>> good evening from bloomberg's global headquarters in sydney. wednesday, --this our top stories this wednesday -- ♪ >> the fed chairman signals he -- he iso breakout open to rate cuts. says they will go ahead next week. the rising tensions sends investors seeking safety.

gold has its longest gain since january, some see $1400 by year's end. u.s., markets rallied more than 2% and the s&p 500, above the 2800 level. ,e saw big banks surging analysts saying the industry would be said to party like it is 1995. we have seen from the fed chairman signal and openness to rate cuts. officials also expecting to avoid tariffs that we saw on chipmakers. s&p futures still up. >> let's take a look how asian markets are shaping up.

the korean market continues to defy gravity and here in australia we have futures pointing higher, probably all banks to the decent rally we saw on wall street. don't miss my exclusive coming up with catherine would. she will join me on the final day of the australia summit here. for now, let's get to first word news. the world bank is cutting its forecast for the global economy, citing the trade war, rising financial strain in the unexpectedly sharp throwdown -- throslowdown. trade is also expected to year, the2.6% this weakest since the 2008 financial crisis.

chief says heank could follow up tuesday's interest rate cuts with another reduction as he seeks to drive down unemployment and drive inflation. it ended a nearly three-year policy by easing it to -- using it. they said the main downside risk come from that comes from global trade deals. made a decision, but it is not unreasonable to expect a lower tax rate at the time. we are prepared that the cash that the cash rate would provide around 1% by the end of the year. >> the mexican president says he still hopes to reach a deal with the u.s. that would avert tariffs next week. they tend to put duties on all imports from mexico unless the government tackles illegal

migration to america. hopes the two sides will make a deal, but present trump says the initial tariffs will go ahead. ministeru.k. prime theresa may has spoken about the substantial risk between the u.s. since present trump took office. she says london and washington are at odds over china, iran and climate change. the president faces backlash when he proposed access for u.s. that national health services should be part of future trade talks. global news 24 hours a day, powered by more than 2700 journalists and analysts and at tictoc on twitter, in more than 120 countries. i'm jessica summers, this is bloomberg. >> we have breaking news out of south korea. of first deficit since april

2012. the current deficit coming in at $664.8 million, not surprising given we have seen a sixth consecutive month of exports contracting will stop of course, we saw the global slowdown not to mention, a downturn of semi conductors and those exports falling more than 30% in the month of may, so we are seeing south korea's current deficit coming in at 606 -- over $600 million. -- economy really starting the economy really struggling after cutting their forecast. let's now turn to some comments from chair feldman jay powell. our international economics

correspondent michael mckee joining us from chicago. how are his comments received? >> they got a generally positive reception, selling off on trade war fears and at this point, when jay powell walked in, it appeared he had to say something, so he put in a line, suggesting the fed is going to do its job and be alert for any negative impacts on the economy from the trade war's. how or when know these issues will be resolved stop we are closely monitoring the implications for the u.s. economic outlook and as always, we will act appropriate to expand expansion with a strong labor market with a 2% objective. rates, butse to cut those who have been looking for a rate cut to get as the fed

ofirman opening the door and course, you saw the reaction in the market. . how do powell's remarks fit into the theme? >> this is a conference that is designed to give some background for academics. kind of policy prescriptions they can use going forward, not the policies themselves, but how do you get to a decision on that and so, they fit into the category of communications. no real agreement on how they should improve it, but the way they do right now, has not worked as well as it could.

>> we are headed to the 5% tariffs on all mexico goods starting next week. what are economists saying on the impact and what is the feeling around the conference? >> the general feeling is the same feeling you get from markets around the world stopped they cannot really believe this could be happening. mexico is an ally and it would have a tremendously negative effect on both the mexico and u.s. economies. are so tightlyns woven that it would be a problem for the economy. a lot of talks about how far the fed would have to go or whether they could even do it. we will get some special insight into that tomorrow morning on bloomberg television when i interview robert kaplan and of course, his sister will be the the longcted at all,

mexican border mostly his. he will have some interesting things to say on what he thinks the impact will be. also, president of the chicago .ed not as concerned we will get his viewpoint as well. mckeenk you so much, mike in chicago. but get back to the u.s. markets. comments about the federal reserve acting as appropriate to sustained growth. we have seen some sectors really rallying. and thetook a step back dow up better than 500 points. let's say to look at the market. real tech heavy sector of almost 8%. notice the net positives on the screen and again, the bonds

really reversing course, given the latest comments. take a look, as mentioned, sherry said mike mail from wells fargo said they will be partying like 1995. that is a reference when banks were out performers and you had a similar situation. what also take a look at may be the short story around us. bloomberg noted that many of the stocks that had short interest stocks thatre among gained on average 3%. downs has had its ups and had a big surge.

>> what extent are some of the short-sellers [indiscernible] >> we did not see as big a jump in the bank stocks. going into the bloomberg, tech stocks on a wild ride. look at the green up here. taken momentum into the tech sector come in and buy back their positions and that tends to do gains. not huge gains in these tech stocks. you have to bear in mind because they have had such a strong one, they are not as heavily shorted. back, look as they came mexicano do with the politicians now meeting and , but alsopush back

take a look at this ox and beyond that you can see some of the other issues going on in particular. we have after-hours gain stocks. this is -- what you are seeing is a dismal sale story. they are scrapping the dividend and the downside has been huge. that may carry over wednesday. >> we saw some big moves for oil and gold stop -- gold. >> has a lot to do with the u.s.-china trade, less than interest rates. yearions earlier in the whether that was still the case. backseat.en a after-hours, we are seeing oil fall and that is because of a report on the inventory, a very

bearish number. dayill be a down significantly from the 40 plus gains we have seen back in april. >> thanks very much. speak with we catherine would. she joins us here in sydney. wrecks up next, hilary kramer joins us here in new york to talk market strategy and which sectors she thinks are the best opportunities. this is bloomberg.

♪ >> two thirds of all the recession since world war ii have been caused by some fed fed policy being too

slow or too fast in one direction. >> it is hard to say whether we will have another cycle with interest rates with the growth and inflation numbers. the key is to be prepared. >> there is a very narrow band of flexibility they have at their disposal and the situation werech more complicated things that are not in their control. one is the trade dispute with china. >> i think if you connect all the dots, economic growth is going to be impacted. it may not be as fast. in terms of trade, i think progress ultimately will be made. >> at the annual summit here in new york and the rising trade tensions. hilary kramer.is

great to have you with us. we have seen all these concerns coming out. we have the trade tensions and the global economic slowdown is already priced into the market. do we see stocks going lower? >> stocks will go higher because the slowdown is not built in, but we have much more global demand than is realized. there's a lot of fear and a lot of switching from some sectors to others. there's still lots of demand and biosciences, industrial, even telecommunication, so i'm convinced we have global demand. we just have macro problems and noise. coursetwo big ones of are mexico, tariffs are going to be slapped on, but mexico saying an 80% chance of a coming next

week. >> what happens if the tariffs are put in place? corporations will not take all of the hit, so does that mean demand will suffer? small andll be so there are so many exceptions to it, just like apple finds a way to get around. it is really more pandering for this is reallynd about politics, about president say torying to stay -- republicans and democrats, we are in charge. we are not going to let any refugees across our border. that being said, you have companies and opportunities created by this. there's a company, the largest avocado grower and shipper in the world and a company like this is going to do just fine

and stocks growing avocados are getting thrown out. it's an opportunity for buying rather than selling. those mexican tariffs were interesting. nobody saw them coming. global markets got absolutely blind-sided, so how do you factor in that risk? >> that is what we just suffered, except for today we had this wonderful bottoming out, bounceback and that is because the realization that not just that it is overdone, but again, it won't be as ominous and impactful as anyone could ever imagine. it is really just talk at this point, so a 25% tariffs will not happen. it is so intertwined, the u.s. economy with mexico whether it

be car manufacturing or parts for electronics, it is impossible everyone will be exempted out of that musso it is argued in building and everyone realizes this is not going to happen. it is just games going on in washington and that is when we saw the market finally shake it off and come back. of course, it also came back because of the realization the federal reserve will be cutting rates and we won't be staying the same and will certainly be tightening. >> does that speak to the general system -- the general fertility of markets? >> the markets are fragile. the markets get nervous. they don't like indecisiveness happened withat mexico and these tariffs came from left field.

we are sensitive, but that is why investors have conviction around their names and understand what they are buying and they have to have the belief that the u.s. economy that they are buying here in the u.s. is strong and the demand is still there. >> with a change in the , we areip in the market now seeing bank stocks doing great. >> goldman sachs, one of my favorite stocks, it makes all the sense in the world. bank stocks -- bank stocks are phenomenal. we are seeing the rotation taking place by saying it is really behind us. really looking into the back mirror instead of driving forward. if you want the nasdaq style

growth, no one -- be in biotech. companies go public and others go public, companies that have great first-class investment banks behind them. those walking in their or even with the larger companies, that is what it is all about. for even boxumbers today. they were not strong enough. the numbers are there. you want to be where the action will be and everyone is rotating to biotech which really sounds like inside wall street. >> is it time to rotate emerging markets given that we could see a weaker dollar and more opportunities outside the u.s.?

>> i would stick to the united states. when you have a 10 year that will become further, it means that money can still be borrowed really cheap which means growth can take place. it is all about the numbers and as long as there are low rates, we will see biotech go higher and the banks do well, so what you want to do is stay in the u.s. where there is demand. -- some of thent smartest money in the world is in first line. >> thank you so much for joining us. you can get around up for the stories that you need to get your day going. to tverg subscribers go on your terminal. you can customize your settings so you only get the assets that

you care about. this is bloomberg. ♪

>> this is daybreak asia. >> let's get a quick check of the latest business flash headlines. they will meet again wednesday after failing to make a decision. the directors discussed the plan 50-50rysler once a combination. ceo could be prosecuted for financial misconduct according to a court filing in tokyo.

the time covers some of the alleged crimes. he denies any wrongdoing. china considers raising the barrier for electric vehicles to prevent the industry from hitting a wall. target arethe main the companies that plan to form out to other automakers. -- the focus of the inquiry, which concerned the transactions up several corporate system of it -- subsidiaries. silicom, we will get an update on what could be a multi-front trade war as president trump

signals is moving forward with tariffs on mexico. all that in a moment. this is bloomberg. ♪

>> this is daybreak asia. fed chairman jerome powell is signaling in openness to lower rates, pledging to keep a close eye on the fallout of the trade war. pound, -- powell's comments gave stocks a boost. we do not know how or when these issues will be resolved. we are closely monitoring the implications for the u.s. economic outlook and as always, we will act appropriately to sustain the expansion of the and ourabor market

objective. >> south africa's ruling anc once the government to expand the reserve bank so it focuses on roads and jobs. unemployment is more than 20% -- 27%. it also wants the reserve bank to look at easing measures to help government debt. they show the economy slumped the most in a decade in the first quarter. struggle tos may coax worried passengers back on boeing 737 max. that is according to a study from a research group and 40% said they would take price year or less convenient options. southwest and united states a will let people switch with no fee. the oldest political party in thailand has indicated his theort for the outgoing --

democrat party's decision puts the army coalition on about 254 seats in the lower parliament and that makes the former army general the favourite to return as prime minister. global news 24 hours a day, powered by more than 2700 journalists and analysts and at tictoc on twitter, in more than 120 countries. i'm jessica summers, this is bloomberg. >> must check in on futures in asia after an impressive rally on wall street. all futures pointing higher. we are waiting on first-quarter gdp out of australia. expecting particularly great things on that front, but we do have nikkei futures pointing

higher. well korean index doing despite all the trade tension. >> given all the economic problems, we saw the first deficit since 2012, tensions heating up on multiple fronts, warning against travel, threatening the tourism sector. meanwhile, president trump insists tariffs on mexico will go ahead next week despite pushback from senate republicans. snyder.ing in jodie we have seen similar moves against south korea back in 2017, so how important is this travel restriction to the u.s. by china? significanthave

implications to the tourism sector. china is the biggest spender in the world and it is the first such warning and a decade even though china has made safety warnings about citizens traveling to the u.s.. the travel advisory is based on concern about frequent shootings and when asked, a foreign it wasy spokesman said because of different circumstances. obviously, this could lead to real effects on the tourism sector. tourists also spent heavily in casinos and retailers such as tiffany's. this could have real implications for u.s. tourism if

the travel advisory holds. china dropping unambiguous hence of where exports that come. what is the latest on that front? >> it looks like the latest weapon in the trade war, they are looking at the chinese somenment imposing restrictions on imports and not u.s.,ould this affect the but it could change the whole market. there's very little alternative source of rare earth which are used in production of military and technology devices, even though there's some production in the u.s.. almost all of the processing goes to china, so this is

something that could have big implications on the world stage and appears to be another response to the recent trade conditions in the u.s.. there have not been real talks since they broke down the negotiations in early may. to avoid the 5% tariffs come next week. to see howrised measured the response has been from mexico. how long will that last? >> that's a good question. the president of mexico has ,aken a very conciliatory tone calling for peaceful negotiations and continuing the working relationship between mexico and the u.s.. we'll see tomorrow when his foreign minister meets with pompeo and pens what exactly the

u.s. is asking for and i think a son that, will no if this tone can continue. how is the terror threat changing the supply chain form -- how is the terror threat -- tariff threat changing the supply chain? >> u.s. and mexico have very intense trade that goes, more time -- more than one item can go through a dozen times. mexico, if there are any retaliatory tariffs, that would double the costs. it would be damaging to the production lines at the u.s. mexico border. >> we know the president has been in the u.k. dangling the

possibility of an fta. give us the possibility of that. >> president trump continues to hold out hope for a trade .greement with the u.k. he says there's tremendous potential for a phenomenal agreement that could double trade between the two countries. that is unlikely to happen anytime soon. first of all, there are roadblocks that would exist that make it difficult for the to get through a deal and also, as we have been discussing, trade tensions with china and now there's potential for the mexico tariffs and also the trump administration wants to get through congress a nafta deal between the u.s. and canada and mexico, so there's a big

agenda there and the u.k., once they leave the eu, which would happen perhaps in october, they would still need to negotiate with the country, so even though there is a phenomenal deal, not likely to happen in the near future. >> thank you for joining us. coming up next, will be joined talktherine woods to investment trade war and which will have the most disruptive potential. this is bloomberg. ♪

[no audio] we saw a rebound from tech

shares. catherine, thanks for joining us. thee has been disruption of wrong kind, the department of justice turning the spotlight on. from aneen an issue evaluation one of you. view.luation point of case, nothing happened and in the other case, we and it up with a bunch of baby bells. a rebound from a more

dovish tone, but is that sustainable going forward? >> if you look at the rebound, it was somewhat relative to other tech shares not facing this trial. >> the trade war is casting a dark cloud at the moment. if you issues, one of them is huawei. up we going to end [indiscernible] >> i don't think so all stop i think president trump is using huawei has one of his biggest bargaining chips. that country is extremely when we band we saw zte, they came back to the table pretty quickly and we ended up solving that

one. i think this is the last big targeting chip and present trump is -- president trump is negotiator. >> president xi is a negotiator as well. industry, howthat much is that going to force [indiscernible] >> i think both countries actually want to solve this problem and they are down to the it is% of bargaining and going to be a tough drag out fight. i think president trump is playing hardball with huawei and i don't think rare earth are going to be bargaining chips at all. i think what they all want his .ower tariffs across the board that would be a massive tax cut

and would help accelerate celery growth for both countries. >> do you find it at all upstrating that this came years ago, the supply chain has never diversified. the if you like there's an opportunity there? >> yes, i feel like there was an opportunity missed. we also saw back then, china responded to increasing prices rather dramatically. i think that could happen again. >> i want to talk about one of your favorite stocks at the moment. saw them joining the tech story fromxclusive the selling credits to other , so $420 million.

is that alter the valuation model for tesla at all? >> i think it offsets some of the cash concerns people have. we have not been concerned about cash. i don't know if you have begin whack-a-mole. last year was production. they cannot get production going and then it was they got production going, but then there was no demand. demand is exploding around the world, especially as they cut prices. .ow, there is cash we went through this with amazon in early 2000. amazon cannot do anything right. look at what amazon turned into. , when we have this conviction, these stocks as you get through the whack-a-mole

game -- get through the whack-a-mole game. tesla evolves into an economist taxi platform -- and autonomous taxi platform. i think that is what a lot of people are [indiscernible] >> i think it is a victim of how research is changing, the platforms of three major innovation platforms evolving at the same time. bergy storage, they will electric and cheaper than gas powered and artificial intelligence, they will be powered by artificial intelligence. auto analysts are not trained to understand those platforms and i think that is where the big

inefficiency in the stock prices. it is our highest weighted stock. >> you made a successful career out of picking successful companies. what you looking at for new successful companies? genomic sector is not well understood. where moving to pharmaceuticals treated symptoms instead of tearing -- curing. are moving with dna sequencing and understanding which genes are mutating. we are moving into a world where we will find a cure for cancer blindness.ic i don't think the market is priced for that at all stop in the late 1990's, if i told you patentsee companies had

for crisper gene editing and they were going to help cure diseases like blindness, cancer, my guess is the foundational thoses would have earned theanies market capital in hundreds of billion dollar range. today, those three companies cannot even reach $5 billion collectively, so hugely undervalued. thank you so much for joining today. forget, directv function tv , you can watch us live bloombergn dive into functions we talk about. you can come -- become part of the conversation by sending messages during the shows.

check it out. ♪

>> australia's central bank chief has strongly suggested he could follow up tuesday's interest rate cuts with another one in august as he seeks to drive down unemployment and revive inflation. >> the board has not yet made a decision, but it is not unreasonable to expect a lower cash rate at the time. our latest forecast, we are prepared. 1% at theace around end of the year. a reporter joins us from sydney now. growth, when we get

that gdp numbers, how far away is that from where the rba would like to be? >> they are at about in our and a half, iverson's point below. -- a percentage point below. thatwe are growing above an important, that is the push down of the unemployment rate. the said, they expect economy to rebound and growing by the end of year, but in reality, that is 3% or more. we talk about the low that, he, but not only actually took media questions. is this the beginning of the post meeting press conference? >> apparently not.

i asked him the question, but hold up hope. his speech was very interesting, especially because he mentioned at the end that it is unreasonable to expect further interest rate cuts and said we might be looking at a slightly longer horizon than expected. probablytakeaway was on the cards. cutsther issue, the rate is the lower aussie dollar, but we have seen it talk of follmann u.s. interest rates reduction and if that happens, it could complicate the central rates. it really does need a lower dollar here, so that is something to look out for. it does seem like another interest rate is on the cards

and then we will see where we go from there. he was not inclined to go further than 1% cash rate. about that 1% cash rate, that monetary policy could go. the same question with full employment? >> exactly. you and i discussed it. he was asked the question on the record and he basically said it is lower than 1% she referred to a very hard cash rate at that stage. he said it is lower and he referred to the experience or they were down and he suggested i was probably the lower bound. i wasantly, back to what

talking about with the 1% cash rate, he did not anticipate going to those levels and whether there will be more cuts. it really does look like 1% largely, but then we go on holds the company's trade disputes -- company's plans are affected by the trade disputes. it looks like to cuts and then let's see what happens. unemployment, he did say it was 4.5%. >> thank you. our strata economy reporter with all the details. let's check on the asian markets. we are seeing stocks gaining a tenths of 1%, not surprising the little more green at the moment as we saw the u.s. market rally. ratee powell signaling

cuts. seeing allare upside. this is bloomberg. ♪

paul: good morning. asia's major markets are about to open. shery: good evening. welcome to daybreak asia. paul: our top stories, the fed chairman signals he is open to rate cuts if necessary, sending u.s. stocks up the most since january. asia set to rise. a profitableing at $11 billion after selling part of a stake. nault discussing a

merger with fiat chrysler. this faces opposition from nissan. markets are opening. the u.s. market rallied and fed -- on the fed chair's comments. the nikkei gaining, the biggest jump since april 15. we are seeing the japanese yen weaker but still holding at around a five-month high against the u.s. dollar. take a look at what the kospi futures are doing, south korea stocks gaining 0.08%. the korean market has been resilient during this week's selloff. samsung electronics doing pretty well this week. speculation they could benefit huawei'se way's -- troubles. south korea, the deficit at $660

million, the first deficit since april 2012. take a look at the stoxx at the 0.3%., gaining the rba cut interest rates for the first time in almost three years and this morning we are expecting gdp data out and economic growth of 1.8% in the first quarter. kiwi stocks gaining ground at the moment. a few markets closing in asia, india, singapore, malaysia, philippines out on holiday. jessica: mexican president lopez says he hopes to reach a deal with the u.s. that would reverse tariffs threatened. the trump administration intends to put duties on imports from mexico unless the government tackles illegal migration to america. lopez hopesaw --

they will make a deal but trump says the tariffs will go ahead. outgoing prime minister theresa may has spoken of the risk between the u.k. and u.s. since president trump took office. she says london and washington are at odds over several issues including china, iran and climate change. the president faced a backlash from u.k. lawmakers when he proposed access to u.s. firms to the u.k. passed national health service should be in future trade talks, but he backtracked on that. u.s. airlines may struggle to coax worried passengers back on the boeing 737 max. 20% of travelers say they will avoid the plane in the first six months after flights resume. that is according to a study on the atmosphere research group. year or less price convenient options. southwest and united say they will let people switch the flights with no fee.

australia's central bank chief has strongly suggested he could follow up to this interest rate cut with another reduction. this as he seeks to drive down unemployment and revive inflation. the rba ended a nearly three-year policy paz by easing the cash rate to 1.25%. he talked about the downside risk coming from global trade disputes. >> the board hasn't made a decision. it is not unreasonable to expect a lower cash rate over time. wereatest set of forecasts prepared on the assumption the cash rate would follow the market, which would mean the cash rate was around 1% by the end of this year. jessica: global news, 24 hours a than 27ered by more hundred journalists and analysts in more than 120 countries. this is bloomberg.

thanks, jessica. says the tradeer war threatens to undermine the u.s. economy and he is ready to respond. us atlicy editor is with the conference. powell's comments hit the bond market hard. what did he say? >> it is interesting. jay powell was speaking at, giving the opening remarks at what is arguably the most important fed conference this year. you can see him taking the stage , opening the conference at the chicago fed, and prepared remarks, he talked about trade negotiations not knowing how or when they will be resolved. he talked about the u.s. economy and clearly, in his speech he opened the door to rate cuts if

they are necessary. >> we don't know how or when these issues will be resolved. we are closely monitoring the implications of these developments for the u.s. economic outlook and as always, we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. >> in the context of the u.s. economy that seems to have solid fundamentals but is already showing signs of being hit by the trade war, we got the weaker fed forecast purchasing managers index in the u.s. yesterday. he talked about acting appropriately and we can assume rate cuts. sidelines, the experts reinforced powell's message. for is an outlook appropriate policy. he said we will do what we need to do to achieve our goals of price stability and higher unemployment.

he is opening the door to rate cuts if necessary, but he said we can't be handcuffed to market moves. if bonds are rallying and stocks are falling, that won't determine it. it is too early to figure out what the yield curve signal is. it has been flat and inverted so i think he is shoving that to one side more than others would. , the postd president of the event, the monetary he headed in the works for over a year. when he spoke, he said inflation is on the light side. that signals the need for a rate cut but in terms of damage from the trade war, he thinks the fundamentals of the economy are strong. i think charlie is giving the consensus view, the door is open but they are waiting to see how things play out. chair powell acknowledgment the potential

need for rate cuts. he is getting on board the train that is already leaving. who is next? substantialeen some moves in this direction already this week because phil lowe, we just heard from him in our first word report, he opened the door in may to a rate cut. he has walked through it in june and leaving the door open to further cuts. with a lot of these central banks, it is not just the trade war adding on. for australia, it is not their most severe problem. they have a weakening economy, rising unemployment, the housing market they tried to rein in, maybe they over-succeeded, property prices falling. we could move onto the reserve bank of india. on thursday, they are expected to cut their key rate again. the high growth is decelerating. mario draghi, the central bank of europe is meeting saturday and they can't cut them -- and negative rate much thursday --

much further. target bank financing. the finance ministers meeting this weekend in japan, i will be covering that. this is one of the big dilemmas. some central banks, reserve bank of india and other banks, have key rates that are high but if you look at the bank of japan, like the ecb, their key rate is already negative. they have the 10 year tethered to zero. how much can they do if the trade war keeps going? that is another big if. maybe we will get good news on comeconomy, or excuse me on trade this weekend, two weeks maybeeaders meet and moving over troubled waters. that could change sentiment quickly. importantly, jay powell and others say they are not just going to say and they will do -- not do anything.

kathleen, thank you so much. mr. powell's words sparked a rally in the u.s. with asia set to follow suit. bloomberg strategist mark joins us from singapore. not surprisingly are seeing the rally in asian equities. good move on wall street, 2% plus rally is bound to get the attention of people in asia. it is not surprising when you see the extent of some of the selloffs. one candidate would be the hang seng index. if you look at the decline from the peak in april, it reached about 12% before it hit the low point recently. that is a substantial decline. there will be some people who will look at the hang seng as being oversold and they want to get involved in the market. it doesn't change the big picture, which is the elephant

in the room, the trade issues between the united states and china and as far as we can tell so far, there has been no pullback in that direction. equity traders may enjoy good news today, they may last for a few more days, but the situation in the background hasn't improved. we need to see the u.s. and china get back to serious negotiations and show that they are willing to reduce the tariff war. otherwise, the recovery we have seen will not last, regardless of how dovish jerome powell sounds. they are pricing in a rate cut. is that likely to change echoes -- change? mark: that gives them the input to us to stick with that. to stick with that.

on monday, we were close to pricing in three interest rate cuts over the next 12 months, which is amazing considering the last thing the fed did was raise rates. the markets are providing a message and powell is open to listening to the message. in january, he surprised some people by saying he was ready to take a pause a couple weeks after the fed raised rates. we had a huge selloff in the s&p 500 in may and he is starting to open the doors towards a possible rate cut although he hasn't explicitly said that is where he is going. some people will be encouraged that they are doing the right thing by pushing the interest rate curve lower. there are lots of other factors at play. that a complicated system will make the fed's decision. the message from wall street is becoming louder and it plays a role in whether the fed will change its status. elephant in the room

remains trade risk. we got a new tweet from president trump saying, can you ,magine crying chuck's schumer saying i am bluffing with respect to putting tariffs on mexico? he gave mexico bad advice, no bluff. how sensitive are the markets to the latest trade headlines? mark: we saw on friday when messagese the first about mexico tariffs, we saw a severe reaction in asia. it came out at the beginning of the asian trading. the selloff continues through today. didn't stop equity markets from falling. it was a big reaction and it continued into this week. the blue forut of a lot of people. it had a disproportionate effect on markets. to have a trade battle on 2 fronts between 2 of your biggest trading partners is significant

and there is a chance it would affect economic growth in the united states and other countries. if mr. trump is determined to , it will have repercussions across markets and economies. it is something investors need to be very aware of. it is something they will need to price into their decisions. we have the mexican peso falling at the moment. mark, thanks very much. will be with awe gentleman who wrote the book on china. we discuss the return of radicalism in the people's republic. shery: gauging the health of china's factories with an economist. this is bloomberg. ♪

paul: this is daybreak asia.

i'm in sydney. shery: i'm in new york. in chinaanufacturing clashed with the official gauge which showed contractions. it was inconsistent with the weakness evident in other asian economies and global factories -- global factory numbers shrinking. with discuss the outlook an economist. great to have you with us. ofot of mixed signals out the chinese economy. what is your assessment? >> the growth is likely to be the main thing in the second half of the year. it will raise from excellent demand. the contribution from the exports to growth is likely to turn positive. stimulus should be sufficient to keep growth at the

target range of 6.5% this year. to see signstinue of more analysts and policymakers thinking perhaps the chinese yuan, the threshold might not hold for long. dismissed the importance of that. what happens if push comes to shove and we see the economy we can substantially more? are they going to let the threshold go to boost the economy echoes -- the economy? >> the policymakers [indiscernible] because the cost is likely to be higher than the benefit for letting go of the important level in the near term. however, if we get further escalation of the trade war, the case could be less convincing.

[indiscernible] as a stimulus because it will backfire and the stabilize the domestic financial markets. domesticilize the financial markets. paul: you think china might sell u.s. treasuries to defend the yuan? >> we don't think that is best for china. the depreciation, it will cost more impact and [indiscernible] for domestic financial markets. has been interesting behavior on chinese and u.s. equity markets since the trade war began to escalate. if you look at the shanghai composite, it is down 2.3% in may. until we saw the powell-inspired bump on the s&p, the s&p was off

6%. chinese equities are holding up well. why is that? think the escalation of u.s.rade tensions with the definitely undermined market sentiment to some extent, but there is still quite high expectation for the policy easing in china, including full implementation of the budgets for this year and also the monetary policy side, they will continue to keep market interest rates at a low level where the market operations and [indiscernible] in order to reverse the escalating lending rates. escalation ofher the trade tensions, beijing [indiscernible] more policy easing if needed. shery: the policy easing

measures have been targeted. the chart shows we continue to see this to virgins with a large smallrises doing well but and medium companies not doing well in contraction territory. how balanced has stimulus been so far? seeing the policy stimulus, which is quite sizable, should benefit private companies and small companies over time because our physical stimulus [indiscernible] big stimulus on the fiscal investment side. those privatefit and smaller companies over time. us.y: thank you for joining plenty more to come on daybreak asia. this is bloomberg. ♪

paul: blackstone group's president says the u.s. trade dispute with china persists, it will lead to slower growth and more uncertainty. jason kelly spoke to him at the bloomberg in paris summit. >> we don't have a ton of business is in the global supply chain. we have some and they are being impacted by this, and i would that is an issue. the broader issue is, what it means for markets, what it means for confidence and what it means for economic growth. obviously if this persists, we are going to see less economic .rowth, more uncertainty markets have traded off and that makes sense. as investors, you have to be mindful of that. i would say sometimes you don't necessarily think through all the multiple impacts of these

things they play -- that play through a lot of industries. it makes you generally a little more cautious. the bond market has moved more , with the 10 year and european yields quite negative. u.s. growth is ok, although we are waiting to see the impact. >> how soon will we see the impact? this year? will see itnk you incrementally. there are companies trying to move their supply chains, that has an impact. you are making companies, if you think about what drives economic growth, if people have confidence that tomorrow things makebe better, they will capital expenditures or hiring decisions based on that confidence. if they feel uncertain about the future, they pull back. i think the tax cut last year was helpful in building now,dence, and i think there is more wariness in terms

of what is going on and i will say, i still think as it relates trade,u.s. and china on i think there should be a resolution because it is in both parties' interest. there is a recognition of a rebalancing that should be taking place. this is about the pace and extent of that. i think the technology side of this is harder to resolve. we may end up in a bipolar technology world. >> rebalancing is one thing. feels like from the tech side, we are looking at decoupling in these economies. your boss intimately involved in china. a leader in both countries. how worried are you about the decline -- decoupling? recognizes that the parties moved apart and i think everybody is disappointed that that occurred but there is a

sense that again, it is in the collective interest of both parties to come back together. that is why in terms of trade and reciprocal openness of markets, i think progress ultimately will be made. i think the technology thing is tougher. presidentckstone's right there. the latest business flash is being, uber examined by tax authorities. there are potential tax charges in key markets. pricing positions and transfer from goods and services. the process has resulted in fines for companies accused of shifting income to low tax jurisdictions. softbank will book a pretax profit of more than $11 billion after selling part of it stake in alibaba. this was announced in 2016.

73 million avr's were delivered. he can retain some upsides if the stock rises. softbank has waned 27% this year. this is bloomberg. ♪

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>> i'm jessica summers with the first word headlines. jerome powell is signifying lower rates, pledging to keep a close eye on the fallout of the trade war. his comments gave stoxx a boost. the fed is under pressure from the white house with president trump calling for lower borrowing costs. >> we are closely monitoring the implications of these developments. as always, we will act as appropriate with a strong labor >> >> and inflation

objective. bank of america -- and inflation objective. >> things are generally solid, but loans could be a major issue. terms for loan investors are steadily weakening. the loan market looks like the mortgage industry head of the crisis. the economy slows down and they cannot carry the debt, they have to restructure, the usual carnage that goes on. , the terms of gotten too much for the borrower. >> u.s. is investigating new ways to supply its rare earth. the commerce department recommends improving uperstanding and speeding approval to find them.

of theccounts for 70% output. as the oldest political party, thailand has indicated support, bolstering the military attempt to stay in power. the decision puts the army coalition to 500 strong. more army four generals a favorite to return. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. we are seeing the upside across markets with the nikkei gaining 1.7%. the biggest jump in than two

months, coming despite the fact that the japanese yen holding at a high against the u.s. dollar. we have seen a lot of optimism and openness to rate cuts. now we have larry summers coming out and urging 50 basis point cut, saying the fed should be ready to do more, if needed in the fall. we are seeing this upside after we saw those 2% gains across wall street. we have the rba cutting rates yesterday. we have gdp numbers this morning as well. up .5%. it is pretty resilient the fact that we have seen weakness in the south korean economy. the first deficit since 2012. has so faroard

failed to make a decision on chrysler's proposed merger. nissan raised objections. have we got any sense of how long this might drag on? they will be meeting in 24 hours again. they could make a decision then. if that fails to happen, it opens up quite a bit. so me stakeholders are involved in the scope. you have the labor unions, the investors. everybody has some state in it. one of the investors has already said that they feel the deal undermines no -- renault.

opportunity to push the case. shery: what are they holding out for? nissan once to safeguard its independence. it has a very strong balance sheet relative to the other companies and it has a long history of car making as an independent entity. it wants to keep its existing relationships with suppliers intact. a merger of this go could involve a lot of changes further down the road. the basic dimensions of the deal so far, there is nothing specific that would harm their interest, but depending on how the relationship takes place from the beginning, that could determine down the road how they be doingre they will things like trying to save money. that is when they are talking about sharing platforms and that

is when a company like nissan will need some clout. shery: thank you so much. nissan/renau that lt/chrysler deal. instead of simply selling opted for aes, they complex transaction. we are talking about delivering 73 million on the contract. why is this such a complex transaction? inwhen this was announced 2016, it had a lot of people scratching their heads as to the shared complexity of the deal. people were just happy that they were selling some of the wonderful investments.

on a balance, it was actually good news. from the back, it turned out to be a very good move. alibaba shares doubled in price. the broadcasting of gains. said herch 2018, he of june 2019 and he delivered on his promise. shery: softbank still owns about 26%. there will be an additional shares sale. an opportunity for more? >> certainly. unwind a veryd to significant state -- stake. there are several considerations. bookinghat they are

their profits and net income on the balance sheet. billion yen is a significant chunk of money. 20%.at stake goes below alibaba shares as collateral. to thestion comes down alibaba growth story yet to be told. paul: is there is concern that there is not enough balance sheet strength to chase all these deals around the world? >> certainly. we know that they are in the process of raising a second vision fund. is actuallydeal part of a significant portfolio.

it is a slightly different company right now. they listed their telecom operations. the proceeds are still there. how he intends to raise the amount for contribution. we have some suggestions that they might have a larger stake in the fund. shery: thank you so much. next, we are looking to china's -- and how it relates to the trade war. this is bloomberg. ♪

paul: china is warning its citizens that it is dangerous to travel in the u.s., issuing a travel advisory through the rest of the year. chinese travelers are having

difficult in the u.s.. the problems are due to current circumstances. .oining us is jude he is a senior advisor. let's start with the travel. what do you make of that? what has really changed? >> not much. this is an attempt to find leverage, to signal to the u.s. that it is serious as we see escalating words between the parties. there were several different warnings. one was about robberies and gun crime. likely toudents were find a more difficult time finding visas to study here in the future. an example of escalating tensions and how both will look

for means to exert pressure, including talent and migration amongst students. paul: the tension does continue to escalate. there is a lot of finger-pointing going on as well. certainly does not bode well for a resolution between the countries at the g20 later this month. it is almost impossible to see a scenario where the two parties are able to close the gap, which has widened significantly over the past three weeks. andre at a new low here there are no positive signs that the countries will come together by the end of june. shery: hitting back at the u.s. with tariffs. do toch damage will this the u.s., but also to china? was a massive unforced

error from china. the u.s. starts from a position that it thinks the chinese economy is weakening. the president thinks that u.s. companies are fleeing the list,y, so issuing a which is clearly mirroring the u.s. entity list, which does nothing than send a further chill down the spines of foreign company is does nothing to exert pressure on the trump administration because it just speeds up the process of moving companies out of the country. this retaliation needs to be better calibrated. it speaks to the larger point that china does not know how to respond to the trump administration. it is still grasping for a strategy. it seems that there is

still a huge gap in understanding what the fundamental issues are. this is what they said when it came to ip. china accusing the u.s. to theing a blind eye to efforts and remarkable progress in protecting intellectual property and in -- improving business environment. a huge gap on where the troubles lie. do you expect a deal to come out now that the trade war has been prolonged? we see a symbolic agreement and a handshake of the g20, just to get it over with. that it is about public signaling. behind the scenes, that is where the action is. we expect some amount of face-saving to go on for both sides. they will try to commence the business community that china is

the most significant protector of intellectual property rights. more importantly, to your question, this is another indication that the sides -- the two sides have such a distance between the two of them that is only widening. the two things that we need to be prepared for is no deal anytime soon. as we have this vacuum, expect lots of actions coming from the u.s. for china's ability to invest in the u.s., which for china is the much bigger issue than the tariffs. paul: you made an interesting point about saving face. the very public nature of these trade talks leaves confrontation with the most favored weapon from china. >> we have seen over the weeks a

concerted effort to turn up the volume on state propaganda in china. they have been playing it quite low-key in terms of blaming the u.s. that has changed over the past couple weeks and we are seeing much more aggressive rhetoric. beijing is trying to prepare the population for a longer, protracted conflict between the countries. at the same time, beijing has to walk a delicate road. be too aggressive in the rhetoric and soured the possibility of a deal with u.s., so i do not relish the role of propaganda in the party. that is an interesting point. he released your book, a new

aggressive, populist china is something that the world has to get used to. a in many ways, this has been long time coming. it is a significant change. with thed in 2008 financial crisis. i think we need to prepare for aggressive china. we need to be smarter in the u.s. about the policies that we are bringing to bear. what we want to do is find a way to coexist with china, not move towards the decoupling that i think many people are moving towards. a dear question coming through. do you think that the chinese are waiting to hold out until the 2020 elections in the u.s.? >> that is a very bad strategy.

the one bipartisan issue in the u.s. is getting tough on china. if you were to get into a room with elizabeth warren, you would hear her sounding like marco rubio or some of the more hawkish members. this is a consensus that the relationship needs to change. kick.s the ultimate can shery: we have seen the rise of china hawks in washington. what about in china? are the hawks in control? we have seen this huge negotiation getting derailed and taking a hit. not had the ultimate hawk in charge of china since he came to power in 2012. a lot of us misread that early on. i agree that the past 12 months

of trade tensions, especially some of the u.s. actions, haidi: -- zte has made them a more probable outcome. if he were a hot in china thought the u.s. was hell-bent on containing china, you have some evidence to point to. shery: thank you so much. the return of radicalism and the rebirth of has a tongue -- mao zedong. bloomberg's subscribers go to dayb on your terminal. it is available on mobile. you can customize your settings to get the news on the industries and assets that you care about. this is bloomberg. ♪

inauguralre at the australian summit where the focus is on shaping the future. the cofounder spoke exclusively to us in his first interview since the ipo of 2015. abouteel the same way australia and doing our part for climate change. role thatve technology can have in our economy. i think that we do not realize

how much energy we could be exporting. it will be up to corporations and individuals to do that. think it will continue to power along. is talking about disruptions and looking for that next sustainable drive, moving away from the classic, trade reliant models. nothave been critical about performing platforms for innovation. >> on the innovation side of things, i think australians are going to innovate. there are some things that the government could be doing to help. the last three or four years, concessions are critical to the industry. that certainly has not helped, but at the same time, we had a

booming tech industry. it is great. they could help a lot more than they are, but i think we have a pretty good future. the u.s. ban on huawei is having a real reverberation across other countries. tech is really the new battleground for trade. i am curious to get your views. are we setting up for different bases for tech? how do you make sense of that? will be really interesting. it will not be a boring world. view, lasting point of levi the train up and down like everybody else. we are a little countercyclical

in the way that we have many smaller customers. we did not participate in trade war's or anything that would affect our software that we sell. general, there are a lot of others -- other concerns that are becoming a big issue. that is something that we will all have to get used to. shery: let's get a check of the latest is this headlines. more stores and fast. more than $2 billion late last year, they planted open dozens around the world to double sales. they will spend more on marketing as it expands into handbags and accessories. 40 recite you stores in china alone. stores in china

alone. its touristsays spending a year ago, the trend has worsened over the last three quarters. tiffany says it has seen improvement ahead, even as spending by tourists drops. paul: it is early days. airline planes cut thousands of jobs. how their actions were instrumental in the revival. became one of the most vilified chief executives in australia. you had people calling for your resignation and they were polls. how did you keep the board on side? i was on tv.

-- >> i was on tv. they said in the poll for i came on, i was announcing the turnaround plan. people want you to resign. my answer was, it is not a popularity contest. work for the board and shareholders. they are fully supportive of me. saying thatreasury the pboc governor and even magician will meet at the g20. mnuchin-- and steve will meet at the g20. ♪

david: it is 9:00 a.m., welcome to bloomberg markets: china open. yvonne: we are about to open trade. topd: let's get to your stories, equities across the region jump is jay powell signals he is open to rate cuts. yvonne: larry summers adds to the debate, calling for a 50 point cut. he says the fed must be ready to do more. -- tom: chinese citizens are warned not to travel to america, dragging