paul: good morning. i am paul allen in sydney. we are under an hour with from the australian market open. shery: good evening. i am shery ahn. sophie: i am sophie kamaruddin and hong kong. welcome to "daybreak asia." in hong kong. welcome to "daybreak asia." paul: our top stories this friday, asian stocks look set for modest gains after wall street got a rebound despite the treasury's rally rolling on. a 20% stake in crowne resorts. we are expecting some optimism

in japan this hour. we will bring you the latest jobless and industrial production data. shery: let's get started in south korea. breaking members. industrial production yawn year contracting 0.1%. much smaller contraction than was expected. the estimate was for its a faulty .2%. it is also a more benign figures and the previous month, where it fell 2.8%. we are seeing it fall 1.6%. jump than was estimated. we have seen a south korean economy under a lot of pressure. five months of the clients when cameme -- declines when it to exports. gdp numbers have been soft. we're getting the bok rate decision this month. in the meantime, industrial production year on year falling less than expected. 0.1 and. contraction territory

throughout the year. brightside. it is less than expected. let's see how markets are shaping up in asia. wehie: korean won has had -- have seen it set up for a monthly decline. the currency may find support for speculation that authorities are intervening to halt its decline. following the industrial output numbers, we will have the decision. we will see if governor lee faces dissenting calls for a rate cut. won -- due tothe dovish bok bets. we are pointing to some steadiness this morning. earlierres erasing losses now looking little changed. with treasury yields marching lower, that could see the bond rally.

it is a busy end of the week on eco-data front. we will have china's manufacturing pmi and gdp numbers which come a day after narendra modi was sworn in as prime minister. we will get treated upon thailand. japan is to release jobless numbers. bok decision day this friday. paul. paul: let's check in on the first word news with ed ludlow. fighting back in the trade war, putting purchases of american soybeans on hold. bloomberg has been told state-run grain buyers have not received their regular instructions to continue placing orders. the countries agreed to a truce in december. that move was designed to show goodwill towards getting the trade dispute resolved. u.k. officials said president trump and prime minister theresa may plan to discuss china's huawei. the u.s. is seeking to convince

allies in europe to exclude the networks,iant from 5g but the u.k. has not made a decision. may fired her defense secretary over a leak that british agencies would not press a full band on huawei -- ban on huawei. a sightseeing boat capsized in budapest. it collided with a cruise ship with heavy rain. only seven people were rescued. crews will attempt to raise the sunken boat. they warn it could take days. inegular modi has been sworn once again as india's prime minister alongside his new cabinet. india's president conducted the lavish ceremony at the presidential palace. members his cabinet

need to boost employment after receiving a resounding election mandate. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ed ludlow. this is bloomberg. shery, paul. shery: we have breaking news out of the financial times, now reporting president trump will threaten to curb intelligence sharing with the u.k. if they allow huawei to build part of the country's five g mobile network. this is a message they are expected to deliver in person during president trump's visit to london next week. british and american officials saying that the u.s. president has decided to raise the issue during the three-day visit to the u.k. that after repeated efforts by his aides failed to convince the u.k. government to block huawei. this coming from the financial times that the president will threaten to limit intelligence sharing with britain as it continues to put more downside pressure on huawei and sort of ban it from networks globally

when it comes to building their 5g system. we are now getting the latest find out of financial times and of course, president trump visiting europe next week. the president has had limited success in trying to curb huawei's efforts globally. let's turn back to the markets. the u.s. government bond market rally powered on as trade war concerns keep fueling concerns and worries about global growth slowdown. our editor, kathleen hays, is here. repricing of some global growth expectations. we are hearing from clarida. kathleen: they see them day after day. it is one of the things that keeps the bond market rally on a boil, forging ahead. bond yields -- vice president mike pence said the u.s. could double tariffs on china if

necessary. jump into the bloomberg with me now. as the 10-year note came down with 2.20%, as the 30 year bond hit a new low in this recent 2.6%, the yield curve inversion got even deeper. it is now out to 16 basis points. the fed would probably say it has to go deeper before we get to worried. the potential recessionary signal is still there and it is helping the bond market rally. of thee president federal reserve spoke in new york today at the economic club of new york. it is a high-profile venue for fed officials to speak. is in asay the economy very good place. unemployment is low. inflation is muted. some would say it is pretty weak , in fact. besides that, when pressed and questioned, he did seem to open the door at least a crack to a rate cut if all the downside

risks materialize. let's listen. to potentialuned risks to the outlook. if we saw a downside risk to the outlook, then that would be a factor that would call for a more accommodative policy so that is definitely something in the risk management area that we would think about. kathleen: at the very least, i think this is important because the fed talked about being impatient. it seems to me that vice chair clarida is letting the world we metta world know we are watching and we do not see it having material impact on the economy yet. if it does, then the fed would consider a move towards a rate cut. kathleen, let's talk about inflation or the lack of it. not looking so good in the latest u.s. gdp report even though growth is holding up pretty well. what happened? kathleen: we knew that in the first quarter, gdp in the u.s. was 3% plus. a lot of that was japan by

inventory building ahead of the tariffs last year. they at the growth even if it means they will not be buying were building so much stuff in the future. investment was on the weak side. consumer spending. let's take a look at the chart that shows you what inflation has been doing. this is the fed's main gate. 2% is the target. on a quarterly basis, it is down to 1%. that is the weakest in three years. we know the fed things this is transitory. transitory.is is as we get further into the year, this number will rebound and get to 2%. and theyheir forecast keep repeating it. that puts all the more focus on the numbers we get out on friday in the u.s. personal income and spending contains the latest monthly read. we will see if it starts showing any rebound. maybe another thing to throw some people on the bond market -- fuel on the bond market fire.

paul: kathleen hays, thanks very much. haltstocks did manage to this week's sharp selloff. the month of may, the lust significant. five points effect. financials and retailers are still under pressure. su keenan has more. what were the big movers today? su: we saw retailers and financials under pressure and we under big gap pressure after hours. some green on the screen. the s&p financials down not by the magnitude we have seen in recent days. notice the future is unchanged. let's go into some of the big movers, and again, this is the perfect example of the turnaround from the prior session. it was down big. this was a momentum stocks up 90% going into the month and it is rebounded on a positive outlook for sales. at a very big way as

sprint and t-mobile consider divesting some of their units to win merger approval for regulators. that got a big boost. stores, a tree retailer with positive outlook. they boosted their outlook and got some big bumps. .otice mylan a lot of drugmakers under pressure for various different stories. let's go into the bloomberg. speaking of pressure. because this is a chart of the gap sales that have been under pressure. the expectation was they would come out with a report after hours showing they were down 1%. guess what? they came down with quadruple that decline. let's go to the after the hours chart and you can see gap shares getting slammed. a lot of stuff going on but sales stumbling across the board in all categories. the cfo on the conference call

addressing a little bit of the tariffs, saying they believe there will be passed down to the consumer as a tax. at least from their perspective. have been ableey to decrease their dependency on china goods from 25% three years ago to 21%. very interesting. a lot of analysts know they were down 10% in namebrand stores and that will jeopardize their ability in the eyes of wall street to turn things around. this: we continue to see excess supply story in oil unfold. su: the market has been focused on opec, which got a big boost at the beginning of the year. and then the traits that. and then -- trade spat. and then we get bearish inventory data. oil selloff in a big way -- sell off in a big -- oil fell off in a big way. the decline was only a fifth of that meaning the glut in the

u.s. is now adding to the concerns about the trade war. notice in terms of the number that this is the year to date chart or at least it is from july to march, but we are up 45%. we are down 14% now from the peak. shery: su keenan, thank you so much. we will have more reaction to the market moves in the next. we will talk to blackrock's isabel about where she sees bonds heading after a volatile may. paul: more on how melco is setting the change for -- stage for global expansion. this is bloomberg. ♪

shery: major markets open at the top of the hour. let's see how we are setting up for the markets open in australia.

sophie: when it comes to stop to walk in sydney, we are watching reaction to agl withdrawing its offer. this update comes up to local media reported that agl's talks ended after sweden's infrastructure made a $2.3 billion takeover bid. the company said it would set the dividend payout of 50% net profit after tax and it sees output at 35 million tons. eclipse will not be paying an interim dividend after paying the first half loss. we are watching amcor. the u.s. department of justice says the company is to sell some assets. given melco's deal to buy -- at 20% in a $1.2 billion deal, we are watching prime resort stock up 8.9% year to date. we will see reaction as investors are likely to take a wait and see stance on the deal. paul. paul: thanks, sophie.

joining us is blackrock official group deputy head. thanks very much for joining us. there has been a lot of interesting action on the bond market in the past week and i want to show you this chart on the bloomberg terminal. it shows negative yield index globally now approaching $11 trillion. now, what do you make of a trade like that? people getting into negative yield, is that a little bit too much panic going on? >> i do not think we are seeing panic but we are certainly seeing a strong desire for safety, for hedging. i think what is really interesting is this combination of stock markets that, you know, while it has not been a very good month in may, they are to date.ng ok year double-digit digit in many cases. at the same time, this strong bid for safety we are seeing in the bond market and that is suggesting investors are trying to have it both ways and have a bit of a barbell strategy.

staying engaged in the market in case things turn out ok but also wanting to have plenty of safety in the form of sovereign bonds in their portfolios. hence this rally we have seen recently in the bond market. our view is based on fundamentals, based on growth, based on inflation, we do not your strong case for rates to -- we do not see a strong case for them to remain low. we don't know what will happen in the trade were between the u.s. and china. if this goes sideways or gets are way too low for the strength of the fundamentals we are seeing. and that is globally. but obviously, if we keep hitting the markets with more concerns that we are going to see an escalation, then this has room to grow. paul: we do have the vice chair of the fed reiterating the u.s. economy is in a very good place

but at the same time the market pricing in three rate cuts. what is the big risk factor out there? is it a trade war is there something else markets are seeing? -- or is there something else markets are seeing? isabelle: it is a little complicated. there are a number of concerns of ad return of a risk hard brexit, renewed concerns around italy and what is the government going to do about it? europe is a bit different. level,global there is certainly this desire to buy insurance. i think it is primarily related to the trade war because when you look at the growth data, growth is slowing. we are not seeing anything particularly alarming in all the data points coming out on growth. i think markets are pricing three rate cuts by the end of next year. that frankly seems excessive to us. at the same time, of course, richard clarida was careful to

not get any sense that the fed was on autopilot. theiraged to really hedge positioning. rest, they will remain patient and on hold for quite a time, and the current market pricing is indicative of the current bid for safety more than a projection that this is what the fed is going to do. shery: this risk off sentiment really hitting not only the equity market but also the high-yield on segment -- bonds segment. how important is the high-yield segmenting your bond portfolio? isabelle: i would say, typically, when you come to the end of the cycle, you would want to be careful about high-yield bonds, but frankly, since we have had this very strong messaging from the fed since the start of the year and the march meeting, that they are going to be patient. they are going to be on hold for some time. it is a space where you get paid. you get paid and we see the risks of recession as surely mild right now so it is not a

bad place to be. bearing in mind that this is an asset class where you have a lot less liquidity that in some others. as soon as recession fears intensify, you could have significant price correction but at least you are getting paid. we do not dislike them. shery: what about the broader corporate credit market? we heard from pimco that they are a little bit careful in this area. this gtv chart on the bloomberg showing that record amount of buybacks we have seen on the s&p 500 in the stock market. given that a lot of this has been financed with leverage, do you see corporate credit risk out there? isbelle: i mean, yes, there risk, but the question is, are you getting paid for it or not? and our sentiment is right now, for the most part, yes, you are. what is important is also to look up the capacity of the corporate to carry that indebtedness, and that has improved. if you compare that to the last cycle, we have longer

maturities, we have got much lower interest rates, and so as long as earnings hold up, we do not see a problem. really, the problem is going to arise when earnings growth slows down or turned negative. and or when interest rates start rising sharply. for now, we are not deeply alarmed. on a case-by-case basis, you have to be careful. he still are going to have a tilt towards higher quality -- you still are going to have a tilt towards higher quality. in terms of systemic risk, we're not overly concerned. shery: isabelle mateos y lago, blackrock official institutions group deputy head. stay with us on "daybreak asia." this is bloomberg. ♪

a boostber shares got after hours following its fourth earnings report as a public company. first-quarter sales beat estimates but it has also lost

$1 billion, among the largest losses of any company. has the details to this loss, larger than that of rival lyft for all of 2018. is this concerning? ian: what you saw was when the numbers came out, people were a little bit focused on the top line. that was good. that met our estimates. and then as they poured through the numbers, the extent of the losses and money being burned saw thesank in and we stock go down and it took the cfo and the ceo to put in quite an impressive performance to talk people around and reassure them and that is when the stock ended up going back up. terms of margins, do you see those improving for uber? and if so, where will the improvement come from?

ian: that was one of the key questions and arguably the turning point. what the cfo was explaining was, look, we have been competing on price in a tough market. we have strong competition. but we are seeing that competition be more rational, less incentive-based, and more on brand. so when he was asked what he meant by that, brand is something we can improve ourselves by making our technology better. we can show people will turn up on time. we will get things like that and that will help. that kind of reassured people that perhaps the worst of the cash burn is going to start to abate a little bit. paul: bloomberg technology reporter ian king in san francisco get things for joining us picked let's get a quick check of the latest business flash headlines. lfizer is pushing into rura china as the drug purchasing program hurts sales of its blockbuster treatments. it is hiring 600 people to drive growth. pfizer lost out to chinese

manufacturers for contracts to supply the cities with generic versions of lipitor. two/onesbc may be about -- to slash hundreds of jobs. the ceo pressures the lenders top managers to cut costs. the reductions are expected to begin as soon as mid june and will continue across the rest of the year. hsbc is still hiring and plans to add 700 staff in asia by 2022. paul: barclays is losing confidence in tesla. the bank says elon musk may be regulated to a niche luxury brand, slashing its price target. tesla shares have lost about 1/5 of their value in the past month. down more than 40% this year as demand for its mass-market model three stagnates in the u.s.. up, a health check

on japan's economy as it releases its latest jobs and cpi data. we will break down those figures, next. this is bloomberg. ♪

paul: you're seeing live pictures of tokyo right now as we received some data out of japan. the jobless rate for the month of april holding steady as estimated at 2.4%. so that coming in line with expectations. dr. cpi weakening a little more than expected. 1.1% for the month of may. the expectation was for 1.2%. cpi, excluding fresh food. again, the expectation for 1.2%. and we take a look at the japanese yen. not a great deal of reaction. still trading -- must get more on the markets now

with sophie kamaruddin in hong kong. sophie: checking in on the yen, we are seeing little in the way of reaction, maintaining that 109-110 range. the concert looking little it is lookingt -- little changed broadly speaking. the downside for the dollar-yen remains if the pmi data from china is weak, but it will likely keep trading at 109 levels. we are seeing some upside potential but little change given the overnight moves we saw for contracts, and for a check on stocks to watch, flipping the board, japan displayed is in view. it is reported to receive aide. be finalized by june 14. oe're keeping an eye on oni pharma as it has announced a

share buyback program. sherry. shery: let's get the first word news with ed ludlow. economic growth last quarter was revised down by less than expected. consumption was stronger than originally reported and so were exports. gdp expanded at an annual rate, originalrom the report. bloomberg intelligence says growth is increasingly dependent on consumer spending but business confidence rattled by trade concerns and volatile financial markets. fed vice chairman richard clarida says the bank is prepared to ease monetary policy if it sees mounting risk to u.s. growth. however, he stresses the economy is in a very good place with on employment low and inflation muted. and notrisk assessment just data could be a trigger for the fed to cut rates. >> the are attuned to potential risks to the outlook and if we

saw a downside risk to the outlook, then that would be a factor that could call for a more accommodative policy, so that is definitely something in the risk management area is that we would think about. itsorth korea has executed top negotiator involved in the february summit with president trump according to a report in south korea. personspaper says the who led working level negotiations for the summit in hanoi was executed in march with four other officials. the newspaper says kim jong-un's top aide is doing hard labor. king salman says the international community needs to use all means to counter what he calls the "subversive actions of the iranian regime." speaking to an arab summit, king someone said he wants -- king some on said he wants -- the king said he wants action.

tehran denies any involvement. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ed ludlow. this is bloomberg. thank you so much. we have president trump tweeting that on june 10, the u.s. will goods a 5% tariffs on all coming into the u.s. from mexico until such time as illegal migrants coming into the country stop. the tariffs will gradually increase until the illegal immigration problem is fixed, at which time the tariffs will be removed. the white house will follow. president trump saying the tariffs on mexico are going to take effect on june 10. 5% tariffs. is quite a u-turn coming at a time when the president also removed u.s. steel and aluminum tariffs on mexico as well as on canada in order to get the u.s.

mexico anded both in canada's parliaments not to mention in the u.s. congress. we have seen mexico take steps to help this process. they approved the labor overhaul that was accused democratic demand. the president coming out and tweeting he will apply a 5% tariff on all goods from mexico, starting june 10, in order to curb illegal immigration. we will get you more details as we get them. for the time being, this is the latest from president trump. paul. paul: thanks, shery. let's talk about oil now. something of a slippery slide. wti crude on track for its worst monthly loss. has been tracking this. what is driving the latest retreat in crude? james: good morning. it is all about demand. the demand outlook is starting to weaken. showsnergy information

gasoline stockpiles are rising for the second week in a row, which is interesting in the sense that we are going into what the u.s. calls to driving season, which is usually a time when gasoline demand is high. we should be seeing demand rise, which is causing concern among traders. we also have the ongoing u.s. china trade tensions. what that means for global demand going forward. it is all about demand at the moment, rather than supply. shery: what are the next catalysts now? james: the options market is telling us there is more scope for downside in the short-term. the demand for protection from isther falls in crude prices currently running at its strongest since the middle of december so that would suggest there could be further to run in the downside rally. move. the downside we had a strong run-up in the early part of the year.

to a certain extent, this is a technical correction but there are those demand worries. the next focus for the market will be on opec and whether they will extend production cuts that drove the rally, whether they will extend the cuts into the second half of the year. they don't seem to be able to agree on a date for the next meeting to deciding that, which does not bode well for cohesion and agreeing on the cuts. currently expecting it to be around the early july, which is being pushed back a little bit from late june. until we get clarity from opec on what they will do, i think the market could struggle a bit. shery: thank you so much. james thornhill in sydney. now, huawei overtook apple world'sthis year as the second-largest smartphone maker. the ceo of the chinese company says he does not want to see has american rival targeted in the trade war. in an exclusive interview with bloomberg tv, he told us why he considers apple -- apple is as big as this to

we became a peach in the last few -- an apple is as big as this. we became a peach. a plum is just a little bit sour and bitter. we can become bigger or smaller. we are not a public company. we are not only pursuing growth or profit. it is good enough for us to just survive. >> there have been calls by some in china for beijing to retaliate against apple. is that an action that china should be looking at taking? that will not happen, first of all. and second of all, if it happens, i will be the first to protest. if there was no apple, there would be no mobile internet.

if there was no apple to help show us the world, we would not see the beauty of this world. apple is my teacher. it is advancing in front of us. as a student, why should i oppose my teacher? i would never do that. >> you talked about having a two-year lead in terms of 5g on your competitors. does that lead get eroded? >> definitely. if we slow down, it is because the wing of the airplane have lots of holes.if we fly slowly but others fly fast, of course they can catch us up, but we will keep fixing the holes and we will fly once they are fixed. moren you give us a few details around the contingencies been put in place? -- being put in place? >> we might have contingency plans for the core of the airplane, the engine and fuel tank, but we may not have a plan for the wings. we need to review the situation

all over again and fix those problems. you can come back to interview us in two or three years to see if we still exist. if we are gone in two or three years, please remember to bring a flower and put it on our grave. paul: the huawei founder speaking exclusively to bloomberg's tom mackenzie. you can catch tom's interview in full on huawei, connected uncontested. that will air at 9:00 a.m. saturday in hong kong, none :00 a.m. friday if you're watching -- 9:00 a.m. friday if you are watching in new york. $1.2 billion deal to take 20% stake in australia's crowne resorts. yorkshares listed in new fell almost 6% on the, news. for more on this let's get over sell almost 6% on the new spirit for more on this, let's get to dave mccombs. somewhat. is go from elco. they had a tie up in the past

and that ended up falling apart after a scandal in china in which 19 of crown's employees were arrested on charges of illegally reporting gambling to the country. marked the beginning of a comeback for crown in which they reined in their ambitions and focused on building their domestic markets. this comes on the heels of a failed offer to buy a stake in the company, so it has been on the market and it is not a shock that there would be a sale here. there is a bit of surprise that it would be melco. you would have thought they would come in earlier if they were interested in a stake. this opens up prospects that melco could perhaps restore the flow of chinese gamblers into the crown casinos. that had been one of the goals of the crown casinos, one of their growth prospects, and they had a hard time doing that on their own. shery: could they come back and try to bid again for crown?

dave: that would seem unlikely. wynn said they have no plan to do so, and they said they had no plan to launch another bid. these properties are rare. they are rare assets. doesoko does not -- melco not control the company. there is always the possibility of other bids. shery: dave mccombs, thank you so much for that. we will speak with the ceo about their push to buy a stake in crown. this is bloomberg. ♪

shery: this is "daybreak asia." i am shery ahn in new york. paul: i am paul allen in sydney. let's get a quick check of the latest business flash headlines.

orders is reporting amazon is interested in acquiring -- amazon could buy boost for an attached wholesale deal, allowing them to use t-mobile wireless network for at least six years. it would approve the merger of t-mobile and sprint if they sold boost. shery: activist investor carl petroleum with seeking a sale of the company. the billionaire investor says -- $1.6 billion stake in occidental and those not like the decision companyre a petroleum for $38 billion. he says occidental's board and management are in over their heads. paul: u.s.-china trade war has landed a blow on a couple high-profile brand names. collin klein and communal figures parent company -- tell hilfiger's -- tommy

parent company -- disappointing chinese new year sales were a direct result of the trade dispute. we have just had the latest readings on japanese employment and tokyo inflation. let's get some insights into japan's economy and markets from our next guest, nick smith. he joins us now from tokyo. great to have you with us. we have seen the labor numbers hold steady, but inflation -- again, disappointing. how are we doing in japan when it comes to price pressures now? nick: there is not a whole lot of price pressure in japan, and i suppose part of the problem is wages. theyeadline is saying wanted to .1% wage increases. wage increases. regular employees are for

egoing wage increases for job security. for every 100 people all looking for jobs, there are 163 jobs. it should not be like this, but to an extent, it is a global situation. that makes me very interested in -- by favorite recruitment stock is a little one amongst the large ones. those companies are very interesting. shery: you're seeing the jobless rate right there and you can find the gtv chart on the bloomberg. the job stop ratio soaring -- jobs to applicant ratio soaring. is that going to affect the job offers out there from industries? i doubt it. when we are talking about job offers, what we're talking about is supply rather than demand. with a shrinking population, we

are going to get tighter and tighter job markets. as far as industrial production is concerned, we have just got to stop fussing about the domestic industrial production. what we care about is global stocks. ut a third of profits are generated inside japan. what is much more important is global. not so much china. the u.s. is more important. you look at eps for topix, and it is highly correlated with consumer confidence, which is hitting new highs at the moment. do not sweat that stuff at the moment. i would have thought that u.s. consumer confidence will hold up there. we just had just -- a tweet out of the blue from president trump threatening mexico with increased tariffs. i know you are optimistic on a japan-u.s. trade deal, but does that underscore just how unpredictable this can be, an does that change her outlook at all? -- your outlook at all?

nick: that is the main problem. the main risks for the japanese market are outside japan, and i said a lot of times, i think that if u.s. and china and others are going to be throwing bricks at each other's windows, japan is in a great position. toyota gaining market share in china through all of this. but the important thing to remember is japan is not the violator here. in the areas where it has trade surplus with the u.s., it has got zero in tariffs. if you say wait it out -- against 2.4%1.3% for the u.s. in 2.8% for europe. japan has very low import tariffs. it should be relaxed about this. paul: i just want to get your thoughts on the boj's inflation

targets as well as we wait on this data out of japan. do you think it is time for the boj to walk away from this 2% number? nick: no. the problem is the boj is printing money. no one is spending it. the government is cutting its budget deficit every year. what is needed is to push out the hike so we can get some tightening, some weakening, at a time when the fed is talking about cutting interest rates. our clients are saying what is japan thinking about? it is crazy. paul: all right. i want to get some breaking news on the bloomberg terminal. those numbers are coming across. industrial production in japan for the month of april declining 1.1% on the year. that is a little bit better than expected. monthly industrial production up .6%. those are beat as well. the expectation was for .2

percent. retail expectations are flat for the month of april and contracting on year by .5%. so i have given you a whole 20 seconds to think about that. what is your reaction to these numbers? nick: i mean, actually, you would have thought you would he of the pre-buying consumption tax hike book consumption is falling apart at the moment. i would october after those consumer stocks but i think a lot of other things are interesting in japan at the moment. risk of at is the stronger yen on haven demand on these numbers? nick: you would be amazed how the yen actually has on japanese corporate profits. and even the automakers. you look at the relative performance of automakers against the yen, they are next to nothing get what really moves with the yen in terms of relative performance are actually financials.

i would have thought with a strengthening dollar -- unless we have a shocking event that causes safe haven demand, i reckon we probably going to end the year around 110-112, to be honest. shery: nick smith, se strategist. the u.s. will impose a 5% tariffs on all goods from mexico, president trump says. he says the tariffs will go up to 25% i october 1 if the crisis -- by october 1 is the crisis persists. thank you so much for joining us last-minute. do we have any indication that these moves were coming from the president, especially given that the president has been trying to pass -- in congress and has been lobbying hard?

vice president pence in canada lobbying them to pass it in parliament. i think this came as a complete surprise, at least from the mexican side. this morning, we had our talking in his daily press conference, saying he was suspecting the usmca will be passed in the u.s., right? so that was an indication he thought this would be sailing through congress in the u.s., and now, we have this reaction from trump. remember that a few days ago, the u.s. left the tariffs on aluminum and steel tariffs that were very controversial here in mexico. this comes as a portal surprise and we have not seen any reaction from the mexican government. shery: very much conflicting signals. maybe not reaction from the government but you can see the mexican peso falling against the u.s. dollar. let me ask you, the statement

from the white house saying gang members, smugglers, human traffickers, illegal drugs of all kinds are pouring across the southern border and directly into our communities. the president has been really upping the rhetoric when it comes to this environment of crisis at the border. is that what we're seeing? is difficult to say. one thing is that a lot of these immigrants u.s.-mexico to pass through" to the u.s. in -- pass-through and go to the u.s. they are coming from central america. it is true if we see the numbers that mexico is doing a greater effort to detain these immigrants. in april, the number of people that have been detained in this condition through about 79% compared to last year. mexico is doing an effort. this is something that is isnificant considering --

more left-wing. his policy is quite tough in this sense. this reinforces the idea that what else can mexico to? do? this decision, if affected, will be very harmful to a mexican economy that is already in contraction. pointyou do make a good that mexico has been attempting to tighten the border. but obviously, it is not enough to satisfy president trump. do you question what more can mexico do? do? do they do they continue to tighten the border or do they take a slightly more aggressive stance with the u.s.? what are the risks there? juan pablo: this is very significant. we need to wait until we have some reaction from the mexican government. but remember this point. his strategy, despite coming from very difficult -- different political grounds and president patient.s to be very

never responds to the provocations of the u.s. president or the attacks of the u.s. president. he has said several times i am not going to get in trouble. i am going to say anything out of line. but this is the limit. a 5% tariff on every export -- remember that mexico's and 80% of all the exports to the northern neighbors. sends 80% of all their exports to their northern neighbors. it will be surprising if we do not have a harsh reaction from the mexican government. we need to wait. as i said, this is new, and we have not seen any reaction yet. the president is scheduled to speak tomorrow morning at 7:00 p.m. here in his daily press conference. for sure he will have to comment at that time if he is not commenting right now. paul: all right. bloomberg's juan pablo spinetto in mexico city. thanks for joining us on that evolving story as we wait for a response from the mexican

government. trading in japan, south korea, and australia kicks off in a few minutes. sophie kamaruddin is keeping an eye on things. sophie: we are likely to take on a risk off tone and markets this morning given the news lines we have. futures indicating losses for the nikkei 225, and we are seeing aussie futures nudging lower, all-time 4%. we are going into the session with more trade . .4%.dging lower, we are going into the trade session. look at how bond markets are reacting. we're seeing treasury futures jump this morning asia in the early session, and the bond rally continuing in australia and new zealand. we have the aussie 10 year yield that below 1.5% this morning ahead of april data for credit. jenny is pmi numbers due this morning -- chinese pmi numbers due this morning. weaker after consumer confidence

hit a six-week low in new zealand. a fourth month of declines. shery: plenty more to come on "daybreak asia." we will be joined by j capital research. this is bloomberg. ♪ paul: asia's major markets are

about to open. shery: good evening. sophie: welcome to "daybreak asia." ♪ paul: our top stories, wall street ekes out a rebound. stocks.t for casino shery: president trump is a new

trade war target with new tariffs on mexican imports. having a huge impact on the markets. the peso is down more than 2%. the nikkei and the topix off this morning. the yen is nudging higher. this is being seen across markets after trump tweeted about tariffs to be imposed on mexican imports. industrial output rose more than expected in april. we have production numbers from south korea this morning. rateis ahead of the bok's decision. the korean yuan is trading 1192 ahead of that. we will be looking for a dovish

tilt in any consenting calls for easing. 200, opening with a little change this morning. the aussie dollar is also losing ground. a quick check on assets on the move in the asian session. as mexican peso is sliding much as 2.4% against the dollar this morning. we also see the potential for even higher tariffs. u.s. treasury futures jump this morning. u.s. stock futures are under pressure.

paul: let's go to the first word news. ed: president trump has threatened to curb intelligence sharing with britain if the country allows huawei to build its 5g mobile network. he will visit the u.k. for three days next week. the u.k. has not yet made a decision. thei arabia said international community needs to use all means to counter the subversive actions of the iranian regime. the says he wants to preserve peace in the region. north korea has executed its top negotiator involved in the february summit with president

trump. he led working level negotiations in hanoi. according to a report, he was executed in march. modi has been sworn in once again as the prime minister of india. ceremonyted a lavish at a presidential palace. 8000 guests attended. employment boost after receiving a resounding election mandate. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. sayingpresident trump is the u.s. will impose a 5% tariffs on all goods from mexico. they will be raised to 25% by

october 1. let's get more with our bloomberg managing editor for economics and government. is juneline right now 10. the tariffs are expected to go up on june 10. leave a of local -- lot ofegotiations wiggle room for negotiations. >> mexico has been doing a lot. the issue is retaliation. let's go back to the steel and aluminum tariffs. canada retaliated. hypothetical the one reaction from

mexico would be to do the same. let's wait until we have a official comments from the mexican government. shery: the president sent the deal to the senate. could this have an impact on what will happen? this could be taken by mexico as an aggression. been incorporated in several aspects with the u.s. 5% across the board for all will beproducts considered an economic aggression. i wouldn't be surprised if we have retaliation.

this could impact the legislative agenda. we will certainly have a clear political impact in congress. aul: what kind of hand does president lopez have when it comes to pushing back? does he take a conciliatory or and aggressive stance -- an aggressive stance? >> we need to see. conciliation when we have a measure like this is quite limited. if you desire is not to do he willg, he will be --

be criticized locally. he has been having an agenda of no confrontation to trump and the white house. that is significant, considering the different political backgrounds from lopez and trump. but the 5% will be hard to swallow. shery: we are getting the latest lines act of reuters. mexico will respond if the u.s. imposes these tariffs. we have not seen any more of the do.ils of what they will the mexican undersecretary for north america just confirmed that mexico will respond. talk about why the white house is doing this. , they are pointing

to this crisis at the border. tell us about the situation in the southern border of the u.s. >> we have not seen the situation in years. we will have to see the domestic politics of the u.s.. what could be the reason for trump to make that decision? this is an unprecedented decision in modern times. juan, thank you. let's get a check on what is moving in the markets. ophie: japanese auto stocks are slumping hard.

we are seeing weakness across the board. another stock is set for an 18.7% drop in the month of may. paul: mark cudmore is in singapore. mark: this tweet is massive news. you don't want to overhype it. this is like a black swan event for markets. it is hard to know what to level is too far a move when it comes to the mexican peso.

many are china to assess what the first order impact is on u.s. companies. $350 billion worth of imports alone one from mexico to the u.s. last year -- went from mexico to the u.s. last year. there is no time to get prepared. there are no contingencies. this is the kind of thing that will send markets into a freefall. it will be sending the u.s. toward a recession. is this even legal? can trump do this? this is so disastrous for the u.s. and its economy, it is hard to believe it will be implemented.

it is at a time when many hoping that trump would roll back some of the effects of the trade war with china. turned this from trade war to trade wars. equities across the world slumped today. even if trump will not follow through, the damage to financial ripple will purple -- through the weeks ahead. a mexican official says retaliateo will not until staff are studying the matter. they don't want a trade war with the u.s..

but to mexico will respond if the u.s. imposes tariffs -- mexico will respond if the u.s. imposes tariffs. the president seems to be hardening his trade stances. they could be threatening to not share intelligence with the u.k. if the u.k. does not ban while away from their 5g networks -- huawei from their 5g networks. mark: i don't want to speculate. there is three layers of impact. this is why it will be so painful. we are going to prices in over the days ahead. -- price this in over the days ahead. there is the direct impact with the two countries involved,

mexico and the u.s. please apply trade is one of the most liquid markets -- the supp ly trade is one of the most liquid markets. trump is willing to risk a severe deterioration in the equity markets. that was one of the things that traders were still clinging on to. this is sending the exact opposite message. is no reason why this fall in equities should stop anytime soon.

paul: the rationale from the white house was the immigration crisis at the southern border. is there more to this? mark: i don't want to get too far down the road of speculating on white house motivations. target seem there is a where the u.s. has the largest trade deficit. it is more about the market impact today. it is going to dominate the secondary issues. unwoud these issues to be

nd to reach any kind of stability. shery: thank you. frome getting more lines the mexico deputy minister for north america. he says the u.s. did not talk to mexico about the tariffs. they did not know this would happen. ahead, her interview with the ceo -- our interview with second of america's largest oil and gas producer. paul: chinese dollars are looking into a nuclear option in the trade war. details ahead. this is bloomberg. ♪

shery: we are due to get chinese

pmi data at the end of this hour. the numbers will give us a key economic health check. trade tensions are continuing to rise. let's bring in the cofounder and research director at jp capital research. we are now seeing the white , going to go ahead and hike tariffs on mexico. given this posturing coming from does this give, you signals at how we are expecting the trade war with china to play out? >> it indicates trump thinks is aratcheting the stakes winning strategy. with china it is actually a losing strategy. the trade war has moved to huaw

ei and the u.s. making a lot of rules barring the company from the 5g networks, i don't anticipate a deal. is that thetrategy u.s. would be able to outlast china when it comes to the strength of the economy. numbers are expected to contract. how does the chinese economy holding up? anne: terrible. but what is it for? aren't there ways when we can work together with china? there are. but this is bad for china. a scathing desc ription of china's economy, a ponzi economy. is that not taking it a bit far?

anne: i mean the amount of debt service that china has to pay every year exceeds the implemented gdp. debts just a description of service exceeding gdp. paul: in terms of retaliation prt china could undertake, esident xi is touring rare earths mines. treasuryibe the u.s. option as the nuclear option. anne: that is much exaggerated. the currency of international trade is the u.s. dollar. if you are going to have a trade surplus, you accumulate dollars. them, you have to buy

something less liquid. i don't think that that is an issue. they will try very hard not to sell. their capital reserves are equal into the u.s. treasury holdings. mulvaney is saying we hope it won't come to the t ariffs on mexico. immigration tariffs are completely separate from trade. have seen in the negotiations with china it is not always about trade. north korea has played into the negotiations. see a resolution for all anytime trade tensions soon?

anne: i think the u.s. administration is confused and disorganized. that the chinese trade talk scott -- talks got bounced to the security folks in the united states. withare more concerned issues that rank very high in chinese priorities. you will not have those folks back off. how will they reach a deal? shery: thank you. get the stories you need to know to get your day going. subscribers go to tv on your terminal. so youze your settings only get the news you care about. this is bloomberg.

♪

a quick check of the latest business flash headlines. amazon could buy boost mobile for an attached wholesale deal. the 26 billion dollar merger of t-mobile and sprint would be approved. hery: one company is considering major cuts in global banking and markets. the reductions are suspected to begin as soon as june. bc is still hiring and plans

to add jobs in asia by 2022. paul: a casino giant is expecting to take a state in crown resorts -- stake in crown resorts. it will also pursue a seat on crown's board. shery: the u.s.-china trade for has affected aar couple of high profile brand klein.like calvin disappointing chinese new year

sales were a direct result of the trade dispute. we will have more, stay with us. this is bloomberg. ♪

>> it is 830 in hong kong. we are about an hour away from the open of trading there. ery: we continue to follow the latest lines from president trump in imposing 5% tariffs on mexico starting june 10, intended to curb illegal immigration and could go up to 25%. fromexican undersecretary north america says mexico will respond if the u.s. imposes those tariffs. acting heard from the

white house chief of staff saying the immigration tariffs are separate from trade. the u.s., mexico, and canada is trying to ratify that 2.0 deal. we are seeing u.s. futures slumping. the mexican peso is plunging. let's get reaction from the markets. sophie: this is essentially a black swan event for markets. we are seeing a big reaction across markets this morning. the nikkei 225 off about 1%. ground.is gaining yuan is under pressure ahead of the bok decision. look at somecloser

of the big moves across asset classes. we did see the mexican peso reacting to this news, slumping as much as 2.4% against the greenback. entry fors a good investors to take a long-term view. mexicould see mexican -- continue to benefit. the aussie ten-year yields are back at record lows. -- the. five-year yield u.s. five year yields are reaching that 2% level. have mazda falling as much as 8.6% this morning. to build a $1.6 billion factory in alabama.

this is not voting well for japan. -- boding well for japan. paul: let's update you on the mexican tariffs decision. this really was a bolt from the blue. where do we see if it is possible to predict the situation involving -- ev olving? >> the u.s. has announced a shock tariff a couple of hours ago. this came in a tweet from the president of the united states, saying there would be a 5% tariffs on all goods from mexico starting june 10th. the president has been upset about immigration traffic coming over from the u.s. southern border. it is not linked to anything

else. the move is a 5% tariffs initially. if what ever the u.s. wants to see mexico do on immigration is not done, the tariffs ratchet up, until finally it gets to 25%. the white house is willing to keep tariffs at that level indefinitely until mexico takes action to reduce undocumented migration at the u.s.-southern border. shery: there was a lot of talk on whether or not the president's tariff powers should be current -- curbed. do we get a sense of whether or not he has the authority to do this? derek: you are hearing right into my -- peering right into my

notebook. we don't have a bought of reaction from capital lawmakers. we are looking to see what, if .nything, congress may do congress has had a locked of words, but not much action. trump has been allowed to do mostly whatever he wants. the president has talked about escalating consequences for mexico previously. he has been talked down from those previously. a lot of major groups have warned about taking action against mexico, and the contagion that has for a want of for a lot ofnomy -- a

the u.s. economy. mick mulvaney says these u.s. immigration tariffs have nothing to do with trade. will this fly? we have seen efforts in the past couple of weeks to pass the usmca. what will happen to this deal? : the mexican peso is the currency of all of mexico. you can see it to reacting. i am not sure how mexico is going to think the two things are different. the white house says the justification is fully related to immigration. migration ofy a humans kind of deal.

i don't think you can separate the contagion risk. you are starting to see speculate of trading in other currencies. -- speculative trading in other currencies. there is no reporting to suggest that is coming close. you see these sorts of contagions happening all the time. suggesting something is going to be limited is a fool's errand i am not going to fly with. paul: thank you. let's get back to the other trade conflict. tensions says the u.s. with china are ideological and could deteriorate. a group of experts agree.

peter, thank you for joining us. in today's events have taught us can really spin at the white house. report is not optimistic in the outlook for the u.s.-china trade dispute. this has got nothing to do with trade. tariffs as asing generalized weapon. other countries could choose to adopt similar policies. collapses in that situation. trade is symptomatic of a broader, geopolitical issue.

the tariffs clearly have a direct impact. tariffs problems have been the single biggest risk to growth in the asia-pacific region. you are talking about large-scale, industrial subsidies. you are talking about an asymmetrical treatment and investment. one of the problems is that most

trade institutions are not in a position to work on those issues. shery: you are ambassador to the trump wants toident impose 5% on all mexican goods. is this in line with wto rules? eter: there are exceptions where countries can take action on grounds of national security. i can't recall a similar type of situation. shery: when we have the president undermining the wto,

is there the risk of not having a body that could mediate these bilateral tensions? peter: it is a very clear risk. that is partly an inherent the wgo has. i mentioned the sort of issues which underscoring the u.s.-chinathe wgo has. trade dispute. what can the wto do in that situation?

rules haven't kept up to date. substandardly, you need the agreement of 164 countries. it was a real strength for the wto.; -- for the wto. but you have to question whether 1640 countries can make progress. problems wto has had in the background. negotiation continues on multilateral trade bodies. the aussie agreement has

negotiationsget on that are to wrap up by the end of the year. negotionations on that are to wrap up by the end of the year. tpp-11 was a big -pacific.the asia agreement.d it includes rules relating to what trade is really about in this day and age. there are big issues for the 0---paficic

asia-pacific region. there has been 25 negotiating haveions in seven years -- been 25 negotiating sessions in seven years. us,r: thank you for joining peter. let's get to the first word headlines. d: the fed vice chairman says the central bank is prepared to ease monetary policy if it sees mounting risk to the u.s. growth. but he stresses that the economy is in a good place. the risk assessment could be a trigger for the fed to cut rates. >> we are attuned to potential risk. we saw downside risk to the

outlook. that could call for more accommodative policies. that is a risk management area we would think about. trouistssouth korean -- tourists drowned after a sightseeing boat capsized in budapest. 33 koreans and 2 hungarians were aboard. worn the rescue could take days. one bank will pay millions of dollars to a male employee who argued policy was biased against fathers. jpmorgan says it's policy was always intended to be gender-neutral.

global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ahead, our interview with the ceo of australia's second-largest independent oil and gas producer. this is bloomberg. ♪ shery: this is "daybreak asia."

aul: australia's second-largest independent oil and gas producer sees opportunities and risks for a trade war. weak lng prices remain a key risk. >> you are not in this business

a must you accept this is a you accept unless this is a cyclical business. we have seen really strong lng pricesices and increasing. markets would expect we expect to see that balance address itself over the next decade. >> one interesting thing is that projects areg going forward with fid despite not having full contracted all that gas. if that goes too far, that's might never merge.

merge. might never for a company like santos, most of our projects are brown fuel projects. economics tend to be competitive. that helps us have healthier margins. that makes me feel more comfortable about the projects we are bringing to market. how are you thinking about the u.s.-china trade war? kevin: it could fall one way, and the potential could go the

other way. our focus is on cost and supply. supply, wehe cost of can deliver. paul: that was our exclusive conversation with kevin gallagher. we have numbers for china right now. for theacturing pmi 54.3,of may coming in at in line with estimates.

petroleum, with the goal of potentially seeing board seats. the board of occidental is in over their heads, karl icahn says. >> price targets are flashed $150.his stock to demand for its mass-market model three has stagnated in the u.s.. mark cranfield joins us for an analysis. we have seen first quarter gdp in south korea pretty weak. it is not surprising that there are calls for a cut. the korean yuan has been weak. room do policymakers in south korea realistically have?

mark: they are expected to leave the rate at 1.75%. they have some room. korea has already decided a rate cut is coming, regardless of what the bank of korea made -- may be saying. the bank of korea probably wants , delay as long as possible until they see how much further the global deterioration goes. the export data in korea is already pretty poor. the data is really stacking up. question of-- a time before the bank of korea may have to given. -- give in. closely the bank

of korea's comments in the months ahead. aul: what is your expectation for manufacturing pmi? will we see a contraction? mark: people are nervous. been hit with this mexican tariff thing. 50, it wouldelow be very bad. shery: the china open is next. this is bloomberg. ♪ rg. ♪ the latest innovation from xfinity

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♪ tom: is 9:00 a.m. welcome to "bloomberg markets: china open." data. bring you the pmi may, manufacturing pmi for 49.4, below the estimates of 49.9, so in contraction territory. that is the weakest since