>> i am paul allen in sydney. we are under an hour away from market open.n >> i am sophie kamaruddin in hong kong. welcome to "daybreak asia." >> our top stories, asian markets look set to rise after wall street reached new highs. futures pointing to gains. trade remains in the headlines. talks with china.

trade remains the number one issue for business. the cleveland fed president gives us her view on investment plans. >> breaking news out of south korea. we are getting the surplus number four may coming in. $5.39 billion. tradet comes to the goods surplus. this coming after the first deficit in seven years. bok has said there could be a rebound following those numbers. good trades, five $.39 billion in may. run ofan -- a long surpluses, a key factor for a country maintaining a strong and

steady rating. we have seen with exports continuing to decline, seven months of the kleins for south korea. the surplus went into deficit in the month of april. it has recovered. how are we looking? gold is slipping along with oil. commodity prices holding. could be set today. we have futures higher in seoul and tokyo. more export restrictions, targeting korea's export industry. this is starting down the road toward economic warfare. wax thank you very much every let's get the first word news's.

china warning the u.k. to keep out of hong kong all addicts. beijing issued a strongly worded's treatment saying the territory is not what it used to be -- worded statement. arrested onve been monday. early indicators for june show the chinese economy under even more downward pressure following the may hike in u.s. tariffs. surveys suggest rising stress among small and medium-sized enterprises. bloomberg intelligence says market sentiment improved toward the end of the month after the u.s. and china reached a trade truce at the g20. president trump insisting he has not given up his campaign to put a citizenship question in the

u.s. census form. despite reports his administration had dropped the any news ofeated the commerce department abandoning the question as fake and insisted the administration is considering all options. iran is warning europe it must do more to protect the 2015 u.k. deal. enrichment will move to the next level sunday. comments backs pressure to back the deal since the u.s. pulled out last year. iran has reached low-level limits. and is moving toward weapons grade material soon. >> we will take the next step. if you want to express regret, do it now. our advice to europe and the u.s. is to go back to the negotiating table.

to respecting the resolutions of the un security council. all of us can abide by the nuclear deal. >> global meadows, 24 hours a day -- news, 24 hours a day. this is bloomberg. >> u.s. and chinese officials set to resume trade talks in the coming weeks. >> i don't know precisely when. they are on the phone. schedulinge face-to-face meetings. lots of communications. china's bring in our correspondent selina wang. what is the significance of this? what do we know?

>> it provides detail how the countries are going to proceed with talks. sayingy upbeat tone, this is not actually trade war this is just a dispute both countries have. thoughing said, even trump and xi did reach this sort key differences do remain including the enforcement measures. economic fundamental model and existing tariffs. we heard from the commerce department, they are expanding these steel tariffs including from china. even though this is part of the routine probe of anti-dumping measures, it does add to these trade tensions. >> after the g20, we saw president trump optimistic about

agricultural purchases. what do we know? >> we have learned from sources china is considering making increases in agricultural purchases as a part of a good-faith measure. it is likely not to be as large as previous purchase promises in terms of the last agreement the two sides agreed. buy 20ad promised to million duns -- funds. the volume depends on how the trade talks continue. we have heard it seems unlikely china is going to purchase a very large amount, considering all the issues that have yet to be resolved. despite the policies and trade dispute, we have seen the deficit continue to widen. what is behind this?

we have seen the deficit continue to widen. if you take a look at this chart, they were larger than forecast. to a five month high. the gap increased to 8.4%. imports and exports both surged. this probably reflects companies rushing shipments. expansion abroad are also likely weighing on exports. trump of course has tried to reduce the trade deficit. he has blamed it on economic weakness and bad traded agreements. most economists say it is a sign

of fundamental economic factors and is more about america simply just producing less than it is able to buy. it is important we don't read too much into these numbers. >> thank you so much. joining us from beijing. the president expressed optimism, he took a swipe at china and europe rate he tweeted, beijing and brussels are manipulating their currencies. the u.s. should match them. what exactly does match and all capital letters mean? complaine seen trump about currencies. this is one of the first times he is suggesting the u.s. actually take action. that could be continued pressure to ease monetary policy. some analysts saying we could

see the u.s. intervene in currency markets. intervention by itself is rare. to see the u.s. go at it alone would be unusual. what would trigger such an intervention from the u.s.? wax this -- >> this puts more pressure on the federal reserve meeting. i was speaking to someone who said if the federal reserve does thecut rates, that makes possibility of interventions higher. even if they do deliver a rate central a world where banks are easing policy, it is going to be difficult to see the dollar weaken in that environment. that could be a conversation for some time. >> how much firepower does the ?.s. have >> relatively speaking, they

don't have a lot of any mission. -- ammunition. at the same time, u.s. intervention would send a powerful signal to markets the trump ministry should is serious about wanting a weaker dollar. >> thank you so much for that. our bloomberg rates reporter. outlook fork the japanese retailers. >> we talk investment opportunity in asia. this is bloomberg. ♪

>> this is "daybreak asia. we are less than an hour away from the open in tokyo with pointing higher. sophie kamaruddin tracking sentiments.

the upcoming vote, putting a spotlight on the commitment to budget.g japan's one of the factors dampening sentiment. >> several factors weighing into these concerns. putting finances in order for japan. that increase is one of the fundss that has foreign pushing the eject button. the impact of the trade war and a stronger yen. dampening the boost that should have come through. nearly $70have sold billion worth of stocks. more brokerages are becoming negative. the topic has fallen 17%.

there is another factor at work. is a much sexier story. that market has a -- been a big drawer of capital. >> thank you very much. let's stay with asia. our next guest sees opportunity. thankg us from singapore, you for joining us. you have recently conducted a -- retailretailer investors and china. what were the findings? wax one of the key findings from the is thate conducted banks are such an important part of the overall financial holdings. they hold about 20% of financial

assets. the are a dominant part of investment portfolio itself. the other thing that is apps is ag is mobile key part of their usage. that is regardless of sex, gender, and age group. where do you go for yield in this era of weakening growth with bonds? first -- the final part of 2018, investors have moved into shorter duration products. different structured vehicles. we are seeing a switching sentiment in q1.

flows are going back into the higher duration products. we are seeing longer duration products. recent announcements, china a-shares. as well as inclusion, opening up the chinese bond market. ofthere have been lots exciting opportunities in china. this week, we heard from them directly, they will ring forward plans to remove foreign ownership limits. what are the opportunities you see? >> we are excited about the opportunity opening up the

markets. just to put things into 11.5ective, there are trillion opportunities in china. 10.5 trillion in the domestic market itself. the removal of foreign ownership restrictions is massive to the global managers who can finally look forward to having -- >> when you see all of this activity, is it as we are talking about global investors investing? wax as far as we can tell right now, domestic investors constitute double of the buying activity. it makes up a relatively small

portion. the numbers are climbing up. many of the global institutions are looking at china with renewed eyes. asviously, placing china part of the global emerging market equity portfolio. looking at whether it should be a standalone allocation. i want to get your opinion on this chart. analysts being much more aggressive cutting earnings estimates. the line there. blue, the u.s., quite a divergence. outlook for earnings for the second half of 2019? and for funds? a lot of the earnings are contingent on domestic consumption. currency in the

situation. the overall economic sentiment. that will have a big effect on asia earnings. suggestions china growth is slowing down, that will have an impact on asian earnings. allocation, many of , current allegations, we believe there is much room for growth. have any sector specific areas you find appealing? tech, for example? >> that is one of the areas we looked at when we evaluate interest in funds. see interest is someology, health care,

sort of innovative future generations. especially technology. there is a lot of divergence. cyclical fromng when it was focused on electric vehicles. quarter, there is a lot of interest around cybersecurity. environmental social governments. a more sustainable approach. >> what about the fact we are seeing hints of the fed easing more this year? how has that affected fund flows? >> we haven't seen that come true.

the slight lack in the data itself. markets have already read ,osition themselves to extend moving out of the shorter duration products. the government. >> thank you. around up of the stories. subscribers, you can customize your settings. this is bloomberg. ♪

asia." is "daybreak >> let's get check of the latest business flash headlines. china is considering a big investment in a renewable energy producer. told the sale process may start in september and could value the chilean company up to $1 billion. >> three of australia's biggest producers are -- they have launched an eight week pilot program. thank their mentees often required as part

of the property lease. is on the cusp of a sprint merger. finalizing plans for asset sales at dish network. they are aimed ensuring dish can a key player in the wireless market. all three companies gained in the latest in news. >> going offering $100 million to the families of those killed in the two 737 max precious. the crashes led to the worldwide grounding of the max, as well as a string of lawsuits. bloomberg intelligence says settling lawsuits could cost them $1 billion. check ofget a quick the asian markets. we are seeing nikkei futures

gaining era .6%. we have seen the japanese yen spike. futures up to 0.1%. this coming after u.s. indus is rose. thursday is the day one export restrictions from abe's government take effect. we are hearing from the finance urging japaning, to withdrawal the export restrictions. deficit we saw back in april. >> we have new zealand continuing to build on gains.

futures traded out of sydney, higher by zero point 3%. those will reset in 20 minutes time. fedl to come, the cleveland president gives us her thoughts on the trade. her thoughts on the trade.

"daybreak asia." president trump has resumed his attacks on china and the european union, claiming both are manipulating their currencies. he said the u.s. should pump cash into the system or continue being as he put it dummies. the trump administration is imposing additional tariffs on steel from asia, denouncing what it sees as unfair business act this is. some steel wheels are being sold

at less than fair cost due to unacceptable subsidies. official said the u.s. is in hosing levies of more than 400 sent in steel" -- steel imports from vietnam. president trump has lost illegal attempt to free up funding for his border wall. officials asked for permission to dip into a billion dollars from the defense department. expected to ask the supreme court to intervene. a million people have been told to seek safety as torrential rain continues to batter the southern japanese island of q shoe -- kyushu. they may issue an emergency warning. events that occur

in decades. it is expected to drop 35 centimeters of rain. excepting-- responsibility for the dismal showing in the general election. the election saw prime minister modi return with an increased majority. gandhi says congress must be rebuilt. global news, 24 hours a day, powered by more than 2700 journalists and analysts. this is bloomberg. >> thank you. to hong kong, for what to watch when treating kicks off. psi'se cost be -- co resilience will be tested.

there could be serious implications for global supply chains. bloomberg intelligence expects reduced orders. asianang aussie anna -- airlines and nintendo and sony. which are among the companies considering moving production out of china. results were released today. we do have a warning of suspicious activity. >> thank you very much for that. let's get more on what we should be watching. we are joined by our strategist. we have the aussie dollar eating the highest level in a month. >> it is playing out to some

governor wasy the fearing. he said in between the cuts the problem is when everyone is easing, you get list of an impact. -- less of an impact. they have cut twice. even before the rba governor sort of confirmed that, everyone was expecting the cut. and then they will sit for a while. the fed is expected to cut will be for the rba does, quite possibly twice. other central banks are in the easing path. that creates the path of least resistance. yesterday, you have the trade surplus which was a record. that is helping to drive the

dollar up. governmentclear the will get its tax cuts passed. that is seen as adding potential government surplus. a bit of fiscal stimulus coming. the aussie dollar up today. it was up yesterday. there is a good chance it will keep on going up. globalontinue to see the bond rally. are we going to see a surprise spike? >> it was a storm brewing. so,e the last day or positions being covered. people pulling out of those.

be driven lower by those technical and positioning factors. if there is an upside surprise, you might get a bit of a spike. not sure how far it will go. people will want to wait and see what powell says. been speaking devilishly. there is pressure from the trump administration. especially with these new board nominees. you would have to get something pretty spectacular. wage growth accelerating, you would think, to have traders deciding the path toward rate cuts. >> joining us from sydney. policy asout monetary

president of the cleveland fed, she oversees a broad range of american manufacturing. she says businesses are concerned about the simmering trade war but business plans remain generally on track. >> trade is definitely a concern. the majority of them say they have not changed investment plans. few saying i may be rethinking that, trying to reassess it. some firms have reorganized their supply chains. saying i wish the uncertainty was over. >> i want to go back to first principles.

let's do that. is it just an import tax on the businesses in your cleveland district? >> i don't see it like that. there are costs to imposing tariffs. if you reorganize your supply chain and do it in a way that is you are notient, being efficient how you organized your supply. will,re a tax if you either in a business that has to absorb it or they try to pass it on to consumers. we would like to get to a point where we have free trade. firms aree thing our telling us is it is the uncertainty where trade policy is going that creates some problems as they plan what they want to be doing with their

businesses. basic idea is china will move out any trade upset to vietnam? the simplistic nature of american president is extraordinary. you are at the heart of what america has to deal with. the fedd you recommend assist us through president trump's trade war? >> we have to take as given policies outside of the realm of monetary policy. uncertainty created by some of the policies, changes in policies, we have to take that as a headwind to growth. position tonough give advice on, to the president about his policies. he is obviously pursuing policies he thinks are correct. we take them as part of the

.conomic environment presidentveland fed speaking exclusively to bloomberg. will check the health of the sector in japan ahead of the sales tax hike. this is bloomberg.

futures in japan, traded out of osaka, higher by 0.6%. shortened trading day in the u.s. >> i am shery ahn in new york. a japanese convenience store operator reports first-quarter earnings later today. great having you with us during

this time of year. we are headed toward earnings season in the retail sector. this chart showing how the retail sector has grown. in the make dy -- -- anemicly. what is this telling you about consumer trends in japan? >> unfortunately, consumer sentiment in japan is bleaker. i would say yellow light blinking. the trend has been going on 2017.late the bonus announced by large companies, down 2.5%. department store first-quarter earnings were not this is an though -- warning sign. >> will that be reflected in

earnings or can some of their global operations offset that? >> right. holdings, there are two main segments. japan domestic convenience stores. the other one, north american convenience stores. facing a multitude of structural challenges. visitors. labor crunch, of course, hurting the profitability. the structural reform called for and the eyes will be on the progress. over side -- overseas, more room to grow in north america. room to grow in topline and bottom-line. >> domestically, a few

challenges, and opportunities coming down the line. sales tax, looks very likely to be introduced by the end of the year. what kind of impact will that have? >> consumer sentiment wise, it will be negative but mitigated. the day today staple will continue to have 8%. on the day-to-day staples. on the other hand, the big ticket items like cars and housing, people will probably rush before the tax rate hike and the appetite might drop after. it will taper down the appetite for the end of the year. >> there were a couple of mega-events on the horizon read the world cup. next year, the olympic games. boost.ld expect a what happens after those events are over?

worried,s what we are the post-summer olympic lola. i am focused on inbound tourism. they have been a rare bright spot. contribute into 4-5%. if that slows down, mainly driven by a chinese tourists, it can be damaging. >> can we expect a spike in spending? categories, i think there will be. particularly the high ticket price items. but we are not seeing as much of a rush as we saw and the last round. people are being cautious about spending right now. >> how was the government going to react after the consumption tax increase? and if you see a dampening of

spending, are you expecting the government to spend more trying to boost consumption? >> there are a number of measures the government has taken to offset the negative impact of the tax hike. it is supposed to be temporary including childcare subsidies. does notpetite rebound, there might be a chance permanent rather than temporary. >> you have interesting thoughts about what convenience stores can do to improve things for themselves. do you feel they are missing an opportunity? can you explain what they mean? stores in japan have been phenomenally successful. still operating under the assumption of analog patterns. you have more stuff and better

services. consumer behavior patterns have shifted. we are more fluid. convenience stores have not captured that trend. -- it may be an asset in all corners of japan. macro factors?he they put the strength of the yen? is one outcome of the trade war and trade issues. they are positive and negative. mindwill hurt the business and the consumer mind.

the currency effect on japan will be mostly the stronger yen. stronger buying power for japan. they import a lot of things. that is good for the retail sector. much foryou very joining us this morning. our interactive tv function, you us live as well as dive into the securities or functions we talk about. you can become part of the conversation and send us instant messages. for bloomberg subscribers only. this is bloomberg.

♪ ♪ ♪ this is "daybreak asia." french unit of samsung

being charged over allegations the company breached ethical commitments. the charges of misleading practices were filed by judges following complaints from nonprofit organizations. >> the nikkei news says there for hpn delta movement notebook production away from china. the nikkei says other tech giants including microsoft and nintendo are also looking to move manufacturing out of china. much of itshifted production to taiwan. offering $100 million and the families of those killed in two max crashes. worldwideo the

grounding of the max. bloomberg intelligence has been theling -- says settling lawsuits could cost $1 billion. banker has been banned for life. the decision follows similar moves by the u.s. and singapore. he has already pleaded guilty to u.s. charges of conspiracy. markets in south korea and austria get underway at the top of the year. let's turn to sophie. futures pointing to gains. tech materials take effect -- if those restrictions

are not withdrawn. stocks on the radar and japan. we are keeping an eye on the likes -- after first-quarter sales that missed estimates. a 19% yearly drop. we are watching telcos. they have agreed to share regional stations to promote faster buildout. also, it has been rated neutral. in seoul, keeping an eye on korean shipbuilders as china moves closer to merging its biggest shipbuilders. >> thank you for that. let's get a look at the currencies trading around the region. the japanese yen, after strengthening. small tweaks to

their bond buying program. we are seeing the japanese futures market headed up. we could see a deal we reopen. one --seeing the chinese yuan reopen. president trump speaking about europe and china playing a currency manipulation game. we are seeing the aussie dollar holding steady. cut targetshe rba this week. signaling a pause in the easing cycle. we saw the dollar -- aussie dollar rally. weakening.one -- won in.ave data coming >> thank you. fidelity's hour, cross asset specialist joins me

to talk investment strategy. heramy king gives us opinion. we have the market open next, this is bloomberg.

>> good morning, i am paul all in -- alan. >> i am shery ahn. >> i am sophie kamaruddin. welcome to "daybreak asia." ♪ top stories this thursday, asian markets look set to rise. risk assets set to enjoy the holiday. talks with china resume in the headline.

beijing and brussels accused of currency manipulation. >> going offers $100 million to the victims of the 737 max 8 disaster's. the final cost may be higher. straight to the market action. >> we are seeing green shoots with the nikkei and the topix. aftervery much and focus benchmark treasury rates fall. jgb, not moving much. aftered to strengthen that. the yen is holding steady. a break for the july 4 weekend. taking a look at the mood in korea, upside for the korean won . the index up a third of 1%. stocks very much and focus.

they take effect today. which moody says his credit negative. we are seeing shares fluctuate at the start after a three-day decline. take a look at the mood in sydney. up 0.1%. , buying you 17ar u.s. cents. a 30 day of gains. .> thank you very much let's check in on the first word news spirit >> president trump has lost a legal attempt to free up extra funding for his border call. rulingtained an earlier barring the administration from construction. they had asked for permission to dip into $1 billion from the defense department. the president expected to ask

the supreme court to intervene. president trump insisting he has not given up his campaign to add a citizenship in the census form. he tweeted any news of the commerce department abandoning the question is fake and insisted the administration is assessing all options. it may seek new guidance from the supreme court. ran morning europe it must do more to protect the 2015 nuclear deal. tonium enrichment will move the next level on sunday. comments raise pressure on european nations who backed the deal which has been unraveling since last year. iran has reached low-level uranium limits and will move forward toward weapons grade material soon. of july 7, we will take the next step. if you want to express regret,

do it now. if you want to issue a statement, do it now. our advice is to go back to the negotiating table. the lawto respecting and resolutions of the european security -- of this security council. >> china warning the u.k. to keep out of hong kong politics. beijing issued a strongly worded statement saying the territory is not what it used to be. and the british government has chosen to stand in the wrong side. 13 people have been arrested in connection with the violent protests. global news, 24 hours a day, on twitter, this is bloomberg. >> thank you. u.s. and chinese officials set to resume trade talks in the

coming weeks. at the same time, the trump is turning up the heat. our correspondent selina wang. how will these duties affect china? >> the commerce department is accusing several asian nations of unfair trade practices including china. some of the steel wheels being imported into the u.s. are being unfairly priced. vietnam getting hit hard with duties of up to 400%. arguing some companies and businesses including china are rerouting through vietnam to get by some of these higher tariffs. we did see this trade truce. there aretrates issues including fundamental policy,round economic enforcement practices, and huawei.

he u.s. is hitting back at challengenstitutional to a sales band. .ot allowing american sellers this is about the ban of federal agencies from buying equipment. there are a lot of questions, despite the temporary truce. purchases could be a part of the goodwill agreement. how much do we know about this? china ise heard considering using this as part of a goodwill part as these trade talks start to resume. american counter arts are not yet aware of this. inyou remember back december, china had agreed to buy 20 million tons including pork, soy, and corn.

the amount is not likely to be that much and the total volume is going to depend on how these talks continue. we are hearing from economists the amount is likely to be less before considering all these outstanding issues. >> we heard from larry kudlow saying talks are resuming on the phone. the situationthat is called a dispute, not a trade war. there seem to be many different views and voices coming from the administration. quite's that is correct. we did hear from peter navarro, saying this is not really a trade war. it is more of a legitimate dispute. the story the numbers towel our policies are not working right now. we had a data dump showing the trade deficit has increased. if you look at this terminal

chart, they miss forecast and thaneficit widened by more forecast. goods trader, the gap widened. with imports and exports surging. this does potentially reflect companies rushing shipments. many economists dispute trump pot fundamental view that the deficit points to a weak u.s. economy or as a result of trade agreements. many argue it is the result of underlying american economic factors. like tariffs are not going to reverse these numbers. all right, thank you very much.

president expressed optimism, he took a swipe at china and europe. u.s. should match them. let's bring in our strategist. the president is upset. he has been for a while. does he have a point? the longhe does in run. we have written over a very long time, currencies are a bit of a zero-sum game. so far, markets not having a big reaction. what we have not heard and the reason why markets will stay a little edgy is because concerted intervention, that is what they are waiting to hear.

the u.s. treasury who controls all things to do with the dollar, they are responsible for if there are changes. we have been getting used to the idea the u.s. has an official policy of having a strong u.s. dollar. past, theen in the u.s. arranged times when they have wrought other countries in. the last time they intervened was to make the dollar stronger. it was weak especially against the yen. time, we havelong had situations where the u.s. has got other countries together to weaken the dollar. if mr. trump gets to frustrated and the fed lowers interest rates, it is possible we will move toward a situation where the u.s. will call in its allies to see if they can weaken the dollar. there are a lot of steps to take before we get there, but that is something that is going to worry

the markets. is the u.s. going to rally its friends and we can the dollar? the dollar? >> we are seeing the 10-year you yield below 2%. are we going to see fireworks this friday as we get the labor report? >> it is always unpredictable. we usually get decent movements one way or another. we have seen the private sector report already, a bit soft. suggesting for some people the nonfarm report would be on the downside as well. anything is possible. liquidity will be a stretch. people are turning it into a long weekend. the numbers are a bit off target read it adds to the possibility of a decent move on the day. people taking advantage of the fact there are fewer people around to trade and protect the price ranges.

it will peter out quickly. most people will go home early. we have a concentrated time of action. it will die down and wait for monday. inwe are seeing a rally china bonds. is that going to last? although analysts have put their projections in place, they hadn't think in the fact short-term money markets are low. good, theis so short-term rates have gone below official rates in china. they are hoping -- helping to fuel the bond rally. pboc does note look like it wants to do an official cut, the market has decided to drag interest rates

lower. that is helping bonds. though they may look attractive in a relative basis, the fact that the rate is so low, it does make them look fairly decent in comparison. all, the reasons for selling chinese bonds are pretty small. you are probably going to keep on to them. strategist in for joiningthank you us. boeing offers $100 million to the victims of the 737 max crashes. >> central-bank easing has our next two bullish on markets. next --oyle joins us anthony doyle joins us next.

>> this is "daybreak asia." >> i am paul allen instant. -- in sydney. anil trump is unhappy about the level of the u.s. dollar. he has been accusing europe and china of playing a currency manipulation game. it has us wondering. we have anthony doyle, global cross asset investment specialist. thank you for joining us. let's start with those tweets from president trump. need to act similarly? short see dollar positions are building. his time up for the u.s. dollar? >> the expectations are the fed will cut at their next meeting

at the end of july. the debate is whether there will be a 25 or 50 basis point cut. seeking is the fed to to ease policy. the ecb, bank of japan, cutting rights. generating competitiveness is one tool banks can use to support their economies. it is the only game in town at the moment. cracked what about president trump himself? anything can happen. can you rule out the potential of intervention by the u.s.? wax absolutely not. -- interventionist president. i would not be surprised if that sort of jawboning was to increase. particularly if you do see

monetary easing. it would require a coordinated effort from a number of the g7 nations. whether that is going to occur or not remains the question. to overweightved treasuries. i do wonder, can we get a surprise? a spike in yields? put too much emphasis on one data reading. labor market is fundamentally strong. we expect a payrolls number of $175,000. the big expectation is whether the fed underwhelm's in terms of future monetary policy action. around about 80-100 basis points over the course of the next 12 months.

surprised by as lack of action, that would suggest pressure in treasuries positionward rate our reflects the potential for fed action in the coming quarter. >> no wonder, that aggressive stance. we have seen u.s. stocks rally. the chart showing for second quarter, u.s. stocks have been the big winner. the line in white, outperforming every other market. what is the risk and the second half? >> it is not only equity markets, it is all markets. phenomena isng markets are rallying. u.s. equity market, a strong out performer.

that reflects weakening u.s. monetary policy stimulus. the cliche is do not fight the fed. central banks globally are easing. on his a signal risk back. we think equities, asia and fromcular, could benefit additional stimulus measures. >> you say don't fight the fed. the fed is cooperating with markets, isn't it? they are expecting 50 basis cuts. i am reminded of the scene from blazing saddles. holds himself hostage and threatens to shoot himself if he does not get what he wants. quiet to cut rates so soon after hiking them suggests the december rate hike was an error.

it is unusual to see that could -- the fed cutting in response. we think the u.s. will continue to grow over the course of the next 12 months. we expect the same from the global economy. previously, markets had been concerned the global economy was entering into a downtrend reflecting the long expansion we have experienced. we think we are going to see the said act. that will continue to support equity markets. >> disappointment could be interesting, couldn't it? you for joining us. you can get a roundup of the stories you need to get your day going. alsoberg subscribers, available on mobile.

you can customize your settings so you only have news on industries and assets you care about. this is bloomberg.

boeing is offering $100 million to the emilys of those killed in the two -- the families of those killed in the 737 max crashes. a string of lawsuits could cost a billion dollars. how bad could this compensation claim get? settle all the litigation, perhaps even more if boeing is found to be at fault and knowingly put these planes in the air. figure, thethat

$100 million is a drop in the ocean. it is a welcome payment for the families. less than $300,000 each. they are unlikely to get that because some is going to local communities, local governments, economic element. boeing has come under criticism at the start, recently we have seen the chief executive express more sympathetic tones. again, he apologized for the loss-of-life. perhaps it achieves both goals. paints going in a slightly more sympathetic light. >> it has been a big issue for airlines. they have had to delay some retirement of planes. >> that is right. this is a problem that will not

go away. problem.bates the use an seen emirates enormous double-decker. it is deploying it on a 211 mile route between dubai and oman. use of resources. that says two things. a reflection of how that mighty bird has fallen. it was designed for long-haul routes. used to haul. it tells you problems airlines face. are going to have to redeploy their fleets. by, the month goes

backlog gets greater. it is not just the planes that are grounded, it is the orders that cannot be delivered. they are turning out more than 42 max is a month but they cannot go anywhere. it is a problem for boeing because it is probably going to have to foot the bill. >> thank you for joining us. let's get a quick check of business flash headlines. it is finalizing plans for asset sales. aimed at ensuring dish can become a strong player. the justice department wants to maximize competition before allowing a merger. french unit of samsung is being charged over accusations the company reached ethical commitments. the charges were filed by judges

following complaints from nonprofit labor organizations allegations are unfounded according to samsung. this is bloomberg. hey! i'm bill slowsky jr.,

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♪ >> this is "daybreak: asia." the first word headlines. hisident trump resumes attacks on china and the eu, claiming both are manipulating currencies. brusselsd beijing in are pumping cash into the system and said the u.s. should do the "dummies"ntinue being who watch other countries play games. his comment sparked speculation the fed could intervene to weaken the dollar. the u.s. government is hitting band fornst the sales huawei.

the justice department once a texas judge to dismiss huawei's suit. it is seeking to invalidate a law passed by government borrowing purchases of its products. is trump administration imposing additional tariffs on steel from asia. the commerce department said it has concluded that some steel from china is being sold at less than their fair cost in the u.s. due to unfair subsidies. yesterday, the u.s. said it is imposing levies on steel imports from vietnam. one million people have been told to seek safety as torrential rain batterers the southern japanese island. widespreadwarning of flooding's and landslides -- floodings and landslides.

the storm is expected to drop as much as 35 centimeters of rain in the coming hours. gandhi has quit as leader of india's opposition party, excepting responsibility for its dismal showing in the recent election that saw part minister narendra modi return with an increased majority, whilst congress recorded its worst performance since india's independence. gandhi says congress must be rebuilt, and that requires her decisions. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. her decisions.s -- hard decisions. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. paul: thank you. time for a market check. let's get over to sophie. >> green across the equity screen with the modest rise from wall street tracking in asia.

, the bond rally is taking a breather. addingfive year yields three basis points as traders assess the latest comments will make a reasonable decision based on conditions. equipmentone office player rising after it beat estimates. a retail furniture operator is rising 4.4% after its first quarter operating net profit beat estimates, plus reported an increase in japanese and overseas stores numbers. flipping the boards and checking andan chip stocks, samsung

sk hynix managing to advance despite warnings of new measures against japan. shery: thank you for that. his decision to impose restrictions on chip related materials to south korea. by minister shinzo abe said he cannot get the exports preferential treatment because so, create is not abiding according to agreement on world war ii issues. this has been going on for years. how is this fight different than before? the fight has been mostly in a diplomatic and political arena has moved to the economic front. we are seeing moves by south korea targeting japanese companies, or at least their assets in south korea. the move announced piper minister oabe is targeting

japanese materials vital to korea's tech industries, materials that can be used for displays and chip manufacturing. they are predominantly made in japan, so the fight is going to the economic front, which it has not really happened before. the fight has been mostly a war of words and diplomatic chill, but the two countries are so interdependent in terms of their economies and have grown together that business interests in both companies have been on the sidelines, but they have enjoyed the piece on the on thec front -- peace diplomatic and economic front. paul: what are the risks of this escalating, and where would it go? what are the dangers here? >> the dangers are corresponding

measures going back and forth. we are seeing it today. shortly after the japanese import restrictions took effect, south korea is considering corresponding measures. it is considering taking the matter to the wto. if south korea does some sort of countermeasure, does japan to respond, and if japan responds, we will see the cycle continuing. it could result in a chill whoeen these two countries are major economic partners in both allies of the united states. there is a security element to this as well. it is all coming together with this dispute. shery: we have seen the u.s. usually step in when there are tensions between japan and south korea. what is the trump administration doing now? are not seeing that much

from the trump administration. president trump was in the region in the past week at the g20 summit over the weekend, then he went to south korea, which included to the trip to the dmz where he met kim jong-un , but there hasn't been any public display by the trump administration trying to soothe tensions between the two. we have not traditionally seen the u.s. stepping in behind the scenes to cool tensions. there have been prior disputes over the past few months that have escalated, mostly political the u.s. wouldut traditionally say enough is enough and it is time to stop until south korea and japan we have to get together, because its security interests are aligned with those of japan and south korea. up aare looking to put

unified front against north korea, antimissile, missile interception. there has to be coordination between the three governments to make sure they know what they are doing in the event that north korea starts firing missiles that are not for test purposes, so the security arrangement is vital to the u.s. interests and doesn't help when it's two biggest allies are fighting economically and diplomatically. editorur asia government , thanks for joining us there. narendra modi is preparing his first budget. our southeast asia economy reporter joins us from singapore for a preview. what is the focus of the budget going to be? >> good morning. yes, this will be an interesting budget. it is the first one since prime minister narendra modi got a decisive election win a few

.onths ago i think the focus of this budget is going to be clearly about growth. was one ofwth, india the fastest growing major economies in the world. it slowed down quite quickly in the first part of this year, so we are going to see probably a abouthat will -- tone boosting growth and making sure that narendra modi can deliver on his campaign pledgers that he made -- pledges that he made that decisive win, so overall expect a lot of measures around what the government can do to boost growth. shery: of course we saw quite a surprise pick from the window modi-- from narendra selecting the first female in almost 50 years. do we know what she would do to

boost growth? theree of our sources say will be some measures around personal income tax relief, helping to support the consumption in the economy. india is a domestically-driven economy, and consumption makes up almost half of the economy, so we will probably see some personal income tax relief. we will probably get some more setails around the bjp' campaign pledges. cash handouts and a huge infrastructure rollout plan. we are looking for more details around that. the banking sector is one that ye on.ors have their e it has been under strain, particularly the shadow banking sector.

the market is looking for any measures that would support that particular industry and unlock some of the strengths. at the same time though, the new finance minister does not have a lot of room to play. is among the widest in the region. 4%,s sitting at three point the target for this year. the expectation is that will widen to 3.5%. even so, she doesn't have the revenue room to play with in order to boost that expansion. she will also have to big announce some revenue raising measures, so perhaps some more detail around state asset sales and possibly extra transfers from the reserve bank of india. paul: ok. if that plays out the way you describe it, the budget deficit

whiter, some asset sales, how is the market likely to react to that? >> we have spoken to some bond investors already. they don't seem that concerned at this point without mild widening in the deficit. widening can be tolerated by the market because the extra bond issuance can be absorbed. i think the key at the moment is , so anys really weak measures in the budget to support the growth outlook is going to be welcomed and probably positive for the market in the longer-term. also, we have a situation with inflation particularly low, so there is room to increase borrowing. we have had the rbi cut interest

rates, times this year and has moved to anything biased, so it has signaled it will continue to cut. from the bond market perspective, it is a favorable environment now and they don't see any major risks yet on widening the budget deficit. shery: thank you so much. our economy reporter in singapore. australia national university senior lecturer amy king gives us her insights on china's foreign policy in the future of trade from singapore next. this is bloomberg. ♪

paul: this is "daybreak: asia." house, advisore peter navarro has two words to

describe the chances of the trade deal with china, very bullish. the revived face-to-face talks may take a while, but the two sides are in a legitimate trade dispute, not a trade war. >> plans are being made to reengage with the chinese, both in china and here in the united to do, so what we prefer always is to negotiate behind closed doors in good faith. says: our next guest conditions are not yet right to reach a traduce. amy king is a senior lecturer at australia national university, but joins us from singapore. it is interesting to see peter navarro very bullish on china trade talks, given he has been one of the biggest china hawks in the administration, and they have not been too happy with softeningperceived as

from president trump site the latest g20. >> that's right. we are seeing some confusing signals. the world was pleased to see the meeting take place at the g20, and a pause intentions and an agreement to return to the negotiating table, but we are long way off from a long-term, sustainable deal. shery: we see reports from the administration that they are going at it against these chinese companies, including the doj keeping that federal ban on , so whatwei products resolution can we expect in the meantime, even if we get a trade deal between the two presidents. doj report out the suggests the real difficulties. strategy ising

creating few incentives for the chinese to come to the negotiating table. the punishments are hard line on huawei. it is strengthening voices on the chinese side who would see a crackdown on openness and encourage greater state-led investment and industrial policy in china. , we arehinese side seeing a strengthening of rhetoric about fighting with the united states, being willing to fight to the end, and an unwillingness to sign a deal with the u.s. that is perceived to be one-sided or locks china into a disadvantageous position. ,aul: that rhetoric on huawei to what extent has it put the u.s. and its allies in a position difficult to climb down from? it is tough. congress doesn't seem to have any appetite to water things down. austria, new zealand, canada likewise. how can there be a resolution

from this? andhe tough line on huawei the strong sense of decoupling, particularly on the high-end technology side makes it difficult to find a way to move forward. although countries like australia and others have been willing to go along with the huawei on 5g technology, more generally in the region and among u.s. allies, there is real concern about the trump administration's desires to decouple the economy from china and expect u.s. allies to go along as well. exactly where we moved to from here is a question that is very open ended and uncertain about what comes next. be what a resolution can reached is something we are still trying to figure out. change theit political landscape in the u.s. as well ahead of the 2020 election?

it has painted most of the candidates in a corner. they need to seem to be tough on china. >> that's right. the domestic political environment in the u.s. there being tough on china is a political asset, and the feist year the rhetoric, the better, but that does not lend itself to finding constructive policy solutions. ultimately we need the world's two largest powers to find a way to work together for the sake of the global economy and their two economies as well. neither side will benefit from this trade war. i don't see appetite in the u.s. to meet china partway. instead it is one-sided, china needs to move, china needs to toorm, and an unwillingness recognize that the trump administration's protectionist measures, punishment of allies and security partners is not

creating much of an appetite for countries to work with the u.s. or support the u.s. in the approach it is taking towards china, so u.s. political candidates in the u.s. more generally may find themselves increasingly isolated on the question of its approach to china. shery: what is the risk of multilateral organizations being paralyzed as it is blocking nominees to the wto panel? how does this increase risks as you are seeing different bilateral tensions on trade? >> it is a huge risk and we cannot underestimate the critical importance of organizations like the wto and dispute settlement that can-isms to uphold the economic order we have benefited from for the last 70 years. it requires countries to abide by those rules and participate by those rules. we need countries around the world not to sit back and wait for the u.s. and china to prop

up those institutions or find an agreement. instead, countries like japan, australia, indonesia will need to do the work to reform those institutions themselves. we can't sit back and wait for the global powers to take the first step, because clearly they are not going to. shery: they have already set up other multilateral deals by themselves. you have the rcep, which they are trying to finalize the end of the year. how will this affect the u.s. standing in the asia-pacific? >> countries in the region are eager to have the u.s. remain an active player in the asia-pacific. the failed u.s. involvement in the tpp was a clear sign of a regional country strong desire to have the u.s. as an active presence. because the u.s. has moved away, countries have turned to mechanisms like rcep.

that is a very positive step. there are a huge number of emerging economies fueling economic growth and they are participating in rcep. the question is whether agreements like rcep can be left open enough so that the u.s. could return to those kinds of agreements when it is ready to do so. we don't want to create exclusive economic locks that set up barriers between parts of the world, so hopefully rcep can move in such a direction for countries like the united states can join when the time comes. right, amy came, thanks for joining us this morning. more to come. this is bloomberg. ♪

paul: a quick check of the business flash headlines. three of australia's biggest lenders are teaming up to create a new digital platform using blockchain technology. the three banks have jointly launched an eight-week pilot program. the banks are working with ibm and an austrian retail company to manage guarantees often required as part of a retail property lease. a former goldman sachs banker linked to the 1mdb scandal has been banned from the hong kong financial sector for life.

the decision follow similar moves by the u.s. and singapore. he is accused of working with the malaysian businessman to divert billions of dollars from the state investment fund and has pleaded guilty to u.s. charges of conspiracy to launder money. paul: the u.k. news says hp and dell plan to move 30% of their notebook production away from china in a bid to avoid tariffs on u.s.-bound goods. other tech giants including microsoft, sony, and nintendo are looking to move manufacturing out of china. bloomberg has reported that google has shifted much of his production of u.s.-bound motherboards to taiwan. shery: let's get a look at markets. >> i want to highlight some companies considering shifts in production away from china, acer. and

market accounts for 20% of acer's notebook pcs revenue. 44%a tobacco shares jumped before closing lower, but with that pullback, the rally has made it the best-performing ipo this year. we are watching chinese gas stocks as well. removes apolicy regulatory overhang on the sector. shery: thank you for that. that is it from "daybreak: asia" ." the china open is next. this is bloomberg. ♪

♪ was it the hardest job you ever had? gen. kelly: it was very hard but very meaningful. not very enjoyable. david: your family was a blue-collar family. gen. kelly: very blue-collar. my dad was a world war ii vet. greatest man i ever knew. david: so you were in combat. did you expect that you would survive? it was very dangerous. gen. kelly: it was dangerous. it's a lot of shooting and bombs and whatnot. we are marines. david: did you ever say to the president that maybe the tweets are too much? gen. kelly: the president feels very strongly that his tweeting goes around the press. >> would you fix your tie please? david: well, people wouldn't recognize me if my tie was fixed, but ok. le