paul: welcome to "daybreak australia." sophie: we're counting down to asia's major market opens. ♪ paul: hear other top stories we are covering in the next hour. wall street. investors assessed mixed corporate earnings, a leading barometer of u.s. economic growth which dropped sharply. no happy ending for netflix. shares sink on a surprise fall

in u.s. subscribers and slower than expected growth overseas. shery: let's get you started with a quick check of how markets closed. we saw pressure across the markets with the s&p 500 falling for a second consecutive session, finishing below that 3000 level. we have industrials leading the decline. there was a mixed bag of corporate earnings, not to mention lingering trade tensions weigh on sentiment. the dow down .4%. dow transportation average, a gauge of economic growth, also sinking. the fed beige book, nothing that , with jobs slowing somewhat. let's see how things are shaping up. sophie: we are likely to see another subdued session. already off yield

this morning, but there is some suspense to be had today. plus, we have jobs data from a strip yet hong kong as well as trade figures from japan. also in the spotlight today, tsmc with analysts respecting -- analysts expecting signs of a revival after a dismal first-half. paul: thanks very much. iran offering a grim outlook for any chance of opening new nuclear talks with president trump. the foreign minister has told bloomberg the u.s. shot itself in the foot by pulling out of the nuclear accord. he also accused european countries of failing to carry out their own commitments under that 2015 deal. we spoke to john mickelthwait in new york. is an agreement, a

multilateral agreement, and no multilateral agreement can be implement it unilaterally. everyone has to chip in. europeans believed this was important for their security. if it is important for your security, you invest in your security. you don't just get security by praying for it. you must invest. you must do what is necessary and europeans need to take the necessary action. the united states has basically, in my view, shot itself in the from thisthdrawing agreement -- john: what is the necessary action europeans need to take? do you want them to buy the oil on credit? >> it is up to them to decide. they have made a commitment that iran's economic relations with the rest of the world will be normalized. they made the commitment after the united states left the deal. they knew the u.s. was leaving. they knew the u.s. impact on their economy, but they committed themselves to allowing

a rent to sell oil, repatriate its money, have shipping, have insurance, and we have none of that. they need to live by their commitment. if they don't, and we do not have a quarrel. we have a mechanism within the jcpoa, within the nuclear deal. we negotiated this deal with open arms without trusting each other. nobody trusted each other. that's why we have mechanisms that we reduce our commitments until they comply. once they comply, it can be reversed, but if we go beyond certain limits, the reverse would be much more difficult and much more costly. withe you continuing enrichment? >> yeah, we will continue with steps, and these steps are legal, in line with the agreement. we're not going to build nuclear weapons because if we wanted to build nuclear weapons, we could

have built a long time ago. john: you're very clear on that. do you think you could build nuclear weapons tomorrow? >> very rapidly. had we wanted to build nuclear weapons, we would have tilted during the time we paid the built itwe would have during the time we paid the price of nuclear weapons. john: to be quite precise about it, do you think you could build a nuclear weapon within a year or very, very quickly if you wanted to? >> if we wanted to, but we don't. the supreme leader had made a commitment, a religious commitment, which is not breakable. his religious view is that nuclear investments are forbidden. john: president trump said there had been noises recently from his side that he is willing to

sit down and talk and all these things. line? uld be iran's red the kind of issue he seems to be bringing up with people close to him is the issue of missiles. he says what about having an ideal on -- idea on missiles in general? >> we have paid the money. we have invested in the steel. we're not going to buy -- different horse, though. >> we paid for that excepting certain limitations, accepting certain sanctions. i mean, the missile sanctions were not lifted by the united states, and they were not lifted by the united nations because we were not prepared to discuss them. we changed the language in the resolution, which is very clear. in 20a different language to 31 then it was in 1929, the previous resolution, so it's clear what we decide.

they have misinterpreted what i said. i was very clear saying the united states has a lot to do before it can talk about our missiles. first, implement the agreement they first made. we did not have a revolution in the united states. a government of the united states elected by its people had an agreement with iran, and that agreement was endorsed by the security council where the aited states was and is current member. nothing has changed, but they have to live up to their commitment. start lookingd to at where the problem is. the problem in our region is not the $16 billion a year we spend on defense. it is the 67 billion dollars that saudi arabia spends on buying weapons trump the united states -- weapons from the united states and other countries. united states is sending $50

billion to our region. that has to stop. that is making our region flammable. bloomberg news editor-in-chief john micklethwait joins us now. that was a fascinating conversation. there are some views that given how unilaterally the trump administration has approached iran, withdrawing from the nuclear deal, alienating european allies, that a man would benefit from not doing much. why does iran feel it needs to act out? john: i think iran felt they gave the europeans quite a lot of time. from their perspective, rightly or wrongly, they think the americans polled out and the , andeans have these deals he stresses the europeans signed on to this the first place and signed on again when the americans pulled out. this, but people

in iran feel the europeans were playing for time. shery: this was a push against europeans, not against the united states? john: it is a push to get the europeans to do something. they are not able to sell their oil or rather they can only sell it to very dodgy people. their deal is with the government, but it is not the governments who would do the buying. europeans say they would do stuff, but they cannot control what a private company does, and private companies are all subject to american sanctions but do not want to do it. americans are in a whole -- the iranians are in a hole and do not get any kind of traction on it. said theypresident could develop nuclear weapons easily if they wanted to in later said they could close the strait of hormuz if they wanted to. would they use

their leverage? game they arethe playing. they really a suspect do not want to close the strait of hormuz, but there comes a point where if they cannot get anything they want, that would become at least one option for them. the bits which are difficult -- he does say this repeatedly -- "we could rapidly get a bomb if we wanted to." that is something which they will always hold a threat over people. if that's true or not, that is something eyes around the world are desperately trying to find out. the main thing is the iranians have two pressures -- the pressure from the outside. the pressure inside is really the one that matters. if you are a regime like that, you need the support of your people. it is worth pointing out that iran for all its many faults still has some democratic habits. it is difficult to give the iranian people perpetually on your side if they are getting

hammered by sanctions. shery: of course, new sanctions from the trump administration on top of the fact that president trump has question america's interest in the strait of hormuz , at the same time saying that he could have dialogue with no preconditions. the arabians understand where the trump administration stands and does the u.s. have a strategy here? paul: i think on both sides, there is a degree of waiting. trump is able to say he can have the meeting whenever you want, no preconditions, but he knows that he would have to have something, i think, some kind of deal to offer the iranians. from the iranian side, you hear these rumors of the french, the to some, who are acting extent as in between years on this. they can say the americans might give you this if you did that. trump has at least in this way

done himself no favors because it deal of good deals like mexico, which again we asked about, nafta, from the iranian point of view is rather a worrying one. yes, trump renegotiated the deal. then trump came back again and said he would tie something like immigration into it. from that point of view, it is hard for a power, especially one suspicious, as iran is, to come in. similar to china saying the u.s. is too greedy. john: very much the same idea. to firstt's not get word news. >> thanks. there are renewed fears hackers continue to infiltrate u.s. targets furthering concerns about potential meddling in upcoming elections. microsoft says it has detected more than 700 attempted breaches hashe past year and notified about 10,000 customers that they have been targeted or

compromised. the report points to russia, iran, and north korea as the most persistent hackers. president trump wants more information about how the pentagon drafted a huge cloud isputing contract that it poised to award you either amazon or marquis off. the deal is worth up to $10 billion over a decade and will be given to one of the pair next month with amazon seen as a favorite. but the president has been told of complaints that companies including oracle were frozen out of the bidding. a no deal brexit is seen as the pound to dollar parity. bank says the risk of that happening is growing daily. the pound hit a two-year low wednesday as boris johnson and jeremy hunt hardened their brexit rhetoric.

following a profit warning from , the industry reported a 7.9% year on year drop in sales for jim, the biggest slump this year and the knife decline in the past 10 months. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: thanks very much. still to come, don't call facebook's libra a cryptocurrency. next we discussed the difference and the dangers. and a negative view on the dollar. we find out why. this is bloomberg. ♪

paul: we are counting down to the sydney open. we have futures pointing lower at the moment by about .2%. u.s. equitiessaw close reasonably far into the red on this major indexes. for more on the markets, let's bring in the cio of attraditional strategies investment firm with $350 billion in assets under management. i want to start with the bank earnings we have seen so far this week. fed easingree is the weighing on the profits for the banks? >> banks are having me and good morning. interestingly, the fed tightening is somewhat more -- the fed the banks

tightening has been weighing on the banks and what investors have really been looking through is net interest margins which have been falling, but that is really a legacy of all of the fed rate hikes. i think what we will see going forward is that as monetary policy clearly has flipped, it has flipped into a significant easing mode and we should see a rate cut of 25 if not 50 basis points by the end of the month. left bestves that are consumer activity and trading, and the one negative which is that we think net interest margin should be improving as the quarter and the year progresses. paul: already, we are seeing some fairly mixed results. what does that say to you about the limits of the fed in supporting the equities market?

>> that's a great point. just after the close, netflix disappoint a disappointing subscriber base. certainly, this is going to be in the back of the fed's mind. earnings are also running up fromst very strong comps prior years, so that is an issue we will also consider, but broadly, they will be looking at the situation they are in in terms of economic activity, but more importantly, inflation. earnings will certainly be the headlines that they will be reading, but inflation and the

stubbornness of that inflation is really front and center off policymaker mines at this point. investors are starting to question. even today, we had a relatively positive beige book. we think the economy is doing relatively well, but i think the mindset of the fed is a little bit different. i think the mindset is more along the lines of they realize they only have a few arrows in their quiver, they're dry powder, if you will. they have some but not a lot, and therefore they really feel as though they need to be proactive. they don't want to find themselves kind the curve at all. while this may be somewhat of a soft patch and on the surface it may be easy to read some of the tea leaves and wonder why we are even talking about a fed cut at this point, i think policymakers are looking much further ahead and recognizing the risks they somewhat of ain limited position with their firepower. the one in done i think is

unlikely. i think it would be a 50 basis point cut probably coming in july. we're not all the way in the camp of what the market seems to be pricing in, which is three cuts this year. we are more along the lines of a 25-basis point cut in july and probably one of the end of the year giving the fed some time to receive a few more data points along the way. shery: many central banks around the world watching what the fed will do and we could be headed easing as aglobal whole. rrr cuts,en several but really no movement when it that to a key lending rate has stood still since 2015. markets and economists in a way under appreciating the firepower china has at this point? >> i think that is a great point

and we would absolutely agree with that. first, to your first comment, we are definitely in a global easing cycle. has absolutely flipped, this global coordinated recovery we were all enjoying in 2017, thinking about what that means from a tightening monetary policy, we are past that at this point. every major central bank in the developed world is in easing mode. this week, we will probably see easing from the emerging world as well. to china, specifically, i think you are right. the market does seem to be disappointed that china is not massivemplementing this 25% increase in government spending like we saw last time around, which is why i think the market is under appreciating the stimulus that is already in the system. rateentioned the reserve cut. absolutely true. what about tax cuts as well?

cutsor less indirect tax for corporations and consumers. china is also underappreciated from the consumer aspect of their economy. we do find ourselves very positive on china stimulus, therefore positive on emerging-market equity performance as well. thank you for joining us. plenty more to come on "daybreak australia." this is bloomberg.

i'm shery ahn in new york alongside bloomberg technology chang in san francisco. let's talk about netflix tumbling in late trade. the streaming giant shocked investors and analysts by reporting a drop in u.s. customers and much slower growth overseas.

basically, the higher prices that were implemented did not sit well with u.s. viewers. >> absolutely. this was a real -- i mean, there's no way of sugarcoating this. are not new tors this roller coaster ride, but i think with the quarter really -- what thewas quarter really highlighted was is this a minor blip we are seeing or the beginning of a slowdown? as you point out, the price hike obviously had a huge role to play in this, but along with that, management also highlighted other factors seasonality. >> how much does this have to do with having an original content hit? we know "stranger things" has just come back. they are expected a surge of subscribers in the current quarter as a result of that. 10 netflix keep the hits coming?

>> i actually think they can. we have so many of these zeitgeist-hitting shows they have been able to put out. they have had huge breakout hits, "stranger things obviously a good example of that. what you have seen this year is thaty strong site line of blockbuster slate. lots of returning hit shows including crown, which will come out in the fourth quarter. if you look at their outlook for the third quarter, it seems pretty strong, so i think they will be able to lure those subscribers back. shery: thank you. is "bloomberg technology global link." don't miss "bloomberg technology" at 7:00 a.m. in sydney, 5:00 a.m. in hong kong and 5:00 p.m. in new york. up next, a wrap of u.s. bank earnings as the big five crack $30 million in profits. this is bloomberg.

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to understand your best plan of action. so why didn't we do this earlier? life line screening. the power of prevention. call now to learn more. paul: just get you across some breaking news out of australia right now. have aluminum production meeting estimates, 982,000 tons for the year. manganese output, 1.2 million tons for the quarter. south32 is the world's largest producer of manganese, an ingredient in the steelmaking process. also expecting an update on the

sale of south african coal interest in the second half, looking around december there, so just some numbers for the quarter. let's check in on first word news now. >> the iranian foreign minister has told bloomberg that washington has "shot itself in the foot" by pulling out of the december 15 nuclear deal. he also said nuclear powers had failed to offset u.s. sanctions against tehran and although iran has failed to -- although iran has the ability to build nuclear weapons, they will not do so. buildare not going to nuclear weapons. if we wanted to build nuclear weapons, we could have done so a long time ago. the supreme leader has made a commitment, which is not breakable. >> data this week show china

continuing to slow. i guess providers as things are on the mend and fuel consumption is returning to traditional levels. toldn and president bloomberg his company is very sensitive to changes in the wider economy, but the situation is stabilizing. the lethal outbreak of ebola is now a global emergency. the world health organization warning hums after the disease was detected in a city of 200 people. more than 200 people are known to have died from ebola in -- since august in what is the second deadliest outbreak of the .isease japan is counting down to this week's upper house election. prime minister shinzo abe seems to be taking inspiration from

president trump, stepping up his social media game and targeting young voters. while the president is a twitter onotee, abe focusing instagram with his liberal democratic party joining us live videos of him meeting and greeting an adjoining local delicacies. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. thank you. let's turn to sophie in hong kong for a check of what to watch on markets. sophie: we are watching alumina loweredafter alcoa projections of demand. nickel traders remain unperturbed, extending a rally to make it the longest run since june 2018, which had pushed the metals rsi above 70, turning

credit suisse cautious on nickel in the near term. checking on gold, holding onto overnight gains. steady, near the highest level in more than four months. silver has been on a tear as and theost holdings ratio with bullion breaking down, falling below the 50-day moving average, as you can see on the chart, and that trend is likely to continue. silver playing catch-up for the year's massive rally. paul: let's get more on what we watching. bloomberg's global markets editor is with us. yields retreating again, jpmorgan raising the possibility they could go lower still. i believe quicksand is the word of the day. >> yeah, and really what they are doing is painting at potential scenario. they are not suggesting this will happen over the next couple

of months or anything like that. it is more an understanding for people who are entertaining the possibility that u.s. rates really do have to go significantly lower. points out the two-pronged scenario where the u.s. does eventually go into recession and you get an extension of the trade war. the continues to push rates in the u.s. toward zero. the u.s. is still sitting reasonably pretty on a relative basis, of course. the 10-year yield around 2% still with other lines of places like japan and germany and switzerland, of course, in negative rate territory. for a lot of people still, the idea that in coming years the see rated ever get to lower bound potential is not really being considered -- the u.s. would ever get to zero rate lower bound potential.

the fallout from the trade war does escalate materially over the next couple of years, you may enter a scenario where you the idea. entertain we have a very significant jobs report later in australia. how will that affect the jobs market? >> economists are pretty much expecting 9000 or so jobs to have been created in the month of june, but, really, this is about what it does for policy setting. obviously, the rba has already brought down rates to 1%. we have had those two cuts and a lot of the market expecting another 50 basis points' worth of cuts. in that context, you would expect this bond rally to push on quite significantly. indeed, as you can see on that chart, that upward trend remains pretty well intact, so you could get record highs for australian bond futures if yields continue to be pressured by further

pressure in the economy. it is typically quite a volatile number on a month-to-month basis, so we are about 43,000. volatility in that number. but what it does is help inform the longer-term trend of how the labor market is playing out and how the rba are continuing to assess what is more of a lack of inflation story really than material weakness in the jobs market. shery: thank you very much for that. you can find adam's charts on the g tv library on the bloomberg. let's look closer at big bank earnings with bank of america reporting records for the fifth quarter in a row. joining us now is our finance reporter. talk bright spots to about. what were they? >> the most bright spot in the entire earnings release was the

u.s. consumer. bank of america, huge u.s. consumer bank, and the strength of the u.s. economy, the strength of the jobs market, the growth in the u.s. really driving that bank. a lot of people see bank of america as a domestic u.s. play, so if the u.s. economy is doing well, bank of america does well and main street doing well is a good sign for bank of america. paul: it was not all good news, though. bank of america and mainstream competitors grilled by analysts about the rate cuts cutting into margins. what was their response? >> that's right. bank of america scale down its net income forecast, but that was not something super surprising to the street because a have up -- they had already laid down that expectation. tv morgan and wells fargo were guiding the rate cuts could get into profit

margins. this was something analysts asked multiple times on the conference call. shery: we have morgan stanley, the last one, tomorrow. will we see a similar narrative? >> it will be different with morgan stanley because they are seen as a trading powerhouse and trading did not do well this week. indman sachs did do well trading, so it will be interesting to see if morgan stanley can compete with its big wall street competitors in terms of trading, but the bar is kind of low because everyone has already seen trading across most of the other banks not doing very well. paul: thanks for joining us. still to come, joe masters joins me in sydney to talk about her outlook for jobs and what is next for the rba. this is bloomberg.

paul: you are watching "daybreak australia." we are awaiting june data for the us trillion market. it will be out later on today and it is traditionally one of the most unpredictable numbers. economists expecting just 9000 new jobs to be added, and it could fuel renewed expectations of another rate cut next month. this jobs read, perhaps more than any others recently, shaping up as a very important one for the rba, isn't it? >> absolutely. the communication from the rba clearly focused on the unemployment rate. it is a very unpredictable number, so lots of financial market trade-off, but absolutely quite important. roe has been talking

about spare capacity in the labor market, maybe 4.5% now , aresents full employment long way off considering we're expecting 5.2% today, but jay powell suggesting the link is very tenuous. is that something worth considering? >> absolutely. i think we need to look to the u.s. as an indication of what may be happening in australia. they have been running with an unemployment rate below full employment for two or three years, and also they have more job openings than people unemployed. we still have a lot of unemployed people, much more so than job openings. to your point of inflation and unemployment, this chart showing the top panel, the unemployment rate, and cpi trending downwards. what does this spell for the rba ? >> i think it is a really difficult puzzle.

they're sort of tune of phases. first is that we are not generating a huge amount of wage growth despite the fact that the unemployment rate is relatively low compared to where we have been in history. now we know we need to run with an unemployment rate lower than in the past. the second piece, though, and this one is more challenging, is that even economies where you are seeing which pickup, it is inflation. to that is a challenge for an inflation-focused central bank. in a strata, the housing components of inflation and also the fact that we're working to bring down the cost of essential services for households, and that is leading through to lower administrative inflation, so it is a challenge. important will these

numbers before the rba, if you consider there could be some election affect baked into them? >> absolutely. we know from the last two elections that tended to boost employment in the month of election and weigh on employment growth in the month afterwards, so that is a key factor, white economist forecasts are a bit lower than what we've seen averaging in terms of jobs the past few months. i think that is important. we have also had back-to-back rate cuts. this started coming on the back of that. my own guess is that the rba could absorb a soft-ish number, but if we saw the unemployment rate rise, he would see financial markets increase the possibility of another rate cut, perhaps august rather than november. have been as we talking, we have seen the 10-year yield, the aussie note , now slipping toward

.9%, so we are seeing yields really start to sink and the rba to some degree seems to really be chasing them down. are we really approaching the of diminishingre returns? >> absolutely. rba's perspective, one of the key challenges is the currency, but that is being frustrated by the fact we're talking about u.s. fed rate cuts as well. the argument is when you cut rates, at a minimum, you get a currency that is lower than it would have been otherwise, and i think that is going to be the primary transmission mechanism. the other challenge, though, is around the perception of cutting rates. we have seen that with consumer confidence, which has actually fallen on the back of those rate cuts. if you look at the detail of that, households should feel a little bit better about finances but very worried about the

economy. poll: some confusing things have happened. like you say, consumer confidence one of them. something else absent in the coming cycle has been re-inflation of the property bubble. are those concerns behind us? i think the worst is sort of behind us. i think when you look forward, we are not going to see the same sort of sharp price gains we have seen in the last couple of years and the reason is perhaps that credit availability is tight and even with the rate cuts and move around the stability floor, there is potentially still some tightening in credit to come as we bring in comprehensive credit reporting and other similar policies. for: thanks very much joining us. just want to get you across some breaking news on the bloomberg terminal right now. we have some second-quarter numbers coming from santos. .ales revenue $959 million production, 18.6 million barrels of oil equivalent. that was up 1% on the quarter.

second-quarter sales, however, down 2% on the quarter. plenty more to come on daybreak australia. this is bloomberg. ♪

lawmakers continue to discuss facebook's libra. proposal argued the contains vast privacy and national security risks. let's hear from someone who was there. housestified to the financial services committee and joins us now. we are hearing more from more -- more and more from critics that libra is more of a company issued asset rather than a true cryptocurrency like bitcoin. how are they different? the point absolutely i made today, so i'm glad to

hear you saying it as well. what we focus on was three primary things. number one, bitcoin is decentralized. nobody can control the network or remove users, sensor transactions. libra is not. it's managed by a group of private, for-profit corporations. difference two that is critical, particularly for lawmakers given the current economic environment is that bitcoin is its own asset. it is backed by nothing but it's on scarcity and the demand for it, so there is not any asset held by any entity that gives bitcoin its value. in contrast, libra relies on a pool of funds invested in currencies and other assets to give libra its value, and this, as you can imagine, poses .undamental risk to libra

the last point we wanted to make with lawmakers is the bitcoin network is a position-less network that anyone can use and innovate on and from

really what they are doing is creating an investment vehicle, and that is regulated activity. asset management is regulated. here in the u.s., we have regulation of the issuance of new products. and the other distinction is the interest earned on the funds that back libra is going to a private group of members, it is not going to the public. the question is, is that a bank, is aa security or investment fund? that is really the question. ok, thank you very much for joining us. let's get a check on the latest business flash headlines. ericsson posted earnings of that

missed estimates for the first time in six quarters. 5g in asia will weigh on profit. for are battling huawei position in the next generation mobile and say that margins will be pulled down, but it should not jeopardize targets for 2020. >> -- in talks with lenders for a syndicated loan, returning to the debt market after a two-year gap. they will havet a loan for $2 billion for corporate purposes. the terms are yet to be finalized. they came to the syndicated loan market in 2017, when they raised $3.5 billion. plenty more ahead in the next hour. we will be joined by scott snyder from the council on foreign relations to discuss the latest developments in this bat

between japan and korea. pat between japan and korea. >> stay with us. "daybreak asia" is up next. ♪ we're the slowskys.

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>> good morning. we are in sydney, one hour away from the australian open. >> good evening from new york, i'm shery ahn. >> and we are in hong kong. welcome to daybreak asia. >> our top stories this thursday, wall street falls as investors face mixed corporate earnings. the leading barometer of growth dropping sharply. netflix is the villain as the script takes an unexpected turn and shares