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. a big week for central banks.

shery: markets close the monday session in the u.s.. 1/10 of 1%.up apple gained ground ahead of earnings announcements on tuesday. the s&p 500 and nasdaq falling and amazon and facebook lost ground and that dampen the sentiment. yields falling again for the second consecutive session. headed to the decision with the fed perhaps cutting rates this week. toare also looking forward the u.s. china trade negotiations starting this week. u.s. future is up 1/10 of 1% at the moment. let's see how we are setting up in asia. conviction int of the market open.

andzealand and australia trading is going sideways. australia will be interesting to watch today. futures pointing higher by one half of 1% and it looks like the asx will hit an all-time high. the kospi future is high in quarter 1%. a big day in japan. job figures for june and the boj meeting. we will have much more on that in a moment. right now, the first word news. >> trump is back on the offensive ahead of the fed the bank willg probably do very little to counteract rate cuts in china. he says the wage cut is not enough. the fmoc is widely expected to lower rates. president said the fed made all the wrong moves, but we will win anyway. leaders in hong kong have

dismissed the latest criticism from china over antigovernment protests. a in a briefing to the meeting -- to the media, they said violence would not be tolerated. it criticized foreign interference to step contention in the city. >> some politicians and western countries have made unwarranted remarks. at the end of the day, the purpose is to stoke unrest in hong kong and turn the city into trouble for china in an attempt to contain chinese development. >> the u.s. treasury is expected to double borrowing in the third quarter issuing $33 billion in net market debt in three months through september. that is more than we saw in april.

the house passed a bill last week and the senate is expected to vote in the coming days. the ims says venezuela's economic decline will reach 65%, one of the steepest climbs in any country of the last 50 years. in thel is unprecedented western hemisphere and is a rare contraction unrelated to natural disaster. --globaluggested the news 24 hours a day, 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 tuesday in shanghai. remain.isions

wherehead to los angeles sarah mcgregor is watching this. what can we expect from these talks? sarah: we are not expecting a lot of substance from the talks. right now the biggest marker of progress is the sides are meeting face-to-face for the first time since talks collapsed in may. robert lighthizer, steve mnuchin, these top trade negotiators will sit down face-to-face. what they can agree on at this point is not a full trade deal. a starting point for talks is a point of disagreement right now. the trump administration wants to start off with the agreement that they had when talks broke down in may. they said they were at 90% agreement before china allegedly reneged on promises. what china is demanding is for the u.s. to roll back the tariffs they put in place during the trade war and the u.s. administration is not willing to budge.

everyone seems to be playing down the expectations. trump said china could be waiting for the 2020 elections. think china will probably say, let's wait. it is 15 months until the election. we will see if one of these people that gives the u.s. away, let's see if one of them possibly gets elected. and i will tell you what. , like almost immediately, they are all going to sign deals. >> i am not sure how much that makes sense. everyone in d.c., there seems to be a consensus in washington of being more hawkish toward china, anyway. absolutely. we saw elizabeth warren unveiled part of her platform. she stands a good chance of winning the nomination for her party. she says she's going to apply

more scrutiny to trade deals. not the same as trump, more about human rights and making sure there is a bit more scrutiny of the deals. but it looks like she wants to revisit those types of things and we know the democrats have been some of the biggest backers of trump going more hawkish on china. they have not necessarily agreed with his approach, but they agree with the idea of it. i think the only thing china could be thinking is a sure thing is they might be a little bit more predictable. the trump administration has been a wild ride with them and trade policy. it seems they are consolatory, and then they slap tariffs on new products. so maybe the democrats will be seen as a little bit more predictable in that way. paul: in the more immediate future, talks are resuming today but in some ways, it seems like the two sides have moved further apart than when the talks broke down in may.

sarah: absolutely. and some of the ways we've seen that is the u.s. raising tariffs from 10% to 25%. we see concerns about fedex and delivery of huawei packages by china, thinking there was something nefarious going on. and the trump administration recently saying they wanted to potentially pull china's designation as a developing country from the wto. that action would get rid of some of the benefits china enjoys in the trade realm. so i think we have definitely seen some deterioration, as much as they say they want to get a deal, there is a lot of irritants out there. mcgregor, thank you for joining us. still ahead, china is backing hong kong chief executive and the police force with the agency overseeing the city, warning demonstrators have gone far beyond peaceful protests. edged and u.s. stocks

lower, dropping for a second day ahead of the fed anticipated rate cuts. a look at the implications, coming up. this is bloomberg. ♪

paul: you are seeing live pictures of tokyo as we count down to asia's first major market open this morning. japanese futures are pointing higher. it will be a big day in japan. mitsubishie up and electric will have jobs numbers for june and the boj decision. this is daybreak asia. lower andcks edged taught -- tech took a tumble. apple is the bright spot, rising ahead of earnings. su keenan joins us with market highlights.

had was dead ahead of the fed. there was not that much momentum in the market. it appears investors are waiting for cues. apple perhaps waiting for the trade talks to get underway. on the major averages. , citigroup layoffs announcing hundreds of traders will be let go. announcing layoffs. in a genericger space for mylan. we were among some of the big winners of the day. among some of the other stocks that moved to lower. let's look at one of the big

projections. in terms of earnings, we are seeing a lot of companies are theirng downward earnings, even though we are at the peak of the season and have a lot yet to come. it is starting to be a theme. paul: let's shift to the earnings after hours. beyond me taking the spotlight again. it is falling. what is going on? >> let's go quickly to the after hours. you can see it plunged. look at recent activity. it had sort 800% in the three months since the ipo and last week it was up 30% and then down 15%. a lot of jitters ahead of the earnings report. they announced they are adding more stock and that concerned investors. there is a filing that says the

ceo is preparing to sell some stocks and that put a damper on an otherwise strong report. they also widened their loss rate concerns. too far, too fast is the theme. was beyond meet -- meat overvalued? this is becoming a credit space. ofry: we are seeing lots competitors. let's talk about oil gaining ground. you are seeing optimism. chart wen see on the are starting to see a rebound second day higher and that has to do with a -- if the fed cuts rates there is a bet a could increase demands. we are looking at central-bank action all over the world. the fact you could see more easing around the world definitely could give a shot in the dorm -- shot in the arm.

shery: su keenan, thank you. , i thank yous now for joining us. this pointrger at could really upset markets and get them concerned about the state of the economy. at the results, there has been a split amongst members about if the rate cut is appropriate. boston, veryt vocal about being anti-cut. a big cut will be controversial. shery: we are in the midst of earnings season and we are seeing a bit of insight into the industrial. we saw caterpillar, a mixed bag of earnings. what is that telling you about where these intentions could

take the big companies? it back byeel sector, auto being one that is more vocal to the trade situation with china, chemicals is another. some have openly said weakness in the area has been damaging their earnings outlet. -- earnings outlook. trade, we are of seeing hope and progress this week. what is the best outcome look like by the time we get to the end of these restarted talks? >> no escalation. do no more harm situation. hopeful. one of the things worth thinking about is whether a rate cut would cause the president to turn his tariffs to other trading partners. seems to be increasingly antagonized by the

eu. i think even if the u.s. china situation remains calm, i would be looking at other trading partners to see if there's something to combat. paul: in terms of toughening stances, it appears the chinese side is digging in a little. we have been talking a lot about commerce.e and we have talked today about the chinese possibly wanting to wait until the presidential election to see if things change. do you see a situation where both sides are digging in? >> it is interesting what trump said on friday, that china might wait out the u.s. election. china has that luxury. it is unclear the u.s. does. if it moves to this week, i do not expect to great deal of progress but as we move toward 2020, there will be some pressure on the u.s. side to start trying to push for a

little bit of resolution. about talk a little bit the semi conductor sector. we saw negotiations soaring. they seem to be the big winners in the tech battle for july. as the sector still safe to invest in, given that they are already caught in the crossfire of the u.s. china tech war, not to mention there could be more regulations on big tech? demandink the secular for semi conductors will continue. i think it is more innovation and getting back down to fundamentals. innovating, getting down production cost and on the of technology frontiers. so in terms of noise of those short run volatility for trade, that is one thing. but i think that sector will

ultimately benefit. paul: one of the big unknowns in terms of risk right now is brexit. a number of scenarios possible and the eu not keen on opening negotiations. of ave had discussions fresh election. it is best from the investing point of view to keep clear of the blast radius? in terms of what is going on, boris johnson has been clear he is going to push for a new deal brexit and the eu has said they are not going to move. as we move through the summer, some key things will be how much the noise jeremy corbyn is making calling for a general election will escalate and whether he will start getting more support from scottish leadership to try to understand away to prevent a know brexit deal from happening. as that gains momentum, we may

see that blast zone start to get is whereted and that we will start to understand if an alternative really exists. paul: thank you so much for joining us. and the stories you need to know to get your day going, you can go to tv and in the bloomberg app. you can customize your settings so you only get news that you care about. this is bloomberg. ♪

paul: this is daybreak asia. warning the is unrest in hong kong has gone far beyond peaceful protest after a chaotic weekend of demonstrations across the city. in a media briefing, the beijing agency overseeing hong kong condemned the violence.

>> they have crossed the redline of the principle of one country, to systems and it must not be tolerated. any civilized society would never allow such rampant violence. shery: let's cross to hong kong and david. how are protesters reacting to beijing? david: from what we saw last night, the telegram messaging service that the protesters have been using to communicate with each other since the protest began eight weeks ago in hong buzz with protesters planning civil disobedience. we are here overlooking the major arteries in hong kong. wasfirst protest planned in theple to come out major traffic arteries coming

into hong kong and drive very slowly. this is a type of civil disobedience that is set to begin around now. we are overlooking queens road in hong kong. slow not have signs of traffic but it is only 7:20 and traffic does not get busy for another half hour. the second type of civil is obedience planned is to take the underground railway system, a real artery for hong kong. that disobedience will be either stopping-- sit ins, passengers from getting on the trains, or blocking the trains from leaving the station. there is a risk with both these types of disobedience. in 2014, thewe saw general public becomes more and

more irritated with the fact that they cannot do their daily business and that is something the protesters need to bear in mind. they need to keep the support of the general public. we will see how it goes coming forward and we will keep monitoring the traffic situation here in hong kong to see exactly how effective the disobedience actions will be today. terms of the beijing press conference, what was it about that that annoyed protesters so much? fact thathink the their support to carrie lam, the leader. she has not been seen. the protesters are annoyed to see that beijing is basically giving their support to carrie lam and showing she is just a

puppet of beijing and in doing undermining the tenants of the protesters, one country, two systems. that is why we expect to see rolling protests continue. something is planned up until october 1. every weekend. it will be something next friday, a protest of civil servants. so there will be disruption in hong kong throughout the summer. paul: david tweed in downtown hong kong, thank you. let's get a check of the latest headlines. tencent has lined up another high-profile partnership, teaming up with qualcomm to work on devices. this will include the development of virtual reality technology. they get one third of their revenue from online gaming and

hope the latest chips will make mobile games more realistic and interactive. and john mcneil is leaving after 18 months and his predecessor lasted less than three years. before joining lift, he spent time with elon musk at tesla. he plans to reassign his responsibilities to other staff. paul: uber is cutting 400 jobs around the world over concerns that business is slowing down. the move centers on the global marketing department, which will lose one third of its staff. many areold employees too big, leading to the risk of mediocre results. up next, on the day the boj meets, we are looking at

industrial production figures in 20 minute, june job numbers at the bottom of the hour. stay with us. this is bloomberg. ♪

shery: this is daybreak asia. news we have some breaking out of japan. these are jobs numbers for june. a little better than expected. 2.3% the jobless rate. the survey was for 2.4%. job to applicant ratio slipped a little, 1.61. the second quarter indicated maybe they would be a little less tightness but we are not seeing evidence of that. exports remain a concern for the outlook. we are not seeing any reaction out of the japanese yen but job

numbers are a little better than expected. 2.3% for the month of june. let's check at the first word news. talks moved to tuesday after a two-month pause without expectation of anything other than a broad framework for future negotiations. theiro sides are holding first face-to-face meeting since may. neither shows inclination to compromise. talks are further heated by thea describing the u.s. as hand behind the unrest in hong kong. indicators suggest the chinese economy weakened further this month. the slow down is seen aggregating the earliest available signs on market sentiment come business conditions. the measure of exports is squeezing profits.

multiyear low as boris johnson stepped up plans for a no deal brexit. it fell the most among currencies. brussels has refused to open up talks on the deal for the irish backstop. the u.s. senate failed to do the two third majority needed to override the president. despite gaining report -- the part a handful of republicans. trump's critiques say saudi arabia must be punished for the war in yemen and the murder of jamal khashoggi. emulate theance to world's most famous spied.

james bond aston martin is being sold next month with an expected price tag of $6 million. the car started goldfinger and thunderbird and has 14 original gadgets, including retractable machine guns. it also has rotating license plates. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: let's get some more on what we should be watching us trading gets underway in asia. we are joined by andrea. the focus is the aussie dollar still under pressure but the stock market getting near of record. what is going on? >> the aussie stock market is lifting up to points of their record high in 2007 and one of

the best-performing markets in asia so far this year. it has been helped by interest rate cuts. political uncertainty has been removed but a lack of alternative investments. the cash rate is a record low, 1% and potentially going to go lower. that has pushed bond yields to a record low and investors do not really have a way to get returns so they have been piling in the aussie stock market. the biggest question is, is this sustainable? we are the cusp -- we are on the cusp of the earnings season, about to get underway. investors will be looking for guidance from companies as to where to go where growth will continue. on the flipside, the aussie dollar under pressure. got a beating last week. a downtrend for most of this year. key inflation numbers are coming out tomorrow and that could

possibly determine whether the ozzie stays in the don -- downtrend or breaks out. australian stays in the downtrend or breaks out. shery: how long can we expect investors to remain cautious? >> the hong kong stock market has been resilient this year. but >> have started to emerge as have started to emerge as talks turned more serious. investors sold stocks in hong kong for the fastest flip in six weeks. tourists are staying away, shops have had to close down and landlords are not being able to increase rent. ofpanies form the backbone the hong kong economy and businesses have turned cautious and are waiting to see how long

these demonstrations will go on and whether they will become more severe. rallyhat going on, this that has seen hong kong stocks reach a record high in april could very well stall in the short term, at least. shery: andrea, thank you so much for that. those charts you just saw from andrea on g tv on your terminal. we have learned citigroup is preparing to cut hundreds of bank takingtest action after a rough first half for wall street. no comment yet from citigroup. dan reichel joins us in san francisco. was this inevitable, given we have heard from citigroup we were hoping to cut costs? dan: did say on the record they were open to cut costs. this is a serious move by

citigroup. people familiar with the matter tell us hundreds of jobs are going to go away. that includes maybe 10% of the equities trading desk. this is a serious move because citigroup has had serious problems on the trading revenue side, much like the rest of wall street does. for the first half, if you take out a one-time cane -- again, citigroup's cell 5%. drop, aslso saw a big did jp morgan. so all of wall street is seeing trading decline and citigroup has responded with hundreds of jobs being cut. paul: they warned of their earnings report a few weeks ago that there would be cost-cutting measures. how does this announcement fit in with that announcement? is working on two areas for cost-cutting. they are trying to improve the

banks'efficiency ratio and improve the return on capital equity. we are in the second half of the when youand that is tend to see lest revenue compared to the first half. thanks do not make as much in the second half. so it will be harder for them to hit their target for the end of the year now that we are in the second half of the year. paul: you mentioned how the trading environment has affected wall street banks. it does not end there. how does it affect other banks around the world? >> we are seeing cost-cutting in europe. and the big one was deutsche bank. they took the major step of getting out of equities trading altogether. banks, especially on wall street, are seeing record profits. they did it again in the second quarter.

so i do not think anyone outside the industry is worried about these firms. but the trading slump is real and there is a feeling maybe it is not temporary and that citigroup will not be the last firm here in the u.s. or elsewhere to announce significant cuts, if they do announce these cuts. reichel in san francisco, thank you for joining us. seeext, the vast majority the boj sticking with current policy. we will be live in tokyo and to someone in goldman sachs. this is bloomberg. ♪

paul: this is daybreak asia. shery: over the past 30 minutes, we found out tencent has lined up another high-profile

partnership. they are teaming up with qualcomm to work on global gaming devices. let's bring in ian king. sit withis expected to the trump administration that is trying to apply pressure on beijing through chinese firms? ian: i think the way to look at it is obviously an american company like qualcomm by going publicly saying they are working with a chinese company is showing you how important the chinese market is. singles the biggest market for semi conductors and tencent is a very important part of what is going on and this shows how important it is, even at a time where there is perhaps more scrutiny on the arrangement and the ties politically. but they said they just have to do this. paul: how timely is this, concerning we have qualcomm reporting earnings up after the

market closed wednesday and trying to rekindle sales? what are you watching for? is: the story of qualcomm after all the travails they have had, the legal problems, they said, wait until 5g comes along and then we will be off to the races again. unfortunately for them, 5g has not come along yet and they are trying to keep that open and we are seeing the beginnings of deployment of new services. another wait and see, we are nearly there rather than giving them the ability to show how well they believe they can do in this new environment. king in san francisco, thank you so much. the boj is widely expected to sit tight ahead of the meeting today as it waits to assess the impact of a looming said decision.

hays is at the boj with our next guest. guesten: a special joining us today outside on a lovely japan summer day. kathleen suey is the vice chair of goldman sachs japan and their chief equity strategists and we have a lot of questions. let's start with the boj. they are not expected to do anything immediate this week. something that will have enough of a surprise it could lose the market, even for a day? >> if you look at most of the surveys that most economists assume the boj will maintain the status quo, not doing much after the meeting today. although they say there are a lot of options, we think

that the options are relatively it is ahead of the fed's decision so we do not want to make a bold move ahead of that and if they were to move dramatically to cut rates right now, there are negative repercussions that could be impacting japan's banking sector. so for all those reasons, we think they will stay put and the markets are discounted the scenario. to what could they do, one minor they couldeak contemplate is considering extending the timeline. right now they are setting themselves for keeping interest rates until the spring of 2020 and we think it will be longer than that. so extending that guidance could be an option, but i do not think it is likely. a small move like that, as the fed are expected to make a rate cut, this would be

boj's way of keeping in the dovish tilt. aware of thatll context globally, but at the same time, when you are faced with limited options to begin with, do you want to pull your cards now or do you want to wait and keep them for the future? kathleen: what about the federal reserve? if they come up with a dovish statement, what if they come out with less or slightly hawkish? now, similar to the boj, the consensus and markets is the fed will cut and the statement surrounding that decision is more dovish. some people could take this positively. if they come out with a more hawkish tone to their statement and post their decision wednesday, the fed could book

market. there are multiple cuts priced in before the end of the year, not just this week. in their view, the economy is hanging in there and they are not expected to do much at all. a third: you expect consecutive quarter of earlier declines but you have coming up a more positive view. >> part of the characterization -- characterization the boj has conveyed to the market is similar to our own. the economy has been growing sense kiwi began this time around. or 12% larger than in 2012 and deflation has turned into mild inflation and corporate profits have more than doubled and the stock market has more than doubled since then. so you cannot look back at the last six years and say it is a failure.

with the length of time of maturity of the cycle, there will be some decline in the momentum and some of the strength we see, which is what we have been experiencing the last several quarters in japan, including earnings. going forward, because we think the bar will get lowered going into the second half of fiscal 2019, we will start to see profits gradually enter recovery. if you look at market reactions to recent earning results, even for text, it is horrific results in the markets are discounting the bad news and looking forward a few quarters for the recovery in the latter half of 2019. so we are expecting the easiest growth of 6%, which would be a rebound for fiscal 2019. kathleen: is this a good time for global investors to get into

japanese stock? >> we think so. some sectors are more attractive than others but we believe there are a bunch of very attractively valued, reasonably growth oriented stocks in japan that people should be looking at from a global perspective. ?athleen: what about banks time.nks have a tougher japanese banks look like the absolute most attractive center in the world right now. multiples of 0.5 times. the cheapest ever. the other side is what we talked about earlier, boj maintaining ultralow interest rates. but are look cheap, they cheap for a reason is the question many people are asking. that would not be our top choice within the japanese stock market

to recommend to investors to invest in now, but if there is a move further out where normalization of monetary policy is on the horizon, that will be an interesting sector. but not right now. kathleen: a time we are more central banks are joining the march toward lower rates, at a time when yields are falling and negative, you mentioned technology. but in japan if i am looking for something to make me money, what are the sectors you like? >> it is clear that even though the global cycle has been slowing, it is interesting to look at domestic capital spend. a reflection of the fact that the labor force population is shrinking so dramatically and they need to improve productivity. as a result, companies are taking excess cash they retain from earnings growth and deploying the cash into capital

investment, directed at efficiency and enhancing factory automation or robotics or ai. -- any of these companies are structural winners. kathleen: what about the risk? is the u.s. china trade war, what if the -- what is the thing that is that biggest risk to what you are seeing? other thanside risk, global risk off events like a hard brexit that is not 100% priced into markets, for japan it is a global economic slowdown which could be triggered by china, the u.s., something along those lines. ultimately, even though japan has healthier domestic demand of

the last several years, it relies on global demand and markets. so something sharp downturn would be very negative. we are also waiting for the u.s. government position on auto tariffs that will come out sometime this fall. the current house view is it will not go for a very harsh hike of auto tariffs, but there is uncertainty about that. kathleen: interesting how much more politics play into these discussions than they did two years ago. thank you so much for coming out here. fairly positive on equities but reminding us there are risks. back to you. shery: one of the risks is industrial production manufacturing. breaking news out of japan. month to month, it contracted 3.6%. the contraction since march is a

big mess because the expectation was contraction 1.7%. this coming after an expansion of 2% for industrial production month-to-month. year on year, a fifth consecutive month of decline, 4.1% contraction. much bigger than expected. is the fifth consecutive month of contraction. seeinginistry of trade the august output will rise 0.6% month-to-month. july output, 2.7% month-to-month. june preliminary numbers not looking good. month-to-month, contraction 3.6%. year in your contraction, 4.1%. we have seen signs this could be bad. june experts were week -- wea k. but this is a big miss. we will have more reaction on

these numbers at the top of the hour. this is bloomberg. ♪

paul: this is daybreak asia. quick check get a of the business headlines. rise tech hosted a slight in oil and gas in the first half. output to help securities. oil and gas production rose one fraction of 1% from one year ago , 226 million barrels. focusingas been efforts on boosting natural gas production to use more cleanburning fuel. paul: a lot is riding on apples earnings on top of the heavyweight market influence and investors have almost $60 billion locked up in the stock.

the iphone maker is the second largest across u.s. uts after microsoft. they report earnings after the market closes on tuesday. has teamed up to invest $2 million in indonesia. the deal covers the next five years and was announced over a meeting with the president. localompetes with ride-hailing delivery services and look for further opportunities in indonesia. markets, kiwi stocks up for a second consecutive session getting 1/10 of 1%. futures across asia are higher at the moment. we saw sydney finishing just points away from the record close and nikkei future is up 4/10 of 1%.

paul: in sydney, we will sort term asia's market opening. stay with us. this is bloomberg. ♪

paul: good morning, i'm paul allen in sydney. shery: i'm shery ahn. welcome to "daybreak: asia." paul: our top stories this tuesday, trade talks resume after two month break. to be in shorts supply. the boj launches a big week for central banks. it's decision may rest on how policymakers -- policymakers see the fed later on. shery: and huawei reports a slow

market for smartphones, it will -- the, korea and australia coming online. coming at a time when we've seen a surprise election victory by incumbent scott morrison and the rba turning more dovish. thenikkei of .4% as japanese yen near its weakest level in almost three weeks. we had some disappointing i.t. numbers earlier but coming ahead of the boj decision later today, the policy is expected to stay unchanged. kospi futures of .3% and we are expecting more movement coming from the korean won after that big gain in the previous session. let's check in on the

first word news. >> president trump has won his on a block on arms sales to saudi arabia. muster theailed to majority needed to quash the bill on capitol hill, despite aiding the support of a handful of republicans. the president's critics say saudi arabia must be punished for the war in yemen and the murder of journalist jamal khashoggi. tried talks resume later tuesday after -- with little expectation of anything other than a broad framework for further negotiations. the two sides are holding their first face-to-face meeting since may with key differences remaining and neither team shows any inclination to compromise. the talks are further hindered by china describing the u.s. as the black hand behind the unrest in hong kong. president trump is back on the offense of ahead of the fed

theyng, complaining that will probably do little to counteract rate cuts in europe and china. he indicated that she tweeted that a small rate cut is not enough. the president went on, the fed has made all the wrong moves, but we will win anyway. pro-democracy leaders in hong kong have dismissed the latest criticism from china over antigovernment and anti-police protest. in an unprecedented briefing to the media, china's top agency said violence will not be therated and reaffirmed police force and criticize foreign interference, stoking tensions in the city. 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.

shery: japan's factories took a hit from trade tensions in the global slowdown. industrial production fell in june from a month earlier, the first contraction since march. on a year on year basis, it was down 4.1%, a contraction for a fifth consecutive month. economists expected smaller declines there. our chief asia correspondent joins us from hong kong, this coming ahead of the boj policy decision. reminder of the external pressures facing big exporting nations such as japan. global trade has hardly grown at all this year and there's no sign it will turn around anytime soon. we already had a hint in the leading indicators that investment was weak, the manufacturing sector was hurting , and overall, weak exports are side of things.

perhaps head of the new sales mayfor october, consumers stock up in a last-minute rush to avoid that sales tax. nonetheless, you have to save the external story remains not just the u.s. and china, we do have japan and korea tensions and also the global economy continues to slow. they probably wish it was reversed, but that's not the case. what are we looking for in terms of guidance perspective? >> there certainly the view that they would like to go after the fed to see what kind of commentary they provide. if you expect the boj to move on the policy front. around how to do forecast, what kind of update they deliver for inflation, and -- after seeing the numbers

out this morning. there's a bigger debate, when you consider the trend moving toward cutting interest rates is to veer toward extra stimulus. they're kind of him didn't now. a lot of the debate has been over the negative consequence and hurting profitability and the like. i think the message today from the boj will be how gloomy are they on the outlook for japan and global growth, and what can they do about it in the near term at least. shery: how big a risk is the strong japanese yen, given that we are expecting the fed to cut rates, not to mention if trade tensions continue? >> anything that forces them as wehe line, especially just discussed when you look at what's going on with industrial production, we know the export

sector is hurting and no -- now we have the japan-korea spat as well. together, the last thing the japanese authorities will want is a strong yen. going forward, there will be scrutiny on ongoing commentary and you have to think that would be a temptation perhaps on the boj side to pull some levers to smooth things out. paul: thanks very much. we have our strategist joining us from singapore. taking into consideration what what aretalking about, your expectations for the direction of the yen? of a is not so much concern to the japanese

authorities, but if the fed goes ahead with the rate cut and we see a strengthening of the skin, it would need to go too far before he gets back on the radar and they would be concerned about it. 105 the somewhere below alarm bells will start ringing. if he gets anywhere close to 100 against the dollar, the ministry of finance would be concerned and probably put the bank of japan on birth to do something about it. it's a tricky situation because they don't want to offend washington, but at the same time they've made it clear they don't like people that artificially keep their currencies week, so japan has to take that into account as well. as we did see dollard again touching 100, that's a serious situation for japan, for the exporters. i'm sure the japanese would want to do something to try to help out in that way, but we are not there yet. certainly in the next few weeks if the u.s. interest rates are coming down, we could see the u.s. dollar get weaker against

other major currencies, including begin. if the trade talks work out with china, we could get a risk on scenario as well and that would likely benefit the yen as well. there are a few things on the horizon that can make begin stronger, but they are not likely to happen this week. certainly in coming weeks and months, is something the japanese authorities will look at very closely. shery: let's talk about the chinese yuan. all of a sudden we see a plunge there. so what is going on? mark: there's a couple of things that have happened in the last few days. we've seen some week chinese data, industrial profits numbers were not that good. there is plenty of liquidity around in the chinese markets at the moment. were coming toward month in. it's making -- coming toward the month end.

with the trade talks coming up, there's not much confidence that much is going to happen, as you were saying earlier. engineering pmi comes out tomorrow, that will give the yuan some direction, if the number comes up before 49 point six, that is the forecast. even though it is below 50, it won't be a big surprise. we have been below 54 a while now. a number that comes out in low 49 would be a bit of a shock and oft would tend to the weight those arguing the pboc needs to do more on the interest rate side. that is something to watch out for tomorrow. shery: thank you so much for that. commentary onis mlive on the bloom work. -- on thed,

bloomberg. chief executive carrie lam and the police force with more demonstrations planned across the city today. paul: up next, boj day is upon us. we will have more on the implications, next. this is bloomberg. ♪

paul: we have some live pictures of people gathering in hong kong on the kowloon side, aiming to disrupt train service and paralyzed the city's transportation. this is the latest step of the a suite oftest over concerns in hong kong about the one country-two systems set up there. protesters now blocking the doors to the trains there. there is also some suggestion that we might see some of what

goes on in the city's road networks as well. we are keeping an eye on that story as it unfolds. as we have been discussing, this is a big week for central banks, starting in tokyo. bank of japan will make a policy decision in the coming hours, the day before the fed is widely expected to cut interest rates. our next guest expectations can be summed up in one word, and that word is dovish. in sydney, jun bei liu how much more dovish can governor kuroda get? what are expecting to hear? >> the equity market is expecting to be very dovish, japan is in a really tough place . really just caught in that crossfire, as well as the trade conflict.

we've seen corporate earning weakness and of course the data has indicated that it's got to be dovish, the market is not expecting a cut. >> we just saw industrial production, not terribly good at all, the fifth consecutive month of declines. a time for governments to step in and do something. government do abe to remedy some of these issues? jun: there's a lot of things outside of control, except to use monetary policy, which globally doesn't have much room to move. what they could do is more guidance such as being dovish as well as any ees in trade conflict should be approved for that data quite quickly in terms of japan. shery: how big a risk is a strong japanese yen, given the current macroenvironment? important for

japan, given that trade is such a big part of its economy. it's very important for jet -- four inches stay low. dovish,is being very talking to whatever is necessary, then boj really needs to step up in its efforts to try to lower the in. shery: let's turn to australia because were seeing the asx 200 at a record high at this point. enough positive surprises to keep the momentum going? i think it's very interesting, clearly the lower interest rate around the globe is going to support the asset value for a little longer. however, the earnings expectations heading into the earnings season, particularly in australia, is reasonably high, unlike the u.s.

so we see volatility and risk for this reporting season and surprisingly, our market has been so resilient, despite the weaker lead from offshore, simply because we are a high-yielding market as well as political certainty for the time being. paul: there was an interesting op-ed recently, the housing market is stable again, rates are low, stock market near records. easing accents? jun: a lot of things in terms of making sense broke down a long time ago. the economy is still not doing great. however, the political uncertainty has been removed, and iron ore prices or supporting our fiscal policy in terms of tax cut and the further thatstructure, so a lot of has started to rally.

the outlook has been somewhat more positive than expected. shery: let's talk about earnings in the u.s.. what are we seeing so far? any opportunities there in the market? jun: that's very interesting earningsf you look at expectations, they were downgraded heading into reporting season in the u.s.. far last week has been somewhat mixed. ,f you look at the bottom line it's a clearer beat. 70% of companies have beaten on the profit line, although on the revenue front it's much less. this week is going to be a big one, is that will really set the tone on whether the market, for the reporting season, what the trajectory will be. shery: thank you so much for that, jun bei liu.

this is a story we are continuing to follow, hong kong's train operator now assigning a number of train door obstruction and passengers requesting assistance on two lines operating in hong kong. some protesters have plan to disrupt mtr services tuesday morning. the train operator in hong kong saying on its website that it will take extra traveling time on two lines. you are looking at live pictures there as passengers are waiting to board those trains amid violent protests in hong kong. another chaotic weekend there, beijing reiterating strong support for the leader and protester continue to roam hong kong and the hong kong train operator saying they will take extra traveling time on two

lines there. plenty more to come. this is bloomberg. ♪

paul: an alert on the bloomberg at the moment, the pound now at its lowest since march 2017. this is after we were hearing from the new u.k. prime minister, boris johnson. he has a couple of preconditions regarding brexit. he's demanding the eu reopen negotiations on the deal that , the eu indicating there is no way it will do that. the second is to lose the backstop. it appears the odds of a no deal brexit on halloween are lengthening and as such, we are seeing the pound heading toward post referendum lows as we see on the chart there. ,hery: let's talk about huawei

it is increasingly in the crosshairs of the u.s. government and its allies, australia, new zealand, japan and taiwan have joined the u.s. in banning the company's products within the global network with several more countries considering restrictions. in the first quarter of 2019, global smartphone shipments contracted, but it didn't stop huawei from managing to ship almost 60 million units. shipments were up 50% from last year, making it one of just three mobile contractors posting gains. paul: indeed the company does have outsized expectations with of $125y sales target billion. reports show sales grew by roughly 30% over the first half. the question is how long can

huawei keep up this momentum? bloombergg in executive editor for asian technologies. what do we expect from these earnings later today? peter: that's a lot of pressure, we don't have all the answers at this point. the company will officially announce results later today, as you mentioned. it's important to remember, it's a private company so it doesn't have the same obligations at twoicly traded company have release financial details. they come out once a quarter and talk about their financial progress on a few key metrics. the talk about revenue and profit and a few other categories. the company after years of being very private and secretive wants to open up and show the world it's not the dangerous company the u.s. hasbro traded as. it also want to show that despite some of the measures from the trump administration

including blacklisting the company, it continues to be strong and wants to signal to wireless carriers around the world that it has robust financials and is able to withstand some of these issues. i reporting earlier showed that for the second quarter, for the first half of the year, we expect revenue to grow about 30%. which is quite strong. is faster than last year, not quite as fast as the first quarter this year, but still very fast. it shows the company is withstanding some of these pressures and getting its hands on some of the components it needs to make its products and then turn around and sell them to wireless carriers and customers around the world. under this kind of pressure from the u.s., the company continues to make financial progress. shery: still, given the fact that they're are getting so much and top from the u.s. management and lots of headlines

these days, internal morale must not be too high. how are they addressing this? the wayt's interesting they kind of position the story. yes, the u.s. has put tons of pressure on them and put them on this blacklisting. the suppliers now are going to the u.s. government to get some exceptions to keep supplying some of these key components like semiconductors and optical components that they need. internally, the leadership of huawei has portrayed it as a company under attack. they're working three shifts a day, 24 hours a day in some cases at their headquarters to address some of these key needs. they want to reassure their customers they will be around for a while and they have steady supplies, and they are trying to reengineer products to avoid using the american components that they may lose access to in the future. , as a reportow

somed earlier, accomplished -- some employees are engineers that are figuring out what is around some of the stockpiling components ahead of this potential blacklisting from the u.s.. you've got employees who see this as they are under attack and they are rallying to the cause. the company is giving out bonuses to the employees who help them the most. that gives it a different perspective from washington dc, where they have portrayed huawei as a security threat, not just for the u.s. but for other countries around the world. paul: that's get a quick check of the latest business flash headlines. anotherhas lined up high-profile partnership to work on mobile gaming devices. it will include the development of virtual reality technology.

the faster data speeds in the latest chips will make mobile games more realistic and interactive. stay with us, more to come. this is bloomberg. ♪

>> this is "daybreak: asia." the u.s. treasuries planning to double expected borrowing in the third quarter, issuing $433 billion in net marketable debt in the three months through september. that's 274 billion dollars more than was seen in april and comes after the bipartisan deal to suspend the debt ceiling and ray spending over two years. the house passed the bill last week in the senate is expected to vote in the coming days. lows as 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 said venezuela's economic decline since 2013 will the steepestere 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%. now, unlike 007, 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. the car 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. thanks very much. hong kong protesters are taking more action the day after china condemned violence in the city. this is afference, civil disobedience campaign. a number of subway train door of structures are reported, according to mtr. you can see some of the disruption there. let's cross to hong kong and our senior reporter david tweed. what sort of response to beijing is expected from the protesters? i guess we are seeing some of it

there. heard thet not we protesters would have two types of response to the announcements out of beijing, or the press conference, i should say. you mentioned one of them, this is the obstruction of the metro the majort's one of interchange stations for commuters coming into hong kong. i just spoken to one of my colleagues he was there at the moment and he says the train, which has not left the platform since this morning, and it's now half past eight. that train has not been able to leave so that means no trains are running along that line, which is a major wind coming into hong kong. my colleague reported that some of the passengers are beginning to get very irritated with the protesters, some of whom are wearing black shirts. some of the passengers are also

leaving the train altogether and trying to find alternative routes into hong kong. the second type of disobedience which was previewed by the protesters had to do with snarling the traffic. if you look over here right now, you can see that the traffic on wherentersection which is the protesters said they would travel very slowly, it is pretty much free of civilian traffic. you can see buses and the occasional car. another of my colleagues who is driving in from the new territory today said, it was as if i was driving in on a weekend. the traffic is incredibly light. i think what has happened is that many on-call commuters, those working in the financial district where i am now, they have heeded the warnings that came out last night from various companies saying if you can avoid coming in to hong kong or

if you will have difficulty coming in, then you should work from home. if anything, the protests have disrupted the day-to-day activities of people in hong kong, but they are getting passed it by working from home. might remind you that the train disruption we are seeing is only happening on one line. i suppose in the future is going to be difficult for us to know which lines might be disrupted, so this is a type of civil disobedience that could pop up anytime but have an impact on local people. the risk is that local people will start to get very annoyed with the protesters. shery: why are they so upset? when we saw that beijing press conference, we didn't really get any talk of central government plarvention, nothing on the being involved or any new proposal from beijing. so it didn't seem like we are

seeing beijing cracking down on hong kong, so while protesters still so upset? >> that is a very good question. one of the reasons we didn't see any direct intervention from beijing and hong kong was because if we did see this, that would be construed as an undermining of the one country-two systems framework. what we did see was a forceful backing of the hong kong police to do what it takes to quell these protests, to make sure that anyone who breaks the law comes to justice. also we saw the unequivocal backing of carrie lam in the way she's been handling the protest. the way she's been handling the protest is to ignore the protest and that is what is rattling the protesters and is the reason why we will probably see whole series of protest going forward. the next big rally is on friday and this is a rally that will be held by the civil servants of hong kong.

government workers who approve of the way the administration is handling the situation. tweed, thank you so much, reporting from the streets of hong kong. coming up in the next hour of bloomberg markets china open, hong kong legislative member will discuss the widening unrest on the streets. overrowing frustration hong kong's political impasse is starting to show in the city stock market. investors selling shares monday at the fastest clip in more than six weeks after protesters clashed with police for an eighth weekend. let's get the details from our china markets editor. what are we expecting from investor sentiment in hong kong, given that we are not really expecting the protests to go away anytime soon. >> exactly. the hong kong market, equity market had not really dropped

much since the protest began. there is really a kind of shift in sentiment over the weekend. after eight weeks, there is a sense that it has been going on for far too long and is starting to have an impact on the economy. we have seen retail sales being impacted. where retail is an important part of the economy. companies saying they have to shut down stores. they are seen -- seeing less traffic in their stores. it's had kind of a snowball landlordscause the who operate the stores will have less bargaining power over the rents. it all started because it is taking so long to get anywhere, it's starting to impact investor

sentiment. on the weekend, the fact that there were three days of protest and the violence escalated, that got investors worry because there's a sense that it's not going to improve anytime soon and the announcement from beijing that they would hold a rare press conference on the protest got investors quite nervous. paul: you were describing their the impact on the retail sector. is it suffering more than others? one stock fell the most since december yesterday on volume that was extremely high, more than double the three-month average. they own all the stores in the station, so that is having an impact. a company that owns shopping honor of hotels and

shopping malls here, any real estate office buildings, all those companies that are listed are being impacted. morph real estate which owns a huge sop -- shopping center on the others out of the harbor, a lot of chinese and mainland tourists go there and spend a lot of money. if there is any sense that hong kong will have fewer visitors from the mainland, that's another huge worry for the retail and property sectors. paul: so what do investors need to hear when it comes to words from the hong kong government or beijing authorities? >> yesterday, everyone was very worried that beijing would say anything that would make the situation worse. as david tweed said, the fact that they didn't -- they backed

the government essentially, in china said -- at least they didn't toughen their stance on the protests. there was some concern that the pla would be deployed and that was actually avoided. looking for a sense that it will move in the right direction or at least not escalate. from the hong kong government, any chance they will listen to the process -- to the protest and have a little more dialogue than they are having now, because as david said, at the moment, there's a sense that they are ignoring the protest and hoping they will go away. the protesters don't seem like they're going to back down anytime soon. an eighth weekend of protest looking like the knights is up,ng up -- nint ish coming and it could be a lot more widespread than the past weekend. paul: thanks very much for that.

still to come, the majority of economists surveyed see the bank sticking with its current policy settings. we will be live in tokyo next. this is bloomberg. ♪

paul: this is "daybreak: asia." shery: i'm shery ahn in new york. the bank of japan is likely to keep its policy unchanged at its meeting ending today. kathleen hays is at the bmj better next guest. -- with our next guest. kathleen: you can see the bank of japan behind me, where officials will wrap up their meeting in the next two or three hours and let us know if they're making any change at all to their extraordinary monetary policy stance. i'm joined by someone who watches this very closely, a here in tokyo.er

masahiko loo. welcome back. makes a tweet but basically stands pat. how much is this because the economy is ok, they don't really need to do anything? how much is because there is really not too much more that they can do? japan.omy is doing ok in inflation, and i think monetary policy has run its course in japan. no the boj owns 50% of the bond market, there is so much more he could do.

kathleen: does the prime minister have any rabbits in his hat? peter: he has the fiscal stimulus package that he actively talked about, if the economy season a slowdown that will definitely come up with some fiscal measures, but that something that have been talking about. we haven't seen any real numbers yet. we will probably know more by december when they come up with the budget. kathleen: the markets are focused not just on the boj, but in connection with the fed's. instead of the fed moving first and the boj sitting back and saying maybe we have to be more dovish, they have to make a decision today, based on their concern potentially that the dollar could weaken if the fed is dovish. how strong a factor is that and what do you expect? masahiko: it's not something

that worries the boj that much. in threemarket pricing or four cuts in the next 12 today will and most probably extend the forward guidance through spring 2020 two q4. you watch the bond markets very closely and you know all these traders. what could the boj or the fed do or say that could move the dial here in either direction? the statement could be uber dovish or slightly hawkish. masahiko: it doesn't really japan, theterms of currency is being controlled by more room forsee

places to rally, places that are more exposed to the trade war like singapore and thailand. kathleen: the bright of the -- right side of the shadow, if you're looking for bonds you're looking for some place for something like that to happen, the negative impact is something that could make you money. you said singapore and malaysia? if you want to buy a 10 1.5%.ould local rates at kathleen: when you look down the almost $13.5u see trillion of this negative bond yield globally and it seems like more heading that direction every day, the guidance has been in the bond market for several years now, what is the message here, what is it telling us? peter: i think we will be stuck

in this environment for a little longer. the ecb might be doing something in september. it's something bond markets in general have to deal with. so this is going to stay for a while. kathleen: what about the stock market in japan? we spoke to someone from global , what from goldman sachs is your view of japanese equities in this current environment? peter: japanese equities have been underperforming. concerny because of the on the hike in october. , investors are not buying into the whole fiscal tightening by the government. we really need to see the real physical numbers being confirmed by year-end. until then, japanese equity

probably remains as it is. kathleen: if they do something, even if it is low probability, what would you be looking for? weer: again, i don't think are at the stage where boj would have to do anything. either cut interest rates or go to something for -- something else. they have always been innovative in terms of being unconventional. we don't think that will do anything. if dollar-yen goes down to 95, it will be a different regine. global central banks have to react. kathleen: in the meantime people the range forout the 10 year jgb, maybe put a

floor on it or credit cap on it. with that make sense to you, as someone who is in the market every day? , not putting ay hard cap in the range you put in a 10 year. i think market perception is like the 10-year could go to plus 25 or 30 basis points. kathleen: when the boj moves, are you in the camp that is going to be easing? usnk you so much for joining . in the camp that clearly says their tools are getting kind of blunt, not a lot they need to do right now. when the policy statement comes out, we'll find out if he was right. that is basically what everyone is expecting. the press conference later this afternoon, we will be covering that in-depth. at theathleen hays there

bank of japan. thanks very much for that. just to update you on the goings-on in hong kong at the mtr station, hong kong mtr says one line has been suspended due to the civil disobedience that you see there, large groups of protesters effectively blocking the doors to the train, making it impossible for that train to move. that is causing a backlog down the entire system. mtr now saying the line has been suspended. more to come in a moment. this is bloomberg. ♪

paul: you are seeing live pictures from hong kong, the disruption that is happening at some of the city's train stations. the line isart of suspended, not the entire line. you can see some ongoing trouble there which is causing delays across parts of the transport network. shery: let's turn to a bloomberg exclusive, john micklethwait has been speaking with the new mexican president in mexico city. he says rates are too high but it won't affect the central bank's independence. a different thing was

possible. i would like the central bank not only to work on controlling inflation, but for it to be thinking about growth as well. growth.me more about >> we are talking about what the central bank is doing. they are more cautious about inflation. this is not a bad thing. this is not the wrong thing to do. i'm not saying that. but it is important to lower the rate, to encourage growth. this is an issue i'm leaving for the central bank to decide. , were not justt going to grow, but also to develop. not only growth, but develop, , that's what we

want to change. and to create new paradigms. rose is creating wealth, but not necessarily disturbing wealth. growing andis distributing wealth. so our administration, our government, what is now doing better than before is , so althoughincome growth,s scarce, little there is a better distribution of well. that is, there is more well-being. paul: that was the mexican president speaking exclusively to bloomberg editor-in-chief john micklethwait. let's take a quick look at how

things stand right now. .75% on a bigh by day for earnings waiting for the bank of japan decision. we did see some rather disappointing industrial production numbers for june. the kospi higher by .2%. the asx now at an all-time record. shery: u.s. futures at the moment gaining .10% after the s&p 500 and the nasdaq fell from record highs. on what happens in hong kong as protesters keep disrupting train services in the morning rush. the china open is next. this is bloomberg. ♪

>> welcome to "bloomberg markets: china open." 'm tom mckenzie. david: compromise scenes in short supply. yvonne: the decision may rest on how policymakers see the fed move later on. tom: mexican president lopez obrador speaks with bloomberg exclusively.