paul: good morning. i am paul allen in sydney. we are one hour away from trading in australia, japan, and korea. shery: good morning. i am shery ahn. from -- i amso sophie kamaruddin in hong kong. welcome to "daybreak asia." paul: our top stories this friday, asia-pacific stocks look poised to extend a rally on wall street. futures point to -- global tech suppliers are in focus.

stocks have snapped a two-day rally. one day before the election, the aussie under pressure under the ongoing trade war the faltering domestic economy. shery: let's get you started with a quick check of how markets close in thursday's session in the u.s. every sector of the s&p 500 was in the green. some earnings from cisco and walmart lifted sentiment. we had a strong housing report. all of that helping yield rebound after the two-year yield fell to the lowest level since february of last year. we have some jitters around the latest headlines on trade on huawei. we saw markets fade into the close a little bit. u.s. futures unchanged. let's see how we are setting up for the asian market. sophie: after a mixed thursday session, asian stocks attract gains in the u.s. although a friday -- may not be enough to drive the benchmark into the

green. we may see some trading in tokyo. the asx 200 is headed for a second weekly loss while the cost because it opened higher after closing at the lowest level in four months. in wellington, kiwi stocks are set for another high. the kiwi dollar is holding a two-day decline as we get some eco-data. consumer prices falling for the first time in three years in the first quarter. we got pmi numbers. manufacturing growth was driven in part by an unusual increase. kiwi dollar remaining under pressure for a fifth weekly drop. oil markets remain in focus with crude trading at a two-week high , set for the best weekly gain amid growing tensions in the middle east. paul. paul: let's check in on the first word news with ed ludlow. ed: oil hits a two-week high as saudi arabia openly accused

iran of ordering a drone attack on a pipeline. futures rose more than 2% as the kingdom's rights minister of defense said tehran coordinated it. terrorist asts -- -- the pentagon is working with the defense intelligencea agency toc release information that supports the trump administration's warning ofts -- knowing threat. the evidence may be given as in as friday following saudi arabia's claim that tehran orchestrated attacks on two oil tankers and ordered revels in yemen to carry out drone strikes on a saudi oil pipeline. the aussie dollar is under pressure from this selection. the escalating trade war -- this weekend's election, and the escalating trade war. clients are being told to sell.

the latest polls ahead of that vote puts them before the liberal national coalition. australia's longest-serving labor prime minister, bobby hauck, has died at the age of 89. he overhauled the economy in the 1980's through the regulation of trading the financial sector and is widely credited with initiating the economic changes that paved the way for decades of growth. he defeated malcolm fraser in 1983 and went on to win federal elections. the labor leader described him -- 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 ed ludlow. this is bloomberg. shery: thank you. and strongngs

housing data health u.s. stocks to rebound for a third straight day but concerns about the u.s. threat to blacklist always technology -- huawei's technology. we saw the rally fading to a close. su: it makes it amazing that we saw the markets stay aloft for so long. look at the snapshot. it was the third day higher for the s&p. you will notice the chemical index in materials, these were the biggest gainers with shows or underscores the relief in the market on the iteris dispute. notice the is expanding -- the vix was a lot lower. walmart saw its best day in nine years although they are warning about the impact in tariffs. pinterest rallied strong ahead of its after the bell earnings. we will show you its move in the opposite direction. other stocks in

our panel which have exposure to huawei. for depend on huawei revenue. all of these stocks have been identified by. and with of having the exposure. they were down across the board. was downrs, pinterest 19%. this is the ipo that had a huge following and managed to be fairly resilient to the recent downturns. analysts said it had a potential for a $1 billion revenue but it disappointed on the earnings front. nvidia, a chip stocks, came on strong in its earnings numbers. paul: we had analysts and retailers giving warnings about the new tariffs. they called one u.s. retailer the poster child. what is the story? su: they called dollar trade the

poster child. they get 40% of their goods imported from china. their exposure to the terror frisk is huge -- tariff risk is huge. are locked within that parameter. notice walmart, which was a star stock and the latest session, because of the strong numbers, it's response to this will likely set the tone for the rest of the retailers. they are saying they will absorb the additional cost but likely will raise prices. many analysts see this as hurting the consumer but it is one of the reasons walmart performed so well. they will simply pass on the increased costs. dollar tree. right in the polls i am these increased tariffs. paul: su keenan -- right in the bullseye of these increased tariffs. paul: su keenan, thank you.

wilbur ross outlined the president's actions against wall way on bloomberg -- huawei on bloomberg television. bring with the company itself will be on bloomberg tomorrow. they would need a special license from the commerce department. joining us to assess these measures on huawei, we have a senior analyst. we are going to have a wide blast radius for this decision. what companies will be called up? >> thanks for having me, path. there will be an impact in the chip stock. you saw that today. huawei is the number one supplier for smart phones and mobile infrastructure, so any , they are going

to be impacted by this decision. shery: yet there are going to be some winners, right? could the likes of nokia or cisco take over in that loss of business for huawei? >> that is a great point. when i was looking at my bloomberg monitor today, my chip stocks were in red, my networking software in green, you know, and cisco's earnings were part of the reason it was up and also the opportunity for cisco to take market share away from huawei and routing. one of the things i did measure is there is a $5 billion opportunity within europe that huawei is deeply implanted in and i am sure that companies like nokia, ericsson, and others, are going to try to take share away from huawei within europe. paul: what is the plan for

huawei to defend itself? is this a deathblow were just a setback? islet's keep in mind, it -- this a deathblow or just a setback? justet's keep in mind because you are on the entity list doesn't mean they will not be able to sell to huawei and to give you some context, zte was on the list two years ago in 2016. the suppliers were able to sell into zte but it was not until 2018 when the export ban was in place so we do not know what the timeframe will be, if there is an export ban. no product should be banned, in my mind, once they are in the entity list. it does however provide that framework. a couple things i can say. earning calls i listened to, huawei has stopped inventory

components. it seems they may have a quarter or two of components to help provide, you know, to fulfill their smart phone orders. right? what happens. this is part of the trade war rhetoric. let's see what china decided to retaliate with. onry: let's apply your ban zte. ban,u did see a van, -- they do have some vertical integration. chiphuawei has its on silicone. if you look at the key components that go into mobile base stations to help with 5g deployment, there are not many chinese companies that can provide that. 90% of the radiofrequency chips, corvo, broadcom, as well as skywards, they provide those

chips. qualcomm is trying to get into that space as well. without those chips, you cannot power your smartphones. so it is a crippling effect if a full-blown ban is in place. shery: china's government saying they will take all necessary measures to defend their company, so what can the chinese really do, and also, what would be the global impact in terms of 5gt idg network rollout -- network rollout? a retaliatoryis measure by china, we have to though mind that even the u.s. companies may have the advanced technologies, there are a lot of smaller chips and more commoditized chips that are only manufactured in china. aree lithium batteries manufactured in china. .maller ics those are key components to make electronics work.

if there is a quid pro quo, so we would have much broader implications to the global supply chain, and you will have a stance on tech. to your 5g point, i would be cautious if i was a service provider rolling out 5g, relying on huawei gear, and i would have to rethink on who i would be gear.my 5g we have heard that prior to the trade rhetoric that's been going on. ? paul: all right, woo jin ho, things for analyzing that huawei story for us. still to come, trade war impact advice from diamond hill capital management. shery: later, how will australia's economy fare after this weekend's big election? we will bring you a full preview. this is bloomberg. ♪

shery: this is "daybreak asia." i'm shery ahn in new york. paul: i am paul allen in sydney. for what to watch at the start of cash trade in tokyo and seoul, let's check in with sophie kamaruddin in hong kong. sophie: in tokyo, we are watching reaction in financial sales to movies at lowering its outlook to negative saying the creditworthiness has deteriorated for the sector's ultralow interest rate depressed profitability. -- being fined 70 million euros for colluding with other banks on on exchange trading. this is part of a moment by global banks with the e.u.'s

antitrust regulator. the chairman of taiwanese panel talk as partnclude of a consortium. he said the company will pull out if the talks fall through. sony may move after announcing another record share buyback this month after completing a similar program, indicating the ceo's commitment to support the stock price. the company will spend up to $1.8 billion starting this friday and we are watching players in tokyo as well as nvidia'sin video -- strong earnings. tech investors me remain -- may threaten to blacklist the company from buying central components. shery: thank you so much for that. in the u.s., equities posted a third day of gains as investors continued to be optimistic on trade tensions. joining us now is that mattel

capital management portfolio manager grady. i have to ask if this is a bit premature given we continue to see these headlines on huawei and trade. if we do see a for clean -- full-blown trade war, that what caused profit expectations to tumble further. what is the likelihood of an earnings recession versus any comic recession? >> thanks for having me. if the trade tensions increase and the size and scope of tariffs increase, that increases the probability we had some negative impact to some global gdp growth, and depending on the size of the intense, that would flow through to corporate earnings more strongly because you could have the potential for higher input costs as well as lower demand, and that would affect some companies honestly worse than others, but i would expect the impact to business fundamentals for some sectors to

theore pronounced than impact of global gdp, and of course, if earnings are more negatively affected, you could even greateree an impact to share prices of companies that are affected. shery: we have seen for example the likes of walmart to come out with solid earnings, but they had even warned that if the tariffs go further, they could be passing some of those costs to consumers, but of course, they are giants. big companies. is this trade war going to weed out the weaker, smaller retailers, exporters, and so forth. grady: that is an important point. you saw in systems earnings last , chuck robbins commodity euro, mentioned they were not seen much of an impact and they pretty much negotiated a further increase in tariffs and for sell highthat value-added products, have good competitive positions, generally

have higher margins, those companies are probably going to fare better than companies that are selling more commoditized products, have higher financial operational leverage, in the event that tariffs -- that tariffs do increase. paul: so is that your overall strategy at the moment, grady? you have to take a long-term view and get a little bit defensive? grady: so we do take a long-term view, and so i think that we that weseveral risks see ends of the of businesses, so one of those is financial leverage and another, cyclicality. we look at the durability of the business model and valuation. in some cases, we do not want to -- we want to be careful when we have a company that has a combination of relatively high financial leverage and cyclicality but we do not want to just completely ignore those

types of opportunities. i would say, right now, on balance, we have not really seen attractive enough evaluations for some of the weaker companies to allocate in there. to quality allocated and economic cycle. shery: i know what on the company's you like is samsung which i found interesting because south korea is one of the most exposed economies to the trade war and samsung's misadventures with folding phones have been publicized, so what is the appeal? grady: that is a great example where you are bouncing several asks so samsung obviously has high degree of cyclicality and it has already seen its share price under pressure. the fundamentals have deteriorated. what we like about diane swonk is it also has clearly the dominant position in memory. we are highly confident that memory demand will grow over the next 10 years. has 80 billion

equivalent u.s. dollars on its balance sheet. when we look back to the great recession in 2009, the company generated positive free cash flow during that downhill. -- downturn. we would expect if the conditions weaken further, samsung would be a share dana. we would not see a significant decline in free cash flow. we have a strong balance sheet. evaluation looks extremely compelling to us even under earnings, trading 12 times these depressed earnings and if we have a cyclical recovery, we will get very strong earnings growth from a company. shery: for the time being, we are seeing declining momentum not only for samsung but also for apple. we have all of the threats coming from the u.s. to huawei. in a way that so far, it's been able to help out the asian have really been selling a lot more to huawei as it's been seeing really

fermentable growth. how can we expect this trade war to impact the smaller suppliers in the supply chain across asia? grady: certainly in the near term, especially the suppliers that generate low-margin and importse commodified into the strong scum i'm in, they are going to be negatively impacted. these are not the types of businesses we would invest in because we do not think the types of companies that are dramatically impacted by these economic issues and trade issues, we just do not think those are the type of companies we want to own over a five-year or 10-year period. towe are more inclined invest in a company like samsung which have seen a meaningful earnings the client and some pressure on the shares, but where we feel very confident in the long run outlook. paul: diamond talk capital management, portfolio manager, grady burkett.

they for a much for joining us today. and you can get a roundup of the stories you need to know to get your day going in today's edition of "daybreak." bloomberg subscribers can go to dayb on their terminals and it's also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get the news on industries and assets you care about. this is bloomberg. ♪

paul: this is "daybreak asia." i am paul allen in sydney. shery: i am shery ahn in new york. walmart rose the most since christmas in early trade after meeting sales estimates and indicating that will not pass on the costs of tariffs to consumers. u.s. sales climbed 3.4% through march marking walmart's best performance in nine years. it is expected walmart's response to paris will set the tone abroad. paul: boeing has finished an

update for software linked to two fatal crashes of its flagship 737 max. says it has flown 360 hours on more than 200 flights with the new software. shares rose. shery: alibaba is facing complaints from six european consumer groups over allegedly unfair user terms for its online retail service. organizations from france, spain, italy, and the netherlands file complaints with the netherlands filing potentially unclear contract clauses in the e.u. the mysterious our terms for settling disputes between sellers and tires. paul: china's starbucks challenger has raised more than $560 million in expended ipo in new york. $17 apiece after

initially marketing 30 million shares. they now have almost 2400 operates in 28 cities across the country. ties across the country.

ed: i am ed ludlow with the first word headlines. can economists are theresa may have been forced by her own party to set the timetable for her departure. she will try one last time to push her brexit bill through parliament next month and then leave office under a deal struck with conservative mp's. it is unlikely her bill will pass. the labor party says her departure deal makes them increasingly wary of supporting her. india's mammoth election reaches laps this weekend with investors pricing for what's been described as a potential both from the -- bolt from the blue.

rocket optimism faded amid concerns about the trade war and worries that modi will not repeat his landslide victory. it has seen large-scale protests from farmers and a looming job crisis. indonesia left rates unchanged as predicted in a bloomberg rupee remains under pressure from the escalating trade war. the seven-day reverse repurchase rate stays at 6% with policymakers choosing not to echo recent hikes in the philippines, india, malaysia, and new zealand. the rupiah is down more than 2% in the past month. name twa is back at jfk airport in new york. the hotel has finally opened after a $300 million makeover for part of the terminal. futuristic design is dedicated age.e new jet

it features a consolation plan and serving as a cocktail bar. a celebrated architect died at the age of 102. the jury said he had given the world some of the most beautiful space and form. some of the most iconic buildings in the war including the 72 story bank of china tower in hong kong. most famous project was the rock 'n roll hall of fame in cleveland. 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. this is bloomberg. shery: we are now half an hour away before trading kicks off in sydney. what stocks are you watching? paul: we are watching diversified -- sophie: we are

watching diversified minors. unchanging market dynamics. the iron ore space is in focus and the concerns of a supply crunch. atdoes see prices peaking 1.10 next quarter. fortescue is set to double its market values this year. also, harvey normand is in view after being upgraded from walled to sell halfway through -- hold to sell. now, this morning, virgin australia said a weak domestic market will damage earnings. growth of less than 2% expected for the remaining two months of fiscal 2019 for the carrier. shery. shery: shares of chinese internet search giant by door -- a chinese internet giant sinking

. englec is looking at the numbers. not only do they have soft numbers but they also lost a senior executive. how bad are things over there? stephen: they are going in a different direction than the other two companies in a bad triumvirate. they had mixed results yesterday, but generally, they are on the upswing with their stock price, but i will get that in a bit. let's get to the results. they were not pretty. we were expecting a net loss in the quarter, but we were not quite expecting it as being this bad. it is the first quarterly loss since going public. we had a net loss of 327 million u.s. dollars.lion the estimate was for $27.2 million, so they missed it quite considerably. they also had a pretty weak outlook for revenue.

the second-quarter revenue outlook missed even the lowest analyst estimates. first quarter revenue was almost in mind with expectations. why are they losing money? away from theying key search business which they control 70% of the chinese domestic search market, but they are losing out in the mobile space and paying a lot more for content and also a place for marketing. another blow for them is the head of the search division. the biggest part of the business has just quit. the senior vice president in charge has been at the company for 13 years. he is resigning. authorizei did a share buyback program. we are expecting a lot and it came in worse than expected and there is the revenue guidance that missed expectations driving the stock down in after hours.

paul: what is the plan for baidu in terms of stemming the losses in an environment of the trade war waiting on confidence? stephen: -- weighing on confidence? stephen: advertising spending as much more, you know, discerning. rivals inosing out to key areas. as well asideo act the newsfeed. upstarts already winning advertisers away from baidu. the more urgent pressing needs attract smartphone users. and keep revenue growing. -- ad revenue growing. the divergent paths, these three companies, alibaba, tencent, and baidu, has been walking lockstep with their stock. alibaba and tencent have those huge determined and dedicated user bases, and they continue to

climb. baidu, not so much. they are reliant too much on the search market. they need to diversify and spend millions if not billions in other areas, and they are further down the road to monetize those, such as artificial intelligence and self-driving car's. paul: chief nurse asia -- self driving cars. paul: cisco systems shown some resilience to the trade war. than 6% ined more new york after the company beat estimates for profit and sales and that indicates clients are still spending despite the tariffs. chuck robbins told bloomberg how the company has prepared for the trade war. chuck: when the tariffs were first brought forward months ago, we said we had a three-pronged strategy. first, we wanted to engage with the administration on a discussion on the implications. secondly, we would do what we

always do, which is we would continue to adopt our supply chain globally. globally distributed supply chain that is over 10 or 12 countries around the world. third, where we have to, we would look at price increases. on the first round, our teams did a great job and we subsequently, because we knew there was a risk of this 25 percent, our team had done an amazing job of working on our supply chain which led to a very minimal set of price increases which we made over the weekend, so everything we need to do on this front is behind us at this point. >> the new tariffs that were announced are now in the guidance for this year, right? chuck: that's right. jonathan: the prospect of even more tears, how do you factor tariffs, how do you factor that in? there is a lot of

discussion from experts who are much smarter than i on overall economic issues. i think what would be impact be? it would clearly be across multiple industries, but the way we would deal with it is we will execute the way we know how to ifcute and as we see them, they begin to become more of a reality, our teams will work on mitigation strategies do the best we can. jonathan: in terms of the three-pronged approach, how productive have you found that? chuck: we found them to be incredibly responsive, and a listen and they understood the issues. at the time, when we talked about the 25%, i was not sure what our ability would be to 25% withintigate the the timeframe that we might have to do so. that is when you heard me talking about the potential for r&d spending to be at risk weause i was not convinced

could path all bathroom. our teams executed at a pace. they did herculean work to get us to the point they did, which enabled us to we continue operating, and we will not have any impact on that front so i am pleased with what our teams have accomplished. shery: chuck robbins. on shaky ground. we will look at the challenges facing australia's next leader as voters head to the polls on saturday. this is bloomberg. ♪

paul: australia heads to the polls on saturday. if those polls are right, the australian labor party leader is poised to become the country's seven prime minister rand paul

years after the elections on saturday. voters will accept -- after a series of leadership changes that mirrored -- labors earlier term in power. the backstory of more than a decade of political volatility. of this century, australian politics have been notable for two things. policy gridlock and leadership coups. ,fter ending john howard's rule he was toppled by his own party gillard.of julia facing election defeat, the first female leader handed the top job back to rudd. it did not work. abbott led the coalition to victory. abbott was toppled. malcolm turnbull suffered a long stretch of polling, leading to a party coup last august that installed morrison.

the nation is still reliant on fossil fuels. extreme weather threatens agriculture and natural wonders including the great barrier reef. housing affordability and the intergenerational wealth cap are also flashpoints. prime minister morrison has been talking up his government's economic credentials. he is promising to scale back tax perks for investors and shareholders, but above all, voters are sick of the revolving door in canberra, demanding they put policy ahead of politics. shery: the elections coming at a time when the australian economy remains fragile. from outside australia, we tend to regard australia's record of in 27ving a recession years as a miracle economy but when you look under the hood, you can see that debt has been

rising, seeing a decade of deficits, not to mention wages and economic growth slowing down. when you take a look at gdp per capita, it is even less impressive. they are trailing the united states. the line in blue, a sharp slowdown since the commodity boom in the early 2000. this week, we got the unemployment numbers and the jobless rate jumping surprisingly to 5.2% in april, and we have not seen that of negativity on the employment gauge since 2016, and when we saw that, we actually saw the rba cut rates, and now, we are at that level again, so the key question is, will philip lowe continue to resist rba rate cuts? monthtudied earlier this at 1.5%. -- steadied earlier this month at 1.5%. paul: a look at the australian economy.

and ahead of this weekend's election. we are joined by jpmorgan chase economist for australia and new zealand, sally. a health check of the australian economy which is probably not as good one to start taking it apart as it appears on the surface. just yesterday, jobs numbers suggest the rba has one way to go now. what is your expectation? sally: we have got everything good image falling into line. we have a set of labor market data that appear to be corroborating the court story so the unemployment rate has risen .3% in the last couple of months rba wants to cut next month, it certainly has enough data to justify that decision. the call that is a will cut twice by year-end. ther yesterday's numbers, risks of an earlier cut have

risen. we have much weaker than expected core inflation and some of the -- escalation of u.s.-china trade issues. with all these things together, it is clear in which direction it will be headed later this year. paul: the rba has been doing a .ot of the heavy lifting with the constant revolving door of leadership in canberra, has there been a lack of stimulus on the fiscal policy side do you think? after this election is out of the way, do you think there is a possibility we might see something more stimulus free from whoever wins? sally: the rba has expressed a little bit of frustration and there is a sense that monetary policy cannot do everything. it can sort of help manage the cyclical ups and downs in the economy but it cannot do much about sort of longer-term growth rates or increasing productivity levels.

we are reaching levels in the cash rate where you can make an argument that there is scope to do more on the fiscal front. stimulus.fiscal it is a question of magnitude. if the morrison government is returned, we get modest fiscal stimulus over the next couple of years. larger. having said all of that, it will depend on the composition of parliament, so we have had the parliament in the last little while where no party has been able to get a majority in both houses and that has made the implementation of some of these policies a little bit more to than might otherwise have been the case. shery: there is a concern in the weiness community that if see labor returning, and their policies have been all about tax cuts, rebates, social spending for the lower income voters, that we might see an environment that is not too friendly for businesses. what have we seen so far? sally: i think that it's fair.

my sense would be among thatrate australia that -- should not come as too much of a surprise. have been very explicit about saying they think capital should be taxed more. and labor potentially less. one does get the sense that these guys want to run a redistributive policy where they are looking to redistribute from high income on his low income earners and also from capital to live. if you are running a business in australia, that might not be an environment that seems overly favorable. especially if wages are going up, the broader demand environment is not as robust as it has been in recent years. margin that tells you compression is probably more likely than not and that is not a great environment for corporate australia. shery: especially when you have the china-u.s. trade tensions. that hit the aussie dollar which is not around three-year lows.

-- now around three-year lows. sally: it's interesting. you can sort of go back in time and say that the aussie dollar actually rallied a couple of cents in the weeks after the election. , but ifout 1.5 cents you don't down into the specifics of each election, what you find is that the currency rallies less if we have a change currencyment and the can see rally less of the labour government is elected relative to when a coalition government is elected. prospect of a change in government and labor government in power after the weekend, that probably told you there is not a huge amount of scope for the all the -- aussie to have much of a relief rally. the reserve bank of australia goes on and on about a lack of wages growth. i want to point out this chart on the bloomberg terminal, which growth in corporate

profits and wage growth remaining stagnant. further to your point about redistribution, i mean, look at the bar on the left, the red one. the little blue one is wages growth. he does have a point about redistribution. what does it mean for the wider economy? it comes at a price doesn't it? the emphasis of policy has to mean sort of less about who gets what and more about rowing the party -- growing uth e pie, so we can create an environment where the surplus is bigger so what corporate and labor gets can go up at the same time. that would be the ideal environment rather than necessarily having to look at the trade-off. if we do that, capital is worse off. i guess those policies probably did quite well with the

electorate at the moment because the electorate is very cognizant of the fact that wages growth has been very low for the last couple of years and there is a sense that the prices are going up and everything you want is going down so there is a cost issue in play, too. works, andf rhetoric that is not unique to australia. we have seen similar situations in the u k, where the labour party almost won the last election and in the u.s. as well and new zealand, too. so there are clearly aspects of this. there is a bigger trend globally in play when we think about corporate's. paul: thanks very much for joining us, j.p. morgan australia and new zealand chief economist sally auld. don't forget, interactive tv function tv . , you can watch us live and dive into any of the securities or bloomberg functions we talk about. plus you can become part of the , conversation by sending us

instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪ erg. ♪

shery: let's get a quick check of the latest business flash headlines. the trade war is slowing domestic growth with first-quarter earnings down 20%. cargo yield rising just .3%. a gain of 3.5% in the previous quarter. passenger demand from china is also weak. paul: baidu tumbled in late trade after posting a loss for the first time since going public in 2005. the search company is grappling with rising costs and slowing sales in a weakening economy.

the board authorized a new $1 billion stock buyback program but the result was deemed not enough for the senior vp of the search business to resign after 14 years of the company. shery: investors are losing interest in pinterest's shares, which slump in trade. shares surging more than , further boosted by better than expected first-quarter trade. in japan,ts underway south korea, and australia at the top of the hour. let's preview the market open. sophie: in tokyo, we may see gains after a choppy week.the kospi could game ground./ the asx 200 set to rise -- could gain ground.-- he asx 200 set to rise.

risk sentiment looking fragile with geopolitical entry risks. the focus in forex market will largely be on the yuan after the -- restrictordered to huawei and zte in the u.s., which is seen as a grave escalation for china. no quick resolution see into the traits that. deutsche's recommending selling the cnh against the yen. nvidia' results showed mixed trends. of a computer company are beginning to order after working their way through an inventory buildup. move.a and sony may chipmakers are betting that an industrywide slowdown will end soon. paul. paul: thanks very much, sophie. still to come on the next hour of "daybreak asia," we will talk to a strategist.

the market open, coming up next. stay with us. futures pointing higher. this is bloomberg. ♪

paul: good morning. asia's major markets open for trade. welcome to daybreak asia. paul: our top stories this friday. asia-pacific stocks look poised to extend their rally on wall street. the yuan has continued its slide. theresa may agrees on a timetable to leave number 10. shery: the aussie dollar is

under pressure ahead of the election amid the ongoing trade war and the faltering domestic economy. let's get straight to the market action. what are you seeing? sophie: in tokyo, gains at the start of cash trade. the nikkei up 7/10 of a percent. the yen is looking steady. the best weekly run since 2012. selling in tokyo shares may be overdone. shareoup saying that buybacks will support sentiment. sony with a record share buyback. let's check in on the mood in seoul. the cosby gaining ground. the one is continuing to hold recent lows. we are keeping a close eye on chip players. strong materials with a sales forecast.

dollar is just holding below 69 against the greenback. strategists recommend going short the aussie ahead of the saturday election. kiwi dollar remains under pressure this morning. fell for thees first time in three years. the kiwi dollar remaining under pressure this morning. paul: thanks. let's get the first word news now. ed: oil hits a two-week high as saudi arabia accuses iran of ordering a drone attack on a key oil pumping station and pipeline. futures rose by more than 2%. the kingdom's vice minister of defense said to ron corrugated the attack but offered no evidence to his claim. he added that the acts or toempt -- hurting attempts mediate the growing slip -- split.

the pentagon is working with the defense intelligence agency to release information that supports the trump administration's warning of a growing threat from iran. the evidence may be given as soon as friday falling saudi arabia's claim that tamron or donated attacks on to oil tankers and ordered rebels in yemen to carry out drone strikes on a saudi oil pipeline. india's election reaches its final lap this weekend with investors bracing for a potential bold from the blue. the ranger of modi will fail to hold onto power. market optimism has faded amid concerns of the trade war and worry that modi won't repeat his victory of 2014. the election has seen longs -- large-scale protests. the aussie dollar is under pressure from this weekend's election. numeral is recommending going short and telling pension fund

clients to sell. a anticapitalist equally pessimistic. the labor opposition marginally ahead of the liberal national coalition. australia's longest-serving labor prime minister has died at the age of 89. he overhaul the economy in the 1980's through the regulation of trade in the financial sector. he is credited with initiating the economic changes that paved the way for decades of growth. he defeated malcolm fraser in 1983 and went on to win for federal elections. the current leader described him as, a racist son. day,l news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. shery: intensifying trade wars producing increasingly dire

forecast. bloomberg economics estimates that in the worst-case scenario, the economy could lose 1.5 percentage points of growth in the year ahead. our global economics editor is here with estimates from some of wall street's biggest banks. what are they saying? >> this could be bad for china. the u.s. wants to escape harm that when you look at some of what people are saying, if it's as bad as it is now, yes, it's going to take a toll on china. one of the biggest things for china is growth. it is already below 7%. morgan stanley is saying if we have that tariff escalation, it will push gdp below 6% this year. by 2020, 5.5%. jump into the bloomberg library with me. nobody expects china to be doing double-digit growth.

7% wasn't so bad. six and below, that starts to look like something that is not just an economic problem, it's also a political problem for the ruling party. it is definitely showing how vulnerable china is with his worsening trade war. let's look at the things people are talking about. its role as a global supply hub is in jeopardy. if manufacturers are looking for alternatives. debt is already close to 3% of output. it is likely to increase if there is more stimulus. these curbs on wally show how the containment thread pushed china back, rein them in. what does that mean for their productivity and development of technology? with all these other things piling on, and makes them so much more vulnerable. it shows you how serious this threat of a weaker gdp is. up, you have this

deepening trade war that's going to cut china. third --cause debt to surge. let's look at the specific things that banks have been talking about. citigroup saying that the tariffs we have seen to date will cut 4.5 million jobs in china. that is not insignificant. a drop in stocks that could wipe out the equity gain here today. they see this as a problem. socgen think silla reversed reverse two years of trying to rein in the debt. everybody says if you have firms looking from tentative hubs for manufacturing, it's going to hurt china's productivity well into the future. there is a lot piling up, just showing how important this is. how potentially damaging it's going to be to both sides, but more and more when people say

they see china as the most vulnerable player, this is the thing they are talking about. paul: in terms of vulnerabilities within china, bloomberg's economics has found that china's richest provinces would suffer the most. >> yes. people say, china is a service economy. that's true. there's a lot of export business. there's a lot of manufacturing. these coastal provinces are among the most productive parts of china's economy. fact, 35% of gdp accounts for 22% of the total population. those are pretty impressive numbers. collectively, exports account for more than 28% of their gdp. much higher than the 18% national level. if you look at a place like china's largest provincial economy, it accounts for 26% of

exports and 11% of total gdp. below 50. fell that signals contraction in manufacturing. timewas august, the first it happened since march of 2016. a rich part of the economy, export dependent, they will get hit hard. that has to transfer over into services, at least in these regions. are 20% of china's exports. there's the rest of the world will keep buying things from china. it's hard to ask -- escape the conclusion that this is a threat. if this continues and escalates, everyone will be watching the macro numbers in these more individual company numbers and things we hear from individual regions to see how that is getting. paul: global economics and policy editor, thanks for that. let's check on what's moving the markets now. i want to highlight sony

which is jumping, highs us -- highest level since december after announcing a record share buyback after completing a similar program. indicating the ceos commitment to support the share price. the company navigate shareholder optimism. it will spend $1.8 billion starting this friday. paul: thanks very much. still ahead, elections about this weekend. australia and india as well. a month-long election will enter its final stage. we will tell you what's at stake. shery: trade tension has carried over from one year to the next. our next guest says, this time is different. he tells us where he sees opportunity in the markets. this is bloomberg ♪. -- this is bloomberg. ♪\

paul: this is daybreak asia.

risk assets are holding up despite the trade headlines and wall street's warnings with asia gaining after u.s. stocks rebounded for a third straight day. let's bring in jp market chief asia strategist. always great talking to you. we are seeing a solid rebound after the recent turmoil on trade tensions. how different is this bout of volatility, given that we now have global central banks being more dovish, not to mention china's policymakers are more proactive? >> you are absolutely right. it's a very dangerous time in the world of investment. there are differences versus last year when trade tension was escalating. the fed last year was very much looking for normalization and policy rates. right now, they are taking a more patient stance.

last year, china with deleveraging in the first half of the year. that position is slowly changing in 2019.sand -- surprised to see more fiscal stimulus to support the economy. you see global central banks -- last week in malaysia, the philippines, new zealand, all cutting rates. there are differences in the investment policy landscape this year compared to last year which ought to be more supportive to risk assets. shery: not to mention positioning by investors given that we are coming off recent turmoil a few months ago. >> absolutely. clients,o all of our there seems to be a large casts -- cash position. a lot of investors after the price surge in the first quarter , many of them were not able to participate. many are waiting for this correction to take place.

important to recognize that if you look at the first quarter earnings out of the u.s., while there is a huge derating and valuations and expectations in the fourth quarter of last year, what we have seen so far in the first quarter has come in ahead of expectations. are aboutheadlines china in the u.s., fundamentally, there are some bright spots, at least good stuffs -- spot. paul: where are those good spots? where are the encouraging signs? >> first of all, obviously, the market is obsessed with u.s. and china trade. ,f you look back to last year they were the most sensitive markets to what -- this tension. in contrast, saudi and india last year, very much better. north south, that's important.

investors are much more mindful of volatility. if you look at the fixed income world, performance in the past few weeks has been pretty steady. decline in rates has offset that widening of spreads. at this point in time, we would recommend investors to focus more on fixed income which should still provide return with a low volatility in gradually rebuilding position in equities in the u.s. as well as in asia. paul: i want to return to one of the themes of the trade story. that has been a weakening yuan. have been discussing how china holdings of u.s. treasuries have pulled back by $10 billion. that move did predate the weekend escalation of the trade rhetoric. what do you think is going on there? is china retaliating or is it trying to defend the yuan right now? >> it's unlikely that china

would use the treasury markets as a weapon at this point in time. there's always a threat of last resort. it is potentially devastating to the global financial system. i don't think china wants to be blamed for that. i think the decline in treasuries is a view on the positions of the treasury market. as you pointed out, it's a way to provide more support to the currency. on the currency front, last yuan is argued that the a very important psychological level. that has not changed. in the near term, there's downside pressure on currency. taking into account the need to maintain stability domestically intottract capital flows the equity and bond market, both of which are likely to be participating more and global indices. the calculation from china is likely to be providing more

stability to the currency towards the end of last year. shery: when we saw those disappointing numbers out of china this week, it was interesting to see asian stocks rally. is that your expectation as well? if the economy takes a turn for the worse, will the pboc come to the rescue again? as we saw last week, state funds are starting to buy again. i think there's a good chance the authorities in china will come back in and support the economy. the question is whether it's going to be more focused on fiscal policies. my expectation is both. at the same time, fiscal policy on public spending could be the power here. -- priority here. if you look back the past several months, lending growth has not been a strong as expected.

the banks themselves are a bit more mindful of not accumulating too much nonperforming assets. inrefore, they have tightening the risk management as well. you need a quick fix to support the economy. there's nothing better than public spending. therefore, that might take the front seat in terms of supporting the economy. paul: jpmorgan asset management chief asia market strategist. thank you very much. don't forget, our interactive tv function is there. you can watch us live or catch up on past interviews. you can dive in to any of the securities that we talk about to get you can become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

shery: this is daybreak asia.

paul: let's get a quick check of the latest business flash headlines. china starbuck challenger has raised more than $560 million in new york. andas sold 33 million adrs -- at $17 a piece. unseat china as -- starbucks is china's top. that miss our interview with their chief financial officer, live on daybreak america at 9:00 sydney. alibaba is facing complaints from six european consumer groups over allegedly unfair user terms for its online retail service. organizations from france, spain, italy, and the netherlands have fired -- filed complaints. problem, the terms for

settling disputes between sellers and buyers. paul: investors are losing interest in pinterest. shares slumped after the social media company gave an annual sales forecast that fell short of estimates. that shook the unshakable confidence that investors had shown following pinterest ipo with sayers surging 60% in its first month of trading. further boosted by first quarter sales. a loss for the fourth time since going public in 2005. china's biggest online storage company is grappling with rising cost and slowing sales in a weakening economy. the board has authorized a new $1 billion stock buyback program but the result was deemed bad enough for the senior vp to resign after 14 years at the company. more buyback news. this time coming out of japan.

sony surging after unveiling another record share buyback months after doing exactly the same thing. our chief north asia correspondent is looking at the numbers. we are seeing these japanese firms really respond more to shareholder activism. how much is sony spending this time around? >> that's right. this is amazing. they are spending 14% of their outstanding total cash reserves to purchase their own stock in the last few months. february was the first big buyback. a record ¥100 billion in february. now they are buying back another ¥200 billion. 1.8 billion. double the amount. 4.8% of outstanding shares now. this becomes a record buyback. new, haseo, fairly spent the better part of the last year really concentrating buybacks rather

than long-term strategic decisions. this is a very interesting strategy. a lot of these japanese companies are responding to shareholder activism in a time of great uncertainty in the japanese economy. it seems as though sony is doing just that and surprising the markets with the second huge record share buyback. 7%,stock is up more than the highest since december 2018. paul: yes, steve. is it a long-term strategy? maybe that's a discussion for another time. let's talk about another piece of news. microsoft and sony signing a packed. talk about that. >> this is very interesting. as a console gamer myself. xbox versus playstation, they are fierce rivals. now we are hearing that they will be collaborating more, perhaps to give a more enhanced entertainment experience to the hard-core gamers.

that's the key clientele they want to attract. saying, theynies are exploring partnerships and cloud computing as well as artificial intelligence. they may also collaborate in semi conductors for gaming can't falls -- consuls. working on new sensors that would combine sony's expertise and image sensor technology along with ai tools of microsoft. basically, they are competing for those hardline gamers. at the same time, both companies face rivals such as google and amazon in the space, as well is competition for eyeballs at home. sony: we are now seeing jumping more than 7%. an indication perhaps that the stock is also cheap, considering its earnings potential. you would be the only one saying that. >> that's right.

they are becoming increasingly proactive, sony is, in boosting shareholder returns according to a number of analysts. operating profit is under pressure. operating profit will mostly be flat this fiscal year asked her -- after adjusting for one-time items. the ceo looking at the bottom line, at shareholder returns, seeing that in order to boost the markets and share price, buyback while we have these cash reserves is a good time. shery: thank you so much for that. our chief north asia correspondent in hong kong. now, we are seeing the markets at the moment. japan's nikkei gaining ground. about 1% despite the strength that we have seen in the japanese yen. you can also see breaking news at the moment. asare seeing the lira react the u.s. is expected to reduce tariffs on turkish steel imports

to 25%. we are now seeing the lira falling on that tariff headline. plenty more to come. this is bloomberg. ♪

shery: we have breaking news out of singapore. we are seeing nonoil domestic exports falling 10%. the expectation was for a slowdown of 4.6%. this is a huge mess on those april nonoil domestic exports. this coming after we saw those numbers just contract 11.7% in the month of march. now we are seeing a 10% contraction. when it comes to the seasonally adjusted numbers, it's also a contraction of .6%. the expectation was for a gain of 5%. we have seen in the previous month of march that as we saw

those exports falling 11.7% year onyear, the biggest weight those numbers were electronic exports which slumped in march by the most since 2013. now we are getting the latest numbers saying that april electronic exports fell 16.3% year on year which is a huge number. of course, that has now led to a contraction on those exports year on year of 10%. a huge miss out of singapore. let's a first world news headlines. u.k. prime>> minister theresa may has been forced by her own party to set a timetable for departure. she will try one last time to push her brexit bill through parliament next month. she will leave office under a deal struck with conservative mps. it's unlikely her bill will pass as she needs the backing of the opposition labor party. her departure deal makes them increasingly wary of supporting

her. unchangedleft rates as predicted in a bloomberg survey. the rupee remains under pressure from the escalating trade war. the seven-day reverse repurchase rate stays at 6%. toicymakers choosing not echo recent hikes in the philippines, india, malaysia, and new zealand. the rupiah is dump -- down 2% in the last month. veteran aviation twa is back on the ground. the hotel has finally opened after a $300 million makeover. part of the original terminal. the futuristic design is dedicated to the new jet age of the 1950's. they have 512 rooms and feature a vintage lucky constellation plane serving as a cocktail bar. global news 24 hours a day on air and on twitter, powered by

more than 2700 journalists and analysts in 120 countries. paul: this is bloomberg. paul:just want to get you back to that breaking news story on the turkish lira. jumping against the usd are -- dollar. rising quite impressively. this is on the news that the u.s. will reduce tariffs on turkish steel imports down to 25%. moving the turkish lira on the news of that development. let's see what else is moving in the markets. let's get it over to sophie in hong kong. for stocks intgs australia, leading the rise of over 1%. the aussie dollar under pressure this morning. trading near a four-month low ahead of the saturday election. the worst week since february. i want to highlight the korean yuan which is on the back foot, trading 11 92 against the

dollar. the weakest level since january 17. malaysia giving back thursday gains. a quick note on the kiwi dollar, under pressure after producer prices fell for the first time in three years. let's check in on some stock movers to see what's on the move. the cow sliding -- cut cow sliding. yuden extending losses amid tech investor anxiety on curbs placed over wally. uawei.le way -- h sony is looking to buy back 1.8 starting this friday. the stock jumping the most since april in raising to a december hike. let's look at the board once more. , extendinglimbing games at july 2018 highs.

an encouraging miners to boost their dividend payout. earthworks contract from rio. gold miners are under pressure this morning. sliding to an 18 month low. the stock was downgraded to underperform. strategists reckon it is overpaying to buy canada atlantic gold. paul: thanks very much. the aussie dollar has been under siege over the past month, falling 4% in that time. the pressure remains as the nation heads to the polls amid a stumbling economy and the ongoing trade war. let's get over to our asia fx and rates reporter. are those the biggest factors driving the aussie or are there more? think you definitely hit the nail on the head there. the aussie is under siege by those three bigs factors.

we all know about the trade were between the u.s. and australia's biggest trading partner, china. that has been very bearish on the aussie. it's also under attack by a slowing economy that is exacerbated by a property slump. citizensas australian had to the polls on saturday, all eyes are on who's going to emerge the winner. regardless, people will be looking for any reason to sell the aussie on any political uncertainty. if labor comes into power, which is looking increasingly likely at this stage. shery: this chart on the bloomberg showing exactly that. investors and analysts recommending selling the aussie. is that what you are hearing out there? >> absolutely. talk to anyone in australia all the way through to europe, you will be finding it very hard to find any aussie balls out -- bulls out there. shop the aussie against the yen.

the risk sensitive aussie is set to fall. at the moment, it is looking to play short the aussie dollar. shery: thank you so much for that, our asia fx and rates reporter. -- electionthon of is coming to a close with investors bracing for a potential pull from the blue. the final round round of voting comes with political tension, layering amid protest from farmers and a looming job crisis. let's bring in our asia government monitoring editor. what is a likely outcome? still say that nobody will come back with a reduced majority. the last election in 2014, you had a huge win. the biggest win in 30 years in india. his party won a majority by himself which was a shift from coalition government. it was a massive one last time.

he's not expected to do as well but his coalition is expected to return. indian polls have historically been very inaccurate and difficult, it's difficult to predict these elections. the margins are slim. there's a lot of rural areas where it's hard to pull. surprises are possible. that is what has been concerning the markets in recent days. i'm reminded of the 2004 election where the bgp was expected to win and didn't because of that rural revolt you describe there. what would it mean if modi didn't come back for a second term? >> then you would have the opposition coalition probably led by rahul gandhi coming into power. power in 2014, there was a sense that the company -- country was adrift. there was a lot of corruption allegations. policy had ground to a halt.

that led to this desire to have a strong federal government. also historically, coalition governments have been a place where reform has gotten through. particularly in the 1990's. the record is mixed with coalition governments in india. it will signal a shift towards more social spending. the opposition has touted aaron t basic income is one of their main platforms. shery: how nasty could things get if it's a close call? -- we'veikely definitely seen rhetoric heating up in the final days before votes are counted on thursday next week. they had to stop voting to do violence breaking out in the streets. you even had one bgp candidate praising the assassination of mahatma gandhi, one of the founding fathers of india. it has gone really nasty. in the past, we've seen parties

come together. whether it's filings after the election is very questionable. if it is heated, anything is possible. india can be volatile in these types of heated political environments. manager,a government keeping a on the indian election for us. theresa may has a major step closer to leaving office. she has agreed to set out a timetable for her departure early next month after she puts her brexit deal to parliament one more time. joining us now is the bloomberg senior international editor. what is may likely to do next? what is the plan for her to go? >> she has lost the support of her own party. exchangea very frank in the past day where she did in the end agreed that she would set a timetable for her

departure. she gets to try one more time to get her brexit plan through the parliament, even though it has failed several times in the past. this is not what she wanted. she's been trying to hang on through everything. she has held on fiercely to her position. now members of her own party say that they need for her to go, they need lead -- new leadership. in the beginning of june, just as president trump will be there for state business. she is then going to announce her departure is the plan. there will be a new prime minister by the end of october which is the new deadline for the u.k. to leave the eu. shey: one of the reasons was able to survive for this long is that there wasn't a clear successor. who is after her job? what are their chances? >> that's right.

a best andy wasn't nobody wanted to step up. everyone wanted to criticize but nobody wanted to step up. , not ase are several many people as are running for president in the u.s.. it's a growing list. the latest to throw his hat in formerg is johnson, the foreign secretary who has battled with may. he has now said that he will want to run. he wants a harder brexit than theresa may has wanted. presumably, that will be part of the platform. there's a growing list of people and it looks like there will be a new prime minister by the end of october when that brexit is set to occur. shery: bloomberg senior international editor, thank you so much for that. coming up next, talking trade. and thesure on huawei

implications for the wider tech industry. this is bloomberg. ♪

>> [inaudible] it's to preserve our national security. i think launching now [inaudible] appropriate, it's not the best way to defend your national security. the u.k. needs to make a decision about the security of our telecoms infrastructure. what i've asked the happen already before this decision is for a properly based review of our telecoms supply chain. i want to say, in the five do world, security is much more important. it as equipment, part of it is security solutions. paul: that was president

emmanuel macron and some of our earlier guests reacting to president trump's latest offensive against huawei. shanghai hopes the two sides are going to come back to the table and find common ground on a deal ,hat resolves structural issues market entry barriers, and unfair competition. plus, a real enforcement mechanism to make sure neither connect. joining us now is our guest. thank you very much for joining us. that list i read out there sounds like a nice to have but realistically, is china and the u.s. going to arrive at that point anytime soon? >> good to be with you. it is a formidable list. both sides very much are motivated to get a deal here. the tariffs are doing a fair bit of damage. nobody likes tariffs. both sides want a deal. we will probably get there.

we seem to be taking the long way around. achieved, if it is that's not really going to be the end of the story. it's not hard to imagine scenarios where one side or the other infringes, there's an argument over enforcement. even if we get some sort of agreement here, what is the risk going forward that it blows up again? >> that is the risk. what we want here is a good deal. we don't necessarily need a comprehensive deal. let's not try to eat the elephant all at once. a good deal is going to have to have enforcement mechanisms. that is in the interest of both sides. china really has a credibility problem, having to deal with enforcement and past promises that haven't been to -- fulfilled. it is not in china's best interest to have a deal that falls apart. they already have a credibility problem.

people talk about promise fatigue when it comes to dealing with china. hopefully we have a deal that includes an enforcement mechanism that makes sense for both sides. it may not necessarily be a comprehensive deal. in other words, if we can get a deal fairly quickly, get the tariffs to come down so we can get back to doing business, lower the rhetoric, tackle some of the more difficult questions which are really about market access and future industries. we continue to see the tensions flare up, not only around the trade deal but also around other issues like access to chinese telecom in the u.s. market. take a listen to what wilbur ross had to say about this. >> this is not actually a part of the trade situation. it was not something that had been discussed in any of the meetings, the many meetings that were held between china and the united states. shery: what are your

expectations about these other side issues affecting the trade negotiations? >> yeah. we would agree with secretary ross. these are side deals, different issues from trade. it highlights some of the things that we are very concerned about. we could win the battle but lose the war. becomes soe dispute contentious and the rhetoric is not controlled, we could run the risk of actually getting a deal that makes sense for both sides sides but then we have destroyed the trust and eroded the equity we had in the relationship itself. china may decide that the united states is an unpredictable trading partner. that would be a disaster for american companies doing business in china. is, the headlines around all negative when you talk about all the bad things that we don't like that china is doing. last 35 is, over the

years, this has been a very productive trade relationship for both sides. americans which have benefited from the production of chinese goods, but also for american businesses located in china. it continues to be a growth market for us globally. shery: many american businesses operating in china have been able to weather so far some of the tariffs that have been imposed. we also have a weaker chinese yuan. what happens if you get more tariffs on top of the 10% going to 25% on the $200 billion of chinese goods. you also get the rest of these chinese exports having tariffs for those as well. >> that's true. tariffs are not a good thing for anyone. the issue in china is actually mixed. indirect direct and

impacts. on direct impact on tariffs u.s. businesses that are located in china has been fairly minimal. the structure of american businesses in china is generally , we are producing products and services locally for the china market. we don't see a lot of movement of goods across borders that would be impacted by tariffs. that isong-term impact more concerning, the relationship overall, it's that breakdown in trust and predictability in the relationship. second, there has been some short-term effects of the tariffs within china. as we have had these tensions in the trade relationship, it is now a very bad time for anyone to be seen as giving a green light or assistance to american businesses. that has had an impact. system orrt administrative offices were approvals are required to go

forward. there has been foot dragging there. you could call that a narrow -- an administrative barrier to trade. we believe that is a short-term phenomenon and hope that we can get a deal done here in fairly short order. get the parties back to the table, get this deal done. we hope that that phenomenon will go away. shery: thank you so much for your time. have some lines coming out of japan. the finance minister speaking in tokyo, saying he kept comments about the u.s. agreeing not to raise those tariffs. right now, the problem in the japanese economy is a lack of demand. when it comes to those auto tariffs, the u.s. has already agreed not to raise those tariffs during talks. bloomberg has seen a draft executive order by the president that he will give japan six

months to agree to a deal that would limit or restrict imports into the u.s. of car and car parts. in return for delaying new auto tariffs. the japanese yen, 109. it weakened slightly after the news. this is bloomberg. ♪

shery: china starbucks challenger is about to hit the

stock market. raised $561ee has million and expanded u.s. initial public offering, selling 33 million american depositary shares at 17 bucks apiece. that is a fraction under $4 billion. daniel away joins us from hong kong. it is notreason that listing in hong kong and is doing it on the nasdaq. this chart on the bloomberg showing those chinese tech companies that have debuted in hong kong, not performing well. how are investors viewing it at this point? >> it is very good to see that it is priced at the high end of the range. however, even in that case, the valuation is still less than half of starbucks. it is too early to say that the market is very pessimistic about their business model and profitability of the new chinese coffee product.

at least shows that investors still have some concerns about their model. it is totally different from any traditional coffee companies such as starbucks. aside, forodel consumers, are there any key differences? >> yeah. when we talk about a coffee business, we mentioned starbucks. this is the typical to -- coffee brand. uckin is totally different. by the one who founded china's biggest car-rental company. it is more like a technology company rather than a traditional coffee brand. by applying the cash burning strategy, it aggressively expands the shore network -- store network to provide a huge amount of subsidies to consumers.

coffee asims to sell a type of drink instead of providing a very cozy environment for consumers to sit in like starbucks does. shery: thank you so much. bloomberg news asia consumer reporter. don't miss our interview with i uckin's chief financial officer. that's it from daybreak asia. market coverage continues ahead at the start of trade in hong kong. we will stand by for bloomberg markets, the china open. that's next. this is bloomberg. ♪

♪ yvonne: welcome to "bloomberg markets: china open." we are counting down to the open of trade. the top stories, president ,rump's ban on huawei kicks in investors are bracing for what the u.s. might do next. the first loss of a listed struggling with costs and slowing sales. china's largest online pharmacy sees revenue jumped 100%. we speak with