paul: welcome to "daybreak australia." are counting down to asia's major market opens. ♪ paul: here are the top stories we are covering in the next hour. stocks and oil sink as president trump ramps up tariffs on china. he is adding 10% next month and may go even higher. move boosts bets on another rate cut in september and the

market stampedes to the bond market. huawei may be collateral damage. we hear from the company's chief market officer. sophie: financial markets taken for a ride on produced terror threats on top of reduced trade when it came to manufacturing pmi. 2% from gains the losses. check out the dow weighed by .tocks like nike u.s. futures hinting at further losses earlier in the asia session. switching the board to check in on treasuries, rally across the curve sending 10-year yields not seen since investors are as boosting their fed easing bets.

of thatd a strength string of we get economic data yesterday with japan and south korea pmi in that contractionary territory. an addition, we had news out of hong kong that retail sales had its fifth straight monthly decline. we're also awaiting another slew of earnings from asia. want to check on the yen here after that trade news. trump tweets announcing a new 10% tariff on $300 billion in chinese imports, not yet an effect. he goes into effect on january worst. aking a little bit more of deep dive into that, the bloomberg dollar index lost .1% after it was within a hair of its 2019 peak. not looking so great. paul: president trump is ramping up the trade war announcing

fresh 10% tariffs on a further $300 billion in chinese imports. he also threatens to raise .uties even further >> it can be lifted in stages. we're starting at 10%, and it could be lifted up to well beyond 25 percent, but we are not looking to do that necessarily. this would be done in stages. on 300. it is approximately 300 billion dollars. we already have a 25% tariff on the first 250 billion dollars. the 10% follows the $250 billion at 10%. u.s. let's bring in economics team leader sarah mcgregor. what a difference a tweet makes. how much of an escalation does this represent? : absolutely.

yesterday, everyone was taking china and the u.s. at their word that they had constructive talks. the assumption was august would be a pretty quiet month while we await further meetings, but with a series of tweets today, trump changed all of that. as their own reporting showed, not only did this happen in the middle of the night for china, there was no advance notice from the trump to beijing that they planned to take this measure. lighthizer a mnuchin apparently knew when they went to beijing for these talks that it was an option that trump may consider, but the decision was made in a tweet today. other than the markets being surprised, even the chinese government may be surprised when they woke up this morning. wasie: the announcement abrupt. there is still ambiguity when it comes to the timeline and when that increase to 25 percent perhaps could come through. where can we muddle through from here? as you said, the chinese market also getting taken by surprise. sarah: absolutely.

trump has the power to put this 10% tariff in place because he already started the process. they released a draft list in may. there was a public comment period. the final list is to be released in days, the final list companies have either successfully asked for an exclusion from or not been granted one, and those will be the goods that will be hit, so onre will be a lot of eyes that final list when it is released, but trump has the power to go up to 25%. initially, that was the threat. if he wants to escalate, he would be able to do that at any time, given that they have already gone through this process with the list. paul: if he does that, does that begin then to have some sort of impact on the u.s. consumer? : absolutely.

i think we have seen almost every type of retail or trade group released a statement saying how detrimental the 10% would be to their business. many have the opinion that the tariff strategy is not working and has not gotten a deal out of china so far, so why ratchet up? very unhappy with this announcement. certainly, you can bet if a 25% tariff hits, that would essentially raise every import into china. that is a dire warning. morgan stanley said if that happens, for instance, within three quarters, there could be a recession in the u.s. those are some of the predictions coming out right now of what a detrimental impact such a move could have. sophie: huge walk us through exactly what happened when president trump sent out that here to walk us through exactly what happened when president trump sent out that tweet. let's start with reactions overnight. >> we were down, we were up, we were down.

financials took the biggest hit. at the top of the list, prudential took the biggest hit because they had earnings. we also had goldman sachs taking a very large hit. to some of the industrials, caterpillar, boeing, you also had best buy. one analyst said these to -- these tariffs could wipe out all their gains for the year. moving to retailers, everything from nike, a shoemaker, to office depot, macy's -- these had some of the biggest losses. tech, look at some of the s.e faang we are beginning to see what market reaction will look like. paul: oil also not unaffected. oil ultimately slid the most in four years. what's the story there? : traders say oil took it on

the chin. let's go through some of the charts quickly. drop on thethe huge far right right off the cliff. look at the big picture, the biggest decline since february 2015. again, the concern is that it factory problems. there you have it -- the biggest drop again in four years. take a look at gold moving the opposite direction. trump comes in with a wild tweet that gives the bulls a new run. followers, they love the volatility. paul: almost sounds like sports commentary. thank you for joining us. news of the tariff short currency is all over the world. walk us through what happened with the currencies.

>> it was a big day. these tweets pretty much set off fireworks in the currency market. the response was pretty much exactly as you would expect. thesaw a huge bid going to yen. it has rallied 1.4%, which is pretty amazing for a developed market currency, and the australian dollar led losses. traders really treat that as a proxy for china. then, the yuan, that is really where all the action lives, where all the focus was. it shot right back up. the weakest level since november. traders definitely have seven in their sites right now. sophie: turning to the offshore yuan, a new 2019 low. how significant would crossing that threshold the? >> that is a level china has usually stepped in and dissented in the past. if we got through seven, that would send a pretty serious message that china has been .acking down

it would really ripple through emerging-market currencies since china typically acts as an anchor. we could definitely finally see a spike in currency volatility, which has been dormant all summer. said chinadent trump devalues their currency. is that what is happening? is china the consensus is letting the market do its work for it. there's no need to devalue the currency because traders are happy to take the currency weaker. if you put massive tariffs on a country, you expect to see the currency plunge, and that is what we are really seeing here. bloomberg news fx and rate reporter, thank you for joining us. we will get bond market reaction in a few minutes with kathleen hays, but first, let's check out

at is going on in first word news. jessica: popular protests in hong kong continue thursday evening with the gathering of finance workers in the city center. there are more events planned across the weekend and a general strike on monday involving more than 90 unions. meanwhile, china celebrated the anniversary of his hong kong-based military and released a training video showing soldiers taking part in what was labeled an anti-riot drill. kong firmly support hong in defending the rule of law and safeguarding national sovereignty and security and hong kong's prosperity. we believe the pla forces stationed in hong kong will be the anchor for long-term prosperity and stability. >> u.s. manufacturing declined last month to a near three-year low weighed down by slowing production and weak exports. the institute for supply management index eased to 51.2 in july from 51.7 and month earlier.

estimate in a bloomberg survey was for 51.2. and most carmakers accelerated in the u.s. last month to generally positive sales numbers lending credence to claims the sector received its first monthly gain of the year. most of asia's main auto names were of while nissan was the exception with a 9% all in what is shaping up to be a bad year. chrysler,ler, -- fiat ford, and gm no longer report monthly sales figures. elon musk is warning the outlook for tesla in india remains gloomy. he tweeted that import duties are extremely high and make s unaffordable. shares have fallen about 30% so far this year. mobile news 24 hours a day on air and at tictoc on twitter powered by more than 2700

journalists and analysts in more than 120 countries. paul: thanks, jessica. he'll to come, we keep talking trade with the china beige book president at the bottom of the hour. sophie: up next, that's on more rate cuts -- bets on more rate cuts after president trump's tariff salvo. this is bloomberg. ♪

counting down to the sydney, just under two hours away. we have futures pointing weaker by a shade under a quarter of 1% after what turned out to be a pretty wild session in the announcement of more tariffs on china. i'm paul allen in sydney. are watching

daybreak australia." paul: president trump's tweets boosting bond markets. jay powell did not signal any imminence for further rate action. does today's news change the picture? >> boy, how donald trump can change the picture, not just in the u.s. but around the world with a single tweet. 10% tariffs on 300 billion dollars in chinese imports will definitely have an impact on the economy. certainly the question is now what it will mean for the federal reserve. jay powell, if you think about it, yesterday, the fed it cut that key rate at 25 basis points. you can see donald trump there on your screen. he complained he wanted a bigger cut, fed not helping enough. tryingeless, jay powell to explain, this is we think a

midcycle, and adjustment. and we can do more. bonds started actually selling off. quite a move up in yields yesterday, but today, what a difference as concerns grow about the economy and people wonder what the fed will do next and how soon. it is the short end you have to look at. the spike in yields, it has taken the two-year yield of the highest since 2009. that white line is showing you how the yields move so dramatically. of course, the head's rate cut also changing. not the fed necessarily but certainly the markets. we have another chart that will show you how that view of the affected the bloomberg library.

. >> is there any question we are seeing growth take a hit? the latest manufacturing report from the u.s. continued to be seen in july. kathleen exactly and not just in the u.s. but around the world. this is a victim of chicken between the u.s. and china on the trade war. some people speculating donald trump but that tweet out to push the fed. all abouts was pushing china who may think he may not push hard before the election next year -- donald trump, that is. go right to the bloomberg library with me again. it is not below 50 yet. the purchasing managers index is at 51.2 down from 51.7 in june, but the trend is so obvious. rosenew order's actually to 50 .8 from just over 50, but a new export order -- new export orders, the number fell.

in other words, new export orders are now below that key 50. anyway, this is definitely a big signal or the bond market. a fed rate cut certainly now back on the table. hard to imagine what could come out in that jobs report tomorrow -- actually, later today, i should say -- that would change the fed's mind. >> for a closer look at the effects of the announcement on rates, let's bring in colin martin, director of its income , schwables schwab center of financial research. we just heard kathleen say got some dramatic moves in the treasury market as traders are trying to price in more bets when it comes to fed easing. with trade and growth top of mind, how is this feeding into

your outlook for the debt market? >> if anything, it means rates are likely to stay low or longer. after yesterday's meeting, any concerns we get another hike soon if at all were kind of pushed to the side, but that clearly changed today with expectations for another rate of skyrocketing. we think rasul stay low for a while with 10-year yields falling so low there is a risk they stay this low. as a result, the tariffs can slowdown global trade and keep global growth slow and it is also a flight to quality bid. ahead toalso looking the u.s. jobs report. what kind of cute would you take from that? would that perhaps help the fed keep this round of easing short and sweet? >> it might not help too much. things are actually looking ok on the domestic side, even though those i sm numbers have been continuing to fall. some of the regional fed surveys have started to pick up. while the consumer is in pretty good shape, concerns really fall on the global side with local below 50.ing

fed chair powell mentioned global uncertainty yesterday. even if we get a positive number tomorrow that beats expectations, it's really unlikely to drive any near-term action by the bed. see: you say you expect to yield curves begin to steepen once inflation is boosted, but we have not seen that anywhere so far. feel a little bit misplaced? >> yeah, that is a big if. initially, we thought if the fed was able to thread the needle and lower rates, as powell put it, as an insurance cut, maybe that could boost growth and lift inflation expectations, leading to a modestly steep yield curve. that looks a little less likely today with new tariffs and play and that sharp drop in long-term yields.

paul: i just want to bring up if i can perhaps bloomberg's most famous chart, the one that shows the negative debt around the world. to see thisexpect begin to unwind, and what might that look like? >> probably not any time soon. it is not just the u.s. where we and loweasing bias rates. it is across the globe and there's expectations they could go lower. even though we see this mountain of negative yielding debt, when you look at u.s. yields continuing to fall, it's not likely we will continue to see those yields fall. the amount of negative yielding debt drop any time soon. >> overnight, we saw the u.s. .0-year fall how much further do you see -- what kind of handle are you expecting for the benchmarking yields? >> it could go a little lower, but one thing we like to tell

our clients is 10 year yield even though they are pretty low, they are probably right where they should we. we think there is a strong relationship between the 10-year treasury yield and the fed's terminal rate. in other words, where they stop hiking rates. even if they hike one or two more times, it will still be in that 2%, slightly below 2% area. treasury yields are not far off from that terminal rate and probably right where they should we. that ifere is a theory you are holding debt, at least your money is safe, but safe from what? what is the biggest risk out there? >> if you are a negative yielding yet outside the u.s., you are locking in negative yields, paying for the right to own some of these government debt issues. it comes as a surprise to a lot of our investors. there is also a currency risk aspect. if you own negative yielding debt in other currencies and the

dollar continues to remain strong, you could see those values fall. incomeirector of fixed at the schwab center. thanks for joining us. you can get a roundup of the stories you need to get your day going in today's edition of "daybreak." settingsustomize your so you're only getting news on the industries and assets that you care about. this is bloomberg.

in sydney.aul allen sophie: i'm sophie kamaruddin in hong kong. let's get a quick check of the latest business flash headlines. pinterest jumped after hours after reporting better-than-expected revenue and user growth for the second and boosting forecast on strong demand for advertising. revenues jumped to $261 million. pinterest added 9 million

monthly users in the quarter for a total of 300 million, up 30% from a year ago. paul: a technology company sores in lake -- late trading after icon icon -- after karel revealed hel icahn had a big stick. he plans to discuss value and potentially seek board representation. sophie: delta airlines is to end operations at a tokyo airport and join other u.s. carriers. it depends on the transportation department finalizing talks. the move will make it the biggest amerian -- american carrier at the airport. , our still to come

conversation with huawei's security officer on what role the company wants to play in u.s.-china trade talks. stay tuned for that. this is bloomberg. ♪

paul: 8:30 a.m. in sydney. the market opened 19 minutes away. on what has the potential to be a pretty interesting day on the markets following the latest escalation in the u.s.-china trade dispute. sophie: in hong kong, it is 6:30 a.m. you are watching daybreak australia. let's first word news. jessica: president trump imposed 10% tariffs on chinese imports next month. the new tariffs affect $300

billion of goods shipped from china and come into effect on september 1. hispresident said counterpart, xi jinping, must do more to resolve the trade dispute. >> i think he wants to make a deal, but, frankly, he's not going fast enough. he said he was going to be buying from our farmers. he did not do that. he said he was going to stop fentanyl coming into our country. he did not do that. we are losing thousands of people to fentanyl. >> the s&p 500 seeing its biggest enough-day drop since may. trump said he's not concerned at all but markets fell, claiming that he expected it. oil fell the most in more than escalationon fear of in the trade war exacerbating the global slowdown and dragging on demand for energy. maybeotests in hong kong

starting to hurt gambling in macau. revenue unexpectedly fell last month. that missed forecast of a 2% increase and cut short a rebound. casinos have been holding up in the face of the trade war and weakening chinese economy, but -- with tourist arrivals at record levels. and boeing is said to be redesigning the flight control to deploythe 737 max data from both its computers rather than just one. we're told boeing still hopes to present a final software package to regulators next month. sources say the timeline could slip. the latest approach is more comprehensive than a software update. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg.

thanks very much. let's check in on what to watch in markets this morning. selina: futures pointing to a weak start when markets open. japan may decide to remove south korea from a list of trusted export destinations as soon as today. cabinetnister abe's such a have a meeting before 10:00 a.m. trump's tweets set off a huge movement across the markets. they further slide could send lowcurrency toward a 2018 last seen in november. also taking a dive into the benchmark 10-year yield, after trump announced a major escalation in the trade war, we saw big moves. traders are now boosting the amount of additional federal reserve easing.

they expected to see more than a half point of rate cuts. sophie: thank you. we have singaporean lender uob beating estimates as we saw a net income at 1.17 billion singh dollars. we're also seeing improvement and the loan ratio. what will be interesting, of course, is what happens for the second half, given the improvement we saw for the second quarter. singapore, of course, grappling with a slowdown in economic growth given the trade dependency of the economy. just one of the signals of how the second quarter has fared. we will be checking in on what is going on with trump safire's tariffs on chinese imports with have implications for the

markets. -- we will be checking in on what is going on with president trump's new tariffs on chinese imports and what applications they will have for the markets. this is a change in tone from what we were just hearing 24 hours ago with peter navarro saying trade talks with china were looking constructive, now with this abrupt announcement from trump regarding tariffs, ? at are you making >> the meetings were not constructive. the understanding was they were not supposed to be constructive. in osaka, they could have rushed to a deal or could have understood this was something that would take until the end of the year to get done. you do not have any gauge chinese leadership because of the prc anniversary in october. this was always going to be a longer, more drawnout negotiation. nothing was going to happen in august beyond talks about the agricultural bias to buy off the president's attention and dealing with huawei.

the fact that nothing happened should not have been a surprise to anybody. that's why i think the first reporting from this was that it was constructive because there were no expectations. i think the reality plus some other things fit into the picture and the president got upset. >> reality taking hold and this shattering an already fragile trade truce between the u.s. and china. what had a response are you went to dissipate them from beijing? >> chinese leaders are basically en route to their leadership retreat, so they are probably not going to react very quickly. they are about to a symbol and have a more drawnout time to be them to figure out how to come back on this. it's very easy to say this is the last straw, the chinese are going to walk away, but at the same time, this could get worse. you can also have a much more aggressive stance toward chinese technology companies. people think huawei is under threat right now.

it's not. it could be. the chinese would be risking a lot. it's more likely for the near-term they are going to try to show a way they are pushing back on the president and see if this could be reversed before september 1. aroundhe popular cliche trade wars is that nobody wins. i guess the question is who gets hurt more here. china or if those tariffs do escalate, that when it really starts to bite for the u.s. consumers and companies. this ise same time, getting into the sensitive stuff for the united states. you're talking about smart phones, going into the pre-holiday season with a risk that some very important consumer products will have higher tariffs and that consumers will pay those additional costs, so this could get nasty either way. the one factor we have now that we did not have a few months ago

is the federal reserve and jay powell has made very clear he is willing to step into the breach and backstop the president in this trade war. good policy, bad policy, the white house is listening and i think that is why you are seeing president trump so aggressive right now. if you had a 50 basis point cut yesterday, i doubt -- you would be seeing this move toward china today. paul: the political dimension becomes more and more important. >> from the white house perspective, it is about who the president is likely to face in 2020. if you see someone like sanders or wawrinka who will try to flank the president from the protectionist left, he has to be very tough on china. it will be much harder to get a deal and then to defend a deal in a debate with some of the protectionist. if he gets joe biden, the

president has a different set of circumstances. i think he is watching the democratic debates. we know he is watching democratic debates, and this will dictate a lot of the tone for what you are seeing in the all. .- in the fall paul: thanks very much for joining us. as president trump escalates his trade war with china, one company continues to be caught in the crosshairs. that is, of course, huawei, which is seeing a dramatic slowdown in growth. we spoke to the chief security officer at the china institute and asked about the impact of the trade tensions. >> the u.s. government has been putting a lot of pressure on us for the last year and a half, and we seem to be increasingly trade in the middle of talks and geopolitical issues between the u.s. and china. we're sorry about that. >> was sort of u.s.-china trade deal could huawei support?

are not interested in being part of the u.s.-china trade talks. as citizens of the united dates, myself and my colleagues in china, we would love to see a u.s.-china trade to because it would probably help both countries, but as we said before, we want to talk directly to the u.s. government. oaks think because there's the will be thewe subject of trade talks, that means everything is political. the fact is we believe there will be certain restrictions placed on huawei just as there are on ericsson and nokia and we are happy to talk with the u.s. government about that. >> how are you trying to allay concerns over government issues? >> when we have the opportunity to talk to the u.s. government, about provenlk risk mitigation methods that have set of side -- satisfied the u.s. government that have allowed nokia and ericsson to do business in the united rates

-- in theeir did ties united states their deep ties to china. country likes to have things specialized for themselves and we are happy to talk about that. >> one of the issues is that course, is a chinese company. one of the big concerns is national intelligence law in china that requires chinese companies to actually turn over toormation in order cooperate with intelligence agencies there. how would huawei defend itself that it will not be used by the chinese government for espionage? >> as we've indicated, two international law firms have indicated the law does not say or mean that. the chinese government has indicated the law does not say or mean that. they are talking about normal cooperation the company can have. in the united states are with telecom operators. we are not a telecom operator.

whatever laws might apply similar to the laws that allow u.s. governments to access communications, those laws exist in china also, but those are relative to telecom operators. we are not involved with that and would not be asked to turn over information. >> would you have access to the information to turn over it you were required to? >> the fact is people seem to in the shared responsibility world of telecommunications, telecom operators really control the access., they control equipment vendors have a role. the equipment issues the u.s. government has raised, u.s. government assumes we would do the bidding of the china government, so there's possibilities on product valuation and also we have special mechanisms in the united rates that we would love to have reinforced by the u.s. government where -- our networks never touch customer networks. we have specially configured

laptops used after written permission from the customer. completely auditable, completely reconstructed will and we have only very limited access to customer data. sophie: that was huawei's chief security officer. we will ask a cme group economist why there is both good news and bad news in trump's latest tariffs. this is bloomberg. ♪

sophie: i'm sophie kamaruddin in hong kong. paul allen in sydney and you are watching "daybreak australia." oil plunged in the steepest one-day drop in more than four years after president trump ramped up tariffs.

bloomberg news' energy editor joins us now. is this an overreaction? do you think we could see oil rebound from here? >> it is certainly a strong reaction. i think this ramp up in trade threats from the president is piling on to really persistent demand concerns that we have then watching. we have a slowing global economy. the international energy agency cut their oil demand growth forecast for the rest of the year last month. this is a concern we have been watching and it is something that seems to be persistent even as u.s. stockpiles have fallen for the last seven or so weeks. sophie: opec production is at the lowest since 2014. why is that not supporting prices? really good question. we have seen supplies fall across the globe. we have sanctions on venezuela, iran, canada. enough.ot seemed to be

the international energy agency oversaid last month that the last six months, there was surplus insurprise supply, so that is something that market watchers are keeping an eye on. one of our reporters spoke with pb securities today, and they said it rather escalation of trade talks could shave another third off of expected crude demand. paul: how new are these demand concerns, though? we have been living with these trade tensions for a wild. global growth easing has been persisting for a while. is this really a new situation? >> it is not a new situation. it is a little bit of an extension of the same. last month in oil, we work in sort of a period of stasis. we posted last month the smallest monthly gain since 1991

even as stockpiles are fought -- falling. you have this tension between somewhat shrinking supplies, geopolitical conflict, but also just increasing concerns about what will happen with the economy. you have the two biggest economies in the world here, china and the u.s., at odds. a lot of uncertainty in the market does not seem to know all the time which way it wants to go. paul: thanks very much. it shows no signs of ending, but the good news is that the conflict reasons are largely blowout -- largely blown out of proportion. let's focus in on that a little bit more. this another 10% on a previously iffed it of chinese goods.

>> none of these increases in tariffs take affect until september 1. basically, at the moment, we are still under the regime we were at since may of last year, which $200 billioniff on worth of chinese goods. that is essentially like the creation of a $20 billion tax on american consumers and businesses who buy goods from china. as of september 1, that 10% goes to 25%. as you mentioned, we have an additional 10% tariff on $300 billion worth of other goods, so essentially, this $20 billion tax becomes an $80 billion tax, which is significant. they are denying that it is significant, but china pays half of that through reduced exports to the u.s. and the u.s. consumers and businesses pay the other $40 billion through higher consumer prices and lower corporate profits.

when you do the math, it should reduce chinese growth by about .3%. it should raise u.s. consumer prices by about .1% and lower aboutorporate profits by 1%, which is consistent with the reaction we saw in the equity .arket paul: president trump does like to measure his success by how the equity markets are doing. how far do you think he will be willing to push this? >> i think there is no particular end in sight. there is no obvious face-saving way out for either china or the united states, edit sort of reflects the administration's frustration with the lack of progress. i do not know that they will necessarily push a great deal further. i think he has probably done about what he can do for the moment. it is always possible tariff levels could go to higher and higher levels, but i do not think it will necessarily change china's behavior in a way the administration might like.

china'syou are saying behavior may not change in the way the trump administration might like. can you assess the impact of these tariffs on the chinese ? onomy can people in china live with the pain? >> i think china can live with the pain. they're exporting to the u.s. will probably fall by about $40 billion. the export -- they export over $500 million with of goods to the u.s. they have been growing at about 6.2%. that probably reduces their growth rate to 5.9%. still a very impressive rate of economic growth by almost any measure. i think china can live with the pain. sophie: this week, we got readings on chinese pmi. a private survey indicated there might be a bottoming out, but it does not look like stimulus measures are reading through

into the sme sector just yet with growth and trade concerns for beijing policymakers. do you it is a great the pboc to have to act when it comes it? >> yes, i think the pboc is likely to ease monetary policy further. they have already taken active steps to reduce the reserve requirement ratio. i'm they would -- i would think that there is probably more of that in store. andother thing china can do probably will do is to allow a devaluation of their currency. when the u.s. impost that 10% tariff in may of 20 18, chinese currency fell by 9% over the next two months. one thing they can allow is the to slide further. it might anger the u.s. administration, but at this point, does it really matter? the fedt's talk about

side of things. i want to jump into the bloomberg terminal and look at interest rates projections. cut inbability of the september -- it was 60 something yesterday. has president trump pretty much locked in that easing he was looking for? >> he may well have. jerome powell mentioned over a dozen times, maybe t doesn't -- maybe two doesn't -- maybe two en times the trade war as a factor in rate cuts. the administration thinks the way to get the fed to cut rates further is to escalate the trade war further, but i think that the fed would be on dangerous ground even had this not happened not cutting interest rates. markets are clamoring for this. the u.s. economy remains highly indebted, and i think even at

two and 1/8% where they are now, at a higher rate than they can bear. paul: is the pound looking a little bit oversold? >> i think the pound is the ultimate sell on the rumor by on the fact. it is certainly possible to imagine the pound may be going to parity against the euro or retesting its 1985 low of 1.05 versus the dollar, but i think ultimately in the long-term, there is no such thing as a no deal exit. even if there is one in the short-term, britain will later negotiated deal and i think the pound is tremendously undervalued. paul: thanks very much for joining us. we have plenty more ahead on

"daybreak australia." stay with us. this is bloomberg. ♪

paul: let's get a quick check of the latest headlines. shares in the london stock exchange groups urged after it revealed its plan for buying a trading startup platform. deal fulfillshe his ambitions to expand into analytics and the fireside industry and will create growth in asked growing markets like asia. the parent of bloomberg news competes with them to provide financial news data and information. shares rose on the news and were bolstered by investment banking fees that beat rivals. meanwhile, capital generation boosted analyst confidence.

paul: there's plenty more still ahead in the next hour of "daybreak asia." we will talk to a market strategist on how to navigate this intensifying trade war. she joins us in about 10 minutes. this is bloomberg. ♪

paul: sophie: i am sophie. in hong kong. welcome to "bloomberg daybreak: asia". ♪ our top stories this friday, stocks and oil sink as president trump ramps up tariffs on china. powell making another rate cut in september and watching a stampede into the u.s. bond