>> 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 the

president, they branded his trade war catastrophic. the markets are lower. chip stocks are headed south. the nasdaq saw its biggest decline in a week. latestre getting the from jerome powell's speech tonight on leveraged lending. he said leveraged loans are good when times are good. if the economy weakens, we can't be satisfied with current levels of knowledge that the fed sees business lending risks as moderate. that is focused on scope leveraging loan markets. the vulnerabilities are more closely watched then before the crisis. mr. powell sees the benefit in seeing who is bearing the risk linethose on collateral loans. the economy shows continued growth, job creation and is strong.

--is giving a keynote space speech at the atlanta fed tonight. what does the next decade hold? we are waiting for those latest lines coming out of that speech. u.s. futures are up. we will analyze what the fed meansor what chair powell with all of these comments on leveraged lending risks. but get a look at how the market closed. we saw a downside pressure on the s&p 500. down for two consecutive sessions. they were very much pressured with the philadelphia index losing 4%. the energy sector is barely holding onto gains. overall, it was those trade tensions around china and huawei lower.d the markets

.2%.es are up we got the latest comment on thatleverage lending in speech. we will see how we are shaping up for the asian markets. we are washing for asian chip related stocks to take a hit as china ones of -- warns of a re taliation. we are seeing little change. they surpassed china as the top stock market this year. we get the continued slowdown, singapore and thailand reported trade figures will give us more help. sam's unconsciously predicted a rebound into prices in the second half. a quick check on the aussie dollar which is holding steady.

this seems to be make or break out and any near-term rate cuts. paul: thank you for that. jerome powell is speaking now. he is at the atlanta fed's annual conference in florida. powell: i will book is on the increase in business debt over the last decade. i will review the steps that the federal reserve and other agencies are taking to limit the associated risks. in public discussion of this issue, abuse seem to range from this is a rerun of the subprime nothing toisis to worry about here. the truth is likely something in the middle. to preview, my conclusions as of now is business debt does not present the kind of elevated risks to the financial system that would lead to brought harm to households and businesses

should conditions deteriorate. the level of debt could stress borrowers if the economy weakens. the fed will assess the potential application of the stress on borrowers. i currently see such risks as moderate. many commentators have observed with a sense of deja vu the buildup of risky business debt over the last few years. the acronyms have changed a little bit. we have seen a category of debt that has increased faster than the borrowers. much of the borrowing is financed opaque way -- opaquely. outside of the banking system. at the fed, we take this possibility seriously. the fed and other regulators are using our supervisory tools and

closely monitoring risks. business debt has reached a level that should give businesses and investors reason to pause and reflect. if financial economic conditions were to deteriorate, firms could well face severe strain. the parallels to the mortgage boom that led to the global financial crisis are not fully convincing. most importantly, the financial system today appears strong enough to handle business sector losses. this was manifest in subprime mortgages a decade ago. there are others. in contrast to the mortgage boom , business credit is not fueled by a dramatic asset price bubble has mortgaged it was. clo structures are much sounder than those that were in use during the mortgage credit bubble. could the debt pose greater

risks to the financial system? that is greatly appreciated. we ask ourselves that question. we are trying to understand and better address the risks. introduction with other u.s. regulatory agencies, internationally through the financial stability board, we are monitoring developments, assessing unknowns and working to develop a clearer picture. we are also using our supervisory tools to hold the banks we supervise to strong risk management standards. we are using our stress test to ensure bank resilience, even in severely adverse business conditions. the basict with facts. many measures confirm that the business sector has significantly increased its borrowing as the economy has expanded over the past decade. is this debt relative to the size of the economy is at historic highs. debtrate -- business

relative to the excise of the economy is at historic highs. investment grade corporate debt has shifted closer to the edge of speculative grade. at the moment, the business sector is quite healthy. business income is strong. because interest rates are low, by historical standards, the cost of servicing today's higher relativels remain low to business income. despite crosscurrents, the economy is showing -- >> we are watching jay powell give a keynote speech. he was talking about the leveraged loan lending situation in the u.s.. let's bring in our editor, kathleen hays. last time that we saw jerome powell speak was after the press conference. he seemed pretty upbeat about his economic assessment. a little more than what the fed statement has to say. he seems a little more confident when he comes -- when it comes

to the resilience of the economy to private sector losses. it is only the second report that has ever been issued. the fed always talks about the kinds of research but jerome powell is the one that oversaw the limitation of this on a semiannual basis. they are watching corporate debt there he closely. i called up a bloomberg chart our library. about alling corporate debt. this is corporate debt to u.s. gdp at record highs. look at how it has climbed from the depths of the recession. the total amount is twice what it was going into it. that is one reason why the fed is concerned. there is a lot of riskier debt piling up. obligations. he talked about their four-point check listings.

there looking at borrowing by businesses and households. also, funding risk. thatare looking at things look like they're at the point where they need to be watched closely. he says toward the end of the speech this debt growth has moderated somewhat since 2018. this might be a pause, a sharp increase in debt. it could increase bone abilities of a. the federal reserve is watching increase appreciably. the federal reserve is watching this. if you keep rates low for a long time, keep liquidity in the system. firms will reach for yield. that will create some sort of financial stability risk. they will take some of those

, who theyential tools are lending to. that is what this leads to. one other thing i would like to add, why are they having the conference in florida? this is the sixth district that includes atlanta, florida, mississippi and tennessee. that is how they set these up. that is how this comes together. it is important that the fed tells us we see the risks monitoring closely. -- and monitoring closely. we will make sure that this does not get out of hand. paul: we also know that jerome powell have a few other things to say about wages, inflation. what is the word? kathleen: he is putting a happy face on the fact that inflation is so far below target. the core rate is down to 1.5%. you can dismiss the headlines.

they are divided by oil prices. they have been volatile lately. the target is 2%. one thing he stressed at the end of that meeting is that these are transitory factors. our bloomberg economics team says you can only count cap of those factors as transitory. that if thisaid consistently low, he would think about voting for a rate cut. speaking inces unison at the fed saying that we are where we need to be, we are watching closely. we will make a move if we need to. paul: that was kathleen hays. thank you for keeping an eye on jerome powell's speech for us. bloomberg subscribers can continue to watch powell go inng if you go to live your terminals. china says they will step up

after president trump blacklisted technologies. jim hackett accused -- zhang ming accused washington of blackmail. stephen engle has the details. nothing,ill not do what will they do? phen: the chinese have been responseted in their to trade were tensions. when huawei starts coming into the picture, the commentary of the chinese gets a bit more the separatists -- vicious. this is where we are right now. we are getting comments as you rightly said from the chinese ambassador to the european union , zhang ming.

wrong behavior. he is referring to president trump's recent blacklisting of huawei. he says this is wrong behavior and there will be a necessary response. businessights and interests are being undermined. he says it will not sit idly by. he says the u.s. government is trying to bring down huawei through administrative means. paul, you said it right, he used the term bullying and blackmail tactics. he urged the trump administration to not go further down the wrong path. we heard from the chinese foreign ministry spokesperson. he says we will have to wait and see in regards to countermeasures. state media highlighted that whether it is a coincidence or not, xi jinping was visiting a .are earth the saudi

feeling speculation that strategic metals could be earthize by the -- rare facility. fueling speculation that strategic metals could be weaponize did by the chinese -- chinese.d by the >> it is not just the u.s. that could get hurt. hina accounting for a lot of global production. the shoe industry is also outraged. absolutely, the shoe industry in the united states is already one of the most terrorist -- tariffed industries. the united states was negotiating the transpacific

partnership under the obama administration, many of these moved to shoemakers vietnam. ofss who pulled the u.s. out tpp? donald trump. they don't have those advantages now. nike, 26% of their apparel is made in china. you can see the graphic on your screen. what are the apparel and shoe industries doing? they have written an open letter. 173 countries have written letters to donald trump to say that these increased tariffs will be catastrophic for in their industry. on behalf of our hundreds of millions of footwear customers and employees, we ask that you stop this action to increase their tax burden. add tariffs ono all imports from china is asking the american consumer to put the bill and a time to bring this

bill.war -- foot the it is time to bring this trade war to an end. >> carl tannenbaum says china has miscalculated on two fronts. they still have the means to listen to them. >> how sri lanka wants to bring investors back after the terror attacks. the ceo.e speaking to this is bloomberg. ♪

>> welcome back. that they areng stepping off the retaliation of the u.s.. let's bring in perl tenenbaum. he spent four years as an advisor at the federal reserve. he led the risk section. great timing to have you on. we have chair powell speaking in

florida. thes talking about leveraged lending part of the economy, saying the leverage loan risk needs focus. the levels could stressed borrowers if the economy weakens. is this the right time to be worrying about these issues as we continue to see slower growth in the u.s.? carl: absolutely. one of the things all central banks have to do is keep an eye on financial stability. they have to issue warnings about access they are seeing develop. they have to get out in front of them before the become big problems. the level of global debt is actually higher today than it was during the financial crisis in 2008. the composition looks a little different. we don't have the mortgage problems that we did. as chair powell stressed, the

debt is very high. some may not be able to hyatt -- handle it. economy doing well globally, we have to take steps to get that exposure under control. >> how exposed is the u.s.? chair powell is emphasizing that while we are seeing this risk, when it comes to the financial system, it was stronger than it was before when we saw the crisis. the system can handle private sector losses. what do you think? carl: i hope he is correct. in one sense, i agree with him. the level of capital in united states banks is much higher than it was hard to the crisis. the oversight of those banks has been striking. i worked on that section. borrowers and investors are finding each other directly through the markets and market products like to exchange traded funds. to be testedas yet

by a bad financial outcome. we are very much hoping that those new structures, new instruments that have appeared and grown since the crisis proved to be reasonably resilient. heard jay powell talking about some optimism around wages. he seems to be patient on inflation. combined with the other comments he made, he seems to think that the u.s. economy is in a pretty good place. the takeaway is the fed is not moving in 2019. carl: that is the takeaway. i would offer that they are struggling with what happened with the wage dynamic. chair powell said that he believes the phillips curve is not dead but it is resting. when it might come back to life is not clear to any of us. terms are proving very resourceful about holding down the wage bill. one of the more difficult things for the fed is how they should think about their policy in light of worsening trade tensions with china and the downside risk.

not just for the american economy but the world economy. paul: in terms of trade, is there a feeling that if things do get worse, never mind, the fed will come to the rescue -- and mark -- rescue? carl: some may be counting on that. the fed may find it comfortable to lean against trade policy that they don't think is well advised, they don't have the luxury of making that value judgment. if the economy and the united states starts to father or the downward pressure on inflation that is already increasing tends to get stronger, they will have to make a move in order to buffer what is going on elsewhere in washington. >> thank you so much for joining us. , he was carl tannenbaum a chief economist. we have a roundup of the stories you need to get your day going. toomberg subscribers can go this place in the terminal.

you can customize settings so that you only get news on the industries and assets that you care about. this is bloomberg. ♪

>> this is daybreak asia. shery: i am shery ahn in new york. paul: i am paul allen in sydney. a quick check of the latest business flash headlines. below $200 at the start of the session. this was on concerns about his ability to make money. tesla's described current state as a coded situation. $230rice targets between from 275. from 375 last month.

he says he has major concerns about tesla's growth prospects. >> shelley pushed deeper into online gadgets. -- services and tech gadgets. these made his name with devices. mobile payments, video streaming and other projects are upsetting smartphone market. paul: t-mobile and sprint both surged as the fcc chairman said he will recommend the green light for their 26 billion dollars merger. the tension -- attention now deal willhether the get clearance from antitrust regulators. the justice department is leaning against the takeover. coming up next, president trump's been on huawei swindling

-- ban on huawei sending ripples through the chip sector. this is bloomberg. ♪

>> this is daybreak asia. i am jessica summers with the first word headlines. jerome powell said harvest corporate loans looks like the mortgage industry ahead of the subprime crisis. he says regulators are watching closely and the system is better protected now. he said policymakers are asleep at the wheel as another crisis looms. he says he takes business debt seriously. china is wanting it may step up retaliation against the united states after president trump blacklisted huawei technologies. the eu ambassador accused the u.s. of bullying and blackmail. he says the chinese government

will not sit by and do nothing. he added that president trump's actions are politically motivated. footweardas and other companies absent an open letter to president trump. they are saying that the trade war is catastrophic for the customers, employees and economy as a whole. stephen mnuchin, wilbur ross and larry kudlow are named in the letter. they say it is time to ring the trade war to an end. kyle has a wanting for hong kong. it is falling well short of usable reserves by all caps relations. he says even a conservative minimum requirement is 500 billion u.s. dollars. the reserve stands at less than 440 billion. usableng's actual reserves are 13% of what is

recorded and woefully inadequate. as the trump administration moves to block done again from testifying to congress, immunity was brought to the requirements as democrats are trying to investigate this. president trump has directed mcgann not to appear at the scheduled meeting on tuesday. this was used under president bush and barack obama. global news, 24 hours a day on -- tictoc to attack on twitter. powered by more than 2000 journalists in over 120 countries. i am jessica summers. this is bloomberg. paul: we have jerome powell addressing the atlanta fed conference in florida. he says the outcome of trade premature -- it

would be premature to judge the outcome of the trade talks. other members of the fed are not so keen on reviewing. the current policy framework has been serving the public well. he says he was making some on the leveraging loan risk economy. let's look at some of the stocks you should be watching this morning. i want to start with a quick check on the aussie dollar. that is rising a touch. the three year bond yield is gaining four basis points this morning. the regulator proposed amending guidance on mortgages to remove them. we are seeing some reaction. -- >> let's recap some of the headlines we are getting out of

chair powell speaking at that atlanta fed event in florida. about the trade talks, saying the outcome of trade talks is unknown and it is premature to judge. see this as a threat .o the dollar as a reserve he is talking about using a rude as onenflation range option to be reviewed. let's turn to president trump's huawei ban. already affecting chipmakers and qualcomm. -- tom, we know u.s. firms will be affected by this. do we know how much this will hurt? tom: it will vary from company to company. there are a lot of ways you can slice the impact this will have

on u.s. companies. on one level, there is this matter of huawei not buying your ip -- areyou are a ch a chip maker. there are smaller companies for whom huawei is a more than 10% revenue customer. that could have significant impacts on your revenues on the line. the other thing to bear in mind ss when you interrupt huawei' ability to provide 5g equipment across the board, that will have an impact on companies around the world. that is going to impact their ability to roll out 5g to provide the services and other things that come with this really important, cutting edge technology. it is supposed to provide ubiquitous high-speed wireless internet access around the world. it is the main provider of that.

can't do its job. how quickly can these 5g rollouts take effect? what about all of the companies impacted by the availability of 5g? how much will that put their plans on hold? it is an immediate effect on chipmakers. there is a much larger global impact about how quickly we can bowl out 5g around the world -- roll out 5g around the world. paul: have we seen this movie before? president trump stumped pretty hard but then something got worked out. is there a potential for something to be worked out with huawei? issue? a more thorny >> there is a school of thought that this is basically him these will take effect

and then at the last minute, if he gets some kind of concession from china, he would pull it. that is always a possibility. the trump administration is the tories like unpredictable. i would say it is a very real possibility. google, other companies are already starting to change the way they do business with huawei. be piling upms to on backwards sales. other hearing that companies will keep supplies from huawei. what is the business looking like? tom: we spoke to people close to huawei. they did stockpile. they feel they have enough for three months, give or take. out, there are other carriers outside of the u.s. that are saying we are not going to go along with the pressure that the trump administration has been putting on us. we will continue to buy from

huawei. we will continue to be a supplier.nd a those relationships remain intact. what is important is to look at the long-term applications for the supply chain between china and the rest of the world. so many of our electronics are sourced through china. what is happening, given the security concerns, given the threat of the trade war and a the reality of a trade war u.s. companies are asking how they can get supplies in places outside of mainland china. that effort is underway. it is not the thing you can build overnight. if these companies really commit to finding a supply chain outside of china, that has implications for much longer term beyond one months, two months or three months. giles,loomberg's tom they keep her joining us from san francisco.

we will be watching softbank when trading -- thank you for joining us from san francisco. we will be watching softbank when trading opens up. we have david. he is the editor in tokyo. what is the state in this deal -- stake in this deal? >> their cell phone bill, hundreds of consumers's cell phone bills could be at stake. we had these two giant companies at the moment, at&t, verizon, they have been dominating the market. you have the two smaller players, t-mobile and sprint. aining them would create third powerhouse that could compete at the same scale in terms of numbers of subscribers. they could spread their cost more easily across consumers. the flipside of that is you are

eliminating that for carrier. that fourth network. you will the competition for that. there is also something at stake for the company -- companies. it has been a struggle for sprint to raise subscribers against these large competitors. they can spread across a large number of subscribers. that has been a difficult project for the guy who owns softbank. is big stakes for them in this merger. they need to get it across in order to move into the next day. -- state. next is 5g. as part of the conditions offered by t-mobile and sprint, they vowed to produce a five g network and compete with the other two big providers to provide those kinds of services.

>> we are hearing this merger could have a few boats -- votes at the fcc. the doj could be leaning against this merger. we had never seen them diverge in the past. what gives? david: that is a big surprise. , at leasts come out three commissioners have said they support this. the doj is leaning against it. they take a broader view of these mergers that go beyond the concerns of the fcc and into the broader picture of competition among these providers. they are not convinced yet. it could be that they see they are more concessions -- there are more concessions that could be made by t-mobile and sprint. they offered -- they committed to producing this 5g network. they have also committed to not raising prices after the merger.

too pretty big commitments they have made. they also said they will spin .ff their prepaid providers at least one of them. people thought that the justice department might have gone in for those. now they are signaling they are not. this is adding a lot of drama to their decision. paul: there has been a lot of drama and news to digest around this as well. how have investors responded? david: you mentioned the shares of all three of the companies, softbank, t-mobile and sprint. there was some pullback when we moved the exclusive story. leaningthe doj is still against this deal. it is a difficult choice for investors to make. have beeneople betting against of this. it did not look good for this merger at all. you had people coming out and saying they were leaning against

it, even on the fcc. the companies were coming up with those concessions. that tilted at the other way. this is a tough call for investors. a lot of people have to say yes to this. we have seen that. the doj is a one-stop shop in terms of who will make the decision. the head of the doj? who will make the call? it will be a tough one. it will come down to the wire. >> that was david joining us from tokyo. coming up next, sri lanka is trying to entice investors after last month's terror attack. we will speak to the governor. live in singapore, that will be next. this is bloomberg. ♪

shery: this is daybreak asia. i am shery on in new york. paul: i am paul allen in sydney.

sri lanka is trying to entice investors back to the country after april's terror attacks rocked confidence. linda -- haslinda is standing by lankagapore with sri officials. haslinda: sri lanka is rebuilding itself after the attack. $146 billion, that is pretty helpful. have sri lanka officials with us. after therst spoke attack, he said it was difficult to quantify the cost of the attack. and you tell us now? >> good morning. likeirst message i would to give is the security situation has been stabilized a great deal since i last spoke to you. we have done a great job in dealing with a small group of

extremists that undertook the bombings. we took from action against the extremists that created disturbances. that situation is under control. haseat deal of normalcy been turned. on the impact on the economy, large swathes of the economy were not touched. the tourism economy has taken a hit. it accounts for 5% of gdp. that was impacted. assess how they that impact was. haslinda: some are saying that the growth target will have to be reviewed. sri lanka is likely to see its weakest growth in two decades. >> the growth number will have to be reviewed. how much lower, it is difficult to say. much of the economy, except for the tourism sector and the

impact on domestic aggregate demand, some loss of income has resulted in these actions. that will have an impact on the growth story. how much is difficult to say. we will have to revise it. it is too early to say. the important thing is the large part of the capacity -- exports, they are largely unaffected. the capacity to bounce back weekly is there. how quickly will depend on whether there is normalcy and that is sustained. if it is, this is something that is manageable. particularly as we go through with sound macroeconomic fundamentals. those fundamentals have held up pretty well. haslinda: foreign investors fled sri lanka after the attack. markets, ink at the

the immediate aftermath, there was a drop of 6%. then, there has been a turn in the market. seeing for the last one foreignd inflow of funds. 3.6 billion. it is very encouraging. haslinda: do you expect that to continue to grow? what are the indicators? to most of the markets in the region, it is very attractive. there is growth potential. investors have identified these factors. they stayed invested and they will make new investments because they feel the potential is there to get into the market.

haslinda: we talked about how she lockout has secured the u.s., $146 from the billion. the you see the need given that revenues are slowing -- the need to tap the markets, given that revenues are slowing? >> there is about $2 billion more. youruld be interesting to theyisk, the imf said that did not see any refinancing problems with sri lanka. haslinda: how will you raise the 2 billion? >> we are looking at various options. some kind of bond, a syndicated loan, we are looking at all of these options. what is happening, in terms of assisting sri lanka in the aftermath of these attacks, the

world bank has offered us a policy based guarantee. they set aside 250 billion u.s. for that. they can be leveraged four times. one billion can be raised on the aaa rating. the haslinda:of world bank. you are willing to ease your policy. -- aaa rating of the world bank. haslinda: you're willing to ease your policy. with that make it easier? >> -- would that make it easier? >> that is something to review. the board would seriously consider using the policy. this hit to growth has increased the output even more. we are not seeing -- credit has also slowed down.

aggregates are where we want them to be. what we will be watching his external conditions and the rupee. wellupee has reacted very given the impact of these events. we have actually seen the rupee appreciate during the course. there was some depreciation after the attack in april. now we are seeing it appreciate last week. haslinda: they have wanted this tech transfer to change forward. what are the views on that? where are you in the conversation? you have been in talks with regional as well as global. legislation is in parliament. year to do the conversion.

part of the revitalization, we withooking at a strategy someone and give us the guidance and know-how. we have been talking globally and regionally. haslinda: will it happen in three years? five years? >> they should happen in the next one year. this will become profitable in the next five or six years. see a moreke to diverse package. haslinda: good luck. thank you for being with us gentlemen. sri lanka, rebuilding itself, shery? shery: we have breaking news out enforce korea, they may -- 20 days of make exports have fallen.

imports have also contracted .1% year-over-year. this is a bellwether for global trade and technologies. these numbers are important. we have seen their exports contracting 2% year-over-year in the past month. been contracting since december. now we are hearing for the first 20 days of this month, exports have fell 11.7%. chip exports took the biggest hit, down 33%. car exports have increased 12%. we have more ahead on daybreak asia. this is bloomberg. ♪

>> a quick check of the latest business flash headlines. deutsche bank fell to its lowest on record after ubs downgraded the stock to a price target. the reported a ninth consecutive quarter of contracting revenues

and cut for the full year. talks about the merger with the other bank were abandoned. with ubs discussion about combining asset management operations are said to have stalled. paul: one of the most hyped stocks of the decade is calling time on hong kong. this was the end of boom and bust. shares have been suspended since 2015. investors voted to take the company private next month. anergy plunged abruptly four years ago. billion before0 the stock tumbled. >> still to come, they had chosen online premium design platforms by her until capital firm. they have joined the 70 million u.s. dollars funding for this. this more than doubles the startup possibly ration to $2.5

billion. coming up on daybreak asia, we the ceointerview with of this company. bloomberg markets is next. this is bloomberg. ♪

paul: good morning. asia's major markets have just opened for trade. shery: and good evening in new york. sophie: welcome to daybreak asia. paul: our top stories, asian stocks are expected to follow u.s. equities down after the blacklisting of huawei on wall street. black boilingd over the trade -- blackmailing

of the trade. shery: jay powell admits corporate debt is a concern but insist the fed is not asleep at the wheel the system is stronger now. paul: breaking news, first quarter gdp numbers out of singapore. survey ofthan the 1.4%. the quarter on quarter numbers was better than expected, 3.8 percent. the foreign minister on saturday warned of exposure to the trade war. u.s. is the largest investor in china is the largest trade partner in the minister says there is increased volatility in the numbers and last week's excitement over trade, year on year number from singapore was

1.2%. the singapore dollar not moving. let's got it -- let's get on to market action. sophie: not much of a reaction from the latest gdp but we checked on how starks are faring in tokyo. -- stocks are faring in tokyo. hovering near the 110 handle. the kospi is opening 2/10 of 1%. despite the latest data on exports, this data comes after they said gdp growth is recovering in the second quarter .

investors are waiting on china's response. in sydney the asx 200 opening up one quarter of 1%. we are watching for a move and commodities as futures are recovering. jumping whilelar bonds fall after it was proposed to ease restrictions so the aussie is facing a volatile session. often traders are the most bearish on the aussie. pressureks are under -- kiwi stocks are under pressure. show a 6% drop over the next 12 months.

stock after the u.s. chairman says he would recommend the approval of t-mobile's takeover of sprint. increased likelihood of a merger should narrow softbank. let's get to first word jessica summers. productionelerating of uranium after threatening to scale back commitment to restrictions under the nuclear deal the u.s. abandoned last year. sayingls are quoted as that uranium has been increased and the nuclear watchdog has been informed that iran has not raised the level beyond limits. trump administration is moving to block don mcgann from

testifying to congress as democrats investigate efforts to curb the russia inquiry. president trump has directed began not to appear on tuesday. he used this claim -- they use this claim under george w. bush and barack obama. wonndonesia, the president the election by double digit. they secured the backing of more than half the electorate. election supervisors projected the claim citing a lack of evidence. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

paul: china is morning they may step up retaliation against the u.s. after trump blacklisted huawei technology. the eu ambassador accused washington of bullying on block now and says the chinese government will not justify a do nothing. stephen engle has the details. is this just a ratcheting up of rhetoric or something that could actually happen? >> they are both digging in their heels. the promised with -- the problem with increased rhetoric is it leads to hardheaded approach. the chinese are throwing out the rhetoric heavy now. quite a pointed comment, saying the u.s. is seeking legitimate gains through bullying and blackmail. behavior and there

will be necessary response, he says. he says chinese government -- chinese interests are being undermined and the government will not sit by. he says the u.s. government is trying to bring down huawei through administrative means. he urged trump not to go further down the wrong path. the chinese foreign ministry had a briefing yesterday and said we will have to wait and see in regards to possible countermeasures coming from the chinese. but the president of china highlighted heavily by state media and that fueled speculation they could weaponize the material in this trades that. -- trade spat.

if you want to see how this ,ffects the financial market stock like rare earth corporation is surging by the daily limit yesterday on this news that it could be used in this trade war. australia, shares up the highest level in seven weeks. we have heard a response from businesses and they are not happy. >> this is a sharply written open letter to trump from the shoe industry. 173 companies sign the letter saying on behalf of the hundreds andillions of consumers employees, we ask that you stop this action to increase the tax adden, the proposal to

tariffs is asking the american consumer to foot the bill and it is time to end the trade war. had started tory diversify away from china given the negotiations. if they set up factories in vietnam, they would in theory be able to export out of vietnam to the u.s. duty-free. shoemakers had moved production to vietnam but 26 of -- 26% of the apparel is made in shoes -- is made in china. it was as high as 43%. shery: jay powell moving beyond his prepared remarks on the threat proposed.

hays has been listening to comments and we were watching the comments closely and what caught my eye was talk of an inflation range. how interesting is that? it is interesting. , youu have a 2% inflation could be in the middle of your range and the boj could be helped by that. in the little bit of getting outside this corporate debt, he talked a bit about the economy and he seems upbeat. growth, jobmy shows creation, and rising wages in the context of inflation pressures. >> he was asked about the impact of the trade war and he said it is too early to judge the

outcome. he sidestepped wisely because he went on to talk about the fed's review of the monetary policy framework. he brought up an idea of may be looking at a range, many ideas will be on the table. let's go to the bloomberg library and see why it is not just on the fed line. unemployment down 3.6%, a 50 year low. it was at 10% during the great recession and wages have gone up to just over 3%, but the core rate of inflation is 1.5%. 3%t if you had a range from to 1%, you would say we are not doing bad. we are in the range.

is where they could adjust their view of monetary policy. if there is a risk to financial security, it gives them room. the firstll spent part of the speech talking about the rise of risky corporate debt but he seems of the. >> the fed is moderate sharing it -- seems upbeat. >> the fed is monitoring it closely. they have the focus on it now. at the conference, they mapped the financial frontier and doubled since has the great recession. they say it is borrowers who are more at risk, not the lenders.

banks are in good shape. but if we go to the terminal we can look at this chart where you see why the fed is watching it closely. u.s. corporate debt is at record highs. people blame the fed for keeping rates so low for so long. if you want to get a better view, read the speech. he lays out with the fed is watching and what they see and it will give everyone a good sense of what the situation is. on central banks, breaking news out of singapore

saying the monetary policy stance is appropriate and expect inflationary pressures to be stable this year. really beating expectations of growth and we have seen pick up in the singapore economy with retail sales rising and lending to businesses appearing to have improved. singapore has one of the most effective economies and the monetary authority is saying the current stance is appropriate. let's bring in sophie. >> we are looking at minor shares.- liner

-- linus faces prospects of not being renewed this year and is the subject of a hostile takeover. come, one ofo china's leading online lenders beat estimates in the first quarter. shery: trade tensions escalate further and we will assess the likely fallout. this is bloomberg. ♪

shery: this is daybreak asia. tol: asian stocks are set follow wall street lower as trade tensions on trump dominate headlines. our next guest says investors

should look past the short-term noise. janet saying -- sang. you say to avoid the nose -- avoid the noise but it is getting loud. i know you expect a resolution eventually, but how much damage will be done while we wait? markets, volatility might persist for a while but it is important to look past the noise and focus on long-term opportunities. we believe there are three things investors should bear in mind. trade tensions can be resolved.

we have them since last year and there will be ups and downs but we do not take the u.s. government can afford having this unresolved. second is the markets. if you look at copper earnings, recent results show there is less negative revisions in asia right now so it is not looking bad. and if you look at technical, most of the investors are not heavy in equities exposure coming in today so the technical is not worrying. overall we believe while the is a good opportunity to focus on long-term and revisit equities position. repricingmentioned

and we have a chart that illustrates that and it shows em stocks are on course to wipe out their 2019gains -- gains. can you be specific about opportunities? impactedrket has been by a lot of issues in china so if you look at this issue there are winners and losers. within china we believe there are strong structural growth opportunities in the domestic area. we have some that will have government stimulus policy and

in the health care sector we have a very strong growth ahead in china. we also have some markets in the region that may potentially benefit from issues we are having. [indiscernible] we believe there are still opportunities in the asia region and there are still good opportunities ahead. shery: given the concerns we have seen foreign investors fleeing the market. this chart showing the daily outflow out of the mainland stock market capping their fourth week of decline. the assumption was at some point they would be a trade deal but we continue to see tensions over huawei. would it be fair to tell

investors to stay away from tech and semi conductors? current situation is interesting but i think there's another reason to explain it, year to date strong gains but instead of focusing on the past we should look at what is going to happen in the future. inclusionthe asia factor will increase and then again in august and november so the chinese market will open up and we believe this is -- interestingmy timing. but you have to be selective as investors. shery: whether in china or other emerging markets, how big is the risk when we see the u.s. dollar

spiking on safe haven moves? >> we identified stealth manufacture -- steel manufacturers. protectionism has come back. the other factors are the u.s. dollar and earnings. the u.s. dollar has been on a steady uptrend. not great for the emerging market. u.s. dollarout the is not strengthening rapidly. and we look at earnings. earnings has been reasonable and there are less negative revisions. if that trend continues it will help the asian markets a lot. shery: janet, thank you so much for that.

plenty more to come on daybreak asia. this is bloomberg. ♪

cfo madeawei's comments -- more than double the analyst estimate. shami has been badly hit in the market. how will the market take this? >> it is not straightforward even though they beat estimates closely,u look [indiscernible] smallave a lot of

companies and they managed to book some profit out of it but if you look at gross and operating profit it is not as glamorous as net income. paul: the smartphone market is pretty saturated at the moment. how is there smartphone shipments outlook quickly? >> pretty good in the sense it did not fall as much and managed to hold steady to 28 medium in the first quarter but the slowdown from last year was significant for them and even though they are doing well in western europe, the market is too small to fill the void in china. shery: thank you. we have plenty more to come on daybreak asia. tune in. we will talk more about the

market. this is bloomberg. ♪

jay powell the corporate loans looks a lot like mortgage history ahead of the crisis but insists regulators are watching closely in the system is better protect did now. he answered critics who say policymakers are asleep at the wheel. he says he takes business debt seriously. >> we think the financial system appears strong enough to handle potential losses. warning is warming -- it may step up retaliation against the u.s. after trump blasted huawei technology. accuses --nvestor

ambassador accuses the u.s. of bullying and blackmail and says they will not sit by and do nothing. he says transactions are an abuse of export control measures. footworkdas, and other companies have sent an open letter to trump saying the tariff war is catastrophic for the u.s. economy. 173 companies signed the appeal, which went to steve mnuchin, wilbur ross, and larry kudlow. the letter says it is time to enter the trade war. -- into the trade war. war.d the trade news agencies have quoted official saying outputs of

enriched uranium has been increased and the nuclear watchdog has been informed and iran has raised the level beyond limit. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: let's look at the markets with sophie. stocks are trading mixed with mostly lower with japan leading the declines. waiting and the 250 is retreating from a recent record high. stocks are under pressure by samsung bucking the trend and helped the kospi despite continued exports we saw this morning. in sydney, the extended rise in

banking is not supporting market poppingaussie dollar is up 2/10 of the percent. awaitingestors are events from the reserve bank of australia's may 7 meeting for any indications of a policy move down the track. the aussie dollar is modest it -- modestly stronger. malcolm scott joins us. >> this is the minutes of the may 7 meeting where traders were 50-50 of will they or what they cut and we had economists about the same and then they didn't. the statement did not give a lot. they said they are looking at the labor market to see which way they will go on rate. they said it looked strong.

there was no easing bias in that statement. the minutes will flesh out the statement more than we want to see more about the confidence in the labor market. we want to know more about how confident they are because if they are confident that unemployment will take lower we will not see interest rate cuts. shery: and we will hear directly from governor low speaking about the economy in brisbane. outlook? affect the everyone was expecting the labour party to win and they didn't so they might have had to rewrite big parts of the speech because the outlook is different. both parties were looking for big tax cuts but the government

across the board won't be as narrow we -- narrowly focused. lower income guys are more likely to spend their tax reduction. the other difference is labor had significant implications for the property market in australia and they were going to revoke tax concessions but that is not going to happen. perhaps mr. low will feel more confident that key risk to investors has been removed. they are saying potential borrowers will not have to factor in quite is high and interest rate and that might free banks to lend a little more. so new homebuyers could find it easier to get loans and if the

, bankss interest-rate could pass it on more effectively. and weting developments hope if they are not in the speech there is may a q&a session to get to the bottom of the points. shery: that is what we will watch. thank you so much. a rebound in construction help singapore's economy grow almost 4% in the first quarter. us.correspondent joins this comes on the back of the first quarter japan gdp numbers that surprised on the upside. is there recovery in the region? it is tempting but japan

yesterday there were quirks around numbers, namely the net exports was the real driver behind growth. with singapore, it is similar in the sense that construction and services propped up nicely but the export story is week -- weak. ushave recent data showing andrts in april fell by 10% electronics exports from singapore fell 16% so the headline number is an upside surprise but you can't separate what is going on in the trade side of things so it is hard to look past the slowdown in china and trade tensions. notwithstanding optimism

surrounding the singapore gdp number, it was for the first quarter so it predate all the development we have had since and singapore is badly exposed to a potential blowup in the trade war. >> that is a fair observation. economists are saying the region economy was finding its feet late in the first quarter and there had been expectations things would accelerate as china's economy -- it looks like a trade truce was holding ground and now that story is on hold and no one is sure where the trade war is going but it is tenths. -- tense. will have a ripple effect across the east asian supply chain and singapore as part of that story. boomhe global technology

is in the middle of the cross hairs with issues around huawei and then we have general global growth backdrop that is not too bad but no one is predicting recovery so when you look at small surges in singapore exposed you would have to say there are uncertainties in the months ahead. thank you for joining us. he mentioned the difficulties and news around huawei. google announced it is halting plans to cut access to stop features on huawei. we will have more details later on. still to come, one of china's leading online vendors had a big forecast in the first quarter and will talk with their cfo in

an interview. this is bloomberg. ♪

paul: this is daybreak asia. shery: one of china's leading online lenders reported strong revenue in the first quarter. net income was up over 200% year million.o over $140 joining us from hong kong is the cfo. your company has the pulse of consumer credit in china. there have been concerns about a slowing chinese economy. this chart showing the rate of growth for retail sales has been slowing. have you seen any impact over the latest trade tensions on your business?

we have had record earnings last night. the net income was 970 million renminbi which is a record quarter so far and we have seen resilience from the chinese consumer given that the bank sector in china is massive. at of 900 million people who have some sort of income, less than 300 million have a credit card. so the demand is immense and we continue to see resilience a demand for credit and using it for consumption. shery: will you be achieving the three point -- 3.5 billion yuan? seems comfortable to us and we already delivered

970 million, over 26 of the number, 28%, sorry. we have three more quarters to go. it is something we can easily deliver over the rest of the year. paul: have you seen any impact from the termination of alipay partnership? >> no. the relationship between us and them has been at arms length. it has always been a fair market value type of relationship and we have never gotten exclusive help in the very beginning. userse probably moved the onto our own app since november 2017 so the entirety of the 2018 results was done independently

of alipay. they are one of the best payment ecosystems in the world, especially in china, so we continue to be happy with the ecosystem. paul: you are also pursuing an online lending license. do you have any news? flux in is a lot of terms of emerging fintech opportunities and noise regarding pdp state -- space. we are not a lender. gotten our owny guarantee license which allows us to participate in transactions to provide a guarantee to the banks who are in fact lending to the target customers.

so we property license already and the whole structure is in good shape in terms of regulatory. shery: are you telling us the lending license will stay in place, there is no change? ofause we saw announcement the regulation drafting schedule for 2019. >> i think a lot of it is a focus on the pdp space and most of the players in the fintech space offer a platform but we do not. we did not get funding from individual investors. we only work with license banks. we only provide data and get a fee from bank partners. in that scenario there is little regulatory concern because the lender is the bank and they are already licensed. shery: can you give us a view of

the funding mix you are expecting for the year? on balance sheets or off balance sheets? see from theat you end of first quarter will be the shape of the rest of the year. the majority of the mix is directly off-balance-sheet, directly generated off the bank partners. a small portion is the capital but we do not lend. they lend against the capital. spot ints us in a good terms of regulatory changes because we are not lending. shery: you are scaling back your auto leasing unit this year. do you know more about the amount to cost savings expected this year?

spentthe past year we about 400 million in renminbi and operating costs and that will probably go away largely this year so that should add that amount in this year's earnings. so we look forward to having a lighter asset model and less exposure in china. thank you so much for joining us to discuss first quarter results. you can get a roundup of the stories you need to know to get your day going. this is for bloomberg subscribers. go to tv . it is available on the app. you can customize your settings to only get information on things you care about. this is bloomberg. ♪

paul: this is daybreak asia. shery: shares of soft bank

spiked at the open up almost 2% after the chairman said he would back t-mobile and sprint merger. dave mccombs. is the market reaction premature given that bloomberg has learned the boj could be leading against the merger? >> it could be. this is not a done deal. the doj has to approve it. the signal they are not happy yet shows there is further to go. when you have the fcc coming again, that is positive news. we know they are supporting it so that gives a little boost to prospects for the deal going through. through,it does not go what are the options for softbank? have a verywould

tough time with the company. worthit owns in sprint is $21 billion today but this is a company with $39 billion worth of debt. in the last three years they have made an effort to turn the company around but they do not have the scale. usedborrowed a lot and their own network equipment and airwaves as collateral for loans. they put everything on the line to try to turn the company around and they are still not getting the sale. they had to stop the outflow of subscriptions but they do not have the sale -- scale and now carriers will have to spend a lot of money to develop new networks for 5g and the pressure is on for softbank to get a deal this themerge and make third to compete with the big three. it would be the second ranked if

it merges with t-mobile. shery: what are prospects for competition that regulators in the u.s. are worried about? >> one of the points they made is t-mobile and sprint are both low-cost competitors. they have had to cut prices in order to keep customers and that is the bottom of the market where at&t and verizon are focusing on higher paying customers who consume a lot of services and use big data packages. when you are at the bottom of the market, t-mobile and sprint have had a thriving business in the prepaid market, which is generally low income consumers because you do not need a credit card and you pay ahead of time. their has offered to sell prepaid business in order to

make the deal go through but that is what regulators are concerned about when it comes to competition. when you reduce the number of areiders to three you reducing the level of competition in the lower price segment of the market. dave mccombs, thank you for watching that story for us. owner of the tictoc video app is developing a paid music service to challenge spotify and apple music. they may launch this fall in developing countries where paying music services have yet to gain audiences. from two gained rights large series. their concerns about

ability to make money. he cut his price carpet -- from $365 last month and says he has major concerns about tesla's growth prospects. cut 7000d will white-collar jobs, 10% amid mounting pressure to keep up with changes. the ceo says the cuts will save $600 million a year in the majority of the cuts will be completed by friday in north america and by the end of august in europe, china, and south america. shery: latest lines of the state department are saying mike pompeo discussed huawei with

japan's foreign minister after the trump administration blacklisted huawei which is accused of aiding beijing and espionage. -- in espionage. let's get a preview of what to watch. >> watching for more tech tremors. 14% since last month high in the rare earth sector is in the spotlight after the president of china visited a chinese facility. more than two thirds of u.s. imports are coming from china. rare earth says if levees are china has restricted exports in the past but those are scrapped in 2015 after it

was determined they violated trade rules. over, let's we hand get a check of the markets trading now. the nikkei is off one third of 1% in the kospi is higher by 6/10 of 1% despite noise around huawei and south korea is one of the most exposed to blowback from the ongoing tensions. in australia, the asx is weaker by one third of 1% as we wait on the words of the rba governor later today. more to come. this is bloomberg. ♪

>> it is my :00 a.m. tuesday morning -- at 9:00 a.m. tuesday morning in beijing, shanghai, and singapore. welcome to "bloomberg markets: china open." >> here are the top stories. china denounces blackmail over trade. kill president trump his tier four is catastrophic. itsd: the dispute has taken toll on a bellwether. jay powell admits u.s. corporate debt is a concern but insists the fed is not asleep at the wheel and the system