si mple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. yvonne: it is 7:00 a.m. in hong kong. welcome to "daybreak: asia." asia faces a mixed start as wall street has a four-day advance. the dollar fell on political turmoil at home and abroad. show a readiness to continue raising rates. headquarters,bal i am in new york where it is just past 7:00 p.m. on a wednesday. the u.s. and china revised trade talks that has called since june lled since june. australia faces more turmoil. malcolm turnbull says he does

have the support. political turmoil over what is happening in washington dc. we had the fed minutes come out. not so much a surprise there, but the big question is how fast are the pace of rate hikes going to continue with gdp at 4% and inflation rising? let's do a quick check on how we ended the day. closed flat, but been positive as well as negative, you could see it was mixed based on what was happening with nasdaq. just 11 pointse shy of that high that we hit yesterday. the last time that happened was

in january. the bloomberg dollar spot at 1178. it had been down five days in row. catching a bit because of a drawdown in crude. record just shy of that for s&p. certainly a lot of questions on whether -- where we are in that cycle. asia looks pretty mixed. let's take a look at how things are faring in new zealand. futures. for we are poised to snap out of losses. we are talking about political leader prices in china. nikkei futures pointing slightly higher. current see, we talked about the revival of trade talks.

the renminbi was pretty much flat on the trade right now, but the dollar in mexico, we have been tracking that as well. some of the highs of the mexican peso after we heard that there could be some sort of handshake agreement. mexico is sending mixed feelings on that statement. ramy: let's get back to the u.s. market close. four-day rally did end. after the fedll signaled it is ready to hike again if the economy stays on track. nan joins us now. su: they will do these rate hikes and they did not have much impact on the market as you would think. let's take a look. we saw bonds move on this. the dollar would normally move higher, but it stayed week.

-- weak. if we go into the big movers of the day, the size of the move is notable. retail is back. have a real resurgence. walmart and target blowing it out, really coming in strong with their turnaround. thinking it out in the quarter. investors are piling on. urban outfitters is lower but they came in with a strong quarter. analysts were really impressed. investors did sellout. there may have been some profit taking. the big move in oil. mentioned, we have the s&p flirting with a new high. on what elsetions is left of this rally. su: you have two reactions when

you have an all-time high in a bull market this time -- for this amount of time. you can find our charts at bloomberg. nine and a half years old this bull market is. ore your chips off the table the charts will tell you there records at thee very top of the market. there is a positive to be taken away from that, if you follow the charts. we have another chart for you. stocks were better under the hood. the s&p 500 is trying to join these august records. a closing high. .ou have the s&p small-cap the small-cap stocks have done well because they are less exposed to some of the harm that might come from a trade war. they are running high, but at least the momentum seems to be

back on track. it has a lot to do with the fact that we are seeing easing. the small-cap hitting record after record there. joining us from new york. let's get first word news. says 4 million people may have had their personal information misused amid the fallout from the cambridge analytic scandal. attempts to tighten security around user details and being more open in communications. appsbook has removed 400 that were attempting to influence public opinion. when you and an all-out trade war can be avoided as the u.s. and china revised talks. the first face-to-face negotiations since june.

the talks are not expected to provide a breakthrough, but they could pave the way for higher-level discussions. sanctionsacking u.s. as unproductive. the recent talks were helpful but continuing action is not relations.tore the trump administration added new sanctions on tuesday, blacklisting to individuals suspected of circumventing earlier measures. >> sanctions are counterproductive and senseless, especially in regard of a country such as russia. we hold our american partners will realize the uselessness of these kinds of politics and start cooperative operations. >> the recent fed meeting showed to raiseers are ready rates again as long as the economy stays on track. further gradual increases would be consistent with the expansion

of activity with a strong labor market and inflation near the 2% target. the fed has come under attack from the white house with president trump rejecting more hikes. former australian cabinet minister will make another bid for the leadership as he feels he has enough support from liberal party lawmakers. he said he has backing from his colleagues and believes he is best placed to lead the liberals. his bid against malcolm turnbull failed. ministered the prime with my judgment that the majority of the party no longer supported his leadership. i asked him to convene a meeting of the liberal party, at which i would challenge for the leadership of the parliamentary liberal party. 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. -- >> 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. the attorney for president trump's former lawyer trump's organization that initiated the idea of hush money for two women. >> strong evidence. i think it is conclusive. that michaelknew cohen would be advancing money on his behalf to hush up the relationships with these two women. it had a political purpose to it. yvonne: in an interview, the president said he only learned of this after the payments were made. trump: later on i knew. they were not

taken out of campaign finance. that is a much bigger thing. did they come out of the campaign? no, they did not come out of the campaign. let's get to our editor from washington. it is difficult to figure out who to believe here. out, the lawyer pointed there is some suggestion that federal prosecutors have additional evidence besides coheel cousin -- michael n's word on this. says the candidate was indeed trump that he was working for at the time. there are still some more chapters in this book to be written. there is a continuing investigation and new york as well as the mueller investigation in washington.

there might be additional charges coming out in both investigations. forne: what does this mean november is the big question. it has certainly handed the democrats a new weapon in their campaign arsenal. they have very quickly pivoted to focusing on corruption in washington, particularly in the trump administration. focusing on the manafort and gates in and the cohen plea deal. and others have benign guided -- then in guided on charges. -- been indicted on charges. ,efore the tuesday revelations the republicans were still

behind in the race for control of the house. ramy: switching to trade. between the u.s. and china we have the restart of those low to mid level to your talks. tier talks. where is the lurch here? noas they say, there is downgrade of the tariffs that are supposed to go into effect. there seems to be a struggle within the white house between secretary steve mnuchin and those close to trump who may be by the a bit emboldened fact that market reaction has traitsirly mild to the that so far. the fact that the u.s. economy

continues to rule along. trump recently accused china of manipulating their currency. whether or not they can negotiate something with china and what china is willing to do to help solve the problem. ramy: less than five hours time, fs go intotarif effect. makerahead, fuel-cell sower plug says tariff threatened the jobs and the likelihood of all 600 of their employees. hours, ahe next few new round of duties. we will assess the market reaction next. this is bloomberg. ♪

yvonne: this is "daybreak: asia." ramy: let's do a quick check of the latest business flash headlines. saudi aramco is said to have participated its ipo on the shelf and buying a strategic stake. sources tell bloomberg does not mean that the share sale is canceled but that they have written to advisors asking to brand work for the time being. aramco has declined to comment. chinese smartphone maker defied critics with an 8% jump in revenue while also returning profit last quarter. the results are the first since the listing last month. it compares to a loss of ¥1.7 billion a year.

ramy: as we know, the u.s. and china are reviving trade talks areas when the clock strikes -- trade talks. when the clock strikes midnight, the tariffs will take effect. ignoring or shrugging off the threat of a trade war for now. director of client investment strategies coming to us from seattle. mark, i know when you say comes -- how shouldks investors position themselves right now? difficult in divers a fine your asset base for the appropriate way. performinget classes , rallying on. the dollar has rallied. not could happen -- i do

think it is as much about the dollar figure or the amount of tariffs. it is the direction of the talks. it is not in their best interest to continue this. what happens? i think you get an exact reversal. i think europe will rally. volatility that has gone towards areas that have benefited could easily reversed themselves with any sort of a time change. change. we will get a muted conversation. more volatility as well. , you come to us with the longest will run in history --

ll run in history. i want to show our viewers what this looks like. it is longer, not stronger. to keep pace with the 1990's surge. between high valuations and excellent earnings. how much further can we go? valuations matter at some point. it can go longer. the way you frame it is correct. it is a tug-of-war between valuations being higher in the rest. -- the u.s.. unemployment sure feels good and earnings are strong. earnings have had a couple tailwinds. comparables were easy. you have tax reform. the -- fromer from

here. i think you are banking on earnings -- we would tend to use the phrase that was used in a segment or two earlier in the program to take a few chips off the table in the u.s. is in interestatter rates are moving up. in interest rates are moving up. yvonne: we have some earnings coming through from australia. reporting income coming in at one edge of 4 million aussie dollars. the underlying profit at 217 million. we will continue to watch. let me take a look at some of the prior analysis. mistlooks to be a slight when it comes to the income numbers. we talked about how some of the oil benefiting from these oil and lng prices. it seems like the contracted prices are linked to oil with

that three-month lag. it should drive the third quarter higher. continue to watch those lines at $104tos coming in million. let's bring mark back and talk about the divergence we have seen between the u.s. and the rest of the world. we are looking for opportunity in the market space. once the dust settles, there is value everywhere these days. >> without the emerging markets, the developed markets were inexpensive coming into this year. it has certainly been more exaggerated. certainly beould pointing more money at space. some of the names are in interest. we love the demographics and cheaper valuations.

also putting money into europe and japan. much more accommodating monetary policy. basically, funding the rest of the world, continuing to play with the house money but putting tips around the world is prudent . yvonne: the one thing that caught my eye was the fed saying it may change that statement, that monetary policy remain accommodative. this seems to be a growing number. thesewkish do you think are and how should we read them? it has been called by the fed. i was looking at the minute. i was zooming in on the emphasis of acknowledging tariffs.

we think it is kind of a done deal. not quite there on december. we will have third-quarter gdp andrmation by that meeting any sort of political effect. i think it will be hard for the fed right now. i would not anticipate too much messaging coming through. i would not think he would come across dovish. i do not think he wants to show that he is listening and trying to remain as independent as possible. we think september is in the books. maybe december with three more next year. as long as we continued economic growth. yvonne: how long that lasts is a big question. you can get a roundup of the stories you need to get your day

going for bloomberg subscribers. focusing on those fed minutes today. this is bloomberg. ♪

yvonne: a quick check of the latest headlines. -- of $104ncome as million. it has agreed to buy quadrant energy per one point $5 billion. the deal will raise reserves by more than a quarter as they take on the recent discovery off western australia. it is the nation's biggest crude oil strike since 1986. estimates.ngs met coming in at 1.6 and aussie dollars.

is 2018's best performing airline stock and its record profit is on the back of the recovering resource that are in australia and demand for leisure travel. profit.a 16% jump in it also followed competitors such as bhp and rio to return shareholders as underlying earnings rose with estimates. the ceo says they are well-positioned to take on the inflationary pressures. -- plus wer from will speak with airways ceo. that is in about an hour's time as well. ramy: coming up, saudi aramco is derailing its plan to go public.

this is bloomberg. ♪

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off, and free shipping, too. go to buyleesa.com today. you need this bed. yvonne: 7:30 a.m. thursday in hong kong. there getting a break from rain, but it could be short-lived. ramy: 7:30 p.m. wednesday in new york. markets closed pretty much flat. the s&p 500 had been flirting higher. we are about 11 points off of the high that we hit yesterday. today we are celebrating the n in history ru depending on which data you look at. yvonne: you are watching

"daybreak: asia." let's go to first word news. president trump has denied using campaign funds as #. the only learned about the payment later on. this statement contradicts statements from michael cohen, who says trump directed him to make the pope -- payments. a new survey says a majority of the british public now thinks the country will crash out of the european union next year without a deal. of the u.k. beaching some kind of accord is unlikely. many people planning to cut their living cost. president trump delivered a series of mistakes as he tried to betray best portray chevrolet

as the victim. abandoned europe last year. he also -- apple and google facing a growing revolt over taxes at their stores. is among those who have complained and are trying to bypass the system. andbling about cost dissatisfaction. trading on venezuela's black market indicates a 95% devaluation has already failed. within hours, unofficial quotes have the currency at at least 65

and as high as 100. the devaluation failed for several reasons. bolivar isat the new incredible. 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. just want to bring an internetyou from the association. they will be starting checks on lenders. bloomberg had reported that they would start this new round of checks on thousands of these lending sites after we saw them go through a lot of pressure amid this crackdown on financial risks. the document we obtained basically stressed that the checks were aimed at guiding these lenders to exit the market. some say this is a healthy development and good regulation that needs to be put on the

industry after 200 have actually failed. certainly, the policy direction gives more certainty to the industry. the good ones will be able to some financial analysts out there. meantime, let's get you caught up on what is going on with the markets. let's bring in sophie kamaruddin. this ongoing political drama that is happening in the u.s. of the latest fed minutes and trade talks. sophie: watching how the yen behaves as the dollar and treasuries are gaining. we do have a push back into technical support at the 110 level. it has been converging on its moving day average. we will be watching to see if the yen bounces. but check in on asian futures.

we could be seeing modest gains when it comes to markets. australia has their own political drama to look into. santos -- asm china we had the results well. that is for the eco-agenda. we have the latest reading from japan and will later get taiwanese and singapore inflation data. ramy: the resumption of u.s. china trade talks will also be very critical. expecting the talks will drive rebound in chinese stocks as well as the yen. tell us more. sophie: the sentiment for chinese assets has turned overly negative in the past two months -- fores have been further negotiation beyond the

talks will spur a rebound of sorts. you can see we are seeing it come through as equities could eke out a gain. said, they do not see a smooth rally. policymakers could go back to their deleveraging ways. that is what the of -- potential impact. expect thets do trade conflict to see a slowdown in the chinese economy next year arehe tit-for-tat tariffs enacted. i want to highlight this opinion piece. there is a whiff of policy paralysis. that has made been -- that has been made evident by local governments. you can see on this chart on the terminal that we are already seeing local bonds creep towards an all-time high this month.

eventually, they are at the highest level since july of this year. we do have analysts saying this could force the pboc to inject more liquidity to meet the higher debt supply. gears down to australia. prime minister malcolm turnbull is to face another challenge to leadership with rival peter dutton placing another bid. the very latest in sydney. fast-moving story that we have been covering. what happens now? haidi: fast-moving and almost a cloak and dagger appeal over the last 24 hours. one person saying vladimir putin saw fake news going around. turnbull narrowly survived that vote against peter dutton. he has been going around trying to garner support.

he has been trying to get enough support to take another go later today. tweeted saying he asked the prime minister to hold another party room meeting today to hold the second vote. prime minister turnbull has refused to convene the meeting at this point because it looks like he does not have enough votes. it looked like he had nine signatures on this petition to call for the leadership vote. that has ridden to 23. it is looking very tenuous for malcolm turnbull. if he manages to survive, he gets a rest by for the next two weeks or so. break untilill september 10. it is looking like a long day ahead for the prime minister. tonne: the economy continues chug along despite the political

drama. haidi: as you know, this has been called the lucky country. there is an argument that a lot been dueic success has to the good fortune as opposed to good policymaking or good management. to benefitas managed from the rise of china and the corresponding demand for commodities and services and tourismthem inflows -- inflows. it is an example of australia's economic success. the problem with the chinese economy slowing down, being exposed to a potential trade war between the u.s. and china, there is an urgent need to find new drivers of growth. malcolm turnbull has been arguing against credit.

despite good conditions, when it comes to many indicators, we still have the situation that many developed economies are facing, which is wage growth being very slow. that has given rise to that sense of populism that has given rise to those that are pressuring him at the moment. yvonne: a strong economy not really helping. thank you. one of the world's most anticipated offerings has been put on hold. saudi aramco is focusing on buying a strategic stake in chemical giant studies basic industries and putting off work on its ipo. this does not mean that the share sale is canceled. from new york to hong kong they have been competing for the deal to end all deals. over 25 years of experience in

commodity trading and the editor , thank you for joining us. isn't much of a surprise? there was a lot of speculation over the timing of this. >> it was not much of a surprise. it was well telegraphed over the last couple of months. just the problem here for the ipo was the inability to rally recovery, where it's historical demand function note -- no longer exists. were looking for at least a $2 trillion valuation on the aramco ipo. that is the issue here because that is twice what apple valuation is. the difference here is that i know the demand for apple products. aramco, in every oil producer out there, the demand

function no longer exists. gasoline energy used to be the most demanded commodity in the world. you name the price that i have to pay regardless. why? we never had substitutes. we never had electric vehicles. hybridr had gasoline that cut into current consumption and will have a future growth recruit will. -- for crude oil. they cannot the valuation they wanted. they pulled their ipo. yvonne: it would much rather acquire a stake and save it. is that a better alternative? can he still pursues is vision 2030 plan despite the ipo?

>> they will get a valuation off of the investment. i think investment into the in chinaical industry or here in america is the way to go because this is where the underlying shift of the fundamentals are moving toward. a natural gas commodity or industry. this is where the growth is. it is an investment in the next energy, which is going to be supporting crude oil. essentially an energy, which is going to investment in natural gas. certainly, we will give them a foundation to continue outreach programs. ramy: with regards to what is happening with reports.

people are saying this could still happen. do you agree? at what valuation? >> never say never. the valuation could certainly happen. plan,hey introduced the this occurred at the beginning of january 2016, when crude oil prices were about $25 to $30 a barrel. we have had an increase in the price of crude oil. they bought themselves a more to keep inhey have mind that they are playing a game of extreme risk. crude oil was to cheap. barrel.85 a it is certainly pushing the realm of how far you can push

the consumer. you never say never. i would be able to put a valuation other than to day not to trillion dollars. to trillion dollars. trillion dollars. we have the whole drama of tesla. certainly, they see the writing on the wall and they need to divest themselves away from being solely dependent or wholeheartedly dependent on oil. we will have to leave it there. they gave very much. -- thank you very much.

crossfire in president trump's trade war. we are speaking to the fuel-cell maker power plug next. is bloomberg. ♪ -- this is bloomberg. ♪

ramy: welcome back. this is "daybreak: asia." guest runs aext company trapped in the crossfire of the trade war. the jump on steel and aluminum prices has stalled expansion plans in china as well. let's take a look with the company's ceo. thank you so much for joining us. it seems like two months ago this trade war, you highlighted a picture where it was coming at your company from all different directions. how has the picture change for you? -- changed for you?

>> when i look at the trade war today, we are more optimistic that solutions will be put in place. we have been diversifying our supplier base to keep the cost down. the u.s. and china have worked together on trade for almost a century. we expect back -- that to continue. we find the negotiations going on in china and the u.s. helpful. solution is in sight. we will limit -- isnne: your supply chain reliant on global trade. you get canadian radiators, italian tanks. how has this affected your supply chain overall? >> a level of uncertainty. that is part of the challenge with what is going on with china and the u.s. and global trade today.

we recognize that some of the issues brought up by the u.s. and other governments are legitimate and need to be resolved. keep thetive is to cost as low as possible and continue to drive that down. we have been working diligently to find alternative solutions. yvonne: you have been looking to expand yard fuel cells. he recently delivered this fuel-cell electric fan. china market,the which continues to be a big opportunity for you. what progress have you made in china? saying 21,000t by units running in the field.

over 70 stations. we have dispensed more hydrogen than anyone in the world. we have been pioneers in developing this technology. we find it is quite applicable to the exciting activity going on in china, where the electric vehicles, china has realized that fuel cells have a place. when you think about range and fuel cells really had an answer for the future. tohave been partnering identify a joint venture partner. we produce that data to two or three potential partners we are negotiating with and look to come to conclusions soon and have a presence in china with a strong partner. yvonne: what are you looking for in a partner? is it more about another warehouse owner? are you looking at someone more in the trucking and automaker's race? -- automaker space? >> many of them are together.

when you look at the major car, they have positions in buses and trucks. that is where plug is looking to position our product. that is what we are looking for to partner. we are not really focused on warehouses in china. we see it as a natural expansion. u.s., where wehe have vehicles on the road, we are looking at places like germany, france, the u.k. and china where hydrogen fuel cells are beginning to have momentum. yvonne: your industry is very capital intensive. scale is a key to your success. how to the relatively small players compete with some of the bigger giant that there, especially in china? i saw all of these that

were already electric. are you able to catch up? >> the chinese government understands that there are limitations to batteries. we believe fundamentally that are the answeres from a cost perspective and sustainability perspective. the advantage that fuel-cell has is for heavy asset -- asset letter -- assets that are heavily utilized. make a longer range and you can fuel them like an automobile today. ramy: thank you so much for coming in. >> thank you for taking the time. ramy: we have an alert to tell you about crossing the bloomberg terminal. a fatal blow considered for malcolm turnbull. three ministers have now quit his cabinet. that includes mathias cornyn, minister for jobs, minister for

the arts and communications. saying petern dutton is best placed to replace malcolm turnbull. a little bit of background here. haidi lun sending this along. it is considered a big loss for turnbull. taking many votes with him. have a close friendship with peter dutton and loyalty to the prime minister. come.o this is bloomberg. ♪

yvonne: down to the market open. just about 300 half minutes to go. focusing on the drama in d.c.

and australia as well. we just learned that three of the prime minister's cabinet members have left. the finance minister certainly the biggest blow to the political capital of the prime minister now. leaning towards peter dutton who is wanting that second challenge. we are seeing more of a backdrop of what we saw a couple minutes ago when it comes to futures. whatt gains on the back of we have been seeing. of 1%. a lot to tell you about in australia. airways ceo joins us with the airlines results. it posted another record of profit. the boosted dividends higher. also announcing a share buyback. and thehave a earnings politics, the storm that is

looming in australia right now. by the university of texas, david fierstein. this is bloomberg. ♪

yvonne: 8:00 a.m. here in hong kong. we are live from bloomberg's asian headquarters. welcome to "bloomberg daybreak: asia." the tension eases on wall street. markets shrug off political turmoil at home and abroad. the latest message from the fed, they show a readiness to continue hiking rates. from bloomberg's global headquarters i am ramy inocencio in new york just past 8:00 p.m. on a wednesday. -- on you -- new tariffs are due on both sides in about four hours. recovering resources and luxury travel help qantas post record

full-year profits. we will be joined first by ceo alan joyce. ♪ yvonne: seems like you it was a bad day for president trump. today, it is the australian political storm that looms over turmoil. we have learned several of his ministers have quit. his cabinet finance minister certainly will be the big blow to the turmoil. we are waiting for indication of the second challenge and whether he can actually edge up and when the leadership challenge. a lot to watch your on the aussie front. -- watch here on the aussie front. ramy: the aussie dollar is that session lows. if something did happen what does that mean for the general election?

earlier we were talking with some analysts. the session low is right here at 70 prince to the u.s. dollar -- $.70 to the u.s. dollar. polls, ifn terms of something happens with done -- labor is leading by 10 points and that could mean that we can --weanother flip and camera 0 can see another flip. the print minister has actually served through a full year term. -- a prime minister has actually served through a full year term. yvonne: we seem like australia investors are unfazed by this political drama at least for now. reporter: it seems like groundhog day given the merry go round we have had. we are seeing the aussie near session low.

not overly affected as we assess the political situation down under. when you take a look at the broader picture, we have little angst on wall street despite the political drama in the u.s.. we have little reaction to the fed. stocks in asia mostly on the front foot. the nikkei set for a third set of gains. around the lower 1/10 level. treasuries are holding onto modest gains. we do have korean stocks looking to clock a fifth day of gains in aussie shares -- and aussie shares up by a 10th of a percent. this ahead of a fresh round of u.s. tariffs on chinese goods. yuan have the offshore holding to study after slipping on wednesday. weeks --ons for these this week straight talks. -- trade talks. this could alleviate some of the pessimism that we have seen for chinese assets.

expect a rebound for chinese stocks as well as the healthy yuan moving toward raising. ramy: thank you very much. let's see what else is happening in the world and get the first world news with jenna dagenhart. the latest fed meeting show policymakers are ready to raise rates again. as long as the economy stays on track. the record says further gradual increase would be consistent with sustained expansion of activity with a strong labor market and inflation you the 2% target. the fed has come under some attack from the white house with president trump's -- president trump rejecting more hikes. facebook says 4 million people may have had their personal information misused amid the fallout from the cambridge analytica scandal. the news comes as the social network attempts to tighten security around user detail and being more open in its communication. facebook also said it is -- it has now removed 400 apps says

are fake or attempting to influence public opinion. russia is attacking u.s. insurance as senseless and unproductive. the president said the talks were helpful but continuing action against moscow is not helping restore relations. the trump administration added new sanctions on tuesday, like listening to companies and to individuals suspected of trying to circumvent earlier measures. >> sanctions are counterproductive and senseless. especially in regard of a country such as russia. we hope our american partners will realize the uselessness of these politics and circle -- cooperative cooperation. reporter: president trump has denied using campaign funds as hush money. he only learned of the payments later on. it contradicts comments from his former lawyer michael cohen who said trump directed him to make

the payments and that they violated campaign finance laws. he -- the attorney thinks prosecutors has their own evidence about the money. 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 am jenna dagenhart, this is bloomberg. yvonne: the u.s. and china have revived trade talks just before a fresh round of terrorists is due to come into effect. this comes as the mainland's leading tech names advance the made in china 2025 push that is essential to washington's complaints these days. tom mackenzie joins us from the smart china expo. how does this event relates tie the boat -- tie the bow? it is really at the heart of the frictions between the u.s. and china.

the frictions around china is industrial policy around upgrading sectors to ensure they are competitive in fields where they as -- expect to see the greatest efforts and revenue streams of the future. things like 5g and big data. like autonomous vehicles. almost topics are being discussed here. got the local government and central government representative along with the rabbit sector the chinese private sector. the big heavyweights in the tech world. then you got the international representatives, top name executives from companies like intel and cisco and microsoft. they are all here as well today discussing those issues. they want to have by and despite the flexion between these two countries. areareally speaks to an that has yet to be resolved. china is showing very little

sign that it is backing away from subsidies and some of these areas. it wants to promote these sectors because it sees it as crucial to lift the economy and to create a strong middle class here in china. the recent round of tariffs we have had from the u.s. were predicated on tackling china, punishing china, for what it said was intellectual property theft. china is using to get an unfair advantage in this area. ramy: how much progress really is likely at the trade talks in washington? side hasnly the u.s. been playing down expectations of the major breakthrough. we know the minister of china will be meeting with his washington counterpart from the treasury department. some tears of friction will be discussed at this meeting including intellectual property theft and

industrial policy and of course, the balance of trade that is a sticking point as well. we have heard that the u.s. i potentially will be presenting their chinese counterparts with a new list of demands. we have yet to know what the demands are but the previous demand from the u.s. site included in click reducing the deficit i $200 billion by 2020. -- the deficit by $200 billion by 2020. we will wait to see what the fresh demands are from the u.s. side. you get the likes of rubber, the trade representative, in the treasury sector mnuchin who wants to get a deal more quickly. it looks like you listen to president trump saying this will be a long drawn out issue, of course, this is all coming as we expect those additional $6 million in tariffs to be implemented in the next you hours and the consultations continue in washington over these are posed additional $200 billion for the tariffs.

has the means to respond in time. for usom mackenzie in today. let's continue us -- this right now. our next guest says both the u.s. and china must make concessions to find a resolution. joining us now is david firestein. from the university of texas. you think there is a sense of urgency on both sides. with that said, here we are just less than four hours away from these new tariffs about to hit on $16 billion pushing ahead to 200 billion dollars. >> i think the sense of urgency comes from the u.s. administration standpoint, the trump administration has been hearing from hundreds of corporate leaders who almost unanimously are saying that this particular path the united

states is going down now just is not any good for u.s. business and is not good for the united states generally. i think from an economic and a political standpoint, there is a sense that this problem is not going to solve itself. ultimately, you have to sit down with the other side. it is a bilateral problem. there is a realization that what may have initially seemed like it could be end of a short-lived sort of set of threats and this could go on for some time. if it does, the real damage to the u.s. economy and the global economy could start to become march more evident. i do think -- much more evident. notwithstanding some of the public comments and statements of thee made and some gut and -- negotiating position someone would expect, there is a growing level of concern that unless both sides do something

differently, this problem can, this dynamic between the united states and china can and/or for some. of time. time. some period of ramy: the hawks it seems are in control right now. tom mackenzie just that was saying that it seems that way. i to get your take on this. i want to show our viewers that it is a tale of two economies. the question here is whether the u.s. still continues and will for a long time have the upper hand? this is gdp for the u.s.. we can see the flat rate of growth for china's gdp here in blue. your thoughts? that one of the things that has been most striking about the last six months since we sort of entered into this trade war narrative, and the announcement of implementation of tariffs on both sides, is that the stock

market is actually reacting very all taking this in stride, the u.s. markets are up for the year somewhere between five and 15% -- 5% and 15%. we have entered officially the longest full market the united states -- in united states history. as of yet, i do not think the pain of what could potentially be generated from a protractor war has yet been felt. over time, i think the cost of both u.s. and china will start to increase. we are hearing that in testimony. the u.s. is currently growing fairly well. unemployment is low. the start market is up. the indicators are good. -- the stock market is good. the majority party in the united states congress would want to protect -- perpetuate out of a sense of political self-interest. from a u.s. stan point -- standpoint, they will have to make a strategic calculation as

to whether going down this tariff path we are on presently is good politics, leaving aside if it is good economics. from china standpoint they are coming at this from their own perspective and obviously growing at a higher rate but arguably some of that growth soft and -- softening. yvonne: head of midterms, does the president want to just struck a deal and let markets surge? for what comesg out of november. >> it is a great question. ultimately the political piece of this is very important. we have the midterms coming up. those midterms occur just before president trump will have the opportunity to meet with president xi jinping of china on the margins of either the asia-pacific economic meeting, or leaders

the g20 meeting in argentina. i do think that from where i sit there, it seems to be a desire to generate some type of improvement in the status quo. some amount of progress by november. at such time the two presidents can come together on the margins and kind of deliver a positive result. i do not think that will necessarily happen before the midterms. i think ultimately the issue of tariffs and the issue of the impact that this is going to have and is having is starting to have on u.s. companies. many of which lean republican in a political sense. i think this will be an issue that is going to play out and what happens in the midterms will likely inform president trump's sense of the politics of the issue as he goes into reelection mode in terms of 2020. yvonne: appreciate the time and insight.

from theesign university of texas. still ahead, suffering from the uncertainty of surrounding trade in alibaba. what the investors can expect. ramy: qantas posts annual profits and investors will be rewarded. alan joyce will join us first earlier this hour -- later this hour. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." i am yvonne man in hong kong ramy: i am ramy inocencio in new york. policymakers are ready to raise rates again as long as the economy stays. on track. investors will be seeing more clarity from jay powell at the annual jackson hole gathering including his take on the turmoil in emerging markets. our global economics and policy editor is in wyoming right now. beautiful background there.

good to see you. how do the latest minutes set the stage for jackson hall? reporter: economists agree taking a look at the -- and for a much confirm what everyone has been expecting. number one, i rate hike at the september meeting -- a rate hike at the september meeting. number two, strong possibility of another rate hike in december. further gradual rate hikes are needed. the was also said at the meeting. a lot of discussion about topics that have been more and more in the discussion of the markets lately. the question of the natural rate. we have had officials say the rate -- the fed moving the rates to the point where it is above the natural rate. maybe we should just get to the neutral rate and stop and see how everything plays out. it is clearly a sign that they will keep going and the question

is will they get even more aggressive? jay powell is giving the speech that the chairman of the federal reserve always gives at jackson hole. hall.kson there is an opening dinner and reception and on friday morning u.s. time, there will be opening remarks from the president of thing. use this as an opportunity to give us some signal about policy. that is what everyone is hoping for. we are not for sure that he will. the topic of this is changing market structure and the locations for monetary policy. his speech will be about making monetary policy in changing times. he could sidestep more hints about is your the economy and rates or he could give us a speech that exit clear that he is heading in the direction that the markets think he is. ramy: we can't escape talks about trade tensions here with new tariffs set to both -- hit

both u.s. and china in terms of $16 billion there. the concerns over e.m., what can we expect, what could the discussions involve your in jackson paul -- jackson hall? reporter: there is often kind of the official discussion and the unofficial discussion on the sideline. this year the official discussion is about things like when you have retail giants like amazon and they drive down prices and make it harder for businesses to raise prices. what does that mean for inflation? what is it mean for conducting monetary policy? on the sidelines though we will probably see more discussion that we saw a reflected in the latest minutes. there is concern about trade and wondering about is a going to stop this -- investors from investing more? it is taking that much of a total -- it is not taking much of a toy yet -- a toll yet.

this meeting is attended by central bankers from all over the world, africa, asia, europe, the u.s.. at what point will volatile emerging markets and their currencies getting hit have an impact on how they conduct policy? up until now we have to focus on a domestic economy first. when we conduct good monetary policy that will help emerging markets. we will get those kind of comments and who knows, maybe jay powell will even surprise us and put commentary like that in his speech on friday. yvonne: a lot of debate about the yield curve as well. how much of a concern is this among the numbers? reporter: -- >> that was definitely reflected in the minutes. we get comments on that, if think you will get officials hearing saying -- official saying there are all caps of expectations about how that is going to affect the long-term

interest rate. it seems like most everyone agrees that they are cautious if it inverts. if the yield curve inverts to something you would have to consider very carefully in terms of being able to hike rates more. recession is something the fed wants to avoid. yvonne: thank you. she is back from vacation. you do not want to miss kathleen's interview at 7:30 p.m. hong kong time. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." ramy: let's do a quick check of

the latest business flash headlines right now. they have a great to buy rival energy to release $2.15 billion. santos' will reach reserve. the find a spot to be the nations biggest crude oil find. yvonne: after posting a 16% jump in full-year profits, stronger commodity prices helped them arrive at production costs. the competitors such as bhp and rio boosting returns for shareholders as underlying earnings throws. -- the ceo says they are well to take on the inflationary

pressure fighting the mining sector. qantas shares are down after earnings came in with estimates. the airlines full-year profits was $1.1 billion. qantas is 2018's best-performing airline and its record profit is on the back of australia's covering resource sector and rising demand for leisure travel. we will talk more about the results with the ceo himself. alan joyce jones us first on bloomberg and just the next two minutes. stay tuned. this is bloomberg. ♪

ramy: welcome back, you are seeing live pictures of the iconic city opera house. by aight now is down little more than 1/10 of a percent. leadership challenges by peter, the former hall affairs minister, trying to challenge a second time prime minister michael. -- malcolm. let's get to our next guest because qantas is this years is performing arts -- this year's best-performing airline. the carrier's panel -- planning to return as much as 500 million aussie dollars to shareholders including higher-than-expected

dividend and another stock buyback. joining us from sydney's ceo alan joseph joyce. always good to speak with you here. give me a reaction because your numbers, they were good as you just told me but the share prices night down -- price is now down. what are you thinking? any to get your reaction on this. -- i want to get your reaction on this. >> the biggest loss in the history think the share price one of my temp percent on that day -- by 10% on the day. we look at the fundamental business and how the business is performing. these were record results. it was extremely strong. we are operating cash flows of $700 million. we are paying and giving returns to our shareholders. including a tencent on frank dividends as well as employee and investment for our customers.

the company is in a great position and we are confident that the future -- in the future. this is the best we have been in our 90 year history. ramy: when his -- one thing that has been helping is a recovery in the resources sector. give us details on domestic fights on the back of what has been happening. >> the domestic economy is going really well. we are seeing good growths there. we have gone through a few years of big declines for the resource the recovery of commodity prices we are starting to see significant growth in that sector. it was up 50 million in the last year. we are not putting aircraft -- more aircraft back into western australia and queensland. we are seeing that increase in demand. the leisure market had a record result. we are seeing really strong growth across the board.

that is why we produce the profit of $1.6 billion in just about every part of the business. ramy: have to talk to you about course. we know that qantas is conservative feel hedger. -- fuel hedger. pretty muche was covered through course. the second half of this year and 50% to 2019. can you update me on these numbers and your coverage? >> a we have done is we have given an outline based on card and -- current pricing with the effect of hedging and what the oil price will be next year. 690 million worsen last year. lester was 200 million worsen the year before -- last year was 200 million worse than the year before. we have said for domestic --kets,

an international our hedging is for a lot of our competitors. they are seeing a bigger fuel increase. --are seeing that the market the market being disciplined and people doing what they can to try to recover the oil prices. that gives us the confidence that we can substantially recover on international. the oil price increases going forward. moment, we are up in revenue by 6% which is a good indication of why that confidence is there. yvonne: you splurge in this investor payout. 500 million aussie dollars and investors. 57 million on your own employers -- employees. how much longer can you continue on this route of handing out these goodies? we look at the cash flow

decision of the company and it generated $3.4 billion of operate in clash flows. we spent nearly $2 billion in new product and you aircraft. that gives us a bear -- very strong free cash flow. we have increased the dividend from seven to $.10 -- from seven cents to $.10. we still believe there is value in the buyback. we do not see anything that is our strongto us that cash flow will not continue into the future even with these higher -- high oil prices. that is what you have that confidence in our interviews and back to shareholders. this gets us to $3 billion in the last three years return to shareholders after we do this by back we will have 26% of our stock. that shows you how effective these buybacks and the increase in earnings per share have been for shareholders. yvonne: given what we have seen when it comes to oil prices,

whether it is politics or economics or fundamentals, what a be better or more appropriate -- would it be better or more appropriate to keep these funds for a rainy day? >> we also have a financial framework which outlines our debt levels. at the moment the debt levels are down to $4.9 billion. that is the lower framework where investment grade rating is -- of liquidityforces going forward and we have been working on extending the debt going out. we are very confident in our continued liquidity. we are very confident in our debt levels. we are the lowest we have been in a long time. we are very confident in our ability to tap into more liquidity if we need it. in this business, it is generating a lot of cash. today that mentioned

you can substantially recover your expected higher fuel bell -- bill this financial year. does that mean higher fares? >> it is done a number of different ways. we are improving our see factor using more of the ftc. we have increased up by 3% in the last year. we are seeing fares improve to revenue management. but still, very attractive airfares out there. airfares are 14% in real terms domestically below where they were 15 years ago. profitsaking record even with those low airfares. we also see our transformation program helping to offset the introduction of the new andnology like the 787's the focused feel program -- improvement program. there is a range of initiatives that are helping us cope with

the higher fuel prices that is why we have the ability to substantially recover. ramy: i want to switch gears. we also have to talk about what is happening in camera -- camera -- they did not have kind words for you last year. saying qantas to stay out of things like legislation happening in the capital. now it is a second challenge that there is a possibility this might happen. -- d you welcome we have gooduld -- relationships with all the individuals within the politics. have a relationship with peter. we do not take sides or the individuals. we are the national carrier and we need to continue with those relationships. they have told me that they regard qantas is an important part of the economy.

-- as an important part of the economy. i think any future prime minister will be in the same boat. what we have said is that we believe it is a good thing for companies to be vocal in a range of issues. we are very vocal on the corporate tax rate which the and very vocal on industrial reforms, gender equality, marriage equality. we believe that big companies have a responsibility to do that and that will not change no matter who is prime minister or who is in government. yvonne: there also is a question of policy too. crisis wee leadership see governments flip-flopping here when it comes to energies as well as tax policies. what would that mean for qantas and australian businesses? today, businesses are disappointed and frustrated

with what is happening in cambridge. they want liability and confidence and certainty about policy in the future. despite all of that, we are seeing a really strong australian economy. it is performing across the board really well. there are good signs of the resource sector. it is rebounding very well, which is important for our economy. for that to continue, we certainly need the government to incorporate a tax policy to measure we have a texas and that is competitive with the rest of the world -- a tax policy that is competitive with the rest of the world. vacuum is concerning all of the business communities and frustrating us. we hope that that can be quickly brought and certainty back the policymaking. yvonne: thank you so much for your time. alan joseph joyce.

ceo and managing director for qantas airways. let's get to the first world news. jenna dagenhart joining us from new york. reporter: there is hope that the trade work and be avoided as the u.s. and china revive talks. the talks are overshadowed by terrorists -- by $16 billion tariffs. they may pave the way for higher-level discussions. president trump delivered a series of mistakes as he tried to portray chevrolet as the victim of chinese practices. he lamented how few chevrolets there are on the streets of -- of berlin. the brandhdrawn earlier, a camaro costs $19,000 actually worth

58,000. they include finance minister -- the finance minister and former minister peter that says he will make up another big for the leadership as he feels he does have enough support from liberal party lawmakers. 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 am jenna dagenhart. this is bloomberg. ramy: thank you. plenty more to come on "bloomberg daybreak: asia." next up, we will talk china tech. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia." i am yvonne man in hong kong. ramy: i am ramy inocencio in

hong kong -- in new york. let's bring in so the camera -- let's bring in sophie. reporter: stocks gaining ground in tokyo as well as in seoul. the political turmoil continues and we have earnings to digest. aussie assets, you have bonds gaining ground heading the 10 year yield lower about -- at about two basis points. the dollar is that for a second day of losses as it's the klein deepens. now it is -- as its decline deepens. it is trading at session low. qantas is off at about 6%. we have legal losses amongst travel related stocks. tbd telecom earlier jumping to a high as it considers a merger with hutchinson australia.

you can cook cosmetic hankookory jumping -- cosmetic company jumping nearly 46%. i want to highlight japan's daido metal sinking. and machinery.s, their production facilities in the u.s., thailand, and indonesia. they delivered a 60% revenue and the quarterly profit and it's made an earnings report while setting off a challenge for local rivals as well. however, things may not be so rosy behind this change. let's bring in bloomberg intelligence analyst and our hong kong set. how encouraging are these results? have they divide the critics here and picked whether there are doubts on the business model?

reporter: look for the encouraging, given that revenue and gross margins are quite robust. it is cost overrun. have noted that the prophet turned into negative. profit turned -- into negative. mainly because the company paid 10 billion yuan share compensation. although that could be a nonrecurring trend, bottom line it does not look that good if the cost continues to overrun. the positive side is on the top line. all three businesses, smartphones, internet revenues, they made very good growth. yvonne: this gain of 2020 have million u.n. -- 22 and a half million u.n. -- yuan.

this is still a company that cannot turn a profit. >> i think for a company positioned to be high-growth company investors maybe more forgivable on the bottom line. they focus more on top line and also monthly active users. they rose 42% in the second quarter. this means having 200 million. investors should be happy about it for now because the story is all about how they leverage on to -- activethings users to increase in the future. ramy: let's take a little bit deeper and look at both the takeaways on the positive as well as the negative. what really stuck out to you that investors need to know? >> i think on the negative side is about the hardware pressure. it is susceptible to any currency weakness.

especially on china's yuan and india's rupee. the upgrade is product line and increase average selling price. margin actually fell. very thinady at a margin and it fell in the second quarter. also the fact that as we mentioned, are where internet growth is quite robust but so far -- our internet growth is quite robust but it may be only just in china. they have to prove themselves that they can copy this from china to elsewhere so they can fulfill the claim their like a global internet company. ramy: international expansion definitely being the name in the game. the tech media and telecoms and alleges -- analysts, thank you very much. we continue on china's tech sector just ahead. alibaba reports first order results before the market opens in some analysts see trade uncertainty. more on the impact.

next. -- more of the impact, up next. this is bloomberg. ♪

ramy: welcome back, this is "bloomberg daybreak: asia." i am ramy inocencio new york. yvonne: and i am yvonne mann in new york. the company -- alibaba reports the free market in new york on thursday with earnings.

we are expecting big boosts in the stock. this is the u.s. equity esu rp option. what the market is signaling right now is it implies one-day move could be around 6.6% in either direction. certainly investors will be honing in on what comes out of these earnings. speaking on asia tech, we have a preview right now on what we can expect. >> when it comes to revenue sentiment it is good for alibaba. analysts are expecting a. safety 1% growth for the company. . that is the fastest growth since 2014. -- analysts are expecting a 60% growth for the company. that is the fastest growth since 2014. analysts are expecting a drop of 46% in the net income. yvonne: stay with us as we bring in our next guest, mitchell kim.

really good to see you. we talk about the fundamentals. this is a stock that continues to be taken hostage by the u.s.-china trade tensions. what is your take? >> i really do not think is it -- it is about the trade itself. --has to do with companies company growth and margins. investors are wanting a better business deal on what a profit margin will look like in the future. yvonne: we were talking about the margin pressure. you think they will continue to be compressed as they enter some of these new retail businesses? some of these investments are certainly going to be writing into those. >> i think that will be a continuing trend. certainly it is not just alibaba it is also with other stocks as well. other companies as well. what we are seeing is there

going from a stage of harvesting the core competence to expanding into new or areas -- you are areas -- newer areas. when you do that there are different margins and lower margin areas of they will have to invest into. they are not profitable at this point. ramy: i want to chime in here. just to take a look at the expected revenue growth here for alibaba. this is in the gtb library. 60% is what we are expecting here. you say that a large portion of the growth is now coming from the nonprofit -- nonprofitable section. slowdownn the growth -- walk me through the sloth -- growth slowdown. >> a couple of components there. one is customer management revenues which also down dramatically, i think.

by my estimates it will go only about 32% year on year basis -- 33% year on year basis. if you compare six he percent overall revenue growth that is great but the court slowing down to 33% -- the core is slowing down to 32%. 33%. yvonne: when it comes to competition alibaba is facing a lot of newcomers including -- what you think about the dynamics? a lot of people are talking about this concession downgrade in china. do you buy into the narrative? >> i think there will always be competitors to alibaba. but alibaba has done a great job of building and promoting its platform. it is very strong. certainly there are other platforms that could focus on certain verticals. but i think at this point i do not see a significant threat other than jb.

yvonne: alibaba is also focusing on so many other segments of the business. when it comes to food delivery two --s, it is going to net connect --it is going neck to neck. the food delivery business could be possible as long as you do not subsidize significantly. as you have seen other food delivery businesses globally, those that have made money, more than just profit, i think you're also looking to grab big data. there is a lot of transactional data which is very important for you to -- were analytics. -- for analytics. that is the other benefit. yvonne: these are the must have stocks and every portfolio.

the sentiment now seems very different. how should we approach the stocks now? i think they are actually better valued now than perhaps five or six months ago. -- i downgraded the stock back in october last year. at this point, based on the target price, there is some upside to alibaba. yvonne: thank you so much, mitchell kim. head of research. that is it from us here on "bloomberg daybreak: asia." market coverage continues next. ramy: stand by for bloomberg markets. this -- this is bloomberg. ♪

♪ david: one month after you take this job, you get a heart attack, and they say you need a heart transplant. said get the surgery. that is the only way you will live. david: i assume you are not flying on private planes. oscar: you have to eat what you cook. david: emotional support animals? oscar: one of the animals recently required another emotional support animal. [laughter]