yvonne: we are live from headquarters. welcome to "daybreak: asia." the top stories this friday. asia-pacific markets look to follow wall street. the dollar falls for the first time in six days. three days of gains as turkey shores up old alliances. washington is warning of additional sanctions in the pipeline. a new york it is just past 7:00 p.m. on a thursday evening. investors are optimistic about next week's trade talks. china must offer a lot more if a deal is to be done.

they reportedly want tesla directors to reveal how much they knew about elon musk's plans to take the company private. yvonne: kicking off this friday morning with breaking data coming out of south korea. the unemployment rate for july missing estimates. had.from the 3.7% that we we have been tracking whether the government efforts to lift are making headway. it does not seem like the case so far. we have seen a lot of weakness in investment. corporate restructuring should weigh on certain sectors. they have sustained these type of levels as crucial for the bank of korea. especially when it comes to exports. ramy: let's get a quick break

cap -- we cap. -- recap. s&p 500 up .8%. that is the most in the past three weeks. the second time in the past six trading days. all s&p sectors, a broad rally. talks about talks between the u.s. and china and also with walmart. let's died deeper into the market close. walmart has seen strong earnings, helping make it a day for the bulls. weekend -- weakened. walmart, the world's biggest retailer blowing out on earnings. cisco come in with a broad quarter. it set up the day as one for the bulls. 1.1%&p 500 coming within

of its january high and nasdaq rebounding. the dollar did a race some of its losses. -- you race some of its losses. some of its losses. jcpenney one of the few retailers moving in the opposite direction. boeing coming in strong. facebook having various different pressures. coming intailing strong, nordstrom. nordstrom came in with a very strong quarter. if you put nordstrom and walmart together, it underscores that the consumer is still spending. into the bloomberg we go. you can find our library of charts.

it is a phrase trump used in one of his latest tweets. he talked about how money is pouring into our cherished dollar like never before. weakened a little bit when the white house said they would we sanction -- put more sanctions on turkey, many believe it has room to run in the near term geopolitical climate. hurtingthat dollar is commodities. we have seen the wild ride. u.s. oil back above $65. gold is also studying. -- steadying. look at take a commodities, you did see across the board, a little bit of lifting. that had to do with the weaker dollar. backipped low $65 and came

with this light at the end of the tunnel. you might see china and the u.s. talking again. the conflict does hurt demand. let's take a look at gold. one analyst said gold has been cast aside and is not being used as the safe haven trade. 19re are many predicting the month low for gold is the beginning of a bearish trend. dollar, stronger interest rates and stronger economy are not helping gold. let's take a look at the big picture on commodities trading. platinum down. they are all down here. in the regular session, we did see copper rebound a little bit. as did many of the others. back to you. yvonne: let's take a look at the setup when it comes to asia.

we looks set to gain on friday. these trade war tensions seem to be easing a little bit. walmart turning out great earnings. take a look at how we are set up for equities. sydney futures pretty flat along with tokyo futures. soul is seeing a little bit of a catch here up .1%. the dollar is slipping a little bit. the dollar-yen also at 100 1095. -- 100 1095. 110.95. snapping out of seven days of losses. slightly stronger yesterday. we are seeing more positivity coming through when it comes to

the u.s. china trade. president trump is telling china to come up with a better offer ahead of trade talks next week. he welcomed the idea of resuming negotiations but that he will not do a deal that hurts america. this will be the fourth round the firstbut only since tensions flared in june. they seem to reach a deal in may but the president act away soon after. president trump: they are a much want to talk but they are not able to give us anything that is acceptable. we will not do any deal until we get one that is fair for our country. >> the yuan surges the most in six months. .t jumped about .8% sunk to its weakest since january of last year. the currency strengthened more as it rebounded from a six day lost.

reportedly asking tesla directors what ceo elon musk told them out of their -- ahead of the tweet about taking the company private. the regulator is investigating whether elon musk intentionally misled investors. tesla is suing ontario for canceling incentives. in india, the latest r.b.i. they assess the impact on the economy. the rustic growth looks reasonably strong but warned of the escalating trade war that could hit investment and exports. the rupee is the worst-performing currency. it sank during the crisis in turkey and a widening trade deficit. 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. ramy: to another of our top stories, that is turkey. the country facing the threat of additional sanctions with steve mnuchin warning of more punishment unless the american -- is released. now?else are they planning it looks like we will correct that audio and get him back to you. let's go to break right now. looking ahead, we will ask in energy portfolio manager why he sees oil prices volatile for the rest of the year. how investors can cash in. ofnext, the diverging paths u.s. and chinese tech.

where investors should put their money. this is bloomberg. ♪

tec: it is the tale of two hs. the forward price valuations of chinese tech versus u.s. tech in the blue. valuations slipped to a six-year low versus the u.s.. it rattled investors from hong kong all the way to wall street. let's bring in all over -- all over. we just -- oliver. >> still elevated. it is a stock pickers market. people have been saying that for

the past the best decade. it is true because there are a number of different forces occurring. you have diverging monetary policies around the world, different cyclical growth patterns and accelerations and decelerations in china with big differences between the u.s. and macro basis.obal we look at the technology space, you need to be very selective. you want to be as broad as avoid companies that rely on single revenue streams area -- streams. ramy: i want to show you one other chart. this is acronym galore. but i and the other chinese -- the top three are u.s. technology etf's. the bottom several are chinese.

that it simple to say is a better bet for u.s. tech? itin many ways, yes, but should not be overbearing. the u.s. right now is the prettiest girl at the pretty ugly dance. that is the thing to remember when we look at the world. if you are in asian investor, you want to be careful about the political landscape, that you do not scum -- succumbed to home buyers. if you look at -- succumb to home bias. i'm sure there are companies microsoft, oracle and that are not part of the same stocks. diversification that can take a rally to the next step in the sector without having to rely on faith or netflix to carry the load.

or netflix to carry the load. yvonne: we have seen such a selloff after tencent. does it come down to the fundamentals of the broad chinese tech sector or have they become the latest whipping boys? >> the latter part holds true. there is a broad market selloff, there is almost no immunity in a sector. when that is coupled with the earnings reports, it becomes problematic. another great chinese company, jd.com does a lot of deliveries from their own merchandise. it is done well. it is not universal but it goes to the point that you want to be very careful in terms of your stock. you want to understand that the overall trend internationally is negative. yvonne: let's bring back our

reporter who has been watching the situation with turkey particular -- in particular. what else is in the cards? >> according to stephen mnuchin speaking at a cabinet meeting, more sanctions have been prepared against turkey. he did not specify what those were, but they are contingent on the release of an american pastor. he is under house detention in turkey. turkey said he had links to a 2016 coups. this follows the sanctioning of other officials. the u.s. is ready to escalate situation. an appeal court is ready this week which could lead to a de-escalation. yvonne: the you see this latest diplomatic spat affecting other

foreign-policy issues? >> absolutely. i think it already has some ways. turkey's president said he will seek to forge other alliances amidst this bat with the u.s. -- with the u.s. he reached out to the french president and angela merkel. they will not comply with u.s. sanctions on iran that supplies oil to the country. turkey is a nato member. it is astounding that there is this risk. -- rift. we already see the shifting alliances are you this will only further that. yvonne: thank you. let's bring back oliver. is it time to move on from watching turkey when it comes to the em?

it iso not know whether time to move on, but it will take longer to lay out. the question is how does europe behave? will they counter the u.s.? i think that is doubtful because they are trying to work out three deals. how does russia behave? how does iran behave? we will see. ultimately speaking, that is what is going to have the biggest short-term impact there. that is what we are focusing on. ramy: in terms of strategy to figure out turkey and greater em, let's play this sound. >> a matter of great deal. if you are exposed to turkey, i would reduce exposure. they are trying to rewrite the crisis management chapter for

the american market. it is trying to go without interest rate hikes. it is trying to do it without the imf. it is not impossible, but it is hard. i would be taking advantage if i am already overexposed to turkey. ramy: right now we are seeing correlation between turkey and em.it represents opportunity. >> he better be prepared to take pain and be is the leader at this stage. while turkey is important, the risk is contagion. it is different in that this is mostly a corporate debt crisis as opposed to public money. the stronger dollar certainly plays into that. that is problematic for all em nations. he is much smarter than i am. he is absolutely right. if you own a lot of turkey, my

first question is why? eming broader exposure to makes a lot more sense. remember when we are talking about turkey from a political perspective, turkey today is nothing like turkey 20 years ago, when it became a member of nato. it is very different with the political landscape. it all plays into it. ramy: it happened fairly quickly here. in terms of what investors are thinkng, they probably there is opportunity. where is that opportunity? or underweightt emerging market as a whole, we think the u.s. dollar value will continue a little bit longer. most of it is probably done. let's remember that the real cause of the u.s. dollar strength is the diverging monetary policy is among the world's central banks.

japan is not doing anything. britain is not doing anything. europe is not doing anything and the fed will raise. divergence in monetary policy and interest rates will continue to drive the u.s. dollar higher. ramy: u.s. pushing ahead further while other central banks stay or push just a little bit. thank you very much. remember, bloomberg users can interact with charts using tv . analysisatch up on key and charts for future reference. this is bloomberg. ♪

ramy: welcome back. this is "daybreak: asia." yvonne: a quick check of the

latest business flash headlines. citigroup has been cited for infractions. a practice that was restricted under the financial crisis. covering losses from unauthorized transactions. they were fired, but regulators criticized them for failing to detect the misconduct sooner ramy:. dealer is -- sooner. ramy: unfair sales prices have suffered huge losses. dealers remain to stockpile cars and offer discounts to offload them later. while 78 dealers joined the protest, only 35 find the letter for fear of retaliation. volvo pressing ahead with plans for an ipo later on after indications from investors that it will hit 30 bodies --

$30 billion valuation. -- arimary listing will be secondary one in asia. the report also says that banks have yet to launch a former -- formal ipo process. ramy: the drama continues over tesla. elong directors what ceo musk actually told them ahead of montheet last one -- last about taking the company private. what exactly are they supposed to be looking for here? they want to know that his disclosures and the information that he had for he sent out that tweet were adequate. they want to make sure that he was following the rules and had some reason to believe that funding was lined up. the idea here being that if he

did have reserves of that, that he had interaction with the board. he would have given them reassurances and made a presentation to them. otherwise, giving them some sense of there is potential for a big deal here. .e do not know a lot we do not have a lot of detail about what the board knew. they are under scrutiny here, especially in terms of, was it ok for elon musk to say what he said a week ago? remember he said that was based on interaction he had with the that a deal fund could come together. there is probably still a bit of a discrepancy between indications that he got in that july 31 meeting and him coming out and saying funding secured. yvonne: more trouble for tesla

but what does this mean work goldman sachs? the two companies have had a relationship for some years. >> it could be a very complicated transaction. this could have great implications for goldman sachs in terms of profile and ability to bring together a deal that could become obligated. it also could be very straightforward. elon musk believes about two thirds of his existing shareholders will want to stay the course and not sell their shares. it will want to hold their stock in tesla for this indefinite amount of time that it would be taken private. that would mean that there is far less money than had initially been anticipated to finance the deal. the question is, have a tens of billions of dollars would it take and what role could goldman

sachs play in pulling that off? , but it is onek that goldman believes it is capable of doing. ♪

yvonne: just 30 minutes away from the major market open. seeing u.s. china trade tensions easing a little bit. what a weekend has been. down more than 12% before and after that earnings relief. it is certainly want to watch today. ramy: 7:30 p.m. thursday here in new york. the highest in three weeks. a broad rally across all 11 sectors of the s&p 500. in part because of hopes of a breakthrough between the u.s.

and china in terms of trade tensions. you are watching "daybreak: asia." let's get to the first word news. >> the lever and gained for a third day as turkey shored up lira gainedidst -- for a third day as turkey shored up the lines. washington turned up the heat with secretary steven mnuchin and warning about additional sanctions if the pastor is not released. the queen of soul early the franklin has died at the age of 76 after a battle with cancer. she incorporated black church music, blues and jazz. it spoke to the younger generation. she became the first female

inductee in 1987. in 2008, rolling stone named aretha franklin the greatest singer of all time. will avoid a damaging strike. offer with complete satisfaction. union reached the an agreement after three months to avoid a be pat -- repeat of the strike from last year. oil could make australia a target for buyers. off got lucky well drilling the coast of western australia. 150 million barrels of crude. it has some of the largest gas reserves. investors have grown immune to economic and geopolitical bad

news, which has traditionally driven demand for gold as a safe haven. that is why it has slumped to a 19 month low despite the u.s. china trade tensions and the crisis in turkey. strengthened as the fed prepares to hike again. we will talk more about gold and haven commodities in the next hour of daybreak asia. stay tuned. 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. ramy: crossing the bloomberg terminal right now. the latest between the u.s. and turkey. donald trump now saying the u.s. will pay nothing for the release of that detained master. advantage anden you can see the last line about

we will not pay anything for the release of an innocent man. this is also happening along the lines of steve mnuchin saying that more sanctions are at the ready if this does not come to pass, if the pastor is not released. turkey is trying to figure out what to do with the currency crisis and economic prices -- crisis. yvonne: we continue to watch the lira. we saw a little bit of a bounce back. it has been stabilizing around these levels. turkey is one to watch. we are counting down to the open in the asia-pacific. a possible breakthrough in these tensions. that will be a relief. what is happening and commodities is very interesting given that trade sector. commodities are being pulled

into this vortex. .e did see them with losses copper rising more than 2%. prices are being driven by financial markets and not fundamentals. are pointingcators to a collapse. this is the premium that chinese customers take to import copper. that is trading near the highest since 2016. the line in blue is the latest factory data from china which is looking fairly resilient. the prospects of talks between u.s. and china has rattled all the bears out there. did not really recovered too much. there could be a reason to rally today.

yuanad the u.n. -- jumping. i want to show you this chart on the terminal. it shows that betting against the yuan got a lot more expensive. mostlue columns jumped the ends 2011 on thursday. since 2011 on-- thursday. with the surge, it implies higher borrowing costs. yvonne: thank you. we want to go through some lines that we are being. -- that we are seeing. giving testimony to the house of representatives on economics.

it will hold steady for a while yet. he said there is no strong case for a near-term adjustment when it comes to the cash rate and more likely the next move will be in increased. there was a lot of talk about how it could go either way. also talking about the economy moving in the right direction. it does not seem like he is too optimistic. not a lot of reasons to be optimistic. house prices have fallen as well. business conditions continued to slide. not to mention the slide in the aussie dollar as well. certainly want to watch as we have been talking about the current the has been the collateral damage when it comes to the u.s. china trade spats. you can turn on to your bloomberg for more on this.

one to watch. you can also watch live go. ramy: a look at some of the stories trending. another terminal function. firedy here about a trader who went through a lot to get his job back. it was actually a big pay top -- pay cut. legalize medical marijuana in thailand and finally on bloomberg.com, plenty of hits for how walmart's latest results . it is putting up a fight against amazon. you can check out those stories and more. get more on those walmart results now. posting the strongest hills growth in more than a decade.

joining us with more on that. where is walmart winning in particular, especially in the battle with amazon? >> walmart is doubling down on groceries. $800 billion a year. really where amazon is putting its horsepower and fighting amazon. , orderlike fresh food online and pick up at the store. ahead of amazon in terms of grocery sales. there has been a lot of optimism when it comes to domestic is this. where does amazon have an advantage? amazon has committed $5.5 billion to growing its operation in india.

suit byhas followed becoming a big stakeholder input cart. -- slick cart. flip cart. it is expanding in australia. it is happening in the middle east and latin america. amazon is on this race to establish strongholds around the globe. asia is no exception. it has basically been circling around but not going after china and alibaba. another interesting area of growth is amazon trying to get into the movie. tell us about this. we had sources tell us that amazon is in the process of about 50 theaters in major cities.

this would be further expansion of the brick-and-mortar presence. they now have bookstores, about 400 supermarkets with their whole foods acquisition. amazon spends billions a year creating content, movies and shows. this would provide a way to showcase. ramy: it is so interesting that starting online, they are going back into the brick and mortar. how energy investors can profit. this is bloomberg. ♪

yvonne: this is "daybreak: asia." is tellingdent trump china to come up with a better offer. that is ahead of trade talks next week. he welcomed the resumption of talks but will not do a deal that hurts america. stephen engle is rolling all of these developments. go to you think will blink first -- who do you think will blink first? the subsequent tariffs tit-for-tat have been imposed. they have not been meeting face-to-face. haveot even sure if they been talking over the phone the past couple of months. larry come those said talking is better than not talking. kudlow saidgh --

talking is better than not talking. to/--ant further pledgers lower import tariffs and a halt of the force text transfers. this is what donald trump had to same as -- had to say. pres. trump: you're talking to china. they very much want to talk, but they are not able to give us a deal that is acceptable. we cannot do a deal until we get one that is fair to our country. >> this comes ahead of threatened new tariffs around the corner. yvonne: it is unusual to announce something like this. also, the timing is interesting ahead of these tariffs. >> he went to washington as part of the advanced team in may as

it did not work out so well. he went in early june. that did not work out so well. they have gone back to this gentleman here. he is quite feisty and very fluent in english. he has called the u.s. a trade bully. globally.he talks thes a staunch defender of trade practices in china. he says china is still a developing nation and should enjoy some benefits under that designation. he said they have made significant progress. yvonne: fourth time is the charm. stephen engle joining us with more on that. more on the trade talks next week. take a look at this. at $71. full 1% higher

crude has find after earlier gains around 65.41. joining us is rob. you take a look at a headline like that where they are restarting talks, is this a light at the end of the tunnel for oil? been all about tariffs and turkey. that has caused oil prices the end of the second quarter. improvements in those areas are beneficial for oil prices in the short term. there are other things on the horizon as well. we think it will definitely benefit oil prices for the second half of the year. yvonne: what will be driving that? is it a demand picture? before then the calm

storm. the storm is brewing. it is more involved on the supply side. the storm clouds brewing are iran. we think the u.s. supply picture is probably a little too high. projections are probably a little too high. that probably comes down. last but not least, the biggest thing is not opec supply. it has helped to offset. over the last several years from your seen little to no invest in apply. -- supply. you have rising demand and limited supply coming online. that is why oil prices will probably rise second half of 2018. hop onto the bloomberg terminal. you can see the blue line which is opec daily production.

brent crude is in the white. what is the selling price forecast? tradesay we get to the tensions between the u.s. and china relatively under the -- unscathed. area thatecast is $70 is a really good place to be. that means global oil demand will continue to rise. the supply will be there. the u.s. will be a longtime supplier, but this could strain the base. it will limit u.s. production growth. ramy: you mentioned shale estimates are too high. -- why do youso think so? the basin in west texas is a

low-cost basin that can supply a lot of oil to the u.s. and the rest of the world for years and decades. there is not enough headline capacity. it has created a bottleneck. , but it is going to happen in the second half of this year, as well is -- as into next year. you need more infrastructure to export oil. that is what companies like enterprise products are doing to help that oil be exported throughout the world. talkingwe have been about how the supply boost from opec has been priced into the oil price right now. are we still not exactly registering how big of an impact that could be later on this year? >> i agree 100%. i do not think the effect of iran is in the market at all. you saw saudi and audio radio

boosting their supply, which has been helping the supply demand equation. now we come in and throw in iran and reduce global oil supply. that will have an impact. it will have an impact on the markets in 2019. a bear we see copper in market. are these due to fundamentals? risk inis the biggest the energy market. if there is a slowdown in the global economy, will that impact the oil market? it will. it will reduce demand. global demand for energy and oil has grown 32 out of the last 33 years. of the degree at which it slows down. it will probably not go negative

but it will slow down to a certain extent. they will still need to match supply and demand. it is a great place to invest if you are looking at energy stocks. headwinds you the have outlined, what are some of the strategies that you would just -- suggest? >> the energy sector is a great place to start. if you think global demand will continue to rise like it has 32 out of the last 33 years, you will need more energy. the u.s. will supply more of that energy. you need more energy infrastructure. ,nergy infrastructure companies planes all-american are building and expanding the u.s. energy infrastructure network to set up u.s. to export that energy going forward. great yields.have for income investors, that is a great place to start. managing director and

portfolio manager for energy. do not forget our interactive tv function. you can watch us live and catch up on past interviews as well as diving into any of the functions that we talk about. this is for bloomberg subscribers only. you can check it out at tv . this is bloomberg. ♪

ramy: let's do a quick check of the latest business flash headlines. jd.com reversed earlier losses caused by a blowout saying july sales have picked up the pace. jd says investment in technology and would just six could affect profit forecast for the year. the net loss from continuing operations surged to $320 billion through june.

that is more than analysts were expecting. sank in late trade. demand for chips used by crypto miners. that is 100 million short of the average estimate. they had expected $100 million in will to currency miners in the second test of coal -- fiscal quarter. applied materials slumped after disappointing sales outlook and growing concern that the chip -- it will be $4.2 billion at best. that is about 300 million shy of estimate. of itsits the midpoint forecast, that will be the first time revenue has failed to grow in more than two years. yvonne: we're counting down to the market open. just less than three and a half minutes to go. and chinave u.s.

agreed to talk a little bit more . we are not sure of the fourth round will yield anything, but markets like that news. equity futures are quite positive. a lot of that has to do with the renminbi bouncing on that news. the offshore renminbi bouncing on the on for rate, saying that is a watershed moment for the renminbi. asiag up next, chief analyst joining us to talk more about the chinese economy. can they withstand these trade tensions amidst this deleveraging campaign? of course, the outlook for the men be -- the renminbi. market will join us at the 8:00 hour. volatility and how

geopolitical tensions and market corrections impact overall. this is bloomberg. ♪ ct overall. this is bloomberg. ♪

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kong. i am yvonne man. welcome to "bloomberg daybreak: asia." asia-pacific markets looks at to follow wall street higher. the dollar falls for the first time in six days. the yen essentially flat. the lira pairing three days. washington is warning of additional sanctions in the pipeline. ramy: from bluebird's global headquarters i am ramy inocencio in new york. we are just as 8:00 p.m. on a thursday. ahead here domestics are up about next week straight talk but president trump says china must offer a lot more if a deal is to be done. gold has lost its shine.

the world is actually -- has actually become immune to bed news. -- too bad news. news.bad yvonne: it seems that we have been battling with this fall from turkey when it comes to the u.s. threatening more tariffs. andre battling between that -- in the china headlines as well. with the toxic to happen next week. for the most part. ramy: looking at u.s. markets investors definitely are hopeful and they did push up the market. the s&p 500 rose the most in about three weeks. interestingly, one of our later guests says that the u.s. though has the most to lose because of all the uncertainty with protectionism around the world. more on that in a few minutes. yvonne: sophie has more on the market. reporter: as we close at the

week asian sucks have been said to track the gains that we saw on wall street. after trump's latest week on turkey we are seeing the literature it around by .85 and it is not selling -- setting off alarm bells. aroundng the lira trade 5.85. copper in london just nudging ever slightly lower. checking in on the aussie dollar that was on the move as the rba governor delivered his speech. sticking around that 72 zone now trading at session love. -- session low. 6.87.re yuan trading at after its biggest jump since january, 2017. this is the yuan is being squeezed. the currency becoming a lot more expensive. checking among the stocks to watch cap bhp on the back foot. this is trying to avoid a worker

stricken chile. this is after three months of lung negotiation and watching samsung has been named along with macron and high next in a dram suit in the united states. the allegation there is now three companies conspired to restrict supply to keep prices artificially high. stocks may also be in a pressure after disappointing guidance from nvidia and apply materials. we are seeing panasonic gain 1.2% in tokyo. this is after he confirmed -- they confirm buyers other than doesn't. -- other than tesla. yvonne: -- ramy: that's get the first world. news with jenna dagenhart. president erdogan held a conference with international investors.

washington turned up the heat with treasury secretary stephen mnuchin warning additional sanctions and the deep -- of the detained pastor is not release. ceo elon musk told him in a toilet about a potential deal to take the company private. the wall street journal says an unidentified source saying the regulator is investigating but they must -- or they intentionally misled investors. in india, the latest r.b.i. minister suggested policy makers may pause after back-to-back rate hikes. they assess the impact on the economy. the governor says domestic growth has reasonably strong but warned of the escalating trade war -- which could hit investment and export. the rupee is asia's worst-performing major currency. it sank to a record this week on the crisis in turkey and a widening trade deficit.

of aretha franklin -- of soul aretha franklin has died after a battle with cancer. the daughter of a baptist minister she incorporated black .hurch music, blues, and just what the rock 'n roll hall of fame called a contemporary synthesis. she became the first demand of in 1987 and then in 2008 rolling stone named aretha the greatest singer of all time. pentagon says china's military is probably training for strength against the u.s. and its allies. in its annual report to congress of defense department said china has expanded its over -- it's areas in the past three years but says the message is not clear beyond a demonstration of improved capabilities. the report comes at a sensitive time with washington and beijing locked in a trade dispute. global news, 24 hours a day, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

ramy: as washington and beijing prepared to head back into the trade talks president trump has prodded china to offer more at the bargaining table. >> a very much want to talk. they're just not able to give us something that is capital. we are not going to do any deal until we get one that is fair for our country. ramy: let's bring in bloomberg senior writer national editor jodi schneider. is either side really ready to make concessions in? -- now? reporter: this seems more about talking the talk. to figure out where the two sides can go next. can there be a truce before we get an agreement? because obviously both says her par apart on what they want. the u.s. has gone ahead with report billion dollars -- $434

billion in products. -- with $34 billion in products. tos looks like an attempt try to bring together the parties to at least start that process and to see if they can move forward and have some real talks. yvonne: it with us. guestbring in our next economist elliott garth -- alecia garcia herrera. i would not argue that it will be a breakthrough but i would actually agree with jody -- getere might be a some time before more comes up. i think this is more about let's may be postpone that deadline. it is all about trade, by the

way, otherwise the delegation would look very different. the chinese delegation. i do not think trade is what the u.s. is expecting. talks were talk of the action has gone somewhere else. do not think it will be with this delegation in washington. it is just not apprehensive enough to get the real deal. -- comprehensive enough to get a real deal. very very short if anything. yvonne: in the meantime we have seen china pitch more to it pro stance -- progrowth stance. do you think they are being more apprehensive when it comes to trade tensions or do you think they are behind the curve already? >> you probably are behind the curve already on the basis of the numbers. thef not, at least behind curve to what they think is needed now. i think china was comfortable with some acceleration. , kind of high liquidity

2018 asusand 17, early a trade were started. as -- at least the fear of the trade war. the kind of started letting it go in march. i think what they realize now that it might not be happening enough. --now it is all of the fiscal. yvonne: given the economic pressures do they have more -- do they stand to gain more if the talks go well? is this more important for them at this stage to try to get this truce than the u.s.? >> sure. at this point in time the market is penalizing china clearly. it is obvious they are more interested in a truce than anybody else. however, the market is underestimating china's additional tools to retaliate. it is focusing on trade and that

is not the only thing china can do. in a way, i think time is of the essence for china to kind of change. the mood. change fiscal measures, show the world that china can withstand this pressure. this time is precious for china. move.a very clever ramy: looking at the chinese some of our analysts have been saying it will blow past the seven mark. right now, it is at 6.86. what he is think about this but they being one of those levers you talk about that beijing can do right now at this juncture? >> thank you for the question. that is the wrong lever. thetually do not think that pboc has been trying to use that leverage. ityou look at the sector, sounds as if the pboc was unhappy about the mold.

if anything, i think have put more pressure for the remnant be thehether renminbi -- for renminbi. anhink we should expect opposition of the renminbi. we should see the pboc coming to the for-profit and the economy -- to the forefront in the economy recovering. with strong economy, we can withstand that part of the mantra. and play a massive role in this mantra because they are not fully out of the woods. why would you go all the way? why would you even upset u.s. congress beyond what trump is showing them? that is the reason for upset. manipulation and the like. why pick up another battle? that is what we are calling for some opposition for the remnant be -- renminbi in the near

future. yvonne: when it comes to interest rates in china to have fallen below the u.s. federal funds rate for the past two months now. we have nothing that for some time. could actually get worse? >> that is why the pboc is reacting as well. if you look at, it is very obvious that they realize that they passed the bottom of work rates that they can possibly go. if they are too low they are just putting pressure. member also that because of the fiscal stimulus that will be coming, and they are late with their fiscal budget, the have in forlemented enough especially and this might be related to the anticorruption company as well and lots of things that happening. i think they need to put more pressure for local governments in particular to act and build.

and thus get financed through the market in particular. this will put upward pressure and rates. you can think of both the pboc moren a way the market, apply of paper putting pressure on rates which will help the renminbi. yvonne: obviously politics is a big part of it as well. the negotiators been sent from china has talked tough on the u.s. they have called him a trade bully, trump. i think the chinese are known to be, i guess there should could more -- go more in the line of what you just said. tois probably being told slow it down. it is not the time to pick this battle. we have already seen boycotts of u.s. companies. i think they will be much more clever.

they're opening up to european companies. and about the 10 billion -- they are just showing the u.s. showthey could appreciation to those. i think this is a much more powerful tool than just boycotting american companies. this is why think they will probably turn to a slightly modular tone. and show the facts. show a stronger economy and they stronger currency. goodiest you can have for others that you do not have for the u.s. companies. that is very powerful. yvonne: modulate the talks. overstretched their power as well. thank you, jodi schneider. alyssa garcia herrero stays with us as we turn to the more broad emerging market space.

currencies -- ramy: later this hour, gold is that the haven it once was. but can it still provide some shelter from the storm? we will dig in with standard chartered cooper. this is bloomberg. ♪

yvonne: emerging-market currencies rebounded on thursday. china said it would hold trade talks for the u.s. until august on the turkish lira continues its recovery run. we are a little bit on the back foot here with some of the likes of the lira. once again with the u.s. threatening more sanctions. that 5.85 are enough for the turkish lira. what a dramatic bounceback that we just saw from earlier this week. nursing a weakening trend is certainly posing a the biggest rally we have seen since 2017.

the chief asia pacific economists alicia garcia herrero is with us. do you think we have seen the worst when it comes to vm? is that the most -- what matters most that? >> we do not have a solution for turkey they just happen to convince the population to sell the dollars. that is all we have. that is really not the end of the story. i think we should see either europe coming with some kind of the back edge. europe you really have big financing instruments to do with that. to do with ukraine. it is just very small amounts. toeurope could get the ims talk about potential opposition that would be a big difference. you can think of kind of argentine times. they would like that to happen but when push comes to shove the -- you may not have an option. i think we should see more of that because turkey has an

account deficit. byis not going to work just purchasing from the population. it is not going to work. i would say more volatility but i do not think asia is -- will be the most affected region. we have seen -- ramy: i want to bring in this bloomberg terminal chart here about the bear market and it and europeaner markets all touching levels -- we might be hitting a low here or a bottom here. what did we learn when the last time, sentiment site this or numbers like this camera? hearken back to whatever type -- came around. what have we learned? >> copper is really more china. fiscallly think that the

stimulus that china is going to introduce in the system is going to put copper prices back up. that is copper. on european banks it is basically about turkey more than anything else. fiscalit is not only spanish b. directly --th -- we we are directly impacted because of its operations. .ut it's also in london the london financial center. also, ocean banks banks. it is a european problem let alone the refugee agreement that they actually have with turkey. imagine at the current juncture the situation in italy and then spain having turkey saying sorry, i am dropping the deal. europe will react in a way -- one way or another to turkish laws. i would argue, that might not be the end or the start for turkey come i do not think we are yet their the -- though.

yvonne: -- ramy: a lot of hotspots we have to keep a night on their. thank you, alicia garcia herrero, economist. bloomberg's us writers can go to their terminals. you can also a semester -- -- you are setting so you only get news about the assets that you care about. this is bloomberg. ♪

ramy: that is despite trade tensions olein is actually -- has actually slumped for a 19th on flow. thought about a. 14% from this year's high. . our next guest is still sticking to her convictions and says gold will bounce back after the fed meeting next month.

let's bring in special metals analysts suki cooper. gtb libraryo the and we will show you is all the red that is happening here. this is its longest slump. the longest slump ever since 2014. if this good buy gold for the foreseeable future? that is one of the main concerns for gold prices in the near term. one of the fact that we look at is what entry-level we saw investors by these holdings. decline isf -- likely to pressure prices in the down -- near-term. beyond the meeting we think number factor should line up to become much more supportive with mental. ramy: you think gold could rebound to test those five-year highs. are you still sticking to your guns? will reachve prices

12.90 in the next quarter. seeing the decline lasting impresses we are not looking or a sharper high that we have -- were expecting previously but we are expecting a rebound. some of the key factors to look for are the dollar inflating but also and perhaps more affordably we tend to see seasonal demand come back into play around september time. given that we have got those positions covered, and we have some of that dollar strength rating, it is set for a more pharrell bull -- favorable track for gold. yvonne: when it comes to geopolitical events gold does not catch a bit. the yen, treasuries, dollar seems to be more of the haven than gold these days. do you think fundamentally we have shifted how we view gold is a safe haven now or is a small -- more about a passing phase?

do you think it could recover? the gold safe havens it has been questioned over the past couple of years. it has not relate called a bit. we have seen more so that save haven demand has demanded a floor for vices rather than being a catalyst to push prices higher. you have seen it key driver changing from tracking will yields to the stocks this year being the dollar. the dollar has been -- the key driver for gold at the moment. we can to see more localized buying. gold prices and local terms will rise to multiple highs but in dollar terms given the dollar is a key factor at the moment, we are not seeing that pressure to the upside. yvonne: what your take on other precious metals as well. it seems to be similar fashion. silver, the lowest since february 2016. plenum some to the lowest -- plenum some to the lowest -- platinum some to the lowest.

the have also been caught up in the dollar sense and the trade tensions concerns. it europeans political situation, they have been caught up in the same cycle we have seen. having said this, within the fundamentals across precious metals are very different. it is a market that we think will be under for palladium in the next below of years. where is platinum will be oversupplied at least for the next year or so. even though we start to see that pressure for all the metals fundamentally we still see palladium looks very robust in a market that has very little opportunity in terms of supply growth going forward. the demand still looks relatively reap -- robust. perhaps more so for palladium. yvonne: thank you so much, always good to have you, suki cooper there, precious metals

analyst joining us from singapore. still ahead, expensive debt. the yuan sores the most in 2011. we discussed the outlook for the currency. this is bloomberg. ♪

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just getting some breaking data coming out from singapore for the month of july. nonoil domestic exports year on year jumping 11.8%. that is much better than expected. we're seeing a bigger improvement from what was on the month of june as well. remainnic exports still kind of the laggard here three down 3.8% is enough from the a person that we did see angela -- june as a. well.ked about -- june as a lot of these trade tensions

certainly slagging the city states. ory: one might expect looking out at least for any singles on the periphery in terms of exporting countries if there is going to be any impact from these ongoing trade tensions between the u.s. and china. as we are seeing for now 11.8% is strong beat against the expect at 7.4%. let's get the first world news with jenna dagenhart. the latest r.b.i. minister suggested policy makers may cause as they assess the impact on the economy. the governor said domestic growth looks reasonably strong but warned of the escalating trade war which could hit investment and exports. the rupee is asia's worst-performing major currency. it thanks to a record this week on the crisis in turkey and they widening trade deficit. -- the widening trade deficit. the copper suggest that the industry will avoid a damaging strike.

the main union said members received a company's latest offer with close complete satisfaction. voting on the proposal that scheduled to finish late friday. the union reached an agreement after three months of talks to avoid a repeat of last year's 44 day strike. the biggest oil discovery in australia and more than 20 years could make its owners a target for buyers. petroleum carnarvon struck lucky while drilling off the coast in western australia, analysts say there is a basic is for 115 million barrels of highly commercial crude. the world's largest gas reserves when no one has found that $100 million oil field there since 1996. the two group is set -- set this up in manhattan skyscraper. we are told that avenue is

valued at $452 million in the proposed deal with bno management which would mean hna taking a loss. they have been trying to find a buyer since at least february. global news, 24 hours a day, on-air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. yvonne: we have been seeing more resilience when it comes to markets to wrap up a tumultuous week so to speak. what is going on and so you're seeing jin air on an bae systems them us on record. it is an affiliate of korean air in the country's second-largest budget carrier. it faces a government decision on whether it is likely to operate -- the license to operate will be revoked. rise they is on the

company said today has sold 3 million playstation be our systems worldwide. the have announced the launch games of two games this year. also, in the wake of china's light -- game license a sony as well as nintendo remain there low profit exposure to china. in sydney, sonic health care falling 3.17%. the company progressive it slow down. soapy check in the markets in the asia-pacific thank you very much. one of our top stories president trump is telling china to come up with a better offer ahead of trade talks next week. he welcomed the resumption of face-to-face negotiations but then he will -- said he will not do a deal that hurts america. our chief north asia correspondent is following

developments and it is a game of who will blink first. reporter: we have been asking that sense of talks broke down. the last time they met in early june. that is who is going to blink first. it is not a coincidence that the timing comes just as another $16 billion of tariffs on another $16 billion what the chinese goods is due to be enacted on august 23rd. also, we heard that the u.s. trade representative office has extended a public discussion. from 40's to six days on the additional -- from four days to six days. on the additional products coming out of china. those could be opposes earlier september 6. it is good as larry kudlow say, it is good to talk, talking as part of the not talking, but he also warned that the chinese government must not underestimate donald trump's toughness and willingness to continue this battle. the tariff from president trump. >> we are talking to china.

they very much want to talk. they are just not able to give us something acceptable. so we are not going to do any deal until we get one that is fair to our country. crosser: he has his arm and it does not look like he will blink first. he is a man that will head to the united states pacific cross the rush to sit across the table from david malpass the other secretary of the treasury department. on show one who was there in may for those earlier talks. he is quite a feisty individual -- individual, fluent english speaker, he has called the u.s. a trade bullet. until he took over the mental last damaging, it looks at xi jinping has gone back to. it. . yvonne: what about the remnant -- renminbi?by

path --: we saw similar a similar path and that we saw the authorities perhaps saying we will put the squeeze on those short-sellers on the offshore. that is what we saw again yesterday. we are seeing the offshore yuan sore by the most since 2011 as the yuan bears really got. squeezed. the cmy also surging seven cents of 1%. -- 7/10 of 1%. it looks as though there is a bit of reprieve on the fast appreciation that we have seen on the yuan. how long that lasts? yvonne: stay with us. we have been seeing when i can to the onshore and offshore is very interesting. with the offshore renminbi you see this yield gap between the offshore and onshore coming up just a little bit. maybe we so that boost in the offshore and actually sticking their and above the onshore

rate. it means we could be in some watershed moment. let's bring our china markets reporter. do you think this is actually sustainable? reporter: it is very hard to say. if you look at the long-term future it really depends on the trade talks. yesterday the first was for the yuan is the renegotiation restart of the talks. that really supports the sentiment because the investors were really concerned that the chinese policymakers may recognize and weaken the currency during the trade war. in the second reason is that the that wasa reference much are than expected and that really is a strong signal from the government that we are told the depreciation. the liquidity actually squeeze yesterday and ask really interesting -- it is really interesting if you look at the level of liquidity in this -- it is really not that high. that brings up the memory of 2016.

worry ifre starting to the pboc will intervene again or burness again. a lot of -- burn us again. ramy: his is this going to be a weaponization of the yuan if indeed these talks have gone the way of the previous three and that has gone nowhere? authorities so far has said no, we are not using it. the word of the pboc as they do not want a one-way depreciation of the yuan. but it could resume as depreciation. it is really hard to guess what the pboc is thinking, i have to say that devaluing the yuan the pboc has tasted the pangs of developing it in 2015. seehey do that i can we may massive capital outflows and we short sale sellers attacking the yuan and pushing the you want to seven.

they will panic. this -- chinese investors will start to go to banks and trying to convert other things into dollars. all of that will lead to very fast depreciation. >> seven is a redline. reporter: it is a very important psychological level. the trade war is getting worse, it does -- it kind of makes sense for china to have a weaker currency. it really depends on policymakers if they are ok with the outflows are not. yvonne: you outline the cascade of events that do not sound very positive there if that happens. you hearken back to 2016. how similar or different is at this time around? reporter: the decline in the yuan this time were actually much bigger than 2016 but interestingly we do not see much panic. what we used to measure, the levels in the

market, they're really not that high. people were kind of surprise when they saw this pboc liquidity squeezing yesterday on the heard that the pboc might be banks then -- onshore of the hang seng fiction -- hang shy friendship. -- pboc canok at what the do there are a lot of tools that they have that you so far such as very intense intervention, they have not used it. have not set the fixing at levels that are extremely much much stronger than any market expected level. there are many things they can still do. ramy: how important is this brief and version in the u.s. and chinese interest rates that could spark outflows again -- cap blows again?

therter: it is a result of monetary policy between china and the u.s.. it does have kind of a mixed impact on the market. if the u.s. rates are higher of course, the economy will be less attractive. a lot of investors will try to by the u.s. denominated product. at the same time china's companies will start to sell bonds onshore rather than a hong kong -- in hong kong because it is cheaper onshore now. for investors it depends if they want to buy denominated products. so far, even if the yuan is depreciated there are still pretty clean on buying english products. yvonne: we have been talking about how u.s. economy is bulletproof. donald trump is -- to what extent does that make andpresident more confident

doubling down on the stirrups? >> that is what the record low also mentioned -- larry kudlow also mentioned. chinese.ssion with the was going to bring first? does -- blink first? look like the united states and donald trump will blink first. theeems so as the -- as of chinese are coming to the table saying we need to talk your. yvonne: chief north asia correspondent as well i think you to our china markets reporter. our next guest says that the -- be defensive. this is bloomberg. ♪

yvonne: mrs. "bloomberg

daybreak: asia" -- this is "bloomberg daybreak: asia." yvonne: ramy: the group says dealers were made to stockpile cars and then offer discounts and order to offload them later. it also says that while 70 dealers join the protest only 35 signed a letter to fiat chrysler for fear of retaliation. yvonne: bubble is reported to be pressing ahead with a plan for an ipo player this year that it will hit the 30 billion evaluation -- valuation. be inimary lesson will stockholm with the secondary one in asia most likely in hong kong. at a later date the report says things -- they have been yet to launch -- yet as to launch the ipo. yvonne: --

ramy: a practice that was restricted after the financial crisis. the sec says three traders miss oppositions to covert -- they were fired but they failed to detect the misconduct sooner for inadequate supervision. our next guest says he is generally optimistic toward markets even in this current climate. hide and volatility means that investors should be looking toward the more defensive sectors of the market. joining us from sydney as marcus, street global advisor ats head of capital markets as well as a pack. talk to a specifically where are you looking at? weat the start of the year were will issue generally on the

market -- we were bullish generally on the market. we recently had a midyear update where we became a little bit more defensive. positiveness is still the u.s. but in terms of sectors we have started to see a little bit of a selloff in some of the higher beta sectors such as technology and we have started to see some significant growth into health care. we think that is how investors should position themselves in the second half of the year. ramy: with technology that has been the same especially with tencent earning this week missing. to what degree is this a temporary blip or a downturn? or is this something that investors really need to keep in their pockets to hold for something longer than the next few quarters? >> in my opinion technology continues to be an attractive sector.

we here at state street just launched the communication sector. etf quite recently that includes the likes of facebook and alphabet. however, it is important to note that technology has been an incredibly well performing sector for a very long time. you have seen some earnings misses recently. it has also been a very consensus long and a crowded trade for a. of time. the selloff a have seen recently in ahealthy correction sector that will continue to do well. yvonne: you mentioned about tech we have a chart that shows the details of two tech we have seen in on it comes to the u.s. versus china tech. it continues to fall. techu think the chinese base has been in a bubble and has burst now? >> i would not say that -- it

has been in a bubble but expectation on the chinese technology names, i just think ort any kind of miss evidence that growth was slowing was always going to have a disproportionate impact on share prices. yvonne: what does it mean for emerging markets as well? em ats to largely unfazed by the turkey situation. we continue to see currencies we can and prices, what does this mean for flows? >> flows and local currency, bond etf's, year to date have been fairly weak. it is definitely fair to say that the currency situation, the strength of the u.s. dollar and the weakness of the currencies coupled with instances of increased volatility in a geopolitical basis such as

turkey for example. they recently cause investors to pause and emerging markets local currency debt. we have seen some outflows, some fairly significant outflows your today -- year to date. investors are becoming more cautious on emerging markets due to this increased volatility that we have seen recently. ramy: specifically with china and with what is happening with the current u.s. china trade tension, what kind of opportunity or money flow differences are happening here that investors should also be aware of specifically in the space? >> you mean in terms of flows in between the u.s. and china? ramy: that is right. again, the sort of trade tension that exists have affected a number of sectors in different ways. i expect this will continue into the second half of the year.

do not think we are out of the woods yet. and so, the investors have definitely started to kind of take note on these tensions and reallocated allocations into more defensive sectors and defensive names across single stocks. i think that given that we do not seem to have two -- have the light at the end of the tunnel just yet that will probably continue. ramy: there is a discussion going back and forth between active zen passives here. earlier this week we had a guest talking about active management has trump passive this year. i want to get your reaction and thoughts on this. we are so very much a passive house. an indexing house, as we prefer to call it. cycle,go through the

there are always opportunities to switch between active and passively managed strategies. i do not think the multiyear growth you have seen in indexing is going to go away. low-cost continues to be a focus especially in etf's. that is continued from 2017 into 2018. clearly, when markets get more volatile, and -- i would expect and we do so at state street global advisors. into 2019, sometimes it may make sense to seek active strategies that can reduce volatility and reduce your drive bound if you will. yvonne: we have about 30 seconds left. short volatility, that seem -- but seems to be back in fashion. are we in for another short squeeze like we saw back in february? >> i would caution investors

very strongly to go against sort of going short volatility at these levels. you remember the specter we saw in february, march? volatility is back at dangerously low levels. i think it is some of the short that we have before. it has been taking out of the market. the covering of short volatility would not be as strong or as excessive rated as earlier this year. i would strongly advice against shorting volatility. yvonne: certainly the flows of changed a little bit after that liquidation of these volatility related ats. thank you so much, state street global advisor etf had of capital markets in em ea and they pack -- apac. you can browse our recent charts featured on number television and catch up on all the key announcements we have been focusing a lot on not just the tech sector but energy, commodities, in light of these geopolitical tensions. this is bloomberg.

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ramy: welcome back, this is daybreak asia. i am ramy inocencio in new york. -- this is daybreak asia europe -- this is bloomberg "bloomberg daybreak: asia." i am ramy inocencio new york. >> this is purely generation --

i am showing my age here. it was very strange to go and watch people playing a videogame. and then actually find -- yvonne: apparently this is a big thing this ea sports thing. phenomenon.uge i am not here to judge in any way. it is great that people enjoy it. it could be expected as a sport in the olympics in the future. companies have really benefited the most from the rise of this, --will discuss all that with yvonne: always an interesting space. thank you so much. bloomberg markets is coming up next, this is bloomberg. ♪

rishaad: asia pacific markets gently positive, trade tensions eased slightly. dollar holding declines, the yen flat, the lira paired three days of gains. washington warning more sanctions in the park line. investors optimistic about trade talks. china willrump says have to give up a lot more if a deal is to be done. i am rishaad salamat in hong kong. this is "bloomberg markets: asia." ♪