paul: good morning, we are under an hour away from the australia's market open. sophie: welcome to "daybreak asia." paul: top stories this monday, scott morrison pulls off a miracle win. it is seen as a bitter economic bid. having early gains. exit polls suggest they may

secure a majority. oil strengthens as opec plus signals output may stay in place all year. russia may not be so committed. a let's get you started with quick check of the markets. we saw stocks falling for a second consecutive week. the s&p 500 falling for the first time in four days. still makers taking a hit after president trump lifted those steel and aluminum tariffs on canada and mexico. fromis feeling the brunt the trade tensions. the nasdaq fell 1%. chipmakers getting hurt because of potential banning of huawei in the u.s. futures higher when 10th of 1%. let's say -- let's see how we are setting up for the asia open. aphie: we could be looking at mixed start to trade. futures hinting at a tepid start. it may affect shinzo abe's

decision to go through with the sales tax hike of the economy. sales contracted in the first quarter. markets are expected to react positively in australia. flipping the board, we did see the aussie dollar jump on the election result, but traders are rebuilding positions. they say it is hard to see why investors would buy aggressively amid bets. it happened friday. to speech will be key determining the currency near-term direction. a quick thought -- a check on oil prices. a strong start after saudi signaled intent to stay the course on production cut. following these 2% gain we saw last week. paul: let's get the first word news now with su keenan.

su: we start with opec, plus saudi arabia and other oil producers are signaling their intentions to keep supplies restricted for the rest of the year. this, while also pledging to shortages.ges -- it is not clear how much russia shared that view with the energy minister, talking about potentially relaxing the opec funds output curves. saudi says the group must stay united. >> my recommendation to my drive --s will be to down gently. to try to stay on the trajectory of bringing inventory down, while making sure that no is left without the requirement. latest ong to the

u.s./china trade negotiations, china has warned the u.s. that negotiations on equal terms is the only way to solve trade issues. the foreign spoke to secretary of state mike pompeo saying ,ashington has harmed beijing including restricting chinese companies from normal business operations. prepared tot is negotiate, but will always defend its interests. exit polls in india suggest the prime minister is headed for and bjp may win an outright majority. his alliance may take as many as 350 seats, well over the 272 seat majority level. it is important to point out that exit polls in india have a reputation for being widely inaccurate. it is wrongly suggested that 2004, and win back in underestimated the size of in 2009.onal delegates

global news, 20 for hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: thank you for that. just want to get some breaking news crossing the bloomberg terminal. the australian broadcasting corporation reporting that scott morrison is on course to secure majority government. 76t means he has won the seats necessary to govern without the support of a cross bench. we have had a few key results rolling in this morning as accounting continues. the seat of wentworth, which was malcolm turner's old seat, that went to an independent. it looks like that is back in the liberal column. karen phelps, the independent conceding. one more in scott morrison's column, abc reporting that scott morrison is on course for the

majority. shery ahn: the center-right government lost no time, now closing to pass signature tax cuts. not to mention other measures to shore out the economy. thes get a snapshot of potential stock market winners and losers in this election. there will be wide region implications for various sectors to banks. they say the uncertainty has not ripped out of the market. stocks look it a boost on the upernment's pledge to shore the economy, that would deliver tax relief for half of the country with rebates for as much as 742 u.s. dollars. banks may have a big weight lifted off them. has beeny government maintained where as a labour government would have gone faster and further in dealing with misconduct in the industry.

the coalition is more friendly to the fossil fuel industry. coal producers and oil much -- oil producers could rally if labor had one. renewables will likely get less support from morrison's government. .roperty developments may climb investors now lifted in the space. there will be no change to negative gearing, which would have weighed on mortgage and bank margins. it may be -- as property market weakness remains. private health insurers no longer have to deal with labors china cap price increases at 2% for two years, which would have dented margins and impacted private hospital operators. assisting impact on the stock market. as jill shepherd pointed out, some of the gloss may wear off once the election chair wanes. australia we have our

government reporter jason scott on the phone. jason, we are hearing that australia's pm morrison is securing -- securing a majority government. it will be easier for him to carry out some of these pledges. jason: you are right, he is on track to secure at least the 76 seats he needs to get a majority in the lower house. he is also looking like he will strengthen his hand in the upper house with vote counting still going on. both houses it looks like he is going to be in a much better position to get his legislative agenda through. his first priority is going to be tax cuts, sweeping tax cuts for middle income earners. it will be interesting to see how far they go in china blocked those measures when parliament resumes. we are not sure at the -- trying

to block those measures when parliament was in ruins. resumes.ment all the leaders are expecting we would have a new government in labor. that is just not going to occur. the abc australian broadcasting corporation now reporting scott morrison on track to have 77 seats in the parliament. he could still have a majority. one of the interesting things on the weekend was the former prime minister, losing his seat to an independent. on the way out the door he held scott morrison saying his place in the liberal pantheon is secure for pulling off this victory. records inof the key the past three years of all that instability. he is gone now. jewel shepard said that might not be the end of the internal party problems for scott

morrison. even though he has legendary status now. jason: i think that is right. there has been a huge amount of turmoil within that coalition, where it has been basically split between the moderates, people like former prime minister malcolm turnbull who wanted greater action to tackle climate change, and the other right-wingers in the party, who were including the affairs minister p or diane -- peter dut ton. divided. has been very morrison has done an amazing job to put the band-aids on top of those wounds. campaign, election and make voters forget there were problems within the coalition. eded, there is still a

lot of problems. i guess that comes through in the lack of a real policy agenda from the coalition. cuts theren the tax is not much to show how the coalition wants to change australia or their vision. i think a lot of people have their own ideas. shery ahn: it is really interesting that you say that. willustralian economy continue to see the downside from property prices shown on the gtv chart on the bloomberg. really clever coming from the chart. that is a bill that they cannot afford. the liberal national coalition and the current government, or was it a vote against any change or fragile for the australian economy? jason: we will have to see.

ideaswent with these big in including tougher action on climate change and stripping tax perks from wealthy australians. it does not work. it was too much for voters to comprehend. meanwhile, morrison was saying, don't trust these guys, don't trust labor, just equip us. it is kind of ironic. -- just stick with us. it is kind of ironic. there are signs that we will drift in the economy now. erae are concerns that this that australia has enjoyed for nearly 28 years of consecutive growth is just about over. overseen.ion is it is going to be interesting to see what leaders, morrison, and the independent central bank can

pull, to see if it can turn around the strict in the which i guessed has been triggered by stagnant wages and fall in house price -- falling house price market. only policieshe you mentioned of the government to try to turn that drift around was tax breaks. when do we think the parliament will sit, and when might those tax breaks be legislated? know at this't stage. new governments say morrison will be bunkering down today with his advisers and senior cabinet ministers. he may decide to go as early as next month. the old senate is actually in power until july the first. he may decide that he thinks he can get these tax cuts through the old senate or he may wait

for the new want to come in after july 1. we will have to wait and see. our australia government reporter jason scott. we will have more reaction to the australia election later. will be joined by j cline at 8:40 a.m. in hong kong time. if you are watching in sydney, that is 10:40 a.m. a first-quarter growth rate is expected to fall back into negative territory. the numbers are out later this hour. will this cause the government to back out from the consumption tax hike. with aicy editor is here preview of this and the rest of the week ahead. we are not expecting a huge contraction, but it could still be meaningful. kathleen: that includes what it means for prime minister abe and his team. the clock is ticking on getting the gdp report. let's take a look at what we are looking for and what we are talking about.

news last year was the drop in third-quarter gdp. it had a lot to do with natural disasters and trade war uncertainty. down 2.4%, a rebound of 2%. in the fourth quarter, the gtv -- gtv tracker is something our team is looking for. 0.2%, why? besumption is supposed to down 0.2%, it was down 0.4%. 2% afternvestment down being up 3% in the previous quarter. those are bad signals. japan trade will add to the economy. it is only because, even though exports fell, imports fell more. do the math. the question is for prime minister abe. what will he do? from 8%umption tax high to 10% is scheduled for october of this year. he has backtracked twice.

if he does it again people will say, the upper house election is in july, he would do it before then. we don't know. the bottom line is, if you have a negative print on gdp as the year begins, if you have a trade war expected to hit exports more, how can you put that one more negative on the table? even if it is not supposed to affect the economy or consumers. the question is, they have in the past, it could do so again. that is why this gdp report has gotten so much around it in terms of interest. shery: our global economics and policy editor. still ahead, we will bring you the latest gdp figures from japan, and have immediate reaction from tokyo. paul: we are speaking to jupiter his outlookr about for global central banks. this is bloomberg. ♪

shery: this is "daybreak asia." paul: i am paul allen in sydney. just to get you breaking news we have had in the past few minutes, it seems that australia's prime minister scott morrison will be able to govern on his own without support of the australian broadcasting -- the australian broadcasting corporation reporting he will have 77 seats in a house. 76 is what is required. he will be able to appoint a speaker and still join majority government without needing to rely on the cross bench. we will head to the man himself, a miracle win. head of strategy at jupiter assets. let's just start in australia. scott morrison, we have already seen the morrison budget for the coming years. it looks like steady as she goes

as far as fiscal policy is concerned. tomorrow we have a speech from the rba governor. do you think we will hear that australia is joining the rest of the asian straggle. >> australia has been on the path around central bank easier. being it looks to be continued. we know many of the problems is across the australian housing market. to do with tightening from the back of the world commission. a multi-year be project. thatne of the key leaders cushions the rba policy. the biggest question is, much of that is consensus. much of that is in the price. we know it has been a consensus-based study for the australian dollar, and for the long rate.

the numbers look like they will be confirmed. the idea that there will be a surprise rate cut, it looks unlikely. steady as she goes. is something that looks to be untrained. paul: let's look at central-bank policy more broadly, in terms of that conundrum that many of them face. inflation strong, missing in action. you see the phillips curve starting to curve. where are you seeing that? a lot of these pivots where people have given up on any sense of inflation in the economy is maybe unlikely to be realized. one of the most important numbers last week was the university of michigan five-tenure inflation number. global central banks have been worried that inflation expectations were actually starting to move down. i think that is what caused some of the nervousness of costs --

across central banks if they would see inflation. number, the fact that they would to be reversing course. inknow that the labor market the u.s. has been reasonably strong. we know wages have been moving higher. to some degree that has been offset by productivity. the idea is that we will never see an inflation globally is something i am skeptical. there are some signs of it. shery: what about economic growth? big inventory growth in the fourth quarter. what does that tell us about acceleration this year? talib: it is really unclear. we had a big inventory build q4. for -- in resize step down. it was because of the government shutdown in the u.s. it was because of the rhetoric from the trade war.

can we see that start to wash through? can we see a more meaningful acceleration for 2019? it is not clear. many of the indicators have not been falling off a cliff, that they have been listening to some degree. the rhetoric which was seen around the trade war makes it more uncertain. reality is what we have seen from corporations. it is coming at a fragile time in the global economy. shery: the gtv chart on the bloomberg shows how the pound is on track for the longest losing run against the euro since 2000. economyile is the u.k. as we continue to see the fallout from brexit? not to mention european assets as well. go, wheneverhere i i speak to my clients from the u.k., brexit is top of the questions that get asked.

the thing about brexit is, we don't know. is, if you have half a dozen politicians from the u.k., they would not have much of an idea either. that uncertainty looks like it will persist. the most important question is, what is the economic damage of brexit, and what is it doing to the u.k. in investing location? for most global investors, the u.k. has become irrelevant over the last couple of years. it is not large enough to be a significant part of people's portfolios. people are trying to ignore it to some degree. i suppose that does open valuation possibilities. when you look at u.k. domestic aocks on his stash on historic basis, they are the cheapest they have ever been. there is value there. global investors who could invest across higher markets and cheaper markets, people are just really putting it in the wait and see box.

paul: that is jupiter asset management head of multi-asset strategies talib. plenty more to come. this is bloomberg. ♪

>> one governors bought $12 trillion, it had to have an effect. paul: a quick check of the latest business flash headlines. they have suspended some of business ties with huawei. google will no longer engage in ands that require -- recover by open-source licenses. outside oft phones china will lose access to popular services, including the google play store. shery: they are denying all my speculations that it stopped offering its products to huawei. they say supplies proceed as normal, and huawei will receive services based on local operations. importantuawei is an

client. anyone spreading false rumors may face legal actions. the world's top oil producers signals to keep the clients restrain. ♪

su: this is daybreak asia. the election in australia, the abc says scott morrison looks able to secure a majority government after his unexpected win on saturday. despite trailing in most polls during the campaign, the liberal national coalition defeated labor in what he calls a miracle. in -- the a rising 68.68, thear sank to lowest level since january. >> i have always believed in miracles. [applause]

and tonight we have been delivered another one. [applause] how good is australia? su: to the latest on brexit, u.k. opposition leader jeremy corbyn is moving closer to ,acking a second referendum saying the public should be given the choice on any deal to leave. talks between labor and the prime minister's government broke up without agreement, each side blaming the other. the prime minister still hopes to push her brexit bill through parliament next month before stepping down. to respect the result of the referendum and that moves on to try to get a deal which guarantees trade and relations with europe in the future, and if we can get that through

parliament, it will be reasonable to have a public vote to decide on that. the japanese government is losing popularity over its land sales tax hike. two thirds of people surveyed said they opposed the move. and the support rate for shinzo the announcement. the government will increase the tax from 8% to 10% in october. he already backtracked twice on the move. there are fears the weakening economy won't handle it. 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 su keenan. this is bloomberg. david: but -- shery: let's go to hong kong for what to watch. sophie: in tokyo we are watching softbank amid speculation t-mobile and sprint are going to make a 26 $.5 million merger.

-- $26.5 million merger. and trump said imported cars threatened international 6 -- threatened u.s. national security. setting the stage for contentious u.s.-japan trade talks. japan tobacco could move on and nhk report that there was a bill in the upper house that calls for the government to sell its interior stake in -- entire stake in the company. in seoul we are watching amiri assets on a report it will invest in 1.3 trillion one in a resort complex in the southern part of south korea asterism is a new source to make up for software manufacturing. samsung is under review after it another $700invest billion in china. day w00t shipbuilding could move on a report that the company is one of two that

pulled out of the race to build three new support vessels for the british royal navy. the opec plus group generally supports rolling over the production cuts after june if global uncertainty persists. we spoke to -- >> we will look at the numbers in june. [indiscernible] support of rollover. reporter: was it unanimous? >> no one spoke against it. reporter: what about that the russians have recommended to reduce the cap at the moment? >> it wasn't up for discussion. [indiscernible] reporter: the russians didn't ask to reduce the cuts? >> they didn't. their position was wait until june.

reporter: you and i caught up earlier and talked about supporting cuts until the end of the new year. that it iss building the baseline scenario? >> it is. reporter: what would it take to expend the opec cuts? what needs to happen for that? >> the numbers [indiscernible] some numbers are supportive of stability and price. some numbers of supportive -- are supportive of production levels. our feeling is right now there is uncertainty. numbers will look good [indiscernible] flip [indiscernible] difficultave a [indiscernible] venezuela, and what is in

the environment in terms of pricing which is under more pressure to increase supply. if you look at the numbers coming out of the united states, they are very boisterous, production is improving, doing better. if you look at the crisis, [indiscernible] happen to make us roll over, maintain the current status, the uncertainties we see in this environment continuing to go on and increase. all this will make us want to roll over. shery: that was the nigerian oil minister speaking to our reporter. erin clark joins us from tokyo. this gtv chart showing the gains in wti prices last week because

of this middle east tensions mounting, but this week as well we are now seeing wti gaining ground as saudi arabia and other producers signal their intention to keep supplies constrained. in this meeting, we saw a split between russia and the other members. first of all, what happened there and how significant is it for prices? >> it is significant. the opec plus group met over the weekend. the main topic of discussion was whether or not they will extend these production cuts that were started and implement it in january this year and are scheduled to last through the first half, june. the big question is if they will extend that. earlier, mostip of the nations are on board including saudi arabia, the de facto leader extending the cuts.

inre is concern of fragility the market, u.s. sanctions on iranian exports, disruptions in venezuela. there is a lot of concern about flooding the market with too --h supply if they reduce eliminate these cuts. most nations want to continue them but we soft hesitancy from russia so i think once to take a wait and see approach. if russia wants to take that wait and see approach, what other options are they putting forward instead of? some of the things they suggest is over compliance in russia -- with the group, there is 100 of the amount they want to cut. they are cutting more than that, 168% of the cuts. one thing they suggest is they return to the normal 100% of compliance and see how the

market reacts. another option is they could suggest to reduce cut levels and put more supply in the markets. those are two options that russia may suggest. there is another meeting next month where they will make the , aboutecision, opec plus whether or not to extend cuts into the second half of this year. we will have to wait and see what they decide but those are options they are may be considering. paul: asia energy editor adam clarke. president trump ended the week by delaying new tariffs on vehicles imported from the union, japan and other nations. he also said they represent a threat to u.s. national security. that didn't sit well with toyota. in an unusually strong worded statement, they said the declaration sends a message to toyota our investments are not welcomed and contributions from

each of our employees are not valued. ros krasny joins us from washington. how have things shaken up in the aftermath? ros: we haven't heard from president trump or any of his administration in response. so many times if he has criticized in any way, he will be on twitter lashing out or back but there was nothing said about toyota, very strong statement. there was a group, the alliance of auto manufacturers who had a statement of their own and said 700,000 jobs are at risk. it seems what we are seeing from toyota and the lobbying group is a preview of what they will say to the administration in hearings and other venues. trying to stop these import gotas, saying if quotas

ahead, there will be less choice for american consumers, car prices will go up and they can foreign carot of factories in the united states , andbmw to toyota, mazda most of these are in red states, trump states. there is a lot of interesting dynamics going on. we will see how much the administration wants to follow through and how the company's push back. shery: when it comes to china we have mike pompeo and his counterpart speaking by phone over the weekend. trade negotiators don't have any talks scheduled yet. ros: that was interesting and we didn't expect it. there are talks a lot of times between opposition that are not telegraphed but we don't know who initiated that call. i suspect it might have been china but don't know for a fact. we got a far more robust read output from the chinese side

then u.s.. we got -- than the u.s. we got one cursory thing from the state department. with trade talks stalled and the u.s. on the warpath against iswei and zte, it interesting to see this rising to the diplomatic level. whether it means the next round of talks is between president trump and president xi, i don't know. certainly interesting that very high level of discussion take place. president trump has been active on twitter and said if iran wants to fight, it will be iran.ficial end of never threaten the united states again. tensions haven't eased in the past 48 hours. they haven't. even though we have heard

president trump does not want to go to war with iran and really maybe wants to dial down the rhetoric, but that was a bellicose tweet. as you remember 2017, his comments to kim jong-un about the u.s. raining down fire and fear he potential on north korea, it could be a rerun of that coming out strongly with a statement with the hope of getting iran to some kind of negotiating table although one thing my colleagues pointed out, there is no channel for the u.s. to talk with iran at the moment officially or unofficially. it is unclear if negotiations could take place. as you say, definitely a very aggressive tweet from president trump, not clear where it came from. watch this space because he will -- thank you so much for

that, bloomberg news editor joining us from washington. minutes away from the latest gdp figures from japan. we will break the numbers when they cross and have immediate reaction. this is bloomberg. ♪

shery: counting down to asia's first major market opening and japanese futures are unchanged, but this of course after the second week of losses in the u.s. we saw the nikkei gained ground and the japanese yen weakening for the past three sessions and now above 110. we will see what happens when they come online. we are waiting for japan's first quarter gdp numbers. our next guest said first-quarter economic growth in japan is likely expected to be flat to negative but sees no and the sales tax hike

will not be postponed. joining us now is the wisdom tree japan ceo. always great to have you. not really expecting a recession and not really for the tax hike to be delayed, yet if we see calls willmbers, the become stronger. why is it important for japan to go ahead with this sales tax hike? >> there is volatility in the global economy and it will likely be reflected in the data. hasnow exports, production been pulled down by the global downturn, but domestic japan, the service sector is not just holding up but is continuing to expand. at the end of the day prime minister abe is managing for the domestic economy, not global economy so go ahead. hike, aread of a vat we going to see a boost in

last-minute purchases to provide support? absolutely, you will get some volatility. you have got to recognize the government has put a lot of fiscal measures into place basically the increased tax will raise 300 trillion -- ¥3 butlion of purchasing power the people -- that is new. from that perspective there would be volatility in the economy but for all intents and purchases, the purchasing power of mr. and mrs. watson of a continues to increase -- watanabe increases nicely. paul: what about what the boj can do? they are running out of power. jesper: you make an important point. the bank of japan is dull. they keep doing what they are

doing, there are technical adjustments here and there, but for all intents and purposes, the monetary policy is beholden to fiscal policy. all eyes are on fiscal policy. the bank of japan ultimately will stay stuck until germany wins the world cup. to see theontinue side effects of the boj being so involved in a jgb market. this chart showing dominance right there. chart, holding central-bank percentage of total. you can see it rising in the bars in white. tell us about how much side effect we are seeing from already super easy policies from japan for years and what can be done next? is very interesting because the biggest side effect it is it is forcing japanese banks to reconsider their

business model because making money by taking deposits and lending, given the boj caps long-term interest rates, you will have interest margins not going to grow. you have got to be creative, go into consumer finance, mn day, noninterest income. the business model of japanese banks will have to change. that is a good thing because they need to restructure and also ironically it is the right incentive to force the banks to rethink how to make money. we have the numbers out now, first-quarter gdp in japan it is an upside surprise, half a percent increase. this up right -- survey was for a narrow contraction. 1% quarterlyalf of gdp. the deflator on year coming in line with expectations, .2%.

is 100 1015 --n 110.15. reaction? the first quarter is volatile. we know from the other data there was a downturn. most important for investors, gdp was positive, surprise but corporate earnings in the january to march quarter dropped 15%. we actually see the negative impact of the global downturn spilling into the japanese economy. what the data shows is yes, thank you domestic japan is holding up well, abenomics is working. first quarter basis 2.1% growth. the estimate was a fall. how much of this is fiscal

stimulus? we have seen housing could have supported gdp growth. is abenomics, is the prime minister doing things right? i think absolutely. he is being held by the demographics, the population is declining. it means wage growth and the quality of jobs is beginning to improve. you are starting to see full-time job creation coming through. as a result, the domestic economy is doing well. the other thing going forward is really business investment expenditure, particularly service companies, upgrading their i.t. backbones, the technology that they are using with labor force shrinkage. it is business expenditure together with mr. and mrs. watson of a -- what's in abe -- watanabe's spending.

upcoming tradeut negotiations? we could see lots of constraints from a u.s. protectionist agenda and stronger yen if the trade environment doesn't improve. if you do the numbers, tariff ariff -- a 25% on cars could caught -- cut profits by 60%. let's be very clear america is in a strong position with take guns threatening toyota and honda. i think we know the relationship between prime minister abe and trump is good. this is not like the people's republic of china. the japanese have a lot of things they can give to the president whether infrastructure investment in the u.s., more factories being built, and last but not least japan is very good

at increasing procurement for defense equipment. japanis a lot of border can offer. i think the trade war between japan and the united states is likely to be averted. paul: all right, wisdom tree japan ceo thank you for joining us. those numbers just arrived surprising to the upside. more ahead. this is bloomberg. ♪

japan, south korea and australia get underway at the top of the hour. let's preview the market open. looke: we can see a nice in sydney. earlier, the domestic economy is holding up

well. i abenomics is working. we could see weakness in seoul was because be set to extend losses for a third session while the korean won would come under further pressure after closing 11.95. and the impact of a trade war on korea's economy could be severe. looking at currencies this morning, we have the aussie dollar paring gains, the yen looking study as the offshore yuan is eyeing 694 against the greenback. and in australia we are watching banks as the morrison government seems to be friendlier to the financial services industry. it is no upgraded to overweight. health whichamsey will stay with policy looking more searching. developers may climb with tax breaks to property investors now listed. no change to negative -- maybe a small relief rally, perhaps housing market related.

lend lease has been cut to hold at morningstar. paul: all right, thank you. still to come on the next hour of daybreak asia, reaction to the australian election from evolution mining chairman jack line. ♪ man jack line. ♪

>> good morning. asia's major markets have just opened. >> welcome to "daybreak asia." paul: our top stories this monday, scott morrison falls off -- pulls off a miracle when -- win. japan also springs a surprise. gdp smashes forecasts.

as opectrengthens signals output curves may stay in place all year. >> we have a few southeast asian markets closed away on holiday today. japan and south korea getting underway. let's turn to sophie. sophie: let's kick it off with trading in sydney. 0.3%. among the gainers so far of note , a bank climbing as banks macy a weight lifted off them. 0.5%. dollar up back of the% on the election results. we are seeing bonds take a hit in australia this morning. we will check the mood in japan after the surprise beat in first-quarter gdp. the nikkei gaining ground up 0.3%. also on the- topix

move. the yen lower against the dollar. trading near an eight day low. the kospi gaining ground. we have the kospi adding 0.75%. the korean yuan seeing continued weakness -- korean won seeing continued weakness. measures to stabilize the market. there will likely be a severe impact on the economy from the trade war. seeing wellington higher 0.3% this morning. the kiwi dollar is trading ever so slightly higher. thanks very much for that. let's get the first word news. china.tart with

isotiating on equal terms the only way to solve trade issues. the foreign minister spoke to mike pompeo over the weekend. saying washington has harmed beijing through its words and actions, including restricting chinese companies from normal business operations. china says it is prepared to negotiate, but will always defend its interests. to the latest on brexit, jeremy corbyn is moving closer to backing a second brexit referendum. saying the public should be given a choice on any deal to leave the eu. talks between labor and theresa may's government broke up without agreement with each side blaming the other. the prime minister still hopes to get her brexit bill through parliament before stepping down. >> to respect the result of the referendum, to try to get a deal

which guarantees trade and relations with europe in the future, and if we can get that through parliament, i think it would be reasonable to have a public vote. >> now the latest on opec plus. saudi arabia and others are signaling their intention to keep supplies restricted for the rest of the year. this while also pledging to resolve shortages. it is not clear how much pressure shares that view, with alexander novak talking about potentially relaxing the opec plus curves. >> my recommendation to my to drive downl be gently, to stay on the trajectory to a normal level no customerssure

left without their requirement. >> to the india election. exit polls suggest prime minister modi is headed for victory and that his party may even when an outright majority. as alliance may take as many 350 seats, well over the majority level. it is important to point out exit polls in india have a history of being wildly inaccurate. bjp wrongly suggested the would win in 2004 and underestimated five of the congressional -- the size of the congressional victory in 2009. 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. thanks very much for that.

let's get back to the australian broadcasting corporation, saying scott morrison was able to secure a majority government after that unexpected win on saturday despite trailing in most polls during the campaign. the national coalition defeated labor in what scott morrison called a miracle. our managing editor for australia is here. a miracle, i think for once hyperbole was warranted. >> that is true. scott morrison took to the stage , treated like a rockstar star by party faithful after delivering an amazing victory for the coalition. they had trailed the labour party in at least 56 back to back opinion polls over the last couple years. this is a win nobody saw coming. waste anyy did not time when it comes to policy. they already plan to pass signature tax cuts.

what will be the challenges for the prime minister? >> the challenges will be first and foremost to see what the makeup of that senate will be. the senate has the power to block and demand legislation. the last couple governments have struggled with it the presence of right-wing populists, single issue independence, who have held the balance of power in the upper house. vote counting is going to continue for a few more days, but it is looking like morrison has probably increased his tally by a couple seats. parties like minor the anti-muslim immigration one nation have not made the gains that were anticipated. the other big challenge for morrison is the economic backdrop. growth is slowing in australia. it is in the midst of its 28th year of unbroken economic

growth, but the shine is coming up the economy. .age growth is stagnant households are saddled with record debt. the rba is under pressure to cut interest rates. he has that to contend with area >> we are seeing a significant rally on the asx now. financials up 3.8%. quite a significant on the back of this results. in terms of the broader election, scott morrison did not take much to the electorate in terms of policies. just those tax breaks. can we expect to see anything else come down the pipe? >> that is the big question now hanging out there. that relief rally in the financials and other stocks is largely off the back of the fact 's progressive policy agenda clearly is not going to get up now. the financial sector will be breathing a sigh of relief that a labour government is not in

power. labor was expected to take a far harder and swifter approach in adopting the recommendations of that widespread inquiry of the financial system misconduct. what scott morrison has up his sleeve is anybody's guess. the signature policy he wants to push through his those tax cuts. he wants to get that through as quickly as possible to deliver as much as $1000 in rebates to people across the board. the middle and lower income earners. that should provide a good uptick in consumer spending, which should underpin the economy in the short-term. paul: on the policy t front, can we expect coherence? morrison is going to be a hero when the caucus gets together, but can he unite the party and

get that policy coherence going forward? ed: you are absolutely right. written byas been deep ideological differences over the past few years. not least over energy and saw tony abbott replaced by the millionaire oustede malcolm, who was and replaced by morrison. now the party loves to back a winner and this is an extraordinary win. it is likely morrison will be able to stamp his authority on that liberal national coalition. and may well be able to craft a policy agenda where his predecessors were simply unable. shery: thank you so much for that. we continue to see that rally in markets on the asx 200, right

now gaining 1.5%. let us see what is moving inside of australia at the moment. sophie: we are seeing aussie banks rally this morning, jumping the most since february 2009 as the coalition government is seen not to be as aggressive as a labor administration would have been. as morgan stanley notes, the result lowered the risks for banks. the mortgage market and the regulatory environment looking eased. property developers climbing as well. the main group gaining ground and marbach rallies to a 2008 high. we also have the morrison government saying it will seek to lower hurdles for first time homebuyers. we are seeing metta bank private group jumping the most as private health insurers no longer face a cap. we are also seeing again in ramsey health care

ers as well,k at min fortescue extending gains after $100. iron ore break bhp under pressure. shery: thank you so much for that. let us turn to japan. the economy unexpected league growing the first quarter spite lower growth and trade tensions hitting exports and business investment. we are hearing from the economy domestic demand fundamentals are firm and private consumption is broadly unchanged. exports are falling. domestic fundamentals are strong. bloomberg chief economics correspondent has the details. is the minister right? nopositive news, there is doubt, especially given the backdrop. it will give rise to debate over

whether or not consumption tax increase will go ahead at the end of the year. i think if we step back and look at gdp numbers, there is softness under the hood. exports are still falling. business investment is weak. consumption has been constrained a little. when we consider there is weakness still there in the domestic economy, when we look at what has happened on the china story with china's domestic economy showing signs of slowing in the flaring up of new trade tensions with the u.s., perhaps more of a challenge for the east asian region. to get your want thoughts on that sales tax. what do these numbers mean? the economy was somewhat weak. it would not be the right time to go ahead with increasing attacks on consumers.

the last time they did that, it triggered a recession. when you see growth figures like there were hawks in the finance ministry, now is the time to push ahead. that is vital for fiscal stability in the country. at the same time, given that gdp is such a backward looking -- we saw pretty soft readings for the month of april. that was during a time of trade truce, don't forget. tariff increases are expected to hit china's economy. there's is a risk of additional tariffs on top of that. all of that will impact the external demand story, which is not insignificant. the debate on japan's consumption tax will remain alive. they: given that china and u.s. are japan's largest trading

partners, as seen by this function on the bloomberg. does that mean if we continue to see this weakening external factors that economics and stimulus will have to carry the bulk of the weight like housing and public investment? enda: it is the big question. where does any policymaker go up the world does slip? ammunition.w on fiscal authorities have been fairly heavy debt burdens. policyw that japan's makes it unsustainable, it is causing pain for the financial sector. kuroda has, governor committed to keeping interest rates low for the time being. there is no sign of pushing toward negative strategy. i do not think gdp numbers will change side, if you are going to raise taxes the end of the year, that will be a

priority. that remains a key question. whether they raise consumption tax or shift gears and look for putting more money into the economy. criticalones will be on where japan's economy is headed. paul: thanks for joining us. still ahead, more views on the australian election. we will speak to the country's number two gold miner on what business wants from the new government. shery: next, the latest on the trade war in the most vulnerable economy in the world. ♪

paul: i want to update you on this story in australia. scott morrison's government looks set to return to power with a majority. 77 seats predicted.

out someings has put news here. it expects the federal government to reach an underlying cash surplus by next fiscal year in line with the budget presented back in april. the economy is slowing. unemployment has inched up and that could weigh on fiscal revenues. a slowdown could lead to pressures for greater fiscal stimulus. fitch is saying it does expect australia's government to reject reach a cash- to surplus next year. shery: another leg of the em rout. stocks on course for their worst month since australia -- since october. erasing 2019 gains. our next guest is watching closely, the head of global macro strategy for state suisse global markets. great to have you with us. how difficult is it in this environment not to like the u.s.

or u.s. assets? >> it is very difficult. the u.s. story is a good relative economic story. at the same time, u.s. assets offer an attractive yield globally. , you stayy near term in the u.s.. that does not mean even though we are in the middle of a ro -- rout there are not options in emerging markets as well. shery: i wonder how you would rate china. we see on the bloomberg that foreigners are just running away from the chinese mainland markets. the pbocsider policymakers could come in with more stimulus measures, it would then count as an opportunity for you. >> you have hit on a key opportunity -- emerging markets are trailing with the ebb and flow with trade news. we thought the news was going to

get better and we had the shop where it might not. know, the things we do they have a lot of leverage to stimulate the economy of trade war news gets worse. if it does, you can expect a lot more stimulus. that will cushion the downturn. if you did see that stimulus, that would be much better news for emerging markets as a whole. opposite --ke the the observation trade war is a lose-lose. how long do you see it all dragging on for? >> it is very difficult. i would say there are some near-term targets for the next month we are hoping to get to. wardifficulty is the trade is a credible threat. we have tariffs in place and there are more coming. is uperage tariff rate from 5% to 12%.

the threat is it goes to 25%. that would be bad news. be ae near-term, it would lose-lose. markets are telling us it would be a lose-lose. we are assuming political common sense rule the day. i just want to draw your attention to this chart on the bloomberg. you mentioned em before. you see here emerging markets have pretty much wiped out there 2019 gains. if you are looking to get some exposure, you will have to be very selective, won't you? to you, that is up right? there are some economies that are very exposed to the trade war and some that are less so. there are some like brazil that benefit from it because that is what chinese demand switches two. when investments began this year , they began in a very defensive mindset. holdings aresh

quite elevated. i think that is really important in the sense that investors have money to put back into the market right now. it's not that we have gone into this year with investors overweight assets like 2018. means once we get a resolution of the trade war and once we start to see a little bit better economic developer to japan, that is going to get dragged back into markets. shery: as we see the chinese economy recovering, is there hope for the european economy? this is a really big open question. we talk about if the trade war deteriorates, the chinese authorities and the u.s. tohorities have ammunition cushion the downside. the thing i worry about is fiscal policy is constrained and

you do get a bad outcome in the trade talks, europe does have nothing. nothing to stimulate their economy, i should say. that's why it was really important, that news we got last week. at least we know the potential for tariffs are going to be delayed until the end of the year. that would have been a knockout blow for the european economy. shery: thank you so much for joining us. head of global microstrategy estate street global markets. this is bloomberg. ♪

shery: let's get your quick check of the latest business flash headlines. t-mobile and sprint are expected to announce commitments to the government in hopes of pushing their merger ahead. after consulting with the communications regulator, they promised to sell one of their --paid brains -- brandis

prepaid brands. struggling iphone supplier used investorsit to secure a rescue package. it needs additional funding in order to lock in a more than 700 million dollar package from a group of chinese and taiwanese firms. the rescue negotiations will not be able to advance until the extra source of capital is found. google has suspended business ties with huawei. we are told google will no longer engage in transfer of hardware and software except where links are covered by licenses. the next versions of huawei smartphones will lose access to services including the google play store in the gmail app. you can get a roundup of stories you need to get your day going the bloomberg terminal

or the bloomberg anywhere app. theonly get the news on industries and assets you care about. ♪ ♪

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>> this is daybreak asia. we start with the latest in australia. morrison looks like he will be able to secure a majority government after his unexpected victory on saturday. despite trailing in most polls during the election, the liberal national coalition defeats labor in what morrison is calling a miracle. a rise in the employment rate and fewer hopes the trade war will be over soon. that is the lowest level since january. >> i have always believed in miracles. [applause]

tonight, we have been delivered another one. how good is australia? >> tensions are rising as the u.s. navy conducts battle group exercises in the arabian sea. this to counter an alleged threat from iran. a senior military commander in says iran is not looking for war, but it is not afraid of confrontation. the callsia echoed and added it will not hesitate to defend itself against iran. king salman has called a meeting of arab leaders. inpeople have been wounded an attack on a tour bus outside cairo. onis related to the attack egypt's tourism industry which

has struggled in the aftermath of the 2011 uprising. december, three tourists and a local guide were killed by another roadside blast in the same area. 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. are seeing markets across asia broadly higher. let's take a look. sophie: a bounce of asian shares after a decent start with regional benchmark rising while bonds are under pressure. the kospi rising for the first day in three. sydney, shares are rising as much as 1.5% while the aussie dollar is looking for more. do not expect the move to be longer-lasting. it is dependent on u.s.-china trade tensions.

let's switch the board to take a closer look at gains in sydney. 400 climbingx toward a december 2007 hi. we have have to sectors on the index heading lower, but it is financials providing the bulk of that rally. some green shoots coming through in discretionary. some slight uptick in the real estate segment. consumer boost in late of the prospect for tax rebates for half the population as the morrison government seeks to shore up the economy. let's see what stocks are on the move. banks, builders, coal miners and health stocks among the best performers today. many bank privates rallying. the most since 2016. niv holdings jumping as health insurers no longer have to contend with price increases that would have weighed on margins.

i also want to highlight one company jumping with the election outcomes the lowering risk for banks. soaring 6.7 percent, rising the most since november with developers finding relief on tax breaks for properties investors now lifted. that is a snapshot of the movers in sydney. much.thanks very investors are watching for clues from the reserve bank of australia. scott morrison's surprise election when. let's bring in our australian economy reporter. welcome -- what are your expectations? >> there may be redrafting compared to what was expected. morrison's election is important for confidence. the dollar is up. housing, which is obviously an important sector, a bit of a floor on the prices now that labor's policy of cracking down on tax breaks for property

investors has been removed. there are deeper issues at stake. falling property prices have been eroding consumer wealth. at the same time, the labor market, we had data last week that showed -- went up. on employment needs to fall to keep growth steady. it did go up to 5.2%. that is an issue. putting that aside you have the whole u.s.-china trade war as well. there is a lot going on. we have seen market bids come back a bit. shery: can we draw a line between rba rate cut threats and also prime minister morrison's when? -- prime minister morrison's win? >> most people are looking at the tax cuts as quite substantial.

it is going to take time to implement them. have got to draw the map, legislate them, get them through an upper house that is hostile. even if they are doing that, it is not going to hit until later in the year. spending cuts are 60% of gdp. a significant sector and they need cash in household pockets. at least tomorrow we are probably going to see an easing bid from the rba. obviously that cash will you welcome. most traders and economists have been betting on two rate cuts. i think what you could say is that morrison's tax cuts would cast doubt on any additional moves after two if that comes into play. shery: thank you so much. now, over in china, the people's bank of china warning the trade war could destabilize the global economy.

they are going to continue targeted stimulus, stabilizing the yuan. our china economics editor joins us from beijing. abouts the pboc saying really balancing, not only the stimulus measures to support the economy, but not flooding the markets with liquidity? are seeing the pboc continuing. they're going to continue with their target stimulus measures, they going to get more stimulus to the economy, it is not going to be a rate cut, but they did say the economy is growing in the potential growth rate, they are not looking to cut benchmark rate across the board. even with concerns the express , they aretrade war continuing to say, we want to get more credit to small private companies that are struggling to

get access to bank loans. we are not going to be flooding the economy with massive amounts of money. paul: the bank saying the economy has some deep seated problems. where are these problems most deep-seated? >> the debt problem, the pboc has been very concerned about structural deleveraging is one of their policy goals. they continue to see the debt to gdp ratio of the private sector, also the government sector. other concerns obviously the trade war. to flow through to the manufacturing sector. also they mentioned overall lines on the housing sector as a

driver. there had been a big pickup on investment in housing and real estate in the first quarter. which is not a sustainable driver of growth even if it does have a short-term effect on things like steel. obviously the pboc is still very concerned. shery: we continue to see foreign investors fleeing the chinese mainland. what are the chances we will see more aggressive policymaking if we continue to see market turmoil? >> if the yuan resumes its fall, you would expect to see the government encouraging state owned enterprises and funds to step into the market, whether that is more policy stimulus is hard to say. last night at 6:00 p.m., the head of the state administration

for foreign-exchange command -- tohe government has defend the yuan. this morning it was approaching 70 on the dollar. to be verbal to me intervention where they say, we have the tools, we are capable of keeping markets stable. if that does not work, you may see stepped up rhetoric, but .lso the fx paul: thanks for joining us. japan's big banks have failed time after time to win serious clout overseas. that weakness abroad could be a serious handicap for lenders .acing tough times at home why have japanese banks failed

to make it overseas? morning. one of the major factors for japanese banks and brokerages failing to make it in the capital markets overseas has been cited as a corporate culture, very risk-averse culture according to people we .nterviewed for the story former employees and current employees have pointed to this emphasis on consensus decision-making. also they cited the practice of rotating managers every two or three years. major japanese firms rotate someone from tokyo to do those jobs. they lose a bit of momentum, a bit of institutional memory. effectorse corporate

ford as being mixed factors japanese banks not making it .nto capital markets shery: we see this low rate environment in japan. the bloomberg showing interest margins taking a hit as we continue to see that low rate fall inside japan. let us talk a little bit about nomura right now. how well have they done about capital markets globally so far? >> not very well. the number is probably the poster child, i suppose, to be itnk, for not really making overseas. the problem is well documented. several times in the past have had the biggest ambitions in trying to make it overseas. they bought up others. now revenue and factors are back

to where it was even before that acquisition. last year they posted their first annual loss in a decade since that lehman deal was done. . it is no surprise they are now going on another round of cost-cutting. that is being poorly received by investors. down for a 10th straight day since they announced their annual loss. the outlook is not looking so bright for nomura. partf the former traders of the latest round of cost cuts cited the bank's risk-averse culture is one major impediment. nomura has a lot of issues to work through. paul: bloomberg asia finance editor russell from tokyo. thank you for joining us. next, a business view of the australian election. we will dig into the results.

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unexpected.y those are the takeaways from the australian election. scott morrison describing it as a miracle, but he knows better than anyone it is going to be a challenging time for control of the australian economy. one of the critical players in us commodities sector joins here in sydney. we were just discussing that result. what were your thoughts? i was as surprised as everyone. it did seem as though labor was going to come in. i picked it wrong. a result few business people would be unhappy with. >> what does this mean for your

sector? did you feel the commodities sector was adequately engaged by both parties? there was a huge amount of coal mining sentiment. you have four minds. >> yes we do. i felt the narrative to mining .as been negative, generally climate change has been a significant issue. but the australian mining sector delivers positives. billion of taxes and royalties to the country. we are the biggest exporter. good paying jobs for hundreds of thousands of people. i think we have a great mining industry. we could make it even better. -- shery: weo seem continue to see environmental concerns.

will this impact your industry? : australia has one of the highest environmental standards. it takes away from the big positives, this negative sentiment around climate change and the compelling need to do something. i think the mining industry is doing something. of course it could do more. we could get into a rational and constructive debate with the government and commentators about what more we can do. australian that's around 1% of global omissions. we are not going to change climate change. but we have got to do is understand the impact and cost of being global leaders in this area. i think the mining industry is up for that. shery: your peers like northern star have purchased assets in north america. do you have plans? jake: we are interested in north america. it has certainly been a trade

that has been done by several companies. we have kicked a lot of tires in that area and we are looking hard. improve the quality of our portfolio. we will continue to look. i would say australia, with all our assets in australia, one of the greatest places in the world to mine. with the right engagement, it could get even better. shery: is that because easier assets have been taken by your peers? jake: i don't think so. we are continuing to look for things. they have made their decisions and we have decided to be more patient and wait it out until we find something that really does improve the quality of our portfolio. do you see anything among that you like taco -- like?

jake: the mind we bought from them has been a wonderful example of -- mine we bought from them has been a wonderful example. we bought it four years ago. we have generated almost over $500 million of cash flow. andave added 3.3 million extended the mine for almost eight years. see them at this recent conference, i certainly put my hand up and said, remember us. paul: you did say australia is a great place to mine. how much of that equation is the aussie dollar? it has been helpful to you. >> it has. acquired assets and economic interests in queensland

, which have proven to be -- in a cyclical sector like gold, you have to be cyclical. ,he gold crash at the moment wonderful gold price. we are making lots of money. shery: we have seen gold prices range down given the recent spike we saw due to trade tensions, would you say the trade war could be the game changer here? we are certainly seeing more investors thinking about gold in their portfolio as a hedge against the increase in political and trade tensions and financial risk that is growing. fundamentally, we are focused on building a company that can prosper through the cycle. margins on every ounce of gold we are producing. we are generating substantial amounts of cash flow. , you have to-term

build a business that is -- that can withstand inevitable cyclicality. we are not building our strategy around that. thanks so much for joining us today. don't forget, our interactive tv function tv . you can catch up on past interviews as well as dive into any of the securities or bloomberg functions we talk about. you can also become part of the conversation by sending instant messages during our shows. this is for bloomberg subscribers only. ♪

paul: a quick check of the latest business flash headlines. toyota has rebuked donald trump's assertion that imported cars threaten national security, saying it sends a message to the company's investment in america is not welcome. the president complained about the declining share of u.s. carmakers and has given japan and the eu six months to negotiate new deals. saudi arabia has fined 16 financial institutions including the kingdom's biggest bank for violating what it describes as

principles. the central bank imposed the penalties to insert -- ensure the entities read the rules of society. the central bank has not disclosed the amount of the fine. paul: china's former top securities regulator is under investigation for a suspected violation and has turned himself in. he was chairman of the chinese security regular tory commission for three years before being replaced in january -- security for three commission years before being replaced in january. he is cooperating with the investigation. shery: let's get a preview of what to watch later this morning. malaysia, singapore, and thailand are fine this monday -- offline this monday. sophie: trading will kick off in a few minutes in taipei. we will be watching how the

taiwanese dollar will perform after posting its biggest weekly decline in two years on friday. collateral damage in the yuan's record retreat. the two are the most correlated since 2015. commerzbank reckons if the yuan does drop seven against the dollar, that should push the taiwanese dollar to 3180 for greenback on concerns of a slowing china on taiwan's economy. a check on that later this afternoon with export orders due from taiwan. the forecast is for a continued contraction at 6.4% compared to the 9% drop we saw in march. i want to pull up the board here to highlight aac technology, which has been updated to buy from hold after its first quarter beat estimates. the tech player delivering better revenue growth.

paul: thanks very much. before we hand over to "bloomberg markets: asia," let's look at how things stand. the nikkei is higher by 0.3%. better-than-expected first quarter gdp numbers out of japan. expansion where we expected modest contractions for the first quarter. asx higher by almost 1.5% right now. the financial sector pulling that higher. it is all due to that incredible result we had in the australian election. scott morrison's government returning with a majority. stay with us. ♪

>> it is not :00 a.m. monday morning here in beijing, shanghai, and singapore. yvonne: we are counting down to the open of train in hong kong and mainland markets. here are the top stories, the aussie dollar strengthens after a miracle win. they may form a majority government. japan springs a surprise, the gdp smashing estimates for the first quarter with a 2% expansion. yvonne: and the people's bank of china warns of threats to the global economy. the targeted stimulus will continue. ♪