paul: i'm paul allen in sydney. shery: good evening from bloomberg's global headquarters. welcome to "bloomberg daybreak: asia." paul: our top stories this thursday, drama in two major stories -- the u.s. and mexico failed to reach agreements. tariff are still set for monday. fiat scrapped its planned merger with renault after a delay to decision. however there is still hope for

billing as it chases a big deal in china. the escalating trade war may force negotiations off course. shery: let's check our markets closed in the wednesday session in the u.s.. another day of gains with the s&p 500 above 2800. there was a lot of optimism over a potential deal with mexico and those u.s. tariff set to take effect june 10. we did not see a deal, however we heard from the foreign secretary of mexico he remains optimistic about negotiations tomorrow. we have seen most sectors on the s&p 500 gained ground. the only loser was energy, wti plunged. u.s. supplies jumping the most in 30 years. s&p futures down 3/10 of 1%. let's see how we are setting up for asia. paul: nikkei futures are fluctuating, but stabilizing. trading out of chicago still lower. policy futures pointing higher. it will be -- aussie futures

pointing higher. it will be interesting to see if that changes in the reset 15 minutes from now. new zealand paring back early gains, 1/10 of 1%. breaking lines on the bottom of the screen, fiat now confirming it is withdrawing its proposal for a merger with renault. we will bring you more on the story in a little while. a reminder markets in south korea and malaysia closed today. shery: back to our top story. the u.s. and mexico failed to agree on tariffs, with duties on all imports set monday. tensions on the american southern border hit their highest level in more than a decade. our white house reporter joins us. at least the negotiations continue tomorrow. josh: absolutely. this meeting included secretary

of state mike pompeo, vice president mike pence. it did not include donald trump, which was a signal early on this may not be the final say. that is what we saw. recently we heard from the mexican foreign minister, who .aid out an optimistic tone these talks will resume tomorrow. it is unclear as to when the deadline is. the president said if there is no deal tomorrow, those tariffs will go into effect monday. if there was an agreement reached friday, there would be plenty of time. other analysts say they will go into effect monday for a short while, then come off soon after. these talks are continuing, and mexico does not seem to be digging in. on the contrary, they are making pledges of optimism and saying they want to avoid tariffs and and are working toward getting a deal. paul: a sharp contrast from what

we are seeing with the china discussions. president trump not actually in the u.s. right now. he has been waiting in via -- twitter, saying there is not enough progress being made. how do we define that? josh: it is a great question. the white house has kept it murky. they outlined three broad buckets of what they can do -- one is mexico taking asylum-seekers themselves, the second is enforcing mexico's southern border, and the third is cracking down on checkpoint's along the route -- checkpoints along the route going through mexico, attempting to go into the united states. that is as much specificity as we have. not a lot, considering what is at stake is 25% tariffs on imports by the u.s. from mexican

products. mexico is the second-biggest source of u.s. imports. we have some time left. trade deals historically go down to the wire. that was the case with the usmca trade deal that mexico is a part of. that continental trade deal andeen the u.s., canada, mexico still needs to be ratified by lawmakers of all three countries.donald trump wants to talk about that deal. it will be harder to pass that deal in congress and mexico, you would think, if these tariffs go into effect. shery: especially as congress holds the usmca hostage if the administration raises tariffs. josh: absolutely. we are seeing pushback from congress in particular, the senate saying they don't think this is a good move. the house minority leader, the top republican in the house of

representatives is saying everyone needs to shut up about criticizing the president, because we are undercutting him. mccarthy's view is talking about tariffs being a bad idea takes the legs out from the table. we will see different views from the senate and house of representatives. right now the blowback is stronger from the senate. congress collectively would need more support in both and particularly the house of representatives if they were to block president trump for interacting tariffs. right now we are only seeing footsie, there is no stampede to get in the president's way. paul: meantime, dialogue is ongoing between the u.s. and mexico. there will be more talks tomorrow. getting the chances of

something sorted out by monday? josh: it is too early to say. the white house has been tightlipped. a lot of people are looking for those details. the whiteo think if house is reading the landscape, the senate's opposition, skepticism from mitch mcconnell of all people, they want the usmca trade deal past, they want to run on it in 2020 -- so they have incentives to actually make a deal. it is not like they have nothing to gain by making a deal. they all comes down to donald trump. we saw this with the steel and aluminum tariff issue with canada. the tariffs remained on those metals for both countries. president trump t calls himself the tariff man, he believes in tariffs. he believes that countries that

bear the brunt of them, which most economists say is not the case. the consumers mostly pay for it. he likes tariffs, so it comes down to what donald trump says. paul: thanks for watching that story. let's check in on the first word news with jessica summers. jessica: the fed's latest book survey says the u.s. economy generally expanded in recent weeks, and the business outlook remains "solidly positive." activity grew at a modest pace from april to mid-may and improved from a slight to moderate pace. however it does indicate problems, including weak retail sales and home purchases. the european union has taken the first step toward disciplining italy for its failure to rein in debt. an initial penalty of $4 billion.

the eu commission says the populist government in room has not made sufficient -- in rome has not made sufficient progress in its obligations, and that the disciplinary process is warranted. the mib index fell on the news. i think examining all relevant factors we have concluded that the debt criterion is currently not respected, and that debt-based procedure is warranted for italy. jessica: ford is preparing to announce the closure of its long-running engine plan to south wales. that is part of continuing efforts to overhaul lossmaking operations in europe. it is scheduled to meet union leaders thursday to discuss the state of the britain factory that employs 1500 people. ford said the future of its whole u.k. operation could rest on brexit and its ability to work within the eu.

global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. shery: fiat chrysler has confirmed it is abandoning a proposed merger with renault. the french carmaker wrapped up a late-night toward meeting with no decision. that prompted fiat to walk away. our chief north asia correspondent stephen engle has the latest. this was a delayed decision as nissan pushed back. what do we know? stephen: this was a deal almost in hand. we are hearing criticism of this merger proposal, which first came up on may 27, had started to face persistence among the interested parties, including nissan. you are right, this is the second day in a row of late-night board meetings that ended without a vote,

apparently at the request of the french government, which requested the vote be delayed to another date. this is intended to create the world's third-largest carmaker. a stakech on a -- won in renault. they had been -- we had been hearing for the most part, fiat agreed to a lot of the concerns. the state also wanted a continued role in governing the merged entity. we are hearing fiat has decided to abruptly withdraw this proposal after a second day of failing to even make ito to -- make it to a board vote in rhino. we are not sure if this is a final decision by fiat, or simply a bargaining tactic. renault has wanted more time to

digest this proposal, especially since we heard earlier this week from key partner nissan, they have been withholding support for this merger. nissan has many questions. even though nissan cannot technically block this deal, they are intertwined with renault extensively. ,aul: in terms of nissan convention the hands of the french government weighed heavily. the ceo of nissan on monday had expressed some of the reservations. he simply wanted more time to learn about the assumptions in the deal. for one, the protection of intellectual property. nissan feels it has far higher technology with ev vehicles, it

believes it is better positioned than alliance partners in next-generation technology. the fiat chrysler renault proposal touted 6.8 billion u.s. dollars worth of cost savings through synergies. nissan says it took us a decade to not even achieve that kind of -- the with the merger partnership alliance between nissan and renault. how can you automatically assume bringing in fiat chrysler would bring in $6.8 billion of savings through cost synergies? the final big concern would be, what would nissan's role be in the merged entity? complained they are the junior partner in the alliance with renault. even though they would gain

board seats, they could be diluted as far as their influence and their say. sinksstill ahead, oil into a bear market as he was stockpiles stoke fears of a glut. our guest will join us later on this hour. shery: but next, we will ask denise simon why gm debt has remained resilient amid the equity selloff. this is bloomberg. ♪

shery: this is "bloomberg daybreak: asia." i'm shery ahn in new york. paul: i am paul allen in sydney. he spoke to bloomberg in chicago. >> we are going to be very vigilant about understanding these heightened trade tensions,

see if they feed through to the economy. most importantly, see if they persist. i think it is too soon to make a judgment as to whether we might or may not take action. i will let events unfold more . paul: joining us is bloomberg international economics and policy correspondent mike mckee, who is in chicago. what else did you learn from that interview? there is a lot of concern about what would happen to the u.s. economy, particularly to robert kaplan's dallas fed area should tariffs go into effect. the main concern is not so much what americans would have to -- would have to pay, but the back and forth supply chains. that would cause immense pain to american and mexican businesses.

there is a lot of fear what could happen if the tariffs go into effect, but there is no certainty that will happen. shery: especially at the time president trump is threatening tariffs on china. a guest earlier was saying these tariffs will undermine each other, because they are not prioritizing who to hike tariffs on first. michael: that is the biggest problem, the two biggest exporting countries to the united states are china and mexico. gopro, they announced they will move out of china because of the tariff difficulties and move operations to mexico. now what do they do? it could be a major issue for the united states in terms of both countries. shery: mike mckee, thank you so much for joining us. lazard us now is the management cohead of asset

management. in the past hour, we saw two biggest rating agencies downgrade mexico. moody's investors service shifting their outlook to negative. how big of a blow is this for mexico's fiscal position? i think this recent announcement on potential tariff s certainly was a surprise, and comes at a bad time for mexico, in that growth has been downgraded from 2% earlier in the year to now 1.3%. i think it gives mexico less space on the physical side. they will have to continue to cut, which is a challenge. on monetary policy, with inflation expected to emerge in the target zone toward the end of the year, and the fed

on hold and possibly cutting, it does give the central banks some room to possibly ease, to smooth out these challenges. the broader issue -- denise: i think the good news -- shery: go on. denise: i was going to say, i think the reaction from the mexican president has been very conciliatory. he understands the immigration issues, and as we have seen, he wants to negotiate. it is not clear that these tariffs as been discussed on the program will go into effect. clearly if they do, it is a serious issue for both mexico and the u.s.. shery: i was going to say this is a broader issue with emerging markets, with trade tensions not only against mexico but with the u.s. and china. whenad a robust 2019 gain

it came to em debt, but will investors have to reconsider their exposure to emerging markets now? denise: emerging markets have been quite resilient since the with chinassions surprisingly broke down in may. emerging-market dollar asset debt and currency debt posted positive returns in may. there are a few reasons for this. one is if you look at the credit fundamentals of the sovereigns, it is quite sound. search for think the yield, with core yields in the u.s. going down considerably, with negative yields in europe investorsan, i think are looking for where they can pick up safe yields. when you look at the credit

belowy, it is on average investment grade. or 50% of the universe is investment grade. want in terms of safety, i to look at this chart on the bloomberg terminal. it shows the cost of insuring mexico's debt has risen above the cost of insuring colombia's debt. do you see anything in the default swaps market that gives you any cause for concern? denise: well, it is still quite low. i think the fiscal situation, the slower growth is a challenge for mexico medium-term, but they are starting off from a comfortable position. they are still investment grade. the spread is still quite low. onould remain cautious mexican assets while this

discussion is going on. just before we let you go, i want to get your thoughts on the yuan. we often talk about china fighting to defend the 6.9% level. is that what you are seeing? denise: we have seen the yuan stabled around 6.9%. i think the dollar weakening more recently, and if it stays at least stable, that gives more room for a stable yuan. paul: lazard asset management cohead of emerging-market debt denny's simon -- denise simon. a bloomberg exclusive coming your way tomorrow. don't miss our interview with the pboc governor coming up friday asia time. this is bloomberg. ♪

shery: let's get a quick check

of the latest business headlines. amazon is showing what it hopes will be the future of home deliveries. its latest drone takes off vertically and tilts horizontally and uses an ai system that amazon says allows the drone to operate without threatening other aircraft or people on the ground. the faa credit amazon a1 your approval to test the drone in yeared ways, -- a one approval to test the drone in limited ways. grew conglomerate lvmh after easing concerns after a slowdown cost after the trade war. of "unheard of" growth rates in china with locallys buy it bags rather than abroad. shery: china approved the first of three companies to join its

new tech project. they will list on the new nasdaq style board. 117 companies have applied as part of the government's push to funding for small firms. regulators waived restrictions on health needs in these reviews for applicants. in on what iseck happening in the markets right now. nikkei futures traded out of chicago, currently pointed a little lower by about -- it is not on that board. [laughter] let's deal with australia first. asx futures down, but those do not update for another 15 minutes. the markets in new zealand higher by 1/5 of 1%. there we have the nikkei futures, printing weaker by four times of 1%. -- pointing weaker by 4/10 of

1%. boeing takes a big order in china, even as tensions between washington and china escalate. we will have that story in a moment. this is bloomberg. ♪

shery: this is "bloomberg daybreak: asia." the u.s. and mexico have failed to agree on a deal on tariffs. all imports are set to be imposed monday. news came as tensions on american's southern border hit their highest level in more than a decade in may, jumping more than 30% to 144,000. a new caravan of migrants has entered from guatemala toward the u.s.-mexico border. with have made progress both positions on both parts.

we haven't the opportunity to share our point of view, explain position we are following in regard to this issue. tomorrow we are going to follow the talks. hasica: fiat chrysler withdrawn its proposed merger with renault after its ceo postponed the decision for the second time in two days. this as the french state isuests the meeting postponed to a later date. former general is back as thailand's prime minister after lawmakers supported his military backed coalition. the decision is a victory for royalist elites in thailand, who have used the court and army to turn over the mechanic elections for more than a decade to maintain power. the opposition won the most

seats, but were unable to build a workable government. china has launched a rocket platform out at sea for the first time. it sent five satellites and two scientific experiments into orbit. the booster blasted off from a floating pad. of the series,h but the first at sea. ocean launches offer advantages such as being positioned closer to the equator, and therefore use less fuel to exit the environment. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. paul: let's take a look at asian markets now with new zealand up and running for an hour and a half. anz index in positive territory. futures in sydney pointing

higher also. futures in japan traded out of chicago, the nikkei weaker by one third of 1%. markets in korea closed for memorial day. indonesia and malaysia closed for the end of ramadan. shery: let's turn to bloomberg's scoop. boeing negotiating one of the largest orders ever of wide-body jet liners with chinese airlines. the discussions continue even as tensions between washington and beijing escalate. our correspondent selina wang has the story. i was surprised when i heard this, because you have the u.s. china trade war, and china was pretty active in grounding those macs 737's after those fatal crashes. it seems to be yet another example of a multinational company getting caught in the fray of escalating u.s.-china tensions. the trade war is actually complicating this deal for every

party. sources told bloomberg the china site is working -- side is governance on how to proceed with the deal. this deal could be worth more than $30 billion. boeing is under increasing pressure from the grounding of the 737 max. on the china side, it is beneficial as well. china is an emerging aviation superpower, but its first domestically built jetline is still eight years away, say experts. people say in china they will likely not shoot themselves in the eye and cancel all boeing orders, but they may order more from airbus versus boeing. paul: in terms of other moves china has been liking, a fine has been slapped on ford. what conclusions can we draw

from that? selina: there has been a flurry of news. one is that ford's venture into a chinese city will be fined for antitrust allegations. this is not the first time china has pulled a move like this. in 2016, they slept a fine on general motors for antitrust allegations. while we cannot say the chinese government is crafting some grand strategy, let me walk you through the moves in the past few days. there was the united states travel advisory restricting earth exports, retaliatory tariffs on $60 billion worth of goods, the drafting of a foreign blacklist. this indicates china is getting serious about retaliation and it is showing it has 20 of tools in the toolbox. of tools in the toolbox. shery: do we have any idea what

industries would be at risk? selina: this blacklist has been target quite broadly to those affecting domestic chinese companies, those cutting off supply to huawei, likely intel and qualcomm. we expect this could be a dynamic list that would include a broader swath of companies. proposalearth exports could hurt many american exporters, dishwashers to military equipment. when we look at this potential travel advisory, this could hurt chinese travel to the united states, which would impact of these luxury retailers which generate massive revenue that chinese tourists spend in their stores. it seems both sides are dug in for the long-term. paul: beijing correspondent

selina wang, thanks for joining us. the imf has trimmed its forecast for growth in china, saying the escalating trade war is tilting risk to the downside. spoke exclusively to bloomberg in beijing about the downgrade. >> we expect growth in 2019 to remain close to the authority's target range of 6.2%. trade tensions with the u.s. have so far been contained. exports and imports have fallen to the u.s., but overall growth has remained steady, conflicting in part the policy statements from authorities. assuming tariffs remain at the current level, we project growth this year to be 6.2% and moderate gradually to 6.0% in 2020. the renewed trade tensions are a significant source of uncertainty. >> what is the worst case scenario if trump imposes tariff

s on all exports to the chinese market, what impact are we talking on the chinese economy? kenneth: it is premature to speculate on the impact of additional tariff increases. if the u.s. were to impose 25% tariffs on all chinese exports, growth could be significantly affected. in that situation we think a temporary stimulus would be appropriate, something contained and focused on rebalancing growth sustainably. that could be a fiscal expansion, it could be modest monetary support. when one thinks about the impact of further tariff increases, you have to think about the negative impact of tariff increases offset by a policy response. >> is it your view that the pboc is drawing a line in the sand with the yuan the seven level? kenneth: i cannot comment on

exchange rate movements. at the imf, we do a multilateral movement of exchange rates. we found it was broadly in line with medium-term fundamentals. that is it was not overvalued or undervalued. welcomeame time, we the flexible exchange rate we have seen in recent years. a more market determined exchange rate benefits china, allowing the exchange rate to be a shock absorber and allowing monetary policy to address conditions. >> your comfortable with the yuan at this level? kenneth: as long as what the market determines we will be comfortable with. bigy: we want to flag a bloomberg exclusive coming your way tomorrow. don't miss our interview with the pboc governor coming up friday asia time. in the meantime, up next, oil

six two a bear market as the u.s. -- sinks into a bear market as u.s. stock boils balloon. this is bloomberg. ♪

shery: this is "bloomberg daybreak: asia." i'm shery on in new york. paul: let's get a latest check of the business headlines. boeing is continuing to go negotiate a big order with china even as the trade war strains tensions between beijing and washington. the discussions centered around 100 planes. we are told the deal is not imminent and the trade war is proving a major problem. the chinese side waiting for official guidance from the government. shery: barnier declined the most in three months on warnings to sell its regional jet program. both sides confirm they are in

discussion, but there is no deal yet. bombardier'sld end involvement and strengthen movingshi's plans for into small passenger planes. paul: an influential auto group in china is calling for new stimulus in the midst of the worst slump in a generation. the association of auto manufacturers wants to lower levies paid by buyers in rural areas. the proposal comes with sales in the world's largest auto market shrugging every month for the past year. -- shrinking every month for the past year. texas crude entered a bear market and brent lurched to a low after stockpiles jumped the most in the u.s. since 1990. our next guest says oil is in of vortex of nerves financial markets and will remain weak as long as trade

tensions continue. she joins us from singapore. let's start off by looking at this chart on the bloomberg terminal. we have been talking about crude entering a bear market, and boom, there it is. it has entered a bear market. u.s. inventories rising 2 million barrels last week, the most since 1990. in this sort of setup, where is the bottom? >> good morning, paul. clearly the pressure is more on wti, the u.s. benchmark, rather than brent. crude benchmarks are under a great deal of pressure. where is the bottom? as long as we see the was in china continuing to give each other an eye for an eye, as long as we continue to get weak macroeconomic data from around the world, as we have been in

recent weeks. i really don't see anything coming in to put a bottom under crude. you may ask, what about opec? i think even opec in the current circumstances is a little bit -- it is going to be helpless. nobody knows how much demand is going to be affected this year, but it is fear driving it down right now. an interesting point, because it's so much discussion around oil this year has been on the supply side. is this becoming a demand environment as well in the trade war? vandana: absolutely. we have seen the likes of international energy agency, growthvising down there -- down their global oil demand growth estimates for 2019, in

some cases 2020 as well. trying to estimate global oil demand growth is always a tricky business, far more difficult than trying to estimate supply, because supply can add up depending on how much opec will plan to pump, u.s. supply and whatnot. it is tricky. why it is hard to pick a bottom for crude, something akin to what we saw in november and december, there is a lot of risk aversion in the market. oil is a prime risk asset. just as you have a flee -- investors fleeing from risk assets, you will continue to see oil under pressure as well. shery: yet we see growth concerns leading to speculation of rate cuts, and stock markets got a boost, but not oil. what happened? vandana: interesting divergence, isn't it?

the u.s. dollar strengthening, it has been interesting, the havenss -- which safe funds have been going into. curiously gold was quite low. the u.s. dollar was strengthening. as the market continues to factor in a fed rate cut and the u.s. dollar weakens, that supports the stock markets, but that is not supporting oil just yet. what that tells me is oil is still under the influence of the pessimism with regards to economic growth. a weaker u.s. dollar or fed rate cut might help the u.s. economy, might help u.s. stocks, might help stock markets in general, because your borrowing costs go down. but that may not save the world economy from deceleration.

that is the view the oil market will take with regards to a weaker dollar . shery: how reflective are prices of physical supplies at the moment? vandana: the physical market interestingly i think was quite bit leaninglittle toward excess supply. a little bit, because inventories have been rising. some months they have fallen a little bit. since the start of this year, inventories have been a bit above the five-year average, which is why we see the minister saying opec should continue cuts into the second half of the year. market, i think there is a dichotomy. there is plenty of supply in the u.s.. u.s. production growth is strong. when you look at the dubai

related market, the asian market has suffered a big plus -- a big loss, from iran, from venezuela. it is quite tight. essentially that tells you the physical market is quite tight. arabiaou mentioned saudi interested in seeing those production cuts continue. whate point do you get -- point do you get pushback from russia? theyannot even agree oa meeting date for opec. vandana: i do not see it as a -opecdown of opec or non collaboration. i am not in that camp. there has been pushback from russia for quite some time. it came out in the open during meeting whenetary

the saudi minister for the first time, talking about the second half of the year, said we should continue cuts and the russian minister said we should hold back and see. as long as the prices are around current levels, paying the russian call for increased production, or russian call for at least removing the cuts is probably going to take a backseat. i think it will be easier in the current circumstances they remain the same by the time opec meets. it will be easier for the saudi oil minister to push through his arguments. we might see arguments for deepening the cuts. it is starting to become a possibility. paul: vanda insights founder vandana hari. you can get a roundup of the stories you need to know in your

condition of bloomberg daybreak. this is also available on mobile on the bloomberg anywhere app. you can customize your settings so you only get news on the industries and assets you care about. this is bloomberg. ♪

paul: this is "bloomberg daybreak: asia." i'm all allen in sydney. shery: china is touting deepening ties with russia as xi jinping makes a three-day visit. tensions with the u.s. continue to escalate. our senior international editor jodi schneider. we are seeing vladimir putin giving a boost to the troubled

huawei company in china. i: both china and russia have reason to deepen their ties because they have escalating tensions with the u.s.. we heard about how the u.s. and china trade war is not going away. there are tensions over huawei,gy, like with and china has warned its citizens about travel to the u.s., and there are concerns having troubles getting visas renewed. on huawei. they have signed 30 documents, some on trade, some other

agreements, but one increases russia's ties on huawei's 5g technology. paul: one of the themes that broadly encompassed this is the potential emergence of a new cold war, if you like. does this development add weight to that theory? jodi: one would think. part of this is china and the u.s. not having the same kind of trade relationship that may have in the past. there is russia as well. russia's ties with the west in general have cooled since the ukraine situation. there is increasing need for russia to have these agreements with another friendly country somewhata, as it is isolated in the west. syria has been another issue on which china and russia have

agreed, but other countries have not agreed with russia's stance. shery: we have seen russia trying to attract chinese investment. give us the take of the trade relationship between these countries. jodi: china is the second biggest economy in the world, russia is about the 11th. there is not the same kind of opportunities that there would be between china and the u.s. or china and other large economies. however russia is looking to china more for the kinds of technology it will need to develop more advanced technologies on the world stage. obviously that huawei consideration, whatever that agreement ends up being will be significant, because huawei is under fire in the u.s.. the department of justice came out and initiative not to allow to invest in u.s. companies.

there are directives from other western countries as well. that is probably where we will see the most advanced trade going on in the technology sphere. shery: jodi schneider, our senior international editor. let's get a check of asian markets. kiwi stocks trading up 1/10 of 1%. asx 200 futures also slightly higher. this coming after the rba governor strongly suggested he could follow up on another interest rate cut. we are seeing nikkei futures unchanged, although we have u.s. futures down 3/10 of 1%. several asian markets closed, south korea, indonesia, and malaysia. paul: coming up in the next hour of "bloomberg daybreak: asia," we are live at the eco summit in singapore talking sustainability. plus we will hear why elian's

global investors will be hunting for capital in the second half. the market open coming up next. this is bloomberg. ♪

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paul: i'm paul allen in sydney. asia's major markets are about to open for trade. shery: welcome to "bloomberg daybreak: asia." paul: our top stories this thursday -- drama in two major stories. the u.s. and mexico failed to agree on migrants and the southern border. tariffs are still set for monday. failure too in paris, fiat dropped its merger with renault. shery: dallas fed chair robert

kaplan speaks exclusively to bloomberg. he wants a slowdown before rate cuts. let's turn to japan. it was one of the biggest gainers in the session yesterday. we are not seeing much movement. the topics two times of 1% -- down 2/10 of 1%. we had a lot of risk on sentiment during the u.s. session. u.s. stocks gain on a second assion with optimism on u.s.-mexico trade deal. that is waning when it did not happen today. the japanese yen strengthening again at the 108 level. it is at the storm's level since january against the u.s. dollar. paul: let's check in on australia, which has just begun trading. a staggered open. in the early going, the asx is

up higher slightly. a little change to the aussie dollar, just below $.70 u.s.. that is despite his appointing gdp numbers we had out on wednesday. checking in on new zealand, anz index is paring a lot of gains, up by eight points. shery: our top story, the u.s. and mexico have failed to agree on tariffs, with duties on all imports set to take effect monday. news came tensions on america's us on america's southern border hit their highest level in more than a decade. not really expecting that much out of these negotiations, given president trump is still in europe. yet there was a lot of optimism coming from the mexican side. >> there certainly was. there has been progress made

according to the mexican side, and president donald trump, who announced that on twitter. trump said it was not enough. the president said talks will continue tomorrow in washington, but it is clear the u.s. side wants more from mexico for the mexico beforefrom they avert the 5% tariffs. senators led by mitch mcconnell say he ought to come to the senate and try to sell a very skeptical group of senate republicans on his plans before actually taking those tariffs and levying them. there is no indication there will be any sort of delay. all indications from the u.s. side are full steam ahead with 5% in position, the possiblen

upscaling from that point. don't read into any possible pullback just yet. paul: in terms of that, president trump sitting there has not been enough progress in the talks with mexico, but not specifying what he would mean buy a new of progress. -- by enough progress. derek: i will give you a really unsatisfying answer. i am sorry for that, but no, it is fairly vague. there is some reporting about some things that may be on the table, but it comes down to the idea that the president doesn't like the amount of people who u.s.urging north to the southern border. he is like the overall number of liketions, h -- he doesn't

the overall number of detentions, doesn't like the overall number of immigration. he wants to see a downturn on all of those trend lines. it is hard to say there is this particular number mexico has to hit and all of this will be averted, because it has never been formally laid out by the u.s. side in that clear of terms. shery: this coming at a time when the usmca is in the parliament of mexico and canada. will congress hold this deal hostage as tariffs go up on mexico? derek: we have seen comments on the u.s. side, chuck grassley and joni ernst who have said the usmca deal could be imperiled by this tariff talk. i think right now it is not on the agenda as yet in the u.s..

we are not sitting here saying, here is a date certain. right now the white house's early days of trying to get enough support for this deal, which they don't have yet. there is work to be done and real concerned that going forward with this on mexico could come second the efforts -- could complicate efforts to get a trade deal through. there is no signal how this gets averted until the tariff issue is dealt with. we are in the midst of that right now. even though the usmca is going through its processes on the canada and mexican side, in the u.s. it is very up in the air. paul: u.s. mexico talks resuming tomorrow. a bit of breaking news at the moment. nissan shares are trading lower

by a shade under 3% in tokyo. they were down as much as 3.8% at one point. withdrawingr fiat from its proposal to combine with renault. that a story we have been watching all morning. renault's board pending a lawn meeting --ending a long meeting after the french state requested a postponement on the merger. nissan walked away. walking away seems to be a popular tactic in 2019. that is the story we are watching in nissan, lower in tokyo right now. let's check in on the first word news with jessica summers. jessica: china is stepping up scrutiny of listed companies to address growing concern about corporate governance. the shanghai and shenzhen exchanges delivered more than

1100 questions to firms in the first five months of this year. that is a rise of 22% from a year ago and -- 23% from a year ago. the questions were mainly about irregularity in financial results. the fed's latest beige book survey says the u.s. economy generally expanded in recent weeks, and the business outlook remains "solidly positive." the report says activity grew at a modest pace from april to mid-may. however it does indicate some problems, including weak retail sales and home purchases. the european union has taken the first step toward disciplining italy for its failure to rein in debt, paving the way for an initial penalty for billion dollars. the eu commission says the populist government in rome hasn't made sufficient progress in reducing its obligations in line with the bloc's fiscal

rules. the ftse mib index fell on the news. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. paul: business leaders, policymakers, and investors are in singapore this week for the eco conference on top of international trade talk. they are also reaching un sustainability goals. haslinda amin is there for us a key member of the singapore investment company. haslinda: the conversations here will revolve around how he, development goes hand-in-hand with sustainability. it is not just the responsibility of a government,

but industry as well. let's talk to head of --others seeing more than $200 billion worth of investment. good to have you with us, the first time on bloomberg tv, so welcome. why is sustainable investing important? >> temasek is an intergenerational investor. oftainability is at the core all things we do. there are a number of things that will govern how we look for example,ties, for affluence and longer life span, but importantly sustainable living. sustainable living is an opportunity to look for opportunities. there be aould between profitability

and performance? >> you need the right balance between social impact as well as financial returns. not everyone has the same expectation, but increasingly investors are looking for the right kind of outcomes so you be a responsible investors. some will have an impact to be measured, whether you are helping the community have access to water, to banking facilities. others will be thinking about whether or not you have water consumption, whether your carbon emission is in the right direction or not. haslinda: for temasek, what might you be interested in? robin: sustainable living is a theme early on. given the existential threat of climate change and depleting resources, it is up to us to

look for solutions that are sustainable. less carbon emissions, new methods of farming as the result of exploding population, for proteins,lternative alternative energy or beyond. haslinda: if you take a look at the 10 year time frame, do you expect those investments to boost temasek's return? robin: the question is looking for the right opportunity and the right stage of development. haslinda: speaking of identifying, temasek seems to have already bagged startups in china, analyzing data for credit scores. what kind of returns do you see there? robin: it is hard to talk about return in actuality.

we know the company well. we know the management and the founders well. there is criteria before we make the investment. you mentioned collective data, big data and intelligence predicating on big data is going real a massive wave, a opportunity and impact the way we live and operate. haslinda: what are some of these disruptive ideas see now? robin: ai is one. as you know, blockchain will be another. for example, new forms of energy might be another. there might be another an area of opportunity. they may be descriptive in nature, but they create many opportunities. haslinda: it seems like many investors grapple with the idea

of sustainable investing. what do you view as challenges for the early adopters? robin: you are probably referring to impact investing, where impact was sought intentionally in addition to financial returns. this is an emerging trend in the financial world, seeking an impact intentionally, meaning you are looking for measurable outcome, whether it is a social or environmental outcome. in terms of environment, it maybe whether or not carbon emissions are safe, water consumption is improved. social outcome, a group of people in a society may have access to banking services. those would be the outcomes we are seeking in addition to financial returns. haslinda: these are the early days. there are concerns about pitfalls. what would be the biggest pitfalls in investing?

robin: we think pitfalls exist in every project opportunity we look for. we think it is important to look at the upside the same time. we want to see whether or not a company putting sustainability at the forefront of the business. the yuan sustainable business . sustainable- u.n business development goals have outlined trillions worth of opportunities. yes, we would like to see companies put sustainability at the core of businesses and make real impact and generate wealth for all. 2030, will wes by get there? that is the question. shery: still ahead, fiat chrysler pulls the plug on a deal with renault.

how it all fell apart and what is next for the automakers. paul: next, the hunt for profit. allianz global strategist tells us what he expects to be a dull second half of the year. this is bloomberg. ♪

"daybreak: is asia." i'm shery ahn in new york. paul: news that the u.s. and mexico failed to reach an agreement on trade as another headwind to global growth. our next guest already expects economic performance in the second half to be dull at best. 's not a word i have heard associated with markets for some time. why do you think things will be quiet in the second half? >> i think the reason i am

relatively expecting a dull second half is i can see the drivers for the global economy. in the first quarter of this year, people were optimistic of inbalance in -- of a bounce asia in the tech sector. concerns with huawei has stalled that, and with exports in south korea, we see there is no real momentum with exporters. we have the extension of brexit in the u.k., which puts a lid on optimism from the european perspective. i think the underlying data in the u.s. is confirming that the fed is losing any further runway to raise rates in the u.s., because the u.s. is looking pretty tired and light cycle. with china under pressure and

trying to rebalance, we don't see an impetus in the second for the economy to come from. paul: there are plenty of drivers to the downside. if we look at this chart on the bloomberg, it shows just how much auto parts mean to the u.s. economy. imports from mexico to the u.s. are auto parts. there is quite potentially a lot of downside for the second half, don't you think? neil: that depends on underlying demand in the u.s., which has been softening rapidly given the free loans to buy cars have played through the system. around the bigger issue what the president is doing with mexico, we thought we had a

deal, we thought it would go through congress, job done. now he is threatening tariffs for a slightly different reason. i think that makes everyone negotiating with president trump, whether the european union or japan next, or currently the beijing government, they will the skeptical -- be skeptical if he changes the rules later on. shery: also not helping is the fact that situating's cut their cutit -- fitch ratings their credit outlook, booties changing their outlook to negative. against taking a hit the u.s. dollar. neil: i think mexico is in quite a challenging position, particularly if it has a un- constructive relationship with the united states. ands reliant on oil price

those cash flows. i think when one is thinking about emerging markets, the issues around the auto sector and uncertainty over the mexican president's policy suggest the peso could weaken. shery: broadly on emerging markets, could we expect a stronger dollar on haven demand to hurt them? neil: what i find around the world is everyone would like the dollar to weaken. i have argued the dollar has been dull, if not quite resilient. while the president at the moment is being more aggressive on trade, safe haven trade will be into the dollar and gold, as we have seen the past few weeks. paul: are you surprised gold has not caught more for a bid? neil: i think it is still

building momentum. it is our case at allianz global investors that at the end of the month we might get a move from presidents xi and trump to have talks to listen the us -- to lessen the escalation of rhetoric. if we don't see signs of the two sides talking more corporative like, people will move from a 50-50 traded deal-tradewar to more trade war. paul: robert kaplan saying risk has increased due to increasing trade tension. what action do you see coming from the federal reserve? neil: i believe the fed will remain very reactive. i think they will only start to cut rates when they see the white eyes of an actual recession.

although there are warning lights around sectors of the u.s., car sales, i don't think yet we have seen sufficient weakness in the consumer to warrant the fed cutting rates. i think the market is too optimistic. the other thing i think is interesting is the u.s. treasury market, with yields back at quite low levels, is telling you they are concerned about the health of the u.s. economy. off all-time highs. the markets are telling you different things. d -- we want to flag a big bloomberg exclusive coming your way tomorrow. don't miss our interview with the pboc governor coming up on friday. this is bloomberg. ♪

shery: let's get a quick check of the latest business headlines. boeing is continuing to negotiate a big quarter with theese carriers, even as trade war screams tensions washington.ing and sources say the deal centers on paul: you can catch our

exclusive interview with the dallas fed president robert kaplan as he insists it is too early to make a future call on rate cuts. this is bloomberg. ♪

is daybreak asia. the u.s. and mexico have failed to agree to a deal on tariffs. sides hit their -- as tensions had their highest level in may, jumping to 144,000. has entered from guatemala, heading for the u.s. border. >> we are optimistic. we have the opportunity, the opportunity to share our point

of view. explain why the mexican position regardingfollowing this issue. -- >>ow, we are going to preparing an arms deal with taiwan. the pentagon has noticed congress of the deal. it is likely to bring protests from china. anld cease taiwan as integral part of its territory. and ford is preparing to announce the closing of its engine plant in south wales as part of an effort to overhaul operations in europe. it is scheduled to discuss the fate of the factory that employees 1500 people.

said the future of the operation could rest in brexit and its ability to work within the eu. global news, 24 hours a day. powered by more than 2700 journalists and analysts. this is bloomberg. >> thank you. they have confirmed they are abandoning a proposed merger toh -- that prompted fiat walk away. stephen angle has been following the story from the start. does this mean the deal is over or could this be a negotiation tactic? >> both of those scenarios could be in play. we are getting statements from the likes of biot. -- fiat. in terms of why they walked away from this deal. which had been given preliminary

approval, we know the board was meeting. concerns. renault was not ready to vote. clear theome political conditions in france do not exist for such a combination to proceed successfully. again, the last couple of days, headwinds have been growing. in particular the french a stakent, which owns in renault. job had wanted to see guarantees.

a role in the new entity. create the third-largest automaker seems to be off, but never say never. let's take a look at the nissan side. where does this leave nissan. reason?ve been a -- could there have been no reason? >> nissan did not have a say but they would have taken a different stake in this entity. had their have reduction. right now, it is 15% they own.

a 7.5ould have taken stake but with voting rights. they could have lost some say in of thisall architecture group. he said monday, nissan would need to review the future benefits of such a deal. again, also review the merit of the alliance. they have a number of concerns including the protection of nissan. ev vehicles they have, they consider to be superior technology. have moreto do clarifications on the plan. have a cost savings. nissan says, it took us more

ren a decade for renal -- nault and nissan to achieve those kinds of cost savings. thirdly, back to that structure, structure. there was concern nissan had gainwould they would not more of a voice. all of these concerns were pivotable in this decision for resistance, we have from the french government. we are going to walk away right now. asiae chief north correspondent stephen ingalls. the dallas federal reserve president says it is too soon to say whether a rate cut is needed. he says downsides have increased veryhe fed will be

vigilant around trade tensions. >> i think it is early to make a judgment. we are going to be very vigilant understanding heightened traded tensions. most importantly, see if they persist. think it is too soon to make a judgment as to whether we may or may not take an action. unfold rather let events . ratevestors have priced in cuts. you have been in the watch and wait camp. what would tip the balance for you? when would you think you would need to make a decision? see somed need to evidence of a deceleration of the economy. -19, but we are still growing about trend. we are seeing lee tightening in

the labor market. i would need to see some indence there is a worsening those trends. we may well see it. i am on watch as to whether we see a further deceleration, but that is what we are seeing. >> cost benefit, what is worse, cutting to early or waiting too long? >> it depends where you are in the cycle. what are stances. my own assessment is we are in the neighborhood of neutral right now. cut, that would be me making the judgment we need to add stimulus to the economy. aat might ultimately be judgment i need to make. if you have a restrictive stance, that is something

different. or if you are accommodative. we are pretty much in a neutral setting. question is, should we be adding stimulus to this economy? downside hashe increased because of these trade tensions. judgment and question i am going to be asking. >> they say the federal reserve decides when to raise rates but markets decide when you are going to cut them. how much pressure do you feel from markets right now? careerve spent my entire in the markets and i have learned they can change in a dying. there has been a dramatic change in the markets since may 1. as we have seen, you can see a dramatic change in a different direction over the next 5-6 weeks. what is happening to the

treasury curve is in response to heightened trade tensions. some of those decisions can be reversed and the next several weeks. i have learned to watch markets. they can change on a dime. >> fed officials are -- interviews in chicago, global economics and policy editor catherine hays. what are they waiting for? waiting what robert kaplan just spelled out so clearly. they are waiting to see further damage from this intensifying trade war. trump tweeted he was going to raise in china.

the world has shifted from may be fed cuts, maybe not, to bond markets moving. they have to see it in the data. kate powell kicked off events. the monetary policy review framework, one of the most important conferences the fed holds this year. the fed still thinks that is what is in place. it is their anecdotal survey, it gives fed officials in the same page when it comes to their policy meeting. how does the economy look in detail cross the country? the synopsis is, it is improving. all the focus on the jobs report to see if it holds up with the

beige book is saying. it came in, jumping into the bloomberg library. adp, up just 27,000 in may. up to 75,000 in april. ,000 in april. it seems to yearly go in the right direction. say,ee that big move, you what happened? about tradeomething war uncertainty causing businesses to say, i am not going to hire anybody. if you look at the hit itsacturing, it hit highest level in two years on guess what?

rising employment. the fed saying, we know what is going on. we have to see it in data before we commit to a move. are on your way to the g20 finance ministers meeting. what are the big issues on the agenda? item isig overarching the u.s. china trade talks. not just that they stalled but the battle intensified. the federal reserve's tilt toward rate cuts if we need them. beven mnuchin is going to meeting with the person his counterpart. the head of the people's bank of china. it is your fault we walked away from the table.

way to getfind a back together. of the key players in the whoese side, he is someone would like to see the trade talks get back on track. maybe they can pave the way for those two strong leaders. finally, in the fed to come of very important. are asian central banks that would like to cut. i would put indonesia on that list. the senate is paving the way with its dovish tilt. there are always concerns about the global economy.

>> thank you for joining us. coming up, we will be talking about the r.b.i.. rate laters key today. this is bloomberg.

>> a reduction in the rate by the indian central bank now seems like a done deal. at a fiveth came in year. joining us is the deputy head of asia. great to have you with us. this chart showing inflation has below 4%.

bond yields in the second panel have stabilized. will this mean the r.b.i. can continue to prioritize growth? >> absolutely. i think you have got it right there. growth is a bigger concern. despite the r.b.i. being in inflation targeting bank, i don't think focusing on growth, wouldity measures sideline their focus on inflation. we are seeing optics and headline inflation in the coming months. despite that, the inflation is withering. headlineld hold down inflation. there is only just one risk of monsoons, which would be a

serious threat only if it turns out to be a drought-like situation. severe impact on food prices is not possible with only a slight weakness in monsoon rainfall. it is time for them to start looking at the a, -- at economic growth. >> we have seen the trump thenistration draw up developing nation assignment for india. how much is that expected to affect the growth momentum? >> i think in an absolute basis, that would probably not have a big impact on growth for now. is a lot ofpecting byse industries affected

decision -- we's have limited space right now. it might be a strain on the budget. we will see how it turns out in the july 5 budget announcement. the revenue side is constrained by weaker tax revenues, i am going to look at the government to raise revenues otherwise. that will help impact them from the impact from the tray decision for the u.s.. >> another thing that might cushion the impact is the week oil price. how much of a tailwind do you expect in the indian economy to catch from that.

>> i would say the oil is volatile. keep -- it help us does help us keep inflation quite low. it is important to ease oil prices. we are going to have to look at the impact. despite the election, uncertainty being out of the given these economic concerns, i do not see a very inrng case for strengthening in the medium term. ofch would keep the impact lower prices quite muted. >> you mentioned the new government. -- islooking likely to that going to make the r.b.i.'s job easier? >> yes. we are looking forward about the

july announcement. given the fiscal stress in the economy, it does look as if the fiscal targets might be relaxed. opposition to carrying out a large fiscal stimulus to the economy. a medium term commitment will still be maintained. do the heavyll lifting for now. >> great to have you with us. of asia research and economists. we have more ahead. this is bloomberg. ♪

way --r pressure, while huawei says it is working around the clock to beat the black list by the trump administration. our guest joins us. perhaps they were trying to sell assets and downside -- downsize. what is going on inside while way -- huawei now? >> the campus is operating around the clock. you have buses that fairy workers back-and-forth. cafeterias are open until late into the night. workers are sleeping on campus

as they try to work around the clock to beat this blacklist. they have brought together 10,000 engineers and other developers, working three s day to reengineer products to avoid american components no longer from the u.s.. to find out if there is a way to develop alternative sources of these components so they can keep operating. the founder of the company has brought the workforce footing. there is a quote where he says, it is not a matter if if we can win. we have to win. i understand there has been a tax waiver issue. >> there has been support. politically, the government has gone to the u.s. and tried to

get some of these concessions. about thisiscussions incorporated into trade talks. president trump has incorporated this could be part of the trade negotiations. the company is working hard to work with carriers in china and business make sure continues. they are offering reassurances about their ability to continue operating. side, there is probably a bit more stability. challenge is the smartphone business. they have been using the google android operating system. outside china, google is not going to be able to offer some of these features. consumers, more of a hit for while way -- huawei on that front. >> thank you for joining us. before we hand it over to

bloomberg markets asia, let's look a tell the markets are trading. -- at how markets are trading. performing well on the tsx. -- asx. >> take a look at futures. u.s. futures pairing back some of those earlier declines we saw after we heard the u.s.-mexico trade negotiations had not given rise to a deal. chinese futures down a little bit. that is it from daybreak asia. the china open is next. this is bloomberg.

>> what does the moment of a lift refer to? lift up all women, we can change the world. it is heartbreaking. that is the story of women, many around the world. david: when someone called you, we are giving you $50 billion or $60 billion we did not expect, what did you say? cried.: we he said, a bunch of us are dancing, why don't you come? david: is he bit a big dancer? people wo