yvonne: 7:00 a.m. in hong kong. i am yvonne man. welcome to "daybreak asia." the top stories this wednesday, asia faces a muted start. 2900 for therossed first time. the canadian dollar jumped on optimism of the trade deal. auto assess progress has been made in initial negotiations. ramy: i am ramy inocencio in new york, where it is past 7:00 p.m. on tuesday. social media gets the message as president trump goes on the attack. he warns google and others to be "very careful." heading for hollywood, amazon

talks to major studios about cofinancing and streaming new movies online. good morning, yvonne. to our viewers across the asia-pacific and around the world, it was hitting new highs. that was the theme for today with the s&p 500 as well as the nasdaq. a lot of that was coming out of the buoyancy from the mexicorough in u.s. and talks. with that said, we saw the peso fall just a tad because there is a lack of clarity on the details that this might not actually go through. there is canada and china as well pushing ahead. numbers, 20.97 and some change. that is indeed a brand-new record, up three days in a row, and strategists are now saying

they are raising their forecast for the s&p 500 by the end of this year to the very around number of 3000. let's flip up the boards, too. the bloomberg dollar spot, canadian and mexican currencies, we can see where they stand right now. the mexican peso did see weakness down by 2.5% in u.s. trading, hitting the 19 mark. as we have been talking about in the past hour, basically, there was a thought that maybe the 69 days we had left is not enough to actually get this through congress and to get canada on board. we did sense a bit of optimism from the foreign minister of canada. she says they were very constructive talks she had with mr. lighthizer. also saying mexico's concessions will be on soluble to canada, so we will see as they get anything hammered out by friday, but take

a look at how the backdrop is. we reached records in the u.s.. we are seeing a quiet start for the asian session. .1% --seeing shares of .5% on the sessions. take a look at currencies and the offshore renminbi. still holding steady here below the 680 handle, so comforting for the pboc. the aussie unchanged with the kiwi at 67 u.s. cents. jessica summers joins us from new york. jessica: president trump warned them to be careful. he went on to say google, facebook, and twitter are treading on very troubled territory and said it will be addressed. liberalgoogle favored

news outlets. he offered knows of vinci asians for his claims. huawei appealing -- appealing to the federal trade commission. it says restrictions based on national security concerns harm consumers by reducing competition. it insists it is not a danger to the u.s.. huawei and its rival have come under increased scrutiny. japan is witnessing the biggest financial exit is in more than three decades. overseas investors have dumped almost $35 billion worth of local equities this year. that puts 2018 on course to be ly sellofft year since 1987. if buffeted by china, global sales concerns. a new report says a number of deaths in last year's hurricane

in puerto rico is vastly higher than was thought. george washington university says 3000 people died, more than the total of 64 in the island's initial estimation. some investigations but the number as high as 5000. the george washington report will be the official total. twitter,d@tictoc on powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. ramy: the canadian dollar rose to its highest in two months on optimism that ottawa will reach the trade deal with u.s. and mexico. wilbur ross spoke to bloomberg television and said the u.s. is keen to bring in its northern neighbor. >> we are asking canada to consider joining in the agreement that has already been reached with mexico. that is the basic ask we have. what remains to be seen is how close the canadian attitude is

poured that. ramy: let's bring in eric martin. he covers mexico and latin america. let's start off with the latest headlines from canada. optimistic, positive about talks this week. mexico seemingly opening the door for canada to come in here. what is the latest? government has maintained that they would like a seen after rename trilateral deal. it was a surprise that they said they would accept the bilateral deal if canada and the u.s. cannot solve the issues because it is something that's out of the mexican government's control. they said they cannot control the state of the canada and u.s. relationship and all aspects that could be up in the air. is workingican side hard, planning for ministers to remain in washington all week and looking for an opening an opportunity to reach an agreement with canada to

incorporate them in what has been agreed with the u.s. by the end of this week. ramy: let's talk timeline, too, eric. 69 days until the midterms. the house may be up for grabs by the democrats. if that changes, how would that change the dynamic with what is happening with mexico and canada if something is able to happen between now and then? eric: the window to get a nafta deal approved has already closed. it closed in may or june. we are looking at getting a signature by president trump and mexican president pena nieto. that is the big reason for trying to send the u.s. congress by friday because trade promotion authority requires 90 days before you can enter into a new agreement that you must inform congress. that is what they are rushing to meet as a deadline by friday.

the agreement needs to be able a satisfy the possibility for democrat-controlled house, beginning in january. ambassador thing lighthizer has mentioned to us in the press in terms of trying to bring enough democratic votes on board to get that kind of support. he said he really hopes it will pass with broad majorities in both the senate and the house in the next congress. a lot of analysts have been trying to parse through the details of this u.s.-mexico deal. pretty dramatic. lifting the rules of origin requirements by 70%. it seems it does not affect that many. are made indels mexico. does this really packed that much punch in this trade deal, do you think? eric: certainly having the isional content be 75% something that will encourage more production in north america.

one of president trump's objectives in terms of trying to rebalance trade. the provisions in the deal for an average $16 per hour wage for of the content in vehicles produced in north america. that is something that could help eventually to raise salaries and mexico, so there is some provisions in here for the where apanies negotiation unfolded over a period of many months. we saw an auto proposal in the u.s. in october, and it is not totally clear how much impact this will have, but certainly something the u.s. trade representative's office is selling as a victory in terms of creating stronger supply chains and more production within north america and the u.s. in particular. much, ericnks so martin joining us from washington with the latest out of these trade deals with mexico as well as with canada.

one big issue in this potential trade deal with have been talking about is autos, but an unexpected an important matter is what president trump wants mexico to agree on currencies. kathleen hays, joining us with more right now. what exactly does the president that, kathleen? kathleen: it's interesting because this is something we have been so focused on, the trade issues and many of the technical issues around autos and what part is made in each country, but this is something i think was not expected, that president trump saying is part of this agreement, and the two nations should agree on more transparency and currency matters. our news team did an interview with the mexichem economy thister, and he said that is intended to actually send a signal to nations that might be currency manipulators. isn't that interesting? many of them are in asia, at

least many of them that could be labeled such. he said the u.s. mexico deal could include a system for resolution that is in essence something that is already in the nafta agreement. currency has been battered by a lot of forces. it's been very strong at times and very weak. a year or so ago, when the bongo to mexico was raising interest rates, it was very strong. what matters is the weakness of other nations currencies because that could give an unfair advantage when it comes to trade. what kind of material impact if any does this have for asian countries then? kathleen: they think if they could get this kind of provision with mexico, then maybe somehow, that puts more pressure on asian nations and could give some more leverage in their negotiations

with china. this remains to be seen because, remember, even though donald trump talks loud and long about china as a currency manipulator, when his treasury department has to follow the various measures to determine when you are a currency manipulator, china has not been declared such. talk about this has been easier on the u.s. side. i think this is something that is a long way down the road. wilbur ross was complaining about the peso boosting u.s. trade deficit, but it seems if you're looking for a target down the road, it has to be much more based in asia. not just china, but japan and korea as well. ramy: thanks very much, kathleen hays. still ahead, the former u.s. envoy to china will join us to discuss the trade talks. max baucus says there is a long way to go in beijing -- and beijing is playing watch and wait. the yield curve is going

viral. a google search spikes to push to the flattest levels since 2007. we look at the reaction, next. this is bloomberg. ♪

ramy: the mac. this is "daybreak asia." i am ramy inocencio in new york. yvonne: i am yvonne man in hong kong. take a look at the first closing records on wall street. let's bring in su with the latest. we thought trade optimism played a role overnight, but you can see the markets barely eke out again in the final hour. su: there was not interest to get the details of the deal and what it means for canada, and that put a damper on it. you will see the dollar rising again. the 10 year yield moving to the 2.9% mark.

you see the tech heavy index rising to a record. the russell 2000, the broadest measure of the market, as well. it has a lot to do with earnings. forecast.utting are -- their forecast. paul calm positive news. developments having to do with the buy back some analysts say could hurt the bottom line. blowing the bottom line, as did tiffany the jeweler. president trump put out a couple of tweets. there may warnings -- be some action. their search results were "rigged." a lot of this creating concern that the president is targeting the social media companies because they have questioned

fake news that he believes was positive to him. quickly into the gtv is where you can find our exposure. it has to do with the largest mexico-u.s. trade improvement in the relations, causing money to pour into this etf. i do not know if we have time to go to an after-hours plot. there is a company called -- it has a lot to do with the pot industry, soaring after hours. they posted a 95% increase in revenue and are valued at almost $9 billion at this point. ramy: flying high for that stock. thanks very much, su keenan, with the latest on the market. joining us is david hader, chief metro strategist -- macro strategist. david, always good to have you on the show. let's hop into the terminal

because i want to talk about these records we have been seeing today. the s&p hitting a record. the nasdaq hitting a record. strategists raising the target price to 3000. what do you make of what is happening right now? >> i am confused by the whole matter. in the camp. you guys have been talking about it for the last few minutes, the watch and wait remains to be seen. uncertainty,t of not the least of which is the midterm elections. we are going to get to more hikes these year, and i am impressed met the stock market is responding the way it is doing. the progress that was made in the trade situation obviously is not part of this. it's gotten enthusiasm. i also want to say, and this is a little dicey, but it is august. it is hot. there are still an awful lot of people out.

i wonder if this is something of thelliquid move coming into late summer. obviously, you know, when we have the fomc minutes last week and powell's speech, people were saying this sounds a bit dovish. i think that is contributing to some of the stocks. a lot ofhere are factors that go into it. i am not a believer. yvonne: with the fed, -- ramy: with the fed, people have said we are still going to be hiking. the rate path is pretty clear dovish.is not so much with that said, looking to the trade deals, we got this is nothrough," but there a lot of clarity between the u.s. and mexico. thena is "encouraged," but there is china. how optimistic or pessimistic argue that we are going to get some resolution for any of these by the end of this year? david: i think we are going to get something, and talking is

better than some of the rhetoric we have had heretofore, but again, we do not know the details. canada, and about the china situation is much more, i think, of a strategic issue, so we have seen a cooling in that. you are think we are going to get something? i think a lot is going to be dependent on what is going on in washington. i mentioned the midterm elections. i do not mean to say we do not know, but we don't. we have the midterm elections, we have got some of the other political issues that are going on with the trump administration that may prove to be a big distraction to all of this. we approach this with trump's rhetoric is this. he is a bit more optimistic. we do not know where china is on this, so they are much more low-key. we do not have a sense of where their stance is going to be. i am, you know, when i was

saying earlier, i tend to be more pessimistic that we are going to come away with trade deals that are going to make everybody satisfied, but we are trading headlines, we are trading, you know, this entity -- the sensitivity to the headlines, so at the moment, it looks good. yvonne: so how do you trade that, i guess? do you just stay invested and hope that we can keep going higher? do you think there is still a bit of complacency and u.s. markets right now? david: i'm going to get really dweebish on you right now. going into september, in the fourth quarter, the stock markets have done well this year, and i think we are going to start thinking and seeing rebalancing taking place, because just for example, there has been these surveys out. pension funds, liabilities. they reached their funding levels, roughly speaking, 95%.

a huge gain from 75% three years ago. i think as we get to the end of this quarter if interest rates per couple little bit, and i think they will, you see an allocation from risk assets that is not only the stock market but the investment grade on market into the treasury market, and i think that is going to be a dampener on some of the better enthusiasm we are to be seeing in the stock market. the fed is hiking and it will continue to hike into next year. that makes the yield curve flattened, and i think it will make bonds much more attractive. want to of trading, i look at it from an allocation perspective. it's quite favorable to bonds outperforming until the end of the year. yvonne: i am glad you mentioned about treasuries. we continue to see the curve flattened. we have the bloomberg chart that shows this odd pairing we see because you see the curve flattening but also the positioning when it comes to the

10-year note's at near records when it comes to short interest into treasuries. how do you pair this kind of divergence? how do you square it? it seems like the treasury rally can continue if there is such a bearish position on treasury at the moment. question.t's a good first, when you look at the commitment of traders and you yearooking at the 10 notes, you're talking about speculators, people who do not have an offsetting position in the cash market, so that is the definition of it. do not not mean they have positions elsewhere, whether it is a yield curve play, against the dollar, against other markets, against an investment grade portfolio. it has not translated. extremely deep short in the front end of the yield curve. seen the short covering rally. the speculative

positions in 10 year note futures are indicative of a very widespread short that's going to give us a big rally. i think they are short, but it's got something else on the other side, when you have this. that theyt bearish are at the longer end of the yield curve now? if you look at other measures, for example, the daily sentiment that, that is neutral, and has been a much better read on the direction of rates than has been the commitment of traders, at least for the 10-year note future. always great to have you on the show. thank you very much. bloomberg users can interact with the charts shown that using gtv . you can browse recent charts featured on bloomberg tv to catch up on key analysis and save those charts for your future reference. this is bloomberg. ♪

yvonne: a quick check of the business flash headlines. to make up lost ground. it can currently rollout about 1.1 million cars annually. -- amid comes as buyers the realization that it will not help china achieve its green target. ramy: 10 evergrande's new slim evergrande'schina new slim look seems to be working wonders. they reported first-half net income growing at a pace close to their arrival. profit rose to 64% to $4.5 billion through june. story withifferent the biggest slide in half yearly

profit in more than two years, as rising oil and they -- the weaker yen drive on earnings. the steepest drop since the second half of 2015. the trade war in rising oil would continue to affect results. ♪

yvonne: good morning. it is 7:30 in hong kong. 30 minutes away from asia's first major market open, enjoying the summer lull in the markets, but we could be set for some gains today, after what we saw overnight on your side. ramy: 7:30 p.m. tuesday in new york. the markets closed ever fractionally higher, only 0.03%, but i am hiding the real headline. brand-new record for the s&p 500. the first time ever it opened above 2900. we aren't able to keep that up there, but still a record, up three days in a row. strategists right now are rushing to raise their forecast

of the end of the year for the row number of 3000. i am ramy inocencio in new york. yvonne: i am yvonne man in hong kong. let's get to first word news with jessica summers. jessica: thanks. the canadian dollar rose to its strongest level in more than two months on optimism ottawa will reach a trade deal with the u.s. and mexico. foreign minister christopher innd -- krista freeland is washington for talks. the agreement between the u.s. and mexico hinged on auto production, but critics a few models will be covered. >> the fact mexico was able to do something that i think people that would be difficult, make those concessions, does set the stage for productive conversations this week. yvonne: the mexican economy secretary has told bloomberg the with the u.s. will

include a commitment to transparency in currency matters, which could establish a precedent for dealing with other nations accused of manipulating exchange rates. >> some countries in the past used currency manipulation to be artificially more competitive, so these understandings we are doing, they will send a signal to all the regions in the world, in north america, we will not tolerate currency manipulation to attract trade. yvonne: republican party divisions are more apparent, with mitch mcconnell offering jeff sessions his full backing. he says he has confidence in sessions and he should stay in the job. his comments confirm a split with some republicans who think sessions might be fired after the midterm elections. president trump has increasingly attacked his attorney general over the mueller inquiry. the michael jackson estate and sony music disputed claims they

misled fans about a posthumous album by the so-called king of pop. the 2010 record is 10 tracks, and some of jackson's family claims he wasn't the singer on three of them. a california judge overruled an the albumse that cover and promotional video deceived customers. global news 24 hours a day and at tictoc on twitter powered by 2700 journalists and analysts in over 120 countries. i am jessica summers. this is bloomberg. yvonne: counting down to the major market opens in the asia-pacific. let's bring in sophie kamaruddin. looks like a pretty quiet session, but you have been focusing on japanese stocks, the biggest exodus since 1987. sophie: the biggest annual exodus since then. at the start of 2018, the nikkei but withng for 24,000, foreign outflows of $35 billion year-to-date, momentum has been

derailed. you can visualize that on this chart. as we have observed, overseas investors typically take cues from yen performance, but this year strategists cite everything from trade to anxiety over next year's sales tax increase. strong corporate earnings in the u.s. has kept investors there homebound, and sean darby writes political risk and the boj slowing etf purchases. at goldman sachs, mixed economic data highlighted, and concerns about sustainability of corporate profit growth, but they predict foreign interest will resume by year-end, citing abe will likely claim victory at the election in september. also citing prospects for earnings, and increased buybacks and dividends. onhave seen attention

japanese stocks at the end of the year, but she points to a light at the end of the tunnel by the end of 2018. yvonne: thank you. on the japanese markets, what the setup will look like in asia today. of course, we have been focusing on the tech sector. president trump has a stark message for google and other social media companies, accusing them of liberal bias and warning them to be "very careful." >> google and twitter and facebook, they are really treading on very troubled territory, and they have to be careful. it is not fair to large portions of the population. yvonne: joining us now is our bloomberg tech editor. the president saying this is a serious situation. are his criticisms fair? >> it is certainly true these big internet companies have to be careful, maybe not for the reason the president was talking about today. in general, these internet platforms are under a lot more scrutiny compared to five years ago, for instance.

they have a lot more reach now, a lot more influence on what goes on in the real world, not just online. so from that perspective, they do have to be very careful. yvonne: we have heard the president bring up this issue time and time again. how serious is he in really implementing some kind of change, or is this just an isolated issue? alistair it has certainly been a common theme that president trump has used over the last two years, really. the general idea's that these internet companies are, according to him, too powerful and they have a left-leaning slant when they are picking what content to show people, what content to rank. specifically today with the google criticism, he was saying that the google news service publishes or distributes news stories from what he called

liberal publications. generally speaking, what has happened recently with google, they were criticized for spreading some actual fake news, foreign manipulation, and they did crack down about a year ago, started focusing on news sources that were more traditional, more established, than some of the blogs and online opinion sites. that is one page that has maybe -- change that has maybe make the more open to this criticism. ramy: larry kudlow earlier this morning in washington did say the white house would look into this. but really, can the government do anything about this? alistair: not really. i mean, in the u.s., there are pretty strong first amendment rules that protect free speech and protect what publishers can say, and really what internet companies can do. one particular thing is the internet sector in the u.s. has

a lot of protections against what users can post on their service. if a user posts a video on youtube, technically google can't be held liable for that content, and that applies to news results on the internet, and on the facebook feed as well. some of those protections have been whittled away at the edges this year, but generally speaking, especially for things like decisions on what news stories to show on a service, those things are very well protected. ramy: alistair barr, our bloomberg tech editor, coming to us from san francisco. thank you. staying in tech, but going to the digital streaming world. amazon is said to be in discussion with at least two major hollywood studios. about now cofinancing movies. we are told they held sony asory talks with ton well as paramount pictures as they look to offer more films on its streaming service. our reporter lucas shaw has more

from los angeles. why is amazon interested in the rights to these movies? what do we know about the conversation so far? more goodzon wants programming to put in front of users. sounds simple, but when you think about the big streaming services you think of the original tv series they come up with, but movies have been very important, especially for retaining customers they already have. people show up to netflix to watch house of cards, but basic around for the movies they licensed from disney. amazon doesn't have some of behind and, first run -- some of the high-end, first run movies, so they are trying to bring them on, either by bringing on movies not shot yet or getting movies that have been shot that the studio doesn't want to release. ramy: the libraries on netflix and amazon, i have both but i tend to go to netflix. it seems there's more options there.

but from your perspective, your research, is that true? lucas: i would say hbo has the best, netflix is next, amazon is kind of a murky spot, because you can rent anything on amazon, which is a great feature that i love. but in terms of the movies that come included in your amazon's of scripture and, that are free -- amazon subscription, that are free in instant video, it's not a great selection, which is why they want to do this. they haven't had as many output deals with studios as netflix and other streaming services. ramy: and given that disney has said it will pull its movies from netflix, why would studios then willingly sell their movies to amazon? lucas: partially because they need money. even though disney has said it will pull movies from netflix, you have seen a studio like paramount celso movies to netflix that they -- so some

movies to netflix that they don't think they can make money on in theaters. netflix has made no secret about its desire to basically swallow the entertainment business. amazon has been a little more amenable. whereas netflix pushes movies into the streaming service at the same time they are in theaters, amazon is willing to hold them back, let them have a theatrical run, something theater owners really want. so there's a belief, although amazon is scary, one of the most powerful companies in the world, it is more of a partner perhaps then netflix. ramy: bloomberg's lucas shaw in los angeles. with amazon possibly getting more content for its streaming service. thank you very much. coming up, more on trade, and the idea china is playing watch and wait. former ambassador max baucus shares his views with us next. this is bloomberg.

>> by far the largest single source of our trade deficit with mexico, autos. so we think that will help mexico get more business back from southeast asia, and we hope it will help the u.s. to do the same. >> this is a complicated agreement. there's lots of things in here that are all-new. i would think canada would be very much on board with stronger intellectual property, stronger protections, modernizing agreements, so i'm hopeful the open issues with canada can be resolved quickly. >> canada should look at it on the economic basis. if we tear up our agreement with our northern and southern neighbors, we will take a hit. 11 million jobs, some say 14 million, hinge on this agreement. >> i think the president thinks the united states has the

leverage, because he's willing to do a deal with mexico. however, at the end of the day, congress has to approve this deal, and if congress is putting down markers that canada needs to be in the deal for congress to vote yes, then perhaps canada has more leverage than they think they do this morning. ramy: all right. whiteard from some of the house and former trade officials, on the ongoing trade talks between the u.s., mexico and canada, all here on bloomberg television. taking a look at where those voices are, a couple of them are clearly skeptical on anything really happening here. we also saw what was happening, in terms of at least the mexican peso, some investors not really boy and, i suppose -- buoyant, i suppose, because we saw the peso fell 2.5% today in u.s. trade, with regards to this possibly getting through congress, especially with the midterms coming up in about 69 days. yvonne: wendy cutler said it

pretty perfectly. congress wants a trilateral deal, so that could pressure president trump to make some concessions here and allow canada to rejoin the talks and rejoin the deal. let's take a look at the currencies. you mentioned, the moves we saw when it came to the mexican peso, really failing to hold those gains we did see the day before. it could be a good sign or a bad sign, you could say, for the canadian loonie. we have seen this pick up in the canadian loonie of i think 6% since the low in june, so certainly that is going to be a big focus here. news pricedhe good into the currencies already, and can the canadian loonie hold onto those gains after jumping to the highest in two months, $1.29 against the dollar now. that will be a focus, what it means if the u.s. makes a deal with the north american hemisphere, does that mean hopes of a u.s.-china deal also fade? ramy: there has been breaking news lines, of course, from the foreign minister, that at least

the will is there. let's just say, from all sides, just coming out of the ustr's office, saying it is constructive, optimistic looking at what may happen in terms of future meetings later this week with mr. lighthizer. let's continue the conversation. the trump administration is putting trade talks with china on the back burner, at least for a deal as they focus on with mexico and canada. national economic council director larry kudlow has some advice for beijing. just say yes occasionally. >> with china and trade, my advice is, just say yes once in a while. you know what we are asking. the list has been put down on paper. we have had a number of meetings. beijing, washington, back to beijing. why not say yes?

--my: our next guest says s has seen the issue both ways, as a senator and recently as u u.s. investor to china. max baucus joins us from bozeman, montana. you heard larry kudlow saying to china, please just say yes. how optimistic, or pessimistic, are you that anything could happen through the midterms, let alone through the end of the year or beyond? max: we are in a difficult spot. first, president trump is focusing on mexico, and nafta. frankly, i don't think there will be a deal between mexico and the united states without canada, any agreement between the u.s. and mexico has to be approved by the congress, and i don't think congress will approve unless canada is on board. economic interests, farmers, ranchers, businessmen in

america, canada, mexico want a trilateral agreement. that would be a bit different from what we had in the past, but by and large the same. .eantime, china is waiting it is very clear china has played a long game, being very careful, not making any rash decisions. they are think going to wait for the midterms, in part because they don't know what president trump once --wants, because he changes his mind frequently. after that, there's a disconnect between him and the administration. he might say they reached something that his administration is saying another approach. and i don't think this administration has a good, long-term plan. when i talk to people who work with the administration, they ask, what his plan b, they don't

get a response. bey say, there will be a plan if the tariffs don't work. ramy: with the u.s.-mexico trade breakthrough, some analysts say that this will embolden the hawk s who are apparently on the ascendancy in the white house. to what degree do you think this, these hardball tactics really a quite -- equate to winning for the white house, embolden them to push harder against beijing? max: i am a little skeptical about that. president trump likes bilateral agreements, not multilateral. he thinks american power can get a better deal for america with a bilateral. that's why he did that with mexico, and he will now be i think forced to work with canada. when he approaches china on a bilateral basis, that tends not to work either, because china will work with other countries the on the united states, find

markets elsewhere. they will play the united states. i think trump is mistaken when he thinks multilaterals are a bad idea. in my experience, they are good. we had tpp all lined up to pass, the transpacific partnership, a huge mistake for president trump to pull from that. it means the u.s. is less engaged in asia, it will be more difficult to trade, not only with southeast asia but ultimately with china. yvonne: i wanted to cite something marion lovely mentioned, earlier on bloomberg television from the peterson institute. she said the issues not just about china, but also the national security case for auto tariffs, which she thinks is still in place even after the u.s.-mexico deal. take a listen. >> we see the option to just say, we want to do that, we will pay a 2.5% tariff. if that is all facing you if you don't conform to these rules, they really don't have any

teeth, so what this deal is signaling is that this administration is going to go forward with a 25% tariff on autos. yvonne: elaborating more, she's arguing that mexico's jumping through these hoops because they want to avoid a large terrace. do you think it's likely that we will see president trump actually slap these tariffs on autos? max: i don't think so. i think he's going to huff and puff and not followthrough. there's a general trend with donald trump. hit someone pretty hard, big body blow, strong statement, and after a while back off. look at the wall, mexico for example. he's finally backed off on that. nafta, the degree to which he criticized nafta, nothing close to the complaints he had when he was campaigning not long ago. i don't think there will be a

25% tariff. yvonne: when it comes to china, do we need a president trump and president xi summit to really hammer out this deal? max: the singapore summit with kim jong-un, i think, is instructive. that didn't work for a well, because -- work very well, because there was no prior groundwork laid. singaporequence, the summit was just a handshake for the world media. president xi and president trump, if they were to meet, i worry there would be the same unless there was a lot of groundwork laid. it has to be done not with public tweets, more with hard work, negotiators on both sides being private about it, working together, trying to find a way to deal with the basic u.s. concern, technology transfer, work onaps, ip theft,

that. i think china will want to give on those issues a little bit, not very much. china 2025 is not far away. but on the margins, xi jinping wil want to keep a strong trade relationship with the united states. that helps him keep the economy stable. in china, they'll give a little to come out with an agreement in the end were both sides come out ok. u.s.e: max baucus, former and bassett or to china and senate finance committee chairman. you can always find in-depth analysis on the day newsmakers on bloomberg radio. bloomberghe app on radio plus or access it on bloombergradio.com/. . this is bloomberg. ♪

yvonne: we are counting down to the market open in japan, south korea and australia with about three minutes to go. we expect a lackluster session, certainly the summer lull days. we have seen u.s. markets eking out gains, records when it comes to the s&p and nasdaq, but pretty modest at best. nikkei futures up 0.1%, flat for korea. asx 200 futures up 0.1%. we will discuss the trade war's impact on currencies with a guest from the commonwealth bank of australia. what does it mean for the mexican peso after failing to hold onto the gains after reaching the trade deal? is that a signal to canadian traders on where to go when it comes to the canadian loonie? and we preview autos. short interest given china opening the auto market, so a

lot of questions to ask. that market coming up -- market open coming up next. this is bloomberg. retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows.

this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. yvonne: 8:00 a.m. in hong kong, live from bloomberg asian headquarters. i am yvonne man. welcome to "daybreak asia." the top story, asia faces a quiet stock after u.s. stocks founder much of the session. crosses the s&p 500 2900 for the first time. the canadian jumped on optimism of a trade deal. ottawa says progress has been made in initial negotiations. >ramy: i am ramy inocencio in nw york, where it's just after 8:00 p.m. on tuesday. emerging-market currencies rise for a third day in a row. we will check the outlook. hitser hits the -- toyota

the gas on car production in china. it has fallen behind major rivals like volkswagen and g.m. ♪ yvonne: ramy, it certainly feels like summer. we can see u.s. markets geeking gains, but nott a lot of action when it comes to the trade front. we saw the u.s.-mexico trade deal, but a lot still has to go on when it comes to canada rejoining the trade deal, as well as what happens with china. ramy: it seems from what the foreign minister out of canada has been saying is that the will, they have those, but whether they have the way, whether the policymakers have the time to get this all done possibly before midterms, possibly sometime in 2019, appears to be a big question.

if the house flips in the united states congress that adds a different complexity to the poetical calculus of this going through -- political calculus of this going through. yvonne: before that, check on what the market is doing now, with sophie kamaruddin. pretty slow going. sophie: we had the lackadaisical run in u.s. stocks. looking for direction today, we might not have much in regional data. japanese consumer confidence for august, vietnam inflation and trade figures. when you take a look at the start of the wednesday session, you have gains for regional major markets. nikkei 225 extending gains. kospi on a ninth straight consecutive gain. asx 200 adding 0.1%, which could be a fourth daily advance. when it comes to earnings, samsonite and citic among those reporting. we will wait for reaction to china's banking giant later.

when it comes to trade optimism, we are keeping an eye on the mexican peso, flirting with the 19 handle after reaching that overnight. the headlines have come and gone on that front. e.m. space, concerns argentina might slide into a second recession in three years, and moody's downgrading several turkish banks. yuan flirting with 6.80 as u.s. officials suggest more tariffs might be imposed on chinese exports. when it comes to stocks to watch out the gate, keeping an eye on korean stocks, under pressure on a media report the north korean regime rejected the u.s.'s demands for removing its nuclear arsenal. rotemator and t

losing ground. ramy: very volatile, those korean stocks. thank you. let's get the first word news with jessica summers. jessica: a new report says the number of deaths in last year's hurricane in puerto rico is vastly higher than thought. george washington university says about 3000 died, far more total than the 64 in the initial estimation by the island. other estimations put the count as high as 5000. puerto rico's governor says the george washington report will be the official total. president trump warns social media to "be careful" as he accused google of rigging search results to offer negative news about him. he went on to say google, facebook and twitter are treading on very troubled territory, and later tweeted the situation will be addressed. the president commented after foxbusiness said google

favorite liberal news outlets. he offered no substantiation for his claims. huawei is appealing to the ftc for help to fight limits on u.s. markets. it says restrictions based on national security concerns harm consumers by reducing competition, and they insist they are not a danger to the u.s.. have come rival zte under increased official scrutiny over fears their devices could be used for spying purposes. and republican party divisions are more apparent, with mitch mcconnell offering beleaguered attorney general jeff sessions his full backing, saying he has confidence in sessions and he should say in the job -- stay in the job. this confirms a split with some republicans who think sessions might be fired after the midterm elections. president trump has increasingly attacked his attorney general over the mueller inquiry. global news 24 hours a day, powered by more than 2700 and

analysts in over 120 countries. i'm jessica summers. this is bloomberg. ramy: thank you very much. the canadian foreign minister says the u.s.-mexico trade agreement sets the stage for productive talks this week. she plans bilateral talks with both delegations, but declined to comment on whether a three-way meeting is in the cards. the fact mexico was able to do something i think most thought would be difficult, make those concessions, does set the stage for some productive conversations for us this week. ramy: let's bring in bloomberg senior international editor jodi schneider. it seems sentiment over canada's improvement -- inclusion in the trade deal is looking more positive. optimistic about looking forward to talks with mr. lighthizer this week. jodi: there is a sense of optimism there, and kind of a rush to get canada to sign off on a deal. to mr. lighthizer wants

notify congress of a deal by friday, which is suing. -- soon. that would require canada to sign off. this gives canada leverage. the other reason mr. lighthizer and the trump administration want this deal with canada, it would make it much easier to go through the u.s. congress. if it's just a bilateral agreement with mexico, much harder to get that through the congress. some good really fight that. it seems the u.s. is pushing for this, and canada is willing to come to the table. whether they can get it done is the question. yvonne: the foreign minister of canada, she mentioned mexico's concessions would be valuable to canada. how valuable can that be? there's still quite a few stumbling blocks. jodi: one major something block canada says is a redline. the nafta agreement, as it is now, there's a mechanism for anti-dumping panels to resolve

disputes over these issues. the administration in the agreement now with mexico doesn't have that. it's pretty watered down. somebody has to blink, because canada says we can't do it without that, and the u.s. is trying to negotiate around it. that will be interesting. someone has to give in. there are other issues, but that's the big one. yvonne: these concessions, if he gets it with canada and mexico, obviously would be big wins for the president, but does it actually back up these pledges he made, shrinking trade deficits? jodi: two things the president famously said campaigning, that he had to get rid of nafta, that it was a bad deal that never should have been made because it cost the u.s. manufacturing jobs and also caused tyhe trade deficit with mexico to rise. agreement, neither of

those things is likely to change. on the manufacturing side, there 's the potential for even going in the opposite direction. the big thing, pointing to the changes in auto rules, the 75% regional content up from 62.5% in the existing agreement. analysts say it will take years to change supply chains in north america, even if they do change. they are complicated. we won't necessarily see that, but the president has made this a, part of his mantra, getting rid of nafta. it seems they are pushing to do that, and canada is the key. yvonne: jodi schneider, our senior international editor, joining us in hong kong. we continue our chat on trade. coming up next, the u.s. and mexico sending a signal about currency manipulation. we talk fx. ramy: joseph: and later -- ramy: and later, what a new trade deal could mean for some of the

world's biggest automakers. this is bloomberg. ♪

yvonne: this is daybreak asia. i am yvonne man in hong kong. ramy: i am ramy inocencio in new york. the proposed deal did not only lift up wall street, but is boosting emerging markets as investors hope a successful outcome might pave the way for a resolution with china. kathleen hays is looking at this. em currencies up for the third day in a row, but volatility has to be attached to this, every time you say em currencies. kathleen: maybe it's because em currencies have been so beaten up, starting with fed rate hikes. so many things. argentine inflation, the turkish lira, erdogan's problems. but now you have a situation where the u.s.-mexico trade deal

looks like it might go through. there is something on the table, canada rushing in to see what they can get to maintain the nafta relationship, if not the agreement. but three straight days they have been up. they are on their way to their best move in a month, when it comes to moving higher, partly because they have been so pessimistic, even a ray of hope helps. what could happen now, president trump is getting ready to look at the end of the 200 day public comment period on september 6. this is what lies between $200 billion more of tariffs on china and something that could possibly happen between the u.s. and china by then, but of course, trump just said he's "not ready" to talk trade with china, and the chinese have not looked especially eager themselves. this could dent the optimism this mexico deal has created. another thing our bloomberg news team raises as a possibility, if there is some

"nafta breakthrough," will it embolden trade hawks to get even tougher on china, pushing the possibility the deal might be further out in the future? maybe we should just enjoy a little rally in em currencies when it lasts, because there are big obstacles ahead. yvonne: focusing on their own neighborhood first, according to wilbur ross, and then we see what happens with china. kathleen hays, economic policy editor, joining us from new york. let's talk to joseph capurso, at cbs. thanks so much for -- at cba. thanks some much for joining us. the mexican peso rally has failed to hold on to gains. is it too late to buy into these rallies? joseph: it might rally a little further. you might see a bit more if the canadians come to the party later in the week to join nafta, thethis has removed one of big downside risks to the mexican economy, so it could go

on a bit longer. yvonne: what signal does it send to the canadian dollar? ew have seen the -- we have seen the canadian dollar rally 2% from the lows in june. even if canada rejoins the deal with u.s. and mexico, has all the good news already been priced in? joseph: look, you have got more good news if the canadians do join nafta, but also potentially some good news on the canadian economic front via the bank of canada. we think they raise rates again next year. i guess the risk is they move sooner than that. this nafta uncertainty, i think , would hold the bank of canada back from hiking more. the cad could get some upsell there. another angle for the canadian dollar, oil prices. u.s. sanctions against iran, which kick in later this year, could push oil prices up as wl

ell. the canadian dollar might have more upside in the near-term, certainly. yvonne: so, as kathleen mentioned, em's have had a hard year. the mexican peso is usually a proxy when it comes to whether you take more risk in em. are thety not out of the woods yet? we needin terms of em, to be cautious on select currencies. south africa has issues, so does turkey, argentina, and elsewhere. but overall i think em is in quite a good position, em currencies, particularly in asia. most of the em fx in asia have current account surpluses, which is big for their currencies.they haven't seen fx much of the negatives in with china trade tensions. and of course, their economies are growing well without

showing too much inflation. overall, em asia are in good position, and i don't think we will see a rotate, because their currencies are generally freely floating, not what they were 20 years ago. ramy: joseph, let's go from north america across the pacific, to china now. i want to get your thoughts on where the rmb should be going, or could be going. right now, the offshore is 6.8. getting further away from the 7 mark. i understand you are bullish usd against rmb. joseph: yes, that's right. my main reason for bullish on dollar against renminbi, two fold. first of all, the u.s.-china interest rate spread that will go in favor of the u.s. dollar. second, which i don't think it's enough airplay, is that china's current account surplus has collapsed. 10 or so years ago, china's

current account surplus was about 10% of gdp. now it is closer to zero. in fact, in q1 it was negative. that is a big game changer for the rmb. what it means is that china is at least partly dependent on foreigners to finance domestic investment. that means it is up to the chinese authorities to have a very attractive investment environment to attract foreign inflows. it's more likely that the fragility in china's banking system will be revealed because of this need to attract foreign money. i see that the rmb is going to thisweakening in tranches year and next. i think seven against the

dollar's certainly possible by the end of the year. the forecast is 6.95. by the end of next year, something in the order of 7.2, 7.3 is very doable. yvonne: this would character -- counter the cyclical factor introduced by the pboc. you don't think this will ease pressure on the renminbi weakness? this intervention doesn't work in the long run? ultimately, the market will determine the level of rmb. these measures are certainly important in the near-term, but a reasonable rally in the last week or so, since friday's announcement, but ultimately the fundamentals are going against the rmb in a way we haven't seen in a very long time. at best, i think the measures will slow the pace of depreciation of the rmb, rather than cause it a sustained

appreciation. don't forget, capital markets in china are fairly open, and that means the market will decide the value of the currency. ramy: joseph, i want to bring in a bloomberg terminal chart and continue this line from china to australia, where you are of course. the gtv terminal library is where you can find this. the red shading, correlation yuan,en the aussie and r pretty much near the record strength here. how concerned should we be with regards to this, especially with the reliance on commodities, but also with the reliance on commodity demand coming out of china through the lens of slowing economic growth? aseph: look, the aussie is very good proxy for non-japan asian currencies, and has been for over a decade. i think this will slowly break

down, particularly as it comes to rmb. day's because the day to movements of rmb are slowly increasing, as the market has a greater impact on rmb. but while there's very good reasons why aussie should be correlated with rmb, it shouldn't be this closely correlated. it would not surprise me if we get another breakdown, although in the near-term these things can be highly correlated. ramy: all right. joseph capurso of cba, thank you very much for your thoughts on all things fx. remember, bloomberg users can interact with the charts v go. using gtd you can save the charts for future reference. this is bloomberg. ♪

yvonne: watching the trade developments out of d.c., with canada joining talks with the u.s. and mexico. we will see what comes out on friday, but certainly volatility when it comes to currencies. a look at the peso and canadian loonie. we saw this relief rally in the peso fade pretty quickly, in just about a day or so. 19.06 now.ing around gains,cad holding on to with a little optimism priced in that we could see a deal by the end of the week, 1.29 for cad now., phil questions and something blocks. when we talk to congress, they want all three in the deal, which could give trudeau more

wiggle room in these talks. ramy: the phrase, where there is a will, there is a way, but we never talk about a timeline for that old adage. it seems our analysts and guests have said, this will not be happening by the midterms, this might not even happen by the end of the year, but it seems the words and will are there, it just depends on the timeline. earlier also we had wilbur ross on bloomberg television, this interview with him. let's play that -- >> we are asking of canada to consider joining in the agreement that's already been reached with mexico. that's the basic ask that we have. what remains to be seen is how close the canadian attitude is toward that. ramy: it's interesting there, because we know that donald trump and this white house is very keen on bilateral relationships, trying to push bilateral trade agreements. now there's a question of

whether this could be a trilateral again, something like a new nafta, or a new relationship akin to nafta. we will look to friday to see what comes out of this. a quick check of the latest business flash headlines. we head to the auto world. triple production in china by 2030 in a renewed push to make up lost ground. they want to turn out 3.5 million vehicles a year by that date. ut 1.1rently rolls out abo million cars annually. the plan comes as buyers warm to the hybrid technology tell you to pioneered with the previous, -- prius. new slim lookt's appears to have worked wonders, with more sustainable profitability. the developer reported first half net income growing at a

pace closer to larger rival country garden, rising 64% to $4.5 billion through june. last week evergrant announced a dividend worth over $2 billion. meantime, a different story over at china southern, with the biggest slide in half yearly profit in over two years. rising oil and a weaker yuan net incomenings, falling 24%, the steepest drop since the second half of 2015. china southern says the trade war and rising oil, and fluctuations in the yuan will continue to affect results. yvonne: now for a look at some stories trending across the bloomberg universe. on the web, reading about how president trump's new nafta might leave his job and deficit pledges unjustified. on tictoc, lots of tweets about trump warning us tech giants about spreading news casting him negatively. on the terminal, goldman's

advice to bond traders, the investment firm saying a dovish take on powell is wrong. those are trending online or on the terminal. this is bloomberg. ♪

i'm all about my bed. this mattress is dangerously comfortable. when i get in, i literally say ahh. introducing the leesa mattress. a better place to sleep. this bed hugs my body. i'm now a morning person. the leesa mattress is designed to provide strong support, relieve pressure and optimize airflow to keep you cool. hello bed of my dreams. order online, we'll build it, box it and ship it to your door for you to enjoy. sleep on it for up to 100 nights and love it or you'll get a full refund. returns are free and easy. i love my leesa. today is gonna be great. read our reviews, then try the leesa mattress in your own home. order during our pre-labor day mattress sale and save. for a

limited time get 150 dollars off and free shipping too. sale prices are available right now. go to buyleesa.com today. you need this bed. yvonne: 8:30 in singapore. a beautiful wednesday morning at there, half an hour from the opening of trading in the lion city. i am yvonne man in hong kong. ramy: i am ramy inocencio in new york. let's get the first word news with jessica summers. jessica: the canadian dollar rose to its strongest level in more than two months on optimism ottawa will reach a trade deal with the u.s. and mexico. the foreign minister is in washington for, and said canada is encouraged by progress made so far. the u.s.-mexico agreement hinged to a great extent on auto production, but critics say very few models will actually be

covered. >> the fact mexico was able to do something that i think must have been difficult for mexico, make those concessions, does really set the stage for some productive conversations for us here this week. jessica: the mexican economy secretary has told bloomberg the trade pact with the u.s. will include a commitment to transparency in currency matters. he says that should a savage a precedent for dealing with other nations accused of manipulating exchange rates. >> some countries in the past used currency manipulation to be artificially more competitive. these understandings we are will basically send a signal to all the regions in the world that north america will not tolerate currency manipulation as a way to attract trade. jessica: a little-known swiss bank reached a deal with u.s. regulators to pay a fine and

provide information about hidden taxes.s used to dodge they will pay $60 million and forfeit fees from the undeclared accounts from two dozen three to 2012. at its peak the bank had more than 1100 accounts for u.s. clients, with $830 million. amazon is said to be talking to at least two major hollywood studios about potentially cofinancing movies to boost its streaming service. we are told discussions involve sony and paramount. options might include developing funds and backing for film production. movies from big-name studios would help amazon attract new viewers and take the battle to netflix, which are currently trails. club -- global news 24 hours a day on air and at tictoc on twitter. i am jessica summers. this is bloomberg. ♪ yvonne: thanks. asian markets, how they are

shaping up so far -- pretty lackluster start, but we're seeing new zealand pretty strong after the outage yesterday. sophie: traders perhaps making up for the outage that saw trading limited to a little more than one hour. that is putting them on course for another record high. elsewhere, we're seeing hints of risk appetite being subdued. the dollar holding steady. despite yuan off 0.1%, the pboc strengthening for 14 straight days. too much uncertainty perhaps to see that support lift the yuan. taking a look elsewhere, nikkei 225 eyeing a seventh day of gains. yen trading 111.24. the koreanr 0.1%, won below 1110. 200 -- in the fiscal

infrastructure activity offsetting residential moderation. gold and nickel miner independence grew rising, affirming guidance and posting record earnings. ramy, we see bellamy's sliding 7.2% as it sees sales growth moderating in fy 19 in part due to slower growth for infant formula in china. ramy: sophie kamaruddin checking the markets there. over to china now. despite a deleveraging push and a record nationwide surge in bad loans, the biggest banks have posted rather stable earnings growth in the second quarter. our chief north asia correspondent stephen engle has been tracking this. what sets the big names apart?

stephen: the big state owned lenders have been doing well despite the deleveraging push. the smaller, rural lenders have not. i will get into that in a minute. we have gotten results from four of the big five state-owned banks in china. icbc reports this friday. as you said, these are not blowout numbers, but stable. that's good, given the beating the bank stocks and the banks have taken the last few years. bank,k, the number three but 7.9% profit to 8.4 billion u.s. dollars. bank of china, the number 4 lender, up 5.3%. five bigy, four out of state banks saw profits rising at least 5%, tighter liquidity improving lending margins. net interest margins of three of the four all increased significantly. agbank to 2.35%, bank of china

1.88%. the net interest margins increased, and capital adequacy ratios also increased, at least at agbank and bank of china. the deleveraging push, the crackdown on risky debt, has pushed business to these large state owned banksr, at the expense of smaller rural lenders. yvonne: and away from shadow banks. stephen: bank lending is taking up the bulk of social financing, to the detriment of shadow lending, which has been cracked down on. yvonne: a record surge in the second quarter. how are the banks coping? stephen: they are exposing themselves less to these industries with overcapacity and big debt issues, whereas the big surge in nonperforming loans, 80% of the record surge in the second it was at these small, rural banks. they are taking the real big hit. the issue here, you could see if

you're having trouble with rural further authorities backing off from deleveraging to help them out. we already see cash injections going in, so with the trade war, a lot of the uncertainty, early indicators in the chinese economy show a slowdown for a fourth consecutive month. you can see some backpedaling. yvonne: back to the old playbook of credit-fuleled stimulus. stephen engle, our chief north asia correspondent, with the latest on china bank earnings. we will see how the reaction goes when china markets open up. coming up, the new trade deal could be a tariff doomsday when it comes to automakers. our guest says chinese manufacturers face greater uncertainty than ever. this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. ramy: i am ramy inocencio in new york. toyota looking to triple annual production in china, rejoining the race in the world's biggest auto market. they are also boosting imports. our asia autos reporter has this story from tokyo. first off, give us the background to this. kevin: obviously tell you talk oyota has not been the quickest out of the gate in china. they have watched rivals, notably volkswagen and china, pulling ahead. geely has taken over from all the japanese automakers, to jump up in the rankings there. it really is high time for toyota to do something really aggressive in china. you know, it has a history of being a cautious company. wait, buto watch and

when they make up their mind, they tend to go very quickly. we have seen them ramping up production this year, two times, and they are already planning to refurbished a line with one of their partners, and build a new factory with another, their partner gac. it seems they are getting serious about china. ramy: it is a high target, but is this really achievable? a very high target. certainly they are moving towards it now as an interim target, early 2020's they want to boost local production to two million, on the way to the 3.5 million target. so certainly if they want to just build a lot of these factories, they can do it. whether there will be demand for that many cars is another question, but it seems these

cars may not all be targeted at the chinese market. toyota may be looking to use china as an export hub for new energy vehicles to the rest of asia, so that may factor into this plan. yvonne: china has been opening up its auto sector. is that why we see this move from toyota now? the turningems point was when chinese premier li was in japan and met with akio toyota, the ceo of toyota, and got a tour of a facility in hokkaido. it seems china has commuted to toyota that hybrid will play an important role in its environmental goals. that's one very important part of this story. the other, as we have been hearing about, is the trump administration going the other way to china, threatening to put up barriers to trade.

toyota may have realized they have been too dependent on the u.s. for too long. they sell twice as many cars in the u.s. as in china, whereas volkswagen and gm have had china as the biggest market for several years. nissan should see china become either biggest market this year. toyota has not followed the trend the other automakers have taken. maybe now with the trump administration threatening trade barriers, that could be a catalyst. yvonne: thank you. kevin buckland, asia autos reporter joining us from tokyo. a closer look at the auto industry in china as earnings season kicks off in july. car sales fell a second consecutive month, with the slowing economy and the trade war having consumers out of showrooms. us from hong kong,

toliver ma. we have the story of toyota tripling targets in china. what does that mean for the outlook for chinese automakers? thever: it affects confidence of the market overall, looking ahead of strong earnings outlook and also the outlook that is really good for the rest of the world. competitive in increasing capacity, and that gives confidence to the market. marketines, the vehicle in china, a strong push for them to build factories. it's a surprise to me they had toh a big target, want achieve such a big achievement there. yvonne: when it comes to

automakers in china, we have seen quite a bit of short sellers the last few weeks, but they have been getting burned. brilliance was the latest one. a chart here shows what we have seen, the divergence of stock price and short interest out there. will this just be short covering, or are people too bearish on the sector right now? toliver: they are always bearish. the uncertainty is still there this year. from the beginning of the year, we had the tax cuts in march, in it will still go over 2019. the chinese government's determination to open up auto onkets and remove limits foreign entities. these have been negative for the market in the same quarter. put all this in context, the

chinese market is rising since 2010. over the next few years, probably a slowing down of sale s growth. the current policies, for domestic players it is quite bearish. they are always sensitive to the market. ramy: and on your screen you can see short interest soaring in recent months, despite what happened with the last few days with brilliance. in terms of valuations, they are pretty close to historical lows, but to what degree is there any upside to this? we are seeing what, groth slowdown -- growth slowdown, fall in e.v. subsidies and tariffs on imports falling away.

to what degree could this be a value trap, if investors want to get in on it? toliver: what we see in the lowet now, is the valuation. i think valuation is very low now. in hong kong has a valuation one or two standard deviations from the historical low. a very good opportunity to accumulate stocks with good growth outlooks, such as companies with strong growth outlooks, sales expectations, strong model pipeline and clear strategy. we should target these companies. at these valuations, a very good opportunity. ramy: i want to dive a little deeper into the sector, going specifically into new energy vehicles, toliver. i will show you in the gtv

library, this shows china will be the largest share of electric vehicle buys by 2022, but already they are nearing 50%. is this a positive, a glimmer of hope for china's electric auto sector? china,: well, for currently they are very strong ectric vehicles because of support from the government, policies insuring -- ensuring automakers can fulfill their 5rgets in 2020, hoping for million new energy vehicles on the roads of china. for all this push, and you can thesel the planning in years from the automakers globally and domestically, china will have very strong ground in the new energy vehicle market. yvonne: which chinese automaker

do you think is best positioned war? least face the trade toliver: in terms of new energy vehicles? yvonne: or just overall in the sector. toliver: overall in the sector, tariffs are very interesting. right now, the chinese have fought back, increased tariffs from 15% to 25%. so now american imported cars james a weak position, -- names like ford, lincoln, jeep, tesla. what could change with these tariffs, brands that sell cars in china, not importing from the u.s., two luxury brands, lexus and porsche, who have no plans to localize in china yet.

these brands would benefit the most, at the moment. yvonne: do you think the threat of auto tariffs from the u.s. is still there, despite what we see now with the u.s. and mexico? toliver: we have the impact on the luxury but in market, we see strong growth in china. the impact would be affecting the competitive landscape. overall market is still very strong. there is demand for luxury cars, as the economy is going up and disposable income is rising. ramy: toliver, before we let you go here, in terms of bmw, tesla, they are raising production, basically localizing in china, making factories there. the big criticism, is that china has not reformed enough, opened

up enough. to what degree is this pushing back the criticism, clearing the way in terms of sentiment, or more? toliver: i think regarding the removal of the limits, last had, the management limits,opening up any with talks with bmw, how they want to change the structure, how they want to promote everything, will be happening after 2022. s right now there'so still a lack of detail regarding these policies, such as how far they can push the limits. i think they are waiting for guidance, and that's why it clea rs up the market concerns. yvonne: there was a report that the brilliance-bmw partnership would go until 2028.

period isround that when the contract expires. yvonne: great to have you. toliver ma. ramy? ramy: and you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers can go , also available in the bloomberg everywhere app. you can customize settings to get only news in industries you care about. this is bloomberg. ♪

ramy: welcome back. this is "daybreak asia." i'm ramy inocencio in new york. yvonne: i'm yvonne man in singapore. yum china jumped the most in a month after rumors of a buyout by hillhouse capital, valued at a 20% premium on monday's close. yum china leapt on reports it rejected the offer. bloombergis month, reported in the others are working with china investment corp. on a potential takeover. ramy: hewlett-packard jumped in late trade after a profit forecast topping expectations, seeing profit of up to $.44.

the average estimate was for $.42. cost cutsst suggests and a push into networking and software are starting to pay off. ceo antonio neri has tried to push hp away from computer higher-margin sectors. yvonne: getting backing from tencent as they prepare to list in hong kong. we are told investment terms will be finalized soon, although the company has declined to comment. to raise ipo is likely 4 billion u.s. dollars. ramy: let's look at currencies. the thai baht is the most loved emerging market currency this month, shrugging off the gloom that gripped most of its peers. the bank of thailand is under no pressure to exchange -- to defend the exchange rate. haslinda amin is in bangkok. the thai economy in focus,

speculation from policymakers on whether they will raise rates sooner rather than later. you are right, ramy. the aide to the prime minister has said the year end is ripe for a rate rise. when it comes to interest rates, thailand is near the lowest ever, 1.5%, so there are expectations rate rises are coming soon. the trend across the world, thailand can't afford not to raise rates. a couple reasons why it is ripe for a rate rise. we have been nine inflation -- benign inflation, gdp coming in pretty strong, just under 5%. solid growth. recovery is pretty much on track. and when you look at current account surplus, it has the highest, behind only taiwan, a comfortable

position to raise rates at this point in time.expectations are rising that rate rises are coming pretty soon. yvonne: the thai stock market has also outperformed. how long can that last? haslinda: they are hoping it will last pretty long. 8% on the quarter, so pretty strong. given that em markets have been pretty sold off over the last quarter. we'll get perspective later, coming up pretty soon. yvonne: looking forward to those interviews. haslinda amin joining us from bangkok. that is it from us on "daybreak asia." market coverage continues with haidi and david next. ♪ xfinity mobile is a new wireless network

designed to save you money. whether you use your phone to get fit. to find meaningful, thoughtful, slightly-weird gifts. or just to know which way you're facing right now. however you use it, your wireless bill is about to cost a whole lot less. ask how you get xfinity mobile included with your xfinity internet. so you just pay for data -- by the gig or unlimited. saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today.

>> equity markets here in the asia pacific essentially treading water as investors continue to assess president trump's trade deal with mexico. and staying on that front the canadian dollar jumping here on optimism of an agreement. ottawa says that progress has been made in these initial negotiations. but when it comes to this side of the world we are talking china. little sign there of movement in those talks with china. the white house wants to see a little bit more flexibility coming from beijing. i'm david.g, haidi: and hitting the gas on car production in china. the trade war suggests-the-time to