paul: welcome to daybreak australia. i am paul allen in sydney. >> we are counting down to asia's market opens. paul: here are the top stories we are covering in the next hour. china threatens a strong response to president trump's huawei ban. america, tom inside

o. nike and adidas called the trade war catastrophic. asx 100 sees its biggest decline in a week. effect. ripple how the trump administration chokehold is reverberating throughout the supply chain. that of course had an effect on u.s. stocks. semi conductors leading declines in today's session. the philadelphia semiconductor index plunging 4% for a third session. it did not help that president trump came out in an interview and said he was very happy with the trade war with china and that china would not become a superpower under his watch. we saw the nasdaq falling the most in a week. s&p futures at the moment are higher, .2%.

>> we are bracing for a down day. it's looking more like a mixed session with nikkei futures looking higher. global supply chain woes over huawei, tech shares and chinese retaliation. the rally may be losing steam with projections showing a 6% drop over the next 12 months. we have data that will offer more clues as to how deep the drop is for the month. plus, we will get gdp figures from singapore and thailand. orderss as april export fell by less than expected. followedeeting will be by a speech that is crucial for aussies depending on whether he

adopts a more explicit plan. now. first word news jessica: the trump administration has moved to block former counsel don mccann from testifying to congress asserting broad immunity. a statement from the white house says president trump has directed mccann not to appear at a scheduled hearing on tuesday. -- mcgann not to appear at a scheduled hearing on tuesday. the immunity claim was also used by presidents bush and obama. backmise to scale restrictions under the nuclear deal the u.s. abandoned last year. enrichment of uranium has been increased and the nuclear watchdog has been informed but

iran has not raised the level beyond agreed limits. american airlines is asking a court to end what it calls an illegal slowdown by unionized workers. it has disrupted travel for 125,000 people in the last three months. american says mechanics are taking too long to repair planes and are refusing overtime to gain leverage in contract talks. the two sides have failed to reach an agreement on pay, health, and retirement benefits. a warning for hong kong. it is falling well short of basic imf usable reserves by all measures. usableng's actual reserves are 13% of what has woefullyorted and are "

inadequate." mobile news 24 hours a day and on tictoc by twitter. i am jessica summers. this is bloomberg. jessica.nks very much, china is warning it may step up retaliation against the united states after president trump lack listed huawei technologies. the trade minister -- blacklisted huawei technologies. china's trade minister accused the u.s. of black male and said china will not sit by and do mail and-- black said china will not sit by and do nothing. >> the question is how they will retaliate to the latest from the white house. it will have ripple effects throughout china and in policy. we are hearing from various chinese officials that they are kind ofreadying a new

retaliation. the chinese ambassador to the eu -- i will just quote a few things he is saying. this is wrong behavior, he says, of the united states. there will be a necessary response. chinese companies legitimate rights and interests are being threatened and china will not sit idly by. does are being undermined, so that chinese government will not sit idly by -- are being undermined, so the chinese government will not sit idly by. he called this bullying and ail and said that china will refuse to back down in the face of such tactics while keeping the door open to dialogue. they often use the position, we have been holding on 5000 years, why not wait another 5000 years?

how else can they retaliate? they cannot do it in kind dollar for dollar on imports from the united states but they do have leverage in areas like rare-earth. they control about 80% of the rare earth that goes into everything from automobiles to iphones. perhapst xi jinping, coincidentally, perhaps not, visited a rare earth facility in the jiangsu province and that was carried heavily on state media. that does raise the specter that aswill weaponize rare-earth a measure for tit-for-tat retaliation against the united states. shery ahn: of course, this would not be the first time china applied rare-earth restrictions. 2011 and prices surged. but that would affect their own producers. how are they going to balance that and is this a real possibility? is a threat. it

yes, it would hurt. the trade war will hurt both chinese and american companies. but again, this is an attempt to gain some leverage, obviously. chief northerg's asia correspondent stephen engle in hong kong, thank you for joining us on that story. for more on the impact of president trump's huawei ban, we will break down the damage. itry ahn: up next, when puts to trade talks a trump is helping the market be resilient. that's just ahead.

paul: i am paul allen in sydney. shery ahn: i am shery ahn in new york. you are watching daybreak australia. trump's.s., president action against huawei was felt

throughout the chip sector. >> many of them have already stopped shipping and that has had an effect already. it shows that the market is still on edge. take a look at the way we closed. notice the semi conductor index, down 4%. that shows you the big drag, which was tech. futures are up slightly as we head to the next open. qualcomm, note they put out a slashing their forecast because of the anticipated loss of revenue from huawei. they have halted shipments as well. takencompanies have all major hits. let's go into the bloomberg real quick. here you see the last couple of .ays of sales

lastly, let's take a look. this is a marquee stock that fell as much as seven point 5% in the latest session. in the friday session. an analyst says this is code red for the stock. they are really hoping that reaching the $200 level is significant. the company faces a monumental uphill climb to return and reach profitability at this point. paul: a fairly diverse range of fallout from tariff related issues. athletic shoes and a telecom merger teetering on the brink. what is the story there? : pretty major moves quickly from adidas and nike. they sent an open letter to

trump saying the tariffs would be catastrophic for the industry. take a look at fuel stocks, which were slower for a number of reasons, including technical reasons. but there was a rollback in mexico and canada on tariff concerns, which some viewed as a positive. t-mobile and sprint moving higher. the regulatory chief of the fcc giving a nod on the merger but the department of justice said to disfavor the deal. signalsnflicting affecting stocks as we head into the wednesday session. shery ahn: oil had been fluctuating recently. president trump talking about iran a few minutes ago. saying any iran action would be met with great force. no talks going on with iran. geopolitical tensions rising. in the most recent session

we saw that opec is going to hold onto these cuts. that trumps the trump comments although that may change as we get more details on the latest comments. shery ahn: thank you for that with the latest on the markets. is a chief market strategist, brad ewing. always great to have you with us. we were commenting on president trump's impact on the oil markets, but of course, it's everywhere. we know he is very attuned to the stock market. would this be considered a trump put? >> yes. very sensitiveis to the stock market. he likes to tout all-time highs every time we get there. onbelieve he pays attention a daily basis. i believe there is a lot of flexibility with this administration to do some things

that would help soften the blow as this trade war escalates through the summer. shery ahn: of course, we do get a lot of data that will affect what the fed does. when it comes to housing, we are expecting more numbers coming out tomorrow on existing home sales. we saw new home construction doing really well. is this a market that would interest you when it comes to investment? >> the housing market and housing industry does quite a bit. i think the selloff in 2018 was well overdone. i think it was mostly fed-induced. this year with mortgage rates we have had the largest drop in rates since 2009. i do believe buyers are going to come back to this market. i believe the housing industry is poised to outperform.

we are looking at that is a great place to put some money to work this year. paul: would you consider tech a great place to put money right now? we saw the nasdaq take something of a beating today. if we jump into the bloomberg and take a look at this chart, you can see the long contracts on the nasdaq have reached their highest point of the year. if you prepared to be patient and wait out all this trade noise, is there still value to be had? we put out a note last october saying that it's a little overcrowded and too much positioning within the index. i think if there is some volatility in the market, i think the indexes are going to punish large-cap tech. we are looking for opportunities in small and mid-cap tech that's

a little more isolated out of these larger index. paul: the russell 2000 was not immune to today's selling. that was a place to hide in the first round of the trade war. is that not the case anymore? >> there was a report i recently about fund flow into small-cap indexes. we are seeing inflows into small-cap sector. we like to pick individual names and not necessarily play the indexes, so. shery ahn: going into the trade negotiations, the markets were pretty optimistic we would get a trade deal. perhaps too optimistic? is this a blessing in disguise that markets have pulled back a little bit? >> we are sitting here having drama over the markets and this

conversation -- we are approximately 3.5%-4% off the all-time highs. yes, the market hasn't gone anywhere for the last 15 months, but i think the market was a little optimistic that a trade deal would get done this month. i think this is more realistic. the market has definitely come to terms with longer-term trade negotiations. i think that's good and more realistic. sales haveretail been disappointing. how are american consumers doing ? the consumer sector is something you still consider an opportunity. >> i think the u.s. consumer is being underestimated as to how strong they are going to be in 2020. i like to focus on jobs. we have had one of the strongest markets in 40 years.

jobless claims popped up but came back down. people have jobs. wage growth is occurring well above inflation rates. is aieve that psychological effect with the consumer, and i think it's going to get stronger as we move through the year. paul: thanks very much for joining us. joining us. ewing you can get around up of the stories you need to know to get you going in today's edition of daybreak. bloomberg subscribers can get them on their terminals. it's also available on the mobile with an app. you can customize the feed to only get the stories you care about. this is bloomberg. ♪

this is bloomberg

technology global link. i am paul allen in sydney with shery ahn in new york. emily chang's in san francisco. let's take a look at the top stories of the day. emily: net income through march was 453 million dollars, more than double the forecast. it made its name with inexpensive devices that touted the potential of online services. global payments -- mobile payments, video streaming, and other products helped it in the market. thention turns to whether t-mobile-sprint merger will clear antitrust regulations. the department of justice is opposed to the deal over concerns.n

mary meeker has chosen an online australian design platform for her new venture capital firm. canva has more than half a million paying subscribers including yelp. those are the top global tech stories we are following. back to you. shery ahn: the impact of the trump administrations iscklisting of huawei sending ripples across the global supply chain, hitting chipmakers such as intel and qualcomm. we look at the fallout and the escalating trade war with mark bergen. great to have you with us. we know these moves are in order to be against huawei and other chinese firms, but it will have

an impact in the u.s. as well. who will be hurt? >> this is really going to hurt the chipmaker and semiconductor industry as well as software. nogle confirmed it can longer provide its version of android to huawei. that could be a big hurt to google's mobile business going especially if you see consumers turning to apple devices. emily: how much will this hurt huawei? if you buy a huawei phone outside of china will you have access to google play? feature,s a huge google maps, youtube. , versions of those apps won't be on huawei devices.

chip ina negotiating the broader trade war. huawei is working on their own internal software. they may launch a version of the phone that doesn't rely on google. shery ahn: recently, we saw moves to reestablish their presence in the u.s. how is business going for this company? mark: they have been growing despite these bands and the political tension. they have seen steady growth in networking and the smartphone business. they are contributive into the cloud and artificial intelligence. they have been looking at europe, latin america, southeast asia. certainly, if they cannot rely on google and google software, that could cripple their business outside of china. emily: we recently got word that the u.s. commerce department

changed the rules a little bit, and of course, the situation is changing by the minute. they could go easier on huawei and that would affect suppliers who have cut while way off -- wei off.y -- cut hua mark: there is a broader political conversation, but the core technology, whether the component side in googles hayes, software or services are being used as a bargaining -- google's case, software or services are being used as a bargaining chip. policy is really shaping the way these companies do global business. we have seen europeans saying they will keep up supplies. how well has the trump administration fought this battle against huawei? mark: it's the first pass.

china has been working for years to become what they call silicon independent. u.s.ow, we see that companies and chinese companies are very codependent right now. worlde not moved to a where china can stand alone. emily: last quick question. what is next? what is the next shoe to drop? mark: one interesting shoe to drop is to look and see how the internet evolves in the future. china has been pushing its own version of the internet and you see that across southeast asia and latin america. there are tighter controls and restrictions. china is the operating system. we will see if huawei can

continue to grow outside of china, what is the evolution of the internet and the technology sector? paul: mark bergen, thanks for joining us. that is bloomberg technology global link. in sydney, 5:00 a.m. in hong kong, 5:00 p.m. in new york.

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830 a.m. in sydney. after monday's relief, futures are down almost .2% following u.s. equities. i am paul allen in sydney. shery ahn: i am shery ahn in new york where it is 6:30 p.m. let's get to first word news. jessica: china is warning it may bump up retaliation against the united states after president trump blacklisted huawei technologies.

the chinese ambassador accused the u.s. of bullying and blackmail and said the chinese government will not sit by and do nothing. he said trump's actions are politically motivated and an abuse of export control measures. nike, adidas, and other footwear companies have sent an open letter to president trump, calling the tariff war catastrophic for consumers, buyers, and the u.s. economy as a whole. the letter was also addressed to steven mnuchin, wilbur ross, and larry ludlow. the latest official results in indonesia show the president won last month's election. that puts him on course for another five-year term. the general election commission earned the votes of more than half the electric. there were claims of fraud but

the commission cited a lack of evidence. global news 24 hours a day and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. ♪ to hongn: let's head kong for what to watch in markets this morning. sydney, as the company sees modest housing growth waning and the intralian market shrinking 2020. the board is focused on the that china has asked for financial due diligence on the aussie health care player. ozzie stocks remain in the spotlight after the big surge on

the election outcome. jumpingled the rally, 9.2 percent, its biggest one-day gain in almost 30 years. venturenounced a joint with blue line to start a rare earth plant in texas which would fill a gap in the u.s. supply chain, which relies on chinese imports. paul: a lot of moving parts in those stories. thank you very much. trade is underway in asia. trade wars are becoming more prolonged. here. is any comfort at all for investors? asians interesting that stocks did not react a lot

.esterday the impact was largely confined to china and hong kong, and to chipmakers in particular. even there, the declines were i think we are going to see more moves in asia. there is a realization that the trade war is going to be prolonged. it is not going to be resolved overnight where is a -- whereas a few weeks ago there was more optimism that we were heading toward an imminent resolution. adapting toe lengthy periods of negotiation. huawei plays into that. i think we will see more of a downside in asia today.

we do have these fed minutes that are going to be very watched. the message seems to be that are cuts, rate hikes weighed equally. something else for investors to watch closely. but certainly, trade again dominating everything that comes rhetoric.he it's something to keep investors on their toes. shery ahn: one of the region's -- onceequity markets going on in new zealand? >> that's right. market cap is now the best major asia-pacific market. china in the first quarter enjoyed a much bigger market,

about five dollars trillion -- $5 trillion. new zealand is a market that's largely insulated from what is going on with the trade war. have new that, you zealand interest rates becoming the first among developed economies to cut. that also helps new zealand. it remains to be seen if that's going to continue after this rally. shery ahn: thank you for that. underrse, you can find areas chart on the g tv library on -- andrea's chart on the g tv library on the bloomberg. fed chairman jerome powell is preparing to address a conference in florida with

investors around the world waiting to hear his views on tariffs, growth, and inflation. our editor is here with a preview, but not just any preview. get a glimpse we of what powell might say? kathleen: i think we can. kickingthe whole thing off with the president of the bank of atlanta. it's his bank that's holding the financial conference in florida. he got the event going this down for anthen sat exclusive interview. he was asked if the market had gotten ahead of the fed and whether we should be looking for a rate cut. here's what he said. >> right now, there is uncertainty. it's hard to say what the next move might be. if you ask me what the scales are, i don't feel they are tilted to the cut than the hike. i think we are balanced.

kathleen: in fact, he thought it could play out in a negative way. he hopes things will work out in a positive way. he said right now fed policy is exactly on point and we are in a pretty good place. other officials echoed the idea that the economy and fed are in a good place. paul: number two and number three at the fed also speaking today. what did they say that might give a hint of what jerome powell might say later on? >> they are getting more into the weeds of monetary policy. they are holding a series of events this year. you can see the vice president of the federal reserve speaking at the new york fed today. thatlked about the fact full employment, the level where we have to worry about inflation because unemployment is too low

may be 3.6%. in other words, you don't have to worry about hiking rates because inflation is low and falling. john williams, the number three among this group, said he has changed his views on how low unemployment can go. listen to what he said. >> this is an economy that can operate at 3.6 percent unemployment without creating inflation. that's good. in a's not too surprising, way, what they are saying. unemployment was off the charts during the great recession. .t's now down to 3.6% that could be the full employment level. meanwhile, wages have risen to percent year-over-year. they have not risen nearly as much as unemployment has fallen. key inflation the

measures. the target is to percent. is it going up with wages and going up as employment comes down -- unemployment comes down? but no wonder officials like these three powerful ones are saying maybe some of these forces have changed. speaking in an interview saying that if core inflation stays persistently low, he would be inclined to start thinking about a rate cut. he also said it's natural for president trump, who is in the real estate business and cares about rates to talk about rates. i don't know if jay powell will say that tonight. shery ahn: we continue to hear from the president. chair powell is speaking in about 20 minutes time. are we expecting him to echo those remarks? on may 1, at the two day meeting, he said policy is

appropriate right now, there is no reason to move in one direction or another. in fact, when it comes to shortfall inflation, he stressed the transitory factors pointing inflation down. raised --cent regular really -- the fed recently released a financial stability report. the report said -- it looked at corporate debt, highly leveraged corporate debt and how much it has risen. powell, whoe chair has so much expertise in capital markets and domestic finance, may take a hard look at those factors as well. those are all very important. some people said he can't keep rates too low for too long. we will see how that gets addressed when he speaks. economics and policy editor kathleen hays. thank you for keeping an eye on all of that.

bank ofp, the australia. should we be expecting a rate cut at the next meeting? this is bloomberg. ♪

paul: after the weekend election, investors are turning their attention to the bank of australia. the governor is to give a speech on monetary policy on tuesday. in britain, many are predicting a rate cut. one economist has a different take. has the rba onon hold at one .5% for the foreseeable future. 1.5% for the foreseeable future. she joins us now. a lot of people are expecting a rate cut in june after the

unemployment figures last week, but you are not so sure. >> we still have the rba on hold , but we are watching it very closely. lot about theed a labor market. they have said we need to see further improvement in the labor markets to bring inflation back to target. we've had a mix of job numbers last week. we saw a solid increase in the number of jobs. we did see the unemployment rate at three point 5%. it will be interesting to see if that's enough to push the r.b.i. -- rba to cut rates in the coming months. paul: after the weekend result, i want to show you what i have

on the bloomberg terminal. australian stocks topping analysts 12 month target. the white line which is the asx is overtaking the blue line, which is the target. that's what it looks like when reality outstrips expectations, so we may see some tax cuts coming down the line, but will that be enough to lift consumption, employment, growth, inflation. is it going to do all that? really large personal income tax cuts for low and middle income earners were flagged to go to about 10 million earners. we expected it would be the equivalent to two 25 point basis point rate cuts. we heard some news stories this

morning that the government might have a little bit of trouble getting the latest round of tax cuts passed through the senate, so there could be a when it those cuts, but comes through, it will be a fairly large amount of stimulus. it will be direct. rates, people have to phone their banks and ask for their rate to be reduced. a lot of people don't do that. the tax cuts could potentially have a reasonable impact on household spending. shery ahn: campaign promises included new schemes for homebuyers. we continue to talk about the property slump. the gdp chart on the bloomberg showcasing the downside pressure we are seeing in the property market. what impact will we see there? was part of the election

campaign. the coalition government talked about allowing first-time buyers to only put a 5% deposit rather withthe usual 20% deposit, the government essentially guaranteeing the extra 15%. that would allow first-time homebuyers to get homes faster. they were limiting the benefit to only around 10,001st-time buyers. typically around 100,000 -- 10,000 first-time buyers. typically, 100,000 buyers are coming into the market. so the policy would only help around the margins. projectionst the , we arebudget surplus in a surplus on a 12 month

rolling basis. the government is projecting a surplus for next year and the following four years. that's their forecast. we have also had our deficit shrink quite dramatically. our budget position and our , as far as the ratings agency, those concerns have gone away. the housing market is rising strongly. we have seen that issue recede as well. i think it's safe to say that our july credit rating is fairly safe at this point in time. paul: senior economist christina clifton, thank you for joining us. you can watch us live and see past interviews on tv . you can dive into any bloomberg function we talk about. you can become part of the conversation by sending is

instant messages during the show. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

shery ahn: i am shery ahn in new york. paul: i am paul allen in sydney. you are watching daybreak australia. about 7000slash white-collar jobs, about 10% of its global salaried workforce after mounting pressure on automakers to keep up with technological changes. the ceo says the cuts will save ford about $600 million a year. the majority will be completed by friday in america and at the end of august in europe and china. in april, the bank

reported a ninth consecutive quarter of contracting revenue and cut its outlook for the full year. in discussionis with ubs about combining management operations. those talks are said to have stalled. kong.calling time on hong it became the very emblem of boom and bust. investors voted to take the company private next month. once the world's biggest solar company, hanner g plunged -- ago.gy plunged four years it was worth $40 billion before the stock tumbled. shery ahn: south korea has held a trade fair that is seen as a barometer for trade with the outside world. the event in pyongyang looked bigger than ever thanks to a large turnout by chinese

companies. tesla shares have seen a selloff of over 20% following this than $2raising of more billion in capital. stock once bullish on the but is warning that tesla faces a code red situation as it tries to make a profit. profitability does not come in

will have to raise $1 billion-$2 billion more in capital. shery ahn: for more on this story, let's go to san francisco. what tops the agenda right now for investors? >> how many cars tesla is going to deliver in the second quarter. the company has given guidance that they plan to deliver 90,000 to 100,000 cars in q2. there is not a lot of visibility yet as to how that's going. in the quarter is halfway over. the bigger worry here? trade or delivery numbers? >> it's both. it's a double whammy. a trade war is never a good thing. china is a big, important market to tesla. they are scrambling to build a factory in shanghai and are trying to get around the trade war. if tariffs go up on imports, that's going to make the cars out of reach for the average chinese consumer. at the same time, we are starting to see signs of a slowdown in the global auto market in general. there is no longer a tax credit for tesla vehicles in the united states. there are a lot of serious questions about demand. we hear a lot about tesla's competitors, but it doesn't really have head-to-head

competition. theler -- tesla has been first mover in electric vehicles for a decade now. we keep hearing about german automakers coming online, but there is not really a lot of other offerings for sale in the united states just yet. the plan for tesla? how is it going to deal with this? >> that's the billion dollar question. elon musk just managed to raise $2 billion. there is talk about autonomy and an autonomous fleet. he promises the company will be back to profitability by the end of the year, but a lot has to go right to get there. we are seeing once bullish investors downgrade multiple times in the same month. it's a surprise. paul: is this going to embolden all the short positions against

tesla? be up today.ould short-sellers profit when the stock goes down and this should be a good day for them. i think they felt all along that the company was overvalued. this sort of bolsters that thesis. shery ahn: thank you for joining us with the latest on tesla. plenty more still ahead in the next hour on daybreak asia. fed chair jerome powell is about to speak. into four is almost daybreak australia this morning. trading in new zealand is .nderway the indexes modestly higher at the moment. lower futures pointing after a big relief rally on monday with the markets popping after the1.5%

surprise victory of the coalition. we will have bank of australia minutes a little later on and the rba governor is speaking as well. the local unit could move. that is it from daybreak australia. all the action coming up from daybreak asia next. this is bloomberg. ♪

>> good morning. i am paul allen. we are under an hour away from the australian market open. -- asian market oven. kamaruddinm sophie in hong kong. welcome to daybreak asia. ♪ story this tuesday, china threatens a strong response to president trump's huawei ban. they accused him of blackmail.

in an open letter to