haidi: it's 9 a.m. here in sydney. asia-pacific markets facing a mixed open at the end of this week. they were tensions continue to weigh on sentiment. private gains in the regular session and rose reports of an imminent word meeting. kathleen: from bloomberg's local -- global headquarters i'm kathleen hays. trade tensions may be affecting companies with supply chains in china. an elephant starting to run. the booming opportunities in india.

kathleen: one thing notable in the last couple weeks is the fact that the trade tensions of asian markets hit china so hard and the u.s. seems to be impervious. is upping the ante and hasn't stepped back. losing some close, ground in the final 15 minutes of trading. read on the dow jones, but even if you look at the 10 year yield on the nasdaq you can say basically flat. a good auction for u.s. treasuries. , that seems to have taken the wind out of the sale of stocks. maybe a sign that investors aren't giving up on bonds and yet. haidi: we are still within striking distance. basically at record highs. you have the most saying going up to 10% for u.s. stocks.

let's look at the set up here in asia. next as you can see. turning mildly positive. his looking to extend the decade high that the market is sitting there at the moment. come upnikkei futures we are expecting a rebound in those numbers for the second quarter and also taking a look at the cost be as well. -- the kospi as well. assets, havoc on these the inflation picture as well as central bank inaction. fresh record low down 5%, the biggest decline since the global financial crisis. it has lost a third of its value so far this year. they also saw declines of the ruble that we haven't seen since 2016 as the allowed continues. moscow saying it will retaliate. to the top story

per the tesla roller coaster continues. shares reviewing -- shares thatping, ace -- a report public --to take the take the company private. it has been a dramatic couple of days. with the lit what is the latest of element? dana: today the two big developments were bloomberg reported that the sec is inwui ring about from other company statement said that is a big developing. the sec takes very seriously ceos being truthful and -- it is ok to make news on social media, but where is the evidence to back it up? late today cnbc reported the board appears to be moving forward with plans to evaluate the go private idea here in your not aware of any advisors being hired yet. that sounds like the process is moving forward which the market

is happy to hear. haidi: we did see a positive reaction in late trade. dana: yes. basically what has happened is fromthere is radio silence tesla and elon musk about the potential deal or effort to go private over the past 24 hours. in that vacuum with lack of information you have seen mounting skepticism and the sec inquiry come out. our report looking at tesla sending shares further today. all of the gains from tuesday have been wiped out and in late trading they recovered a bit based on the report that the board appears to be moving forward with evaluating the idea. kathleen: and of course the sec watching every move he made. asking a lot of questions pick what have you learned about that? dana: we don't know much beyond what we reported earlier today which is that folks from the sec enforcement division have reached out to tesla. they are looking not just at elon's tweets but other

statements the company has made recently. broader than the treated so. our tesla reporter joining us from san francisco today. test was just one pressure on stocks today. trade work and turned one. the s&p and dow a second day in the red. all the major indexes work first truly -- were virtually unchanged. let's go to su keenan, what are the dynamics? su: lower than normal volume, about 10% lower. summer vacations and a lot of the drop came in those last 15 minutes. let's go to the board. bonds higher with the dollar, oil hovering near a seven-week 100, teche nasdaq heavy even lower than the nasdaq lee doubt -- which eked out a gain. if we go to the big movers, is the size of the moves that is

noticeable. with roku, they hit it out of the ballpark with latest earnings. the expansion of their free streaming service is seen as a big catalyst. investors just piled in. dropbox, people piling in ahead of earnings. i will get to after the bell. transocean, a lot of the oil related stocks. yelp just blowing it out. they quit tying advertisers to long-term contracts and they saw a lot of growth. investors loving it. trade policy uncertainty surging. a 20 year high. , particularly the multinational. kathleen: in focus trade war will it hurt them, oil we

thought stabilized after falling $67 per barrel. etf's, a lot of people leaving. what is going on with key commodities? su: oil, the concerned there is the tariffs might affect oil. the fact that it is not a slight relief. the latest list is on the fuel. easel, propane, gasoline. gold very different story. the gold cannot catch a bit. are --dings in the spd spdr shrank in the smallest since early since 2016. continuing to lose that letter there for gold. lots of big movers. overstock.com is one, a massive move. 25%. su: hong kong private equity firm taking the stake.

outside moves that you don't see in after-hours. it put tesla on the board. you are seeing that move higher on that report about the board taking a look at the go private plan. let's go into the stocks one by one. overstock has mentioned they have an infusion of cash. hong kong-based gsr capital putting in a big chunk of change 0 buy some of their tea -- t that beat analyst as lens. an online filesharing service had a strong report. another strong report from lions gate. after-hours that was also moving higher after-hours. strong for the open on friday. haidi: think you so much for that. su keenan in new york with a round of of the overnight moves. let's get to the first word news with jenna dagenhart. jenna: thank you.

the escalating trade war is starting to affect american companies with supply-chain exposure to china. some have already moved production elsewhere. the beijing-based u.s. china business council represents 200 companies doing business on the mainland. it says they have been forced to shift abroad with brazil and the eu big the main beneficiaries. north korea says washington can't expect any progress toward stability or denuclearization on the divided peninsula while it keeps its outdated script. they noted calls for tougher sanctions on pyongyang even after it halted nuclear tests and dismantled some launch site equipment. the north remains willing to build trust and implement the singapore agreement. legal teamrump's says some sensitive topics would be out of bounds in any interview with special counsel robert mueller. they include the firing of fbi director james comey and his comments to come he about the investigation of a former

national security adviser michael flynn. trump's attorney rudy giuliani told fox news that mueller's russia pope is a different kind of watergate. administration is calling on congress to allocate $8 billion for extra security in space and a special new branch of the military. the defense department has released a report outlining plans for a force with aggressive offense of capabilities that would include systems that could degrade, deny, and destroy adversaries. the white house says the issue is becoming urgent. years, nations from russia, china, north korea, and iran have pursued weapons to jam come up blind, and disable communications satellites the electronic satellites from the ground. recently, our adversaries have been working to bring new weapons of war into space itself. jenna: global news, 24 hours a day, on air and at tictoc on twitter powered by more than

2700 journalists and analysts in more than 120 countries. i'm jenna dagenhart. this is bloomberg. you.: thank still ahead, economic data is out from japan this hour. analysts are expecting a rebound in second-quarter gdp and a slowdown when it comes to factory gate prices. we will be unpacking the announcement. kathleen: up next, u.s. stocks are flirting with all-time highs , a good sign or a sign that something is about to give? a risk assessment with capital management charles lieberman. this is bloomberg. ♪

haidi: we are counting down to the open up markets across asia money. shaping up going into a day that will give us second-quarter gdp pictures. futures looking a little bit low. one quarter of 1%.

a sunny day in tokyo by the looks of it. we are expecting a bit more of a sunny picture when it comes to inflation but less so when it comes to cpi did those in just 40 minutes time. this is daybreak asia. i'm haidi stroud-watts in sydney. kathleen: i'm kathleen hays in new york here it the turkish lira fell another 5%, extending a record low concerning soured relations with the u.s. joining us now on the line from ridgewood, new jersey is capital management chief investment officer charles lieberman. away from a look train wreck like the turkish lira. , love one of the headlines turkey gets roasted as literate drops. as an investor who has to watch money in the u.s. but around the world, what is driving this? do we have to watch closely? charles: it's being driven by

the death by turkey. to the total control that he appointed a relative headed of the hang. like king canute who ordered the tide not to roll in, he is saying the interest rates should not go up to defend the lira to weaken the economy and he is reaping what he is selling. kathleen: i have a chart from our bloomberg library. sanctioning threats, rising slightly. it's not just turkey. geopolitics in one form or another are affecting so many markets right now. is the fact that we saw a tepid u.s. doc market today -- u.s. stock market today, maybe we are entering the outlook as well for investors? charles: not really. turkey is a sideshow. the real issue is between the u.s. and china. secondarily the u.s. and europe,

third, the u.s. and mexico and canada. turkey is not relevant to that. of a may be a little bit spillover effect psychologically and markets. but i don't see it as a major event. picking up on the point that kathleen was making, essentially we are seeing a wrecking ball be taken to these markets as a result of more aggressive u.s. policy via trade policy. you look at not just what's happening with the lira but the quite clearly the picture when it comes to the chinese markets. others suffering because of the u.s. dollar. this is a theme you expect to continue given that individually these markets have good fundamentals? charles: i do expect it to continue. trump's approach is to confront

others when he thinks they are doing something wrong or hurting the u.s.. after any player anywhere whether they are a fellow or an ally. he goes after them fullbore. so, he is a bit of a wrecking ball in that respect. there are consequences in terms of how the markets react. we periodically the u.s. market take a tumble when he has spoken chineset the tariffs on markets. we become less sensitive to it. if you look at some of the recent action, it has been a lot more modest. people are figuring out the talk is one thing and let's or for that matter

him and anyone else. haidi: as we rotate into talking about u.s. docs, even with the sluggishness we have seen in trading, we are is to record highs. there are some strategist, looking at a note saying s&p at 2300 by the end of the year. that would be a 12% gain in less than five months time. do you see room for that? is that an extension of the ruts of the market or are we stretched as we are? charles: i think the notion that it is stretched is based on looking at the performance of stocks without taking into account the performance of profits. profits this year are coming in very strongly. part of that -- a large part is you to the tax cut in the u.s. so, there is a huge improvement in after-tax profits. some of it is just growth in the economy care the economy itself

is doing quite well. over 4% gdp growth in the last quarter. that's a powerful combination for supporting u.s. stock valuations. is,ou look at where the s&p to apply a 17 multiple projected 2019 earnings, you are comfortably over 3000 on the s&p. you could make a case that because interest rates are so low the market multiple should be higher still and the only reason the market multiple is as low as it is is because people are nervous of all the other stuff that we've been talking about like trade wars and geopolitical developers. haidi: we have a story today on the bloomberg which won't surprise you. august has a history of crushing dreams for stock market. you're clearly a bowl and have been through lots of august. we have emerging markets getting

crushed. so much going on. his august right for him kind of direction or hit? charles: since it is still early sayugust, it's a for me to the market will take a tumble sometime in august. it will probably take another tumble in september and october. unfortunately that will make the news in the media will put out a news article any time any strategist anywhere in planet -- maybe even on the solar system. kathleen: i'll let you off on that one but august has come for seven of the 50 drops in sometime. in the midst of all this, how are you bobbing and weaving? what do you like and what you trying to avoid? charles: my big concern is upward pressure on inflation. i'm actually a little taken aback by the fact that mr.

evans, the president of the chicago red is now a little less dovish than he had been before. he is concerned about patient being around 2% and if it gets much above that, they will have to tighten. certainly to slightly restrictive territory. his definition of restrictive and minor probably different, but the fact of the matter is that have doves at the fed who are thinking that rates need to go higher. i agree with that sentiment. anything harmed by higher interest rates is something i would prefer to avoid hearing that means utilities, real estate investment trusts, especially real estate investment trusts that invest in mortgages, residential mortgages in particular. another sector of course the whole class of assets fixed income. the bond market. within the bond market, the worst category would be

long-term, high grade investment-grade bonds like treasuries. the coupons are lower and there is simply less protection, less insulation against rising rates. those are the parts to avoid. sectors that i think benefit our -- are financials that have positive and stupid to rising interest rates, commercial mortgage rates would be one example. honey center banks and even regional banks would be others. those are all attractive. companies that have large investment portfolios that benefit from rising rates. insurance companies like a would be another beneficiary. companies that benefit from inflation, energy would be a great example. rate expectations be markedly higher if you take into account her impact? -- tariff impact? charles: i think so. my sense of it is people are

nervous because of all of the reasons that you've given. every time trump says something about chinese exports to the the market tends to react negatively. less so right now, but it could happen in a larger way at any time if it does anything else. plenty of people have been scared out of the markets. there are plenty of people who never got back in after 2008 because of all the noise surrounding it. been extrare has caution imposed on the stock market which translates to a lower price earnings multiple. if you look at the market the multiple on a historical basis, the markets current pe is very low when adjusted for the level of interest rates. we've interest rates not far from record lows. that means that the pe multiple

should be somewhere in the vicinity of record highs and it is not. charles, we always appreciate your time and your insights. a roundup of the stories you need to know to get your trading day going. today is friday edition of daybreak. today's edition, turkey roasted. less delicious this year. in particular, the lira went down 30% this year. this is also available on the mobile and the bloomberg anywhere app. this is bloomberg. ♪

haidi: a quick check of the latest is this flash headlines. teaming up with samsung to take the battle of apple music. the apple be available when users set up new samsung phones. spotify hopes that tie up will

boost users. 5% deal sending spotify up here at its biggest gain in two weeks. shares up 40% since the company went public. kathleen: chinese hepatology provided changing international from the struggling hna group era the conglomerate is selling the reticence take -- the radisson stake. $17 billion of divestments hna has made to lower debt. the highest in corporate china. haidi: deutsche bank continues to cut costs to now even fruit bowls aren't safe. daily truths are disappearing with investment bankers traveling economy cars. former employees say severance pay was also less generous than in the past. ceo has warned senior managers that if they can't control

expenses they won't enjoy his trust. up next, the escalating trade for stopped operating in china. this is bloomberg. ♪ phones have made our lives effortless.

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this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. haidi: latest 7:30 a.m. friday in sydney where it is just about 30 minutes away from the market open. it is 9:30 a.m. here in sydney i should say. a beautiful shot that you are watching of the sydney harbour bridge. markets looking to see more upside this friday. we're watching of course in just about 20 minutes time japan gdp and inflation numbers coming through. kathleen: it is 7:30 p.m. thursday in new york at the market close just basically flat. evening, cooling off to 87 degrees fahrenheit, that's about 31 celsius so it is

nice and warm here in newark city paradigm kathleen hays in new york. haidi: that's a gorgeous site there. i'm haidi stroud-watts in sydney. you're watching daybreak asia. jenna: tesla had a roller coaster first day erasing all the gains from elon musk a going private tweet and recouping some of the losses in late trade. investors doubt his claim of secure wanting for a buyout that rose on reports that the board will meet next week to discuss the possibility of going private. has offered no evidence to back up his tweet nor have they indicated they are behind the plants. if there is a deal going on, there is a chance that we will be part of the conversation. jenna: the lira is plunging to new apps. turkey and the u.s. continue to

sour. this year's losses to almost 30%. release a refusing to detained pastor. to turkish government ministers. the latest standoff increases the likelihood of more action. losses foryamaha led automakers after revelations about an adequate fuel economy and emissions test. the transport ministry says half of samples were not properly examined. it has taken quite a beating in general after nissan and subaru admitted to improper testing methods last year. >> the test were carried out by inspectors in the data was not checked by management. we realize the poverty of the system is the responsibility of a company as a whole. our system.wing

jenna: philippine central bank governor has reaffirmed its commitment to returning inflation to target next year. that is after the bst raised by 50 points -- 50 basis points, the steepest hike in a decade. it will do whatever it takes to deliver on the mandate of price stability. a decent number of we will hear more from central bank governor himself who joins us on bloomberg markets at 9 a.m. hong kong time. global news, 24 hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i'm jenna dagenhart. this is bloomberg. so very: thank you much. we have breaking news on the taiwanese carrier china airlines missing by a mile. second quarter net income coming in at $63.4 million, estimated

at 878 million operating in million -- 772.2, one point 2 billion. coming in a little better than the billion -- than the estimate. something not so good for them in the latest quarter. haidi: and this is a carrier in addition to battling -- the standard issues like oil prices as well as these trade tariffs and how it will impact tourism given that we have crossed tensions. it hasn't moved very much. we can take a look at it on the one year basis. we are counting down to trading across the asia-pacific this friday.

continuing to be the case in this right trading day here in asia. >> going into the friday session we have the turkish era. currenciessure for and that could lead into stocks as well. we may see more pain and volatility for emerging stocks. they have been on course for a bottoming process your it we have seen market the most volatile against developed markets in three years. you can see on this chart right here which you can see on the library. it shows you that jpmorgan relative to the g7 equivalent that is the line in blue. it outperformed its counterpart. asianhat backdrop, futures are pointing to a mixed session in japan, looking to see how trade talks may feed into sentiment there. looking ahead on the agenda today, factory output data from

malaysia and india. on the central bank front, the rba is due to these monetary policy statement in two hours. the forecast will be closely watched. from china, we could get new lending data as early as today. we might not see the early -- the usual june slowdown. gdp figureswe have that we are waiting on. japan's economy a big one rebounding in the second quarter. what is driving that growth? theie: after contracting in first quarter, it looks like we might get a boost from stronger exports. it does overcome headwinds from higher oil prices and business risk from trade tensions. bloomberg economics penciling in 1.2% quarter on quarter growth. that could bode well for reflation. even with that rebound, that is

still lagging. chart,can see from this , even with the that's aup kathleen: great chart. thank you very much for checking on the markets for us. the beijing-based council represents 200 companies. we are joined now by washington reporter greg sullivan. how big of an effect is this going to have? it's interesting. while economic data hasn't painted a picture of an effect from the tariffs yet, there is no visible sign of an impact on exports or imports out of china or the economic data is pretty rosy right now. we are starting to see companies reacting to the tariffs. vice president of the u.s. china business council in beijing, jacob parker says companies are

starting to shift production out of china. this isn't necessarily companies looking to build new factories in other countries, but shifting capacities where they already have facilities. if the content -- if the trend continues it could end up a bit of trouble for china. definitely concerning effect from the tariffs beginning to emerge here. just hang on there for a second. i want to bring in tom mackenzie from china. pitting their hopes on the domestic market. tom joins us from beijing. onot of talk and propaganda domestic demand. can it really fill that gap? tom: that's the key question, isn't it? for some it looks like it could well do that. bloomberg has been speaking to

the manufacturers of things like richer and seafood. strong domestic demand now and you have a middle-class in china. greater spending power. a competitive market but there is demand for high-quality products. you have an advantage because you can turn around and talked to your consumers and potential customers here in china. .ith the ability to shift consumption, household consumption in china has been growing. about 40% last year. that is well below what you see in the u.s.. but it is moving in the right direction. you hear from the likes of ing saying it will lift the veil on this shift to consumption in china. it could help to some degree at least. haidi: we have heard from chinese officials who have vowed to respond to each u.s. move like for like. toknow that this is going run out of space soon. due to the nature of the two economies and the structural

differences. what about the potential economic impact as opposed to concerns about what happens beyond that point? certainly the potential economic impact is at the front and center of concerns over these tariffs. parker and others have started to notice signs that chinese officials are increasingly worried. there is a report out this morning that even said the u.s. china trade dispute was actually causing a rift in chinese leadership. chinese officials are clearly paying attention here to u.s. moves and how to respond. and what to do going forward. president trump goes forward with his next round of tariffs aimed at $200 billion worth of goods, that is likely to increase the trend of supply shifting and have a further impact on the economy. so, definitely people are paying attention. tom: what sensory getting the president trump and his team are sensitive to the pressures that

the u.s. firms are under? is he listening? are they listening? greg: it seems there is no sense of that. some officials have said they are aware of u.s. companies and treasury secretary stephen mnuchin said he is keenly aware and wants to avoid reprisals by the chinese on u.s. companies. president trump himself seems to be barreling forward. some who are paying attention are beginning to question whether this is a negotiating tactic or this protectionism is an end in and of itself. tell how much u.s. companies will weigh in on trumps calculus here. but we are not getting any sense that is a the center. maybe in china 2025, very tech heavy. wanting to be at the front line of all of that. how is this trade war impacting

china's tech sector now and where is it going? tom: it does seem to be taking its toll. certainly if you look at etf's, the grain shares, china internet fund is one example. we've seen outflows of .1 million u.s. dollars. that is an indication those companies are under pressure as a result of those trade worse. they are quite mystically focused. alibaba focused on e-commerce is a bigger part of the pie for them here it is less surprising. it is starting to pressure these tech firms now as well. the biggest blue-chip in opportunity. her speaking to a hedge fund manager in shanghai who says

financial in china could benefit as policymakers shift to more support and more easing and monetary's stimulus. -- monetary stimulus. haidi: opportunity still a bounce but you have to have a strong stomach in this environment. tom mackenzie here in beijing and out of washington, greg sullivan there. taking a look at what is coming up, kathleen? kathleen: the imf calling india's $2.6 trillion economy and elephant that is starting to run. we will get on board coming up next. this is bloomberg. ♪

haidi: i'm haidi stroud-watts in sydney. kathleen: and i'm kathleen hays in new york here in india on track to hold on to its title as one of the world's fastest-growing economies with the international monetary fund expecting expansion of more than 7% through next march. the imf chief told bloomberg why he describes the economy as an

elephant that is starting to run. >> india is as we say an elephant starting to run in the sense that it has benefited from important policies focus on macroeconomic stability and structural reform. if we look to the indian economy, it had suffered from to transitory shocks in roughly the last 24 months. first was demonetization and second was implementation of the goods and services tax. we think is actually a very important positive structural reform. we see the economy accelerating from 6.7% to 7.3% in the current fiscal year and accelerating further in the next fiscal year. that is what we say the elephant is starting to run. ensure that the momentum is sustained and if

possible, to accelerate further. haidi: the imf sees more interest rate hikes from the reserve bank of india. kathleen: there have been two back-to-back hikes. the currency has been under pressure and inflation has moved up. some people say inflation is going to peak. is there a risk that further rate hikes are what will cause the economy of india to slow down and could that be a mistake? >> we believe that it is important to maintain a consistent monetary policy framework. the new inflation targeting framework which is just begun over the last few years has played a very important role in bringing down inflation expectations. part of the macroeconomic stability policies that we think will help india grow. so you need that underlying basis and as the reserve bank of india has said in its policy focused on they are

bringing headline inflation down to 4% over the medium term. that is why we think monetary policy needs to readily be tightened. kathleen: how many more rounds of rate hikes to expect? >> this would be partly data dependent. we see the possibility for of another 25 basis point hike, possibly later this year. after that point, we would expect to become even more data dependent. haidi: that was cap lanes exclusive conversation. this is bloomberg. ♪

haidi: getting japanese second-quarter gdp numbers crossing the bloomberg now. 1.9% on an annualized basis beating estimates of 1.4% gain there. taking a look at quarter on quarter, the number at half a percent pace better than expected. just breaking it down a little bit more, looking at that nominal seasonally adjusted quarter on quarter number 80.4%

better than expectations. were expecting a change in the gdp deflator but we got a rise of 0.1% against expectations of no change. we are awaiting the factory gain inflations. beat 3.1%year also against the surveyed 2.9%. a month on month gain of .5 of 1% -- .5%. numbers consider we are expecting a weighing down in terms of metals prices. it has been offset by gains in oil prices. we were looking at a rebound in second-quarter gdp after the previous year decline but that was better than what the markets were looking for. kathleen: let me throw in a couple other quick numbers for our guest who may not have the benefit of the terminal. second quarter private consumption up 0.7% on the quarter much more than the 0.2% estimate. business spending more than

twice as strong. joining us from tokyo is jesper koll. you've got a few headlines. what do they tell you about the strength of the second-quarter gdp? jesper: it is very important that we got the rebound. it is stronger-than-expected that effectively, the data run rate oft the japan's economy is now around 1% and very importantly, private demand, japanese consumption, and very importantly business investment spending is contributing positively to growth and it is particularly the capital expenditure number that is very important because where japanese companies invest -- if they invest in japan, that leaves the foundation for a structural up cycle. overall, it is a positive result. kathleen: absolutely. on the investment side people

have been concerned about the trade uncertainty and yes, it is intensified that it has been ongoing. we've seen week household spending numbers recently. it is interesting to see the consumption of her get that are in that quarter. jesper: exactly. you've got this tit-for-tat here. this is what having better conditions, there is more pay and job security is improving. against that, it is not the pursestrings that are being opened up. there's a bit of a savings boom going on because of the uncertainty about the future, because of the risk of taxes going up next year, and so as a result of that it is important to see the overall balance of economic growth with capital expenditure by companies coming back to japan. that is the driver for stability. haidi: our animal spirits coming back? that has been the key missing part to the inflation or reflation puzzle? jesper: you are exactly right.

it is the animal spirits of corporations coming back. we are seeing a record amount of where they of m&a are engaging. now we have positive this this expenditure data that suggests investing for growth and better technology and embracing the opportunities of the technological revolution, finally that is starting to happen. even the japanese thanks and financial institutions which have been sleeping giants wanting to ignore the i.t. revolution. japanese financials are stepping up to the plate, investing in better data management system spirit it is important to the corporate animal spirits are back in japan. haidi: does this change anything for the bank of japan? also, did anything actually change at the last meeting? jesper: no. i think it doesn't change anything for the bank of japan

here. forward-looking, you have the risk of the trade war and the risk of a slowdown in the people's republic of china which is japan's largest trade partner. there is no smoking gun. it is good to see nominal gdp actually continuing to grow. that is new. the purchasing power of the japanese economy is actually increasing, that it is not a be aped recovery. there is no smoking gun and no reason for the bank of japan to change course. --hleen: heidi just managed just mentioned animal spirits. the other phrase that applies in japan is deflationary mindset. there were seven straight quarters of gdp growth. quarter.ive now back on track. i have a chart up to show everybody a chart we look at all the time. yes, inflation has risen off that worst levels but it is a long way from the green line that shows 2% the matter which key measure you look at. is there any chance -- i'm always an optimist. will it finally start moving

higher? are we there yet? jesper: no. .t is very important we are actually in a goldilocks situation. we have a pickup in economic growth in nominal and real terms , asset prices are giving you tailwinds. confidence should be improving, but demand pull is not strong enough to generate any inflation risks. if you look at the beta, what does this tell you? it tells you an economy that is balanced domestic growth, running at around potential which means corporate profits should be having their a positive upside surprises going forward. but 19 straight months of gains when it comes to export growth as well, that is seeing through. at the trade were intensifying, when does that start weighing on the numbers if you take a look at sectors like autos and the

entire manufacturing supply chain? very important. that is the elephant in the room. if there were to be, god forbid, 25% tariffs on japanese cars and car parts, that could cut economic growth by about .5% which could be enormous. that's the uncertainty we happy are we shall see. the japanese negotiation team has a lot of presents as it were that they can offer to the trump administration. increasing food exports, soil been exports, also increase in defense spending could bring the bilateral deficit down. you are right, the trade war's are a big risk, but that is it ising that right now important to see that the animal spirits that domestic dismissed increasing which tells you corporate japan is investing back here in tokyo. great to have you on with

us reacting to the second-quarter gdp beating. counting down to the market open to get a reaction from investors and south korea and right here in sydney. this is bloomberg. ♪ this is bloomberg. ♪ two, down and back up.

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sydney. tensions continue to weigh on sentiment. private gains in the regular session. i am kathleen hays in new york. unexpected reasons to be cheerful. gdp and consumer spending the expectations.

>> orders from japan forgotten with this gdp. domestic consumption numbers as well. >> this will feel some optimism. there were setbacks in the first quarter. the second quarter looks good, and if trade war uncertainty can

be avoided, things will keep going ahead. japanese companies are investing money at home. that is very important. sophie.uld -- go to ophie: despite the strong rebound for japanese and gdp growth, stocks in tokyo are edging lower by a 10th of a percent. a third day of losses. sydney looking little changed as we start this friday. futures are pointing to a lower open as well. emerging currency headaches will likely feed to sentiment. greenback is also adding to the track on the kiwi dollar.

it has fallen to weigh march 2016 low. -- a march 2016 low. earlier, we were told with gdp growth coming in, that bodes well for corporate profits. i want to check on this japanese households product maker. it is edging slightly higher. this posted a loss during its first earnings report as a public company. a 17% drop posted in first-quarter profits. and this is a company that says it does not have any plans to

recall vehicles. u.s.-japan trade talks are also in the spotlight. >> thank you. posted better than expected second-quarter gdp figures. let's run through the numbers. what do you see here? headlines look good. give us the details. a tremendously positive set of data. this puts the contraction of the last quarter into the rearview mirror. much of the driver of growth appears to be internal.

that is something we have been looking for in terms of gdp data. private consumption and business spending were well above estimates. there is a very slight drag on the numbers. this blue the estimates out of the water in terms of the japanese economy. >> when it comes to numbers on they did notnding, look so hot. when you put those against what we saw in the second-quarter gdp, you have to think, what is the dynamic?

why aren't people buying more stuff at home? >> this is a positive dynamic for companies. this lays the groundwork for a wad of the stuff we're going to see in the year. one figure from earlier in the week was the wage growth we saw. there was a second month of positive growth. japan's preliminary gdp data is notoriously unreliable. of weekse a couple until the final data comes out before we celebrate. this may not change anything for the bank of japan. does this have implications for

the boj? >> i would agree. i don't think it moves the needle. it backs up the statements that were made, making stimulus more sustainable. this is more growth above the potential growth rates for japan. it will put pressure on inflation and consumer prices. we are approaching the leadership election later in the year. they will talk about a final to raise thehether sales tax. it will make it an easier decision if we continue to see growth like this. deputythank you, our tokyo bureau chief.

let's check in on the market action and take a look at how we are expecting this to play out in the friday session. what is your initial reaction? does this change any sort of assumptions or optimism with the level of growth we are seeing? >> good morning. japan has been a lower risk market right now. it has always been kind of a hedge for global portfolios. the numbers continue to be good. so thereno inflation is no reason for the boj to

start pumping money into the system. the boj owns too much of the stock, and that will create a problem. you have the elections for next year. all of these things are still in the background. tame,n japan is fairly lower than it has been in the past. these numbers will help that. pretty good for market confidence, given that this was a bit of a goldilocks scenario for japan. sustainable monetary easing at these extraordinary levels. yen, thismes to the

has not been a victim of the safe haven given all the turmoil we have been experiencing. it has gone back to the 105 range with all this uncertainty. the risk manager in the thinks there is complacency. there are risk numbers that i see.ith the -- that i given theay too low level of uncertainty we have in geopolitics. numbers,d up all the it is buy, buy, buy. ve thishave ha -- ha

debt coming through and geopolitics is unstable. should we be that complacent? haidi: if you look at japanese stocks -- kathleen: if you look at japanese stocks, consumers are spending more. is this a trend that is going to maintain? trend is the right word. those numbers are surprising. how much of this personal is due to spending

before prices go up with tariffs? those numbers are surprising and they are surprisingly good. the big questions investors have , even the boj keeps pumping. we have long-term questions that are not being addressed. >> we want to continue this conversation, but let's get to the first word news. >> this bank governor has

reaffirmed his commitment to returning to inflation targets next year. the 50 basis point hike was the steepest hike in a decade. says second-quarter gdp missed forecasts. a pretty decent number. theill hear more from central bank governor on "bloomberg markets" at 9:00 a.m. hong kong time. sour.ra continues to it has fallen 30%. washington said a turkey was refusing to release a detained american pastor . tesla had a roller coaster thursday, erasing all the gains

from elon musk's going private tweets. the board is set to meet next week to discuss the possibility of going private. no one has indicated they are behind the plan. if there is a deal going on, we are going to be informed and part of the conversation. legal teamt trump's says discussing the firing of investigations flynn would be out of bounds if he was to be

interviewed by special counsel robert mueller. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. trade andtalked examined the future of u.s.-japan relationships. the u.s. ambassador is our guest later this hour. kathleen: coming up next, a market check. this is bloomberg. ♪ kathleen: this is "daybreak:

asia." there are investor concerns over of authorities

inability to put a lid on the inflation of the lira. i want to show you this chart. this chart goes back four years. it was weaker than what the trend has been. worsternight loss was the we have seen. the 10 year bond yield is close 20% debt. our guest is still what's us. -- with us. you are starting to see an aggressive policy from the u.s. towards the turkish lira or even the ruble. is this becoming a little bit of a weapon? olivier: it could be.

a decade of qb problems in the united states was followed by account deficits. this led to an interest rate curve. that contributed to inflation in countries such as the philippines. choice but to follow the fed and raise rates. turkey has gotten nowhere to run. the economy is weak and inflation is high. this is the world we live in today. we also had a report that willing to sell u.s. dollars to exacerbate the situation.

emerging markets were meant to pick up the baton and run with it. is there a risk this is not going to materialize because of a trade war? the supply chain is riddled with emerging markets. anything that disrupts that in terms of a trade war, but also disrupts emerging markets. investors have already felt this. is going onat what between the emerging markets and developing markets, this is upside down. they have been higher risk and lower returns. the whole curve is upside down mostly because of geopolitics and the uncertainty

about where this is all going. there is some good news. i think investors have started to believe that this trade war talk is manageable. other, they to each can find ways. we heard earlier about japan saying they could buy more soybeans and increased defense and by more energy products from the united states. the rhetoric from the white sose and china has gone up, investors may be lured into a false sense of comfort. kathleen: i want to bring up another bloomberg chart.

this is a risk index. belown see how it was of 2016 and ite goes up after the brexit vote. mean buy such a deficit in what does it mean for investors? down in list has gone the united states -- risk has gone down in the united states. relations of the united states correlations in the united states are very low. in china, risk has gone up. up 50%-60%. are

risk deficit where the u.s. has low risk and china has high risk. happens every time you have happens every time you have this pattern of geopolitics and trade talks. kathleen: if i want to avoid losing money, where do i take it money, where do i take it out? you have to do a ball of stress testing to figure out what could happen -- lot of stress testing to figure out what could happen in geopolitics. ific. very geo-spec the way stress test and figure out what could go wrong -- do a

stress test in figure out what could go wrong. kathleen: thank you for that. olivier d'assier. users can interact with the charts i just showed the charts i just showed you using gtb go -- gtv go. this is bloomberg. ♪ s bloomberg. ♪

this is bloomberg markets: asia. a quick: let's go to check of the business flash headlines. operating profit came in at 25 million u.s. dollars.

estimates have china airlines at four buys, three holds, one sell. 51% of radisson hotels' stock was bought from the struggling fna group. group. up next, samsung its most inventive phone get.

will the smartphone market take notice? competition,t of and the trade war is raging. keep it right here. ♪ ght here. ♪ >> it is 8:30 a.m. in singapore.

coming back online after the national day holidays. you are watching "daybreak: asia." let's go right to the first word news. >> japan positive economy expanded in the second quarter, sustained by both private and business spending. up one point 9% against 1.4%.tes of

jumped 1.3%, more than doubling estimates. american companies are getting supply chain exposure to china. some have already moved production. 200 companies doing business on the mainland. brazil and the european union are the main beneficiaries. north korea says washington cannot expect any progress for juniper station on the divided -- denuclearization on the divided peninsula. halted even after it nuclear tests and dismantled the launch site. indonesia says the number of people killed by earthquakes has reached 319. the island suffered powerful

tremors in a little more than a week, with the latest magnitude 5.9. indonesia is prone to earthquakes because of its location on the bring the fire. tsunamiake triggered a that killed 230,000 people. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. bloomberg. it is time to see how asia markets are shaping up. sophie: asian stocks are looking mixed. regional benchmarks could reset the snap. the yen is firming up. the nikkei 225 is headed for a third day of losses.

i want to highlight the korean falling by the most since july 2018. the kiwi continues its dissent lower. aussie stocks are gaining about 8/10 of a percent. i want to highlight samsung in korea. 2.5%. the new galaxy note nine is a game changer for the company. its full-year target missed estimates. mercari sliding in japan after posting a loss during its first earnings report.

earnings have made a path of its target -- up half of its target. a look at suzuki, rising for the first day after losing 6% on thursday. kathleen: thank you. with japanese automakers. admits the system was not appropriate regarding the emissions. >> the data was not checked by management. we realize the system is the responsibility of the company as a whole. kathleen:management. we realize the system is the responsibility of the company as a whole. reporter.

we saw's is tumbled yesterday. what is the real impact on carmakers? question. a good it remains to be seen. the immediate effect is not so much, because there will not be any recalls. the problem is fairly minor. during the emissions testing, they are supposed to keep their cars within a certain band speed throughout the tests. the band, butide did not get back inside within enough time. biggest decline in suzuki yesterday. 2016, they had a similar

scandal with fuel inefficiency testing. it --zuki chairman give gave out the ceo post to his son. half.uts the losses in the initial cost does not seem to be much. carmakersjapanese seem to be caught in this kind of scandal again and again. case?t really the is there something about the culture in this industry, or has this been a bad couple of decades? >> it has been a bad couple of decades. costs play a factor. the focus is on a transformational period in this industry towards ai,

electrification. what we saw in 2016 with mitsubishi motor, where they falsified data, that may have been an attempt to cut corners. did not have enough qualified people to do final inspection. be a problem with the cost of training. there is certainly a lot of pressure. japan's testing is very stringent. yamaha said yesterday these are in ordericult tests, to accelerate and hold speed

before the amount of time they stipulate. it could be the strictness of the tests play a part. was sayingleen -- we are looking at reputational damage for japanese manufacturing? i am explaining the details. if you are just someone who suzukit the headlines, has been embroiled in scandal that has snared nissan. the ceo going to jail keeps adding to the tally of bad eggs. that will not add to the reputation of made in japan.

toyota has not been involved with any of these scandals. lexus are made in japan. is -- has lost its allure over the last few years. maybe brands that depend on their japanese-ness for sales could be affected. there has been some damage done. kevin, our asia auto reporter, thank you. samsung has released its priciest phone yet, starting at $999. enters thenote nine smartphone market amid slowing global demand. could be forging ahead

with a more aggressive smartphone strategy. apple would never be able to sell a thousand dollar phone. the share price does not tell the entire story. it is down a little bit. there is disappointment the note nine did not represent a bigger step forward than previous generations. this is more aggressive in the wake of the infamous note 7. they have rolled back a little bit on introducing new features. you are seeing an upgrade in style and certain features with the note nine. there is a management shift toward a more aggressive strategy.

they are waiting before the next big thing. this is still a pretty limited market. you can argue about the iphone x,l whether it was a disappointment, -- whether it was a disappointment, but expectations were pretty high, and i don't remember it disappointing expectations. haidi: is apple hoping to get some of that success with the thousand dollar iphone x? >> yes. this moves into a premium space. apple has had a stranglehold on this for almost a decade.

it is always more expensive to play in that space. move on to other areas of samsung. wearables? olivier: -- look for samsung in other areas, such as the smart speaker's. -- smart speakers. it will be interesting to see how samsung leverages its ngths, to-- its stre tackle the internet of things. >> thank you so much. ahead, the outcome of u.s.-japan trade talks.

former u.s. ambassador to japan it joins us. this is bloomberg. ♪ ♪ >> a look at some of the stories

trending across the bloomberg. spacex stock plans and elon musk's plans for taking tesla private. also, bloggers use a cartoon to mock president xi. haidi: we're going to talk more about trade. japan's economy minister had a frank exchange in washington.

let's bring in a former u.s. ambassador to japan. what is the likelihood we will get some success out of this round of talks? gdp is expected to be a bit of a sore point? >> it will be a difficult negotiation. we have countries going in the opposite directions. i think this will be a difficult set of negotiations. were very upset with the united states pulling out of the tpp.

efforts they made to keep us together were very strong. australia and japan should get the credit. do you think there is the likelihood that the united given may rejoin the tpp, that it is one of the most powerful ways of countering beijing? >> it made sense. obamahe bush and administrations were big advocates of japan joining. when it did not join, they made great efforts to make sacrifices

within the agriculture sector. there will beime an opportunity to rejoin the negotiations. i don't know how soon that will come. makes so much sense from an economic and security standpoint. this allows to bring asia into the world community and play by the same rules as everyone else. the japanese are so interested in keeping this alive. the japanese have this as a front and center concern.

there was a former defense minister talking about concern over china. is there any chance this aspect has gotten any more importance with donald trump than it has been? there were some indications it might be in the interest of the united states to explore this. it could've have gone anyway in the last few weeks. -- any way in the last few weeks. hopefully, reentering the tpp negotiations would be there. we have to see how this plays out. thee is no question japanese are much more in the mold -- in a

multilateral decision of trade than a bilateral treaty. kathleen: in the mold -- in a multilateral decision of you weh negotiating the u.s.-australia free trade agreement. what is most important about getting a deal? what do you think will change the bounce -- balance between both ambassadors? thomas: i don't know what would turn the tide. bob lighthizer has very strong views on trade. beengricultural issue has the most difficult for all nations to negotiate. decisions were difficult to make.

when you talk about trade deficits, the effect they had on the economy. there has been a direct investment and the japanese are going to point that out. out. you can close that gap through foreign or direct investment. about 75% of the japanese automobiles that are sold in america are made in america. you have to take things like that into account when you talk about trade and the effect it has on each other's economies. i know one of the things that will come up will be this idea of the trade war with washington and how it will impact the entire asia supply chain.

you look at the back and forth when it comes to the rhetoric between washington and beijing, we hear about steve mnuchin and donald trump -- how much of this is good cop, bad cop in terms of a negotiating tactic? what is your sense of what is going on? >>? a very serious situation with regards to china and the trade war emerging out of it. the chinese are not anxious to look at if they are doing the bidding in the united states. tat,you have this tit for it is a downward cycle. it is not one that produces good results for the country hopefully be brett direct can come down a bit and both sides

can reflect on what they are cool -- the rhetoric can down a bit and both sides can reflect on what they are doing. i don't think a trade were would be good for anybody. i think the japanese share that theo -- that view. some wayo figure out to get out of painting ourselves into corners. haidi: we really appreciate you taking the time to speak with us, the former u.s. ambassador to japan and australia. livean watch bloomberg on tv . you can also join in on the conversations and send us messages.

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check on the latest business flash headlines. this net shortfall in the june quarter climbed 40%.

u.s. downloads of this app neared 40 million by the end of june. this is japan's biggest tech offering. the recent performance of bill gross has been disappointing, but his global wasnstrained bond fund downwards one billion from its peak in february even though he is confident he can bounce back. goldman sachs is introducing a child care program in japan to retain more female workers and improve diversity. the program will also cater to the sick -- to the children -- to the sick children of employees. almost half of its graduate hires in japan are women. a look at whatke

is coming up over the next few hours. we are going to talk through this massive move from the central bank of the philippines and what comes next. ad: we will talk about the 50 basis point hike, the biggest move in interest rates in a decade. still negative if you look at what is happening with inflation. that is it for "daybreak: asia." this is bloomberg. ♪ retail.

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rishaad: markets on the slide. futures with modest gains. japan offering reasons to be cheerful. , spending, consumer demand ahead of expectations. china,chains exposure to reports say some have moved away. i am rishaad salamat in hong kong. this is "bloomberg markets: asia." ♪