not going away anytime soon. the markets have to continue to digest that. will the u.s. do anything? have to mix in with this idea of what happens with the yuan over the short term. will it become a tightening financial condition and it felt? the fact that the chinese have come back with something, it suggests it could be a net positive. we could still be selling

rallies in equities. ramy: how do people position themselves for this? >> we have been looking at the yen. it has been one of the best-performing currencies this year. the bank of japan has come to a bit more of an explicit guidance , which has been seen as a dovish move on the yen. the banks are looking to increase loans and money multiplied in japan. that is an interesting one. u.s. equities trending higher. suggests that the market goes higher. we are looking now aggressively at duration. that is the back and of the u.s. end of the u.s. curve.

yvonne: the trajectory for yields will be up? we are heading to a 5%? are we at that new normal? i am not buying that myself. cleverer man than i am. ,n terms of trade right now reapplying flattening trades between tuesday and tens. and tens. 38.5 basis points. that came down after the payrolls. fairly poor service data came out on friday. i continue to believe that probably goes down a little shorter in the same time. we are looking at a very small size of increase in duration in positions. i do not see the u.s. treasury

going up to 5% anytime soon. yvonne: what you mentioned about the renminbi, whether we can actually sustain or stall the decline that we have seen. the pboc did make that action to support the renminbi with the reserve requirements of 20% on -- fx contracts. do you think they'll be effective in stopping this weakness? it has not played out as to what the pboc wants. >> i think it will help the depreciation of the yuan for sure. the move against the rest dollars since april. we have seen the basket moving down as well. we are going to see a more stable basket. we'll see a sharp appreciation of the yuan. we will see a lot of speculative designed to this is do, coming out of the renminbi.

once that settles down, we will see a much more stable move coming through. removed thetariffs -- removed the tariff to 0%. you will see a much more stable dollar yuan here. yvonne: you talked about the correlation between the renminbi is very strong these days. complex,omes to the why we have seen these the kleins is mostly china, not so much the rest of -- declines is mostly china, not so much the rest of em. >> chinese equities continue to fall. broad u.s. dollar, which has been getting a lot of its variance -- variability, the what is going on with

yuan. we see a breaking out on the dollar index right now. they will struggle to find buyers in this environment. if you're looking for a contrarian trade, it is probably one of the better ones out there. we are still of the camp that the u.s. dollar will appreciate on a gradual basis at this time. yvonne: we appreciate your time. joining us from melbourne. coming up next, the bellwether for the industry gets rocked by a crippling virus area -- crippling virus. a hit to its production line could affect shipments with largest customer, apple. this is bloomberg. ♪

ramy: welcome back. this is "daybreak: asia." chipmakeriwanese racing to recover from a crippling computer virus. the company is one of apple's largest suppliers and says the virus affected 80% of its tools on friday. it may affect their top and bottom line. is a technology editor joining us from tokyo plaza with a little more on this. virus thatad a brought down a facility of theirs. what is the latest on the recovery efforts? the company put out a couple statements over the weekend. this is a computer virus that as introduced into systems by mistake. it brought down some of their production facilities. said ashey came out and

of sunday afternoon, 80% of their production pools had been restored -- tools had been restored to capacity. they did say they expect a full recovery by today. a important supplier for technology companies. their profile company is apple, which is ramping up production of new models of the iphone they are planning to introduce later this fall. people will be watching closely to see if apple will be affected. they said this would affect shipments for customers, but they did not specify which customers would be affected. ramy: let's get a little more detail into this. what kind of effect will it have -- thecity's business company's business? bethey said revenue would trimmed by 3% in the third

quarter. operating margins would be affected by 1%. they anticipate a full recovery, as its capabilities and capacity picks up. it would get that financial revenue back in the fourth quarter. it maintained its full-year targets to be able to grow by single-digit dollar terms by the end of the year. short-term, it will have an effect, but long-term they will get the money back. ramy: we will see how that pans out area -- pans out. china has launched a renewed effort in deterring short-sellers. is it working? this is bloomberg. ♪

7:30 a.m. monday morning in hong kong. we are minutes away from the first major market open. the trade rhetoric getting heated as well over the weekend. china imposing $60 billion of tariffs on the list of u.s. goods. we will watch china and the currency rating. ramy: 7:30 in new york where the markets closed up half a percent friday. i was before the headline broke about new tariffs out of china -- that was for the headline broke about new tariffs out of china. earnings and at that point, positive trait headlines as well

as nonfarm's payroll. i am ramy inocencio. yvonne: you are watching daybreak asia. let's get to first word news. president trump has offended tariffs, saying playing hardball is his thing. he told supporters the u.s. rebuilt china over the years and it is time to focus on america. he noticed the plunge in chinese stocks, saying it weakened their -- bargaining power. on friday china released $60 billion worth of u.s. goods it intends to hit with tariffs. he has switched strategies, think the meeting with the russian lawyer was to get information on hillary clinton. he tweeted it is routine and politics, legal and done all the time. his comments contradicted statements last year would say the meeting was focused on adopting children from russia.

he also said he didn't know the meeting at the time. for theonal forum nonaggression pact in the south china sea, hoping north korea will turn its promises into action. they have is code of conduct -- a code of conduct, a milestone now. more three of the sizing united states for what it calls -- north korea now criticizing the united states for the sanctions. chinese companies, offering google cloud services in the mainland. the talks began this year over -- although rate did -- although rising trade tensions could make it difficult. google is developing a sensitive report of its search engine for china. 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. amin.aslinda

this is bloomberg. yvonne: let's get more on what we should be watching us trading gets underway in asia. adam haigh joining us. good to see you. china's move on friday, making it more expensive to vote against the yuan. that will set the tone. are there any stock lines this measure will work and determine short-sellers? i think it is clear we have seen the initial knee-jerk reaction areas late friday we saw the move by the authorities that had a little trigger in the the -- the yuan against dollar. it is pretty steady now. we have not seen any further moves higher, but neither have we seen return to the weeks of losses we have been seeing in this currency. let's remind ourselves where we come from in this currency. look at the chart in your gtv library.

this speaks to one of the things authorities are trying to do, to smooth out the movements now in the currency. and where this would normally be week, they don't want to reverse the declines we have seen but rather than smooth out the moves and steady the ship's. from a lot of traders and friday,s we spoke to on basically a lot of people who are short yuan relative to the dollar, they pared back those or round them in somewhat though they could be using money on that trade. we have seen a significant move towards that kind of seven per dollar level. at this stage unless you have a short one already, this incremental move on the authorities friday doesn't really speak to wanting to add in a neutral position. that is where we are at the moment. it will dominate markets in asia

this week, but the yuan against the dollar trading steady. from 6.91 earlier when the pboc came out with new regulations. the earnings season rolls on with softbank and hsbc reporting monday. japan regaining now its position as the second-biggest stock market. you think earnings momentum can sustain further gains? happeningink what is in the japanese equity market is a lot of pricing of discontent with earnings. consensus numbers have come down . people are expecting the earnings season not to be that good if you believe what is reflected in prices. any chance for uptick and beat from companies could give you a nice rally. we have had the conversation friday which is a historical moment.

let's not undersell it. japan back there again with china having come out of the number two spot in terms of global equity market capitalization, so it is a time to kind of revisit the longer-term bullish thesis on japan, which is expectations for earnings is depressed, valuations are good, relative to themselves and other markets. in continuation of improvement in the corporate landscape, the governance reform that you see in japan of course and a structural loose monetary policy that is slowly getting the deflationary mindset to be something of a historical position in japan. what you want to do now is there are mobile managers who will want to answer to that, and some of the earnings we are seeing point to this. one caveat worth ending on, the

fact we did hear from toyota, wanted -- they are warning if we get more tariffs coming in the u.s.-china trade war, it could have a huge impact, so we should not lose sight. ramy: editor adam haigh. don't forget to check our library for the church you saw on the terminal. let's go back to japanese stocks. softbank is due to release first-quarter earnings later monday. for clues on where that company is heading, the asian tech reporter has been analyzing the words of ceo of masayoshi son more than 300,000 of them. what did you find out it is a strange affair. sprint has to report a week before the domestic telecom business. doesn't change a lot. when people tune in, they to

hear what he has to say area he definitely takes advantage of every opportunity to speak about his vision. we look at the terminal and have 12 years worth of transfers on bloomberg terminal available. the starting point we are seeing curiosity, what has he been talking about, his passage -- passions, focus. publicly available open source natural price [indiscernible] one thing we have got to wait for is any mentions of artificial intelligence or robotics or the internet of things, things that have been in public vocabulary for quite a few years, but seem to be in the central part of his speeches these days. he hardly ever mentioned them inil they acquired a company 2016. it was a robotics firm. it is a new obsession for him. he does increasingly use these

terms and ideas to tie his other investments in ride-hailing and vertical agriculture and all kinds of things. ramy: bring this into focus, how does it help investors figure out how all of his recent investments fit together? i think if you look at his language over the past 12 years, you see there are recurrent themes and he tends to latch on on a single idea and single organizing idea taking it for the most of the past decade. he has been talking about the internet and mobile internet. company at that time, having iphone exclusively in the country for two years was a burgeoning point for the company and put them on the map as a global sort of telecom conglomerate. you can see the mobile internet

moving business and it has been a quagmire for a few years. you see a new resurgence of ideas talking about information evolution and the group strategy. it is like he is working out problems to create a new way to restructure softbank into something it is not. it is confusing for investors and sort of a work in progress. people think softbank is going back to the good old days where companyeen a telecom easy to understand, that is not happening. it is worth listening to him to see how he articulates the vision going forward. earningsen it comes to as well, -- yvonne: when it comes to earnings as well. so are we looking at sprint or something back home? room for not a lot of surprise. sprint reported good quarterly earnings. this is not something they are

selling anytime soon. an upcoming ipo is interesting, but beyond that it is steady as it goes. yvonne: our bloomberg asia tech reporter on softbank. exclusive chat with the ceo of hong kong and shanghai [indiscernible] all the peninsula hotels across the board and [indiscernible] plans involved in the second half. how they stay competitive. this is bloomberg. ♪ ♪

asia.this is daybreak i am ramy inocencio in new york. yvonne: i am yvonne man. the hong kong and shanghai hotels revenue rising 10% in the first half while underlying profit increased 41%. the company is known as the owner and operator of the peninsula hotel, a luxury brand

with roots here in asia. let's discuss this with the ceo who joins us exclusively here this morning. great to have you. these you mentioned uncertainties, the results were pleasing. how confident are you in the second half? >> things are looking good because the market is hong kong and even their ups and downs, but at the moment we are seeing a stable growth in our business. mainly chinese travelers coming back to hong kong and international markets are strong. what that has enabled us to do because of the super luxury space, to increase room rates and that is pleasing. generally we are very long-term looking business, and we are an owner as well as operator. it was great when the cycle is looking good but you have to go

through up and down cycles and have staying power for the longer-term. thene: you talked about route you have in asia, a luxury brand -- what is your competitive advantage? is it because you know the chinese customer better than other hotels, and how do you? clement: super luxury is something to stay. the demographic mix can change from time to time. 20 years ago over 50% of the business in hong kong was japanese. those trends go up and down, but what we believe in is if you commit to taking those extra steps for super luxury, that will sustain over time. yvonne: so is it the chinese customer that comes your hotels more? where else do you see that kind of traffic? clement: the good thing for us

with the business in hong kong, it is more diversified. when i mentioned over 50% japanese 20 years ago, we are happy we don't have that concentration anymore. it has spread more diversified. mainland chinese very strong, but we get a lot of business from the u.s. and europe. everybody knows the mainland chinese are big travelers and go to other places. demographics include middle east, russia, south americans and we love it. we love having a good spread of customers. ramy: the footprint of the peninsula is small compared to the big massive hotel chains of the world. how do you plan to be competitive with marriott, with a high-end -- hyatt defined number of hotels? clement: our business model is different read i touched on it earlier on when i talked about the long-term. we believe in being owners and

at death operators of our assets. we take a long-term approach but we also don't have as many hotels so we focus on smaller numbers but in terms of quality level and exclusivity. thany to take it higher the other brands you mentioned now. we only have 10 hotels operating around the world. we have three new hotels under development, but luckily we believe they have given us very strong brand names in the super luxury space. ramy: one thing yvonne had mentioned was knowing the asian consumer. in new york i have been to the peninsula hotel. it is there but also its lost among the other hotels. it is not asian localization happening here, it is trying to for thatme, height space. how do you intend to do that to make it more prominent? clement: we don't think of asia

localization. it is much more by focusing on that quality. we are aware now there is a super wealthy affordability amongst quite a few different demographic segment groups. so we are seeing the top end business come from china, middle east and a number of other places. we truly believe in the world of increasing supply, so many new hotels being built, airbnb entering the equation and so on, there is a segment that would pay that premium price for something super luxury. anyne: you don't see opportunities here to scale the business? it is quite critical now to do more consolidation to grow. clement: there is one part that is quite valid which is because of the way we do things staying small. we don't get as much economy of scale in terms of growth.

we have global distribution systems, advertising. we spend money but only across 10 hotels. that is the way to keep quality and luxury and that is the way we prefer to keep it. yvonne: you have hotels on both sides of the pacific. what do you think of the trade war, and particularly if we see trade with the u.s. and china nations affecting business travel? clement: a full-scale trade war would not be beneficial. our business relies on flow of people, people coming to trade, invest and clearly we would hope it doesn't happen. however i would say so far we have not seen any negative impact. our business is going well, but no doubt that is not what we would prefer to see. yvonne: is there any way you can mitigate that if travel starts to slow down? clement: one thing of peninsula,

because we focus on super wally, actually our mix of business tends to be quite a lot of leisure as well as is this. in most of our hotels leisure is 50% or more. i believe the super luxury travel will continue because a lot of wealth is being created and people have income but nevertheless we would prefer to see more trade and people movement for business purposes. yvonne: i want to bring it back to the consolidation. marriott, they have merged, but [indiscernible] two weeks from now. combining these loyalty programs, talking about 150 alien members worldwide, does that force you to rethink your program? clement: that is not the customer segment we compete with. we use the word called the unmanaged traveler. why would that be unmanaged?

these are travelers who can make specific decisions which ones they want to stay at. these would be high net worth individuals, ceo's who know what .s a hotel in each city if they are trying to attract people through points or rewards or that sort of incentive, it is not our segment. question, where are you expanding? clement: we are building in three cities, london, istanbul and myanmar. these are taking a lot of resources and we are happy to go with these three. that would take us from 10 to 13 hotels. as a longtime owner operator, it is good to have. ramy: thank you so much, clement kwok. looking at the future trajectory of his company and the peninsula brand. looking at the things trending

on the bloomberg, terminal users are reading about the goldman sachs [indiscernible] tradingal cohead of its office. we track how softbank founder masayoshi son's focus has changed from the earnings briefings. and on tictoc feature about the bids of the world largest overseas soft drink supplier. you can see these online. this is bloomberg. ♪ s bloomberg. ♪

quick check of the business flash headlines. cbs says that investigates all allegations of sexual harassment and is trying to foster a safe and collaborative workplace. the head of entertainment rejected claims of a corporate culture hostile to women after a string of complaints over the

ceo. outside long forms -- law firms are investing -- investigating. the ceo will stay during the inquiry. half times is lowering their list. and another are among suitors selected for the second round of bidding. they have been seeking $1 billion for the assets, more than 20 times per earnings. profitsecond-quarter improved by lending and fee income while loans and assets declined. income rose from a year earlier. the nonperforming loans ratio was 1.4%. last week they beat second-quarter forecasts. it was a myth with trading slump.

amazon has removed items with nazi or white supremacist symbols from the website after criticism from advocacy groups. a blocked account of some and sacred suspend them. critics say the week and inadequately enforced policies anti-muslim racist, and other groups to spread ideas. mission accomplished for tom cruise. his latest mission impossible leading the box office for the second straight weekend. it added $111 million to a worldwide total of $330 million. hello mr. billionaire had an impressive second week bringing in another $65 million there but it was muted for disney's christopher robin. they managed only $30 million in ticket sales. yvonne: we are counting down to the market open. 3.5 minutes to go.

seems like we are focusing on china quite a bit here today. the pboc stepping into question the bearish trend in the renminbi. we have seen stabilization in the offshore, holding 84. is it enough to boost equity markets? we see that across the board in nikkei futures as well. futures up .1%, of the futures up .3%. we did hear from china talking about imposing tariffs on $60 billion of u.s. goods as well, so what does it mean with global market sentiment? we have risk on rallies despite what we see in the chinese work it. we'll talk about that market impact of trade tensions and discuss strategies. our asian macro strategist joins us. also the outlook for batteries and minerals in australia's mining sector. mark calderwood will join us

live from australia. this is bloomberg. ♪ this isn't just any moving day.

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♪ 8:00 a.m. in hong kong, i am yvonne man, welcome to "daybreak asia." the pboc raise the cost of shorting the currency, set for a small advance today. president trump reiterates his liking for tariffs, saying he has the upper hand on china. beijing refusing to black down -- back down. 8:00 p.m.s just past on sunday in new york. mike pompeo once against easing up on north korea. battery makers and electric

cars, we are live at the diggers and dealers forum to assess the outlook for lithium. ♪ yvonne: it seems like it is all eyes on china again. beijing authorities is stepping in to support the currency and an hour later slapping tariffs on u.s. goods, up to $60 billion worth on the list. we are seeing trade tensions ratchet up. another clear sign of perhaps the pboc not comfortable seating dollar -- seeing dollar china where it is. ramy: pboc advisers saying the yuan will not break seven per dollar. hard stopntially is a against further weakening.

as we said, it has pulled back from the seven line around 6.8 or so cute a very big -- or so. it is a big week around the world. last week, it was a central bank party. have the rba and some other central banks. trade will be the main thing weighing on people's mind with $60 billion of additional tariffs that could be threatened from the united states. there this week also talking about ethics reserves in china, whether they have been trying to use the route to stem currency decline spirit also current account numbers in focus after we saw the deficit in the first quarter. let's get a market check. >> checking in on equity markets, the nikkei 225 adding 1/10 of 1%. japan becomes asia's top share market for the first time since 2014, surpassing china. the yen looking fairly steady,

could be headed for smoother sailing according to options traders. fall has dropped to the lowest in a month. 68441re yuan trading at against the dollar, after the pboc's surprise move. are unlikely to see seven dollars against it anytime soon. we have a lot of earnings upstate. midday in hong kong. we have several on the radar, and toyota gaining ground after its first quarter. analysts positive about the report, but somewhat of a volume cut. dissolvinghis -- is a relationship with another company. we're also watching nissan, they have agreed to sell its electric

car business to china. samsung on the radar, gaining about 7/10 of 1%. the company is set to delay its investment plan announcement. the chipmaker saw its shipment to apple tumble. ramy: thank you very much. president trump meantime has defended his use of tariffs, saying later -- saying playing hardball on trade is "my thing." an additional $60 billion in goods could be hit in retaliatory tariffs. tom, trump is claiming to have the upper hand on china. really underscoring what he sees as the importance of introducing tariffs, saying they are working with the eu. this is ang that

tactic that will pay dividends in terms of the trade tensions and relationship with china, saying that the global economic foundations needed to be rebalanced in the u.s. favor, that the u.s. was taken advantage of for too long. at what he had to say a rally in ohio over the weekend. >> they have taken $500 billion per year for many years. we have really rebuilt china. it is time we rebuild our own country now. check theto fact present, he said $500 billion, is talking about the deficit, it's actually closer to $375 billion. nonetheless, president trump outlining, saying the tariffs were making a different, having an impact in the longer term would benefit the u.s. economy. that was his key argument. it comes after we heard from his

economic adviser larry kudlow saying president trump would not be a backing down after china published the latest list. the two you get from sides as they are digging in, no backing down from the u.s. or china at this age -- this stage. yvonne: we heard the $60 billion worth of u.s. goods china had imposed on friday, certainly not the tit-for-tat reportable retaliation we have heard from beijing. what does that tell you about the latest response? where is it really going to hurt? to target theg $60 billion, a whole range of goods, 5000 different items imported from the u.s. to china, everything from wigs too small to areas where they are going to raise tariffs at a slightly higher level. at the high end, things like meat and liquefied natural

gas. this is in addition to the $50 billion we've also had outlined by china, some were talking about a total of $110 billion from the u.s. market into china. china imports about $130 billion worth. we have been waiting for this response, they detailed it on friday and it is a range of tariffs, some more consequential than others. some of the energy players in the u.s. down on this news. consequences around the lng sector. we will look at the impact on the markets, you've been talking about the pboc running in place additional measures to make it more expensive to short the one that you on -- yuan. the fx reserves out tomorrow will show some indication as to whether or not they have been at all, andort trade out on wednesday. the focus on the markets is

beijing and washington digging in. yvonne: thank you, tom mackenzie there. it's get to the story on the currency and china. trade tensions escalate. the measure by the pboc makes it costlier to bet against the yuan. our markets reporter is here to talk more about this. that, tariffs, and before measures to support the yuan. >> the timing is interesting. i think 30unced minutes before the commerce ministry announced new tariffs. deutsche bank says that means the pboc is trying to support the one before the announcement of the new tariffs. an escalation of the trade war. it helps stabilize the currency before the potential slump. -- it wass also made

also on friday, it was close to seven per dollar. that was an important psychological level that had not been reached since 2008. if the level was bridged, it could trigger real panic. it was a bold time to move that day. ramy: this mechanism, is it more of a band-aid solution, or credit -- or could spell the end of depreciation? >> it is kind of like a speed bump. it is not going to change or reverse the trend. i don't think it makes many people suddenly bullish about the currency. all of the reasons driving the depreciation over the past few months are still there. the trade war is still escalating, no signs of easing on that front, and china's economy is slowing.

it makes sense for china to have a weaker currency in this environment. i don't think it will reverse the depreciation, and they are still forcing depreciation going forward. ramy: thank you very much. let's get the first word news. arabia hassaudi frozen trade investment and economic ties with canada, the latest escalation over the arrest of a women's rights activist. they have ordered the canadian envoy to leave within 24 hours. us week, canada criticized saudi arabia. the number of people killed in a powerful earthquake on an indonesian island has risen to 82. the magnitude seven tremor struck just a week after another quake killed a dozen people on the island. the latest quake triggered a priest in army warming -- a

brief tsunami warning. local airports remain open. brexitade secretary says negotiations are more likely to end in failure than success. he says there is no a 60% chance of a no deal outcome. he blames the european commission for a lack of flexibility. a prime ministers office issued a statement saying the government remains confident that they can secure a deal with the eu. the call has been ended for a nonaggression pact in the south china sea, and for north korea to turn its nuclear promises into reality. china and neighbors issued the initial draft of the so-called code of conduct, said to be a milestone after 16 years of sporadic talk. north korea criticized the u.s. for what it called alarming

sanctions. bloomberg has been told that alphabet is in talks with chinese copieser about offering google cloud services on the mainland. -- begin earlier this year, but trade tensions could be an obstacle. lawmakers are demanding obstet -- answers from google about its search engine for china. day,l news 24 hour a twice 700 more than journalists and analysts in more than 120 countries. this is bloomberg. yvonne: next, the pboc strategy for discouraging yen shorting. ramy: plus, mike pompeo issues -- urges continued pressure on north korea. we will talk about geopolitical risks later this hour. this is bloomberg. ♪

♪ ."my: this is "daybreak: asia a closewe are keeping eye on chinese markets as we start the week you'd after fresh solve those in the trade war, and the yen support measure goes into effect. analysts expecting respite for the currency, but perhaps more pain for equities. our expert is joining us in the studio. how should we read into these back to back analysis from beijing on friday? on the one hand, it is positive they are supporting the currency, but now we have a new round of tariffs. >> it highlights that they are level weo defend the saw in the trade index in 2017. tariffs are different from currency. tariffs are limited to a particular sector and particular country. currency effects everyone.

if they really want to use the currency, the context has to be there. also creating a penalty for other trade partners other than the u.s. but i think they are keen to defend this level on we got the signal on that friday. also in terms of this tit-for-tat with the u.s., i think simply they are trying to raise the stakes. in some respects it is a way of raising the stakes, and we are still trying to get a compromise with the u.s., maybe around election time. yvonne: these reserve requirements for fx, we've seen this from china before, and we continue to see some the kleins after -- see some declines after they announced these measures. you think they can sustain some kind of reversal? signaleast we got the from beijing.

we will have to see from the fx reserves data, whether they are using the reserves to defend the currency. that is our suspicion. capability atthe least for a little while, and we think they will stick to the script for the time being. we think it will be effective in the near-term, and another dimension is u.s. policy. let's keep in mind that weakerionists like currency, and trump has complained about the currency already. there are those dimensions. at least in terms of keeping the market stable, we think it was the right thing to do. it might be effective in the near term. yvonne: currencies are important, equities, some are saying there's a lot of pain, but it is rare to see the stars aligned when you are talking about more easing, valuations are cheap. ,undamentals are still strong but a little off the highs of late. do you think we have seen a

bearish sentiment when it comes to the chinese markets, too far too fast? homin: to some extent, chinese economy is wedded to the u.s. economy. yvonne: are we nearing an inflection point with equities? homin: we suspect that is the case, maybe in the fourth quarter or early next year, when we have more clarity on a trade and u.s. policy, it might be a nice window to do so. is credit, youus look at different sectors and are down since the scare in the second quarter and pressure from trade. a nice way to tiptoe into the market might be the credit side. eventually in the fourth quarter and first quarter, when we have more clarity, it might be an opportunity to be more aggressive on the china story. ramy: you were talking about

u.s. policy. what is your base case scenario in terms of where the trade tensions, trade disputes are headed for the rest of the year? acceptwe simply have to that some of these tariffs will stay. for instance, steel and aluminum tariffs are politically powerful, it is difficult to see the trump administration walking back on these things. but if you think about how the u.s. government has behaved since the tariffs were and implemented ine july, it is clear to us that the pain threshold is low for the u.s. government. for$12 billion subsidies farmers is nothing compared to the size of the u.s. economy, but they still have to do it because it is a politically sensitive segment. we think the rationale for compromise, maybe around election time, is there. we will may have to live with some of the tariffs staying in place for quite some time.

potentially, the tariffs on $200 billion of trade, exports from china to the u.s., and corresponding measures from away, they will likely go but it is difficult to predict precisely when things will go away. we think the political rationale for copper miser still there. ramy: an interesting thing you point out in your notes, investors are probably overlooking the democratic agenda. of not see many people talk about this. what do you mean by this? homin: what is very unique about the trump agenda is that much of it is from the democratic agenda, especially on trade. the 1990's, about it sounds very similar. we are not saying the democrats will be aggressively protectionist. we have to think about the

internal debate the democrats are having right now, especially with some of the primary effects we have seen from places like new york, for instance. if we imagine, i think the consensus is for democrats to take the house and republicans the senate, it might be stable, but if democrats sweep in november, there might be room for trump to what we call triangulate. that might not be expected by some of the investors out there, because the expectation here is that congress going forward, especially if it is opposition party, they will have to restrain trump on most of the measures, but on trade and economics, maybe they can cooperate from time to time. yvonne: do you see the trade war escalating to a currency war? do you think the president will get his way with a weaker dollar policy? homin: i think weaker dollar policy china will work on.

it might boost emerging-market trade and investment. , it is moree supportive of monetary policy, so i think china can live with the outcome. the other outcome is stronger dollar, continued pressure from the u.s. on tariffs and other investment and trade measures. that kind of scenario, it would be more difficult for china to withstand. i think if it is a weaker dollar and lower real rate policy from the u.s., i think china can live with that. yvonne: you are little more negative about where the dollar goes in the near term, why so? all,: i think, first of the fed will continue to raise rates. it is very difficult to see how they can accelerate the pace of rate hikes. there is a lyrical pressure, protectionists like weaker currency. trade, china was

a dominant exporter, but that implement it tariffs. they avoided despite shifting production to taiwan, the u.s. put tariffs on taiwan. they shifted to malaysia. malaysia until last year was the leading exporter of solar panels to the u.s. currency is -- populists like higher inflation and more jobs. deficits,e higher negative for currency. what is propping up the dial -- the dollar right now, the idea that there's something fundamentally positive happening in the u.s. and the fed will be very aggressive in terms of the rate hike trajectory. we don't think there is a fundamental revolution in the

trajectory, we think the trajectory is forward. we think the fed is lightly to keep the real interest rate slow. the means at some point, second half of the year, you hit that point where the dollar cannot depreciate further. yvonne: and you have twin deficits as well. we have to leave it there. our macro asia strategist joining us. get the stories you need to know to get your day going on daybreak. bloomberg subscribers, it is on your terminal and your mobile app. this is bloomberg. ♪

♪ a quick check of the latest business flash headlines. saysphones a player friday's computer virus will calls shipment of lace and additional -- shipment delays and additional cost, but it

should be back to normal on monday. the impact on third-quarter revenue is about 3% with growth margins affected by about 1% point. it happened during the installation of new software. ramy: a higher second-quarter profit driven by improved lending. from a yearose 16% earlier, to 884 million u.s. dollars, and the loans ratio was 1.4%. they beat second-quarter forecasts. yvonne: long time partner's woodside petroleum and chevron are now in competition to shake the next phase of australia's natural gas development. they are trying to build a pipeline that will allow them to develop their own fields. they will also let third-party ship gas -- third parties ship

gas you'd -- gas. his lithium becoming oversupplied? coming up, we will discuss with one of australia's newest reducers. retail.

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♪ yvonne: it is 8:30 in singapore. half an hour open from -- from the opening of trading there. ramy: you are watching "daybreak: asia." let's get the first word news. president trump has defended tariffs, saying laying hardball in trade is his thing. he told reporters that it is time to focus on america. he says they have weakened nations bargaining power in the trade war. friday, china released $60 billion worth of tariffs on the u.s..

that his sonssays meeting with the russian lawyer was to get information on hillary clinton, it was totally legal and done all the time. this contradicts his statement last year, saying the meeting was focused on adopting children from russia. know abouthe did not the meeting of the time. stephen said been appointed as special envoy. he is to facilitate relations between two countries. he was given russian citizenship in 2016 and has criticized the u.s. government while defending president clinton's -- putin's policies. iran is racing to complete a string of deals before the u.s. intelligence pass new sanctions. and has taken delivery of

new passenger planes after washington give approval. popular sentiment has been building as tensions with the u.s. push the riau to new lows. security forces and venezuela have made a wave of arrests after a military parade was attacked with explosive carrying drones. the president of venezuela was unharmed. they're drones were reportedly carrying c4 explosives. six people have been arrested, including one man at the julie -- allegedly involved in an attack on a military base last year. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm haslinda amin, this is bloomberg. time to see how the asian markets are shaping up this morning. we are pretty steady this morning after the pboc stepped

in to support the yuan. the asian markets pretty positive. >> so far so good, stocks in the climbing across the region, but the nikkei 225 looking fairly flat. we have tokyo electron and fast retailing heavyweights dragging. -- seeing cn gains gains for australian stocks. this is the earnings season. 200ast hundred -- the asx expected to push higher. the aussie dollar is under pressure. this is australian rate diverging from the u.s., it is saying to bash it is intensifying. look at sydney, given havearnings spotlight, we seek falling as much as 8%. the company expects profit

growth to come in at the top end of the range for fiscal year 2018, but going forward, expects profit growth to be flat given early stage ventures. in tokyo, i want to highlight pacific metals, leading gains in tokyo. earlier, jumping as much as 18.2%, the biggest rise since october 2008. they make electromagnetic materials for data communication. gaining ground. if they don't form a new alliance, they could have structural weakness. i want to highlight this story as well, a furniture retailer jumping on report that an event management company making control following a capital agreement in november. this comes as the company said it is mulling options to turn

around the business, including forming business partnerships. thank you very much. our next guest is the head of australia's newest lithium producer and says its product is "possibly one of the best concentrates to leave western australia." joining us from the diggers and dealers conference. mark, good to speak to you. what could this be one of the best concentrates to leave western australia? iron and lowlow potassium and sodium. it is good for the converters. it saves them money during conversion. also high in lithium. ramy: looking at the outlook for the market, tell me where you see in how much you see in terms of demand. mark: demand is strong, there

are number of conversion plants being constructed at the moment the don't have supply. andplans are being built there are companies chasing feedstock for the plants. ramy: there have been concerns recently about short-term oversupply could to what degree -- oversupply. to what degree is that warranted? or do you want to tell people this is not something to be nervous about? mark: we are not seeing it from the production and. the demand for product is still very strong. issuesnot seeing any with oversupply, but we would not see that necessarily good -- necessarily. these copies are looking for long-term supply sources. syria's players in the industry we talked to are not worried

about six month or three-month movements and pricing. -- in pricing. yvonne: whether it is battery measures or car manufacturers, i think this time around, as you were mentioning, they seem more relaxed about the outlook and what -- than what we've seen in the recent past. do you see potential issues that could tighten the market in the next 12 months? mark: no, not necessarily. i think we have a steady increase in supply. supply is behind expectations this year. next year, we will probably still be under predictions in terms of supply. i think as supply increases gradually and as more of these conversion plans to build, there will be a steady increase of supply and demand.

i don't see any dramatic shortfalls anywhere, i don't see any massive oversupply. you are currently targeting production of about 155,000 tons per year of lithium concentrate. how much more beyond that can you do, and what options are you looking to grow more? fairly easy, it is for us to upsize our operation. our plant is going well, and we can double up reduction was quite limited capital spend. as little as $30 million and we can double our production profile. we are one of the easy mines to upsize in terms of capital expenditure, and we are in discussions with a number of potential off takers that could take that sort of supply.

over the next few months, we will have a fairly good idea about changes to our production outlook going forward. yvonne: we talked about lithium batteries, they have been included in a list of u.s. tariffs, and china also potentially placing tariffs on lithium carbonate. how big of a threat is the trade war do you -- to you? mark: i don't know at this stage. western australia will produce -- it will become one of the world's biggest hydroxide producers. that more chance product could be converted in australia. i think australia has a pretty good relationship with the u.s. and china in terms of trade. yvonne: we are going to leave it there, we appreciate your time. mark calderwood. next, how the u.s. and china

trade war could hurt economies in southeast asia. guest to join us to talk about the risk and opportunities in the region. this is bloomberg. ♪ bloomberg. ♪

♪ is "daybreak: asia ." a regional forum ended with calls for north korea to turn nuclear promises to reality. easingmpeo warned about up on pyongyang, pointing the finger at china and russia. pompeo met the north korea foreign minister and said they had a quick, polite exchange. later, the foreign minister accused washington of demanding too much without demanding -- without allowing anything return. meanwhile, eight has been offered to vietnam, the philippines and indonesia.

a long-awaited draft of a so-called code of conduct was issued for the south china cheap. china laid the blame for increasing militarization squarely on the u.s. after all of that, joining us from kuala lumpur, a banker and commentator, chairman at the asean business advisory council. trying to sum it up through the lens of what is happening with china, before we go elsewhere, what is your biggest concern and what is your biggest hope? >> i think the biggest concern the looming asia is trade war. the trade war that has started

between the u.s. and china, and also america's increasing protectionism. it might affect other countries. [indiscernible] singapore, vietnam, malaysia. we have these concerns, and i think they were voice quite clearly in the meetings in singapore to both china and the u.s. i don't know if anything came of it, but at least we have the opportunity to express that concern. so far, in terms of how come of those meetings you mentioned, the main measure is nothing that happened. -- nothing bad happened. our interest is to see what good came out of it.

what you just mentioned is a single negotiating test, the code of conduct, that is the sort of outstanding for 16 years, since 2002, when they first negotiated what was called a declaration pete -- declaration. [indiscernible] in those years, especially since 2012, 2013, singapore and other countries have just observed how china consolidated its position in the south china sea to back its territorial claims and militarized large parts of it. while the united states, as you mentioned, china now accuses of increasing tensions in the south been i suppose

sharing the flag, the freedom of navigation, naval visits. it stays the way it is, and let's hope the code of conduct will be negotiated more seriously. ramy: i wanted to ask you, in asean can and can't do here, critics will say they are a bystander, buffeted back and forth. what do you say to that? and what is something they can do as opposed to getting in the middle? in the short-term, they are completely in the middle, but it can do a few things like talking. not necessarily doing, but in terms of what they can do, they can try and consolidate economic

integration, regional economic integration. [indiscernible] it's not a real economic community yet. milestones and milestones. they could try and do that, and there are many things that need to be done. reduction of trading costs. [indiscernible] consolidatest their integration and size. dollars.ion u.s. if it was one economy. so they must make it one economy. that is part of doing. the other part of doing is enlarging the regional economic through competence of economic partnership. -- through conference of

economic partnership. are lead by other countries. just want to get some questions and before we have to let you go. the tradelking about war, does it come to a point where southeast asian nations have to choose sides between the u.s. and china? wheret come to a point asean needs to choose sides in the trace -- the trade dispute? >> it can't take sides, the u.s. market is by far the largest in the world, the u.s. is an economic superpower, even though china has grown. the u.s. is close to 20 trillion, and china is about 13 trillion. there is an impact, a big impact in the u.s. measures against china and is countries do not

want to take sides. what they want is what everyone talks about, open trade, free systems, rules-based systems. now, whichhey are trump feels are disadvantaged to the americans. yvonne: thank you, we appreciate your time. about how a potential trade were between u.s. and china could further integrate the asean region. don't forget our interactive tv , you can dive into any of the securities are bloomberg functions we talk about and become part of the conversation. you can't send us instant send us -- you can instant messages during shows. this is for bloomberg subscribers only. this is bloomberg. ♪ g. ♪

♪ isy: welcome back, this "daybreak: asia." issued hsbc second-quarter results on monday with analysts looking at evidence of better revenue momentum. our asia finance editor joins us from tokyo with more. tell us more about what to expect here. hsbc been doing to drive revenue growth? basically they have

been pivoting to china, this is what the new ceo is continuing from his -- continuing. been is the key, it has several years retrenching another markets and putting resources into rader china, including hong kong as well. today is how much china will drive revenue growth for hsbc and the new regime. hong kong is the gateway to china, and it has been benefiting from rising interest rates in the u.s. with its local benchmark rate tied to the bit rate. some margin on the lending coming through this quarter. not fully at this point because the prime rate, one of the key rates in hong kong, has not gone up yet. but certainly the benefits will start to come through. ramy: management has been

committed to improving profits this year, what is the outlook for costs and profitability this quarter? russell: the corollary to revenue growth is expansion, the issue of cost good -- cost. they have a measure of how fast revenue and cost is going. they had a negative last quarter, costs are growing faster. positive foring 2018, they will have to get on track for this quarter if they want to achieve that target. ceo has also pledged to spend $17 billion in greater china, expanding business there, which was not something a lot of investors were impressed with. will be a bigt focus of today's results as well. ramy: russell ward in tokyo, thank you very much. coming up in "daybreak: middle

our interviewiss with a finance director. more to trading now, larry kudlow says president trump will not back off in the escalating trade war even as beijing plans a $60 billion retaliation. currency --hina's a currency is weak. >> i'm not an expert, i tried to follow it and it looks to me, you all may disagree, it looks isme like the china economy declining in growth, it is weakening almost across the board. it looks like the people's bank of china is trying to pump it up by adding high-powered money and new credit and so forth. the currency fall, i think that is partly they stopped defending the yuan, the thing to offset

the u.s. effort to get rid of their unfair trading. some of the currency fall, i think it's just money leaving china because it is a lousy investment. if that continues, that will really damaged the chinese economy. if money leave china and the currency could be a leading indicator, they will be in a lot of trouble. i will make the case that they are in a week economic position, not a good place for them to be, these of you the trade vis-a-visns -- to be the trade negotiations. plus, president trump is determined to follow through on go,asks, ip theft, no forced transfer technology, no go. nonreciprocal trading. the president is a trade were former, we have said many times,

no tariff barriers, no subsidies, we want to see trade reforms. china is not delivering. their economy is weak and currency is weak, people leaving the country. don't underestimate president trump's determination to follow through. i can't speak for the common his party -- communist party in china, but i can speak for our president, do not underestimate his determination to change trading practices. >> one thing you can speak to is the strategy of the president, it seems that the strategy of the of meditation at the moment is to exert maximum pain on the chinese economy. is that the direction of travel for you guys? >> what was the end question? >> is the direction of travel for you to exert maximum pain on the chinese economy to get them to come to the table and change the trade regime? >> i would maybe rephrase it a little bit. i think what we are saying is that we are serious, and in a trade, as you well know and your

guests know, negotiations often include the use of tariffs. and the president has said time and time again that targeted tariffs will be part of the game plan with china, and less and until they begin to meet our request, which so far they have not. months, we've hardly had any conversations with them at all. there is some hints now they may wish to talk, but i can't say that with certainty. was larry kudlow, national economic council director, and that is it for "daybreak: asia."

♪ rishaad: the yuan holding onto gains. weekendght, saying the by iris will hit businesses but expect productions to return to normal. president trump reiterating, saying he has the upper hand on china. beijing refusing to back down. i'm rishaad salamat. haidi. wesydney, i'm the diggers and dealers for him. this is bloomberg markets: asia.