>> welcome to daybreak australia. world -- bloomberg's world headquarters in new york. >> i'm in hong kong where we are counting down the major asian market opens. >> here are the top stories we are covering in the next hour. president trump turns up the atade war -- trade war he with china. stocks fall as investors seek safety as 10 year yields drop

their lowest since 2017. they must not fix the slowing economy and a looming jobs crisis. >> let's take a measure of today's risk off day will stop the dow jones industrial average , nasdaq, all down at lisa percent or more, small caps getting hit hard again. , 28, 22, 1 report saying it continues to worsen. see -- could be a possibility. the flash key manufacturing and service market indexes, weakening a good deal, the manufacturing index hitting its lowest reading in a decade, oil getting hit, rising u.s. oil and terry one of the factors,

actually turning around and regaining its losses. it had been nearly 6% and you can see globally, act of futures are pointing to a bit of a turnaround as well, so maybe after a decline people are hoping that asia could help turn things around and trade, weaker , now let's turn it over to sophie, asian markets are really the spotlight now are they,? with could continue futures pointing losses across the board. qe stocks and futures in chicago hinting a cap at session for japanese stocks that kicks off this weekend. a risk off likely to continue after an 86 they rise. in on the yen, the

rose in japan, likely april, but core inflation expected to slow. investors assessing how the secretary will be and the taiwan dollar, they're looking steady, above 3153. best three-month stretch in the index since had lost seem, sliding to a march low. >> thanks very much. the latest selloff in stocks and industries set to roll trade disruption so that chip stocks, auto an industry.

sue, where was the damage worse? >> the question was, -- the question really is where is there a place to hide? where's the place that is innovating from the decline that was widespread as many strategists said this was a reality of the trade war hitting the market. let's go to the snap shot annual see bonds that had a lot of focus on the interview stocks. just below $50, but that was a huge piece of the market story. let's take a look quickly into the bloomberg. the question on this chart, thee is the support, below 100 and moving average and that is significant because the small caps have been a place of safety

within the volatility we have seen, but not in the latest session. let's go right to some of the hardest hit. that is the oil chart which shows you oil fell precipitously down in the trough coming back, but the trade war is a very big part of it and quickly to the size of the stumbles we saw, some of the energy stocks, a sea of red. notice the drilling and expiration down in double digits. a very tough day for that sector. >> just because you get about that the end of the day, does not mean it is over. it wasn't just energy. also, changing his position, not looking or the trade deal to get done fairly soon, but actually tariffs and all the damage that allith it will stop >> --

the damage that goes with it. [no audio] >> take a look at how chips were effected. many of these are related to the huawei story. again, that is issue waiting to drop, but it is hanging over the industry heavily. we have hewlett-packard front,ises and right up they talked about how this u.s.-china trade issue is creating enormous uncertainty. they saw the kleins year-over-year, but positive with the outlook. >> thank you for getting us caught up. let's bring in bloomberg regular, founder and president of global strategies. what happened today? what is happening right now? it is it -- isn't all about trade and what happens next? withu have spoken a lot

the feds and have reported on that particularly. i think it is a combination of that action, global economy and the trade war and all of them are coming together at this point in time. let's start off with the fed. i think they made a serious and they would increase rates twice in 2019 and give the idea that the fed actually has no long-term plan in terms of how they go about it. the global economy has been slowing and we have this trade war accelerating in terms of not only tariffs, but the attack on the trade war is taking on new dimensions, restrictions on chinese

companies and all those came to a head in today's market. >> what are the logical to expect but a data dependent who was watching the impact of the trade war, if this continues, will take the appropriate action? whenhave not cut rates there is a strong enough case for it. twohe fed only has mandates, inflation and economic growth. at the start of the trade war, they have not seen any indication that growth has weekends because the first quarter was still good. wise, we have never hit the 2% target for 10 years, so it has been transitory for the feds to speak of it being low. ,f they are going to change they will do it because the stock market drops which is not part of the mandate but i said

in my most recent piece, don't on therised if it touch june 18, june 19 meeting and if you have more days like today below, bond yields went if we see that happening further , then yes, the fed cut is coming. >> you mentioned the dual mandate of the fed will stop it is not difficult to imagine a scenario of the trade war getting worse. if we look further down the track in 2019, you could see that fed on a dilemma, couldn't you? >> you are absolutely right. i think your reports -- your points are very well taken. i think growth will slow and the trade war is going to cause the

growth to slow in the united states and therefore on the global side, there is no doubt about that. i believe that inflation still will not pick up in the united states. the reason is the population is getting older and consuming less and near zero interest rates, but that is done is essentially income ande interest the stock market investors are not the consumers, so that is why that has not happened. i don't think the situation is going to change. expect ite low -- i to continue despite the trade war, but in terms of what the fed is likely to do, they are just going to say inflation is low, and we are going to cut interest rate so in a sense, going back to kathleen's

question, rather than the fed being data dependent, the data is actually independent in terms of what it wants to achieve, so that is my grout with the thread -- the feds. please do stay with us. we will return to the conversation a little later, but for now let's get to first word news. >> a government researcher in beijing says china and the u.s. may be locked in the trade war until 2035. the two will spend a few years testing each other's strategy and misjudgment could make negotiation difficult. the new york fed has put a price -- price on it, saying it is costing american families hundreds of dollars in year. the imf is contradicting

president trump on who is footing the bill for his trade bill. they say american companies are paying almost all the cost. the mf adds that some of the tariffs are part of u.s. --sumers, but most are being present from has branded huawei is dangerous and could be included as part of a future trade deal with china. the administration is choosing to choke off access by limiting the sale to huawei. they're proposing legislation that would ban american five g .etworks from using equipment >> huawei is something that is very dangerous. get what have done, it is very da deal. if we made a deal, i would

imagine a possibility where they can be included. global news 24 hours a day, powered by more than 2700 journalists and analysts and at tictoc on twitter, in more than 120 countries. >> still to come, when will have more on the challenges ahead for india's prime minister. >> still ahead, we see good the about its newo valuation of $2.5 billion. this is bloomberg.

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>> i'm kathleen hays in new york. >> i'm paul allen in sydney and you are watching daybreak asia -- daybreak australia. india has shifted further to the right as the prime minister has

a strong election victory will stop the question is what it will mean for investors. toy answer, let's get back the global strategies. what is a second one look like? >> it was based on two wasciples, one wants -- one economic changes, our people 2014 when the prime minister took office. secondly, it was spot on religious grounds. months, it boosted the popularity of a prime minister at that time in which people thought it was ahead of the election. the question is, is it going to be the reformist or the chauvinist one? that is still an open question. in terms of economic reform,

do you expect to see anything there? morewould like to see opportunity for foreign investments. i would like to see an opening in terms of it being closed to foreigners, but that is all unknown as yet will stop we are going to have a new finance and it will be a new team and the question is how much of that is going to be implemented the new individuals. to me that it is very much in the cards. again, it is a between religion and economics and we're still waiting to see what is going to dominate the second term. >> they have a large budget deficit, but the big promises fact theyrmers, in campaigned heavily towards them. is this landslide victory going to give us a mandate? what can be done? >> i think the farmers are

suffering rum a big volume of it is a big social problem. second, unemployment, the country has the biggest group of unemployed workers and young people which is a good thing demographic we, but even if the economic growth doesn't find enough jobs, that again is a big challenge for the prime minister, so hopefully that makes them focus more on economic reforms rather than shipped over on the religious side. at the tradeook war, you have to be the person with the worst odds and biggest return. what are you betting now that looks like a cold war? for?are you preparing >> i'm preparing to that the trade war has further to run.

it is probably going to effect emerging markets, but once the fallout is finished, then after that, it is going to be much .etter to invest >> what sort of retaliation do you expect to see from china in the coming days? >> the big move will be in terms of restriction activities on u.s. companies operating in china. you have google, apple, caterpillar, all increasingly finding a market and present , thecan restrict huawei chinese can say what google can or cannot do all stop that is a form of retaliation becoming increasingly important. not --

if individuals are going to be lack listed on the u.s. side, then the retaliation would be against going into china and starting enterprises. investments, at least in the short term. >> any kind of tech company, is it at risk? >> it is likely to be the leading sector effected by the trade war. you not only want to be defensive, but in terms of your political background, i think it is a good area to do that occurs any retaliation is going to hit tech the artists. -- the hardest. >> thank you. you can get a roundup of the stories you need to get. mobile on thee on

bloomberg anywhere to news you care about. this is bloomberg. ♪

>> i'm kathleen hays in new york. >> on paul allen in sydney and you are watching daybreak australia. let's return to a big story we reported early, silicon valley, choosing an australian design firm. but discuss what this means for the founder and ceo. thanks for joining us. who may not, people have heard comment can you describe on what it does? >> it is an online design form that makes it simple for

anything from presentation to social media and a whole lot more. there are other products out there that do the same thing. how was yours different? simple andit really i was taking it and thinking it was really confiscated. i wanted to do was take the design products, make them simple and customize them to everyone. also, a lot of high-quality ingredients. usually, the normal person is [no audio] we wanted to take off and make it accessible for everyone. substantialracked a investment. how to duck come about -- how did that come about?

>> it is amazing to have investors backing up our vision. catalysts, so it was an incredible round with such great investors. we were using 190 countries across the globe. we hope to take it to the next level. we feel like we only have done 1% of what is possible so far. >> let's talk about that next level. where do we go from here? we've had designs creating campuses today. schools, 80%50,000 of the fortune 500 companies using that, so we are getting pretty good across the world now, but the goal is how every single workplace. you had a couple products in the workplace to help with the

entire brand, so it has been pretty impressive, but we feel like we have so much more to do to empower everyone to design everything. >> part of the platform is free, so how do you make money? premises. one of the we wanted to make it affordable. you can use it as many times as you want and if you want to increase activity, you can upgrade, but we have 15 million people around the world and all sorts of things. fewe reported on a high-profile ones this year, some better than others. is that is something you are considering down the track? >> never say never.

our team is really focused on bringing an awesome experience to our community. we are actually a profitable company which is a typical in the tech world and it means we can invest in the long-term are working hard on a number of projects that have yet to launch, so we are excited to see how far we can take this thing. we will be seeing how far you can take it as well. next, huawei is president so says trump. the latest on the trade war coming up in a moment. this is bloomberg. ♪

>> 8:30 a.m. friday morning here in sydney. there's a foul stench in the air. futures pointing lower. there's a lot of smoke out there. hazard reduction burns have returned. it's quite unpleasant. of clouded,kind it's 6:30 p.m. here. quite a day in u.s. markets. we will get the first word news. theresa may is set to announce the timetable for her resignation as the conservative party leader later this morning.

her brexitom strategy grows. the news comes after leading brexiteer denies overall increasingly confident about his party's chances in the eu election. some officials at the ecb are worried about eurozone inflation after years of failing to reach their target. the banks april meeting some members of the governing council describing the rate as uncomfortably below target and the expectations of price growth are falling. the new york fed told bloomberg this week that inflation is a worry. declined asies investors sold the rally triggered by the prime minister's election victory. mumbai.1% down in the nikkei declined after briefly topping 12,000. modi's government faces a

slowing economy and a looming job crisis. the u.s. aviation regulator is making progress with its foreign counterparts over how to return boeings max plane to the skies. talks in texas were extended by an hour as officials brief regulators for more than 30 countries. boeing is redesigning a software system implicated into fatal crashes and expects to submit its final proposer soon. global news 24 hours on their and on twitter. this is bloomberg. now time for a market check with sophie in hong kong. how did the u.s. set the stage for the day in asia? >> looks like we are going to get direction with some futures pointing to a mixed session here in asia this friday.

it is picking up in chicago. the yen is holding on to gains in the face of continued losses for the dollar this morning. markets wait on drums visited japan. strategists reckon that trade disputes will be resolved. i want to see what's going on with commodities as morning. taking a year to date view, jumping into the terminal real quick to check in on commodities. i want to highlight what's going on with platinum for example. platinum holding losses this morning. let's not jump into this right now. that's what we're looking at when it comes to future so far. paul: thanks for that. let's got more on what we should be watching us trading gets underway with asia. investor vision has been building up his the

u.s. etf market. this is a really important indicator to look at. tf -- etf is one of the most liquid securities in the world. people use it as a hedging tool and a way to make an outright that on the market. short interest this week is up 7%. that has taken us to the highest level since 2015. these are hedges against downside risk in u.s. equities and also a column where the u.s. equity market is heading. it's a real significant turning point in the way that investors are positioning. there's no shortage of reasons why you want to be risk-averse at the moment. we've seen that huge flight to quality in the past 12 hours with sovereign bond yields across the world plummeting for 2019 and in many markets multi-year lows. the reason to be coming out of filing back your equity with --

risk is clear. that huge increased in short interest going into a long holiday weekend does speak to this idea that traders don't want to get caught shorthanded in the u.s. market over the weekend. inmay see more volatility asia as we get into friday's session. people wanting to not leave anything on the books going into the weekend. kathleen: in australia, things seem to be brighter. at least for stocks. why is the australia stock market doing a better performance? i'm guessing it might have something to do with the rda? >> yeah, kathleen. it is one part of that. bond yields are hitting all-time lows here. the aussie dollar itself continues to remain under pressure. you have an equity market which is a real stark relative at performer to the rest of the world. there are three reasons for that. the rba is one of those.

the market is pricing 25 or 50 basis points of cuts over the next 12 months or so. the surprise election victory that we got at the start of the week for morrison really did lend a lot of weight in support the financials, especially. you also had the change in regulation for proposals for what might happen in the housing market that will ease some of those lending fears that people have had about the slowdown in the housing market that is being putting a damper on the economy. you have this to bulimia things all working in favor of the australian equity market. been gatheringas pace this week on the back of the election and those proposals. it is lending support to an australian equity market that has already sat at 11 years highs -- 11 year highs. it really is looking like a great place to be at the moment.

kathleen: thanks for pointing it out for us. our dtv library for some of the charts we have just been talking about. dtv go on the bloomberg terminal. moving on to washington. president trump turning up the may on huawei, saying he insist becomes part of trade talks with china. has removed the company from one of its sites that offers cloud here. -- gear. >> huawei is something that is very dangerous. you look at what they have done from a security, military standpoint. it's possible that it would be included in some kind of a trade deal, if we made a deal. i could imagine huawei being included in some form or part of a trade deal. gregeen: let's bring in sullivan to put this in perspective for us and give us behind-the-scenes ideas of what's going on. is president trump throwing

something out there hoping the chinese will pick it up and throw it back in a better form? do you think you know something -- he knows something? >> those were interesting comments from president trump. companies toiring do business with the chinese company to get government permission. saying,president trump that company could be part of any final trade deal. thatoutside observer said blacklisting huawei in the first place was a bargaining move to try to get can sessions --- concessions from the chinese. today's comments signal that the president is willing to include the company in any final trade deal. president that the waited before putting huawei on the blacklist out of concerns that they would interfere with trade negotiations. when those stalled, the u.s. made their move against huawei.

certainly an interesting back-and-forth. it indicates that the president could be willing to use huawei in any kind of negotiation despite his concerns over national security. paul: let's run that hypothetical. if the president does grant some sort of reprieve as part of a trade deal, is that a guarantee the company is off the hook? >> there are voices in the administration that are very concerned about chinese rise in next-generation technology. lawmakers in congress have significant concerns. they have been eyeing companies and zte for a while over concerns that they could be tools for espionage for the chinese government. lawmakers have deep-seated concerns and may be willing to take action. a group of senators today introduced a bill that would ban huawei and zte technology from the five g networks. that has a long way to go before coming up.

it shows lawmakers are concerned and willing to take action irregardless of what president trump ultimately decides with a trade deal. a lot of angry voices, a lot of concern. he could face pushback if the deal is too easy. kathleen: a lot of tech companies are going to hear of it. joining others, saying that most tariff revenue has been born by u.s. importers. it goes against what president about,as been saying don't worry, china is paying for them. how does this add up? >> for a long time, we've heard from president trump that tariffs are a benefit to the u.s.. that the terrorists get him trade negotiation deals. and potentially investments. he has long argued that the chinese are paying the tariff. that is contrary to what most economists have said for a long time. u.s. conservators -- importers bear the cost.

the report is basically saying that same thing. it's not the chinese that are paying the price for the tariffs. it's u.s. consumers or their importing firms in the form of a smaller profit margin. whether this changes his calculus, it seems unlikely. economists have been saying this for a while. the math doesn't add up on tariffs for the president. unlikely to change the calculus. yet again, we hear of the effects of the tariffs. paul: bloomberg deputy team leader. thank you very much for joining us. the u.s. china risk of trade technology could have an expensive effect on global supply chains. a cfo spoke to bloomberg on how he would use the tensions and lenovo's plan for dealing with them. >> definitely have various plans to cater for different scenarios that come up. company, we really would want a more open market,

more free trade. in the event that that does not become forthcoming, we have plans to mitigate the potential negative impact on our business. today, if you look at our business, a lot more world spread. aside that the trade tension between the two major economies will be starting a global recession, that impacts the entire world. if you look at the two geographies, our business is relatively good set -- well said. china, asia-pacific, india, middle east, africa, as well as america. our business is well spread. we have a global supply chain. changedarket actually in whatever way, we would obviously have different options and plans so that we could move much quicker than our competitors. >> in the u.s., the ban is on

huawei. it is not on lenovo. you have significant ties as well to the big u.s. suppliers. whether rich semi conductors or intel. your phones run on android. have you gotten any indication that these platforms, whether it's this in my contractor chips could be disrupted. what about android? huawei will come up with its own operating system. is that something you have to keep in mind that you might have to do? >> i go back to my early answer. as a global company, we are in full compliance. we are not aware that we are in breach of any rules or regulations. as a result, we don't worry about being included. there are no signs of that happening. i think that's the best i can tell you. paul: that was the lenovo cfo.

later on today, we will talk trade and tariffs with china's ambassador to the united states. that will be at 7:30 tonight. kathleen: up next, indian stocks rose and fell on modi's win. where he will take the economy in his second term in charge. this is bloomberg. ♪

kathleen: i'm kathleen hays in new york. paul: i'm paul allen and city. you are watching daybreak australia. politics has dominated the news this week. first there was the unexpected result here in australia. now, the victory for modi in india. the win surprised commentators who had forecast a reduced majority or even i minority result -- a minority result. win's discuss modi's when --

with a senior fellow at the brookings institution. thanks very much for joining us today. win onave a look at that the surface. modi now with a thumping mandate. what sort of reforms could we expect to see in the economic sphere? >> it was an unexpected and resounding mandate. certainly there is some combination of his being seen strong on security issues and nationalistic sentiment. in terms of economic performance, he has delivered. there has been skepticism over whether india's gdp growth and employment numbers are as low as they look in the official statistics. aside, it has been a decent few years for india. there have been reforms that have been put into place such as the goods and services tax, some

aspects of banking reforms, and a few other things that have been done to get the economy going. there have been some missteps as the such as them -- demonetization that did not help the economy. it created a hiccup. a lot needs to be done in terms of getting the banking system on its feet again. it is burdened by a large amount of nonperforming loans to -- loans. farmers are facing difficult circumstances because of loans and prices and agricultural system not working very well. labor laws need to be reformed. difficult act of governing that india needs for long-term growth. paul: in terms of trade, india is not going to stop performing here either. modi has been criticized for driving the train on the asset agreement, he has been slow to navigate.

have you seen developments there? >> there's one aspect which is trying to negotiate good trade deals. the more important question for him yet whether it's in a position to take advantage of those trade deals. the manufacturing sector has not been performing very well. one of the weaknesses in india is growth over the last three years. it has been very weak. pregnant -- private investment isn't responding. to theis not flowing more productive parts of the economy because the banking system has this huge burden of nonperforming loans. there are difficult challenges in terms of infrastructure, power, labor laws. the will question is whether mr. modi can undertake the reforms to reinvigorate the manufacturing sector which will unlock it to take advantage of whatever trade deals he may be able to negotiate. india does stand a good chance of being able to take on some of

the manufacturing activities that higher wage economies like china are ceding to other countries. this is the real challenge for india. whether manufacturing can pick up and whether high-end services can pick up and create high wage middle-class growth. kathleen: indebted banks, it seems there has been steps taken to clean up the debt. do you think that will change now? >> it's a hard nut to crack. there's going to be a fiscal cost. the government policies of the past generated a lot of nonperforming loans. to the highestnd priority sectors. that cost has to be born. that is an uncomfortable situation for the government which is trying to maintain fiscal discipline and convince

investors that it's going to maintain that discipline. the other equally big challenges improving the government structure of these banks, especially the state of banks. owned banks. the banks lend to favored companies and sectors. those things change, it will be difficult to fix the banking system and get it to provide more credit to support growth and the economy. kathleen: you have to allow for winners and losers. waseems that mr. modi reluctant to do that too much ahead of this important election. he has had this very strong victory. when you look at the regulations, the lack of infrastructure, the government has to do something. this issue has been in front of him for a long time. is he going to do something now? what is the specific thing he should be doing? >> there will be the need to

continue reducing red tape and bureaucratic impediments to allowing infrastructure to be financed by the private sector. there will have to be state financing of the private sector. really, it's the overall government environment that matters. mr. modi has taken steps, even in his first term, to try to deal with the corruption endemic in india. the demonetization was ostensibly part of that drive. people feel that he is trying to tackle that problem. it requires real root and branch reform in the government and to get the government out of many areas of the economy where it so has a present -- pervasive role. that requires a lot of political will and cost. whether wister modi is willing to bear those costs and take on some powerful forces within india, the existing corporations, big banks themselves, his old party was

reluctant to take on such drastic change. it remains to be seen. that is what india needs. i look that is how he reads this new mandate. one for substantial new economic reforms. i want to update you and our viewers on a headline breaking on the bloomberg right now. the united states moving to impose duties on countries that undervalue their currencies. reading between the lines, this has interesting applications for the yuan. you don't think that china would use it as a weapon, do you? >> that would not be one of their most potent weapons in their arsenal. they could certainly use currency depreciation to offset the effects of the tariffs that has been imposed -- have been imposed. risk is that it could set off a currency depreciation outflows spiral that feeds on itself and gets out of control. likeer this year it looked

the chinese know was stabilizing. the latest batch of economic indicators suggest the stimulus may be weighing on growth. market sentiment is fragile. in that context, trying to use offset u.s. trade sanctions would not be a good play on the part of china. thanks very much for joining us this morning. we have more ahead on daybreak australia. this is bloomberg. ♪

paul: quick check of the latest business flash headlines. facebook says it has removed more than 2 million fake accounts in the first three months of the year. it's a record for the company. more than three times the amount enclosed in the same time last year could -- year.

facebook says it has shut down more than 1.5 million posts promoting or engaging in tracking down sales. india is a group in selling shares of its joint venture to a partner. at $650 is valued million and takes holdings in reliance upon asset management. capital will offer the rest of its stake to other investors to ensure that minimum of 25%. paul: it's about to come easier to go diving at the great barrier reef. ,ber is launching a rideshare allowing customers to book a someone -- submarine trip. $2000, a one-hour submarine ride. the service will be called su ber. kathleen: sounds scooby-doo to me.

more still ahead in the next hour. our exclusive interview with the m where ceo pat gelsinger. paul: that is it from daybreak australia. all the action coming up in daybreak asia next. this is bloomberg. this is bloomberg. ♪

this is bloomberg. ♪ at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

paul: good morning. i am paul allen in sydney. you are under one hour away from the market open. >> good evening from bloomberg's global headquarters in new york. i am kathleen hays. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." paul: our top stories this friday, president trump turns up the trade war heat. he says while he is dangerous and may have to be included in any talks with china. asian stocks are set