.ost 1: good morning this is bloomberg daybreak: europe and these are today's top stories. chain reaction. a big week for central banks. smartphonees for a sales drop. we had been working to mitigate the impact of tariffs by looking at more effective ways for the movement of goods around the world so our products will not be more expensive at point-of-sale. big climbg protests, down.

amid alive on the ground mammoth public turnout. damage limitation. deutsche bank is considering a 50 billion euro buyback. and the absence of boris johnson steals the show as u.k. prime ministerial hopefuls hold a debate. suspension ofhe parliament causes the most friction. a big climb down.

the governor of hong kong's executive council has told bloomberg the extradition bill that has sparked protests is essentially dead. >> it is not a good time for any discussions because it is so polarized. to cool offers before we can talk about any chance of a dialogue. >> are you saying the bill is essentially dead? >> yes. the chief executive made it very clear. this is a suspension indefinitely. host 1: the chief executive announced saturday the legislation is on hold. yvonne man is live for us in downtown hong kong. what is happening there right now? yvonne: rain has started to come down here in hong kong so some of the protesters are taking cover outside of the legislative council building.

government headquarters. it is closed for today. this is after they retreated from some of the key arteries this morning. ,olice took a softer approach not wearing their right at gear. they were telling the negotiator to speak to the protesters to allow for traffic to come through. werehe protesters applauding that at one point and decided to give up that area. it was a stunning show of defiance we saw over the weekend. protesters -- their number were about 2 million taking the streets of hong kong. they marched for several hours. atice put that number 338,000. they were counting the people on the main arteries. at one point, people were so overwhelmed, they were pushed

down some of the side streets. close some forced to of those side streets as well. it appeared to be a much bigger crowd than we saw from the previous sunday when organizers put that number at around one million. a lot of questions about the future of carey lam. we had the sound from one of advisor's., senior he said she deserves a second chance. we spoke to many people though that said there is hard to find an alternative. it is such a difficult job. you're the gatekeeper between hong kong and china. it is difficult to be sandwiched between those forces. some say that if it is not her, the really is not anyone else that can do a better job. host 1: thank you so much. the government and investors might be asking themselves what

does the force of the protests mean. trade in focus this week as well as central banks. most notably the fed. we got retail sales and manufacturing output. it did in the s&p 500 on friday. global equities had a gain. the fed rate cut that still front and center. will the fed signal anything about cuts to calm this week? come this week? indonesia and brazil, the e.m. currency index hovering around the 200 day average. oilird day of gains for though we had a weekly loss last

week. juliette saly, how is it looking? interesting -- we are watching a rebound in hong kong markets. the debate over the bill has been suspended. hong kong markets have risen quite sharply, the biggest gain since we saw the protests last wednesday. a turnaround in the nikkei in late trade. much inbank action very focus for investors' lines this week. a big drop coming through in non-oil, domestic exports for the month of may year on year. much weaker than what the market was looking for. individual stocks -- the warning whichday from broadcom

has seen quite a ripple effect in asian tech stocks. japan display hurting today. db kay that taiwan's says it is withdrawing from the rescue plan for japan display. agl walked away from its 2.1 billion dollar takeover offer. juliette saly in singapore, thank you so much. as dovishness sweeps the globe, central banks are focusing. the central bank officials meet this week. does the eurozone me more stimulus? mario draghi and mark carney speaking. wednesday, decision time for powell.

believes -- analysts the fed will hold. announcements from the bank of japan and the bank of england. will show whether policymakers are splintering after a year of unanimity. joining us now is william porter , head of strategy at credit suisse. is the fed going to signal this week that they are open to a rate cut in july? it probablyuspect will. there is some speculation that they will cut to the chase and move this week. we do not expect that. the fed feels it has time and likes to do things in a very ordered way. if there is to be a cut in july, we think they will probably signal it this week and we do expect a 25 basis point cut at the end of july. the policy a look at

rates. closer to zero compared to any expansion since the 1950's. the fed does not have much room if things get worse. does this lower a bar for the a cut sooner? howiam: interesting to see near to zero we are. is arguably a near-death experience for a lot of the central bankers. one of the nice things about high rates is you can always cut them. as we rethink monetary policy post crisis, perhaps the minus two percentage rate looks low for this reason. one of the reasons why i think the fed will be a little careful is because it does not want to leap back to zero bound. if you think that rates at this level are not actually having much of an impact, there is a lot of signaling involved rather than the rate itself.

and our focus on the yield curve for example feeds back into market sentiment. what they say is incredibly important and ultimately, what they do regarding money supply is incredibly important. then aok, do you expect cut in july and then for them to be done and perhaps implement other policy tools? william: this is where it gets interesting because the market is sitting out way ahead of the fed, 3.5 cuts roughly in the next 12 months. about 50 basisg points in july. if you do 50 basis points in july, that is two 25 basis point lookingddenly 3.5 is not so bad.

cutting 50 basis points potentially is disastrous. what are they worried about? you may avoid the distant version -- the disinversion. in terms of other monetary policy tools, the taper and so they put that to one side for the moment. , eventually,to qe if i were powell i would do that before i cut -- crush the rate back to the vicinity of zero. nejra: 50 basis points in one go could be taken very negatively. william: never say never but that to me star still look as a policy mistake. disappoints, fed people are expecting a in bondant reprising

markets and maybe equity markets as well. again, we need to look at what the fed says and then what it does in terms of what it achieves. one of the things that has happened in the world is over the last couple of years they have reduced u.s. money growth from 8% to 4% or below. they are just putting a base on that. the difference between eight theent and 4%, we just put misery index at 5.6%. in moneye running growth at 8% and normal growth at 5%, you are looking at 3% trying to find a home around the world. one of the things we have noticed is that the really ininant presence in even european credit markets is what the fed is actually doing even

perhaps more than what they are saying. if we look at the selloffs, particularly the q4 selloffs, that was driven by the market fearing a real fed policy mistake. what is effectively going on has turnedd is it much more bullish on european credit markets. that posture. and then the question is whether the ecb followthrough with its own policy tools? nejra: william porter from credit suisse securities stays with us. let us get the first word news with every now from hong kong. is no doubt iran was responsible for the attacks on the tankers in the persian gulf according to the u.s. secretary of state, mike pompeo. he says the u.s. will guarantee safe commercial navigation in the waterway going forward. iran has denied any wrongdoing and blamed the trump

administration for tensions in the region. tori rivals traded insults in the first tv debate of the party leadership contest. one refused to take part. dominic rob was criticized for suggesting suspending parliament. accused his colleagues of engaging in a macho showdown. preparing for a 40%-60% drop in international smartphone shipments. one of the tech giants most important -- when of the tech importantst businesses. it is not ruling out a cyberattack after a major power blackout left millions without elect the city. eventesident said the that hit five south american countries was unprecedented.

it is not a primary hypothesis however. he could have been technical issues or even the humidity. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. debra mao in hong kong, thank you. a slew of interviews from the paris air show including a chief executive of raytheon. the ceo of boeing and the chief , davidve of ge aviation joyce. a lot to look forward to. this is bloomberg. ♪

nejra: this is bloomberg daybreak europe. let us get the bloomberg business flash with debra mao from hong kong. biggestne of china's infrastructure companies has deal.ed ubs from a bond

this after a bank chief spark a furor with his phrase "chinese pig." thisfurther complicates with lender's push into asia's largest economy. goldman sachs is finally embracing its status as a private equity giant. top executives have laid out plans. the bank will rely less on its own balance sheet. the wall street lender is reportedly looking to consolidate the activity of multiple units to add more have to to its merchant banking division. deutsche bank is considering setting up a bad bank unit that many asentually hold as 50 billion euros. this is part of the plan of the overhaul of the german lenders trading operations. it could see a shrinking or closing of deutsche bank's

trading businesses outside of europe. that is your bloomberg business flash. you.: debra mao, thank intel is reviewing its global supply chain as the trade war escalates between the u.s. and china. swan spoke-- bob exclusively to bloomberg. >> we have a lot of customers there. we have a factory there. we have assembly facilities and a lot of trillion engineers there in china. it is a big market for us. arere incurred -- we focused on encouraging both sides to engage in constructive dialogues. we do not believe that tariffs are an effective way to drive global trade. we do not have control. what we try to do with our customers and partners is work to mitigate any consequences of

place thatt go into could impact the free flow of goods throughout the world. we are focused on that because product ands need some of our global customers have big assembly facilities in china. we need to work constructively with them to medicate these implications. peers which isr -- which are shifting production out of china, that intel is not considering or at least in the back of your mind you have some kind of backup plan should something happen to shift some of the production outside of china? we have to figure out how to mitigate the flow of goods to tariffs haves that with respect to the business.

ultimately end up in higher prices for goods around the world. not yet thinking about shifting anything out? you are not worried about a backup plan? you are focused on mediating between the governments? bob: there are multiple things going on. we are working with the government's to encourage them to get to a better resolution to the good of global economic trait. secondly, we have been working since the tariffs started since last year with our manufacturing operations as well as the assembly operations of our customers. we have been working to mitigate the impacts of tariffs i looking formore effective ways movement of global goods. >> do you have anything actionable to tell me?

what does mitigate mean? tariffs have been essentially on product assembled in china and shipped to the u.s. mitigate means how do we move goods? sometimes our customers will move their operations. less product is coming directly from china to the u.s. that will be subject to tariffs. mitigate means had we collectively work together on us, oural supply chain, customers, and our partners to reduce the impact of higher costs. >> that does involve perhaps a moving around. bob: absolutely. nejra: that was our exclusive interview with rob swan. -- bob swan. and meantime, wilbur ross is theplaying the impact of

tariffs. let us get back to william porter, head of european strategy for credit suisse. if that is what we get, a commitment to renew talks, what does that mean for markets? william: i think we have priced fairly effectively to some continued rumbling and problems in this area. the market -- i was guilty of this and perhaps oversimplified this and took bob swan's argument that this is in no one's best interest and it isn't. but you have to look at the internal political incentives. internal political incentives in both places, and the hong kong problem feeds into it helps to have

an external villain. like what is going on with iran. at a time, if i were sitting in a chinese city with full access , it mightwo big if's be seen as a threat by xi. incentivizedump is for political reasons not to rollover. roll over. if you look at it as a game of chicken, china ultimately has to swerve. i think this will rumble on. slightlyts, having oversimplified this, are priced better. a neutral outcome where we are agreed to disagree. and there is always a back

channel. if you get the idea that the back channel is open, the market will be fine with that. down, have a public break not just for public consumption, the market will not take that kindly. nejra: president trump officially starting his 2020 campaign as well. where does this lead your view of recession? what indicators are you looking for? william: that is an important question. is theasy to say this end of globalization and to think a recession is the natural way to inaugurate that end. what i do in terms of deciding -- nejra: we have 30 seconds, by the way. william: we have to look at corporate profits. you do not get a recession without a 10% drop in profits in the us and there is no sign of that yet. a bad tariff breakdown might put that into the numbers.

that is not my working hypothesis. up.ra: well summed tory rivals battle it out alongside an empty lectern as the front-runner to take over for theresa may is not present. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

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nejra: this is bloomberg a break europe. biggest date own infrastructure companies has excluded ubs from a bond deal officialsbank's comment. sparking a fury. philip, thank you for joining us. there we move onto

implications of this and what happens next, briefly recap for us how we got here. >> it started mid last week when the commentary, the now infamous commentary came out from donovan about pork prices in china and the potential impact on global inflation arguing that there would be no real impact. in that audio know, he used the term "chinese pig." a seemingly innocent remark. it ended up getting massively differently interpreted. nejra: how bad could this get for ubs if this spirals anymore? to say it is hard exactly where this is going to end up and lead them. it has cost them some in terms of business. they were excluded by the bond deal.

it is worth keeping in mind that hugely coming at a crucial time for ubs and everyone else in the finance sector going into china. 51% just got 50 per -- stake there and they are now free to set their own strategy. the china strategy right and friction free is going to be absolutely key for them. it is a $44 trillion financial industry they are pushing deeper into with huge private wealth which is something the ubs private bank is very interested in. nejra: as you have suggested, the whole finance industry watching this saga closely. what do other banks have to learn from this? philip: it is probably safe to say that you will not be seeing g"is term "chinese pi

popping up again. you will probably see people hitting the brakes a little bit. looking at the wording being published. andthrough it one more time be careful of saying anything that could be interpreted in a derogatory or racist way or whatever. and everyone will be reminded that these are sensitive times. times of high tensions especially between the u.s. and china right now. i think people will calibrate the strategies accordingly. nejra: thank you so much, phillip. great to have you with us. let us check in on the markets around the world. great to have you both with us. trading a little weaker on indian equity markets today. what is souring the sentiment?

>> thank you. investors are watching the u.s.-china trade war. back home, india levied import data. it soured the sentiment today and the second half of friday's trade. we are underperforming today and indices areenchmark both trading with cuts at about 0.5% each. the bank has seen cuts of about 0.5% but the pain point for indian markets so far has been the broader index which has seen some selling pressure. of the market has been in favor of the decline. the declines have been taking

over the advances. the volatility index is back in action today as we reopen lower. not seen any recovery from the lower levels. trading today with gains of about 4% or 5%. seen gainsg, it has at about 4%-5%. nejra: thank you so much. a mixed session in asia. we are looking ahead to a busy week for central banks. not least to the fed. >> a huge we for central-bank policy and asia -- in the markets are moving in different when it comes to equities. hong kong is up 0.7%. suspending the extradition bill. australia is a touch softer.

foreign-exchange -- i'm looking at the malaysian ringgit under pressure. the central bank governor gave an interview to local press saying it faced volatility. and the turkish lira is down. turkey responded to moody's downgrade this weekend saying it is incompatible with fundamental indicators. in commodities, they are red. these are shanghai contracts. look at some of the metals. i am going to stay in commodities because i want to look at copper. investors seem to be losing faith and going back to the records we have on copper since 2006. is so interesting is clearly the market is focusing on trade war and worried about demand but we have a strike in chile and many are worried about

a deficit. still, we have shorts on copper. the market is worried about the trade and not so much on the supply side. nejra: a lot of worries for the market at the moment. much.you so we are asking the question on mliv -- ahead of this big week, where well volatility spike the most in the second half of 2019? and what will drive it? bloombergs get the business flash with debra mao. debra: hong kong rose up in defiance of this weekend a day after the later suspended the controversial extradition bill. protesters are calling on her to resign and for the resolution to be fully withdrawn. figure of the peak professors at 340,000.

there is now no chance that debate on the bill will resume. there is no doubt that iran was responsible for the attacks on the tankers in the persian gulf according to the u.s. secretary of state, mike pompeo. he says the u.s. will guarantee safe commercial navigation in the waterway going forward. iran has denied any wrongdoing claiming the trump administration for the renewed tensions in the region. wilbur ross has downplayed the prospect of a major trade deal from the potential meeting between presidents trump and xi. that will comet out of the g20 summit is an agreement to renew talks. preparing for a 40%-60% drop in international smart shipments as the trump administration's blacklist is starting to hammer one of the giant's most important

businesses. argentina says it is not ruling out a cyber attack after a major power blackout left millions without electricity. the president says the event that hit five south american countries was unprecedented. it also could have been technical issues or even humidity. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. debra mao in hong kong, thank you so much. the front runner -- the front runner to be the next prime minister in the u k did not take part in the debate. an outsider rory stored accused his colleagues have engaging in

a macho showdown. william parter from credit suisse securities is still with us. you have been on the show before when you have hinted around the low quality of the debate around brexit. did this debate confirmed that for you? william: let us just say on the gingtion of pro-roe parliament -- the ultimate defender of the constitution is the crown and the armed forces owe their loyalty to the crown. literally if you were to be a new prime minister and knock on the door of buckingham palace and say by the way, i would like to pro-roe

parliament, there may be a rifle aimed at you and you would be on your way to the tower. more realistically, it is an idea that will go away. it will not happen. the more interesting question is whether you get someone who is prepared to believed parliament -- to lead parliament into a -- we don't know and the empty chair helps us not to know. boris johnson voted for the deal. he needs 30 people to get it through. that is the easiest way to deal with the whole thing. make it go away and start talking about the new relationship. wins which looks , in thatir assumption circumstance you're not going to see this happen in parliament.

the most likely outcome is you will see a deal go through. i have always said this parliament will never go out hard. an election is a singularity. you do not know where the brexit party may show up. i don't inc. you can forecast beyond that. the chance of leaving hard has zero up. it you haveiament, 100th of a percent. nejra: what does that mean for the pound? william: it is seeing the worst of all worlds. if this deal where to go through and people realize it is the beginning of a new thing, potentially, that could be a real opportunity. boe be all the

nonevent? william: probably. they will effectively play for time. i think the ecb is more important. nejra: we have a meeting in portugal. we were talking about the fed earlier and your expectation we could get a rate cut in july. and your idea that there are -- that they may use other policy tolls. does the ecbview have left in its toolbox? tooiam: maybe i am simpleminded. tiering. you are really getting into the end game of your usefulness frankly at that point. i don't think rate cuts are a realistic possibility. you have some of the same issues that we talked about with the fed as well.

driving yields further down. not necessarily what we are seeking to achieve. what they can do and are almost constrained to do is to buy my market. that with the do corporate book. this is part of our reason for now being overweight investment grade again. we start with logic and get to book hopefully. that, there is still some value in our market. a negative rate coming using the flow of credit through the economy, encouraging , there is a channel

time and a place for outright intervention. if they decide they need to do something, my view is that is what they are going to do. , from william porter credit suisse securities. great to have you with us. we now go to paris where the airshow kicks off today for boeing, it will be an exercise in damage control after the 737 max 8of its aircraft. also in the spotlight is raytheon. it is there touting its new merger. it would be a heavyweight. on thergs guy johnson is ground. great to see you. guy: great to see you as well. we are joined by john harris, ceo of raytheon international. force inis a dominant his life i would suspect at the moment. good morning. is bigger better? usn: probably and it affords

an opportunity to compete more effectively in the international marketplace. for the simple reason that we do not just compete against companies but countries. having the wherewithal to bring together some $8 billion of research and development, 38,000 patents and 68,000 engineers with a focus on innovation and an ability to continue to build on our strong legacy of performance and most importantly speed to market. that combination will afford us the opportunity to do that. and with a level playing field in europe, the middle east, and back home, we believe we can make the right kinds of choices and assure our customers are getting what they need. guy: we have spoken in the past that raytheon's business is international. will be about 50%

domestic and 50% international. and also, 50% commercial and 50% defense. well-balanced. well focused with the ability to leverage the innovation, the experience, and knowledge as well as intellectual property and share among those capabilities and markets. guy: in terms of the international market, how will that change the way you do business? do you anticipate any pushback from governments around the world? the president was talking about his concerns regarding the deal. do other governments have concerns? when we have the opportunity to share the details of the proposed merger, our customers understand and support what it proposes to do. there is little to no overlap between our companies. less than 1%. we are much more complementary than competitive against each

other. i have been at this for the better part of 30 plus years and i cannot remember a single time that i've ever competed against utx. you do not anticipate any regulatory issues? to do and we intend have been doing since we made the public announcement is a sure all of our customers, and customersrs -- and have the opportunity to understand the merits of this proposed merger. they understand what is in it for them. -- the secondle element is cost. we see a significant cost savings as a result of this combination. gross savings of some $1 billion

a year after the merger. for the u.s. government that is a better part of $500 million net savings that we should be able to give back. this is about not only bringing new capabilities to the forefront at a much higher rate of speed but also doing it in a cost competitive nature. in the end, we want to make sure that our customers get value for money. there was a story this morning about germany. give me an idea of the ordered of magnitude -- of the order of magnitude we are talking about here? already the world's leader in missile and missile technology with a focus on cost competitiveness. competitivedy cost because in order for us to be as successful as we have been in the last five years, we have had to have that focus.

bringing together the capabilities of utx as well as raytheon will further accelerate our ability to reduce costs, include new innovations, and bring new technology to the table. this is about what our customers need. one i want to ask about possible customer and that is turkey. will you be selling patriot missiles to turkey? government toa government relationship. we have been very responsive to our u.s. government customer, foronding to their requests information. and our intent is to remain that way. if the u.s. government did ara, howith ank quickly could you provide that? that is confidential.

suffice it to say we have been extremely responsible. provide the only integrated air missile system. since the day it has been introduced, we have only done him prove men's. it's capability is second to none. the system of choice for our customers. guy: so great to see you. john: you have to visit me over at the pavilion. you very much indeed for the invitation. back to you. nejra: guy johnson at the paris air show. we look forward to the rest of the coverage. upe from the airshow coming including the ceo of a boeing and the chief executive of ge aviation, david joyce. withater, a conversation the ceo of qatar airways. this is bloomberg.

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nejra: this is bloomberg daybreak europe. ofliam porter, head strategies at credit suisse is still with us. we have talked about copper shorts hitting a record. is this the canary in the coal mine? william: not shorts. they do not seem to be pushing the price down very far. slightly mixed signals. we call it dr. copper. of whathe uncertainty might or might not the going on and struggling to keep up with earnings, it is on the front line. inhave seen some weakness hong kong this morning. the fact that shorts are piling on, effectively forecasting a notssion, and copper is

really acting in such a way suggest to me that the markets that the market perhaps is getting its self too -- it's self -- itself too b earish. nejra: where are the best opportunities for you then? if you are prepared to take the view that there is not going to be a recession, then opportunities are opening up all over the place. equity markets. favorably disposed equity markets globally. credit markets. the u.s. credit market has been fairly weak on recessionary views. and indeed, you have to be very careful because this has been a real graveyard -- i tell people

to write in above their mirror in the morning, the ecb is running out of german banking to buy. nejra: william porter, great to have you with us this hour. william will continue the conversation with us on bloomberg radio at 7:30 a.m. u.k. time. hong kong strikes -- hong kong stocks -- we are live on the ground. this is bloomberg. ♪

nejra: good morning. nejra cehic. as you. huawei braces for sales drop. we have been working to mitigate the impact of tariffs by looking at more effective ways for the movement of goods around the world so that our products won't be more expensive at point-of-sale. nejra: big protest. hong kong stocks traded in the green as they suspend the extradition bill.

we're live on the ground amid turnout. deutsche bank considering a 50 billion euro that bank unit in china. ubs excluded from a bond deal after a fallout about pigs companies. and the absence of boris johnson steals the show as hopefuls holy debate, a clash over suspension of parliament suspends friction. ♪ nejra: a big climb down. the extradition bill that sparked a week of massive protests is essentially done after the legislation was on hold. yvonne man is lit conduct of hong kong near the government offices.

give us an update on what is happening there now. yvonne: well, we have seen things died down, although you see a couple hundred protesters camped out outside the building. they retreated from the court area, one of the main arteries in the city after staying the night and blocking traffic. we did see head-to-head with police. it was much more of a self approach from officers. we saw a hundred people try to speak with protesters. they were not wearing right here to clearly -- riot gear to clear them out and decided to move here. it's funny. in the last couple hours, i've been getting random airdrops of pictures some of the organizers are sending to everyone around here. one of them says yesterday, we saw a show of effort of up to 2

million protesters on the street. that's what organizers are calling it. police are giving 38,000, but the numbers are going to dwindle. it doesn't mean they are giving up just yet. another one i got was saying that delaying this bill does not equal withdrawing it altogether. i think that is still the complaint a lot of people have. we have heard from senior advisers saying it looks like the deal is dead. there is not enough time in this term to get this vote through, havee still have -- don't official confirmation and they are asking the chief executive to step down. nejra: thank you very much. let's get the breaking news from h&m crossing the bloomberg every second-quarter sales come in at 57.4 7 billion swedish krona. the estimate was 57.14, so we

have a touch of a beat on the second quarter sales, h&m saying the transformation worked is taking us in the right direction, instead intensified the work even further, but hard work and many challenges still remain. that might be a stock to watch when it opens in an hour time. let's take a look at how futures are set up. global equities last week, including the u.s. and europe. a bit of softness with the china data, good news being bad news in terms of eco-data strong. what does it mean for the fed? that is the key question. will the fed signal a rate cut in july? will they drop the word, patience? all of little bit in the green. looking at the bond market, the two-year and tenure treasuries rise.

it was steeper earlier, pretty much flat at the moment. the 10 year bond yield to -26 basis points, but overall futures indicating we could see money moving out of the bond market. juliette saly in singapore has more. to see you. we got an update -- good to see you. we got an update from yvonne. how is the rest of asia looking? juliette: the rest of asia is weak. fourth session of losses. the nikkei closing flat. weakness and australia, also near. -- also india. the hang seng index is a front a reliefp 7/10 of 1%, rally after quite a few sessions of losses late last week. in the midst of concern over the extradition bill. the fact it has been suspended

has given a leg up to hong kong equities. china markets turning around in late trade. when it comes to currency markets, we're watching the u.s. hong kong dollar, which had the rally last week. it's pretty flat to lower against the dollar. we're watching for a strike option of 7.85. 7.8291 is where it trades at the moment. we see the greenback a little bit on the back foot as we await tilt.d's perhaps dovish we did have a very big sign of how much the u.s. china trade dispute is affect the the market. particularly electronic exports. nejra? nejra: thank you so much, juliette saly in singapore. until is reviewing its global supply chain as the trade

war escalates. bob swan said he is encouraging the government to exchange in dialogue. they are downplaying the prospect of a trade deal emerging from a meeting between trump and xi. ross he says the most italy's will come out of it is an agreement to resume talks. as we discussed trade, here is live pictures of the huawei founder, speaking about the discussion focused on technology, markets, and enterprise. you can follow all the development on life go. joining us now is the chief economist for china, and mary. welcome both, bo and mary. great to have you both with us. let me kick it off with you and get your outlook for the g20. you think all we will get out of this is a commitment to talk a

little longer? mary: we do. we think probably things will get worse before they get better. we're not expecting much out of the meetings. a lot of the indications, especially from comments from wilbur ross, are not encouraging to what we can expect. even the comments from president trump. you never know. they could pull something at the 13th our. for now, expectations are low. nejra: what does this mean for the renminbi? a lot of people say it's not going to break seven before the g20. you see the u.n. going beyond seven? guest: yes, i do see it going beyond seven. most likely, it will string very fast. so, the market forces will try to push it down. the pboc were passively allowed the currency to go to depreciate

and break the benchmark. nejra: what does that mean for the prospect of other stimulus from china if we get escalation from the trade war? bo: we do expect fiscal policy to carry the heavy weight. it's quite unlikely china will repeat the same style of credit easing we have seen. budget ofment, the fiscal expansion is quite limited. china is more likely to move on to a quasi-fiscal stimulus. nejra: mary, i believe you also believe chinese authorities will continue to respond with stimulus measures to the for the economy. what does this mean for your investment strategy and elsewhere in asia? mary: we still remain cautious on china. we like china from a long-term perspective. for now, given the headmans surrounding the trade war, it's hard to jump in on chinese

equities. from a long-term perspective, we like it and it's got good potential. one thing probably we're looking at his asian high-yield. we see value in asian high-yield. a lot of that tilted toward asia. and tilting rates toward china, and bonds. on the back of fiscal stimulus, it's going to mean rates will have to remain low and they could see potential more liquidity into the market to support the economy overall. economy, wen the got this data friday, industrial production and retail sales. building that did better was retail sales. how concerned are you about the pace of the slowdown in china, if at all? bo: i'm not very concerned about infrastructure. i'm concerned about manufacturing. the potential threat of the new

tariffs on the rest of the exports would definitely undermine the investment confidence in the producers. it's more likely manufacturing will drop further in the coming month. i think it's more likely we are going to see policy response to stimulus infrastructure, which we have seen some policy's reaction. nejra: what about deleveraging? is that something investors understand the dynamics of at this point? bo: yes. having most investors are -- i think most investors are familiar. where it isperiod declining and credit growth will move up. china will have increasing gdprage, which, compared to ratio we have seen in the last two to three years. nejra: great to have you with

us. us.nd mary stays with we have a look more to discuss. let's get a bloomberg first word news with debra mao in hong kong. debra? iran wasere's no doubt responsible for the attack on two takers in the persian gulf. that's according to secretary of state mike pompeo. he said they will guarantee safe navigation in the waterway going forward. iran denied any wrongdoing and blamed the trump administration for renewed tensions in the region. tory rivals battling to be the next prime minister traded insults in the first debate of the party leadership contest. boris johnson was mocked for refusing to take part. dominic raab was can desk criticized for suggesting parliament. he was engaging in a macho

showdown. argentina says it isn't ruling out a cyberattack after a power blackout left millions without electricity. the president says the event that hit 5000 american countries was unprecedented. a -- or even isn't humidity. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. nejra? nejra: debra mao and hong kong, thank you. coming up, a slew of interviews from the paris air show, including the ceo of boeing and the chief of aviation, david joyce. and later, a conversation with [no audio]

43 minutes away from the equity market of. i'm nejra cehic in london. we're seeing red on the msci pacific index, but hang seng in the green. dollar-yen struggling. we look ahead to the fed and the boj and bank of england. the 10 year yield is higher. some of the dead on friday, perhaps meeting we hold back slightly -- we've pulled back slightly. will the fed signal right that's to come? u.s. futures on the front but. -- front foot. european futures and brent on a third day of gains. let's get a bloomberg business flash with debra mao and hong kong. debra: one of the biggest

infrastructure companies excluded ubs from a bond deal after the chief economist sparked a furor with the term chinese big. it's the first issuer to distance itself from ubs. this complicates the push into asia's largest economy. has intelwar reviewing its global supply chain according to chief executive bob swan. he said the chipmaker doesn't believe tariffs are effective, and is encouraging the government's to engage in talks. he spoke exclusively to bloomberg in tel aviv. >> since the tariffs started last year, with our manufacturing operations, as well as assembly operations, we have been working to mitigate the impact of tariffs by looking at more effective ways for the movement of goods around the world so that our products won't

be more expensive at point-of-sale. debra: deutsche bank is considering setting up a bad bank unit. they could eventually hold up to 50 billion euros according to the financial times. the plan is part of an overhaul to the trading operations. the rebound isn't finalized, but they could see the shrinking closing of deutsche's rate trading businesses outside of your. and that's your business flash. nejra? nejra: thank you so much. make keyank leaders decisions against the challenging backdrop of a trade war. dani burger has the details. taken away. dani: it all starts today. they are meeting and portugal. we have seen draghi use the buting to sway investors, how does the ecb react to the slowdown risks, especially given relative lack of ammunition?

just as they are talking, we get the fed decision was day. economists expect them to keep rates on hold, but we'll be listening to language that spells out the path for cuts if the trade war creates headwinds. thursday, we get a boj and boe announcement. analysts don't expect changes here, but one of the interesting things, we'll see if policymakers start to splinter. nejra: thank you so much. now we go to paris, where the airshow caps off. guy johnson is on the ground. guy? guy: thank you. we're joined by wilbur ross. mr. secretary. good morning. let's talk a little bit about aerospace and how aerospace will play a war -- role in the trade narrative. does europe need to spend more in the aerospace? wilbur: europe does need to

spend more. they should be living up to the commitment to defense spending as part of the nato arrangement. aerospace is thriving. it is one of the largest overter of aerospace, $140 billion a year, roughly 70% of our whole industry's export industry. so, it is a very powerful driver, helping reduce the trade deficit. we make the best and most advanced products in the world. guy: in terms of how big the gap is, how big do you see it being? how much more does europe need to do? wilbur: 2% of the eu budget is a pretty big number. they've already increased by almost $100 billion, so there's more to come because some of the wealthier countries, like germany, are still way below the 2%. guy: does this overlap with the

president's concerns about the german auto industry? how do those two things fit together in your mind as far as balancing the books? the president is clearly very much of the mind europe needs to do more. how does the areaindustry -- aerospace industry overlap? wilbur: a lot of them want to be compatible with nato. it only makes sense to have your overall source and local domestic one being simpatico, have into mobility. so there's an inherent industrial logic to it. but also, it's only fair. even with them spending only 2%, when they get to present, it's risky for 4%. it is an we'-- it isn't we're not doing our share. we're prepared to do more than europe. we just think they ought to step

up to their share. we're trying to understand -- the question we ask in europe, why the president is going with tariffs, is your expectation that tariffs, from the united states against europe, can be avoided? is this something you anticipate can happen? or do you think that is increasingly inevitable? wilbur: the president made clear in canada that his objective is no tariff barriers, no nontariff barriers, no subsidy, no disrespect for property rights, but a true free-trade environment. the problem with europe, the european leaders top free-trade and practice extreme protectionism. we would like their rhetoric to be matched by their behavior. u.s. is the freest trading nation in the world, and we have

the trade deficit to show for it. guy: what advice are you giving the president? wilbur: well, the president, we've already got a formulated trade policy, so it isn't inch by inch. the situation with europe right now is a little complex. you just have the european parliamentary election. haven't yet picked a new president for the european commission, haven't yet decided who the trade commissioner will be. so it's a little bit hard to negotiate when you're not sure who the counterpart will be. likely be early fall before that gets resolved. also, under the european system, the trade commissioner needs to get a mandate from all the european member states. that may take a little while to do. it took commissioner maelstrom about seven months to get even a

limited mandate after president juncker came to washington. guy: let's turn our attention to china. that aur ross' base case deal can be dumb of china? wilbur: i think eventually we'll have a deal with china, but it won't -- out of the g20. g20 is a 40,000 foot level of discussion. so the main thing that could come out would be an agreement on principles for how to move forward. that's the most that could come. guy: the concerns that the markets will have is that will look at a deal like that and say, is this sustainable? is this something i can get a degree of certainty of? what you're telling me is that that would be a deal that has a low degree of certainty around it. and my interpreting correctly? wilbur: well, you never have a deal in anything until you have a deal in everything.

things as complicated as trade negotiation, is always a degree of uncertainty until you really get to the finish line. no business hates uncertainty. i hated it when i was in business. but the real world is a world filled with uncertainty. guy: do you think that's something businesses have to deal with from now on? is the degree of uncertainty around the trade narrative elevated? wilbur: i feel to the contrary. this administration you should judge, above all others, by results. there was a lot of screaming and yelling on nafta. we should renegotiate nafta. now we have come out with this far superior deal to nafta. so, all those complaints, all that angst was a big waste of time. people should have a little more confidence. sayingly, people were

don't negotiate with korea. well, we did. guy: thank you for your time this morning. very much enjoyable to talk to you. this is bloomberg. ♪ the latest innovation from xfinity

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