paul: welcome to "daybreak: australia." sherry: we are counting down to the major market open. paul: here are the top stories were covering in the next hour, trade talks resume after a two-month break. compromise is in short supply. ,oj launches big weight decisions made be based on how the fed moves later on. all streets -- wall street

struggles, spooked by the rumbling trade war. sherry: later, we will discuss .uawei with jun zhang let's get a quick check on market close in the u.s.. it was a bit of a mixed picture with the dow outperforming, up .10%. earningsh its announcement on tuesday. the s&p 500 and nasdaq falling from record highs. other tech heavyweights weighing on the market, amazon, netflix, facebook dragging the benchmarks. also the 10 year yield falling for a second consecutive session ahead of the fomc meeting. focused on the resumption of trade talks between the u.s. and china. in the meantime we have futures unchanged in early trade.

let's see how asia is shaping up, paul. paul: new zealand has begun ,rading on this tuesday morning , mixed picture for futures futures traded out of chicago for the nikkei currently looking kind of flat. a different story for so, up .25%. a big day in terms of news out of japan, a big earnings week with jobs figures expected to hold steady. the big one, the bank of japan meeting. in sydney, meanwhile, currently trading higher by .5% on the futures market. closing just shy of a record on monday. let's get the first word news. >> trade talks resume later tuesday after a two-month pause with little expectation of anything other than a framework for further negotiations.

the two sides are holding their first face-to-face meeting since may but key differences remain and neither side shows any inclination to compromise. china describing the u.s. as the black hand behind the unrest in hong kong. early indicators suggest the chinese economy we can further this month, reinforcing the case for more stimulus to shore up growth. the slowdown is seen in a bloomberg economics gauge aggravating the earliest available signs on market sentiment and business conditions. small-company peers have deepened, the measure exports is worsening and falling producer prices are squeezing profits. president trump is back on the offense of ahead of the fed meeting, complaining that the banks will probably do very little to counteract anticipated rate cuts in europe and china. he tweeted that a full rate cut is not enough, with the fomc widely expected to lower rates by a point -- a quarter-point this week.

he said the fed made all the wrong moves, but we will win anyway. pro-democracy leaders in hong -- in an dismissed unvested -- unprecedented briefing to the media, saying violence will not be tolerated and blaming foreign interference for stoking tensions in the city. >> some politicians in the western countries have made unwarranted remarks. at the end of the day, there purpose is to turn the city into trouble for china, in an attempt to contain china's development. such an attempt will lead nowhere. >> global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: the u.s. and china are set

to resume trade talks later on tuesday in shanghai but neither side is showing any real desire to compromise. last friday, president trump seem to indicate that a deal would be some way off. >> i think that china will , let'sy say let's wait thatf one of these people give the united states away, let's see if one of them can possibly get. i will tell you what, when i win , like almost immediately, they will all sign deals. angelest's head to los where sarah mcgregor is watching all of this. what can we expect from these talks? we will don't think expect a lot of substance from these talks. we certainly don't expect a deal to come out of it. this point, just to go back a little bit, the talks collapsed

in may, and there has been no face-to-face talks. this will be the first time the real top negotiators have sat down and had a chance to try to solid way forward. the u.s. wants to start were things left off in may. that leaves the big question of where is the wiggle room, the u.s. insisting on deep structural reforms and china insisting all tariffs be removed that were put in place during the trade war and for balance agreement. so it is hard to see were either side will budge. i think the big outcome from this meeting is for any sign each country will give a little bit of wiggle room. shery: can there actually be a deal without lifting those tariffs on chinese goods, and also some relief on huawei? are the big questions right now.

neither side has given any indication they are willing to give up, that they will stand down from their position. if anything, things have worsened in some respects. trump raise those tariffs on $200 billion of goods. recently we've seen the u.s. naming chinaort of as a developing company that gives it special privileges in the trade realm, the u.s. has given a 90 day window as of last it thinks the time has run out for china to be labeled a developing country. we see them in a more hardened position on china's side, we saw them said the u.s. might be involved in the hong kong protests. as much as they say they want to get along, we see the sides a little further apart in many respects. shery: thank is so much, sarah mcgregor. bloomberg has learned that citigroup is preparing to cut hundreds of jobs at its slumping

trading division. the latest thing to take action following a rough first half. no comment yet from citigroup. what do we know about these cuts? >> the cuts are pretty broad-based. we are expecting hundreds of job cuts across the fixed income and equities trading divisions. it's like you said, it's been a tough first half are trading across wall street. this is the latest thing to take this action. paul: so how does this fit in with other cost-cutting measures citigroup was warning of? jennifer: they are in a rare position. they have set some pretty lofty the return on tangible common equity. it's a key measure on profitability. usually in the first have it's

the best time for banks, when we didn't see that materialized this year it means for city to meet the target they really have to cut cost to achieve those goals. shery: we have seen in drastic overhaul for deutsche bank, announcing 18,000 job cuts as well. it will be interesting to see how this plays out. the cuts are really broad-based. it will be interesting to see what we see from other wall street banks. are they cutting more of these front office clients or are they focus on consolidating , orations from the back end will we see more things like deutsche bank where they are getting out of businesses? i think we will see different approaches from different banks. paul: thank you for joining us. still to come, will take a close .ook at blacklisted huawei

we will preview the numbers. stock of next, we take .he markets with mark eibel this is bloomberg.

paul: i'm paul allen in sydney. shery: i'm shery ahn in new york. you're watching "daybreak: australia." talkssumption of trade and corporate earnings, our next sc's only limited upside for stock. , great to have you back. are you only seeing limited upside for the s&p 500, given that the cuts were expecting

this week from the fed have already been priced in? be 25i think there will basis points followed by another 25 basis points in september. they will move once and then wait and see how trade plays out which is what everybody in the world is waiting for. we see limited upside from here, simply because it is so late in the cycle, earnings or flat year-over-year. the gdp number of 2% was fine but we think it will trend a little bit lower. it's hard to see a real catalyst to take the u.s. market up much higher from here absent a trade deal. shery: does it mean you are positioning more defensively, and what does that mean if were going into a long-term cyclical downturn? ank: fixed income is not asset class that will give you great returns. we think it will protect you on the downside. we are underweight the u.s., and for some of the things i just

mentioned, continue to have a little more exposure in international markets, looking for resolution for not only international development. i don't know what the brexit solution will be but we will find out at some point this year. upside, you see limited it's probably safe to say you are not the only one. do you see some declines from here? trend oras said the bias has to be looking to the downside. what an exceptional year it has been. i don't think on new year's eve any of us would have thought that nearly seven months out we would see this kind of return, in virtually every asset class in the world. in a multi-asset portfolio, it's been a good year for investors already. being a little bit more defensive, maybe taking some of those gains off the table is a prudent strategy from here, since the fed action is pretty

well priced into the market. earnings season is over. i don't expect too much excitement out of the jobs number coming up. wait to see what the next move might be. some so you're taking profits off the table. where are you able to invest, do you like emerging markets? mark: we have a slight overweight to emerging markets. they will be the most likely to benefit. all none of us know the timing, if you assume there will be a deal at some point, they should get a nice move off the bottom. a little underweight in the u.k. because they have more to lose with brexit. a trade deal with certainly hurt -- certainly help germany. brexit, there is some upside to continental europe and emerging markets. defensive, does

that mean you also like safe havens like the japanese yen? ark: we are overweight from currency standpoint to the japanese yen. we've had some nice placements, level reads, commodities, infrastructure up nearly 20% year to date. clients have benefited from being diversified into those areas. it's been a little longer in duration with the recent move down in yields. class has done well this year. you've been absent get nice returns for client portfolios without having to take more equity risk. shery: we had the boj policy decision today in asia. you, since iter to have not been able to boost inflection -- inflation expectations? mark: everybody is trying to boost inflation expectations.

i don't know the market will move on the news. i think if it is 25 basis points, it won't. i think it will move if it is something other than that. all eyes are on the fed this week for market direction as we move throughout the rest of the week. i know you see an elevated risk of a recession sometime in the next 12 months. what would be the key risk factor that would set that off? mark: as with most recession, starts with a catalyst. it's probably trade tariffs. seeing theart employment numbers dropping, the monthly numbers. maybe we will get an indication of that on friday that will lead into if people are not being andd into consumer spending the consumer will determine what happens. we've had two or three of those

posts. i don't think we are in a recession camp yet, but in the u.s. we will start slowing below 2% growth. it might not be recession, but it will start feeling like on and that will be the area we will all be looking for, certainly as we move into 2020. paul: thank you, mark eibel. you can get a roundup of the stories you need to know to get daybreak.ing with you can customize your settings to the industries and assets that you care about. this is bloomberg. ♪

paul: this is bloomberg technology global link. .'m paul allen in sydney emily chang is in san francisco.

let's take a look at the top global tech stories of the day. uber is cutting about 400 jobs around the world on concern the business is slowing down. memoeo told employees in a that many are too big, creating overlapping work and leading to mediocre results. yft shares fell the most in one month after announcing departure of its chief operating officer. spent 2.5 years as deputy to elon musk at tesla. replacementt hire a and plans to reassign his responsibilities to other staff. there's a lot riding on apple's earnings results on top of its market influence. investors have almost 60 been

dollars locked up in the stock. according to a recent report, it's a second largest holding across u.s. etf's after microsoft. those are the top tech stories we are watching. shery: huawei reports earnings in the next few hours. has written extensively about the impact of the ban and joins us from huawei 's home city. great to heavy with us. let's talk about the blacklist on huawei. they had a 90 day release for certain u.s.-based companies. how much has the temporary license helped and how big will the impact be once it expires? >> good morning from shenzhen.

first we look at smartphone --ts, after the huawei man ban, it was affected especially in the european markets, but quickly after huawei found some , shipments recovered. the huawei ceo had an raisingw talking about output to 270 million. i think the huawei strategy is to focus more on the 5g smart phone. i think the impact on the smartphone unit is very small.

mostly from the android support but huawei will be able to find around downloading some google apps inng the european market. they used to use a lot of u.s. components, but right nowh [indiscernible] there are some other solutions they can work around to solve the ban. emily: meantime, your time in china you have trade talks between the u.s. and china restarting today, though neither

side has shown much interest in compromise. how well is huawei positioned long-term if the issue doesn't get resolved in the near future? jun: i think there is a lot of concern around the trade talks between the u.s. and china, obviously right now it's moving toward the positive in and the two countries resumed talking again. the ban remains, they have to work on the solution to replace most of the u.s. components. there are couple of choices, they can switch to japan, south korea and come and european suppliers. the u.s. components can be replaced by chinese local components.

have the ability to do internal i.t. impact of the u.s. think huawei don't will heavily rely on the u.s. supply chain going forward. emily: we are also waiting for apple's earnings results. obviously china is a huge part of the apple story. how much do you think apple's loss or weakness in china could are youi's gain, and seeing evidence that consumers there are opting out of american brands like apple, in favor of chinese brands? jun: i think in the last two quarters, i think huawei actually took some shares in the high-end. my concern is that huawei has

active in high end smartphones, those they launch in the second half will be 5g. their prices very competitive. i think with a competitive continueawei 5g will to taking shares in the high-end market. i'm only concerned about apple market share. apple is talking about launching a 5g smart phone next year. cheaper and i think it will be very competitive with other smartphones. rosenblatt securities .anaging editor jun zhang thank you for joining us.

plenty more to come on "daybreak: australia." this is bloomberg. ♪

morning30 a.m. tuesday here in australia. it's raining for the first time in almost three weeks. futures pointing higher by almost .5% after mixed close. shery: i'm shery ahn in new york courts 6:30 p.m. you're watching "daybreak: australia." . >> the u.s. treasury is thing to double expected borrowing in the third quarter, issuing $433 debt, morenet market than was seen in april. it comes after the bipartisan deal to suspend the debt ceiling

the senate is expected to vote in the coming days. and falling to multiyear lows and prime minister boris johnson stepped up plans for a no deal brexit with just three months to go. the pound fell the most among g10 currencies as johnson warned he won't resume talks with eu leaders unless they agree to renegotiate the deal struck with theresa may. brussels has so far refused to reopen talks on the deal or the irish backstop. the imf says been as well as economic declines in 2013 will reach 65%, one of the steepest five-year contractions of any country around the world over the last half-century. the fund said the fall is unprecedented in the western hemisphere and is one of the where contractions unrelated charmed conflict or natural disaster. the imf adjusted its forecast for venezuela to a contracted

35%. unlike double 07, you only live once so here's a chance to imitate the world's most famous five. his classic aston martin is being sold next month with an expected price tag of $6 million. had 13 original gadgets, including retractable machine guns, a nail dispenser and rotating license plate for the u.k., france, and switzerland. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. that.thanks for let's get a quick check on how things are shaping up on asian markets.

we've had new zealand trading for a over 30 minutes now and currently higher by just over .10%. as i mentioned, the bank of japan makes policy decisions in the next few hours. we're expecting no changes, despite inflation remaining far from the 2% target and with the trade war taking its toll on exports. instead, governor kuroda and his team are awaiting the federal reserve's expected rate cut later this week. kathleen hays is at the bank of japan. what is the governors thinking here? is obviously thinking about the state of the japanese economy, the u.s. ongoing u.s.-china trade war.

the federal reserve is just going to start its two-day meeting later today and we won't know what they are doing until wednesday afternoon. in the meantime, the boj is expected to wait and see, 25 pointven though a , what if thecut federal reserve comes out with a more dovish policy statement than expected? what if it is something that could lead to a series of rate cuts? if that were to weaken the dollar and boost the again, that could reverberate through markets for the boj. they will just now watch and wait and see what happens, our economics team say the boj can definitely tolerate a spike in the again up to about 100 on the dollar-yuan rate, but it's something that could give them pause. the ongoingabout

trade war and weaker asian demand? is that expected to factor in? kathleen: is certainly true that downside risk to the economy seems to increase from the last meeting because to trade war still going. we've seen japanese exports get weaker and pressure on manufacturing. spending had a nice little jump recently so that might reassure the boj that they can wait and see what happens next. ,ore inflation year-over-year oil price has been weaker. that had a tough time keeping momentum going. talkingre people are more about if the boj had tools they can use, at this point it's about fiscal stimulus, it's about prime minister a stepping going.et momentum the boj might have done just about all it can do. paul: central banks around the

world share the complaint. what more might it do? kathleen: 38 of 47 of the bloomberg economists surveyed said they will not do anything, they are just going to wait. something about extending the pledge to keep extraordinary monetary stimulus going for even longer, but no changes seen in the negative rate at the short end, no announcements on etf buying or yield curve control target or anything like that. let's go to the list of our decision guide day and see what they say we should be on the lookout for. governor kuroda the first part of the year with saying there would be growth pickup in the second half.

now you have japan and south korea at odds over trade as well. 70% of economists say when there is a move it will definitely be a move to easing. some 30% said they think boj could expand their yield curve control range from 0.2 on either in 20, maybe even double it. because the boj has surprised many times in the past, no one is going to totally discount that. 2010 a bitter memory for the boj. they came out continuing stimulus. boj had to hold an emergency meeting and that's kind of thing they want to avoid. it makes their decision-making a little more tricky today. shery: kathleen hays, thanks for that. now to bloomberg exclusive, john micklethwait has been speaking

to the new mexican president in mexico city. he discussed his countries relationship with the u.s.. cripes he is an ally. we are not betting on politics or authoritarianism. we think the solution to problems should not be through coercion. we think of cooperation for development. that is our thought. it is indispensable to have a good understanding with our neighbor, with the united states , because of matters related to friendship, culture, trade, ,ommerce, the economy as well and geopolitical relations as well.

we have 3180 kilometers of border with the united states. if we were in any european country or south american country, perhaps we could try to have a different type of relationship with the united states. however, we are neighbors, and this neighborhood makes it mandatory for us to understand each other, and there is nothing , that'shan politics what politics was invented for, to avoid confrontation. it is really a great pleasure to talk to you, and for us to be here at the national palace in mexico city. it is a good relationship that we have with the united states administration. and we are going to try for this relationship to continue being a good relationship.

we are convincing or persuading, saying that the best way to face the migration phenomenon is through cooperation for development. that is being able to help central american countries. we are also able to support mexico, for mexico to be supported as well, but mainly central america, so that we can promote productive activity for there to be jobs. many people do not know that the biggest flow of migrants, the hot -- highest number of people passing through mexico come from central america and from countries that, due to various

special circumstances, are going through an economic crisis, lack .f job opportunities there is violence in those , and migration from mexico to the united states has fallen, and it will continue falling increasingly with time. what we are seeing, we have been seeing in recent times, is growth of central american migration. so then what are we recommending? development. >> can i ask you a particular question on that? on friday, as you know, thirdala agreed to a country agreement to do with those people you were talking about, that when people from

countries like honduras or salvador seek asylum, they have to seek asylum in guatemala first, rather than going to america. would you ever let mexico agree to the same? >> we wouldn't. we haven't accepted that proposal of the so-called third state -- third said country. we could not commit ourselves to doing something like that. we are enforcing a program to reduce the number of migrants, with protection for those that are coming into mexico through more surveillance systems, according to our legislation, and also protecting human rights, respecting the human rights of migrants. same toit is not the have shelter of migrants in the

south of mexico then in the north. mexico,outhern part of for instance, there are less violations of human rights. in the northern parts of mexico, we have more gangs, criminal gangs, and migrants have been murdered. we have had some cases like that. and that is something we do not want. that's why we are being more cautious in the south of mexico. mexicanat was the president speaking exclusively to bloomberg editor-in-chief john micklethwait. , the asx later on today. a ceo tells us his plan for growth and why he chose to

distance sydney. this is bloomberg. ♪

paul: minneapolis is quite a long way from sydney, but it hasn't stopped a digital payment company from choosing to list on the asx. it joins a growing group of such providers in australia. the -- the ceo joins us now before he heads down to the exchange. charlie youakim you operate in the u.s. and canada. why australia? ourlie: it is a cluster for sector. there are number of companies, and that means investor is really educated on the sector, much more than the typical u.s. investor. paul: your goal is to raise 43

million australian. what will you use that money for? charlie: mainly on the marketing front. it's to expand into a really large opportunity in north america. worriedre you at all that the capital you need might outgrow the australian market? charlie: the vast majority of funds we are talking with our billion dollar funds. don't see it outstripping their capabilities to fund us. retailers arey you working with now? charlie: the last data point i can speak with is march. we had 3300 active retailers on the platform and we had 260 9000

active customers. paul: you are planning to expand between the u.s. and canada. would you start here in australia? charlie: it's not out of the question. australia would not be our top market, but we believe the product linzie itself well to expanding internationally. we are researching new markets, but the best -- vast majority of our focus is in north america. paul: you do have competitors listed on the asx. the territory is getting a bit crowded. how do you differentiate yourself? thosee: every one of companies has a little bit different viewpoint which helps with the competitive landscape. to lend itself into the high-value space. zip is not present in our

landscape in the competitive set. it's really us and after pay. the way we face the competition in the united states, almost to the extent that were seen as a social impacts product. paul: with these new products you are entering into uncharted territory to a degree. you have attracted attention of one of the regulators for suspected noncompliance -- are you confident you will not run into these sort of difficulties? charlie: it's different than here in australia. of course when you have someone that has blazed the trail ahead inyou like afterpay has australia, we proactively react to those in plan ahead. we are quite confident that we've put systems in place to avoid those types of incidents

in the u.s. shery: so how different are your metrics to assess risk when it comes to traditional lenders? charlie: we do use some traditional elements to analyze the risk involved with offering our product to consumers. we also use some new age products that have lend themselves well to tech. we know the user's mobile phone number, there email address are tools tied to those data points and we pull everything together out we can when they check and that helps mitigate our risks. paul: you next engagement is down at the exchange, not far from where we are sitting now. they were up 900%. charlie: our viewpoint from our meetings with investors, they have been very positive. that gives us some confidence in what we are doing.

we really have a long-term view in this country and are trying to bill for the next 7-10 years. we are less worried about what happens today or tomorrow, but more for the long-term. founder and ceo charlie youakim joining us. thank you. use our interactive tv function, tv . you can become part of the conversation. this is for bloomberg subscribers only. .heck it out at tv this is bloomberg. ♪

paul: i'm paul allen in sydney. in newi'm shery ahn york. you're watching bloomberg "daybreak: australia." weekend ofotic demonstrations across the city, in an unprecedented media briefing, the beijing agency

overseeing hong kong condemned the violence. >> across the line of a principal of one country to systems and by no means must be tolerated. let's cross to hong kong and david tweed. this was china's most high-profile response to the unrest. was -- what was the response to beijing statement? david: among the protesters, what we saw was the encrypted messaging system they've been using ever since the protest began here in hong kong eight weeks ago. haves alive with plans to two types of civil disobedience. one of them is to come out onto the streets of hong kong in cars and to drive very slowly, thus disrupting the traffic, which is

why we are out here overlooking some of the central thoroughfares leading into the central business district to see how effective they are going to be. the authorities are taking in quite seriously. we've heard that the bus companies have implored bus drivers to really continue to drive according to the rules, not to speed, not to do anything to break the rules. veryare taking the threat seriously. the other, civil disobedience, is to go into the ntr, the other ground -- underground rail system that is the lifeblood of hong kong. their plans to go into one on the others out of the harbor near kowloon, to go into one of the key change points and to block passengers trying to get on the train's or to block the closure of the doors. protestshese types of

have risks attached to them. 2014, there back in were three months of central hong kong occupied by protesters. a lot of the public who supported the protest in the beginning became very irritated towards the end because they simply couldn't go around doing their business in hong kong. i would say that is one of the risks of both these types of civil disobedience which have been planned or today. david, in terms of the beijing press conference, what was it about that that really got under the skin of the protesters? david: there were two things that came out of that press conference yesterday, one of was, you can take any measures whatsoever to quell the protesters and they should be

brought to justice. irritated the protesters, the other was the unequivocal support they got. saying she is a puppet of beijing and that shows why one country, to systems, isn't working here and that's why we will see the protests continue. tweedseen reporter david in hong kong, thanks for joining us. let's get a quick check of the latest business flash headlines. afterc posted a flat rise heating calls by president xi. rose to 226 million equivalent. focusing efforts on natural gas production with the government striving to use more cleaner burning fuels. shery: plenty more still ahead on daybreak asia.

decisione on the boj with the chief strategist. this is bloomberg. ♪

paul: good morning. we are under one hour away from the australian open. shery: and good evening from new york. i am shery ahn. welcome to daybreak asia. ♪ our top stories this tuesday. trade talks resume after a two-month break and compromise seems to be in short supply. big week for is a central banks. -- launches