haidi: a very good morning. australian markets have just opened for trade. i'm shery ahn in hong kong. sophie: and i'm sophie kamaruddin. asia." to "daybreak haidi: a weak start at best for fell for atrade third straight session. we are also watching developments on the trade front. larry kudlow says the u.s. and china are close to a historic deal, but no joy in hanoi.

president trump wins praise for walking away, but north korea says the talks were not productive. ahn: investors have a lot to digest. let's get right to sophie kamaruddin here in hong kong. this feels like old times, doesn't it? action,comes to market investors have a lot on their minds. yes, we have seen lackluster trading. u.s. stocks continue to tread water, closing in the bed even as the gdp report believe some recession fears. stocks opening margin higher at the start of the asian session, but again, caution may remain.

we do have nikkei futures, .hough, hinting at some gains kiwi shares are off by .2%. we saw trade from new zealand falling on. kiwi lower darian alumina prices. keep in mind, south korean ,arkets are closed this friday so we will see if there might be onecovery after it fell thursday. take a look at the aussie dollar in the wake of february home prices, we did have them falling on a monthly basis for february. nothing much of a move in the aussie dollar, which is set for a weekly loss in light of the greenback's strength. the aussie dollar lost about 2019 pretty much raising gains. one of the big movers at the start of trading in sydney, we do have it off by 2.6%. more downgrades on the stock.

we had technicals from morningstar so we have the stock under pressure after jumping 9% on thursday, the most since may 2012. haidi: let's get you to first word news now with ed ludlow in san francisco. kudlow says the u.s. and china are on the brink of a historic trade deal after what was described as terrific progress. he says beijing has agreed to cut subsidies and decide when the pboc intervenes. china is also set to agree to deemphasize its plan to dominate emerging global technologies. the indian air force pilot captured by pakistan may be released friday, but it's not clear if that will help reduce tensions between nuclear armed neighbors. the prime minister says he will free the officer as a gesture of these. he says he hopes the international community will help ease cross-border

relations. mike pompeo says he has talked to both sides and is calling for calm. the u.s. economy less than expected as business growth picked up. the commerce department report suggests trump tax cuts may have hised growth support three-year target. tesla fell in late trade after elon musk says he does not expect a profit in the current quarter, though he does see improvement in the next quarter. tesla also says it is shifting worldwide orders online only and says it will wind down brick and mortar outlets over the coming months to concentrate on direct sales. 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. haidi: thank you. says thenorth korea failed summit was constructive, despite president trump walking away. theasically, they wanted sanctions lifted in their entirety, and we could not do that. they were willing to do a large portion of the areas we wanted, but we could not give up all of the sanctions for that, so we continue to work and we will see. we had to walk away from that particular suggestion. haidi: our chief north asian joins us now.

steve: the success or failure of the second round of talks was really going to be determined on -- what? sanctions relief is what the north koreans wanted or denuclearization process. that is what the americans wanted. at the end of the day -- not even at the end of the day, in the middle of the day, the whole summit was called short. they skipped lunch, and donald trump was the first 1 -- his motorcade left the hotel followed by kim jong-un. in the hastily arranged news conference, last night, which is quite unprecedented for north korean brass, the foreign minister as well as the vice foreign minister called a select .roup of foreign journalists this is what the foreign minister had to say refuting donald trump.

>> it is difficult to say if there might be better agreements than the one based on our proposal at current stage. such opportunity might be difficult to come by. steve: the foreign minister said they offered a realistic proposed relief from sanctions that were enacted just in 2016 and 2017. they were not asking, according to the north koreans, as donald trump said, a full relaxation of all sanctions against pyongyang. also, we heard from the vice foreign minister. she said that the u.s. is missing an opportunity that comes around once in 1000 years. also, the foreign minister went on to say that this was just a first stage, a first step in the process of denuclearization, but also went on to say it could be

difficult to meet again. since then, we have gotten a little bit more of a softer tone coming out of pyongyang. the talks were constructive and that conjunct own would be willing to beat with donald trump however, neither side is saying that another summit is in the works yet. haidi: in terms of reaction across the region, the u.s. has gained support for being willing to walk away. steve: that's right. he got widely criticized for the singapore summit in june of last year, eight months ago, for agreeing to a fairly water down and vaguely written's it meant with the north koreans -- vaguely written statement with the north koreans. this time he took a page from his old playbook and that is if it's not a good deal, walk away.

that is what he said in fact. we just decided to walk. maybe that was pre-scripted, but at least on the public agenda, there was supposed to be a lunch and a signing ceremony, but they kiboshed those and left early. we are getting comments from chuck schumer, a democrat, a critic of donald trump oftentimes. he said president trump did the right thing by walking away and not cutting a poor deal for the sake of a photo op. the senate majority leader, of course a republican, mitch mcconnell, says kim jong-un now has a long train ride home and he will have time to reflect on the future that is still within north korea's grasp. ian bremmeril from of eurasia group. he says it is a setback that the talks ended early, but there is progress to build upon. : thank you very much bring

in now and veteran of international diplomatic .egotiations mr. ambassador, great to have you with us. let's discuss what happened or what came out of this second summit. we know the north korean leader just got another photo op. it was a great public relations victory for the north korean leader. what does president trump get out of this? >> i think president trump demonstrated he was willing to draw a line in terms of what he was able to or willing to provide north koreans in terms of sanctions relief. we do not know the exact details. it could take a while, we may never know all the details, but it seems to me the north koreans were asking for very substantial if not full elimination of the sanctions, in return for which they were going to make some kind of commitment on

denuclearization, but clearly, in the eyes of the president of the united states and his team, what the north koreans were willing to offer was insufficient. it may have been that the offer was insufficient. it may have been that the monitoring or surveillance or the process of making sure they were complying with it was inadequate, but somewhere along the line, the north koreans were not willing to give enough credible assurances of denuclearization to satisfy the united states, and the united states decided we have to go, we are not going to get a deal. has been the case for years, decades now, if it's the 1994 agreed framework. what makes the u.s. administration believed that this time will be different? >> i think that there was some hope on the basis of the earlier summit in singapore that perhaps

the need of the north koreans for relief of these sanctions was so substantial that they were willing to make a greater degree of commitment than they with a moreast robust verification system. the president's intelligence people had been telling him -- and we saw this in open hearing -- that the north koreans were not going to give up their nuclear capability. by the way, the nuclear capability is not just the testing. they are doing a lot even now over the last several months to strengthen their nuclear capability, even though they are not testing. they are doing a lot internally. the general conclusion he comes to is they are not willing to make the kind of very substantial or blanket commitments to denuclearization that the united states has been asking for. while the united states had

hoped they might do more to get the sanctions removed, they gively were not going to the united states, the president what he wanted and what he perhaps anticipated. you are right, it is not very different from the past because we have had difficulties negotiating with the north koreans in the past with expectations of progress and those expectations have not been met. up.talks are broken this is not all that different from the past, although the expectations perhaps no were higher than they had been simply because they needed north koreans for more development, more money. idi: of course, we have the president himself trying to tan down expectations. as you say, just because a moratorium on testing remains does not mean they are not still carrying on with their own nuclear development strategies. are we better off than we were

at the start of this week? are probably not worse off. i don't know that we are better off. we are better off in that the north koreans now understand we have a clear, bright line test to what we will not do, which is to say we will not give them substantial or complete elimination of sanctions without their making the much more substantial commitment on denuclearization. if there is a negative side, it is not what happened in this meeting. it is the fact that the diplomatic discussions between the united states and north koreans may have given a signal to some other countries that don't have as strong a commitment to the sanctions that they can do a little more trading or that they can explore other options with the north. i think we are not worse off because of what happened. i think we are actually in a

stronger position, but it may be goinghe sanctions are not to be as strongly implemented by some of the countries because of visible diplomatic .nitiatives haidi: the chinese or russians because it takes commitment to enforce those sanctions. mr. ambassador, thank you very much. coming up next, larryhaidi: kudw says the u.s. and china are on the verge of a "historic trade deal." claims chinaat he has pledged. this is bloomberg. ♪

shery ahn: welcome back. haidi: you are watching "daybreak australia." the u.s. and china are on the brink of a "historic" deal.

our china correspondent has the story in beijing. it is starting to sound imminent. everyone from robert lighthizer to the president himself still saying that perhaps we should be lowering expectations for when this deal gets done. >> it really depends who you are listening to and the trump administration, doesn't it? it does seem you are heading, at least, in the direction where a deal might be possible even if you have those caveats from the likes of robert lighthizer, but we're talking about comments from larry kudlow. as you said, there were some important details he gave in this interview, particularly around what he said was a to significantly roll back state subsidies for industries here. ,he other element, as you say is around currency.

kudlow saying the chinese have agreed to a alert u.s. authorities when the pboc intervenes to move the currency. that would be a fairly significant concession from the chinese if indeed that is true. the other area was the deemphasizing of the made in industrial policy. that would be easy for china to do anyway. we have heard reporting here that potentially they will be doing that anyway. more details from larry kudlow -- he also said we are likely to get a meeting between the two presidents potentially in mar-a-lago in florida at some point in march. sophie: but at least president trump seems to have gained a key victory over china at the wto. tell us about that ruling. >> yeah, he's not a great fan of the wto, but maybe it's a little more popular after this ruling. the wto came out with this ruling that said that china had

indeed been subsidizing in excess its agricultural sector, in excess of its previous commitments, so this was a claim but to the wto by the u.s. that the chinese had been spending about one hundred billion dollars to support their agriculture sector and also putting quotas in place. the first part of the case was around the subsidies. the second part was around the quotas. the u.s. also expected to win that as well. this could prove a benefit for u.s. farmers and make them more competitive. there is a key caveat, which is that beijing can appeal this decision. >> our china correspondent tom mackenzie in beijing with the latest on trade. ambassador, are you a little more encouraged by these latest developments? do you think a final deal would go far enough in terms of deeper, more painful structural changes that washington has been saying are necessary or is

substandard and enforceable trade deal with china? difficult to say. i think what larry kudlow was saying, and larry is a pretty straight shooter when it comes to telling it like it is, certainly giving us a clear idea of where he thinks things are and that is that if the chinese on willing to cut back certain subsidies, that would be a significant step forward in leveling the playing field, which is one of the things the u.s. administration and many american companies have been asking him to do. i also think that there are opportunities for a greater level of understanding and onhaps even agreement

intellectual property protection, which is another u.s. issue, but it's not only a u.s. issue. a number of chinese companies have been urging their government to take stiffer measures to protect their own intellectual property, so it is entirely possible that some level of understanding might be on intellectual property protection, whichreached to movn intellectual property protection. i do not think it is likely that they all will be agreed all at once in one big package with a bow tied around it. movenk if this is to ahead, we will have an agreement on some things. other things, there will not be an agreement, but there will be an orderly process or framework whereby senior negotiators on both sides can deal with those other issues. we should not expect miracles here. if we can make progress on two or three issues and china decides it is going to buy more american products, that will boost the economy, but not everything all at once. we should not be overly euphoric or pollyanna-ish about it. views on itsong

side. the u.s. has strong views on its side. it will take time to work them out. >> not to mention the trust. issues thatd the start to veer. he goes to the heart of what people see as a long-term strategic and competitive battle of our time between the two superpowers. >> the take issue is at the center of a great deal of the discussion that they are having. this is not your conventional trade negotiation with tariffs and unfair barriers of a traditional type. this is about who is going to be the major power or major economy when it comes to 21st century technology. whole range of things,

autonomous vehicles, a wide range of biotech. i do think we should not expect the chinese to give up their ambitions to be a very strong technology influence and power in the world. the u.s. is used to being the dominant power in technology, the dominant economy when it comes to advanced technologies. the chinese want to play a role equivalent to or perhaps even greater than the united states over the next 15 to 20 years and they have a variety of policy moves to do it. the question is -- what are the ground rules for competing in this area? chinese have their own intellectual property. they have their own technology. i was in shenzhen if you weeks ago, and they have a lot of technology on their own. the question -- how do we compete? what are the roles? there will be disputes and , not to have them

become confrontations or very disruptive. continue the conversation. do stick around. plenty more to come on "daybreak asia." this is bloomberg. ♪

>> we are certainly able to grow our u.k. business. we just cautious on the outlook for credit given the lack of certainty for direction of the u.k. economy. >> let's get a check of the latest headlines. southwest airlines jumps the mid--->> let's get a check of te trumps the most amid speculation berkshire hathaway is considering a takeover. the carrier has declined to comment. fund makings vision a big bet on used cars in china investing $1.5 billion in an auto trading platform and the investment value of the group would be $9 billion.

coming up next, the u.s. economy remains robust. the fed, though, remaining cautious. we will be asking why next. this is bloomberg. ♪ so with xfinity mobile

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haidi: hello. we are getting the latest jobs numbers out of japan, the job to applicant ratio coming in exactly as expected. in january, the jobless rate 2.5 percent from 2.4%. that was expected. we are also getting tokyo's cpi coming through today. .6% higher, slightly better than expected for february. of course, we do know the labor market is not a concern in terms of how tight it has been. in fact, the labor shortage has hit something like a 45-year

anh as they had issues with aging population and issues bringing in foreign talent as well. not really much to write home about, .7%. let's look at the market reaction. what are you seeing? wasiven that the number expected, holding steady when it comes to the jobless rate, we're not seeing much reaction in the yen. that overnight low we saw was the weakest since december, so breach for the yen sparking further declines. again, holding those overnight losses. this wraps up february is one of the biggest g10 laggards. now flipping the board to check in on australian markets, which let higher byt,

real estate and health care. 10-year yield has climbed to the highest level in about three weeks and the aussie dollar gaining ground, up .1%, but just nudging higher, holding overnight losses that are raised its weekly gain in the face of the greenback. in the aussie.on home prices down under falling further in february and that has fueled rate cuts. checking in on stocks on the move in sydney, a two-day decline. upgraded to outperform at rbc with a price target at three aussie dollar spirit harvey norman rising to its august 2018 high, noting that the retailer a retailer'st the australian costs rose -- noting that the retailer's australian costs rose. the stock was downgraded at

ubs, credit, and morgan financials in the wake of these infrastructure players' results we got this week. that's now get to first word news with ed ludlow. eight: huawei has pleaded not guilty to stealing trade secrets from t-mobile as well as wire fraud. friday is the deadline for canada to decide if they will whodite the huawei cfo is wanted in the u.s. on fraud charges. israeli prime minister benjamin netanyahu is being indicted for bribery and fraud after an investigation that could end his political career. the first time a sitting israeli leader has come close to charges and just weeks before what could be a close election.

thenyahu described investigation as an unprecedented witchhunt. expanded 6.6% through december from a year earlier. slightly below estimates, down 7% in the september period. aning consumer demand hurt economy where domestic spending accounts for 2/3 of gdp. the new chairman ever know -- of replacingid to be two chief executives in the wake of the carlos ghosn era. wants the board to be less of a rubberstamp corporation. 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. haidi: thank you. three federal reserve speakers up to one conclusion -- jay powell and his team are in no hurry to raise interest rates. let's start with the fed vice chair richard up clary. what exactly did he say? >> what he exactly said is the can be patient now because inflation is subdued and there are all kinds of global risks like the slowdown in china and europe. he also made an interesting thet that at this juncture, fed has to strike a very important balance between being forward-looking on policy, but making sure as they rely on models for things like inflation that could be flawed they do not make a mistake. that is why waiting to see is very important.

patrick harker from the philly inflation is subdued, the core inflation rate has even edged lower. surprise inasant the gdp for the fourth quarter because it is now in its 18th month of expansion of two point 6% in the fourth quarter of 2018. it was supposed to go down to 2.2%. so the growth continues. chief economic's adviser was on bloomberg earlier. he says tax cuts are working now and will continue to work in 2019. listen. >> if you look at capital spending last year, we had 10% more equipment, 11% more intellectual property. kind of stuff tends to create positive momentum in the fact that it will continue -- the investment will continue into this year, but second, they have then building factories this year -- all year, and this

year they will turn them on, so it gives you reason to have optimism about growth continuing. >> 3% growth, he said. let's get back to the vice-chairman of kissinger associates. think tax cuts have helped. the benefit tends to peter out over a certain pew would've time, but it certainly gave the economy a boost last year and will probably have some positive growth benefits, at least for the first part of this year. first quarter may be a little weaker just because of a lot of things to do with the shutdown, but the second quarter is a better bellwether for determining what the growth outlook is going forward. week have been talking all that the fed is taking into consideration volatility in the stock market. does that mean that is a power

put? because if we see markets are performing better, does that mean they should be resuming their trajectory? >> i think they will be looking more at their inflation numbers. a stronger stock market probably is not going to give them a signal to go ahead and continue to raise rates. they are looking at the numbers. they said they will be patient, which means, according to what the various members of the fomc have said, they will look at the data and watch to make sure they inflationing correctly. that is going to be a big issue going forward. the third is they are not going to jump on the fact that unemployment is going down and the excess number of workers is shrinking. they are not really looking at wages as much as looking at the actual numbers. higher wages will not push them

toward an increase in the fed funds rate. >> financial conditions have really rebounded this year. when will they become part of the conversation again? they will not become part of the conversation right away because almost no fed governor has indicated that they were paying a lot of attention to this. they are talking about many other things, not this. i think as the economy continues to grow in the second and third quarters and you get some genuine increases in inflation, that, combined with a more liquid financial market and greater degree of financial boost, then you may get movement but not until then. >> chair powell has said that he to stopounce a plan shrinking the $4 trillion balance sheet at the federal reserve. until we get that announcement, does that mean we will continue to see volatility, that volatility is inevitable? >> i do not think it is

inevitable. i do not think it will be determined by the policy and balance sheet. i think other factors are more likely to influence volatility than that. he has already projected that and the market has taken that into account already. >> i have a question that has two parts. one of the fed's the concerns, even before the stock market started falling in december so abruptly, is the global slowdown. is slowing down with the threat of the trade war not truly off their map yet. what about those two parts of the world? how did of a threat to growth is this? >> those of the undercurrents i think the chairman was referring to. we still do not know what the outlook for china will be. i suspect it will not drop dramatically, but it may be a little bit weaker. to beexit thing is going an issue. we do not know what will happen with brexit. but you are right, europe in general has been deteriorating

in the outlook is not very good. if the trade issues with china -- this is in contrast to the chinese economy -- could be very stable, but if the trade war escalates and you get escalating tariffs, that would be very abrupt for the market and i think the fed will be concerned about the impact of that on the economy. >> what's the number one thing that could push the u.s., even the global economy, into recession? >> if there is a big credit problem in the private sector, the fed has already talked about somewhat of a credit problem. if that becomes worse, that would be a difficulty. a trade war could trigger a sharp decline in the markets which could in turn have an adverse effect or negative effect on the markets. >> thank you very much. also thanks to kathleen hays. on the, the latest

rising tension between india and pakistan ahead of the expected release of a captured air force pilot. this is bloomberg. ♪

idi: i'm in sydney. shery ahn: i'm in hong kong. you're watching "daybreak australia." amazon has a new program that lets prime members group orders together to cut packaging and reduce the number of boxes ship. it allows buyers to select a specific day when their orders will arrive. shipping is one of amazon's fastest-growing expenses and consistently outpaces online sales growth. the company aims to make all shipments meet zero carbon by 2030. >> california utility pg&e has reported its biggest ever loss and says it is probable it will be blamed for the deadliest

wildfires in the state's history. the company will take a $10 billion charge resulting in a record 6.9 -- $6.9 billion fourth-quarter loss. >> british airways owner iag has decided to order 42 boeing 777's to replace its fleet of jumbo jets. take 18 of the planes the carrier currently has, 34 to be retired in the next four years. airbus had pitched the anti-350, but iag preferred boeing. >> pakistan says it may release the indian air force pilot captured earlier this week, but it is not clear if that would help reduce tensions between the

nuclear armed neighbors. let's bring back the vice-chairman of kissinger associates. mr. ambassador, this was the worst escalation since 2001. how dangerous is the situation right now between india and pakistan? >> well, these are two major powers in the indian subcontinent, so, obviously, this is something we have to be concerned about, but i do think there are efforts on both sides to try to 10 things down a damp things- down a little bit. the pakistanis are going to aturn the indian pilot, and senior indian air force official was on tv just a little while ago trying to reassure people that this was not going to escalate into some dangerous situation, although the indians were going to be steadfast

protecting their security. he gave them also a reassuring message that they should not worry about the situation, the indian military had it under control and with deal with the problems. they are trying to deal with public opinion, which is pressing for tougher reactions. i think the indian government and pakistani government really do not want this to escalate into some big confrontation, despite public opinion on both sides, in some cases, who do want tougher action. >> an interesting sidebar to the story is india accusing pakistan f-16sng these u.s.-made in its rate in kashmir. as i understand it, the purchase from lockheed martin was only meant to be for counterterrorism purposes. mean thatpotentially we could hear something else

from president trump or that that relationship deteriorates further? >> the president has not said anything yet to my knowledge about it, but secretary pompeo has. i think he was using the power of his office and his judgment to try to dampen this down as well. this always tends to be an issue in the united states when the u.s. supplies other countries. you cannot always determine how they are used and sometimes they are used in ways that are not consistent with american desires. or american this is one of the risks entailed when you have large-scale arms sales, particularly with weapons like an f-16, but i do think this is a risky situation, but if both sides determine they want to deescalate, i think they will be able to do that, but you cannot take it for granted because sometimes situations evolve in ways that are not as easily controlled as we would like. week has been such a busy

with geopolitics. we have been focusing largely on hanoi but also trade negotiations but also brexit. it seems like the idea of a no deal brexit, we are being pulled back from the brink of that. are you feeling a little more comforted that there will be, i guess, a more market friendly or economically friendly resolution to this? >> i wish i could predict brexit. brexit, to me, is a big risk, and it will require a lot of careful diplomacy on the part of prime minister may and the leaders of the eu. i think they are big markets for each other and neither wants the the iso be disrupted, so a very strong interest in resolving this, but the eu has said there are certain lines that it will not cross. the british are having difficulty getting support from the parliament for the kinds of

things that theresa may has been proposing. then you have the very tricky ireland and the question of if there will be a between thercation irish republic and northern ireland. no one wants to have that. that does at least provide an incentive for trying to work things out. it is hard enough to predict what is going on in the world. it is a lot harder to predict this very, very new situation with a prime minister who cannot fully control party in parliament and the eu has to deal with 27 countries in the eu , so this creates a situation that is not easy to predict. >> we talking about north korea u.s. talks. we're talking about trade talks.

how will those affect the global economy this year? anything else on volatility that we can expect? >> ironically, the global of the in some parts world is weakening somewhat, but there does not seem to be a precipitating crisis at hand or likely over the next few months, like big oil crisis or some other major event that could really cause a very substantial negative blow to the economic outlook and could weaken somewhat does not necessarily mean there is recession, but the expectation of some major unexpected curveball that we cannot predict -- it's always there, but it's very hard to determine what it would be in the current environment. i think a major deterioration of trade relations between the

united states and china, if they cannot reach an agreement that avoids re-escalation of tariffs, for instance, if that cannot be worked out, if there is some compromise that can be worked out, that's great. if they cannot work it out and the confrontation intensifies with more tariffs, that could be a major problem for both u.s. and china and the global economy. i would say that is a big risk for markets, and if it is a risk for the markets, it is a risk for the economic outlook as well. an agreement there would be a boost for the economy. failure to agree and escalation would have a very negative impact. not necessarily recession, but certainly weaker growth and more financial instability. >> ambassador, thank you so much for spending time with us today. lots more to come on "daybreak asia." this is bloomberg. ♪

>> elon musk is delivering his promised cheaper model three, but he is also warning tesla may not be profitable this quarter as he had predicted. let's bring in our detroit bureau chief. great to have you back. what does this mean for tesla? this is an announcement we have threeaiting for the past years. >> if you are a car buyer, this is great news. shareholder, it may not be too good because in after-hours trading, shares were down. not givingey are great demand for cars the cost of $2000. they have also reduced the prices on the model s and model x. we are getting past the people who really wanted it, the people obsessed with tesla, and getting

more into the mainstream car market. that is where you have to play a little harder to get sales and they have to reduce prices and as doing it at the same time the tax credits they get have been cut in half. it kind of looks like they are fighting hard for sales and tesla has not exactly been a leading manufacturing company, so the pressure has been on them to reduce costs so they can make a profit. >> that pressure is going to play out in the first quarter. is the second quarter going to be more hopeful? >> could be. to bere also going totally online sales process and getting rid of a lot of storage. they will be costs associated with changing over the retail network. they are also investing quite a bit in more service trucks. tesla sends people out to fix your car. they were going to have to build that up, so that is going to cost money. we will see. themore quick ring is

$35,000 tesla only comes in black. any other color costs at least another $1500. it adds up pretty quickly as you add more options. >> thank you so much. david welch joining us from detroit. inhie kamaruddin joining us the studio. sophie: futures nudging higher. the quick check on stocks to watch. bridgestone on the radar amid speculation of a sale. the tropical agency operator. >> thank you so much for that. coming up on the next hour of "

daybreak asia," we will look at the supercar market when we are joined for an exclusive interview by the ceo of mclaren. the market open is next. this is bloomberg. ♪

haidi: asia's major markets have just opened for trade. shery: good evening. i am live in hong kong. sophie: and i am sophie kamaruddin. welcome to "daybreak: asia." haidi: our top stories, and mixed start at best. we are also working developments on the trade talks. larry kudlow says the u.s. and china are close to a historic deal. that president trump

might have lost any chance at a deal. straight to breaking news south korea. record numbers for the month of february. much higher than the expectation that they would only contract by about 9.5%. it is a bigger fall from the previous month of january. down 11.1 percent. imports also falling more than expected, 12.6%. the expectation was for 11% contraction. huge fall for imports from the previous month when it only fell 1.7 percent. a contraction of 12.6% for the month of february. 3.98 billion dollars, much lower than what was anticipated.

by the u.s.ard china trade war. the chinese economic slowdown and preliminary numbers for the beginning of the month of february. it was due to some weakness. now we are getting more confirmation that the numbers for south korea looked pretty grim. let's get to the action with sophie kamaruddin now. the korean markets are closed. we are seeing some movement. sophie: nikkei 225 adding .1%. this after we saw tokyo shares cap a second monthly gain in february. lastg more than expected quarter. when it comes to some movers early in the session in tokyo, we are seeing players gaining ground.

off by .2%.layers we do have the asx 200 gaining and rising for a third straight day, led higher by we're estate and tech shares. steadysie dollar holding and kiwi stocks are swinging to gains up one third of 1%. the terms of trade coming under pressure and kiwi dollar above. haidi: let's get to first word news. >> larry kudlow says the u.s. and china are on the verge of a trade deal. beijing has agreed to cut subsidies. agreed toalso

dominate a global technology. an indian air force pilot maybe released later on friday. it is not clear if that will help reduce tensions. freed them as a gesture of peace and hope the international community will help to ease relations. mike pompeo says he has talked to both sides and is calling for calm. israeli prime minister is to be indicted for bribery and reach of trust after an investigation could end his political career. it comes to seven weeks before what is expected to be a closely fought general election. he denies any wrongdoing. way -- huawei has pleaded

not guilty. a trial date has been set for march of next year. trying to decide whether to extradite. appearnext scheduled to in court next wednesday. 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. pushed to expand. dollars into one of the major stock markets. investorknow that sentiment has been all over the place. we are talking about one of the worst-performing markets. sending them into hot territory.

what does this latest announcement mean? completely unexpected. some of the money flowing into equities would have been in anticipation that they were going to increase wages. not everybody will be involved yet. the confirmation that they will increase to 20% in stages is good news for the china market. probably even more money to flow in that direction. they want to see profitability. they want to see improving data. play are other factors at aside from the upgrade. it is all coming together at the right time. picture shows that china is taking its place as a major destination within the world. you have the u.s. that has

established itself as the number one place and china might be able to capture that number two spot. as have a range of companies people become more reassured. people have to take china very seriously. things are moving in the right direction. that greater institutional will gave more credibility to what is a retail dominated market. this is great timing. news.ood what are we expecting in terms of economic and financial policy? not huge changes. but they will be looking for is more support for the private sector. this has been lacking to some

extent. he did say he is leaning in that direction. that means more helpful for private companies. they make up a large part of the index. that is what investors will be looking for. there will be a better deal, maybe tax breaks or something along those lines. profitability. all those kinds of things will help sentiment. in terms of major changes, not so much. we want to keep the economy flowing. thank you so much for that. go back to our other top story. a top diplomat says kim jong-un may have lost the will to reach

a deal on denuclearization. despiteonstructive, president trump walking away. wanted therump: they sanctions listed in their entirety and we could not do that. they were willing to denuclearize a large area that we wanted, but we could not give up all the sanctions. away from that particular suggestion. our chief north asia correspondent is still with us. north korea disputes the about what claim they asked for on sanctions. the first footsoldier in and last shoulder -- footsoldier out. was even canceled and

the news conference moved up a couple hours early. getting out of town earlier than planned. has plans to meet with the prime minister and the president early -- later today. was interesting because the north korean held an extremely rare press conference with the foreign media to refute those claims that you heard from donald trump saying that they wanted total relaxation of the sanctions against pyongyang. they asked for targeted relief of sanctions and the success or failure of the second summit was always going to come down to whether the u.s. was going to give relief on sanctions and whether the north koreans were going to make more pledges on denuclearization. saying kim minister

offered a realistic proposal to begin the process of denuclearization. we heard from the vice foreign minister and she said the u.s. is missing an opportunity that comes once in a thousand years. i will not paraphrase her anymore. let's hear from her directly. >> they came out with the deal that we have never offered in the past. -- iterican government concerns me that our chairman could lose the desire to negotiate with u.s. the foreign minister kind of concluded saying that all of this that transpired could make it difficult for the leaders to meet again. overnight, the news agency out of pyongyang has softened the tone saying it is mainly

targeted at a domestic audience but putting out a statement saying that kim jong-un is still willing to meet with donald trump. they have not said when or if they will do so for summit number three. to likeashington seemed the fact that president did not give in to a nuclear deal that would not be good enough. the has been the door -- reaction so far? did not know that this was baked into the plan. donald trump was definitely eviscerated back home when he came back from singapore with a watered-down agreement with kim jong-un that even pledged to stop military exercises with our allies, south korea and north korea not giving many timetables

or pledges that are concrete. he got criticized for that, so this time, he walked away early, rather than doing a deal that was not satisfactory, even senate minority leader chuck schumer, a democrat and often critic said president trump did the right thing by walking away and not cutting a poor deal for the sake of a photo op. the republican senate majority leader said kim jong-un now has a long train ride home and will what ise to reflect on a north korea's grasp. he does call it a setback that says there was progress and there is no reason to believe this is the end of diplomacy. we just did not know when it little restart. shery: thank you so much for that.

still ahead, we will be moving into the fast lane and speaking to the ceo. isdi: next, the u.s. says it on the cusp of a historic trade deal. what that could mean for the markets. this is bloomberg. ♪

shery: you are watching "daybreak: asia." top white house adviser larry kudlow says the u.s. and china are on the cusp of remarkable historical deal. there is and will be widespread skepticism until a deal is actually done. sarah, great to see you for the first time. thank you so much for coming. let's discuss what we can expect for the markets. bloomberg sources are saying

that we could see a summit as soon as mid-march. has optimism over trade already been baked in to the market? i think so. it is reported by the market, so i think this is very positive. he could see a significantly higher rating if we have some concrete and demonstrable outcomes that come out the next talk. it would be very positive for the market. >> how much is about geopolitical issues? how much is it about valuations across asia being so much cheaper? >> we are always looking at valuations. book.about 1.6 times the it looks cheap relative the -- to the history.

we are pretty selective in what we own. we are careful. we like china and are very bullish on china. we are picking the more value oriented name because some of the tech names have had a very strong value. the are more conscientious there. more: do you like china now that the msci has announced that they are increasing their waiting by the end of november this year? it was an announcement that we were expecting, but it goes a long way to lend credibility >> >> to the market. -- credibility to the market. >> it very exciting. it is not something that was unexpected. the spaceen active in for a while now, so we are not changing our view or positioning.

we have been looking at shares for a few years now. i think this is a step forward. yesterday conference and some managers were saying this is a once-in-a-lifetime event. said this is like beyonce going solo. it is exciting for investors. the market is opening up and we are getting more access. it is a very diverse market. you can get a lot of different types of exposure through china that he might not be able to get in other parts of asia. other countries might be more focused on a single industry or a few key industries. china is very broad. haidi: you really need to do if you want you want to look at fundamentals. if you look at a broader gauge,

a lot of them are slashing. do you still see value in this rally? >> we do. the market is huge. you need to be selective. there is a lot of gambling going of daytrading and intraday trading. we are long-term investors. we look for value and growth opportunities. we look for good, corporate governance and franchises that will expand over time. china might get painted with a broad brush with negative implications, but there are lots of great companies and businesses there that we are excited to own. we are now hearing from msci that they will make a decision by around may or so. given that we are also seeing thatovernment push towards

2025 policy, why do you not like those tech names? is it because evaluation? evaluation.ause we would love to own them, but at the right price. looking's levels, it is pretty tough. shery: what about other emerging markets aside from china? >> we like korea. shery: did you see the numbers today? falling more than expected. that must say something about north korean demand. >> korea is a big market. there is lots to own their. is of our largest openings samsung electronics. it is hard to compete with amazon with the concerns and taiwan about the apple supply chain. bullish on certain stocks in korea.

we like russia and we have been adding to mexico. selloff, we use that as an opportunity. that works overtime if you have a long enough horizon. to use bad news as a buying opportunity. great to see you. you can get a roundup of the stories that you need to know to get your day going. subscribersope -- can customize their settings to only get the news and assets that you care about. this is bloomberg. ♪

haidi: putting not guilty to charges of stealing trade secrets from t-mobile. the latest development in a

story that goes all the way back to 2012. ramy: seven years back or so is where the story starts ended thed with huawei, allegations leveled at it. they basically took photos and components, measurements of this mobilephone quality robot, testing robot. sending those from the u.s. back to china. that is the allegation there. time phones up until that were not really doing well in terms of their own quality and the u.s. is saying that they found in email showing that they offered bonuses to employees, basically bounties if they handed in stolen information regarding that ip. they released a statement on this, pushing back very hard saying that the company denies that it or its affiliates have committed violations.

roguectually blamed employees, but looking ahead, this is clearly not over because the trial is scheduled for march of 2020. 5ey are also facing a fine of million dollars and allegations of obstruction of justice. it is really not that much in the grand scheme of things. it would really just be a slap on the wrist. the fact that this comes a day before the company finds out if canada will extradite. ramy: that is right. we are waiting to see what happens there. the expectation is that it is going to happen. you are seeing her when she went to the court in vancouver on january 29, but she is wanted on fraud charges in the u.s.

in brooklyn, there are allegations about her link to iran. they are alleging that she lied to banks to trick them into processing transactions that may have violated trade sanctions that the u.s. put on and. u.s. had that strong relationship and whether it will take months or years, the expectation is that she will be extradited from canada to the u.s. shery: thank you for the latest. let's get a quick check on the markets because we are seeing more positive sentiment across asia. president trump and president xi jinping could be meeting as mid march. we are seeing the asx 200 gaining pray third consecutive -- gaining for a third consecutive session. gettingxx are also

ground, .3%. -- keeley stocks are also -- kiwi stocks are also gaining ground, .2%. -- .3%. ♪

>> this is "daybreak: asia." president trump walking out of the summit with kim jong-un. no tong on both sides say a nuclear deal. the complete lifting of sanctions. deal that weith a have never offered in the past. the american government does not want to lift the sanctions. cannot assure that this chance will come again for the american government. administration --

the farm subsidies breach international commitment. it forced china to reduce subsidies making american farmers more competitive. china is considering making an appeal on the ruling. indian growth slowed in the fourth quarter with conditions worsening. 6.6%.xpanded slightly below estimates and down from 7% in the september period. accounts wereing two thirds of gdp. to beairman is said replacing two members of the board amid the shakeup in the government. we are told the wife of former prime minister not be returning.

say she wants the board to be less of a rubberstamp corporation that it was. 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. time to see how the asian markets are shipping up. sophie: asian stocks are starting march on the front foot. gainsposting the bulk of ahead of the open in hong kong. the focus will be on the msci decision to boost inclusion. datae waiting on the pmi that may reaffirm what we are seeing from china's initial pmi numbers. it is hitting the won. a closer look at the korean won move this morning.

being pushed above 1125 against the dollar trading, the weakest level since january 19. switching out the board, that is not derailing chip related stocks. a treaty -- a three-day decline. perhaps finding support as they anticipate a recovery and demand in the second half. .eing driven by investment i also want to highlight the travel agency operator jumping to a high in tokyo after posting profits that beast -- that beat estimates. company did cut its operating in -- operating income. shery: larry kudlow says the u.s. and china are on the cusp disclosingic deal,

when the pboc intervenes in the currency market. us in theider joins hong kong studio. you're hearing from sources saying that we could see a president trump and president xi jinping meeting. >> we're hearing very positive signals. they have told us the meeting could happen after the mpc meeting in march. we heard from larry kudlow with a detailed agreement. sayingasury secretary 150 page agreement is being readied. we are also hearing some other signals that might be a little more cautious. said he is hopeful about an agreement but there is still much to be worked out. had arade representative

more subdued tone, saying that this could happen, but there are still significant things to work out. haidi: i'm wondering if there has been much progress on these major sticking points like intellectual property. that is the major sticking point. that is something that has long been an obstacle to agreement. in his testimony, he said that the u.s. will not do a deal unless they can get some significant structural reform in china's economy, which is a big asked. that is what has really dragged down these discussions and made them go past that initial deadline. shery: it looks like a victory for president trump. >> a tough week for president

trump with testimony before congress. this was a bit of good news that they ruled that china's farm subsidies, cultural subsidies went beyond international law. this could be good news for the u.s. in terms of the trade negotiations because one of the things that they wanted was for the subsidies to be curtailed, that the u.s. has long contended that china support its cultural industry in a way that is unfair to trading practices with u.s. haidi: jodi schneider with the latest when it comes to trade. let's bring in our senior advisor from the group. you encouraged by the latest developments? it seems like we are getting more specific, but still i am wondering on the impasse issues like china's tech ambitions.

is that going to be progress in terms of what washington once from beijing? >> i think it is important as your colleague was saying, reflecting on testimony this week. he laid out clearly how much ground we have to cover before we get to a meaningful deal. i recommend people who are watching this closely that we really do distinguish what trump has promised, which may see some kind of watered-down deal. significant issues stand in the way of a longer-lasting truth. away fromes are far being settled. at the end of the day, we are framing the narrative for who has greater influence and greater development over the

next 10, 20, 100 years. is there wiggle room to get a resolution? payinguld recommend attention to the discussion in the national security discussion. if you are in ottawa or berlin or brussels. there is a strong agreement amongst a host of government and government actors that this is not a trade dispute. that this is a long-term strategic competition between many developed nations that is going to be a prolonged wheel alignment, but it will be along the lines of a connection between technological innovation and national security. we are seeing this clearly with the battle over 5g. this is where people should be spending time and attention. where nationalt

security is the paradigm where we are looking at these issues? that ship has sailed. is a distraction from this more fundamental shift that is going on right now. shery: how much of a distraction is the wto? we are seeing that they have ruled on chinese farm subsidies. at the same time, we have president trump undermining the organization so much. even though this is a victory for the president, that this even counts now. >> this is not president trump's victory. he does not have too much sympathy towards the wto. we are seeing how the wto can be incredibly useful for arbitrating some of these disputes. this will not strengthen his belief in the wto and going back to national security, just

remember the wto has a mac truck loophole.-- wide china and the u.s. have played footsie with that. the regulatory actions that will come out of that rather then are we going to see a pullback on the tariffs. everyone is saying the tariffs are not going away as a threat, even if we go ahead with the signing ceremony as part of the new enforcement mechanism. the tariffs will always be there. china's danceh of will be confirmed? last year it was such a momentous occasion when president xi jinping came president for life, essentially. >> big on my face and other on my face and

other analysts when we said it would be a sleepy affair. if we look at some of the legislation up for discussion, we have a foreign investment law that is being discussed and raised through china's legislature to clearly be a part of a full frontal attempt to reach a deal with the u.s. this is promising in the legislation. it is promising to look at and address issues of ip traction. it has troubling language in there, but we should be watching that very mostly because legislation was rushed. it did not go through it normal draft period. importantbe a billy piece of legislation for anybody doing business in china. coming up next, we will

take a look at the car market where we are joined with -- by the ceo of mclaren. this is bloomberg. ♪

haidi: i'm haidi stroud-watts in sydney. shery: you are watching "daybreak: asia." the auto industry protected annual auto sales with top 300 million by now. but they have fallen to just over 90 million last year. they see the 100 million milestone to be seen -- surpassed the next decade. with the ceo of mclaren automotive. just to underscore what you mentioned.

as you mentioned, we have mclaren's ceo. thank you for coming into the studio. what brings a man like you into town? >> we opened a new showroom last evening. quite a special night. big is your customer base. we first came here in 2012. we have quite a good, established customer base. david: and china? how is that business doing? much demand lead. -- i think it will grow by about 5% each year. you are very high-end. we really saw slowing down in terms of delivery.

has that affected you at all? i different conditions affecting your business? >> the same conditions influence, but they do not have as big an effect. we are still building from a late start in the market. no, it did not affect us, but we are always conscious of the different pressures in the market. it was considerable growth for us. i think will go again through this year. because of the trends that we have seen, have any chinese buyers or groups approached you about taking part, partnering with a brand? conversations around technology, not around equity. david: in terms of production, have you explored the options? have you thought about building?

what would be the conditions that would need to be met? reality of volume is that it is hard to split production. what does have potential is technology in different markets. they are starting to lead the way. as that becomes relevant, there are opportunities there. david: when do we start talk about -- talking about mclaren? do it just forr doing an ev. but we have to do is find a way to harness ev, not just as a power chain but to make it exciting. david: you are an engineer by trade. how does not fold into the performance?

what part of the conversation goes into that short term? >> there are things about it that are very exciting. it gives us more freedom and design. the characteristics a great in terms of the stock that you can generate. there are restrictions like weight, cost and limited range, a little bit in opposition to each other. we have to solve some of these things for it becomes relevant. david: final question on china. that is not your number one market. >> is number five. david: is there a way to extrapolate that? >> it is difficult to say. it is certainly growing. i could see us moving to 500 cars. that would give it to him percent of the global market. david: a couple days ago we were talking to bahrain sovereigns. maybe an ipo could be in the cards. is that something that we should expect?

next 24 months. it is a sovereign wealth fund. they are a rational investor. at some point, they will realize value. an ipo is one of the options. we do not need the money. we are pretty well-financed for what we are doing. have all talked about contingency plans. you are a player. do you have a plan b? >> we are taking sensible precautions about expanding the supply chain. we fear disruption as we go to the change. year,appens through the it has been sensible to open up the supply chain of part. david: talk a little bit more

about that. >> this concept where we have this friction in trade. we will hold three to five days worth of parts to build the cars. -- wecan ensure the parts cannot ensure the price, we cannot build the cars. david: final question. you drive a mclaren. you drive any kind of car other than a mclaren? i'm kidding. joining us. the opening of the dealership here in the city where they look to sell 60 cars based on that conversation that we heard there. haidi: as he said, the top and of the market. of the market. let's get you more ahead on "daybreak: asia." this is bloomberg.

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haidi: a quick check of the latest business flash headlines. speculation on social media that berkshire hathaway is considering a takeover. calling the talk unconfirmed. four largest airlines in 2016 and number two shareholder and southwest with 9.9%.

the carrier has declined to comment. shery: british airways owner has decided to lease 42 boeing triple -- boeing planes. 18 of the planes. the carrier has before 47 that are due to be retired. airbus has made a pitch, but iag sevens giving the triple a list with sales slowing after the initial jump. rose. shares of jd.com google backed retailer reported sales that beat analysts estimates. >> there was a lot of concern going into the earnings that it would have a great impact that would be hurt by the slowing chinese economy.

part of the reason why there was such a big concern is that they really rely on the sale of these big-ticket items that chinese consumers have been cutting back on like a chronic -- electronics and cell phones. it really speaks to resilience onlineese arlene -- retail. that being said, jd.com did have it slowest quarterly revenue growth since its initial public offering. competition from the likes of alibaba. shery: what about the impact from the slowdown it of the economy in china? >> jd.com has stated surprisingly resilient. to offset the slowdown, they are ending in finance, more logistic data centers, ai and making a big push into lower retail

market. they have taken a lot of market shares. these results come at a critical time for the company. are much narrower because they want to own the entire logistics distribution, which is very costly and expensive. trying to sell some shares in its logistic unit. haidi: is that part of the broader effort to rein in expenses? >> right. they have been trying to rein in expenses. it has been a concern. steps.e taking they said they are trying to cut about 10% of their senior staff to reduce some of the bloating. company shares have mostly recovered since the big scandal from last year when the ceo was well, was-- potentially under investigation

over rape accusations. although he was not ultimately convicted, there is headline risk for the company because a civil suit could still be filed, which would mean that the brand name would be dragged into the mud for another few months. shery: thank you so much. a preview of what to watch and the market leader with sophie in hong kong. more positive sentiment in the market in asia, despite the fall on wall street. wait of investors have to in terms of data. boostinge had the msci chinese a-shares. an extra $3 billion. pmi duet have that 9:45 a.m. hong kong time. there is a build to next week's national party congress.

soaring in february. watch reaction. jumping 25% last month. haidi: that credibility from msci. before we had to over to bloomberg markets: asia, take a look at how we are trading at the moment. getting abused by that weaker yen. we have markets closed in south korea today for a public holiday. seeing some modest upside, about .5% in sydney. plenty more to come on bloomberg tv. we have the china open. this is bloomberg. ♪ want more from your entertainment experience?

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>> it's not :00 a.m. in beijing. welcome to bloomberg markets china open. >> for counting down the open of trade. thisre other top stories friday. ofre could be a tidal wave cash flow into what is a fairly volatile market. >> for watching development in the trade stock. larry kudlow saying u.s. and china are close to a historic deal. >> in north korea says hanoi was constructive but warns president trump he may have lost any chance of a landmark deal.