>> good morning i am paul allen in sydney. we are an hour away from the australian market open. bloomberg'sing from global headquarters in new york. i shery ahn. welcome to daybreak asia. paul: our top stories this wednesday, trade talks resume in shanghai. with dinner, dazzles, -- jazz and angry tweet. and tim cook says he is return -- thrilled at the

return to growth. results expected to confirm a 60% drop in operating profit rate >> >> and south korea industrial production for the month of june, when it comes to the seasonally adjusted month-to-month we are seeing growth of 0.2%. but still growth recovery from the contraction we saw in the previous. . estimates ofssing growth of 0.3%. the number for may has been revised to a smaller concoction that it was thought initially, to a contraction of 1.3% from a. year-on-year, it is a bigger contraction than expected, a contraction of 2.9%. the estimate was for a fall of 2%. it would mark the second consecutive month that the year on year gauge is in contraction for factory outputs and south korea. so both numbers missing

estimates. the bigger fall is on the --r-on-year number from 2.9% of 2.0%. a down cycle in the semiconductor sector weighing on the economy. we are getting export numbers later in the week. that is also expected to contract for eight consecutive months. already the first 20 days of july exports declined more than 13%. industrial production not looking great at the moment. let's check how the asian markets are expected to perform today. futuresuth korean pointing lower as well. looks like a down day in store in seoul as we wait for samsung earnings we are expecting at the bottom of the hour and 30 minutes. cindy futures also weaker after tuesday's record close. where waiting on other numbers out of australia as well expected to show a modest

expansion. in japan, nikkei futures trading slightly higher. a few stocks to keep an ion, sumitomo, ensuing. profits sliding on bad loans and lending. we also have nomura, mizuho, and mitsubishi reporting later. with reddick ago to any arc. more tension on the streets of hong kong. protesters gathered near the police station in calhoun. people were being -- in kowloon, hk chief executive carrie lam play into the beat -- painted a bleak picture of the economy. sterling continues its miserable run, following a fourth day ongoing concerns the u.k. is about to crash out of the european union at the end of october. prime minister boris johnson suggested there may be new -- no new talks saying it it in

europe's hands whether u.k. leaves without an agreement. johnson reiterated he does not want a no deal brexit but warned the current one is not acceptable. e.u..up to the it is their call. it is in their court. unless we are determined to do won't take us seriously in the course of the negotiations. saudi exports to japan slumped took supply from the kingdom to replace loss-of-life in iran. filling the void by turning to the uae which has become japan's biggest supplier for the first time in four years. shipman's from iran fell to zero expired in may. the u.s. is urging japan and south korea to resolve their trade differences amid fears it could spiral out of control. the white house is calling for what it calls a standstill

agreement to give tokyo and seoul time to negotiate a wider deal. the comments and comparative silence -- ends weeks of compared of silence from the u.s. during which japan thought it could bring u.s. on its side. global news 24 hours a day and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. president trump is lashing out of china again as trade talks resume in shanghai. bashing beijing for what he says is an unwillingness to buy american farm products. tweeting china continues to rip off the u.s. and is morning china will get a worse deal after reelection next year. let's bring in a senior editor. excitations are low going into trade negotiations this week. the president not making matters better just upping the pressure on beijing. >> yes, i think the president

here is ratcheting up the rhetoric ahead of these senior-level talks in beijing. the fact that these talks are happening at all was seen as a pretty big sign. right? standoff been a lot of and tension. they dramatically met at the g20 and osaka. warm rhetoric comes out of that. a truce, no additional tariffs coming in. the resumption of trade talks. i think there was some thought in the market that, hey, look, we are on a great track. we are going to get right what we need to be. and this is going to be the thing that breaks it down. the problem is, that that really papers over some of the really stiff differences china and the u.s. have had. instead of getting into a situation where people are ratcheting up rhetoric and ratcheting up tariffs, where we are now is actually back to thingse were before

really got worse. points at this impasse where china and the u.s. have to sit down and make some real tough decisions about some things that up and keeping them apart. remember, they had gotten through to the point that there was some sort of framework of trump's under president telling, that he says china walked away from china says the u.s. walk. did not do what it was supposed to do. they had left a lot of the tricky issues that had not necessarily gotten solved. that is where we are now back to. that is the framework i would put all of this meeting in. shery: has there been any change in beijing's position, whether it be lifting the tariffs or leave for huawei ? know, there has not. trump has signaled that huawei

will be one of the things that is last on the list. but beijing is looking for some compromises across a range of issues. this is going to be one of the key things to see where the u.s. bends if they bend at all. in some of these talks this week in beijing. i think one of the critical things that we have to be looking for is, as you mentioned, on huawei and on all of these sort of contagion things. he started to see other companies get rolled in, notably fedex. and some stuff to do with shipments of huawei products. i'm not sure if that is fully connected. but there is a view on the u.s. side that it is not complete disconnected. so, you could be looking for whether or not some of those sideline contagion corporate risks are contained if they go down and there's is not an escalation their that would present a positive sign. but back to the president's

tweet about agricultural products. the president clearly not thinking agricultural product purchases have,. china has said it wants the u.s. to do some things before it starts there. so there are points for clarity that can be made this week. that may be little things that might signal things are going in a positive direction. what about some of the presidents other tweets that suggest china may be waiting until 2020 to see who was sitting in the white house then. the issue is so big and thorny and multifaceted. one of the chances of an eventual deal ever being cut? think i would take the president's tweets on that subject as a sign that he is very cognizant that there is a, craddick debate in detroit tonight. very cognizants that he is going to be running an election campaign. and there has been a move from this white house to try and paint democrats soft on china.

is similarfor this to where democrats are debating right now. they are debating in detroit, michigan. it is at the very beating heart of the american rust belt. and part of where, in america, there is a big feeling that china has taken advantage of the u.s. for a long time. now, donald trump in 2016 one a lot of the states he won pennsylvania, he won michigan, he won his constant. that was key was white house bed. you should look at this as a bit of election framing going on right now ahead of that democratic debate later tonight. right, derek while they can seen for. jumped and beat estimates. speaking on the earnings call tim cook expressed optimism over the company's performance in china. >> i would like to provide color on her performance in greater china where we saw significant

improvement compared to the first half of fiscal 2019 and return to growth and constant currency. we experienced noticeably better year-over-year comparisons for our iphone business there then we saw in the last two quarters. and we had sequential improvement in the performance of every category. bloomberg technology hasrter and apple expert been picking apart report and was on the earnings call. mike, what are the key takeaways here? >> apple demonstrated a little bit of growth. it is pretty much flat for the third quarter. and it is barely an all-time record for third quarter. which is good news given that apple has had a few significant declines in recent quarters. we saw what happened in the holiday season of 2018. we saw them pushing their narrative around the strength of wearables and services, which is a fair point. however, those two product lines are still much tied to the

iphone. so it is basically like apples future is wearables and services. but it still requires the iphone to axley function. we'll see how apple tries to differentiate the two product lines from each other in the coming years ahead. shery: how well have they done of the virus if i into those other products and services -- how well have they done in diversifying into those other products and services. they have done pretty well in diversifying. the iphone made up half of apple revenues a little under 50% for the first time. the ipad, the mac the two other product lines contributed about $5 billion each. wearables well above that went by was services. but they have differentiated quite a bit. the problem is that these new product lines that are doing so well actually require the iphone. so people are buying fewer iphones -- if people are buying fewer iphones these new services and wearables are not going to

work. that is the conundrum in place now. i think as soon as apple starts coming out with more and better designs those will turn better. shery: to get any more clarity on what happens to the mac pro given the ongoing trade tensions between china and the u.s.? >> ok, so i have two theories on that one. one is the possibility that tim cook is saying apple wants to make the mac pro here the u.s. continue to do that. of course, as you know, there is a significant difference between wanting to do something and actually doing something. theory two is that apple could be asking for these exemptions on the components for the mac pro, bringing them over to the u.s. for manufacturing in the u.s.. but i do not think theory to what had such a strong response from president trump the other day on twitter. so i think it is likely .8. to be honest with you. certainly the other point is very possible as well. shery: very interesting. mark, thank you for that.

are apple and consumer technology reporter. till ahead, the democratic presidential candidates had to detroit for the next round of debates. will we see fireworks? paul: up next, investors have a lot to digest this week with trade talks, the federal reserve, corporate earnings and u.s. jobs. coming up. this is bloomberg. is bloomberg.

shery: this is daybreak asia. i am shery ahn in new york. paul: and i'm paul allen and sidney. weighing potential market catalysts. u.s. china trade talks, second-quarter earnings. and the big one wednesday the fed decision. investors are expecting a quarter-point cut. presidentuest is the and portfolio manager for the portfolio family of friends.

this 20 point basis point cut that we are expecting cut we are point expecting. on the bloomberg terminal, it shows the s&p has a technical by indicator flashing again. i wonder about your thoughts about the extent here after what season a modest earnings is the fed artificially propping up the equity market? >> to large degree really. if you look at the most recent run of say the last four to six weeks. it coincides with the fed talking dovish and talking about rate cuts. to a secondary degree, there was some better talk on trade and discussions with china as well. that it has been primarily a fed story. the trade talks have been out of the picture under the guise that they are talking, and as long as they are talking that is a good thing. and reasonable minds will come to an agreement eventually. on that front, we are definitely

seeing a different story today. and on the fed front, we are getting wilds differences in terms of expectations and opinions on what the fed should be doing. anywhere from doing nothing to 25 basis points, which is primarily the contents us, to some bigger number like 50 basis points with -- primarily that consensus, to a bigger number like 50 basis points. that will be the mistry for tomorrow. once -- the mystery. what happens after tomorrow. is it watchful waiting? to thed be a big lift equity markets. 25 you might see a selloff because it is expected. whatever the conversation or talk is, that will also significant he impact the markets going forward. it will give a hint about what their plans are going forward. the buzzurance cut is word at the moment. but if you really strip out things like inflation and business investment, things in

the u.s. look reasonably healthy. myththis make a bit of a out of the idea. >> hence the name insurance cut. the conventional wisdom is they went too far in december. when you look at u.s. rates compared to global rates that could be true, especially with recent global rates declining. rationale.hat is a because you do not want the u.s. dollar to be too strong. you do not want u.s. exporters to be hurt too much. but when you look at the u.s. economy now, corporate earnings have been decent. there beating lowered expectations this quarter. but still good. unemployment is very low. people are working. this is our spending though a little bit softer than they were earlier in the year and last year. cost of capital is reasonable with or without the fed cut. and inflation is under control. there is a strong argument, and i would probably put myself in this camp to some degree, that they do not have to do anything. at this point. the economy is strong enough

without two and half to 3% gdp type growth. why cut right now? keep that dry powder in reserve for when they may need it in a potential recessionary scenario. it is a strong argument, hence the name insurance. because a lot of people believe this is not an essential cut right now. it is a solution looking for a problem. shery: to paul's point on slowing investment, this gtv chart on the bloomberg showing that as we got the second quarter numbers, we saw investment dropping for the first time since 2016. how much worse could sentiment these we continue to see trade tensions between the u.s. and china heat up. i have been saying it so much these days. >> aren't we all. it is one of them are tired stores. business bending softening is interesting. today, the you general -- the general perception is that the u.s. economy has not been impacted as much as the rest of the world or even china, with

respect to this ongoing trade war. even mine we have trade issues going on three fronts. there is the new nafta that is not been ratified yet in the americas. and you of all kinds of trade issues happening with europe, whether it is france or england or the general european union. so as not just china. but the issue i think is starting -- you're starting to see is that the reason business spending appeared to be potentially softening is number one, global growth appears to be weakening. i think that is a byproduct of the u.s. and china fighting in the other unresolved trade issues. second, while talking is good, the market is perceived that is a good thing. i think businesses, people in the c-suite around the country are starting to say when is this going to get resolved, and how? and with that uncertainty comes a reluctance to spend, whether is on people,, new business initiatives, whatever. new business

initiatives, whatever. that will eventually affect the u.s. economy peered is definitely a data point we notice and we are paying attention to it as well. i think it is a secondary indicator or a tangential indicator to some of the collateral damage of the trade discussions. shery: and michael, quickly, given everything that is going on on that front, are we going to see a spike in volatility? that we seems to happen late summer. >> maybe? i do not see anything on the horizon right now. but definitely some controversial fed comments tomorrow could create some volatility. also geopolitical events at any point could do that. or you have potential issues on the trade fronts in terms of a deal or no deal. headline risk politically always matters as well. especially as u.s. elections heat up. i think those are all factors that could create volatility. but when you look at the landscape right now, recently

there has been really a lack of volatility in the last couple of months. i think that is because of the general consensus of what the fed has telegraphed, and the debtor -- general state of affairs. we have not seen much this year versus last year. shery: thank you for joining us. plenty more to come on daybreak asia. this is bloomberg.

this is daybreak: asia. and in paul allen in sydney. i am shery ahn in new york. the stage is set for the second round of primary debates, it is a mashup of progressive senators bernie sanders and elizabeth warren are analyst is in detroit. kevin, will the gloves come off? for the gloves come off? >> know they not going to come

off. but it is really the place for a crowded democratic field, including elizabeth warren and bernie sanders. they will be standing side-by-side next to each other. i'm told they will not fight each other but rather uses as an opportunity to individually make their case. i also have my eye on a couple of other candidates on the state, including a centrist candidate, senator amy klobuchar, a democrat from minnesota. how will she differentiate herself? on issues like medicare for all, reining in wall street regulations, and environmental protection. look for south bend mayor pete buttigieg he has to have a breakout moment. remember he had struggle with criticism for how he dealt with a racial police situation in his city. backdrop to the fiery conversation on race that is gone on the past couple of days.

on trade policy look to see how someone like senator warren discusses things like re-imposing glass-steagall. and look for senator standards to lay the gauntlet down on negotiating with china. -- senator sanders to lay the gauntlet down and negotiate with china. paul: in the heart of trump country, isn't it? >> this is huge. this is balla ground zero four trade policy on issues -- battleground zero four trade policy issues. this is a state heavily impacted by union workers, steelworkers. this is a state that president trump won in the last cycle. this is a state that democrats want to pick up. sanders defeated hillary clinton in the michigan primaries in the 2016 cycles. joe biden gets a rematch

against, harris tomorrow night as well. stakes are high. paul: thanks ray much for joining us. plenty more to come on bloomberg daybreak: asia. huawei will be talking with in a moment. this is bloomberg.

is daybreak asia. i have the first word headlines. shanghai head of more formal discussions. presidentdes met as trump lashed out at china saying they do not live up to their word. he posted an angry tweet saying there has been a promise to buy more u.s. farm produce, but no apparent progress. he ended by writing that they did not come through. british oil giant bp said it is enjoy -- avoiding sending ships through the straight of hormuz, because they could be seized by iran.

load iraqin plans to crude and took shelter off the coast of saudi arabia. the company fears the vessel could be a target. a british warship had to intervene to ensure the tanker safe departure from the persian gulf. >> we are going to be externally careful. we have had concerning incidents. right now we are certainly not sending british cruise and should dips into the persian and ships.ews about a hundred million people in the u.s. are legally access. prosecutors accused the woman as breaking into the cloud. capital one said 6 million people in canada were also hit by the breach. do you think a robot could convince you to sign up for a credit card? j.p. morgan chase does. it signed a five-year contract with aia marketing company to

use its machine learning - ai company. the deal follows a pilot program where j.p. morgan sides, through rates on ads jump 450% with the robot creative's leading the way. global news 24 hours a day and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ paul: chinese tech giant huawei has reported a dramatic slowdown as it deals with the u.s. blacklist. we spoke exclusively with the chairman in what was his first ever television interview in shenzhen. tom? a couple of top lines from the interview with the chairman

of huawei is that growth is expected to continue for the company in 2019 to top the growth we signed 20. despite the bad, despite the blacklist, despite the damp and by the u.s.. as you say, if you lift up the hood on these earning numbers and you see the problems arising , particular after that blacklist was put into place, so for the first quarter of 2019, revenues are up almost 40%. the blocked list then came in nec revenue growth falling to 13%. there concerns about what the lack of access for huawei to the key technology, the chips and software it means for their 5g business their enterprise division and the smartphone part which makes up 50% of the revenues. we put these questions to the chairman and got his views. liang hua (interpreter)

we do not know when the u.s. will make a decision on android and when that decision will come. we have to make decisions for our products. we will evaluate for product lines. if we are not able to use android we have the ability to develop our own operating system and ecosystem to become the basis of our services to customers. >> give us a sense of how fundamentally you had to change your supply chain to mitigate some of these pressures. have you completed these changes or there more to be done? entity put into place was disruptive to our supply chain -- the list was disruptive. we had already made plans use components for business. u.s. suppliers stopped supplying us. we had to make adjustments to our supply chain, including our process of purchasing, many factoring, and delivering projects -- products. we will do the adjustments to our supply chain. we will change to other suppliers.

and use our own ships for the core components. i think the damage to the u.s. suppliers is even bigger than it is to huawei . we will have to increase our workload and manage continuity internally. at the damage to the u.s. supplier is direct, as they lose a customer. frome u.s. removes huawei the entity list, that would be a solution. you seeingact are for demand for your 5g equipment given the u.s. pressure campaign on some of its allies around the world to block access to huawe? >> although the u.s. has been launching a campaign among its allies, it is up to each country to decide its partners, based on its own developing demands, telik me kason, and carrier infrastructure and construction demands. telecommunication and carrier infrastructure and construction demands. i think there may be some others willing to work with huawei . fortill major uncertainty

this business, and much of that uncertainty stemming from the actions of the trump administration, whether or not they do ease those curves on -- curbs on access to chips and software. they still do not have access to key supplies used at their enterprise business, a smaller part of the company. they are suffering because they cannot get access to intel chips. in terms of the consumer division, the smartphone division, they're going to be launching new smartphones by the end of this year. but they still do not know with they will be able to use google's android operating system. if they cannot do that they are bracing for a drop off in sales particularly in international markets. when it comes to 5g, they say contracts are still being put together for that. they continue to subsidized stations in 30 countries. that is a business they are confident about. it is the smartphone side of the business that faces pressure at this stage. shery: thank you. also i will be speaking with

huawei chief security officer and on all of those security allegations against the company later this week. for now let's turn to a supplier and competitor, samsung. some breaking numbers. paul: second-quarter earnings just starting to hit bloomberg right now. we have second quarter operating profit at 6.6 trillion won. 56.1d-quarter sales at are waitingn. we for breakdown on smart phone display. that makes up a large percentage of the profit. we'll keep an eye out for defects and capex numbers as now we have the operating won. s6.6 trillion let's get brian mott in

singapore. great to have you with us. 56.1 3quarter sales profit. won. operating we are still not getting those divisional numbers per what are your excitations for the second quarter? is, think the big question as paul was pointing out, is it chips that are really the thing dragging them down? how is, in contrast how the phone division doing great i think the problem is that there are weaknesses in both of those we have to be concerned about. to the point about the phone division, it is a product category that has already been slowing down on a global basis for all vendors. from aomething where samsung pipeline perspective, you can argue they are not necessarily that competitive or that revolutionary in terms of

the product line thus far, foldable's aside. we can talk about that later if you want. if you look at the components business, that ties back to the earlier discussion tom was having about huawei , if they really run into problems. don't forget, samsung is a big supplier of chips to them, particularly memory. and memory is one of the big components, or one of the big pieces that drives samsung's profits. hits a stall, that also hits -- hurts samsung. even if the phone division could benefit if it could pick up some of huawei lost momentum. shery: that is a double-edged sword where you get gains but also losses. let's talk about the semiconductor side of things. we also saw sk hynix earlier. their performance was weak but they cut their spending in 2020, expecting to reduce output. how will this help prices? >> that is the issue, right?

it is because of the prices and the supply situation that is hurting the entire industry. the flipside is, this is what had fueled samsung's big gains over the previous years. obviously the situation has changed now. marketof that, slowing for things like smartphones. questions about the global macroeconomic conditions and with the trade were going on. all of that uncertainty is a thing that is really a concern for samsung now. chips -- inot these think the days are behind us, in other words, where those chips that were helping to fuel a lot of those profits -- now the problem is the market is correcting itself. and that is coming back down. brian, as we continue to wait for those divisional breakdowns out of samsung. let's talk about huawei a little more. how effectively do you feel its

efforts at diversifying its supply chain have been so far? arehe thing is there certain components, if you break down all of the components within a phone, you could actually -- there certain components that yes they can source from non-american suppliers. the problem is, there are a few key components like some thing called and rf front end that tends to be dominated by american suppliers, at least for the high end ones. that is where i am not sure if they are going to be able to find an alternative source. to the earlier point in that segment, yes, sure, they are adjusting to manufacturing. they are able to source alternative components in many cases. but you're only as strong as your weakest link. so if you cannot get those rf front ends, and you run out of your existing stock, that could be a problem for huawei . this is still going to be one of those issues in addition to, course, getting access to those

google services, which is the other big problem. paul: yes, let's talk about that. android is due to resume support. how crucial is that development for huawei ? it is a critical thing. and to be clear, it is google services on top of android that is the key and that is being blocked. if huawei is going to sell its phones and markets outside of china, having access to google services, google store, and google updates, those are critical in making the product compelling and, quite frankly, useful to the user. conversely, if you do not have those services, the phone is limited in its ability and it loses a lot of its appeal. hence, that is what hurts huawei . i guess everyone is watching how this trade war develops peer to all that uncertainty is one of the things that makes everybody nervous about what is going on. because thesad

products themselves that huawei has designed, they are quite nicely done. you look at what they have done , they're leading the industry, but without access to the will services that makes it tough. shery: at least for now we have seen that 90 day relay for certain u.s. broadband companies and wireless customers. far,impact that we seen so given that we have a temper a license in place, what happens once that on august 19? on august 19. seen fromwhat we have huawei is that it has been business as usual. they are still doing launches around the world and planning for fall launches later this year on the assumption that they get access to all the components .hat they need but, as the deadline looms, as

you point out, what happens then? is there resolution? let's assume there is no resolution. that obviously throws these product plans into disarray. so, how do they react? how quickly can they react to that. they're really just pull every thing off the shelf? for that matter, how do retailers and channels and telcos react to that. they have to be wondering, do i commit to buying these huawei products are not? what if the rug gets pulled out from under us at the last minute? that is a big pressure as well. shery: we are seeing more and more pressure from the u.s. in these chinese tech forums. on the other hand, will they get some relief as we see this japan korea text back going on with curbs on chinese companies? will they be turning to chinese suppliers? and what is it mean for samsung in the long run? >> that is another risk we need to watch out for was samsung.

samsung says they have enough components that they can keep going for now. i guess it is business as usual. but if the japan korea's traits that does not work itself out, -- trade spat does not work itself out that could negatively impact samsung's business and folks might have to go to alternate suppliers. paul: brian,, idc feist president -- vice president. silicom, the fed under pressure from the white house to deliver a bigger rate cut than expected. can the calm president trump and the markets. this is bloomberg.

paul: we are counting down to asia's first major market open. we have futures for japan currently looking weaker by almost seven tens of 1%.

a big day for bank stops in japan. we have nomura, mitsubishi and u.s. j. also a chance for the markets to react to sumitomo. this is daybreak asia and in paul allen and sydney. shery: and i'm shery and new york. tomorrow is fed decision bay -- decision day. with a quarter-point cut seemingly baked in, let's blame -- let's bring in our editor. kathleen, everyone sees a cut this week. the key question is will the fed be hawkish or dovish when it comes to a future potential cut? about thewhat it sees economy, definitely, we're going to be watching those things very closely. watching the central bank, watching the feds cents. another question is this the beginning of an easing cycle, of a series of rate cuts? a couple of weeks ago jim bullard answer question of mine

at a press conference, president of the st. louis fed. he would not say that the fed is on a preset course. does not think that is what is happening at all. but the fed's mantra, jay powell's mantra, is sustaining the economic expansion. and this is a question. how much will be needed? in the latest gdp report, consumer spending surged over 4% annualized, and help gdp growth above 2%, while business investment turned negative. so, what is the complication here? can you just sit and wait and let the fed be independent? not if you are president trump. answering reporters questions yesterday he said he wants a big rate cut. he is still blaming the fred -- the fed for growth not being faster. meanwhile, a bevy of federal officials from alan greenspan to janet yellen to bill dudley the former president of the new york fed and a bloomberg companion piece said the fed probably just needs to do one rate cut now which puts a cushion under the

economy in case it does get more of a squeeze from these global tensions. that seems to be the consensus. it does not mean they will not have a fairly dovish statement. the question about signaling another cut, and if that is going to come, i think jay powell will give a lot around that question at the press conference following the meeting. paul: kathleen, a wide expectation that the fed is going to cut their key rate. the bank of japan is expecting it. governor kuroda is under some pressure to keep up with jay powell as well as the ecb? that is right. keeping up with the other central bankers, the fed is going to cut at least one time. in contrast to six month ago when they were ready to hike rates now they are getting ready to cut probably in september. so the governor what can he do, it seems a dovish tilt in that policy statement yesterday, trimming the gdp and inflation

forecast, saying that there will be more easing. that they will not hesitate to ease if it is needed. you can see him entering that press conference yesterday, and as he answered questions from reporters, he said that policy statement is intended to show a stronger commitment now toward easing if we need it. is a more positive stance now toward easing amid this shift by global peers. clearly that is the fed and ecb. big,dovish tilt may not be but remember the policy tools of the bank of japan, extraordinarily monetary stimulus in place, they are using those tools as much as they can. so for governor kuroda maybe the best he can do is to signal we are doing the best we can. he told me that a month ago and made it clear are willing to do what we can. man at the doj for 40 years

the yesterday a pass -- baton has to pass from fiscal policy in japan to monetary policy. it is no longer about of kuroda put on easing but in abe put on more government spending. paul: that is a common complaint among central bankers around the world. tune into our special coverage later on bloomberg tv. the fed at 2:00 p.m. new york time on wednesday, that is 2:00 a.m. thursday in hong kong. we still want to get breaking news, that is breaking slowly, more news on samsung electronics second-quarter results. won. the 6 trillion expectation was 4.8 8 trillion. it is a decline from we saw that it meet the expectation but is a decline from the first quarter. samsung has this to say, second half chipped demand recovery is

expected to continue amid uncertainties. but it does expect persistent uncertainties in the memory business and samsung says it will flexibly manage drm products in the second half. won. second quarter net trillion trillion won. we will have plenty more analysis on this in a moment and break down the samsung never's forest shortly. the meantime, stay with us. this is bloomberg. ♪

shery: this is daybreak asia. i'm shery on new york. allen city. paul a quick check on headlines. under armour fell the most since 2017 after warning that sales

and is vital north america regions continue to be a drag. a slight decline in full-year north american revenue the overall still projected drive above 4% on international demand for overall income. shares fell as much as 20% of one point. paul: shery: beat expectations thanks are rise. kfc comparable sales rose 5% while pizza hut also taught forecast. the results are prompt in the company to plan hundreds of new locations to tackle increasing competition. ergot king, starbucks and tim horton are all extending rapidly. banned abdelhi has invev from selling in the city for three years. the rolling follows a lengthy investigation alleging the brewer has been evading taxes by using double get barcodes on

bottles supplied to local retailers. the company will appeal against the ban order. shery: more evidence of the lack toa revolution -- resolution the u.s. china trade war is hurting global business. love tons is affected as planes flew with the most empty cargoes -- lift panza - lufthansa affected as planes flew with the most empty cargo space in a decade. asia, kiwi stocks unchanged at the moment after two sessions of gains. keep an eye on those apple suppliers. we have apple revenue forecast for the fourth quarter above avenue list estimates. even i on samsung we got them leading on net income. moment kospithe are down. nikkei futures and sydney futures looking to the downside. paul: that's is after the asx

had a high on tuesday. asia,m on daybreak investors and the fed banking on the first rate cut in a decade. just ahead, this is bloomberg.

am paulmorning, i allen. major asian markets about to open for trade. >> welcome to "daybreak asia." ♪ our top stories this wednesday, trade talks resume in shanghai. president trump lashing out at rip off china. 4% abovee almost expectations for samsung. turns up then

heat. more missiles fired in the second such launch. japan, korea, and australia coming online. under pressure after closing at a record high. watch out for inflation numbers later this morning. kospi down 0.1%. take a look at stocks including iphone suppliers. policykei down, after was left unchanged. the yen rose a little bit. keep an eye on stocks including sony and nintendo reporting earnings. a busy day when it comes to earning results. >> it certainly is. you did mention samsung. let's check in on that stop everyday kospi heavyweight, a

bit of a bellwether for south korea as a whole. -- let's check in on that stock. half chip recovery. maybe signs of a bottom inditex recovery. beatinguarter profit, estimates. they did cut their sales forecast. we will keep an eye on that one as trading gathers steam in japan. let's check in on the first word news in new york. >> more tension on the streets of hong kong tuesday night. hundreds of protesters gathered around a police station. -- this was after local media said 4040 people -- 44 people were charged with writing. carrie lam painted a bleak picture of hong kong's economy.

sterling continues its miserable run, following a fourth day in growing concerns the u.k. is about to crash at of the european union at the end of october. boris johnson suggested there may be no new talks for brussels, saying it is in europe's hands whether the u.k. leads without an agreement. he says he did not want a no deal brexit but warns the accord is not acceptable. >> it is up to the eu. it is their call. unless we are determined to do it, they will not take us seriously in the course of the negotiations. >> bp says it is avoiding sending ships through the stra it of hormuz. tinker had to avoid plans to unload iraqi crude -- a bp

tanker had to avoid plans to unload iraqi crude. >> we have to be extremely careful. we have had some ships move in and out. we have had some concerning incidents. we are not sending british ships and cruisers into the gulf. >> exports to japan for saudi oil slumped to the lowest level in 17 years. 25 millioned about barrels in june. it is filling the void by turning to the uae which has become the first -- biggest supplier for japan for the first time in four years. from japan fell to zero after waivers expired. this is bloomberg. shery? electronics sees a

second-half recovery in chip demand. we have net income numbers, beating expectations. a mixed picture when it comes to mobile numbers and chips. the final results from the second quarter coming out along with guidance. we have stephen engle with the numbers. what is standing out? net income if the came out better than expected. we got the preliminary numbers indicating with the industry has been facing. a downturn, a cyclical downturn in the memory chip business. that has seen the likes of cut capex spending and also cut out some capacity. knew operating profit is confirmed, falling about 56%. number was pretty much the

same preliminary. the net income number is a little better. second quarter, 5.0 5.60,000,000,001 -- trillion won. some of the guidance we are getting, we are going to have a conference call coming up at the top of the next hour. with all of the division heads. in the second-quarter results, we are getting this kind of guidance. persistent memory -- they see recovery amidst these uncertainties. i want to break out some of these. the mobile market demand and the second half to remain week. -- weak. they see further improvement in the display division. operatingusiness, profit, it is the biggest driver

of profit but one of the most vulnerable to any slowdown. second quarter business profit, 3.4 trillion won. that is down 70%. display business profit, that is down. won.illion home appliance operating profit, up 39%. number of different headlines. they do give a first half capex number. yetoes not give a forecast for the second half or into fiscal 2020, which the market will be looking at. to sum up, samsung electronics confirms a preliminary operating profit number. however, second-quarter net income, higher than expected. expected, 4.2 8

billion u.s. dollars. the added pressure with these japanese trade tensions and export restrictions. >> let's get into that a little more. the result somewhat better than we were expecting. does it reflect what could be coming down the pipeline in terms of trade tensions? wax absolutely not. we do not know how deep and how far this dispute is going to go between japan and south korea. whether these export restrictions are going to continue to hurt samsung electronics. they have been saying the right things, saying there is enough supply, they can whether --

weather supply disruption product launch coming up in the next couple of months. theember 18 is the date newspaper says samsung will launch its full smartphone or is fablet? it is foldable. the launch was delayed because of problems with the screen. that is yet another product failure after the 2016 failed 7 which hadhe note a tendency to burst into flames. samsung has had a couple key flagship products go awry. they are hoping the foldable smartphone will drive revenue going into the holiday season. >> at least it did not catch

fire. david engel -- stephen engle and hong kong. some commentary and 's expertfrom bloomberg editors. north korea fired more muscles -- missiles. what do we know about this latest launch? comes six know is it days since the most recent launch. the defense ministry from south korea confirms these short range ballistic missiles traveled for miles250 kilometers, 150 at a maximum altitude of 30 kilometers. a ballisticlow for short range missile to be traveling that low at that altitude. the defense minister quoted saying this could be a new type

of missile. that area of the missiles were launched this morning, they were the same location as many other short range missiles from before. has shruggedtrump off those missiles as not helping matters. how do we expect secretary pompeo to react? state pompeo,f they are making their way to attend and thailand to regional forum. south korea's foreign minister expected to go. what is interesting is north minister who was set to go changed the status, saying they will not be sending and they will send the thai ambassador instead.

this is the first time north korea did not send their foreign minister in 10 years. this says a lot about how they want to approach their talks. >> thank you so much for that. the latest on the north korean missiles. still ahead, bloomberg's exclusive interview on how the company is grappling with u.s. blacklist. >> first we will be talking market strategy ahead of the fed rate cut. this is bloomberg.

this is "daybreak asia ." is fed decision day with officials set to vote fire firstfirst -- for the

rate cut in 10 years. let's bring in kathleen hays. 25% cut a done deal? >> it certainly looks that way. the question is what next for jay powell. the spotlight is what are you doing next for me? the mantra is, we want to sustain economic expansion. now whiledone consumer spending is strong and investment is not strong. people are worried maybe it will need extra assistance. in the complicating side is president trump. the fedready blaming for the economy not been stronger. he wants a big rate cut. fed officials,r alan greenspan, janet yellen,

piecebloomberg opinion saying expect 0.25% cut. otherre signaling to global central banks. a dovish tilt has begun. we sought at the bank of japan meeting with governor kuroda. fed is going to cut rates for the first time in 10 years, what can the boj do to stay in step with that and make sure they yen does not get too big of a boost? whatever is said in the fed policy statement on wednesday, whatever jay powell says at his press conference which gives a signal of where they are going next will also be important to the bank of japan. the best they can do at this point is say we will ease more.

with their tools stretched thin, they do not have a lot of room to move. for the fed, they say their focus is domestic. they are not going to be focused on weakening the dollar, although a lot of people say and the president says it would a nice outcome because that would hurt u.s. manufacturers -- that is one of the big clouds for the fed to make that cut and maybe wait and signal more. >> global economics and policy editor kathleen hays. to get some perspective on how markets are positioned, carrie craig joins us from millburn has pretty much got this one baked and priced in. 25 basis points pretty much expected. this is even as earnings are

kind of modest. expectations were modest as well. i liked your recent op-ed. >> the tell us more market was expecting a recession coming through from the current earnings season. if you look at the companies so far, 60% of the market cap. 2% year are running at on year. 76% of companies are beating expectations. lift theelping markets. within that, there are worrying trends. revenues betting on expectations to decline. rising wage costs. we think it is the case of modest.earnings are

low hurdles to be beaten, and they have done so. expectations for what the markets can do should remain modest. that is where you start thinking about, not just this year but 2020. 10% growth numbers the market is looking for. they have been a bit rosy in terms of the backdrop and risks out there. what are the risks? a trade war? arehe general slowdown we seeing, especially in the u.s. economy. 2%.th, just at the momentum is slowing. we saw revisions. consumer that is strong. you are not getting that business investment coming through. there is that weakness coming through in the economy as well as uncertain global outlook. we also always had that trade element.

we should be clear on how much we can expect from the market, especially as multiples have moved up and yields have fallen. some fallout in the industrials and manufacturing parts of the economy, given everything going on. have you seen contagions and other parts of the economy? as we see those trade developments and the economic slowdown around the world? >> it has been a case of the weakness being focused on those ones related to trade. the material sector. given what has happened to the oil price. things looking relatively more modest and that is a positive sign. again, if we look at how the economy is holding up, the data over the last couple of weeks,

consumer confidence, has been pretty decent. u.s. iset in the elevated in terms of price to earnings ratio. there are some pockets of weakness. we like the u.s. equity market as a defensive play in terms of the equity you get. stocks offer more of a quality bias. >> we are seeing valuations near one year highs. as a defensive play, you might like it. compared to other regions, does it still stack up? a lot of it has to do with the tech sector. you have a tech sector looking more elevated, bringing up the overall of all of the index. he don't have that dynamic in the -- you don't have that dynamic in the euro zone.

in the australian market, things look more expensive than they do. around the world, earnings are looking above average. since the lows of last year. the earnings, they have looked better and more consistent. that is why we would favor that relative to say japan or the euro zone at present. >> in terms of ostrow you, -- a australia, do you feel like the asx has a ways to run? toit did take a long time regain that 2007 hi. if you look at how the market has moved, it has been because of multiple re-rating.

a little bit more earnings growth. that has been related to what we are seeing in the mining stocks. $120 a ton. if you look at the industrial things are not looking as good. you are seeing multiples closer to the high 18 times. thestrength focused on mining stocks, to my mind. weakness. given the potential fallout. weakness or softness in the domestic economy. it is a one sector story for me in australia. that is the risk. even though it has moved through the new highs? it is not broad-based in terms of the growth. >> thank you very much for that. the j.p. morgan asset strategist.

this is bloomberg. ♪

this is "daybreak asia." check of thea latest business flash headlines. first quarter profit decline. net income declined to the equivalent of 2 billion u.s. dollars. that accounts for almost a third of the bank's forecasts. the drop in lending income reflects how low interest rates have affected profitability. -- fell the most since 2017 after warning sales in north america continued to be a drag.

overall income is still expected 4% one about international demand. shares fell as much as 20% at one point. >> let's take a look at some of the movers in today's session. samsung the big one. 3.7% better than we were expecting. 0.5% in thef about early going. indicating although there have been difficulties in the crucial sector, they are working to manage those. sony doing very nicely. second quarter profit beat the outlook. nintendo, not faring so well. off almost 4%. missed its profit estimate, even the lowest.

it did maintain proper guidance and switch targets as well. huawei caught in the middle of the trade war. national security concerns. this is bloomberg. ♪

>> this is "daybreak asia." talks underwaye after a two-month hiatus. met afterdes president trump lashed out at china. he posted an angry tweet, saying there was a promise to buy more farm produce. is urging japan and south korea to resolve trade differences. calling foruse is what it calls a standstill agreement to give tokyo and

seoul time to negotiate a wider agreement. both japan and korea sought to bring the u.s. on their side. capital one financial slumped in u.s. trade. reviewing personal data for 100 million people in the u.s. was illegally accessed. she was identified by amazon as one of the former cloud service employees. capital one set about 6 million people in canada were also hit by the breach. you think a robot could convince you to sign up for a credit card? j.p. morgan chase does. it signed a five year contract with a company that uses machine learning to create ad campaigns and strategies. click through rates jump 450%.

global news, 24 hours a day, on air, tictoc, and twitter. in more than 120 countries. this is bloomberg. ♪ to strugglentinues with the trump administration's component ban. the chairman spoke exclusively to bloomberg in shenzhen. the first ever television interview for him. >> we don't know when the u.s. will make the decision on android and when it will come. make preparations for our products. we will evaluate our strategy for the overseas market. developthe ability to our own operating system and

ecosystem to become the basis for our services to the customers. >> give us a sense of how fundamentally you have had to change your supply chains. have you completed those changes or is there more to be done? the entity put into place by the u.s. was disruptive. we had made plans to get the components for our business. suppliers suddenly stopped supplying us. we had to make adjustments to our supply chain. including purchasing, manufacturing, and delivering products. we will change to other suppliers. chips for the core components. >> i think the damage to the u.s. suppliers is even bigger than it is to huawei. we will have to manage continuity internally. the damage to the u.s. supplier is direct.

huawei fromremoves the entity list, that would be a solution. seeing,solution are you given the u.s. pressure campaign on some of the allies around the world to block access? >> although the u.s. has been launching a campaign amongst its allies, it is up to each country to decide based on its and carrier infrastructure demands. there might be impacts in places like australia. there are others willing to work with huawei. >> you said you are still blocked from some of your key suppliers. can you give clarity who they are? and the success you have had were not finding alternative companies to fill those gaps?

components have some we cannot buy from the u.s.. components our own to supplement. smart phone systems like googles google's system have not resumed business with us yet. we hope to see good news. tothere is not, we will try enhance our own capabilities. >> you expect huawei to be part of the conversations when the trade negotiators meet in the next few days in shanghai? >welcome the backing of the chinese government for your company? is purely a company. when two countries talk, they talk about big topics. in the talks between china and the u.s., they will talk about big topics. for us, huawei once to only do its own job. patch up the holes and manage

continuity. we don't sell to the u.s.. what we do care about is doing a solid job to make sure the products are delivered to our customers. huawei chairman speaking exclusively to our correspondent. i will be speaking to the security officer in all of the allegations against the company later this week. huawei is at the heart of the china u.s. trade tensions. president trump lashing out. his bashing that she is bashing beijing -- he is bashing beijing for what he says is an .nwillingness to buy products let's bring in our chief asia economics correspondent.

time wheng at a officials are getting ready to wine and dine their u.s. counterparts in shanghai. >> it is difficult to know what triggered this particular outburst giving the -- given the trade talks are restarting. president trump has his own domestic political audience. frustrated purchases are not where he would like them to be. purchases from the u.s. to china are at a decade low. pork sales came off as well. president trump probably feeling whatsense of frustration he hoped would be an upload -- not happen.has >> what is the chinese attitude

heading in? china said they are willing to come to the table and make a gesture of goodwill. they have made it clear they want some concessions from the u.s. side. around while, for example. some of looking for that -- those bands to be lifted. so they can begin buying from u.s. suppliers. with the delegates meeting in shanghai since may, that will be one of the key features. >> what are we realistically expecting from these negotiations? is there an understanding of what needs to be done? asian has already put the redlines when it comes to lifting tariffs and getting some sort of relief. >> both sides have been managing

expectations. thing you can get out of these talks would be something of a framework for further negotiations. things are not that complicated but the closer we get to the u.s. political cycle, that will complicate calculations in the u.s. side. china might be calculating they can write out a storm. a storm.ut china once -- wants tariffs listed. the u.s. has a long list of things. oversight and execution into considers their sovereignty. nobody expects all of that to be resolved. the key takeaway will be what the mood music is like and

mood forhat sets the more substantial negotiations. >> we will get a health check on the state of china's economy when june pmi's are released. signs point to another rough month. this is bloomberg.

>> this is "daybreak asia." by for thetanding latest pmi readings. manufacturing data likely to stay below 50 in july, suggesting the industrial sector may still be contracting. julian eva's. great to have you with us. what are you expecting? >> conditions do not look great in terms of exports.

global demand continuing to fool. demandsve been positive for metals. we could see a slight improvement in the manufacturing pmi. remain belowt to 50. >> how much of the weakness is coming from domestic weakness as opposed to external demand? >> quite a lot of the slow down has been domestic. that is one reason why we have some of thesal, slowdown that came from the slowdown in credit growth. we have had a bit of a pickup.

have seen from monetary easing has been pretty weak. there do seem to be a lot of mechanisms dampening including wider credit spreads. i think there is more policy makers will need to do to offset the headwinds the economy is facing. >> we do have the politburo proactiveaintaining fiscal policy. is this really going to be enough? is some reform going to be needed? language, it didn't move things forward very much. mention of the deleveraging goal. they are moving away from that and are willing to see renewed

increase in the debt ratio, as long as that feeds through stronger economic growth. a signal we will see further monetary easing. it is not clear how that will come through. we will probably continue to see , as well as assets we are starting to see signs of increased willingness to turn back to off budget are owing. >> domestically, china does have something economies which they did which is inflation. pricesat is resolved and begin to ease, would you expect the chinese consumer to recover?

think as you mentioned, the kind of inflation china has is not the good kind in terms of the consumer story. it is mostly driven by pork prices with if anything well undermine consumer confidence. growth consumption started to decrease markedly swine fever became an issue. i don't think that will be immediately resolved unless we do start to see signs of a recovery in the chinese economy, which is a way off now. >> we are expecting a fed rate cut. what are we expecting from the pboc? how will they respond? have downplayed expectations for rate cuts.

over what acern rate cut means. i still think there is a possibility the pboc could follow the fed with a downward adjustment. it could match that not as a rate cut but a technical adjustment. past.ave done that in the they did that in the other direction, following previous fed rate hikes. that is a possibility this week. pritchard,vans senior china economist. don't forget, you can watch us live. on you can catch up securities. become part of the conversation by sending us

instant messages. you can check it out at low -- tv . this is bloomberg. ♪

real lastingf the damage, it would take a few months as protests continue to see what international companies would do. we are seeing economic damage in terms of retail and other basic

areas. i don't know how this is going to end. the young are so determined. so unrelenting. >> we have never seen this before. hundreds of thousands of people for eight consecutive weeks. >> earlier guest wayne and in the protests in hong kong. second-quarter numbers, we are seeing signs the protests may drag on. the economy growing at the slowest rate in a decade. jewelry sales down. negative signs for the economy. carrie lam says there is no room for optimism.

investors sold hong kong stocks at the fastest rate in six weeks. property and luxury stocks taking the biggest hit. at risk, a 9% rally. a strong track record. seeing the city whether -- weather past crises. >> an alert at the moment. mike pompeo says he is going to meet representatives from japan and south korea in bangkok. it is an attempt to mediate these simmering trade disputes. first bilaterally, and then together. the south korean foreign minister and japanese foreign minister. to broker some sort of dispute between japan and south korea. let's get a quick check of the

latest business flash headlines. more evidence lack of a resolution to the trade war hurting global business. anza's -- liftft the carrier says it will toe to cut if demand fails stabilize. beatd-quarter sales expectations thanks to a rise in customers due to sales and deliveries. pizza hut also trump forecasts. these are trump team the company new locations. burger king, starbucks, and tim hortons are all expanding rapidly. the indian capital new delhi banned -- for

selling in the city for three years. abinbev denies the allegations. >> let's return to a discussion in hong kong. protests becoming a sticking point. beijing accusing washington of stoking the unrest. let's bring in our north asia team leader. we have seen president trump onently praise xi jinping how he was handling the hong kong protests. what is happening now? yesterday was extraordinary. just as trade talks were getting underway, the chinese foreign ministry was blasting mike pompeo who had made comments that were a paraphrase of what trump had said earlier. thehought china would do

right thing as far as hong kong was concerned. the foreign ministry said the violence hong kong has seen was the quote creation of the u.s.. it was very strong language, the strongest we have seen so far. it shows the underlying strategic tensions between these two great powers jockeying for influence in asia. >> no wonder, given these ongoing protests, we are seeing concerns over growth in hong kong. carrie lam giving a warning. what was her main message? it is not going to get any better anytime soon. china is caught in the middle of the trade war. protests that, the themselves have taken a bite out of the economy. a lot of warnings coming from retailers.

away.ters scaring people a growing sign people are moving their money to what they see as safer shores such as singapore. sporadic seeing incidents breaking out. radio hong kong reporting another one. can you describe what happened? there was a huge group of protesters gathering outside of the police station after word broke the authorities were going to be charging 49 participants in the protests on sunday night that resulted in tear and other clashes. 43 of them were going to be charged with rioting, a severe crime in the hong kong books. it can carry a sentence of up to 10 years in prison. >> the north asia team leader.

before we hand over to bloomberg markets: asia, let's take a look at how we are tracking right now. off by 0.7in japan 5%. and australia, the asx pulling back as well by less than 0.2%. this is after the index hit a record high tuesday. we are waiting on second-quarter cpi numbers. those will be due out in 90 minutes. a look at some of the movers we are following committed we are seeing samsung 0.8%.onics down thang in at more 5,000,000,000,001 -- 5 trillion won. they talked about the mobile demand remaining weak.

also falling more than 3%. this after their fourth quarter missed estimates. we are talking about missing their lowest profit estimate. they had a week game lineup. sony up more than 5%. yesterday,gs probably the most in two months as profit eases those concerns. that is it from daybreak asia. market coverage continues as well as well is the start of trade in hong kong. for bloomberg markets next. this is bloomberg. ♪ tom: 9 a.m. in beijing and

shenzhen, welcome to "bloomberg markets." yvonne: we are counting down to the open of trade in hong kong and the mainland. david: let's get your top stories. trade talks resume in shanghai. president trump is lashing out. protests rage on in hong kong and the unrest is taking its toll. carrie lam sees no cause for short-term optimism. david: samsung delivers a beat in the final second quarter. almost 4% above expectations.