>> u.s. and listed financials and rising oil gave energy producers a boost. s&p closed at its highest since january. 11-month smp t to an low. >> iran demanding compensation of what it calls decades of american intervention. >> new york prepares to put the

brakes on uber. that should bring relief. break s this is "day australia." will the next hour, we be looking how it will be playing into your tradey day and a little hope and optimism on the market, but it was a financial as well as energy pushing up stocks, trade being on the back burner here. looking ahead to where you are across the asia-pacific. we are looking at central banks. four-tents by nearly of a percent. the number 2872 is the magic number that would signal the end

of the correction. looking up the boards. currencies and the bloomberg dollar spot was up. you can see it holding on to those gains. revealing abia was it had production cuts. and gold futures in this rising ate environment falls. haidi: no response. very close to that 12,200 level. asia, the setup that we are getting, pretty busy day. we are looking ahead to the reserve bank of australia and how trading is getting under way in new zealand. e are seeing a downside. we have the bloomberg dollar index returning to strength and close to a forte night high.

we are treading water. and looking to see the downside and not looking for a move, keeping the rate on hold. but looking for a potential downward. we are continuing to see downside pressure. rising to 538, just a reminder the record high is for dollar era and bonds tumbling and retall tower sanctions and just looking at that 10-year bond yield closing in on that 20% level. let's get you to our news. >> iran is striking a hard line ahead of u.s. sanctions and demanding compensation what it calls for decades of american

intervention. iranian president looks forward to talks but while it is not under sanctions and said iran can rely on china and russia. sanctions are to be imposed at midnight eastern. greece has received a final payment in its european union bailout after objections from germany delayed it by several weeks. the mechanism paid the uivalent of $17 billion, $11 billion will go into a cash offer for almost two years. the remainder is paying down depreast's considerable debt. contradict star has formed a coalition and ready to name ar government in pakistan. it has 174 lawmakers on its side more than 172 needed for an absolute majority and expects to have many as 182 in the end. claimed tion parties

widespread fraud in last month's election. the c.e.o. of pepsi crmpomp is leaving in october but will remain chairman until early next year. she is the first woman to lead the company. her replacement will be the sixth c.e.o. of the 53-year history of the company. global news 24 hours a day powered by more than 2,700 jourmists and annual iferts in 120 countries. this is bloomberg. >> we have breaking news. this has to do with china. trading is expected to start on august 8 and says that it is hong kongaise the net

i.p.o. and pricing at the shares at $1.26. finally, it says that the hong kong i.p.o. retail portion is 1.36 times subscribed there. china tower says trading can be expected to start on august 8. back to the u.s. market close. trong results from buffetts. berkshire hath away boosted stocks. bloomberg has the latest. >> the economists and analysts if you take the trade war, the earnings tend to rise the market. let's go right to the snapshot. there are a lot of interesting factors in the mix. dollar, oil and stocks. gold is lower and we have oil when it gets to how a lot of

hedge funds getting scared off by these trade news. let's go into the big movers of the day and i'm calling them spotlight stocks. berkshire hath away coming in with a strong second quarter report. that is boosting the sector. facebook looking large as there is speculation they may have some kind of connection with the banking industry. twitter showing google along with the ride. it's not going to be cleaning out the information war accounts. let's go into what is really the big story of the day and that is the earnings, unprecedented earnings is the title of this chart. find our charts and the story is 80% of the s&p firms have exceeded estimates.

we are way up here. that is a peak. health care has led with 94% and telecommunications sector which is just three companies. and energy has been exceeding expectations, 44% of the time. that is in the cross winds that we have in the oil sector. >> they both saw a bit of a pop here, not just because of the saudi arabia supply issues, but also because of iranian sanctions. what is the detail we need to know? this is the first week that the sanctions will be taking effect. there are concerns that china would not go along as a way to show its diss dens with the u.s. so that is interrupting the equation. look at the price charts. it has been a rocky road for oil this week alone but did catch a

bit of news from saudi arabia engaging in production cutbacks and there is a view to see strong demand growth and that only the russians and saudis are going to make up for iran and venezuela. look at the bigger picture and the oil demand is very much driven by global factors. all this trade war talk has scared away the hedge funds, the direction is very difficult to call. day-to-day, we seem to get new information on where the trade war conflict is going and have aken their ball home with it because hedge funds are at a two-year low and we don't usually see that. haidi: i want to ask you about this bank and talking to an adviser about selling a third of its business to an i.p.o.

impressive numbers. >> the real question is evaluation. and going to advisers to find how much of its business it would be. $90 billion is the number that is being thrown around. take a look at the chart there. again, this would be domestic business and planned i.p.o. offering. some who are familiar with this situation and we are getting information saying this could possibly be the biggest i.p.o. ever. they are speaking to advisers, this is the short tirm picture about selling a third of the company which would come to $30 billion. people are not asking to be named because discussions are ongoing but this is getting information. the decision will depend, these people close to the situation say on feedback from the public on what the interest might be in this kind of stock. hide

haidi: thank you so much for that. taking a look at what is still ahead, the aussie declining. the biggest loser in the g-10 space overnight. i will be asking what investors are looking for. > jamie diamond's yields and our next guest says it is possible. ♪

aidi: i'm haidi. >> as you know, we have been discussing jamie diamond's call saying markets should prepare for 5%. our next guest says that is certainly possible. we are joined by joe davidson. while we talk about this, i want

to show where we are currently are with the yields right here with the 10-year, how can the bloomberg terminal guys and that is your function, 2.94, 10-year treasury yield. you say it is possible to hit 5%. that is interesting. month ago, you said 2.5%. >> thanks for having me. anything's possible, although it's possible, i think it's highly unlikely. we would need to see several factors unfold to get to even 4% on the 10-year. we would need to see a chill break out in higher wage inflation and haven't seen it yet. we would need to see the e.c.b. and bank of japan moving ahead any sort of tightening prospects. if we saw all of that, the whole

rising debt picture would come into the forefront. and we would use that. >> along what time frame and what number are we talking about that is probable then? >> something that we have a higher conviction is the 10-year close to where it is now. the forward rate market would anticipate a further rise in the 10-year. we see more pressure. we see the federal reserve raising the rates four more times before stopping the cycle in the middle of next year. on the two-year part of the curve, we would see upward pressure. it largely depends how and what the economic conditions are when the fed communicates its policy. were with non-farm policies coming in cooler, g.d.p., 4.1%, do you expect a pause? i know last time you were saying

december, are you still holding to that? >> we have revised. we saw it last time last year, the fed was going to articulate a pause and the fed fund rate for the first time in this cycle would be at the core rate of inflation. but the labor force has been deproge. core inflation is tracking according to expectations. we haven't changed our forecast, but we have eliminated the pause because the burdenen of proof has risen for the fed to stop before then. >> just for the benefit of our viewers and very simple between china p.m.i. and this is a bellwether. they are very closely correlated. how closely are you watching this as the can ari in the coal

mines and see the impact of the trade tensions? >> it's a great point. we are watching it closely. we saw our lead indicators on china at the turn of the year, even before the trade war skirmish started to gain in volume. so we are watching it close. we will have a great deal of volatility with respect to this measure. on the downside clearly of uncertainty and china's deleveraging. on the upside, we may have false positives given the need at least the thought to restock inventories. i don't think we will get a clear signal on some of these measures unfortunately until we are probably in september. >> do you have a clear consensus what this does to the u.s. economy? are you working for an

artificial boost or than the ultimate question does the fed have the policies to counter these effects? >> sure. i think it does, at least up to a point. we are most concerned from the tail-risk scenario from a recessionary scenario. and much like an oil shock, i think the fed in any central bank will look through it as will the bond market and look towards economic weakness. we are seeing a little bit of a rise which tend to crimp investment. and we would need to see the tariff reach roughly $500 billion given our calculations before we would downgrade our economic forecast. we are not there yet. i hope we don't get there. but that is the number as a

measure of corrections. >> to push a little bit further where we are in the cycle. hop in to the terminal, looking at the chart of the s&p as i mentioned earlier, 2872 and change is the number is to watch. but looking ahead, where do you think, if we can get past that towards something higher or trade tensions that we are talking about something that is going to keep us from growth? >> well, i think it clearly is a headwind and the other is trade valuations. we still remain guarded on the capital markets, but if our central forecast is achieved which means the fed engineers a false landing without a material outbreak of inflation, then this bull market could continue.

it it may be at a lower growth trajectory, but hard to see a recession occurring. >> and your forecast where the dollar is going to be going, by the end of this year it's going to turn bearish. >> i think it would be downward pressure for two things. we would have monetary convergens and the federal reserve would stay whole around 3%. i don't know about the bank of japan but the e.c.b. would be closer in liftoff and you get into other pressures. so all that, that would be a reasonable expectation as we go into next year. >> i appreciate your time and incites. bloomberg new economy forum is

coming up in november. and we spoke to the former treasury secularry summers, the looming trade battles and in particular china. >> i don't think china is the state of globalization. i think china is a developing still in terms of its average income country with average standards of living like those in the united states during the 1930's. so its context is very different. >> larry summers is on the advisory board in beijing that is taking place on the 8th of november. uch more can be found on bloomberg.com. ♪.

>> you are watching "day break australia. iranian president is taking a tough line ahead of u.s. sanctions. he criticized president trump but left the door ajar for talks if the sanctions are lifted. >> negotiations and sanctions at the same time is meaningless. if someone stands in front of his rival or enemy and pushes a knife against their arm, his response is should put the knife in his pocket and come to the negotiating table and use logic. >> we are joined by jim stugger. what does president trump want? >> the administration officials briefed reporters before the administration officials were announced. they want to renegotiate the

nuclear deal that was previously goirted under president obama and other major powers of the world. but they also want added into that some changes in the behavior of iran's government, namely, they want them to stop developing missiles that could possibly carry nuclear warheads and end support for hezbollah and hamas and withdraw their forces from syria where u.s., russia are engaged in the civil war there. they say they do not want necessarily regime change, but that is some of the subtext here of wanting to have a change of behavior in the government. now the u.s. national security adviser john bolton says trump remains open to negotiations but as we saw the iranian president

has scoffed at that. >> joe, the u.s. pulling out of the jcpoa. what will europe do? will it go against the u.s.? >> they are in a bit of a box. the european union had made steps to try and protect its companies from the effects of the u.s. sanctions but as a practical matter, these firms are not going to be willing to risk the massive u.s. market in exchange for the prospect of small gains in iran. so the effect of the sanctions, though the europeans may speak against them and want to resist them, will, in fact, still have an impact on businesses trying to do work in iran. one of the u.s. officials said that 100 companies have already announced they are going to withdraw from the markets, so

they are in a pretty tough place. >> thank you, joe. let's do a quick check of the latest and softbank is mulling an i.p.o. over its wireless arm with the potential of over $90 billion. talking to advisers of the final decision and will depend on feedback. $30 billion would make it the argest listing ever. >> seeing creditors and bankrupt toys 'r us are making an opening bid for its operations in asia. far less than the billion dollars the company was touting a few months ago. the lenders would make a credit bid rather than cash and ownership of the unit and auction in new york next month.

china's renewed, the warning we are seeing before. don't bet against it. we'll get analysis, next. two, down and back up.

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haidi: it is half past 8:00 in sydney where markets open in 90 minutes. futures, not too much action. ibid. of trading warfare ahead of the rba decision. no change expected, 1.5% is where we are expected to stay. it is 6:30 p.m. in new york and you are watching "daybreak: australia." now we have the first word news. >> facebook jumped on optimism that it is forging deep ties with banks. usercould boost

involvement as growth slows on the main platform. facebook tried to make messenger and natural communications destination with the aim of replacing email. however, it faced criticism about security of private data. the leading u.s. aluminum producer is asking washington for release from tariffs said to be intended to help. from thed for waivers 10% duty on metal imports. three of them are for aluminum available from u.s. producers, and two others are for metals that cannot be made in sufficient quantities domestically. the turkish leader sank to a new low and bonds tumbled as a with washington affected this. the rate on 10 year bonds hovered below 20%. the turkish president vowed to respond in kind after the u.s.

imposed sanctions for the detention of an american pastor. a new report highlights the gap between making music and marketing it. citigroup's artists received 12% of the $43 billion generated by including last year, cd sales, streaming, youtube ads, radio royalties and concert tickets. complaints that record labels and text companies are getting rich off the work of artist. global news 24 hours per day on air and on twitter, powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. haidi: let's get a quick check of the markets. the early markets in asia, trading in new zealand getting underway. no change expected from the reserve bank of new zealand. i little downside when it comes to kiwi stocks, the kiwi dollar

at 67.29. the bloomberg dollar index climbing to the highest in a fortnight overnight. sydney futures looking flat going into the open in sydney. the aussie dollar, 73.87 -- 0.7387. let's get more as trading gets underway. our bloomberg markets editor is here. marching higher as european and asian shares struggle. there are a lot of analysts saying these concerns over trade are still there, but for the session overnight, they didn't seem to matter. >> we talked about this before, the way that trade concerns are something that, it is difficult to pin down what the impact is. ifre has been arguments that

it wasn't for the trade wars, the u.s. stock market would be higher. it takes a while to come through. at the moment, we had some very nice earnings from berkshire hathaway that came out. print ate strong gdp the end of last week. the u.s. looks like it should be an exception, but the difficulty seeor asia that as you can in the futures this morning, there is not a lot of followthrough out of wall street. wall street looks happy but that is not putting a smile on asia plus face. >> we have to look at the lira. it is hitting near record monday., crashing it had been 5.37%. any way to stop this? >> it doesn't look like turkey has much of an idea how to stop it. you are right, this helps add to

the gloom for emerging markets and risk appetite in general. the retail some of currency traders in tokyo might be facing fresh margin polls. that has happened before with and other currencies. unless the sanctions go away, erdogan finds a way to get dialogue with the trump administration, that will keep pressure on the lira and bond yields. we have a chart that we can show you about how the yields are climbing and climbing and the lira is crashing. turkey's central banks made some tweaks around the edges overnight that did nothing to halt the lira. it didn't last long. the commentary in the markets is, they need to raise interest rates. the central bank in turkey needs to raised -- raise interest

rates. unless mr. erdogan has other ideas of things he might try trading,o restrict there has been no sign of that. ramy: they had the opportunity earlier but decided to hold against that. it has pollen 40% against the dollar year to date. bloomberg news markets editor garfield reynolds, thank you. check our gtb library for the charts you just saw on the bloomberg terminal. let's head to the central bank world. the people's bank of china drew a line in the sand with its move to make it more expensive to short they -- short the yuan. in trading today, the yuan is moving about 0.33%. our policy editor is watching this. what is the pboc doing?

to what degree is this going to work? >> they are pushing back against an traders. yu last friday, they announced a on reserve are why are meant selected foreign exchange trades. they are trying to remind traders, short the yuan if you want but it can be dangerous. let's take a look at a chart from our library. this shows you for eight weeks in a row, the onshore renminbi has been declining anywhere from 1.7% to 4%. it is the length of decline and it is escalating trade wars. the fed will raise interest rates. the list for the bears on the chinese currency are a slowing gdp in china, rising debt risk as the yuan weakens and liquidity gets more scarce, and the trade wars are escalating. kevin smith at questec capital

in denver thinks the renminbi sink by 50%-70% over the next 18 months and the chinese will print more money and do all kinds of things. but even with this bearish view, 25%,ended his positions by realizing the pboc will do whatever they can to stop this. the holes are betting on -- bulls are betting on china to stem capital outflow. this is interesting. economic observer cited the pboc toing the yuan will not fall seven on the dollar. but around 0.680, you're getting close. rba, theat can the aussie dollar is coming under pressure. , australia's

economy is very dependent on china's economy when it comes to exports of key australian commodities. that is not a surprise. it has fallen against all of its because thend part reserve bank of australia potentially may cut its inflation forecast. that would be a dovish signal, although no one is expecting a rate move until the middle of next year. the rba is holding the key rate at 1.5% again. capital spending is seen as a headwind. it has not picked up much. wage gains are soft. another chart from our library, you can see wages, look what they are doing. they have leveled out, just over 2% year-over-year. here is the key rate. inflation is barely at 2%, the bottom of the rba target, another reason given the flat

wage growth that they may decide it is time to cut inflation forecasts. you know about this well, the housing slide in sydney is another reason why the rba may say there is nothing we should do now, we don't want to put any more fuel on the fire. home prices falling. ort was wanted a year at -- two ago is more than some have bargained for. haidi: thanks for that. we will get plenty more on the aussie meeting. what we are looking for in policy statements. this is bloomberg. ♪ ♪

♪ welcome back. i am in new york. haidi: i am sydney. you are watching "daybreak: australia." sydney home prices are sinking.

the rba may amend its policy outlook, and the cash rate could remain on hold. the bank of australia chief economist is with us. we have the same conversation about being stuck between a rock and a hard place. low inflation, low wage growth, the property market is an issue. overlaying that is the trade war. making things difficult for policymakers. i think we will see the same outcome today, and that is doing nothing, leaving the cash rate at the current record low, 1.5 percent, signaling it will stay at that level for a long time. haidi: will we see any changes to the language of inflation and wage growth? our whatmbers we see we expected to see. higher oilanges prices, so what the margin you could see the headline cpi nudged up.

i think forecasts will be unchanged. showing any moved to the middle of the target, that is a long way away. look: this chart takes a at expectations for the aussie dollar, the worst performer out of developed market currencies. hedge funds are betting that the aussie will continue to weaken. what is your view on that? these are good factors if you want to run through, the trade war, the verge and if the u.s. continues to go on its trajectory. you heard jamie dimon saying watch out for rates close to 4.5%. what is the value of the aussie? >> around about $.83. certainly, all those forces you point to suggest a move. the medium-term, we think the aussie will move lower, $.72 by the end of two or three. by the end of 2019.

it will go down, then a slow progression back towards that level. haidi: one of the downsides is what happens to commodity prices, the pressure on base metals, iron ore has been resilient. as the trade tensions we can and spending andowed demand, will that start we can even more? i think were commodity prices are sitting right now surprised people compared to expectations at the start of the year. the supply and demand factors point to deflation and commodity prices of the next 12 months. we are not going back to the lows we saw in 2016. ramy: one thing i have learned is historically, the rba has never raised rates when sydney's home prices are falling this century. we have seen them fall dramatically in july.

to what degree do you think this may change, and when? or is this low for a long time? >> i think that is the case. the pressure is on sydney house prices. it is a new concern for the reserve bank, do you lift interest rates against falling house prices? the answer is probably no. i don't think they are concerned about where we are sitting now, so any possibility of a rate cut looks remote. looking had a preview at home loans for month on month later this week. it looks like there is a 0% a priororecast versus 1.1%. seems like this is another screw in the coffin. his right. particularly on the investor side, it seems dead in the water. you can see that in credit growth as well. mean a house prices

resurgence of interest for first-time homebuyers, so we have offsetting forces at work. the investor weakness in the dominant at the moment. haidi: how is the re-balancing going? that was a strong narrative in terms of what the australian economy is reliant on. a resources-reliant economy. >> resources will always be important for australia, but the re-balancing has worked well, and we have seen this has been offset by rising infrastructure spending, rising resource exports, residential construction boom, and we are seeing non-mining capex moving ahead at a reasonable rate. haidi: if your glass is half-full, you could see the trade tensions could work out positively for the australian economy in terms of diverting the trade flows to australia from the u.s. are you think this is a big headwind? >> i think this is. thefocus is on trade, but

demand behind the trade will go away. third-party countries like australia could pick up a bit, but overall, i think nobody wins in a trade war. all the research and history shows that clearly. haidi: has it surprise you, the correlation between the aussie dollar and the yuan? >> there has been a long-running current -- correlation. the markets extrapolate anything that has negative sentiment, and that will reflect in the aussie dollar. haidi: his politics weighing on your outlook for the australian economy? political element in there that we don't normally andk about in australia, you can see it in the appetite of foreign investors to put their money long-term in australia. to investors, what is happening with politics is something that comes up in discussion. haidi: what it benefit growth to

have a more coherent and stronger trade policy with china? >> i think so. it is a major trading partner. we are tied closely to china and asia. it is where growth will come from over the next decade. we want to be part of that story. ramy: we will live up there. -- we believe it there. michael, thank you. we are looking ahead to the rba rate decision, expected to stay at 1.5%. we have teamed up with twitter to launch tictoc by bloomberg. new zealand's prime minister had her first day back at work since the birth of her daughter. >> the last six weeks has been wonderful, not only because of the birth of our healthy daughter, but because we have been gifted by the people of new

, and i know [indiscernible] thank you so much. ♪

♪ haidi: i'm in sydney. and youam in new york are watching "daybreak: australia." the latest headlines, danske bank's legal problems are worsening. there is a criminal investigation around its estonian unit being used to launder billions of kroner. that claimed in july danske bank was guilty of money

laundering and other offenses. haidi: one of australia's biggest money managers is paving the way for pension money to tap china's $11 trillion bond market that is becoming more accessible to foreign investors. they are ready to use bond connect by the end of the year. this is australia's first money manager to use the platform. ramy: australia's amcor is to buy u.s. rival -- by its u.s. rival. that is to expand sales of thetic packaging in americas. they will receive the stock at $7.75 per share. before reports of an impending deal sent shares surging. haidi: bank of australia expected to drop for the first time in nine years. emily is here with a preview of

the earnings. why are we seeing, it has been a difficult year. why are we seeing this? , we spend a lot of time talking about the scandals at cba. the scandals have costs. settlements, if you remember cba agreed to the corporate fine in australia's history over allegations of money laundering. costs there, and also the additional compliance the bank needs to put in place. the second thing is the australian banking is not what it once was. the housing market is slow zinc -- is slowing. costs that rising funding , an economy that is not soaring, and the outlook isn't that great. ramy: what are the key data points the market needs to look at with these results?

>> we will be looking at the normal numbers, cash profits. these results may be slightly messy. the new ceo has been reshaping the bank. he has been selling off assets, things the bank owns and doesn't want anymore. at the wealth advice unit. we will be looking for more clarity and break down about how that is going to work. as always, how is a business of everyday banking going? cba makes most money from retail banking. we will be looking at the net interest margin, how profitable is the day-to-day business? haidi: are these themes likely to be relevant for all lenders? as we continue to look at the light of the end of the tunnel, or meaningful

change should we expect? thehis will be relevant to other banks. cba is australia's biggest bank. some of the trends are more pronounced when we talk about cba. that same themes are coming through. all banks are under pressure and stealing it -- dealing with it in different ways. doublingalian bank is down on lending operations. other banks are looking for other areas to grow. growth will be a lot harder to come by. reports are inim september and we will get more recommendations. we will end up with australian banking systems that are not as profitable as they have been. no one is suggesting the system is in fiscal trouble, they will still have multibillion dollar profits, but the outsized profits doesn't look likely anymore. haidi: a new normal, perhaps. ramy: great stuff, emily.

thank you very much. almost it for "daybreak: australia" this morning. we are sticking around for two more hours on "daybreak: asia" and we will be talking about everything from trade war's to yields. jamie dimon talking about hitting 5%. that.l talk about a good friend of ours and bloomberg opinion columnist is coming up in about 12 minutes. he is president of a global strategies company. a television exclusive, we will speak with richard of anter, a ceo electricity provider in hong kong. lots to talk about, first half results, the strategy, the outlook for energy. talking about the risks from trade tensions, they get a lot from mainlandess

china and australia. they may be more vulnerable to the burgeoning trade war. "daybreak: asia" is up next. ♪

>> is mom-and-pop a.m. in sydney, where we are live. stroud-watts. modest gains after wall street rose a third day. and berkshire hathaway listing energy and financials. the s&p 500 closing at its highest since january. brexit angst sent sterling to an 11 month low. ramy: from bloomberg's global headquarters, i am ramy inocencio in new york. will be in thes spotlight later after snuffing out initial gains following the pboc move must week.