tion. so why didn't we do this earlier? life line screening. the power of prevention. call now to learn more. paul: good morning. we are under an hour delay from the australian open. shery: good morning. sophie: welcome to "daybreak: asia." stories thisop thursday, hong kong's government headquarters will be closed for the rest of the week. protesters on the street until the bill is dropped. they are being asked about hong kong's teacher.

there is no case for holding assets in the city. president trump has words. he has no deadline on china and a morning for mexico. threatening germany with sanctions. we had concerns over trade tensions between the u.s. and china dampening the mood. we did have slower than expected inflation. we had two opposing forces. the stock market fell, the s&p .2%. the biggest loser with the energy sector. falling to four months low. u.s. futures up .1%. topie: it might be another recession.

u.s. futures are gaining ground. the euro is looking steady after slipping below 113. mexico.actions on the euro and the dollar are holding steady. riskussie dollar is at a for reaching its may low. thes holding steady against dollar. aussie bonds are slipping. a site improvement. --a slight improvement. paul: let's get to first word news with ed ludlow. >> 739 billion dollars in the first eight months of the fiscal year. more than $200 billion bigger than years earlier. on top of that congressional

budget, expecting the national deficit to come in at about $1 trillion by 2022 and above that level for about seven years. the watched measure of u.s. inflation trailed forecast in may, reinforcing the case for the fed to cut rates. removing energy and food cost and growing 2% from a month earlier. president trump has been calling for lower rates. wilbur ross says the fed has been wrong in their approach. >> where most economists have been wrong, particularly where the federal reserve staff hasomists have been wrong been in the idea that as unemployment goes down, inherently, inflation will become a problem. they have been simply wrong and that thesis. >> inflation remains below

target in india as well. consumer prices rose a fraction, matching forecasts low the r.b.i. 4%. inflation has been below target and provides more argument for rate cuts. sales of passenger vehicles also declined last month. tens of thousands of people have been evacuated as a major storm bears down on the western indian state. it has already brought heavy rain and it would be the second most powerful weather system to hit india this weather season. wendy goes dusting -- winds gu sting at around 140 miles per hour. 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. this is bloomberg. paul: thank you very much. hong kong may face another day

vowing toprotests, keep up the pressure until the government abandoned its controversial bill. i will not shy away from my responsibility in introducing a piece of legislation. we are very convinced of the justification, causing this public outcry. sometimes, as a political leader, you cannot shy away from difficult decisions. paul: our chief correspondent stephen engle is live. we have the hong kong government headquarters closed for the rest of the week. does that mean that things will be a little bit quieter on the streets today? >> they could be quieter on the streets. they definitely are as people make their way into work.

they do not know whether the roads are closed. most of the avenues into central hong kong are open. at train station, which is the epicenter of those protests yesterday, we have been told that the trains will bypass that station. worku are coming to work, away from admiralty. 30, they cleaned up -- at 6:30, they cleaned up most of the garbage strewn around here. at 6:30 with precision, the garbage men came through and cleaned it all up. the remnants are still there. a lot of hardhats and goggles to protect the protesters from the tier grant -- teargas. found in the gardens

and trash cans, even on the street. if i could also show you the morning papers are out. this is what hong kong people are waking up to. police firing teargas at the protesters. they warned them. they said back down or the teargas will be headed their way. the police did open fire, but not live ammunition. beanbags as well were shot from guns. it did cause a number of injuries. 50 men and 22 females. there are many views out there on the bill itself. take a look at what the chairman of holdings had to say about it. everybody sees red and worries about it. in effect, it is the right thing

for hong kong, but the way they went about trying to sell it to the public is what is wrong. shery: he thinks that this is the right thing for hong kong. what are the stances for and against the bill? >> the second part of his comments are probably right on target. it was not sold well to the hong kong people. that has been a big criticism of this government. it has been handpicked by beijing. there is built in suspicion of the intention. it is quite a bit different from the 2014 occupy central movement , where people turned out in great numbers. and werepied central protesting for something that they never had, universal suffrage. protestinghey are

for something that the hong kong people have always had, and independent judiciary. , inpeople of hong kong 240,000. they feel the extradition bill really erodes that firewall between the chinese judicial system and the hong kong british common law system, where there is an independent rule of law. earlier.were hearing determined to push this through, even though it is unpopular. his people power going to be enough to stop it from happening -- is people power going to be enough to stop it from happening? >> legislators still have to meet and have hours of reading and bait before they can have a vote.

one thing that the protest accomplished is that they tabled the next meeting of that, yesterday. the building will be closed this week. been delayed for now because of the circumstances but the protesters, need for this to be approved, so that hong kong is not a refuge for wanted criminals. keep in mind that you have to keep in mind the other side of the story. that is the one place that hong kong had served for many years. the 1949 communist revolution in china -- this has been a legal place of refuge for those who could speak freely against those in power in beijing. many of the protesters fear that this bill will erode that safety

net for those that are willing to speak out against beijing. shery: stephen engle, thank you. president trump says he has no deadline for china to return to the trade talks, other than the one in his head. let's see how things stand with greg sullivan. this coming after the president threatened more tariffs against china if president xi jinping does not meet him at the g20. that summitare on in japan. xi president plans to meet jinping, but threatening more tariffs if he does not meet him there. during a press conference, he said there was no deadline china , butturn to the talks again, expressing some optimism that a deal would be reached. that het trump has said

will meet g jinping -- president xi jinping at the summit. be a process for talks to restart after they broke down last month. talkedresident trump about his agreement with mexico and warned about what would happen if it did not work out. that same press conference, he warned that mexico faced a tougher biggest if they could not stem the flow of great to the u.s. southern border. he threatened tariffs on mexican exports to the u.s., if they did not cut the flow of migrants. a deal was reached to avert those tariffs. mexico's -- mexico has 40 days

to cut the flow. president trump said he is coming from a position of strength in this morning to mexico. it is unclear if they can stem the flow of migrants, raising the prospect of another instance where trump lashes out at mexico for the flow of migrants. president trump also lashing out against germany over the gas pipeline from russia. how serious is this? >> we heard similar comments from president trump four. we know that he is not a fan of this pipeline. today he threatened sanctions over the pipeline project, but he did not actually a or name any countries or companies that would be sanctioned. he has been critical of germany for their trade deficit with

u.s. and this pipeline. he has warned that this would need -- leave them captive to moscow and that it would be a bad mistake for berlin to go through with this. deterioratingto a relationship between the u.s. and germany in recent years. shery: thank you so much. still ahead, the boss of china's what be tesla arrival says is hitting the stock is no big deal. paul: but first, riverfront investment constantine joins us. why it is not time to fight the fed. this is bloomberg. ♪

shery: this is "daybreak: asia." allen in sydney.

a reading of core inflation is boosting market inflations -- market forecasts. usis, thank you for joining today. that old adage, you do not fight the fed. those coreioned that inflation figures were disappointing. let's just take a look at this chart on bloomberg. if you look at one measure of highestn, it is at its level since 2012. this is from deutsche bank. market price the and -- in? >> it is possible.

you make a pertinent point. they are pricing inputting much a done deal for rate cuts in july and possibly further out than that. fed has a lot of cover. cp -- cpi, that is still pretty benign. reserve has to be cognizant and aware. hyperaware of the uncertain situation on trade. is a lot of risk factor out there. they have to be aware. i think that they will on the -- err on the side of

being dovish. we think that some of the slowdown in the international reward and it makes risk somewhat make -- mixed. is it time to get defensive? what is your outlook? u.s.,ould say that in the it looks pretty remote. that is the good news. that about jimmy. -- germany. oriented export economies. they have really deteriorated and are below stationary levels.

that is a consenting sign for -- the economy. a place like germany may already be in recession given some of the data we are seeing. shery: this chart is illustrating what you are saying. levels dropping. eat -- u.k.. mean that you are getting defense -- defensive? would you cash out of international markets? time ofpends on the your investing.

with riverfront, with our shorter horizon, we have taken capital out of international markets recently. to leave that in cash. we are opportunistic. there are some assets that we would like to buy. tolerant, instead of leaving the capital in cash, we have not kept in international. we have brought it back to u.s. stocks. it is more a call on elsa then beta at thisa than point. it in where would you put the next few months as we continue to see trade tension? g20, justlook at the the sheer lack of time between

now and the fact that we are a .ew weeks away from the g20 it is somewhat improbable. into the second half of this year, the longer the trade uncertainty goes, the worse consumer company -- confidence may end up. onhink the longer this drags -- if the cease-fire does not in for 20, we could be some tough sweating. 2950, that previous high on s&p will be hard to break. chartwe do have another --the bloomberg economy

library. do you see anything you like in china? do you see any opportunities? --the way we have emerged invested in emerging markets has been broad. earlier this year we had a regional tilt towards emerging asia. we neutralized that and we neutral anna regional basis. regional neutral on a basis. if asian markets in general, if north asian markets went down another 15% on increased trade concerns, that could get iferesting for the region, you have contrarian investors. our core belief is that the u.s. and china, for different reasons, it is in their interests to find a cease-fire

over the next six to 12 months. make asia anwould interesting place at levels 10% lower than where they are today. paul: chief investment establishment -- strategist, thank you for direct -- joining us. bloomberg subscribers go to dayb terminals -- they're terminals. you can customize your settings so you only get news on the industries and assets that care about. this is bloomberg. ♪

shery: here is a quick check of the latest headlines. shares of cyber company called strike sword into the first day of u.s. trade.

the stock was up close to 90% at one point. called strike raise more than -- crowdion in ipo strike raised more than $600 million in ipo. paul: backing boeing's estimate that the jet should be back in the air by december. a safety official said that they are carrying out reviews on the plane's design. boeing is finalizing a fixed per flight control malfunctions that linked to two crashes. shery: being urged to vote against the reappointment of kojima after he was penalized for leaking sensitive information. he should be held possible for

the incident and so his we tion isn -- reelec unwarranted. with the nio cal. with theive interview nio ceo. ♪ we're the slowskys.

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shery: we have breaking news. bloomberg hearing from lawmakers that they will meet at 11:00 hong kong time. the council is expected to meet at 11:00 hong kong time. the legislative council decided to delay a debate on the legislation on extradition to china. we are now hearing that the legislative council will meet again at 11:00 hong kong time. we will have legislative council member later in the show. stay with us. let's get to first word news with ed ludlow.

>> the hong kong government says its headquarters will be closed on thursday and friday following a day and night mass protest against this extradition bill. protesters are bowing to regroup and continue demonstrations. lam has called for calm after many people were injured in confrontations with police. >> if you are a u.s. investment banker in hong kong, you have absolutely no rationale to stay in hong kong. you move to singapore or move your assets out of hong kong. the reason you are seeing a spike is the mass of the quiddity shortage in hong kong. >> president trump says he has no official deadline for china returning to trade talks. washington saying aging the

negative on the terms of a deal d on the terms of a deal. president trump is also stepping up his criticism of germany, threatening berlin with sanctions over support for a new gas pipeline with russia. lead -- leaveld germany hostage to russia. he might move troops to poland because of berlin's low spending on defense. and spacex has launched free canadian satellite that would take scans of the country. they took off from a military base in california and were deployed successfully and hour later. the canadian space agency says images.l provide

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 ed ludlow. this is bloomberg. shery: let's get back to hong kong and what is moving into market right now. sophie: let's check in on oil. at $51 after sliding 4% on wednesday. demand is alsoer adding to the downside pressure. a chart here may share the essential for futures to pick up as prices have continually checked lower. with the contract, there might be support. in yellow on this chart. that is below 50.

-- the line in yellow on this chart. that is below 50. paul: another tepid inflation reading may not be enough to push the fed to a rate cut. kathleen hays is with us now. let's start with the inflation report. is that a signal that rate cuts are needed? kathleen: consumer price index is not illustrating what jay -- buthas said that they they were hoping it would. exactly gratified by this report today. if you look at the monthly changes, falling short. 0.1% in may. up to lower oil prices.

0.1% in may is what you have to look at. .2%xpected increase -- expected increase. what we have looking at is a really cool chart. the cpi on top is back to around 2.0%. around one stumbling point -- 1.5%. how are the markets reading this? when tradersthat saw the core cpi, the headline cpi from one .8% -- 1.8% from 2%, that is when we saw inflation expectations. they are falling even more. wilbur ross, now u.s. commerce

secretary, he echoed a theme that they are looking at. the fed is treating inflation like it will be pushed higher by low unemployment. it has not. here is what he had to say. economists have been wrong, particularly where the federal reserve staff economist have been wrong, is that they have been believers in the idea that as unemployment goes down, inherently, inflation will become a problem. they have it simply wrong and that jesus. -- in that thesis. kathleen: when they say, why don't you cut raise -- rates? there is some validity to that. nobody expected yet. they have to see data defended fed, more evidence from growth,

labor market and more. the market is pricing in rate cuts this year. feasible, if the economy gets hit hard. look at the bloomberg chart with me now and you can see the whole idea that we could have a rate cut in 2019. you can see that it has come up quite a bit, studying off of it. bit.eadying off a 50 basis points in september. a billionaire and backer trader was on bloomberg television earlier. he is getting ready for rate cut 101. this is what he said. 101 train.t cut

long fixed income, probably short the dollar come along gold. -- the what you do dollar, long gold. that is what you do. how much further are they going to go into the path of first rate cuts? i think they are going to go a long way. kathleen: he has been pretty successful. first rate cut could have big applications for the market. cut next week,e but what will it do? thinkch member, where you rates are going this year? what if we see something like two cuts. to the marketl that they are concerned. concerned about prices, et it is not a

reassuring sign for investors. shery: china's would be tesla is facing difficulties. however, the boss is not worried. interview.exclusive how does he defend the company's performance? high spiritsd in despite being open about the onslaught of challenges they have been leasing. -- facing. employees,aid off but he did blame some of the challenges on the unprecedented issues in the auto market, facing very weak demand. investors have been less than satisfied. they pushed the stock to the lowest level ever.

they are concerned that they may run out of funding by the end of the year. >> i think our investors do not understand our long-term value. we have faith in our long-term value. there are complicated reasons, which are below -- beyond our control. especially if there is a shortselling mechanism in the u.s. >> the chinese government is trying to attract the top technology companies to list on exchanges. is that something that you would consider? >> the shanghai tech board is at an early stage. we need to look into regulations. we will consider oversee interest. >> the money from this partnership will be enough to last you through the year?

>> broadly speaking, we would like to connect the markets. any r&dnot raised funding. to the entity, we will be able to raise funding in the future. haver the fundraising, we a clear timetable. we hope to close the deal in the near future. so far, we are on schedule. tohow long will it take nio become successful? >> you cannot ask a toddler to make money. i think it is difficult. it has been established for 15 years -- tesla has been established for 15 years. i'm sure we do not need over a decade to make profit. >> how are you thinking about the u.s. as the market long-term? the am currently leading

team that has been working so hard. what does the community meeting to the customers? what is the correct way to provide service? we will figure it out. >> he is confident that they can take a slice of the market, which is projected to reach 15 million. china is set to take the lead. in that interview, this partnership with the chinese government affiliated entity millione them about $10 in r&d funding, which should allay some concerns. paul: thank you. coming up next, we will speak to someone president trump called probably the leading authority

on china. he joins us to discuss the impact on the extradition bill on international relations. this is bloomberg. ♪

shery: hong kong protests as the extradition bill receives mixed reaction from washington. nancy pelosi said in a statement that if it passed into congress -- past, congress would have to -- congress would s whether hongs kong is sufficiently autonomous under the one country two systems framework.

very is --ls michael, great to have you with us. we have heard president trump's noncommittal response. could his position change if the trade tensions with china deepen? >> i think it is an important question. president trump took note of the protest and how they affect the china trade talks. talks worst case, the depend on enforcement. that has been the hardest part to negotiate. of law, extradition to a country that does not really it -- it allals, suggests that president xi

jinping needs to resolve this. look, we do not need this amendment right now. that will help the u.s. china relations and the trade talks. i am just a scholar who observes china. in my book, i talked about the talks wristed -- hawks versus the reformers. they love the extradition concept and do not want hong kong to become a model of economics rule of law. there is arbitration for intellectual property disputes. aging does not really have that. we have this debate going on in beijing where carrie lam has to decide who she will listen to, reformers.r the i hope that she listens to the reformers.

what about the hawks in washington? we heard that they were considering banning some chinese technology companies over the role on oppressing. couldn't this fall within that realm itself where it would be about human rights issues? >> that is right. as long as this continues with no resolution, it allows those who care most about u.s. rights to really press for human rights . technology companies who violate human rights would be included in legislation. senators have u.s. legislation to crack down on this. slide towards a new cold war much less of a scenario that will happen. i do not think that there is a

cold war with china right now. it ends could be suppressed in hong kong. if the demonstrations are suppressed, we are starting to see more pressure in washington on the president to get tougher with china. he has not been tough with china about a cold war. trade,s to get some more more investment and a better relationship with china. that is what he has been saying for two years. we had a story across the bloomberg now. this is from the agency in hong kong. it is urging the chief .xecutive, carrie lam that could be a way out of this. the earlier point about how this comes to an end, a violent

crackdown would be a dramatic escalation of this, wouldn't it? how likely do you think that is? >> is certainly one scenario. whereis another scenario, she gets new guidance and receives some sort of signal from beijing that you do not have to do this right now. let's think of the larger picture, larger context in the u.s. china negotiations over trade issues and other issues. we are testing their territorial claims in the south china sea with our navy warships going through. we are talking about major arms sales with taiwan. isust wonder if carrie lam taking into account these factors and if she is listening to the right messages. i think she should talk to

president xi jinping directly. was: the 100 year marathon a pretty strong restriction of china's willingness to play the long game. president xi jinping is president for life. is there the possibility that china is willing to say that enough is enough? >> there is no election, but there is politics. there are hawks and doves. president xi jinping has proven himself to be a brilliant announcer of these different points of view. how he will serve the hong kong problem in the long term is an issue. reformers want to see the market in china be decisive. they want a trade agreement that has enforcement. they even expanded the number of levels that you can appeal intellectual property cases china and increase the penalties for violations. they loosened up on foreign

investment restrictions -- not as much as they should. they are focused on the growth rate. they wanted to be 6% or 7%. that is their plan for surpassing the u.s. economy. --says that china once president trump said china wants to surpass us, but it will not happen on my watch. president trump once to see a to see aome -- wants good outcome. shery: president trump seems to be personalizing these trade tensions, saying he is holding up a deal with china. what is the strategy here? does he want to deal or will he build this up until the 2020 election? >> goldman sachs put out a study that has my own views, answering your question.

the president has written a lot about trade with china about 20 years ago. he has pretty strong views of getting towards a good outcome, but he is a little bit unhappy that people who work for him often go out and give a signal or say something that does not reflect his views. what he was saying today, when he pointed at his head, it is going to be me. he is reminding everybody that he is in charge and has the relationship with president xi jinping. calls toabout 25 phone president xi jinping. that is how the deal will get done eventually. i like it when the president reminds everybody that he is in charge. shery: what happens if there is no deal? he will have to bear the responsibility. we are out of time. plenty more to come. this is bloomberg. ♪

andy: japan, australia others get underway. sophie: further losses seen in tokyo. the yen is holding steady and aussie dollar is trading year a month low. 16,000 jobs are expected to be added in may in australia. -- trying to finalize a bailout package for japanese and taiwanese investors. ofporate government is top mind. advising against the reappointment of the ceo due to low statistics. production out

of china into southeast asia. they may move on a report that the group may face a first quarter loss. art -- we are be keeping a watch. they are setting up a car battery venture with the goal of building a 10 gigawatt plan by 2021. also in views are after morgan stanley updated several names, including korean investment. you are watching chip stocks after leading the decline on wall street. thank you very much. still to come on the next hour, hong kong legislative council will join us to discuss wednesday's protests and what lies ahead for the controversial extradition bill. coming up next, we will check in

on futures. plus, the market open and all the news ahead. ♪ i don't know why i didn't get screened a long time ago.

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to understand your best plan of action. so why didn't we do this earlier? life line screening. the power of prevention. call now to learn more. paul: good morning. i'm paul allen in sydney. shery: i am shery ahn. sophie: and i am sophie kamaruddin in hong kong. welcome to "daybreak: asia." paul: our top stories this thursday, hong kong lawmakers convening in the coming hours to discuss the extradition bill. carrie lam says she is ready to take -- make tough decisions.

expectations are mounting that mayyuan may be each -- reach seven dollars. look at thee will rising global campaign for lower rates. expectations of more dovish control banks have held a rally of the market. let's get straight to the market action with sophie. sophie: we are seeing weakness in tokyo with the nikkei 225 set for a second day of losses while the yen is holding steady. among the laggards is tokyo electric. seoul,g on the mood in .1%.ospi up -- samsung shares -- the aussie

is trading study ahead of jobs data and kiwi stocks are looking for a change to the downside this morning. paul: let's check in on the first word news with ed ludlow. atthe u.s. deficit looming -- more than $200 million bigger than a year earlier despite the revenue boost. the congressional budget expect the annual deficit to come in at around $1 trillion by 2022. acutely watched measure of u.s. inflation trailed forecast in may. the core consumer price index removes energy and rose to percent from a month earlier, 1/10 lower than predicted in a bloomberg survey.

fed willss says the simply be wrong in their approach. economies -- comments have been wrong, staff economists have been wrong because they had been believers in the idea that as unemployment goes down, inherently, inflation will become a problem. they had it simply wrong in that thesis. remains below expected in india as well. below the rbis medium-term goal of 4%, it is the 10th consecutive month that inflation has been below target. sales of passenger vehicles also declined last month. haveof thousands of people been evacuated as a major storm bears down on the western indian state.

onis due to cross the coast wednesday. it will be the second most powerful weather system to hit when -- india this season. reaching near 180 miles per hour. 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 ed ludlow. this is bloomberg. shery: hong kong may face another day of street protests with the demonstrators vowing to keep up the pressure until the government abandoned its extradition bill. notie lam says she is backing down, becoming emotional when she was asked whether she is selling out the city. >> they said i am selling out hong kong. how could i do that? i grew up with everyone in the city.

i made a lot of personal sacrifice because of my love for this place. stephen engle is in central hong kong. bloomberg has learned that the legislative council will meet again today at 11:00 a.m. should we expect more process -- protests? >> you can expect that the organizers of the protest are regrouping right now, perhaps licking their wounds a little bit. many of them were injured and sent to hospitals. we heard that they would perhaps reconvene somewhere near here around 7:00 a.m., but there has been no indication yet. behind me is the epicenter of the protest yesterday. it is clear of traffic. hunterseeing scavenger going through piles of garbage.

admiralty has been left untouched with all the garbage. perhaps police are gathering evidence of what transpired yesterday. helmets andt is all protected many protesters from the different projectiles that the police said at them yesterday, including teargas. these are strewn everywhere, as are facemasks. there was pepper spray and used and hardhats because the police used rubber bullets. yellowolor, blue, white, , remnants of the protest yesterday. it is all that remains visible on the streets of hong kong. in the legislative building two memberst least said they would have a meeting

of the extradition bill at 11:00 a.m. we are getting news from the radio station reporting more than 200 of the election committee members are urging the chief executive, carrie lam to resign and withdraw the controversial extradition bill. it is a body made up of 1200 members. mostly, if not all are pro-beijing. they are the group that actually picked carrie lam to be the chief executive, but at least 200 members of them are urging her to quit. paul: we did have a hong kong showing carrie lam's popularity at its lowest. she is hanging tough, determined to hang on. she does have the votes to make the bill law. could there be amendments moved?

could people power be enough to get her dropped? >> that is the hope of the protesters. they hope that their vociferous demonstration and their organization skills -- it was much more well organized on sunday. lasted 79 movement days in 2014. this did not last more than 72 hours. it is a very tenuous time right now. it is sentiment and overwhelming rejection by the people of hong kong. still, the signal from carrie lam and others are that they are going to push this. this is for the betterment of hong kong to provide a more firm, legal standpoint to not be a refuge for criminals. keep in mind one thing that protesters said is that has

separated hong kong from the main judicial system. this has been a refuge for those willing to speak out against beijing. they are worried that this extradition bill erodes the safety net between the party back system of china and the british system of common law here in hong kong, where you can expect a fair trial. paul: stephen engle, live in central hong kong. thank you for watching that for us. democrats have called for a review on the u.s. relationship with hong kong. president trump says he hopes the issue can be resolved. --sident trump: when they when you look at this demonstration, they say that was one million people. i hope it all works out for china and hong kong. paul: let's bring in senior news editor, derek.

it sounds like the president is trying to walk a very diplomatic fine line here. >> that is right. it is a tricky issue for the u.s., which does not usually consider matters related to hong kong. inre is a special deal place, a special relationship between the u.s. and hong kong. there is a special consideration of hong kong status, kind of separately from china. that special status is actually something that the u.s. -- they are starting -- there is starting to be doubled up talk. nancy pelosi made a very pointed statement as the protests were going on, that if this extradition pell -- bill passes,

maybe there needs to be a rethinking. congress would have no choice but to reassess whether hong kong is truly autonomous. the top republican has made similar comments that are not quite as striking. they have concerns as well. there is some attention being id in washington to the special status, whether hong kong is sufficiently autonomous from beijing, to continue warranting it. it is something that needs to be paid attention to. shery: president trump really noncommittal when it comes to hong kong. i wonder if that would change if trade tensions worsened with china.

there is no deadline for china to return to talks. i think that the president -- on the issue of trade, i think it is a very good point. i think his comments will draw looks. when he is talking about the deadline, the deadline is up here, in his head. this comes right after president trump said that china better or else he the g20, might slap tariffs on them. would maked that he a decision on further tariffs after the g20. month, theof the meeting with xi jinping will still happen. it is the key moment of this

relationship. thing. the to be sure, there is probably a little bit of confusion after president trump said the deadline is right up there. shery: thank you for that. on these trade tensions. we are seeing markets a little bit mixed. seeing in tokyo, we are japan sinking at least 16% after announcing to cut headcount as it tries to finalize a bailout package for japanese and taiwanese investors. it is off by as much as 2.3%. over in sydney, sliding as much

as 12% to a february 2016 low after it revised its profit goal. rangesting and even lower for 2020. falling after receiving a request from regulators to check on its anti-money laundering over a period from 2015. under pressure after is trading update to downgrade its profit forecast. that is off as well this morning. quite a few stocks on the move this morning. with hongl to come, kong's legislature about to resume to be, we are going to with a member. hereby the level -- upr why there will be no let

because of trade tensions. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. paul: i'm paul allen in sydney. our next guest says it will break seven soon. they do not expect washington and beijing to reach a deal. strategist.s macro think you for joining us. let's start with the yuan. we have been talking about when it would break through seven. this chart on the bloomberg, we can see it has been marching ever closer throughout the course of this year. haspboc governors saying he no red lines. we have drawn one for him. when will that breach happen? >> i think it will happen after

the g20 meeting or before the g20 meeting. the authorities will try to keep 690dollar below levels of to seven. once the meeting happens, if it is an acrimonious meeting or a meeting that does not result in further talks, i do not get his think it isdo not likely. u.s. norther the china, for different reasons, do not want to see it too weak. what kind of range do you think president trump would like the chinese yuan trading at? see think he would like to it trading stronger than weaker. theould be able to offset impact of the u.s. tariffs.

it is quite clear, if we look at the price action, when we look at what chinese corporate's are doing, that dollar demand is very strong. i expect the authorities in -- will have less incentive to keep the yuan out. expectation that they are not going to get a trade deal anytime soon one of the reasons that we have heard this rhetoric coming about the level seven not being too much of a concern for them? >> yes. it was an interesting comment. they choose their words very carefully. for them to say this, it clearly shows that they have a more flexible exchange rate. we had to for the g20 meeting, but once weeks away,

it is out of the way, they have already prepared us for more stability. shery: let's discuss the dollar yuan impact on other currencies. the chart on bloomberg showing how the volatility of exchange rates has spiked up to levels that we have not seen since 2015 to reach euro-dollar levels. how much, in order to gauge other currency moves? >> yes. we think that the market looks at the dollar yuan index the wrong way. influences the fix by the people's bank of china, which determines the dollar yuan rate of exchange. we like to look at the way that moves in the dollar yuan rate

and other major currencies. the main reason is if we see the dollar being strong against the yuan, it tells in real time that the u.s. deficit with china has been financed through exchange rates. given that is a huge chunk of is more of ait likelihood of the u.s. attracting more funds. that situation, the euro is more thely to weaken against dollar. we saw that last year with the dollar running against the yuan and the euro. thank you very much for joining us this morning. do not forget, interactive tv function tv . you can watch us live and catch up on past interviews. you can dive into any of the securities that we talked about. you can become a part of the conversation by sending us

messages during the show. this is for bloomberg subscribers only. this is bloomberg. ♪

shery: after the collapse of merger talks, the chairman faces investors for the first time since taking the helm. he promised to improve relations with nissan but did not blame them for derailing the deal. what the chairman suggests -- it will take to restore the alliance. generalitiesith and talked about restoring trust. he said that trust must be earned. he delivered that message in the context of the importance of the alliance in the global auto industry and but it would mean to move forward with the fiat chrysler alliance. he spent a lot of time talking

about how the industry has become more competitive, how there is an emerging competitive threat from chinese automakers, and how important it is that they get back to the business of making cars and working together as an ally. -- alliance. he came to that point. thatpeated his thought this should be an equal setting, would have equal representation on the nissan board. rundell has coming -- has come -- renault said it would be voting against this proposal to reform it into a tree committee system. ther position has been that system does not allow it adequate representation. this is all in a broader context

of making sure that the alliance can go forward. and underscoring the importance of it. he talked about how these carmakers can work together. while each company has its own self interest, the broader interest of building an alliance and maintaining the power of that alliance supersedes that interest in each company. paul: conglomerates editor in tokyo, thank you for joining us. let's get a quick check on the business flash headlines. rival. tesla's says they have raised 70% of the market value in the past three months and it is no big deal. deal to a fundraising finance r&d.

nio will be profitable in a few years. shery: one of china's biggest on theges plans to raise stock exchange, becoming the first company to use the new program, linking shanghai forces. they plan to sell more than 80 million global depository receipts with trading set for next week. program launched on wednesday after months of delay. nomurahareholders of urged to vote against the reappointment after being penalized for thinking -- for leaking sensitive integration -- information. ction ishat his reele not warranted. still to come, we will explore how a gas deal would help with u.s. china deficit.

that story and a check of the markets is coming up. this is bloomberg. ♪

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asia.s is daybreak the hong kong government says headquarters will be closed thursday and friday following a day and night against the controversial extradition bill. vowed tosters have regroup and continue demonstrations until the government withdraws the bill. the chief executive has called for calm after 70 people were injured. the situation is causing some concerns among investors. president trump says he has no official deadline for china returning to trade talks.

a message forhad mexico, saying he will impose what he calls a tougher phase of the migration argument. he did not offer any details. president trump also's directly -- stepping up criticism of germany, echoing previous threats about chancellor merkel's support for the project, he said that would leave germany hostage to russia. he said he might also move german based troops to poland. spacex has launched three canadian satellites that will take a scans of the country. the satellites were deployed successfully and our later. the space agency says they will provide 250,000 images a year.

global news, 24 hours a day. by more than 2700 journalists and analysts. >> let's check in on the markets with sophie cameroon. asian stocks are seeing little enthusiasm with aussie shares an outlier. we are seeing a drop in tokyo and seoul. -- tracking the overnight drop. ers, noting they are at an all-time low. let's check in. highlight prices in singapore,

while oil is folding near a january low after losing 4% overnight. we are seeing a move, 30 year yields slipping two basis points. >> thank you so much for that. here is one reason why president trump may want a quick trade deal with beijing. trackld put the u.s. on to be the biggest supplier of liquefied natural gas. here is the asia energy editor erin clark. how much could this help the deficit? the base case scenario is there is a trade deal. energyd impact global markets as well as energy flows. if there is a deal, morgan stanley forecasts liquefied

natural gas exports would make gasbout 21% of total imports. that is a big chunk. it is important because china is expected to become the largest lng import or early next decade. exports would only make up about 5% of china's gas imports. there is a pretty big difference. u.s. lng exports only made up about 2%. this is an area where would reduce the trade deficit by $17 billion a year. costs bylower energy $1.8 billion a year. there is significant upside. >> let's explore the no deal

scenario. what if the u.s. and china do not reach a deal? what is the impact then? morgan stanley says is china is going to pivot to other global suppliers. they will look to russia, big suppliers in the middle east. australia. they would pivot and look to a lot of these other major lng suppliers. increase theto costs for china. you could see higher freight costs. isthe other side, the impact projectsstment in new u.s. producers are trying to start. like to take cornerstone investors who put up a lot of the financing. take -- beingd to

cornerstone financers. >> bloomberg energy editor aaron clark. the man known as china's father of electric cars is betting on another kind of automotive future and that is hydrogen. he spoke exclusively to bloomberg executive editor, asking what the goals are for the market? the market is huge. the key is to sort out the factors that have been hindering cellevelopment of fuel vehicles in the most appropriate markets. we should establish a hydrogen society.

the electric society has been established, but it would be a process for the hydrogen society to be established. adoption ofote the hydrogen vehicles and selected trial regions. we will work on setting up the host system including hydrogen production, storage, and the carg as well as transportation network. >> based on china's energy structure, having no oil, pollution and cities being a problem, to those things add together to make fuel cells the best option for china and the future? -- in the future? >> it is not only fuel cells. it would be electric as well. carslectric and fuel cell are both important. they have their own focuses. in cities, people prefer to take electric cars. inter-cities, they prefer fuel

cells. thes it possible some of achievements, the progress china has made in developing its new energy industry, that has prompted the u.s. to be a little bit more concerned and do things to try to contain china's development. the european and american friends, there is not anyone that believes there should be concerned. they think if china doesn't develop, that is a big problem. coping with climate change is our common responsibility. we must recognize we are one of tters of carbon the knock side -- dioxide. we have a responsibility which is why we have been working hard in this area for more than five years. of new cars and

china fell for almost 30 years. do you think that was an important signal for development? is a natural phenomena. the court issue in this phenomena is the problems in the markets have not been solved. it is because of those problems the markets hesitated and fell. hassale of new energy cars increased 60%. if there was a signal, and tells us we need new energy cars. the father of electric. coming next, a legislator joins us to discuss the controversial extradition laws. this is bloomberg.

>> hong kong lawmakers discussing the controversial at 11:00 locall time. that is in about 2.5 hours. wednesday saw police use tear gas. great to have you with us. how long are you prepared to be out in the streets? >> it depends on people's will. a situation -- it is our hometown. toctly how this is going

play out, it really depends on the people's willpower. we are expecting at least some of the crowds to come back. >> the government position is to close a legal loophole. pass, hong kong could become a fugitive haven. executive council, --a jurisdiction cannot keep protect these to rights, what would happen. >> we will terminate cooperation. the decision came out of new

zealand forbidding the extradition of an extradition -- ethnic korean to china. >> if they cannot keep the promise, hong kong will stop the extradition's, why is this not enough -- expeditions -- extraditions. it was meant to be a firewall to protect hong kong from chinese judiciary. we are supposed to be different. under oneshould come country, two systems. but now they are turning it into one country. 1.1 system. trial.s no fair no humane treatment guarantees. any court anywhere around the world should decide not to

extradite a suspect. basically a principle of humanity. >> beijing once this bill. -- w ants this bill. carrie lam expressed her determination to push it through. what are the expectations and the hopes for stopping it? >> you may call this a losing battle. why are we still fighting on? we have to. we are answerable to history. we need to put up a fight. this is our hometown. lose, at least history will record the fact we did put up a fight and hopefully a heroic fight. has proved she is just a little puppet of her

beijing boss and will do anything the beijing boss tells her to. you look at the bookseller story. them decided to flee to taiwan. beijing tells carrie lam, we went that person back. do you think carrie lam would dare to say no? >> we have to be realistic here, right? the umbrella movement, after they peteredtests, out. how will this be different? bei am not expecting it to very different than what happened last time except you anger, understand, the frustration, the fury. of desperation on the part our hong kong young. we are talking about a future.

it is their future. been talkinge about 24/7. when thesee -- promises will expire. it is there hong kong. people in my generation would not be around anymore. to expressvery right their desperation, their anger. the way they were suppressed by police brutality tells you hong kong is going down like a boat. >> president trump has been noncommittal. he said china and hong kong should be able to work it out. do want washington to get involved? >> i wish the international community including washington avoided concern.

help keep it safe haven kind of status. we are not just a financial hub. this is a vital moment of -- for world.ernational >> how will the latest developments. i am not only speaking about the bill itself, if you continue to have these protests across hong kong, how will they impact the image of hong kong? -- also >> this is an upside down argument. -- harm theht argue

image, but at what cost? knew they would come to hong kong to invest. but also chinese city, the china cake for pie. the free flow of information could be taken out just like that. happen toing to international investors? want to stay in and hong kong? at how our economy has been if the mainline

investment would want to pull outsiders keep playing the game? there is no game to play. >> we have seen efforts to integrate hong kong into the mainland. linking hongroject kong and macau. how do you view those efforts? >> it is so obvious. that is the grand plan to assimilate hong kong to disappear into the vast hinterland. at the end of the day, there will be no more hong kong. beijing is so fed up. kong,d think, with hong this city would learn to listen, to be obedient.

kongwant to make sure hong would not stay as important as to the outside world. they are planning in five or 10 years, shenzhen will take over as the i.t. hub. and that is the end of hong kong . >> thank you so much for your insight. that is claudia mo, hong kong legislative council member. you can get a round up of the stories you need. subscribers, go -- you can customize your settings so you only get news on industries and assets you care about. this is bloomberg. ♪

abe is a friend of the u.s. and iran. to mitigatehis most tensions threatening to plunge the middle east into chaos. a rare moment for the prime thester to shine on diplomatic stage. what is the state of your past relationship with iran? good relationship

with iran for decades. it has been a major importer. it was a major importer of iranian oil. japansions have flared, has a itself off of iranian oil. leader. he has good relationships, personal relationships, to good personal relationship with trump. when he was foreign minister went to iran several decades ago, trying to ease tensions in the middle east. affairs, a lot going into this one trip. >> you mentioned this relationship.

are they on the same page when it comes to iran? >> very much so. going to be doing anything that will counter u.s. policy. trump for departing on the trip. lying. follow the u.s.'s given the hostilities, anything he can do to lessen tensions -- chinle as thee -- as theyof part of rand the tictoc globally. faces stiff competition

outside of china from facebook and snapchat. strike sword in the first day of trade, knocking another off its perch as the fastest first day gainer of the year. to raise more than 600 million in an ipo. company has sold shares above its elevated target range. markets mixed across asia. let's get a preview of what to watch. releasedg data overnight, that may add a headwind for chinese stocks. remain onwill likely edge after surging into bank rights -- rates. 2% wednesday.h as they will be elevated until july

which could weigh on stocks and property developers. plus, -- and ever grand is about to spend 23 billion dollars to build bases in guangzhou. this is the second biggest health care ipo in the world this year. it is set to make the founder richest woman. >> the china open is next. this is bloomberg. ♪ the latest innovation from xfinity

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