haidi: very good morning. i am haidi stroud-watts in sydney, where australian markets have just opened for trade. shery: good evening. i am shery ahn. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." haidi: our top stories this tuesday, sterling falls as the ukip parliament rejects all options to replace theresa may's brexit deal. the split is 11 days away. political action. josh will hand down the last budget before the election,

aiming to woo voters. the trade talks moved to washington. a list of concessions could help produce a deal. shery: we have breaking news out of south korea. consumer prices in march in south korea fell 0.2%. that is a deceleration from a rise of zero point 4% in the previous month. it is below expectation. year on year rising only 0.4%. also missing estimates. cpi, which includes oil and agricultural products also coming in at .9% gain, which is much slower than anticipated. the core cpi had stayed around 1%. cut.d get a 15% fuel tax that might have added to deflationary pressures in the south korean economy, not to mention we had in some softening demand, -- we had

some softening of domestic demand. we have seen that with the month on month cpi falling instead of gaining ground. haidi: let's get you a quick check of our markets close in the u.s. on the first trading session of the week. we saw a major indices gaining more than 1%. a lot of optimism when it comes to wall street with the s&p 500. not at the highest level since october. the dow jumped in the most since february 15. the nasdaq was up 1.3%. s&p futures unchanged. it is all about concerns over global growth retreating. let's see how we are setting up for the session in asia. sophie. are pointing to dance with the momentum we saw at the start of april. the hang seng entered a bull market. continue this tuesday. on a federal budget day, the asx 200 adding .3%, extending gains potentially set for a six-day sincehe best streak

november 20 18, according to the bloomberg terminal. shares and wellington are set for it a sixth consecutive -- for a sixth consecutive day of gains. check in on the kiwi dollar, which is under pressure this morning, losing .3% after first-quarter business confidence took a hit. ratesnz will need to cut on growth concerns. the aussie dollar little changed after a two-day advance. bonds opening lower across the curve with on the yield climbing three to six basis points. cba says the risk for the rba today is that it will take on a more dovish tone. i want to flip the board to check in on bhp, which is gaining .7%. followinge miner rio tinto. iron ore production will be cut by 6 million to 8 million metric

tons in july. let's check in on fortescue metals. of its ihe stage two am bridge project has been approved. it comes with a price tag. in 2022.expected and this project, the high grade, is a partnership with china's steel company. haidi: let's get you the first word news with jessica summers. jessica: thanks. china's top trade negotiator is heading to the u.s. with a range of trade can concessions -- trade concessions. scrap tariffs on imported cars and plans to tighten regulations on the opioid fentanyl. the concessions are seen as efforts by beijing to keep the momentum going as the two sides enter what could be the final stretch. european commission boss

jean-claude juncker has reiterated criticism of china days after xi jinping tried to ease concerns in paris. younger told -- he told lawmakers that it is unfair for chinese companies to have open access to e.u. markets while the reverse is not true. he said selected chinese investment undermines e.u. foreign policy. a veteran algerian leader, beautifully got -- leader has agreed to step down. news agency says he will go before the 28th of this month while taking important steps to ensure the smooth running of the state. he sparked demonstrations when he announced he would stand for a fifth term as president. as u.s. aviation regulators say a fix for the grounded boeing 737 max is unlikely to win

approval, it is being reworked by bowing to make it less likely to and less malfunction. it was due to be shown to the faa last week, but the schedule has been pushed back. they need more time to carry out additional work. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. onto one of our top stories. the u.k.'s messy divorce from pushes deeper into crisis. u.k. lawmakers rejected all alternatives to theresa may's unpopular brexit deal. the commons debate did not command a majority. a no deal brexit is 11 days away. the stalemate leaves the prime minister with no clear idea on what to do next. her deal has been rejected three

times in parliament. try once again. she was cabinet tuesday morning and the commons will have another chance on wednesday. joining us now is the chief market strategist, victoria fernandez. thank you for your time today. we are seeing a decline in the british pound, but not as dramatically as we have seen it in the past. is that expectation we might be headed towards -- immune -- are markets immune? victoria: there's probably much more downside potential than upside at this point. we have seen it in the economy in the u.k. you were talking about the pmi numbers earlier, and those were strong. their unemployment is below 4%. they have some good underlying strength in the economy. so i think the pound, the sterling, has been pretty steady. it does come down with some of

the headlines. we are 11 days away so that would fit more in perspective for them. shery: no wonder we have seen stability when it comes to the outlook for the british pound. this gtv chart on the bloomberg showing the expectations for the pound to be higher than the there. level is right so given all the different options that the prime minister may had at the moment, whether it is a potential long delay of brexit or a hard brexit on april 12 or even a general election, what could be the outcomes for sterling? victoria: i think anything would be aard brexit positive for sterling. i think the people of the u.k., the people in the european union, would see that as a positive, and we would see some strong momentum going forward from that. they are poised to break out. we saw that with the gdp number. we.'s gdp was higher than saw in germany and france. i think they are ready for some positive momentum. there is some built-up progress

that they are waiting to see, so the pound could move much higher as long as there is not a no deal brexit. that, i think, will be a little difficult for them to swallow. haidi: we know some of those numbers are because of the front loading that we are seeing from businesses and factories that are trying to get in before a potential difficult brexit situation. i am wondering, you know, europe keeps saying our patience is not going to last forever, but we have seen the kind of concerns that perhaps a hard brexit or disorderly scenario could play out even worse for broader europe than it does in the u.k. i want to bring up this chart. staged aanufacturing bit of a recovery. even some of these trade indicators in asia are not as horrible as they have been over the past few months. what we are seeing is europe, germany, just floundering. is there a bigger concern that europe will be the biggest

victim if we have a chaotic result of brexit? is absolutely true. you did mention some of the stockpiling led to some of the stronger numbers we were seeing in the u.k. but it was about 20% of that. the rest of it still came from some strong underlying fundamentals from new orders, from employment. that shows that there is some underlying strength. when you look to the other countries in europe and you look at the e.u. as a whole, you can see that they have had a hard time. a big issue for germany. they will be hit pretty hard by this. we have seen this in france, and italy. is setting up.u. that this could be quite difficult for them. they don't want to do anymore negotiating. they don't want to have a long, drawn out deal for brexit. how theycerning as to are going to approach this. if they cannot agree on a plan b, if the u.k. cannot agree on theresa may's deal, then where does that leave them in 11 days?

haidi: in terms of the broader market sentiment, i am scratching my head as to who you believe. do you look at the fed being patient? we are looking at rates markets across asia. new zealand, south korea, india, pricing in using over the next 12 months or so. do you look at this recovery story? actually, the global growth story may not be as bad as we thought for 2019? victoria: some people are thinking this could be the bottom. right? atecially when you look china. a lot of the issues have been domestic issues. we are seeing credit growth improve. purchases,t as many but there's infrastructure being built. see as we are starting to bottom. having the central banks take a step back, the fed saying they will be patient. at least towards the end of this year. that gives the market a little bit of time that they can see if

things get better. is this a bottom? is this an upward trend? if there, this will be positive for all of the market. haidi: victoria, thank you so much for joining us. vittorio fernandez, chief strategist -- victoria fernandez, chief strategist. -- aiming to boost the government reelection hopes come may with a vote expected to be called next month. the fiscal plan is expected to of things forfull voters. what are we looking for in this budget? the key thing we are looking for is going to be that headline number. australia returning to surplus for the first time in more than a decade. $4.8 billion.ng it could be as high as $9 billion. that is thanks to a number of reasons.

we have had a weaker aussie dollar as well. things have fallen the governments way -- government's way besides good management. spending on an election year, the election will probably be announced sometime this week for the middle of may. so there's going to be tax breaks for low to middle income earners, help with energy bills and infrastructure spending as well. we are on the lookout. that: and of course, given it is the election year and we could be heading towards elections in may, how relevant is the opposition budget at this point? well, it is going to be very relevant. normally, it is not that closely watched. when the shadow treasurer hands down his alternative budget, that is going to be closely watched because that might be the one that end up getting an active -- enacted.

we will just have to wait and see. hasady, the opposition promised more spending on health, education, as well as tax breaks for low and middle income earners. with the election likely to be announced probably may 11 or may 18, the government is going to be hoping that it has done enough on the economics side and that the internal dysfunction over the past six years that has seen them burn through two prime ministers. and the rba board meets today. are we expecting any movement on rates or is this more about that knowing what comes next? -- about signaling what comes next? paul: not today. the last time the rba moved was also on a budget day back in 2016. that was the start of an easing cycle. rba with this

neutral stance. we will be looking at the language to see if they turned more dovish. already, markets pricing in a rate cut for august. some analysts thinking we might be at 1% by the end of the year, so the rba looking at those weaker house prices, weighing on consumption, balanced against strong employment growth, but then balanced against weak wages growth. plenty to watch out for later this afternoon. act for a balancing policymakers. paul allen in canberra. goldman sachs closing a short bet on dollar-yen. we will be speaking with their head of global currency and emerging market strategies later this hour. shery: jpmorgan asset management's carry trade -- kerry craig joins us. this is bloomberg. ♪

haidi: you are looking at live pictures of canberra, where the treasurer will be handing down his first and potentially last federal budget. counting on buoyant commodity prices to dish out 9 billion aussie dollars in cash handouts to woo voters ahead of an expected may election. the rba decision dave. the aussie dollar trading flat at that $.71 handle. stocks have strengthened worldwide as improved manufacturing number went some way to allay concerns. the global market strategist with jpmorgan asset management joins us from melbourne. this is the head scratcher. i am looking at bloomberg data suggesting that whether you are india, about australia, the outlook over the next 12 months according to rates what markets is we're going to's --

swap markets is we are going to see easing. practicing and preaching patience as well. if you look at the latest members does this suggest a turnaround for 2019 when it comes to global growth, that it will not be so dire after all? >> good morning. i think it's fair to say you could see some signs of stabilization in terms of the outlook for global growth. our view is there will be in moderation. can look at economic data that came out most recently in inventories and retail sales. we had this pmi numbers picking up in china and stabilization coming through in the economy from those stimulus measures. we are not thinking about a recession. these growth rates are moving lower after expanding rapidly in 2018, and that is probably about right for where we are in the cycle. it is a relatively benign economic environment being

reflected in bond yields. the chances that we see -- chance is that we see an easing. some central banks may cut rates, there is a pretty high hurdle to move, and the focus is more on fiscal stimulus coming through in places like australia and perhaps europe as well. >> is the assumption that we continue to get goldilocks scenario play out with low inflation but pretty good recovery in growth? you are already seeing markets seeing their breast first quarter in a number of years. we have had hong kong enter a bull market as of yesterday. asian stocks trading at six-month highs. are we really close to the peak here? certainly feel that all the investors i speak to do not feel like this is a goldilocks environment. they are more concerned about the downsides to the outlook in terms of market that are rallying so hard over the first part of this year, yield, and thinking about their income

stream. risk view is asymmetric from here. the rally has been boosted from the outlook by the fed. they came off a depressed level. i think that is the real head scratcher. markets have done so well while the economic data is mixed. from here on out, we see a market with valuations and equities around the world that are full is not above in most areas and a relatively muted expectation for earnings. we are seeing mid to low digits in many markets. inspiring wheny we think about allocation towards equities. we have a neutral view when it comes to bonds versus stocks. focus onue to put income in the environment and lean toward credit markets. shery: in that phenomenal rally, stocks and bonds really performed really great for the

first quarter since 2010. should we be positioning more defensively, whether it is stocks or bonds? it is not a case of positioning more defensively. it's a case of having the right protection for risks met could present a downside to the outlook. those are still prevalent. indications point toward the reconciliation on a trade agreement, but that might the no escalation of tariffs. i want to think about a resolution to the long-running or technologyip transfer. the fact that you are going to see perhaps less upside to equity markets after a strong rally also keeps us a little bit more cautious. on that basis, we do like the more defensive market of the u.s., given how it's growth outlook and earnings outlook is positioned, but we see the such asotential

emerging markets almost taking the barbell approach. it is similar with the fixed income market, where we think duration still have a place and portfolios even though yields are very low. about duration declines a lot and the need to have it because it offers protection, but at the same time looking at imaging market debt, carry,eld markets that when the assets that do perform well, when there is no recessionary outlook for the global economy. shery: how supportive will the u.s. dollar beef emerging markets -- be free much markets? kerry: that is a big question. you should see a u.s. dollar decline if we think about the twin deficits or even the view of where the fed is going. it has been a case of certainly strong u.s. dollar as growth around the rest of the world has been quite weak. our view is a bit of pickup elsewhere in the world to see the dollar decline and actually the best nature of many markets outside of the u.s. might see more upset essential there. of therefore, a flight

capital to those places, which helped depreciate the dollar. we think there are assets in emerging markets that can perform if the dollar does come down, the debt -- but the depreciation is not as strong as we had expected six months or nine months ago. it is a moderating factor. in the long term, those are the assets that will provide the growth in portfolios. shery: thank you so much for that. jpmorgan asset management and global strategist, kerry craig. we have plenty more to come on "daybreak asia." this is bloomberg. ♪

haidi: a quick check of the latest business flash headlines. bhp is following rio tinto after a cyclone hit. bhp says iron ore output will be

cut by 6 million paid million to 8c tons and is -- million metric tons. in february, the miner forecast at 280 million tons. shery: it is already a bumpy investors after the highest profile stock sale. shares dropped as much as 12% during its second day of trade, falling well below the ipo price of $72. wall street analysts highlight concerns about how fast the writing or can start making -- ride hailer can start making money. tesla has reached a settlement with the u.s. environmental protection agency over hazardous waste violations at its manufacturing plant in california. the epa said tesla failed to comply with emissions standards and requirements for managing potentially dangerous products. tesla will pay a penalty and $55,000$55,000 -- buy

of equipment for the fremont fire department. china's negotiators heading back to washington, including the bp. beijing offering a potential all of branch to get a deal. this is bloomberg. ♪

jessica: this is "daybreak asia ." i am jessica summers with the first word headlines. sterling so as you can lawmakers failed to agree on plan b for brexit, rejecting all options put forward to replace theresa may's unpopular deal. comments debated four policies. -- the commons debated for been policies. the stalemate leaves the prime minister with no clear idea on what to do next. she will host the cabinet on tuesday morning with a no deal brexit just 11 days away. are said to bes struggling to reach consensus on a mandate for trade talks with the u.s. that threatens a delay that may irritate washington after the block refused agriculture in

the discussions. e.u. ambassadors meet in brussels on wednesday and told france is expected to push back on giving the green light to eliminating industrial tariffs. business confidence in brazil fell last month to its lowest since president bolsonaro won the election on the plan that he would -- he would deregulate and improve the ease of doing business. growth forecasts for this year have been cut from five straight reeks to just under 2% -- weeks to just under 2%. india has taken another giant leap in its space program, sending up 29 satellites. the largest satellite is a 400 kilo unit that will carry out a range of electromagnetic experiments while in orbit. the rest include 24 satellites from the u.s. and others from us so when you, spain, and for the land.

-- lithuania, spain, and switzerland. the world is drowning in plastic. a dead whale was found to have 22 kilos or 48 pounds of plastic waste in its stomach. the world wildlife foundation corrugated two, throw weight plates, shopping bags, and a detergent water bottle. has killed five other whales in the past two years. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am just the summers. this is bloomberg. -- jessica summers. this is bloomberg. shery: it is early in the session, but so far, it looks like the global rally could extend into the asian hour. let's turn to sophie for a check of the markets. sophie: we are seeing gains extended in sydney. to match00 up .6%, set

the best winning streak seen since from the 2018. a sixth they of gains -- day of gains. oil players gaining ground as wti holds its gains above 61 and we could see brent test the 70 level today. the aussie is off ever so slightly but holding steady after a two-day rise ahead of the rba decision. drag on tone could be a the currency. we are seeing bonds fall across curves, sending yields higher by two to six basis points. let's check in on some of the best performers. to searchs continuing and eying a fresh record above 23 australian dollars. yourhare price is up today. fortescue is gaining 3.2% after of itsng its stage two iron bridge project. the developments will cost $2.6 billion compared to an earlier forecast of $1.5 billion for a

small operation. let's look at some of the laggards in sydney. credit corp. group is up 2.7% this morning. company announced the completion of its institutional placement, which would increase to 125 million aussie dollars and was raised that a discount of 20.45 per share. the pivot is off this morning after offering an update on the impacts of dry weather and rail averages. distribution sales in the first half of fiscal 2019 are down year on year. the industrial chemicals producers as it is unlikely to see any to financial recovery of those lost volumes in the second half. haidi. haidi: sophie there with the movers. china is offering a trade olive branch as negotiations resume in washington this week. beijing says it will extend this is mention of retaliatory tariffs on autos and

include opioid fentanyl in a list of controlled substances. themackenzie joins us with latest. is this the final stretch of the trade talks? tom: it seems that we could be in the last leg of these negotiations. of course, we have china's lead negotiator en route to washington. he is expected re-start negotiations. we know that when the u.s. side, inchin and lighthizer, were beijing, they were going through the text of a proposed document they could put to the two presidents, outlined by line, and a news agency said there has talks.w progress in the the u.s. said the conversations have been constructed. we had to measures by china to oil the called -- on these cogs on these negotiations.

around theuestions enforcement mechanism. it has done things like what the functional ban in place. it has been put on a list of controlled -- fentanyl ban in place. it has been put on a list of controlled substances. it has been blamed on the death of thousands of americans. there was the suspension of a 25% tariff on u.s. autos. it started january 1 and the chinese are saying that suspension will be continued. yes, beijing's officials are putting in place measures to try to ease concerns in the u.s., try to offer and olive branch as -- an olive branch. shery: when it comes to china's relationship with europe, we recently had that love fest between president xi and france and italy. it seems europe is stepping up its criticism of china. what is going on? tom: it looks so cordial, didn't it, for a moment? met -- they met on

march 26. what we heard from jean-claude they hads that indeed a sharp worded critique to their chinese partners. it comes down to the fact that european companies still cannot get free access and equal access to china's markets, but chinese companies can come into europe and it is an open playing field for chinese companies. in that situation, that lack of the quality simply is not sustainable. he also said he was concerned that the europeans were concerned that chinese investments in certain countries within the 27 member bloc would make it and are making it more difficult for the bloc to speak with a unified voice, particularly on questions of human rights. china is under the spotlight over its incarceration of about one million muslim people. from theeard

commission. they put out a report saying china was a partner, yes, but also a competitor, and also a systemic rival in issues of governance. so the europeans seem to be taking a tougher line on china. they have run out of patience. if the europeans are slightly divided, particularly when it comes to issues of belt and road. you saw the italians standing up for that. concerns about the transparency, the sustainability of that project. country tofirst g7 join the initiative. tom mackenzie in beijing, thank you. coming up next, a pickup in momentum on santa claus from the u.s. to asia has prompted goldman sachs to alter some of its currency.e -- this is bloomberg. ♪

haidi: this is "daybreak asia."

i am haidi stroud-watts in sydney. shery: the bond market continued to selloff as a wave of strong the manufacturing in asia carried over into the u.s. factory data, leaving germany standing alone as the weekly on the global -- weak link on the global chain. does that leave manufacturers vulnerable? would think so. it is good to see some improvement, particularly in china, where the games went above 50 from at least a couple of points below it. above 50 from at least a couple of points below it. we don't know if it will continue. the bond market selloff continued after the u.s. manufacturing data, the institute for supply management's purchasing manager gauge, strengthened more than expected. let's jump into our bloomberg library. for the last almost two years, it has been in the stratosphere. 58, 60 -- anything above 50

signals growth. it peaked towards the latter part of 2018 and started coming down. bit.ame back up a . it is back up to 55.3. employment in stronger. all these are good signs. what was not such a good sign in the u.s. data today, retail sales. they came in on the weak side. they all came in a little bit lower. people are taking this with a grain of salt. there was harsh winter weather. groceries.terials, ec programs, -- you see the snow. that is a big question for first quarter growth and the fed because the consumer has to pick up in the second quarter make it -- look better to make it look better -- in the second quarter

to make it look better. haidi: what is denting the german powerhouse? kathleen: it seems that you're broadly is suffering most from the global slowdown, in the crossfire. intony, let's jump back the bloomberg library now, because their gauge, which had 44.7in preliminarily at came in at 44.1. the threat of disorderly brexit hits them as well. when you look at the u.k., i am not going to show you that chart. purchasing managers index got lifted to a 13 month high. why? businesses are so worried that they are stockpiling inventories. haidi: kathleen hays, thank you so much for that. of that stronger manufacturing data in asia and the u.s. has prompted goldman sachs to end it short bet on dollar yen.

our guest joins us now in new york. risks thatof the kathleen just mentioned, whether it is on trade or that china's manufacturing data could have been a bit diluted given the lunar new year holidays, aren't you concerned that the bet could be premature for closing the recommendations? >> we might not be entirely out of the woods from the standpoint of the global cycle, but we have come out of the period where growth has been particularly weak, and that has been supporting began on the margin. we have seen enough data to indicate the global industrial cycle at least is on the margin picking up, particularly with the chinese numbers. i think it is too risky to be betting on yen appreciation over the short run. shery: what does that spell for the u.s. economy and also for the u.s. dollar when it comes to the direction that we will take eventually? there are so many different calls when it comes to the greenback. lower dollarin the camp. the u.s. economy last year had

booming growth and a fed that was hiking while other central banks have been staying on hold. you have a slower u.s. economy in areas like housing, in areas like the consumer and industrial sector as well, and the fed is on hold as far as the eye can see. we think this is a fundamentally weaker dollar outlook, although it is taking a little while to materialize. haidi: the fundamentals never made sense when the fed pivoted. we saw a stronger dollar trajectory. what about the argument that it is the best out of a bad bunch? see very narrow ranges among developed market currencies at the moment because most of these economies look more similar than they do different. you have seen a more dovish fed, but also slowing in europe, slowing in canada, and easier central-bank policy and both of those places as well. we have very tight range is among developed market exchange rates. you do not see a lot of divergence in these markets

today. the bigger short dollar opportunity today is in em, where you do see central banks that have been a little bit tougher, where you have yield pickup, and where growth is on the margin, improving. that is in china and other economies. that is where the short dollar opportunity is today. it will take a little while longer before we see dollar weakness materialize against develop market exchange rates. haidi: dollar weakness as well as that improvement in the outlook for china. the two factors that drive you to believe we will see aussie dollar strength. zach: on the margin, that is the case. the australian economy has some domestic challenges that make it hard to get fully invested in that view. soft.using market remains some of the business indicators we have seen the little bit squishy still, and so, i think some of the weakness in the domestic economy puts investors off. i think you're right that the better global backdrop, the pickup in china, is probably

enough that we see the aussie dollar move beyond its recent range. we have a target of $.75 versus the dollar. shery: when it comes to the economy, optimism over the fact that we could be getting a trade deal really has boosted the market there. i do wonder how much has already been priced in in the yuan. zach: the yuan has been pretty stable. we have seen chinese equities have a very large movements the start of the year, but the yuan has been much more managed as an exchange rate. policymakers are aiming for profitability both versus the dollar and on a basket basis. as we approach the conclusion of the trade deal and as domestic growth picks up, we think there is a little bit more room to run in the yuan. you're probably right. we think the currency has a bit more to go. shery: how much of a support and for otherl it be asian currencies when we see this divergence starting to happen in asian economies like south korea, japan? manufacturing rebounding

but not in the expansion territory as of yet. zach: it is a little bit early to say. we have just seen the survey-based data, the earliest data for china, start the pickup. we have not seen a pickup in korean and japanese exports, and place you lookst for validation that the chinese economy is improving. over the next couple of weeks, we will get there early trade data through up the rest of asia along with it. as it can, it is a little bit narrowly concentrated. the green shoots we are seeing in the data. there is naturally some skepticism on how far it will extend. haidi: another day, another brexit vote. a sterling pretty untradable at this point? -- is sterling pretty untradable at this point? is the biggest opportunity today. have to pay pretty close attention to be actively

positioned in it, but we do progress are making despite the failed votes. the customs union approach, a soft version of brexit, came within three votes of a majority in parliament today, so we think we are angling towards a softer a customs union, packaged together with a second referendum, and we think that will be coming together in the next one day or two days. we are coming to a big finish, but i certainly would not say it is not tradable. we think this is an important market opportunity, and really, the main issue of focus for develop market exchange rates at the moment. shery: the euro has been pretty range bound since september of last year. range round,bly going nowhere fast in the last couple of months. the challenge is that the u.s. and europe kind of look similar. both economies are slowing down. the ecb and the fed are both very dovish. the question for europe is how do we get from that

chinese stimulus. turkey, we seem to have weighed on the euro area. german auto sector, other parts of the german economy, have been really affected by what has happened side of europe. it has not been a homegrown problem as much as an external problem. we will be waiting to see how much demand pull we get. that will really set the trend for the euro in the second half of this year. substantial a chinese pick up, we could see the euro area falling behind with a bit of a line. haidi: zach pandl. don't forget to use our interactive tv function at tv on the bloomberg. you can watch us live and dive -- catch up on past interviews and dive into any of the securities or bloomberg functions we talk about. you can become part of the conversation by sending us instant messages during our

shows. this is for bloomberg subscribers only. do check it out. it's that tv . -- it is that tv . this is bloomberg. ♪

haidi: new zealand and china have signed new tax agreements as the prime minister made her first official visit to beijing. she and president xi planned to improve ties that have been strained by u.s. led effort to block chinese telcos from next-generation mobile networks. our guest joins us from wellington. things are easier in terms of this relationship. guest: we think they are. was overdue. it was originally scheduled for last year and it was one of the things that of the servers -- raiseers started to questions about.

it seemed to be successful. put some of the tensions to bed. we have the trade minister going to china later this month as well. the high-level connections seem to be in place. shery: was she able to achieve that reset in time? that is an ongoing relationship issue. i think one of the things she did achieve was the personal connection with the chinese leaders. they seem to be getting on well from what we can observe from wellington. they made a commitment to pursue the upgrade of the free trade agreement, which new zealand has been very keen to negotiate. it is in its third year of negotiation. the two leaders said let's push on with this. there is as you mentioned the double tax agreement. agriculture and research, and talk about how new zealand can get involved in the chinese belt

and road initiative. again, the trade minister will talk more on that when he traveled to beijing later this month. haidi: what about the elephant in the room? 5g.official decision on how is that expected to play out? guest: certainly, that is as you say the unknown. the prime minister was very keen to stress that huawei has not been banned, but it is not clear telecom thatlocal is trying to include one and its plans for 5g can mitigate -- huawei in its plans for 5g can mitigate it. in that case, it might be quite difficult for huawei to get approval.

thathina will react to is not clear. the chinese leaders were talking equitablet and an environment. after the meetings, they told reporters that differences between the two countries should not and will not interfere with the overall relationship, so just sort of taking an optimistic view whatever the outcome. shery: tracy withers in wellington, thank you. deutsche bank is said to have hired morgan stanley to advise merger talks with commerce bank. we are told deutsche recruited citigroup. opposition to the potential merger is increasing. commerce bank staff wants more details. blaber unions are openly against a deal and some deutsche investors are unhappy. wells fargo's credit outlook was cut by s&p global ratings after its ceo, tim sloan, stepped down last week.

lenders overall rating was affirmed at a negative. sloan quit after struggling to revive the bank from a wave of scandals including charging customers for services they neither ordered nor received. shery: let's get a preview with sophie. sophie: risk appetite is looking decent this morning was nikkei futures hinting at gains of one and 1% while the yen is weaker for a fourth. korean investors have inflation data to chew on as well. in tokyo, we are watching inbound tourism related stocks after department stores reported growth in tax-free sales. looking solid in march due in part to the softer yen. in seoul, cosmetics reached a record on a monthly basis. 27% month on month. probe,rom the u.s. sunday motor on the radar of --

hynudai motor on the radar. the stock was upgraded to buy. plenty more to come on "daybreak asia." this is bloomberg. ♪

haidi: a very good morning. i'm hide hide in sydney. >> good evening, from blook bloomberg's global headquarters in new york. i'm shery ahn. >> and i'm sophie in hong kong. welcome to "daybreak": asia." haidi: our top stories, the global equity alley is set to roll on through asia today as the g factory numbers lift model. the split for brexit is now just

11 days away. shoip is they arerer will hand down the last numbers before the election. trying to woo numbers with extra cash. sophie? sophie: both the nick kai and topix gaining down. the yen is weakening for a fourth straight day. rafu 10 extending its drop down, about 10:5% down so far. .4% ul, kospi gang about while the korean yuan is eyeing that 11.43 handle against the dollar. inflation slowing to a near three-year low in march. can. r thing for the b.o. to consider.

yields in bonds in morning, yields continue to climb but the b.o.k.'s benchmark rate falling last week. let's check in on aussie shares, on h are set to match gains course. gains are being led by tech shares while the as -- aussie ollar is up ahead of the announcement. we're also waiting on building approval data due in about hatch how were from australia. another fresh high for stocks in wellington but the kiwi dollar off by a quarter of a percent on sliding basis confidence in the first quarter, signaling headaches for g.d.p. growth. so that exceeds expectations for the rates to be cut this year.

haidi: let's hear from jess in new york. jess: the top trade groisht of china is heading to the u.s. chinese moves to scrap tariffs imported cars and tighten regulations on the fentanyl by the start of next month. as the two sides enter what could be the final stretch. european commission boss has reiterated criticism of china, just days after president tried to ease concerns in paris. he told lawmakers that his -- it is unfair for chinese companies to have open access to e.u. markets while the reverse isn't true. and business confidence in brazil fell last month to its

lsinarosince president bo won the election vowing to rink the size of the government however, growth forecasts have been cut for first time straight weeks to just under 2%. and u.s. aviation regulators say a fix for the boeing is unlikely to win full approval. the system is being reworked by boeing. it was due to be shown to the f.a.a. last week but the schedule has been pushed back. the agency says boeing needs more time to carry out additional work. global news 24 hours a day on air and on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries.

i'm jessica summers. this is bloomberg. aidi: treasure are you hands down his first major budget. the vote expected to be called next month. paul allen is at parliament house for us. paul, what are we looking for? paul: we're looking for the first surplus in more than a decade. the estimate is for around $4.8 billion. it could be more. the treasurer has promise that would this will be a bullet of surprises. a number of things have fallen their way. commodity free-throws pries higher than expected, a weak aussie dollar. some of that might be given back to the australian people. lrt already, we've had announcements of a tax break from low to middle-income earners. there will be assistance for people on energy bills and infrastructure as well.

frydenburg's er first budgets and may be his last because he will have an election very soon. haidi: can we expect this budget to be actually enacted? >> there is a possibility nate won't be. one other piece of news we'll be looking for is an announcement of the election date. it's likely to be either saturday the 11th of may or the following saturday, the 18th. the government obviously intending to campaign on this budget, saying we brought it back to surplus, there's some tax breaks there. we've been sound economic managers as well. the government will be hoping that the electorate overlooks the dysfunction that it suffered internal limb. now, the opposition will, of course, be seeking to remind the electorate of all of, that as well as promising spending of

its own, mainly in health and education and tax breaks as well so we'll hear about the opposition's plan later in week and that alternative budget could well end up being the one that gets enacted. haidi: we'll also hear from the o.p.a. we're looking for signals and commentary about what's to come. paul: yeah, that's right no. movement expected today. the cash rate expected to stay at 1.5% but these meetings have gotten a lot more interesting in 2019 since the banks shifted to that neutral stance at the start of the year. house prices declining. that is weighing on consumption. the fiscal stimulus from this budget going to be welcomed there. job market is strong but wages still stagnant and the growth forecast has been pulled back as well. we'll be looking for that kind of rhetoric in the statement but

already price traders have priced into august and some economists thinking we'll be down to 1% by the end of the year. haidi: thank you as much for that -- so much for that. the u.k. has bo gone into even more chaos. a possible way forward for the prime minister whose deal has survived three votes already so where do we go from here? >> the idea is that possibly she might put this towards a fourth vote as early as wednesday but with the fact you just mentioned that she's lost it for three times in a row, at least one ade bloomberg has spoken to said she may not actually do that let's show our viewers here. basically the four votes we had earlier today, every one rejected. the customs union, which was the most popular option.

just last week, six shorts -- votes short then was just four votes shy today. the common market was 22 votes shy. the referendum on a brexit deal, allowing the people to weigh in on something, also rejected there. 13 votes shy of majority and then an emergency brake on a no deal. this san amendment in parliament. that was 101 short there. with that said, all of these did get more votes than theresa may's deal so the fact that we're getting very, very close to some kind of consensus here over those few votes that we saw that were shy begs the question on whether this might happen again with at least some vote getting over the finish line but look at what's happening with the british pound. we saw over the dours co-of the u.s. trading day the optimism there with the british pound

rising and then right after that parliament vote coming out against all four brexit options, we saw it fall in our second trading day here. this is where we stand in terms of where we are. i guess you put it best when you said chaos here and a brand-new kind of chaos. haidi: theresa may now facing a painful range of choices. she's scheduled a five-hour meeting tuesday. even as we see those numbers of the votes that theiro a bit. >> that's right. they still didn't narrow as much as they need for any kind of majority. so interesting as it stands, the only deal still on the table is theresa may's. looking ahead to tuesday, there is that five-hour talk, from 9:00 a.m. to 12:00 p.m. theresa may is going to talk just with her cabinet level

officials trying to figure out what they're going to do. five options as we count them. one is to embrace a soft brexit but it would abandon her so-called red line that would yum set and possibly split her party. another option, she could leverage the support we've been seeing for that so brexit to say soft brexit could happen. another thing is ask for a longer brexit delay but that would also upset a lot of skeptics and another thing is to call for a general election but there is some thought here that these three hours of political discussion tomorrow, the first three hours, would be for that and finally, something a lot of people want and a lot don't want is a call for a new brexit referendum. but the openings there. all of those. if you say the least of any of these evils, i think you'd be in a very difficult spot to say which one that would be.

haidi: very difficult spot for theresa may. still ahead, coming up, find out ore.- is betting on iron shery: up next, a word of caution. the gains in asia and emerging markets may be overstretched. this is bloomberg. ♪

camber ll the action in in the nation's capital. the budget full to be full of sweeteners to the tune of about 600 billion u.s. dollars. seen to nment also return the bulk to surplus. this is "daybreak": asia."

i'm hide hide in sydney. shery: and i'm shery ahn in new york. our next guest says e.m. asia's rally may be stretched. joining us from singapore is head of economics and strategy at the bank. always great to have you with us. have the markets taken the fed's patient rhetoric a bit too far? >> well, i think there was some front running a bit and i think the fed has delivered a little bit. they have pulled back on quantitative tightening a lot sooner than was earlier anticipate sod by q 3, we're done wilt. t the margin it does provide relieve -- relief. baked in of this is

and we're running on fumes beyond in even the u.s.-china trade deal, the devil in the details will start chipping away at how good the outcomes may be. for these reasons, it looks like asian markets will be struggling to find traction beyond i think the initial euphoria they've seen. shery: the ideas also that the rates would continue to fall. i do wonder how many lower can yields go when you also factor in the balance sheet and the runoff ending soon not to mention the composition of the balance sheet changing. >> that's really a good point. for the most simplicic view on jeeleds we take it that the two-year yields are ghost close to the fed rates so for them to meaningful go lower, you're right, the belt on fed rates

must come through. given more time and breathing space for the market is the fact that even after quantitative flattening has ended. the fed will be swapping out securities for u.s. treasury so that could -- and value of the yeempleds down a little bit more but that's really maintaining some of the bouncy rather than giving fresh reasons for the markets and rallies to continue. that's why we think it's going to grow a little bit tired. shery: if you're saying that asia and -- are in a sweet spot at the moment, we're looking at data on the rates market that every market from australia to new zealand to india is pricing in quite a bit over the next 12 months. is that an overshoot? >> that may not entirely be wrong in terms of the bias

having shifted a lot more. i think the r.b.a. got in very, very nicely put in a concise manner. the r.b.a. pointed out that while the -- of a rate cut and rate hike are quite even. they said if there's going to be a move, it's more likely to be a hike. i'm sorry, if there's a move it's probably going to be a cut. however, if the model shifts up next year it's more likely to be a hike. none of these moves are going to be a sustained cycle. amp a short calibration so markets could be a lot bumpier than we expect on these straight-line projections. shery: that is a really interesting point. what about the u.s. dollar? we've been wondering why fundamentals clearing clearly are no. driving strength in the u.s. dollar but since the fed pivot,

we've had a sustained projectry of u.s. strength. is this the case it is still the pick out of a pretty bad bunch of developed market currencies? >> our temptation is to say that the dollar would star in an ugly contest. but our initial view was the fed would peak out and if the e.c.b. were to remain on call, we would have seen a little bit of rebalancing. the youro going higher and the dollar lower by late this year, early next year. the economic downturn in the eurozone is arguably deeper than what we would see in the u.s. the argument that remains out there for wide dollar should start coming become back lower in terms of potential dovish moods, the fed can do a lot more, at least in the hit linets

than any other central bank will. the question is whether they will. that will be determined by things like how the u.s. handles trade negotiations on a goebel basis. the downturn being a lot more be al would necessarily baynesed on policy missteps. shery: how did that vote for the chinese yuan, which has been pretty stable recently? >> i think the chinese yuan is in the gold locks position. we do think that because of the ongoing trade negotiation. stability is going to be a little bit more certain than it was last year. what we get, i think, is a little bit of gyrations. probably the dollar going a bit higher into the middle of this year.

late this year before it comes back lower to about 6: 0 by early next year but the pboc is going to take a view of it on a trade-rated basis. on that basis it's already 2% higher and won't go a lot higher than this. a lot of that will be determined by where the u.s. familiar goals rather than fresh input from the umboc. shery: always great to have you varathan. shnu bloomberg subscribers, go to your early in false and it's on the mobile in the bloomberg anywhere app. you can customize those settings. this is bloomberg. ♪ this is bloomberg.

♪

haidi: this is "daybreak": asia. i'm haidi stroud-watts in sydney. shery: and i'm shery ahn in new york. officials are launching into a formal investigation into millions of auto arrestos made by hyundai and kia after thousands of complaints that they suddenly went up in flames. what do we know right now? >> we know that an auto advocacy group had petitioned this agency in june and at that time they knew of about 120 reports of cars spontaneously going into flames. at that point we now know there are 3,000 complaints, one of them fatal and now the investigation is into roughly 1.3 million hyundai sonata and

santa fe models as well as in terms of the kia models, it's the opt ma and sorrento models and these cars were made between 2011 and 2014. we also know that these particularly south korean automakers, while separate leoned, do share some of the same all the parts suppliers so they could have a commonality in terms of the engines they're using. the companies have had some kind of recalls in the past that etch have -- that have dealt with questioning why these fires are happening or engine straws. according to officials in the company, hyundai said it's ooperating with the nhta's investigation. kia said it will continue to work with the agency in a "full and transpatient manner." so the official word is they're welcoming in probe.

shery: what likely happens from here on in? >> the advocates are pushing for a recall. this is a preliminary stage. if you look at the way these company stocks have traded and the -- any announcement of a rahm would be a negative for stock price. again, this is at the investigative level. the set up for all the say. said that they home in step will lead to a recall as quickly as possible. they also say the reality is that extended investigations by leg -- regulatory or say. agencies such as this one do not solve the problem of protecting owners of hyundai and kia cars that have had these problems. there's also the additional problem for many owners whose cars burnt to a crisp as to how they continue to pay for vehicles they no longer own and

that there's been no accident to report on. shery: let's get you a quick check to have laltse business headlines. right now, french prosecutors to payments allegedly made by clients going to an all the distributor following the reports that the money may have been used to pay off personal debts. some say they were made by a special fund. a spokesman for ghosn has denied wrongdoing. >> the effort p.a. said tesla failed to comply with air emission standards and requirements for managing potentially dangerous products. tesla will pay a $31,000 penalty and will buy $55,000 of equipment for the department. a io tinto is warning of

fall in production after a cyclone hit northern australia last month. it's reviewing it overall guidance as well. ♪ the biggest week in television is almost here.

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customize each line by paying for data by the gig or get unlimited. and now get $250 back when you buy a new samsung galaxy. click, call, or visit a store today. jessica: the first word headlines. sterling fell as u.k. lawmakers failed to agree on a plan -- plan b for brexit. rejecting all options to replace theresa may's unpopular deal. none commanded a majority, pushing the e.u. submit mr. further into criticize. the split leaves the prime minister with no clear idea on what to do next. she'll hold a conference tuesday with a no-deal brexit just 11 days away. threatened a day -- delay that my further irritate washington

after the bloc already refused to include agriculture in the discussions. e.u. ministers meet wednesday and we're told france is giving a pushback to the grooth to liminating industrial tariffs. the official a.p.s. news bouteflika will step doubt as president. he sparked demonstrations when he announced he would stand for a fifth term as president. and india has teab another giant leap in its space program, sending up 29 satellites in a rocket launch, the first of its kind for the country's space agency. the largest will carry out a range of magnetic experiments while in orbit. the rest include 24 satellites

from the u.s. and other countries, lithuania, spain and switzerland and rolling stones front man mick jagger is to have heart surgery. the 5-year-old needs to have a damaged valve replaced. he'll have surgery in new york this week. the stones had to put their latest tour on hold in the u.s. and canada after doctors told jagr he wasn't fit enough. the tour began in germany in 2007, crossing europe before landing in america. bloomberg powered by more than 2,700 journalists in and analysts in more than 120 countries. haidi: just getting some australian data for the month of february coming in at a gain of just over 19%. xpectations were for a 1.8% --

decline. that was not as bad as the 27% decline that was expected. and, of course, comes on the back of, as we continue to see deterioration in the property market in australia. declines in the most recent numbers not as steel as what we've seen over the past few months. a little bit better when it comes to construction activity, not as bad as earlier predicted. let's look at our asian markets this morning. sophie? sophie: not much reaction to the ussie dollar to that data. the federal budget announcement. the 200 heading towards the best un since november. led higher by tech shares. overwhelm asian stocks are rising, bonds under pressure. the british pound, this is the currency under pressure, heading

back towards 130 against the dollar as the brexit crisis is deepening but footsie 100 stock futures are climbing. "on thekiwi dollar also move." speculation that the fed will cut rates but kiwi stocks are headed for a fresh record. led higher but financials and tech and with that, i want to ighlight some movers in tokyo. industrial machinery merrick disco adding 6.% this morning after reporting a drop in fourth quarter sales. etailer shimamora is the worst performer on the index this biggest move the of 2018. lyft shares dropped below the

i.p.o. price and over in sydney, i want to highlight fortescue metals, rising with other iron ore miners. surprising strength. according to reports shipments from the four biggest producers fell 16% last month due to the cyclone. now rising to the highest level since august 2018 2008. haidi: the bond markets continues to sell awful as a wave of stronger manufacture over.n asia carried leaving germany as the weak link in the chain. kathleen, run us through the numbers. kathleen: we have l.a. away looks like a global factory rebound. it started hours ago in china. that move above 50 got the bum

market selloff started and it continued in the united states when the united states purchasing index for the insurance institute for supply and middleweight came in also on the stronger side. let's look. you'll see we had pretty strong numbers in the u.s. from easily the summer of 2007 from 58 to 60. started to come down into the third quarter of last year but suddenly after up and down, back 54.2ain to about 55.3 from after a two-point drop in february so that's giving some hope about what's happening in manufacturing in the u.s. despite the trade war. retail sells not so hot. one of the big factors, snow, cold wirblets weather, supermarkets, grocery store sales were down. building materials were down. rethales were supposed to be slightly higher last month and they were actually a little

lower. haidi: more bad news out of europe in particular. the supposed manufacturing powerhouse of germany continued to suffer. kathleen: germany is having a tough time. it looks like europe is suffering most from the global economy slowdown this ongoing trade war but let's look at a german manufacturing gauge purchasing managers. france, the eurozone and the german number. let's look first at the factors. we're showing you some car production video. why? ecause there's been an ongoing interruption in german industry. that's one of the reasons for the weak number here. in we look into the bloomberg library, you'll see the numbers looking much lower in downturn is concerning investors and the bond market but in a different way. now, if you look at the u.k., a

very different picture because there's some uncertainty about brexit, manufacturers, businesses are stockpiling inventories so their purchasing manager index went to a 13-month high. haidi: all right, kathleen hays there. china is offering something of an olive branch. beijing says it will extend the uspension of tariffs on u.s. autos and also add the control of fentanyl. what's china hoping for by offering these concessions? they're hoping to wrap up these discussions, even though the white house said it will take as long as it will take. >> i think that's right. they're they're pretty minor concessions on the chinese parts. the minister said it was about

creating a good atmosphere. trying to keep negotiations with china going punishmenting these things on the tablele. puttling the ban on synthetic pioid stems in a clear suggestion from president trump. as you said, we had commentary in the white house last year, larry cudlow saying it could take weeks or months. obviously progress is being made but whether both sides are at a point where they have ironed out concerns that the u.s. has remains to be seen. that's why it will be crucial the talks this week and if momentum continues out of those. haidi: in the meantime we're seeing the europeans step up their criticism of china. they're having a hard time seeing eye to eye on how to deal with beijing.

>> i thought these were very interesting comments. especially the week after the chinese president did that european tour with much fanfare. chinese investments in the e.u. complicates e.u. foreign policy and he also made the point that chinese companies are allowed to roam freely within the effort u. but european companies don't get the same reciprocity in china. one of the complaints people have had about the u.s. strategy is that rather than build an alliance, the u.s. took a fairly unilateral approach. so i think the effort u. either comments will certainly be noted in washington and interesting to see whether somewhat of a broader alliance does come or whether the u.s. continues to do that -- go flair own way and the e.u. cornlts to go their own way

in dealing with china. >> could we see this president xi-president trump summit anytime soon? >> clearly talks are progressing. last week in beijing they were trying to get an agreement finalized they can hand out to both presidents but we had those comments from already yeah cudlow last year -- week saying it could take weeks or months. perhaps there's a deal on the table but in the narrative and signals out of those talks remains significant issues have yet to be resolved, the u.s. is concerned about enforcement. that would probably mean we have a little bit further to run. all eyes to see how it goes in washington this week. >> the china p.m.i. recovery

kicking off the feel-good story amongst global equities. dulls that change the amount of leverage the parents have going into this next stage of talks? >> there was a feeling china really needed this agreement, the trade war was weak. their economy was hurting. now it feels as though their economy is finding its feet a little bit. still a skewed effect from the lunar new year but there's no doubt they're in a better space than they were six months ago. the market has rallied about 30 points, the economy is improvering. that gives china a little bit of breathing room but the overall sense is they don't need a trade war at a time when they're trying to clean up other parts of their economy. obviously the u.s. is in somewhat of a stronger position in terms of their lout -- outlook but people in the u.s. will also tell you they're

worried about 2020 and see some softening there. i think both governments would have had like to come to the table and sign off some agreement to make sure things don't get any worse. haidi: thank you some for that. and of course the u.s. administration is fighting trade battles on all different fronls. it's been almost a year since the administration imposed tariffs on steel and aluminum impomplets from canada. company official today. >> clearly we have to continue to engage at every level. i've been very engage told look at how we can move away from ose steel and aluminum changes. we're going to continue to work

with our colleagues and our allies around overall trading issues between canada and the united states. the united states and china. aidi: on the week nassau exports of canola oil halt told china, you had china buying $30 million of air bulls jets. are you afraid canada will lose an edge with luring investments? >> i'm confident over the long term we'll get to a position that makes more sense. we all wants to have a relationship that works and obviously foundational is getting through the new nafta and making sure we move away from the steel and aluminum tariffs. >> we are hearing from the trump administration that they could be thinking of quotas. would that be aa -- acceptable

to you? >> i don't want to get into specifics of a conclusion. our jew is that the tariffs in and of themselves don't make sense. they were put there in in on a security basis. we don't think they make sense or are helpful either in the u.s. or canada. our premise would be that we should move away from those? shery: not even quota? >> canada and the u.s. have a very balanced rhythm in steel and aluminum. we should be able to continue doing that haidi: coming up next, we'll be mwell bank official. this is bloomberg. ♪

shery: this is "daybreak": asia.

i'm shery ahn in new york. hype and i'm haidi stroud-watts in sydney. strong manufacturing out of chinesed woirs about a slowdown and boosted prices. our iron -- next guest, joining us from melbourne is viveck dhar for commonwealth bank. weather and cyclone conditions have impacted the amount of output and shipments but it seems like the dam disaster is creating a longer term effect than we might have thought a couple of months ago. >> yeah, absolutely. i think first and foremost that the dam disaster was the big ews item of the march quarter. what they have in terms of sales is about a 57 million ton reduction -- reduction.

what we have in decision to that are reports by rio and b.h.p. that cyclone veronica has shrined supplies so we're also taking into account as well as of nose drunks to supply response from china and programs weaker demand from china we're looking at porkt -- potentially 45 to 0 million tons of iron ore displaced. that's about 4.5% of supply. that is absolutely going to interrupt the market and it already has. the question is when will the physical market seal it? iron ore and coal are still physically traded out of china. in february since the disaster happened, port stocks have lifted but now vale has warned that the physical market is now going to feel that impact. we see those risks very clearly

that port stocks, which fell last week, continue to decline. that's pushing our conviction hat iron ore could limit above $90 a ton imminently. haidi: how much of a tame wind from the demand side are you expecting and who's best place to the benefit seeing we've seen this preference for higher grades going into china? >> in terms of the demand side, the most critical element is the steel mill and the margins. the margins still remain quite subdued and their buying appetite for now has been best described as reluctance or hesitation so what we expect going forward is very much, if there's a pickup in downstream sectors like manufacturing that's clearly positive but we're not seeing that in the

property sector where we're seeing property sales slowing and that's probably going to be a head wind. so property could curtail most of nose risks. what we're seeing is actually potential slowdown in that demand side and even know the manufacturing p.m.i. was positive, we always expect tad turnaround to happen because china, as we saw in the two sessions, is clear that they want to support economic growth and in particular infrastructure. for us, the real question from the p.m.i.'s has china bottomed? and that's a question we'll have to shore up with more data, f.a.i., industrial production and credit growth. haidi: supply concerns and optimism over demand cents those commodities higher last quarter. that charlotte on the bloomberg showing that commodities had the best quarter in about flee

years. the risks you talk about, especially only the demand side, how much of that can be offset by dovish central banks? >> sure, so in terms of what's central to commodities, it will be china. china counts for 40% to 0% of mining commodity consumption so what we're seeing right now and what was positive out of the two sessions was the local government bond issuance which is going to funnel into the infrastructure investment. that has limited about 800 billion yuan this year on top of last year. that sets the tone that we could see demand growth pick up. we expected the second half to be the positive half but if we've reached the bottom, that already may be translating through but a lot of economies around the world are increasingly seeing a slowdown and they're responding by supporting the economy and for us, that's what's going to mark in turnaround at some points and

we're going to see that positive activity some time in coming months but in our view, base -- best case is second half. shery: how mr. a u.s.-china trade deal factor in here? will .s.-china trade deal certainly boetsch demod commodities -- benefit commodities. we saw that last year. there was a lot of pressuring on commodity fries. we expect this year if a deal is announced it will be positive but it will be metals over iron ore and coal. that's because the metals are more financially driven. so if your -- inor screw is an agreement is reached, the metals is where you want to be placed. shery: thank you for that. mike boris joins bloomberg

markets asia for an exclusive interview. this is bloomberg. ♪

a quick check a quick check of the latest business/headlines. wells fargo's credit outlook was cut after c.e.o. tim sloan stepped down last week. s&p lowered its outlook to negative from stable while the

legender's overall rating was affirmed as a negative. sloan vowed to critics and quit mid a wave of scandal. haidi: tesla has reached a settlement with the u.s. protection agency over hazardous waste at its plant in california. tesla will pay a $31,000 penalty and will buy equipment for the fremont fire department. >> to sophie and hong kong. what are we watch something sophie: we're watching consumer stocks in china after authorities began cutting add taxes for various properties and that has led to price cuts in lieuy via toone -- vitton and apple. the carmaker is cutting its

dividend and the widening net loss highlights the fragility of even china's best domestic brands. we're keeping an eye on gourmet after the founder's release from jail. keeping an eye on the housing after the rally hit a milestone on monday, putting the hung sing in bull market territory. we look at the start of trade in hong kong, shane high. stand by for bloomberg markets. this is bloomberg. ♪

>> it is not a clock a.m. in beijing, shanghai, and -- it is 9:00 a.m. in beijing, shanghai. david: let's get to your top stories. the global equity rally rolls on. australian stocks are marching toward the longest winning streak since 2017. yvonne: sterling fell as the u.k. parliament rejected all options to save theresa may's deal. brancha offers an olive of trade negotiations, sayin