♪ paul: good morning. i am paul allen in sydney. we are about an hour away from the market open in australia. shery: and i am shary -- ahn in new york. am sophied i kamaruddin in hong kong. welcome to "daybreak: asia." paul: our top stories, asia-pacific stocks look to track the advance, with an apparent truce in the escalating trade war, but the pressure is still on. huawei says it has a range of answers to president trump's ban.

it adds up to the slow down for the global economy. the oecd cutting its forecast again, calling for trade negotiations to resume. in a fewnd coming up moments, we will have an exclusive interview with st. louis fed president james bullard. for now, let's get a quick check of how markets close the session here in the u.s. most were up on the s&p 500, semi conductors rebounding for the first time in sessions after the 4% selloff on those tensions around huawei. we did have some stocks in the negative though. we got some ugly first-quarter department store earnings, and that really hit stocks like jcpenney's and cole's. we also had some disappointing existing home sale numbers, and that did not bode well for some, and the u.s. futures at the moment holding steady. let's see how we are shaping up for the asian markets. the door is, shery,

still open for u.s.-china trade talks. start ahead of japanese trade data that is expected to show a fifth straight month of a drop in exports with potential auto tariffs among the threats. let's get a check on ozzie bonds, which are giving back some of tuesday's rally -- on s, which are giving back some of tuesday's rally. checking in on oil, edging loyal amid concerns -- edging lower amid concerns. rising u.s. stockpiles, and copper futures are nudging higher this morning after slipping to a three-month low on ugly u.s. home sale data. paul? paul: all right, thanks very much for that, sophie. let's get to first word news with jessica summers. jessica? jessica: thanks, paul.

theresa has made a final dress to push her bill through a finalnt, but the -- press to push her bill through parliament, calling for a final referendum, but only if her bill passes first. and othersopposition propping up or government say they will not back her. now, minister may: right this is slipping away from us. we risk losing a great opportunity. this deal is not the final word on our future relationship with the eu. it is a steppingstone to reach that future, a future where the people of the u.k. determined the road ahead for a country we all love. jessica: the iranian president says his new government needs new powers to resist what he calls an economic war being waged by the u.s. he told a gathering of clerics that during the eight-year war with iraq, the supreme council

held all of the power, and the parliament and judiciary did not intervene. he says they are now in an economic conflict and need the same type of overarching leadership. japan's influential automotive sector says it is deeply disappointed in the trump declaration that imported cars threaten national security. the comments are seen as being unusually strong for the group, but they come from the chairman, toyota, also the president of toyota. he said the group is dismayed that the long time investment in the u.s. is no longer welcome. local news, 24 hours a day on , air and @tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. anchor: jess, thank you. playing a waiting game in washington, the trump administration said it held off anding a ban on huawei

that they only went ahead when latest talks stalled. tom mackenzie joins us. to, we are hearing about the tom, to target huawei -- we are hearing that the plans to target huawei were sitting on the table for months. tom: indeed, they have been working through the restrictions being banned, and if they pull the trigger on it, it would have potentially derail the trade talks, and, of course, everything changed when those trade negotiations broke down, and then those orders were put in front of president trump, and they had to scramble pretty quickly at the commerce department and others to get these executive orders and the blacklisting implemented, and, of course, there is concern

amongst u.s. officials, we are being told, as well, that trump could still use this as part of trade negotiations to walk back these actions. of course, many in the security sector, particularly in d.c., are concerned that these continue to hold on huawei, which they see as a major threat to cybersecurity. back in 2018, there was one company facing pretty steep, -- regulations from the u.s. and was almost brought to its knees. president trump, as a favor to president xi, walked back some of the issues pertaining to zte. there are some concerns that something like this could happen again. , they have been hoarding components for the last three months or so. holding, tom, huawei components to adapt to these restrictions. do we know anything more?

tom: well, one of the head of operations, abraham liu, came out, that they were designing work in-house, an operating system, also holding tools with rivals to google to see if there was some option there, because, of course, this blacklisting has made it very difficult for google to continue their partnership and their cooperation with huawei. take a listen to what abraham liu said about the broad ramifications. --huaweihaidi lun is is a victim of the administration. this is not just an attack against huawei. it is an attack on the liberal, rules-based order, and this is dangerous. tom: they say they have been

hoarding components. now, they are looking at building out their own operating system, but that will be an ongoing system, and they will likely need some cooperation with u.s. companies. that looks very difficult at this stage. paul: yes, that is a major , tom.aking, indeed still ahead, rising tensions in tech and the future of 5g with brian. exclusivet first, an interview with st. louis fed president james bullard. this is bloomberg. ♪

paul: this is "daybreak: asia." i am paul allen in sydney. ry: and i and -- am shery ahn

in new york. that policy with james bullard with rishaad salamat. rish? shery, let's get straight to jim. talk about the minutes. tell us what is going to be in them. bullard: i cannot comment on the minutes. a thorough discussion of all of the issues. rishaad: let's maybe start and drill down to the bottom with the st. louis fed president. soybeans. a trade conflict. you have got a big farming community there. how do you look at that? mr. bullard: well, our farming community is very concerned about the trade war. it is an issue, and exports are down a lot if you look at the charts, and, of course, the government is trying to come

back and offer some payments back to farmers. those are usually considered barely enough or not enough, and so, i would say, overall, u.s. agriculture is not one of the stronger sectors of the u.s. economy. we have got other parts that are doing pretty well, but probably not the agricultural sector in the last couple of years. whichd: is that something you think will be reflected across the board? such anause it is important headline-grabbing thing here, how much do you think about the trade war as a fed body? mr. bullard: well, an important issue. i think for this to actually affect fed policy, these terms would have to stay on for quite a while, something like six months, and at the end of six months, if it was still no prospect of a resolution, then i think that is the point at which it would start to weigh on fed policy, but at this point, we are just talking.

we are too early in the process, so it is premature. you say that, but people with investment have a wait-and-see approach, and that in itself is probably damaging. mr. bullard: i agree with that. i guess my sense, being over here, is that the chinese side would benefit a lot from getting this deal done, and you would have more confidence and investment in china and with a feeling that they are going to protect foreign investment, and i could see a boom in china coming after a deal. rishaad: no deal? mr. bullard: if there is no deal, it is an expert-led -- export-led economy. i think it is a great opportunity for china to sign on to international norms on trade policy. rishaad: ok. i was going to ask you this

later, but this is causing weakness. sevenhe yuan going beyond affect your thinking in any way? certainlyd: well, we track exchange rates all around the world, but this would not come back directly, i would say, to u.s. policy. rishaad: ok. i china slow down, certainly, would hurt you, and -- a china slowdown, certainly, would hurt you. mr. bullard: china has become very large, one of the four largest economies of the world, depending on how you want to cut it up, but we very much have relied on chinese growth in recent years in global growth. the u.s. has gotten better. just recently, the last two years. but we are all counting on china to be an engine of growth internationally, so i think it they retrenched

and started growing more slowly. tell us about where rates are. mr. bullard: rates are at a good place in the u.s. right now. if anything, we are a little bit restrictive, i would say, and i am concerned that we might have slightly overdone it. we had a summer rate hike, but i was pleased that the current projections from the committee are for the policy rate to remain flat during 2019. we have got very low inflation, low inflation numbers, and low inflation expectations prayed that is a little bit concerning to me, and i think that could be used to justify a rate cut at some point. rishaad: absolutely. markets factoring in. if markets factor, one or maybe two. mr. bullard: we have had two years of great upside surprise

in the u.s. economy, that growth turned out to be better than we thought, unemployment lower than we thought, everything coming up roses on the real side of the economy, and yet, inflation has not hit our 2% target, based on our preferred measure, which is the core, which is only 1.6% right now, so it gives me pause that that is so low, and it does give me more pause that the inflation expectations are low our targets, so why aren't those centered right at our 2% target? i think we can take this opportunity maybe to try to re-center inflation expectations above the 2% target and gain credibility for our target. rishaad: ok. a newspaper interview recently, what is the definition of persistent one-month, full year? mr. bullard: i think at a minimum, we would like to see

what the first and second quarter of this year brings as far as inflation news, and we will not have that information until we get to the august-september timeframe. it could be that there is just noise in the data. it is always possible. this bank might outback. -- this thing might bounce back. but if it does not, and it looks like we might miss our inflation target again in 2019, that is where it gets concerning. rishaad: miss it to the downside. mr. bullard: yes. since 2012, why is that? it seems we should be able to hit our inflation target over that long of a time period, so i do not want the inflation expectations to get entrenched in the u.s. economy and globally that people think that the inflation target is only one point 6%, which is kind of the average inflation rate less some %, which is only 1/6

kind of average inflation. ,ishaad: seriously though looking down the line, people looking critically, why do you want it? mr. bullard: are you talking about yield curve control? rishaad: nominal targeting, which is something i think you are against. mr. bullard: again, the japanese have been leading the way as far as new ways to run monetary policy, even when rates are very low. they would claim that it has been successful. i think it has been modestly successful. they still have not hit their inflation targets, and that is an issue, but, you know, the issue about targeting longer-term rates really goes back to the 1940's and world war ii, when the u.s. did this, and coming out of the war, there was the target long-term rates that did not end well, and then there

was a lot of inflation. that is why it has been a sour issue in the u.s., is thinking about that experience from a distance read it did not work very well, but the japanese -- the experience from a distance. it did not work very well, but the japanese are looking at asset purchases not on such a grand's gather we have been doing, and that would be the idea. -- on such a grand scale as we have been doing, and that would be a good idea. rishaad: many of your colleagues on the fed board on the fomc have been talking about, especially jerome powell, using the word "transitory" for inflation. mr. bullard: i think just to put in perspective for our viewers here, the 2017 experience, that was one where during this timeframe in 2017, inflation came in below target. janet yellen was a chair. she said, "i think this is going to bounce back."

we waited an entire year, and, indeed, it did turn out to be transitory, and we did get to our 2% target, but it is unclear if we want to tell that story again after two years of upside surprise in the u.s. economy after a 50-year low with unemployment. i mean, come on? rishaad: it looks wonderful, at least on paper. mr. bullard: [chuckles] rishaad: but tell me something. you guys at the fomc, during the financial crisis, looked at money supply, especially m1 and m2. as do not seem to do that closely now. you see them going down, and that is normally indicative of a low-inflation environment and one that will remain in a low inflationary environment, so why are you really not talking about it that much? mr. bullard: yes, the st. louis fed over the last 50 years -- it

has been a very tough issue. very long-termn trends is helpful, but as far as helping on a quarter to quarter basis, probably not that useful. you know, we do need to supply the right amount of money to hit the inflation target, and we try to do that. i think you would have to have a deeper analysis of m2 to see what is going on. rishaad: ok. have we reached, with where we are -- let's say we had a quarter-point cut. how much difference would it make? mr. bullard: well, i think if we cut a quarter-point in an environment where the u.s. economy is surprising to the upside again in 2019, that would probably send a signal that we are serious about hitting the 2% inflation target, we are serious about we want the average inflation rate over a period of time to come out at 2% on a preferred measure, and we are

willing to tolerate somewhat higher inflation for some period of time in order to get the average to come out to 2%, so i do think it would be an important signal, if we get to that point. i do not think we are there yet. i think it is premature at this point, but this is something that could be done possibly. rishaad: ok. that answer and how you went around -- to let bullard: -- what about the united states? with the number of bullets in the chamber expended, what has it left you guys? mr. bullard: well, the normalization in the u.s. has been quite successful. the policy, we are up some 225 basis points. that is very similar to other tightening cycles in the u.s..

rates still seem low, but they are high compared to looking at zero and negative rates. rishaad: and real rates. rates.lard: and real we have managed to reduce the size of the balance sheet. reserves are down some 45% from where they were. there are other issues with the balance sheet. we cannot get it any lower, but we have reduced the size of the balance sheet, so i think we have put ourselves in a good position should there be another downturn somewhere down the line that we would have enough ammunition to handle a recession should come around. rishaad: my point would be, and the question is, there are limits of fiscal monetary policy, and talking to a monetarist fed, what about fiscal policy? how much more has to be done on that side with taxation, et cetera? mr. bullard: well, i would prefer that taxes be set for a longer run. what?d: you

mr. bullard:es, because they do tend to generate uncertainty. just had a major tax bill in the u.s. at the end of 2017. so, i think it is probably not too realistic to expect further reform. i think that reform was very successful. it put the corporate tax structure in the u.s. in a competitive, in the middle of the pack, as far as oecs is concerned -- as far as oecd is concerned. rishaad: the heavy lifting question mr. bullard: i think it is a pipedream to think it will react in an eight week cycle and that you're going to get congress or any other parliament around the world to react in a timely manner. it is just not -- it is a pipedream. like that.e not

it involves negotiations with all kinds of people in various economies for things to happen, so i don't think that it is very likely that you're going to get fiscal policy makers reacting to day-to-day shocks in global macro p what they can do is set an official tax structure and spending structure -- day-to-day shocks in global macro. what they can do is set an official tax structure and spending structure. we have got a quite levered up, leveraged loan market now. know theyd: yes, i have talked about this in the u.s., and that is a moderate concern. i agree with the chair on that. we will have to watch and track it going forward. sometimes, these things can get away from us and turn into unintended consequences. i think that would be the concern here. on the other hand, corporate's -- corporates can decide how they want to fund themselves,

and if they want to go more through debt, maybe that is a business decision, not so much a macroeconomic concern. rishaad: jim, what are you most worried about at the moment, economically speaking for the u.s. or even globally? mr. bullard: well, i sleep pretty well. i think we are in a fairly good position right now. we do get paid to worry, so we worry all of the time, but if you want to talk about something like future financial crisis, i would say almost certainly, they would be generated outside the banking system and probably, with all of the tech and payments initiatives going on all around the world, there will be some unregulated sector that will be the source of future problems, so that is what i worry about. rishaad: something that comes out of left field. mr. bullard: absolutely, absolutely. rishaad: what would be the worst

mistake you could make right now? mr. bullard: i think the committee did a great job of avoiding what i think would have been a big mistake, which was to push u.s. interest rates considerably higher from here, like 100 basis points higher from here. i think that would have been a mistake. i have argued and have been arguing for a couple of years that we should take it slowly on raising the policy rate, and to the chair's credit, he pivoted, and started -- starting in january in atlanta and continuing from there, we are in a better position now. jim, 10 seconds. was the december hike a mistake? mr. bullard: i argued against it, but i respect the decision of my colleagues, but i did argue against it. rishaad: we have run out of time. or natural neutral rate? mr. bullard: mine is about 2%, so we are a little bit tight right now. bullard,thanks, james

president of the st. louis federal reserve. we have a lot more coming up. this is bloomberg. ♪

anchor: this is "daybreak: asia." i am jessica summers with the first word headlines. chinauing trade talks, committed to the tentative trade agreement that the two sides had reached, but the u.s. had changed its mind "overnight." tosays china is still ready address trade balances and to buy more u.s. products and services. tochina remains ready continue our talks with our american colleagues to reach a conclusion. dialogue is still open. jessica: huawei says it has several solutions to being blacklisted by president trump.

speaking in brussels, it is said they have ways of offering support to customers, announcing what they call washington's unprecedented "bullying." abraham liu warned that what happened to huawei could happen to anyone at any time. mr. liu: by the u.s. this is anion, unjustified attack. liberal,attack on the rules-based order, and this is dangerous. jessica: the australian prime minister, scott morrison, will begin his new term with rising threats to the economy. university national says chinese investment in the country is in freefall. that is with strained relations with their biggest trading partner. after reaching a peak of over

$10 billion in 2016, chinese investment plunged last year to $3.3 billion. and u.s. aviation authorities think a bird strike was the likeliest problem leading to the crash of an ethiopian airline in march. "the wall street journal" cites unidentified officials, although boeing itself has declined to comment. a total of 350 people died in the ethiopian disaster, with the inn air crash off indonesia october. both involve the 737 max plane. to --e chinese, trying the chinese woman illegally trying to enter president trump's mar-a-lago resort once to fire her legal team. to fire her legal team. she is being charged with making false statements and others.

she denies all charges and told the court she has no need for attorneys. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. ♪ paul: all right, thanks very much for this, jessica. checking markets, let's go over to sophie kamaruddin in hong kong. sophie: things being tested this morning on bets there will be a benefit from a huawei ban. in the released mid day wake of the gdp forecast being cut for south korea by oecd. iny are blaming weakness domestic demand and jobs plus global trade woes, and that is having an impact on the korean won, which has lost over 4% against the dollar in the past month, and south korea as well

as taiwan have the most to lose if things intensify. now, the taiwanese dollar has slipped to a january 2017 low, shorting thee, currency against the yen as a hot trade. the pair has fallen, and it is expected to go to about 72, 75 in a few weeks. this morning, we are seeing the a low on theg wake of rba easing. of the big trading themes in the regular session and after hours has been the gloomy outlook for disbarment to her chains -- four department store chains. -- for department store chains. more, with also competing against online. su: this appears to have overshadowed it in that most of the year a lot of other industry

sectors have been hit, not the retailers, and now the new round, as we learned a couple of weeks ago, going directly at apparel and consumer goods, and that is impacting this group had also, the negative earnings reports from jcpenney and kohl's , just going through the industry. home depot has mixed results. mart, if youstein cannot beat them, toy -- join them. they are teaming up with amazon.com to have lockers and receive returns on amazon merchandise, that was a big boost to their stock. let's go one by one through these retailers. jcpenney's, the loss much wider than expected. what was also a concern is that the fiscal 2019 started out on a bad note and then just falling sales and earnings for the

company continued to bring the stock down, revenue falling more than 4%. lower saleskohl's, than expected and way below estimates. they also cut their 2020 profit outlook, and if we go to home depot, a mixed report. their sales missed on lumber prices, but they are warning that the trump tariffs aimed at retailers could actually impact them by $1 billion a year. cost. in the product paul? paul: su, there were after the bell earnings from nordstrom, as well, disappointing results, just like kohl's, cutting their full year outlook. hope thathere was perhaps nordstrom would lift the mood freed it did not. let's go to after hours. -- nordstrom would lift the

mood. it did not peel let's go to after hours. they are a luxury retailer. if you look at the big picture chart, nordstrom also under pressure with the entire regional group. they cut their sales forecast for the year down 2%, and that was from a 1% to 2% increase they had previously forecast. what is very important to note is they are believing that optimismhich dave some -- which gave some optimism, was an anomaly. also, big focus on two other retailers, target reporting wednesday at best buy reporting thursday. what they say about the tariffs and the mood in the industry and the threat from big giant amazon will be very critical. for: all right, su, thanks much for joining us. in fact, trade tensions continuing to ripple through markets. lawrence boone,

spoke about the extent of the fallout. oone, spoke to the -- about the extent of the fallout. >> there has been trade tension, and we are seeing that trade has derailed the global recovery that was going on in 2017. looking in the past, it is difficult to disentangle from the effect, from what happened in argentina, turkey, and china, but looking ahead, we can actually model what would happen if the trade tension were to continue -- looking ahead, we can actually model what would happen if trade tension were to continue. anchor: if trade tension continues, do central banks have the tools needed? one: that is actually a very good point, because we also underline how much the global

growth has still been on life support from monetary policy and how important it is to consider what exists for policymakers, for government, fiscal policy, and structural policy, so the one message we send for that beyond the trade negotiations is, first, invest. interest rates are what we call to bend they are said persistently low, and on top of reform, competition reform, regulation, the digital transformation that we are seeing really requires government to act and fast. e, i wantaurence boon to rip up the script. talking about an eu financial policy that is "back to the ice age," how restrictive right now are central banks? how restrictive is financial policy when you see inflation

coming in so low? i think i would distinguish two things from your question. the first one is monetary policy, which, i think, is usually accommodative, but, obviously, with a flat yield curve, if the bank business model is not as good as it should be, it will weigh on profits forget that is one thing. number two is to modernize the business model. and the other thing is finance. actually, very accommodative. they started tightening at the end of the year. it is one of the reasons why emerging markets or some of them took a hit. i really think we should take a page of this financial condition to actually invest more and talk about fiscal policy a lot more than what we do now. anchor: that is the oecd chief

economist, laurence boone. china vowing to face what it calls "u.s. bullying" in ban.ion to the huawei this is bloomberg. ♪

>> the issue comes down to whether or not you can trust china. the answer is, no, you cannot, so i hope the people are prepared to separate huawei and huawei's from china. whether you can or not, given the rather murky issues of the ownership of huawei, is going to be a really important and challenging question, which we are going to have to discuss over the next weeks and months. >> right now, we have a very high-stakes poker game going on, but that is not in the interests of either country. i think china has more to lose,

more at stake, because the tariffs are going to hit them harder, but it is going to affect both countries. >> we can tell you forest -- first and foremost as prices go up, as duties go up, the american consumer does pay that duty, not the chinese. anchor: we are getting the latest lines, saying that the u.s. did embrace auto export quotas for japan when they had negotiations. of course, we have seen the president delayed those auto tariffs by 180 days. there were reports though that the president had asked a condition from japan and europe that they may have to agree to restrictions, limits, or some type of quotas when it comes to those auto imports, and now, a news agency saying the u.s. did not raise auto import quotas in their negotiations, paul. paul: all right, thanks very much, shery. let's turn to another front on

the trade war. the bank of commerce may have granted a 90-day reprieve for huawei. the temporary license does not lift restrictions on future huawei items. according to analysts, this makes huawei phones technically unsellable in? it's -- in western markets. the vice president of client devices, research joins us now from a group. pretty colorful remarks. only one affected by these decisions -- the blast radius about huawei supplies is pretty wide. you can see three of them slumping on the troubles of huawei, and i think huawei has something like 310 suppliers, most of them weaker as a result. how do you organize a supply chain like that? >> yes, and it is not easy, right question mark as you pointed out, a lot of the

suppliers are american. -- yes, and it is not easy, right? out, a lot ofnted the suppliers are american. it is not easy. you look at like radiofrequency front end parts, or as mentioned earlier, when it comes to even software and google, right? huawei has been saying they have o.s.heir own homegrown that is ready to go, but it does not do them that much good. the viability of that product or the usability of that product is dramatically increased. it going, and how is to affect the 5g rollout? there is implications there, too, right? bryan: yes, there could be. the good thing, at least there are other carrier or rather other network-equipment suppliers out there, as well, but, yes, obviously, huawei was

one of those that was leading on that front. i think part of the motivation here is, of course, because of where -- you know, huawei was driving there, maybe this was part of a motive -- in fact, not so much with 5g as a whole, but to give huawei a few speed bumps along the way here as it was pushing forward in this regard. samsung shares rising. are they one of the big winners out of all of this? bryan: yes, they very well could be. they have the same product range that huawei does. they have the same, you know, type of channel set up and depth in these mature markets where huawei is playing, and so, particularly in europe, right, so if huawei no longer becomes

one of those key android players for consumers to turn to, well, who is one of those big, alternate suppliers? it is going to be samsung. of course, there are more out there, but they tend to be a lot more targeted in their approach to the market, so samsung does stand to benefit from that. anchor: how about apple? of course, we know that huawei surpassed apple as a phone maker. could they be at risk? well, apple is -- ok, sorry. to back upam trying a second. if we take a look at apple and where they might be able to get users from the android side, i think the challenge with that is that users don't necessarily migrate between the ecosystems that easily. i think where your question was and what i am sort of stumbling

on is where is apple going in china? don't forget that huawei in china is probably still going to be in a good position, at least from an operating-system perspective, assuming they can get a lot of these components in place. they say they have got a bit of an inventory that is built up, so huawei can still be in a good position there. i think the bigger question is where huawei looks and the rest of the world. i think in china, they have more of a buffer. anchor: trade retaliation. on the apple business there -- are you expecting some sort of retaliation in that sense? yan: i am sorry. i am not sure i got you on that one. come again? anchor: good the chinese retaliate, including against apple in china? bryan: oh, yes, yes. sorry.

in theory, that is possible. i do not know that that would necessarily come to fruition, but, yes, in theory, of course, it is possible. anchor: bryan, thank you so much. idc vice president. we have breaking news at the moment, getting equal numbers out of japan. we were expecting those machinery numbers. the japan april exports now gaining ground, subtracting 2.4%, a bigger contraction year on year for the month of april than expected. it is in line with the previous month. imports, year on year, rising 6.4%, rising more than expected, as well. core machine orders month on month gaining 3.8%, which is quite interesting because the expectation was for it to remain flat. of course, machine orders are a leading indicator for investment, so perhaps that is boding well for the japanese economy. machine orders year on year in

contraction territory, but a smaller contraction than was expected. exports you're on year contracting 2.4%, more than expected, so we are seeing weakness, given what we saw given the china-u.s. trade tensions and the slowing chinese economy. let's bring in our chief asian economics correspondent for a look at these numbers. butexport number missed, machine orders seem to be doing pretty well. what is your take of the numbers? reporter: i think it probably reflects the negative backdrop, the negative sentiment, and remember, shery, next ports have been a big driver to first netter gdp growth -- exports have been a big driver in the first quarter gdp growth in japan. there is something of a softening backdrop with china taking the turn it has over april, and of course, heading

back into more protracted trade tensions. i think the real outlook for the japan trade story will come in june, when we have the g20 summit, when president trump will probably meet with prime minister abbaye. we will see -- prime minister abe. we will see then. course,t forget, of that the china-u.s. trade story is import for japan, given the supply chain. with these numbers, probably hinting negativity, but there is a circuit breaker in the month ahead, and that is why we have to look at june. paul: in terms of other circuit breakers, we have got the boj making its own calculation of economic growth. do you think this could call into question those unexpectedly strong gdp numbers we got earlier? reporter: yes, the numbers were skewed. imports were so weak.

aat meant net exports were driver for growth. the backstory, some questioning of the japanese situation recent times and behind the scenes among officials, the central bank, the finance ministry both, just how strong the economy is, and let's not forget that the reason why is there are those who want to push through a sales tax increase at the end of the year, arguing for fiscal sustainability to get a bit of a handle on the debt story in japan, and, of course, some are arguing japan will not be able to handle such a hike. last time they did so in 2014, it flipped them back into recession. just how strong japan' is economy is. -- just how strong japan apostasy economy is. paul: thank you. more coming up on "daybreak: australia" and "daybreak: asia." ♪

paul: a quick check of the latest business flash headlines. a stop to watch when hong kong opens later. -- a stock to watch when hong kong opens later today. video streaming has added only 7 million new users in the last six months. they expanded their base previously by 40 million in a year. theent has not said streaming platform is profitable. wehor: hang in the balance, are told some members of a supervisory board are questioning whether one person is good to leave the company, and they will discuss it. are navigating a costly transition at bmw to electric and other vehicles. anchor: japan getting underway

at the top of the hour. what are you seeing? gauge: shery, we will reaction to the trade data, exports falling more than expected in april, and checking in on the yen after that data, fairly steady after earlier touching a two-week low, while the aussie is holding steady after testing a low. the pair recovering a touch after falling for five straight weeks. going short aussie and going long yen has become a hot trade. it is more like a riskier currency, which means more volatility, and there is plenty to watch in the commodities sector. acquisitionroposed of a project from origin energy. fortescue says their deal was approved, and coronado says no change from australia that is a snapshot of what to watch for.

japan, south korea, as well as australia. plenty more ahead on "daybreak:. asia" this is bloomberg. ♪

paul: good morning, i'm paul allen in sydney, where asia's major markets are just opened. shery: good evening from bloomberg's global headquarters in new york. i'm shery ahn. sophie: i'm sophie kamaruddin hong kong. welcome to "daybreak: asia." paul: our top stories this wednesday. asia-pacific stocks look to track wall street's advance. tradefrom the escalated war. the pressure is still on. huawei has a range of answers to president trump's ban. and china says they will win the tariff battle.

shery: jim bullard says the rate hike may have been a mistake. may haveoncerned we slightly overdone it with our december rate hike. shery: let's get straight to the market open in japan, south korea, and australia. sophie: in tokyo, we have stocks gaining ground as they digest the latest trade data that shows exports fell 2%. the yen is trading near a two-week low. we will also digest the outlook for japan. in korea, the gdp growth forecast cut this year and next. we do see it continue of one third of a percent. extending gains we saw tuesday when sam's gun helped boost the benchmark on bets it will benefit from the ban on huawei. trading against the dollar. let's check in on the

antiquities. we do have the asx 200 opening. little change. the aussie dollar is holding steady after testing a form as we get more bets on easing from the rba. we had the chief economist at westech pushing forward his bets on a rate cut in august. the asx 50 resuming gains. paul: thank you very much. let's check in on the first word news with jessica summers. jessica: theresa may has made a final through parliament before she steps down. her efforts seem immediately doomed. in a hastily arranged speech, she promised to give the vote on whether to call another referendum. only if a bill passes first. say they won't back her. >> right now, this is slipping away from us.

we risk losing a great opportunity. this deal is not the final word on our future relationship with the eu. it is a setting stone to reach that future. of thee where the people u.k. determine the road ahead for the country we all love. jessica: iranian president caps on romani says his government resistew powers to what he calls an economic war being waged by the u.s. he told the gathering of clerks that during iran's war with iraq, the supreme council held overall power and the judiciary committee did not intervene. iran now in an economic conflict, and a sustained type of overarching leadership group. japan's influential ottoman of fractures -- auto manufacturers are disappointed that imported cars threaten u.s. national security. they are seen as unusually strong for the group.

they come from the chairman, who is also toyota's president. the group is dismayed that japan's long-term investment in welcome.is no longer global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers, this is bloomberg. shery: investors will be watching cues from the fed when it releases its latest minutes on wednesday. that after st. louis fed president told us the central bank may have overdone its push to tighten policy. we spoke to him earlier today. >> a wide-ranging conversation taking place about what the trade war is doing, was the fed correct in making the december rate hike? we hear about that. looking at a micro level, what does he see as fed president

with the local community. jim: our community is very concerned about the trade war and the serbian issue. exports are down a lot. the government is trying to come back and offer some payments to farmers. those are usually considered barely enough or not enough. overall, u.s. agriculture is not one of the stronger sectors of the u.s. economy. we have other parts doing well. probably not the agricultural sector in the last couple of years. >> is that something you think will be reflected across the board? importantis such an youdline driver, howm uch do think about the trade war as a fed body? james: it is an important issue. for this to affect fed policy,

these tariffs would have to stay on for quite a while, something like six months. end of that six month, if there was still no prospect of a resolution, i think that is the point in which it would start to weigh on fed policy. at this point, we are too early in the process. >> do people hold off from investment? they have this wait and see approach. it is damaging. james: i agree about that. my sense being over here is that the chinese side would benefit a lot from getting this deal done. more confidence and investment in china. that theye feeling are going to protect foreign investment. i can see a boom in china coming after a deal. >> tell me about where rates are?

james: they are a good place in the u.s.. if anything, we are restrictive -- and i am concerned we may have slightly overdone it with our december rate hike. i was pleased the committee pivot did -- pivoted the current direction for the policy rate to remain flat during 2019. we got very low inflation numbers. low inflation expectations. that's a little bit concerning to me. i think that could be used to justify rate cuts at some point. >> absolutely. markets factoring in some market indicators. one or even 2. two years ofe had great upside surprise in the u.s. economy. growth turned out to be better than what we saw. unemployment lower than we thought. everything coming up roses on the real side of the economy. our 2%flation is not at

target, based on our measure. it is this core pcu inflation. i think it gives me pause that it is so low. that theive more pause inflation expectations are below the target. why aren't those centered at the 2% target? i think we can take this opportunity to try to re-center inflation expectations at 2% and gain credibility. talking to me a bit earlier. heng on to talk about if thinks rates may be restrictive. also what his main concerns were. you can watch the interview on tv . with that in mind, back to you. thanks very much. themberg has been told

trump administration held off on blacklisting huawei out of concern it could derail trade negotiations with china. officials only went ahead when the latest talks stalled. joining us now is derek wall bank. if that is the case, this is starting to look a little bit like the situation with zte. is it possible huawei is a bargaining chip in all of this? derek: the parallels are ones people have been talking about. there certainly is some parallel in that case. the zte case ended with negotiation. there are thoughts that huawei good end -- could end in a similar way. there's a story we wrote, the reporting suggested the trump administration has been considering the steps it has been taking on huawei for quite some time. it held off on that because the

trade negotiations were at a delicate point. there was a giant risk that if they took these actions on national security grounds, it could imperil trade talks. the people that our reporters spoke to stress the huawei probe had been going on for quite some time. it was unrelated to the trade stuff. when you get into these moments and are trying to have this conversation, this white house and china have stressed that a lot of things are interrelated. had news like that broken when trade talks were going fairly well, you can be assured that trade talks would not be going fairly well very quickly. i think that is a little bit of how that timing gets together. shery: talking about the trade heardtself and we have from the chinese ambassador to washington that the door is open for talks with the u.s. deal, farmers a

in the u.s. are still suffering from those tariffs. the tariffs on the agricultural goods. is there more aid coming their way? derek: there is likely more aid coming this way. it could be announced as early as later this week. hearing it could be about thursday when you're getting details on a full aid package that will try and help farmers. i think it is critical to note that farm country was split on the last aid package. soybean farmers got a lot of aid, compared to corn. one of the things you have to watch is planting decisions in the u.s. midwest. there has been a really terrible weather, a lot of rain and flooding in the midwest grain belt. are often planted on the same acreage. if there is a package perceived as more friendly to soy growers,

it could affect planting decisions because some of the acreage has not gone in. if you are in commodities watching this space, it is something to watch out for. look for the details and how it affects plantable acres. there is plenty of criticism with the idea of the u.s. government taking borrowed money and bearing -- bailing out farmers on the risks associated with its own trade war. it is nothing to mention the political consideration. a very apparent market play that if you're not following along closely, you may miss it. shery: soybeans go down as much as 1.5% after that report. thank you so much. a check of what is moving in the markets right now. sophie: i want to highlight line is, going up 10.6%. a june high after clarifying

over the figures from the investor presentation that it would deliver the growth plans 2025. the biggest executioner is china -- indian outputs. open in sydney after pausing trade after rallying 14%. shery: still ahead, theresa may's big gamble. the embattled u.k. prime minister offers lawmakers a final chance for a break the deal. opponents on all sides are not impressed. tol: 5g strategists joins us talk about the big risks in markets today. this is bloomberg.

paul: this is "daybreak: asia." i'm paul allen in sydney. shery: i'm shery ahn in new york. we just heard from st. louis fed president james bullard who told

us rate cuts may be justified if inflation remains below target. the fedore clarity on relief system from its main meeting wednesday. let's cross to our market strategist. great to have you with us. are you expecting any fed moves this year? think it is something we will look at into 2020, just singapore, we do get uncertainty, in terms of whether is to come. there is not rod expectation for growth slowdown prayed trade tensions are adding to the worries. as far as the u.s. economy is concerned, we see indicators that there is no need yet. there are a few changes, but my expectation is into the next year. shery: because of those trade

tensions, we see the bloomberg dollar index around a two-year high. ofjust heard from the cio payment capital management. take a listen to what he had to say. long dollars, u.s. dollars. that means we are short southeast asian currencies. shery: what are your views on where the dollar is headed? especially given that you have to factor in whether or not washington will tolerate a strong dollar. the u.s. dollar strength at this point in time looks a little bit in applicable. if we look at the reasons supporting this, look at uptrend. very tight at this point. what is really driving this point over and above the fact u.s.many do view that dollar is a bit of a safe haven, given the tightness of the u.s.

economy. the fact that we have a lot of these nonessential banks around allowedd, so many have more of a dovish rhetoric. realization is going to keep the u.s. dollar going. as we move forward, there is expectation that the central banks around the world will get more supportive, just because you find growth itself, including here in asia. sense, they are keeping their raw sentiment to what is a strong dollar at this point. paul: you have a slightly different position, you short the dollar versus the yen. can you explain that? january, the u.s. dollar was expected to rise. really against the yen, there is downside.

they really have been trading between 108 and 11 four. there is a lot of this roughly in the market. what we have right now is this u.s./china trade tension erupting. it has not really gotten to the downside. one of the reasons over above all we have and expect to do, furthermore we have the trade tensions, a lot of this may have not flown true to economic data. bring ait will nextwave. something to look forward to as you move ahead. we have the u.s. china tariff duration, that is a big question mark. paul: we just saw on the screen some of your other top picks. one is your long gold. how long? what is driving that? is it trade or something else? what is the price tag you have? of gold prices,

really at this point just looking towards any shouts above $1300. something that remains to be seen, just because to some extent, the yen, the same haven trade, there is a little bit of risk sentiment eruption that can happen. not to mention the others to come. we see the u.s. taking a bit of a positive side. since we need to get of trading partners in line, should it come into the topic, it will be a long drawn, more confrontational than we had to see. it can bring about pressure for global growth. think we have april, the u.s. dollar, and gold prices strengthening in tandem.

that has also been brought by the economic data weakening. we would just look into that. i would not so much put a finger to it as a target. haven say that the safe hikes are expected to go through the year. paul: thank you very much. joining us.yi pan theresa may making a final attempt to get her brexit deal through parliament. already it is not looking good. we have the latest ahead. this is bloomberg. ♪

paul: u.k. prime minister theresa may is making a desperate final attempt to force a brexit deal through parliament before she resigns, saying the opportunity for leaving the eu is slipping away. a gamble looks to be doomed from the start. let's bring in jodi schneider.

how is theresa may packaging this forth? what conditions is she imposing? it is a last-ditch effort for her to try and get something up through parliament. it would be a fourth attempt. she's had three humiliating defeats trying to get the plan through. when she's offering at this point, her pledge is that she would give parliament a chance to call for another referendum on brexit, but only after they voted again on her plan to try and have a brexit. she would try to get that through the first week of june. she has already told members of her party that she will come up with a timeframe for leaving office and choosing her successor. it's a question of whether she time.at much after this came out, there are

calls for her to resign right away to abandon this plan. people say it does not offer anything new, and there has been enough time with this. we will see whether she gets the chance to move this through the house of commons and get a vote on this plan through parliament. it looks very unlikely that she will succeed in getting the votes she needs. shery: we saw the potential success of that deal with the movement of the pound. that rally in the beginning did not last long. how much will she deal with the irish backstop? that seems a stumbling block in her other proposals. plan.this is a 10 point on the irish backstop, the word could be some alternative the arrangements that can mitigate the impact of that backstop. and to come up with other things in the plan, trying to cushion some of the blow from this. again, it looks like she does

not at this point have the votes. she also tried earlier to work on a deal with the labor to get something through parliament. that attempt fell apart, as well. the real question is whether there will be a chance to move this through. if it happens, how she can try to rally the votes that first week of june. shery: jodi schneider, thank you so much. let's get a quick check of the latest is this flash headlines. tencent will be a spot to watch one hong kong opens. the ceo of the video streaming business is warning slowing deals in china. they have added only 7 million new users in the past six months. it previously managed to expand its user base by almost 40 million in one year. the nikkei says tencent has an streamingsaid if the platform is profitable. the: jobs hanging in

balance, according to people close to the company. it told members of the supervisory board questioning whether he's the right choice to lead the company and will discuss prospects in the next few weeks. his current tenure ends next may. the turmoil comes as bmw's navigating a costly transition to electric and autonomous vehicles. shery: the self-proclaimed inventor of bitcoin has won u.s. copyright for the paper and computer code underlining the cryptocurrency. the agency has named chris wright as the author of the proposal. it may not settle controversy of bitcoin's creation, as has not been detailed. stay with us, plenty more to come on "daybreak: asia." this is bloomberg. ♪

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jessica: this is "daybreak: asia." i'm jessica summers with the first word headlines. beijing remains ready to continue trade talks. china was committed to a tentative trade agreement that besides had reached, but the u.s. changed its mind overnight. he says china is ready to address trade imbalances and to buy more american product services. >> china remains ready to continue our talks with our american colleagues to reach a conclusion. our door is still open. jessica: huawei says it has several solutions to being blacklisted by president trump. speaking in brussels, the

company's chief envoy says huawei has secured ways of offering support to customers and announced what he called washington's bullying and unprecedented lobbying. he warns what has befallen huawei could happen to any company at any time. victimei is becoming the of the bully that is the u.s. administration. against huawei, it is an attack on the liberal rules-based order, and this is dangerous. has so fare u.s. managed to build just 1.7 miles of wall on the mexican border, point $5 billion of funding congress appropriated last year. the information was provided as part of a court hearing in california, where a judge is to

block president trump for using funds for the wall that have not been authorized for congress. think aation authority bird strike is the most likely reason for the problem with the anti-stall system to link to the crash of the airline 737 max 8 in march. the wall street journal cites unidentified officials. boeing has declined to comment. almost 300 50 people died in the ethiopian disaster and the lion air crash off of indonesia in october. those involved the 737 max 8 lane. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers, this is bloomberg. thank you very much. let's check in on what's happening with the markets. sophie: midweek stocks are looking mixed for japanese

shares. gaining ground, despite the latest data showing continued export weakness. electronic makers rebounding in tokyo from a slump. the kospi resuming losses. the korean won is just ever inghtly firmer this morning the wake of the forecast, which comes on the heels of the gdp forecast for tokyo being cut. i also want to highlight the turkish lira, which is moving in the asian session, extending the overnight drop after the central bank undid recent tightening. checking in on aussie bonds. the 10 year yield gaining ground. about 2 basis points higher this morning after a record low tuesday on rba be -- rba easing bets. rate cuts seeing in the next 12 months. in the commodities space, oil

under pressure this morning. trade tensions muddy the outlook of the demand. wti around $62 a barrel. as we assessed the impact of the trade were on the global economy, we should look at 2 groups sensitive. kathleen hays has the numbers. miss and a beat. kathleen: bottom line, when you bells, and allde the other bad export data we have seen, including the last couple of days, south korea, singapore, and japan. japan's export orders fell for the fifth month in a row, down 2.4%. that is unchanged from the month before. imports rose a lot stronger than the month before. 6.4% on top of 1.2% before.

demand still looks good. there's a lot of imports coming in. exports, the demand around japan has worsened. the supply chamber getting andrrupted by the trade war more. one measure falling to only ¥60 billion from 528 billion. not quite as bad, but still in negative territory. versus ¥154 billion. the core machine orders are very important. they rose more than expected on a monthly basis. iny were up 3.8% versus 1.8% february. that is encouraging. theyyear-over-year, ther are still negative. they were down in march. they were down 5.5% in february. let's step back. one more reason why this is byortant, how badly shipped the trade war, what will happen next, what will happen next with the consumption tax hike due in

october? every number that shows where the economy is now and where it may go will add to this debate should prime minister abbe and his team call it off. it looks like for speed ahead of print the gdp number we got came in positive. this will definitely be added to those skills. we will see how it balances out down the road. paul: let's talk about the impact of the trade war on growth. sounding more worried than ever. kathleen: we are in the middle of a trade were, looks like the u.s. and china are heading for a deal. you know, china steps back to my trump steps up, more tariffs on tap, even more potentially. let's listen to what the chief theoecd told bloomberg television today. over the pastened year. it is now quite weak.

there have been trade tensions. we really see trade has derailed the global recovery that was going on in 2017. >> you are the only one that really slashed global forecast in march. 3.2%. numbers like that are too close to something that can begin to look like a recession globally. downgraded, sot has japan. the u.s. has upgraded. nevertheless, there are more threats in the trade war. let's see what's on the list of what they are worrying about. trade tensions, hitting crisis level. we have seen weakness in manufacturing. what if it creeps into services? they are so closely aligned in countries around the world. what about the high levels of private debt in many countries? financial stress can come from that. we've seen them stimulate the economy.

does domestic demand falter as a higher level of tariffs hurts the small and medium-sized companies that are so big exporters. the oecd calling on governments to "reignite multilateral trade talks." s to the leaders of the u.s. and china. it does not look like it will happen anytime soon. that's the latest from them. bloomberg global economics and policy editor kathleen hays, thanks for joining us. let's get more on the trade front. the trump administration's decision to blacklist telecom giant huawei technologies may be more than another twist in the u.s./china trade war. tim pop and says it is too late to expect a suspected cold war can be averted. why is this move against huawei different than what the u.s. already did to zte? maybe it is not a bargaining

ploy. >> i don't think it is. if it is, it will backfire. it will not be able to reverse. whenzte got banned from -- went zte got banned from buying u.s. products, there was a reason. for broke an agreement reparations, including changing management. it reneged on that deal. it was only after that that they were slapped with a ban. whether or not you agree with the sanctions against iran, or u.s. policy, it was clear what they were being punished fore. andei is allegations rumors. nothing has publicly been released by the u.s. there are plenty of researchers that pointed the finger at huawei, but the u.s. has not publicized specific allegations. if you look at donald trump's executive order last week when he handed over the control of administration of that order to

the commerce department, he did not name huawei specifically. he just said there are tricks and he is worried about them. they need to control this type of technology. the issue is more of an ideological battle donald trump has started and put us on a path toward. it is probably inevitable, just as the cold war between the soviet union and the u.s. was building over time. this is probably inevitable. i think this is the first shot in the cold war. shery: you mentioned backfiring, the u.s. moves backfiring. will this boost china's resolve for technological independence? tim: it is. we knew that they wanted to do this. they were looking at this for quite a long time. this was something xi jinping had been talking about. they were throwing billions of dollars around the country. semiconductors are a key area, but not the only area. what this really tells us is that even if donald trump says it is a bargaining chip, he will

somehow turn it around and forgive huawei and allow them to buy u.s. technology as part of getting a trade deal. china and beijing and huawei executives, pretty much any other executive in china, realizes this is not an administration in the u.s. that we can be confident in and we need to go it alone. it is the straw that breaks the camel's back. there is no way to reverse that. i think it is naive to believe some kind of trade deal will mean they can go back to where they were. that horse has bolted and there's no way to reverse that trend. paul: we are just getting a few lines from the american chamber of commerce. about 41% of its members are considering relocating outside of china. about one third of its members are considering investment delayed in china. let's get back to the idea we mentioned, whether or not this

business about huawei is a negotiating tactic by president trump. let's fast-forward to a hyper political future in which a trade deal is all done. does that mean the huawei issue blows over? tim: no. those statistics you just said in china really tall operated 41% of companies considering moving away, or doing less in china. that really tells the story. what we will see in the future, and not immediately, but over .ime, there will be 2 spheres of influence. the u.s. and. chinese. there will be a time five or 10 years from now where countries and consumers will be using technology that is developed by and made by the u.s. sphere, and technologies made and developed by the chinese spear. i think they will not cross. that will be the scenario we see, where people will be on one

platform or the other. now, we see this with both sides, trying to divide up the world, or certainly bring in our lives to make sure they are spears of influence. this will be building a. shery: tim culpan, thank you so much. we will chat with one market strategist who says china's central bank will find a way to next.he yuan stronger, this is bloomberg. ♪

paul: our next guest is the people's bank of china -- says the people's bank of china will keep the yuan stronger than seven dollars to prevent capital outflows and preserve its foreign reserves. joining us now to discuss this from hong kong is citigroup's global market china strategist.

i want to get to the point right away. the yuan. bringing up this chart. it will illustrate what we are talking about. as things get tight around trade, you see the yuan approaching seven to the dollar level. you see the pboc defending it. why is it so critical? is it not just psychological? >> indeed if you look at what will happen from here, there is risk for further tension escalation. it's in the format of the u.s. putting more tariffs on the .emaining chinese exports it will put pressure on the currency. if the currency depreciates from here, and we are estimating another 5% in real effective exchange terms, it can offset the tariff impact on exports. you can argue there are other advantages for the depreciation,

including losing of monetary conditions, and also sending a shot to t shock -- sending a shock to the market. there are also major disadvantages for such depreciation. first of all, the capital outflows. we have seen that during there is morethe dollar demand in the system. right now, the conversion ratio is decent. the expectation could change once the currency goes above seven. the real sectors in china have their demand on dollar increase. the second is financial stability. ofthe past, during periods depreciation, we saw financial conditions in china tighten. that damaged confidence and potential financing channels for the economy. it is also quite detrimental.

the third part is if you look at the capital inflows into china in the past two years into the stock and bond market, it would be writing on the waves of appreciation. now, we have index inclusion stories. we are expecting inflows. these flows are also very political. we have seen outflows during periods of high pressure. i think this will be the next impact, the currency will go above seven. lastly is the reserve. if it goes above seven, the pboc will probably use more reserved to manage the pace of depreciation, and potentially in the future, stop it at a higher level. compared to keeping it below 7. anchored,tations gets the real sector demand on the dollar will be stronger. everybody offshore will also try to add up to their topside dollar. at that point, it will probably cost more reserved to stabilize

the currency or slow down the pace of depreciation. paul: a comprehensive list of why policymakers don't want them to push above seven. the question is what do they do to ensure that does not happen? lu: over the weekend, we saw verbal intervention. the pboc website published an article that the chinese authority had accumulated rich experience and policy tools to avoid extreme volatility is. -- volatility. they plan to issue pboc bills again in that market. this has been listed as one of the macro potential, countercyclical measures to manage the currency. this could tighten the liquidity and the tour -- deter our market. shery: we have seen foreign outflows from chinese a-shares. this chart showing the csi 300

is now nearing key support levels. the last time we saw it at this level in february, we saw the markets rallying. are we going to see a repeat of february? could the weaker yuan hurt that? lu: yes, certainly. in terms of impact and growth, and sentiment, our economies have downgraded our gdp forecast for china from 6.6 to six .4%. they are expecting the higher tariffs to impact the second half growth by 25 basis point. it certainly can impact the stock market. the market is also expecting more easing measures, given the high uncertainty. we are expecting measures from more infrastructure projects to measures to stimulus

consumption. on the monetary side, we are also expecting the pboc to maintain more easing and accommodative stance compared to before. shery: thank you so much for joining us. citigroup global markets china strategist. much more in the next hour. the bloomberg markets china open team will be joined by the amtrak chairman after 9:00 a.m. in hong kong. this is bloomberg. ♪

the last governor of hong kong has spoken out against the territory's proposed extradition law. controversial proposal would allow people to be sent to mainland china. chris patten spoke to bloomberg in london about the proposal, as well as the rising tension over huawei. what the extradition law does is destroy the fire wall between the rule of law in hong kong, and what the chinese diplomatically call rule by law in china. that means there is no real distinction between the courts, security services, and what the party wants to happen. hass not surprising this caused as much alarm as it has in hong kong. i think it is the worst thing that has happened, as far as the communists in beijing are concerned in hong kong since 1997. it raises a fundamental issue for all of us.

people talk about china growing in the 21st century. the chinese have yet to prove that we can trust them. if they break their word over hong kong, where are we going to trust them? >> paul: huawei specifically when it comes to the u.k., -- >> huawei specifically when it comes to the u.k., do you think they can be trusted? chris: if the issue comes down to whether or not you can trust china, the answer is no. i hope people are prepared to and theiruawei interests in china. whether you can or not, given the rather murky issues of the ownership of huawei, is going to be a really important and challenging question that we're all going to have to discuss over the next weeks and months. i'm not knowledgeable to comment on the relationship between the core of 5g technologies and the

fringes. what i can comment on is a simple fact that china cannot be trusted. chairman and hong kong governor, chris patten. let's get a check of the business flash headlines. hong kong has sold 4 separate green bonds to nominated in u.s. dollars to become the second asian government after indonesia to raise such debt. a one billion dollar five-year greenbaum will yield 32.5 basis points over treasuries. that's according to bloomberg data. the proceeds will be used to finance environmental projects that support the sustainable development of hong kong. paul: johnson & johnson has lost case and must pay at least $25 million to a woman who claims she contracted a rare as best this related cancer after using the baby powder and shower products. the new york verdict only reflects the order of compensation. jury will return next week to think about damages that will be

far higher. let's get a preview of what to watch in the markets later this morning. sophie. sophie: in hong kong, amid the huawei ban, we are keeping an eye on zte. exceeding its call for both the h and a-shares. no delays for china building out its 5g network. 25%.s have fallen about today, we saw -- we saw back in april. after it 4 they drop, the nikkei citing the ceo warning of pitfalls facing its video advertising sales in china this year. losses of the company in singapore. chart watchers will add a key level for it today as it closed below 28 .04. it has already 12% since label peak. the hong kong dollar is hovering near the weak end of its trading range. it has caused the currency to be

shorted in the expected view that they are not sufficient. other watchers disagree with that. the liquidity buffer remains thick. shery: before we head over to "bloomberg markets: asia," take a look at the markets are trading. japan's nikkei unchanged at the moment. we have the disappointing exports numbers more than expected, down 2.4% for the month of april. south korea's cost be losing half a percent. we saw their export numbers fall more than 11%. plenty more coming up. the china open is next. ♪

>> program to bloomberg markets china been. i am tom mackenzie. david: county down to the day of trade. yvonne: we are counting down to the top stories. the fed president spoke exclusively to bloomberg. december rate hike might have been an error. concerned that we may have slightly overdone it with the december rate hike. back, huaweing