paul: welcome to daybreak australia. shery: i'm shery ahn in new york. sophie: i'm sophie kamaruddin in hong kong. we are counting down to asia's major market open. ♪ storiesre are the top we are covering in the next hour. huawei wins a waiver extension in the u.s. but still says it is being treated unfairly. the new reprieve will last for 90 days. baidu's earnings top estimates and holding onto advertising despite a rising challenge. china moves to lower borrowing

costs in the slowing economy. the loan prime rate tracks credit of trustworthy customers. shery: we will discuss the crackdown by social media giants and what they called a china backed effort to undermine the protests in hong kong. first, let's get you started with a quick check of how the markets closed the monday session in the u.s. the s&p 500 gaining more than 1% for a second session. every sector in the green, led higher by energy and tech stocks. oil rallying after a drone attack in saudi arabia. that really highlighting middle east tensions in the oil market. the dow gaining 250 points. the nasdaq up 1.4%. more optimism over the trade fund. that is filtering in through the u.s. dollar which was higher throughout the session. taken to another level, the highest this year after the boston chief eric rosenkrantz

sounded a more hawkish tone. see how things are shaping up for the a's markets. sophie: asian futures are trading mixed with tech very much in focus after semis rallied on wall street with the huawei reprieve. more big chinese tech earnings. show me to report after bai du beat estimates. also on tap, bhp expected to post a solid report card. investors are looking for a special dividend. we will be getting the rba meeting minutes for the august session, when it held steady on rates. second quarter trade data from taiwan. july expected to show inflation slowed for the month. this after we saw the jobless rate pick up in the city. a three year high amid protests. today marks the first fixing for the pboc of its new loan prime

rate. paul? paul: let's check in on the first word news. >> president trump has resumed his assault on the fed, calling for a full percentage point rate cut and complaining that the strong dollar is hurting other economies. he tweeted that the key rate should go down by at least 100 basis points, along with some additional easing. the fed cut rates last month for the first time in a decade. some policymakers are not convinced of the need for more. gete still expect we will reasonable growth over the second half of the year. bond rates are low but i think it is reflective of the global conditions. global conditions are weak. i don't think there is a circumstance of which we will be willing to ease, we want to have evidence that we are going into something that is more of a slowdown. growing at 2%, not concerned. >> crunching the numbers on the trade war. the growing uncertainty could

lower gdp by sixpence of 1% in 2021. a scenario where there is no trade war. that would be double the direct impact of the tariffs themselves and the equivalent of $585 billion off the imf estimated global gdp of $97 trillion in two years. the u.k. prime minister boris johnson is planning a nationwide pr campaign to prepare voters for a non-deal brexit. previous briefings have been highly technical and aimed at his business but government sources say the new drive will be user-friendly. ministers have been warned that small companies are not ready for a hard brexit, because of the extra paperwork they will face. >> after failing to negotiate a brexit deal that would protect jobs and living standards, boris johnson is driving the country towards a new deal cliff edge.

let's be clear. we will do everything necessary to stop a disastrous no deal for which this government has no mandate. >> global news 24 hours a day on air, on tictoc on twitter, powered by more than 2700 journalists and analysts. this is bloomberg. shery: huawei has won a temporary reprieve with the trump administration extending a set of exemptions from a ban on doing business with the company for another 90 days. more than 40 affiliates are being added to a trade blacklist and huawei says it is still being treated unfairly by washington. let's bring in woo-jean. one of the reasonings of secretary ross, also saying some telecom companies in the u.s. are dependent on huawei so how significant is the latest reprieve not only for huawei, but also for u.s.?

>> hi. thanks for the question. from the huawei perspective, it is actually very little. it is fairly small but from the u.s. telecom firms, it is -- there's a lot of smaller wireless companies that require huawei equipment. alternatives few to huawei at the price they provide and the quality they provide. paul: what was huawei doing before it was put on the entity list and how to this behavior anend after? woo jin: huawei, it was business as usual. i could give you a couple of examples. they were purchasing a lot of semiconductor chips for their smartphones, as well as their mobile base stations for five g and 4g deployment. companies, combined,

they had $250 million in sales in 2q prior to the ban. post-ban that has diminished to about $30 million. shery: we have seen huawei taking steps to mitigate all the impact coming from this u.s. blacklist, including announcing the new harmony operating system which would replace the android if need be. what was huawei able to buy during this race -- grace period? woo jin: similar to what they were able to buy when the grace period was put in place, all chips as well as software that was offered for products currently in the market. the smartphone like the p-20. you can buy chips for them. it was very important that

android was involved as well, as chips sooftbank's arm they can actually manufacture smartphones in 2q and possibly into 3q. there was an announcement recently that huawei was going to be introducing a 5g phone as well and that is probably because of the chip sales. ho, thank you. china moves to lowering borrowing costs, making it cheaper after policymakers stepped into interest rates for the new time. pboc will release a new loan prime rate on the 20th of every month. let's look at this closer with our china correspondent selena wang in beijing. how will this work and why is it significant? selina: this reform is intended to lowering the foreign costs for households and corporations. it is a long-awaited reform. it will allow markets to have a bigger sway in dictating what

the borrowing costs are. the problems thus far is the pboc has been pushing liquidity into the banking system but it has not been filtering into the real economy. the big picture problem they are trying to solve is this monetary transition issue, improve liquidity flows into the financial system. the pricing of loans to based off the loan prime rate. this is the rate that banks charge their best clients. that will be linked to the medium-term lending facility which is the lender's cost of borrowing from the central bank. previously, that have been linked to the benchmark lending rate which is seen as too blunt of a tool to manage china's economy and not very tied to financial conditions. officials said they plan to ultimately abolish that one year benchmark rate, but existing loans will still not be changed. shery: what will we see at 9:30 a.m. today? are we going to see a lower lpr as the reasoning for the pboc to do this, and what could

be the risks ahead? selina: at 9:30 a.m., we are expecting the rate to be lower than the one year benchmark rate given that it will be tied to the medium-term lending facility which is a lower rate. bloomberg estimates expected to come in at 2.4%. the bige concerns that interest rate overhaul, one of them is that it could squeeze the profitability of them. they want to lowering borrowing costs, provide credit demand but they don't want that funding to flow into the housing or stock markets, potentially reaching bubbles. economists are saying don't excite to see really big changes right from the start. tridium research is saying this should not significantly boost demand in the economy, and dues credit growth. in the short-term, it should be seen as a targeted financial easing that will improve financial conditions on the margins. paul: china correspondent selina wang, thank you for joining us.

to come, we will see how iron ore's rise and fall with vhb reporting earnings. gives uslls fargo anna her take on the market outlook. this is bloomberg. ♪

shery: back to the action on the u.s. market now where the dollar rallied and chip stocks led the major indexes to a third straight game. thanks in financial stocks fell as president trump push for a aggressive rate cut. su keenan is here to take a deeper dive. president from calling for 100 basis points of rate cuts. the markets the not react that violently. su: it is really interesting that there was reaction to the positive or seemingly positive move on the trade fund, although one strategist, if you look at what is going on, it is kind of like a drunken walk. there is no reason why it could

affect we see the market swinging from gains and losses day-to-day. you will notice chip stocks were the markets helping again. if we go into the bloomberg on president trump calling on the rate cut, it is interesting because the table rate is an economist back in the 1990's who came up with an equation based on real interest rates and inflation levels, where the interest rate should be. it is much higher than it is now. of course, with trump calling for a rate cut, that makes why the banks are showing weakness. let's go into some of the big movers. you will note nvidia entering into a partnership with microsoft. baidu and another chinese internet stock both reporting after the hours way ahead of the earnings. up big on positive performance for wynn resorts with a new casino in the boston area.

after hours because one of the two stocks beat in a very big way and the other disappointed. major moves in both stocks after hours. paul: that's talk about oil prices, getting a boost from a hint of trade war progress but also some signs of more of a flashpoint in the middle east. su: we had two of those factors both impact oil, we are still bigger picture, down 15% from a bitril peak so taking of a breather from the very strong bull run. talk about another interest rate help gold but given all the uncertainty that still remains, it has a long bull run ahead. shery: su keenan, thank you so much for that. joining us now is wells fargo securities equity strategist anna han. great to have you with us. we saw yields rise today as well as stock market.

more transitional move then we have not seen so much of recently. given how extreme the bond market has performed recently, where are we in terms of equity valuation especially with the recent selloff? anna: it has really created a buying opportunity. what we have been telling respectable ofe the selloff. this is not a time to dive in. the near-term volatility for us signals the equity market is still digesting the new information that it has received in a very concentrated amount of time. when you have that, in our view, we have characterized it to investors as this is a pencil down movement -- moment. until we see big catalyst that can relieve the uncertainty in the market, we would think it is a time to pause and reinvest. shery: what is the new information at the moment because we have seen the july rate cut which was bit of a hawkish cut and the fed emphasizes it will be data-dependent. we continue to see the same trade wars we saw last year.

what has changed? the yield curve inversion? anna: i think you are pointing on something important because when you have a yield curve inversion, you are trying a lot to a recession. it weighs a lot on consumer sentiment. that is also the hawkish cut we saw earlier in july was a blow could you consumer sentiment. while you are seeing similar shock to the market, you would hope the market would take a more dull fashion, you are seeing a reaction because the sentiment when that really sours, that can bring down consumer spending and slow down the growth of the economy a lot faster than we had expected. paul: anna, the markets got a pretty clear idea of what the fed is going to do next. this chart on the bloomberg terminal. the expectation for a september rate cut is a near certainty, but what is going to happen if the fed disappoints? we had eric rosenkranz today saying, well, just because other

countries are weak and we are strong, does not mean we should cut. anna: good point. what is important now as we see the tone from the fed and that is something friday's speech from jerome powell will be important for us. we saw in july a cut but the market did not take the tone of the message behind it well. it modeled hawkish and that is the reaction. on friday, but i think investors are looking for is are we going to get additional uncertainty injected into the market or reduced uncertainty? more of an idea of a certain rate cut path or a little bit of up in the air? paul: in terms of uncertainties, one of the granddaddy's of them all right now is the trade war. that seems to be spinning on a dime depending on what is tweeted on any particular day but you are optimistic there will be a resolution by the end of 2019. do you know something we don't? anna: the trade war is a little bit too large to think you will resolve it in one fell swoop but

it is fair to say we think we will see progression in the front by the end of 2019. andhink certain groups sectors, the semiconductor space , should see some of a relief. i want to get across some breaking news on the bloomberg terminal right now. bhp, the world's biggest miner, reporting results for the year. we have a final dividend of $.78 per share, underlying profit $9.12 billion, a bit of a mess from the excitation of $10.02 billion. capx, $6.25 billion. earnings-per-share, $1.76. weaker than expected. underlying profit, as i mentioned, $9.12 billion. net debt 3.8% above estimates. perhaps not the flashiest set of

results from bhp in terms of expectations. we also have bhp say it expects raw material prices, iron ore and coal, to be easing as well. shery: paul, let's get back to anna of wells fargo securities. we have seen incredible strength in the u.s. dollar this year. today, rising to new highs for 2019. when we consider the fact we have the trade war ongoing, we have the fed easing but still other central banks easing at the same time, should we be a bit more concerned about the prophets, the earnings outlook for these companies that are very highly exposed to overseas? anna: it is certainly a concern. something paul mentioned is it is a developing situation and we are not sure how it is going to end exactly. so far, we are pretty positive we will see progression in the front. if you are exposed internationally, it is something to be watching but domestically if you look at earnings,

earnings reaction has been mundane. we look at it from a macro perspective. we have not seen any huge warning signs or flashing signs from the earnings season. shery: as we continue to see this risk off sentiment, do you turn more defensive? anna: we have looked in those spaces but to be honest, we find the value -- it is too expensive for us. especially in the past couple weeks, you see investors fleeing towards that space but are pencil down moment has let us to think we prefer the food, beverage and tobacco. we find a lot of defensive qualities and that sector. the value in that space is much better. shery: thank you so much for that. anna han, wells fargo security equity strategist. plenty more to come on daybreak australia. this is bloomberg. ♪

paul: this is bloomberg

technology global link. i am paul allen alongside sherry on and emily chang. let's take a look at the top global tech stories of the day. emily. emily: baidu beat estimates, reassuring investors it is to limit your force in the fast-moving chinese internet seen. second quarter revenue rose nearly $4 billion, sending shares soaring and extending trade, despite increasing competition of rivals. baidu bounced back from a first quarter loss that was the first since going public in 2005. sony is set to buy california-based insomniac games, the studio behind last year's marvel spider-man in a bid to state competitive. insomniac has created several , includingsony spider-man which has sold more than 13 million copies. facebook's digital currency

project has a new china inspired arrival. crypto exchange binance plans to create the independent digital version of libra, call venus which will work with companies and governments. it says it handles more than $1 billion of trading volume every day. those are the top global tech stories we are watching. shery: china may be waging a social media campaign to undermine the pro-democracy protests in hong kong. twitter says it found and deleted nearly 1000 accounts used by beijing to spread political discord in hong kong. facebook says it found evidence of similar operations. sarah frier covers twitter and facebook. how massive were these chinese operations? were: these operations significant in that they were the first effort that has been taken down by twitter and facebook as a significant disinformation operation by china. aose companies have had

previous entanglement, taking down efforts by russia, iran, other countries. this is the first time the chinese government has been implicated in one of these campaigns. the campaign itself was relatively small but still very significant in that sense. emily: twitter is saying it will stop taking out money from state backed media companies. what exactly will be impact of that be? sarah: twitter users were complaining that a lot of the chinese government media was able to promote their own information, spread them to people not necessarily following that news. promoting a certain version of the story and really propaganda, that should not be able to be promoted per twitter's guidelines. the company came out and said they are making a global rule that they cannot be any state backed media. that does not mean that they can't post on twitter. they certainly can.

they just can't promote their tweets to a wider audience. it does not affect organizations like the bbc, which are independently operated from the government even though they are funded by the government. shery: do we know at this point how much influence beijing would have if they significant he wanted to disrupt world politics on social media? sarah: i have been talking to some experts today. this government has complete influence in many areas of the world that they have not really fully put to the test. this is a small example, an instance of maybe testing some of these operations. really, it could get a lot more sophisticated over time. it could get a lot stronger. this is not china at its top capacity to disrupt global politics. i'm told they could deftly do more -- definitely do more. paul: sarah frier, thank you for

joining us. that is bloomberg technology global link. don't miss bloomberg technology 7:00 a.m. in sydney, 5 a.m. in hong kong and 5 p.m. in new york. more to come. bhp earnings next. this is bloomberg. ♪ from the couldn't be prouders

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paul: 8:30 a.m. tuesday morning in sydney. the market opened 90 minutes away and futures pointing higher by about 2/10 of 1%. after a very positive day on the local market on monday. up about 1% on the asx. tuesday is setting up for some gains as well. shery: you are watching daybreak australia. let's get the first word news. >> the trump administration is extending exemptions for another 90 days that protects rural networks and other customers from a ban on doing business from huawei. secretary wilbur

ross says some smartphones rely on huawei. the administration is adding more than 30 huawei affiliates to its blacklist. the number of people migrating from hong kong to taiwan is surging as protests continue with no end in sight. jumped by almost one third this year compared to the last, with hong kongers making up 12% of all new residents in taiwan. the president has been vocal in her support for hong kong's protest movement. there are more demonstrations to come after a peaceful mass march over the weekend. --our message is very clear do not use violence, the police will not use force. the protest took place on sunday shows if protesters are peaceful, rational and orderly, the police have not and will have no reason to intervene. it is never a solution. willffrey epstein wrote a

two days before his suicide, creating a trust with more than half $1 billion which could come look at efforts by his accusers to claim damages. prosecutors in manhattan say they will close the sex trafficking case against epstein following his death. however, they told the court the investigation into his alleged co-conspirators will continue. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts. this is bloomberg. shery: what to watch for markets later this morning, let's turn to sophie in hong kong. sophie: with bhp's earnings and focus today, miners will be key as traders assess if the slide in august has more room to go given the squeeze and easing while demand is softening. this backdrop has sent iron ore figures two an april low.

checking in on the terminal given the massive selloff, the contracts on the longest since december 2015. maybe there could be some here when it comes to the technicals. the selloff may be nearing a bottom. comeback for iron ore at $100 a ton within three months on the global deficit, which is at odds with other banks that have more. paul: sophie, thank you very much. let's get some media analysis of bhp's results. david then ask is a resource analyst and joins us. what did you make of that result from bhp? it was not probably the best set of numbers. david: you have to look at what has happened in the past. we did see a good strong iron ore price. that did give them really some drive going into this full-year result. it was not actually a bad result

when you look at the complete set of numbers. we did see an increase in net profit over last year. we also saw an increase in revenues, but it was probably expected to be just a tad stronger than it came in at. the one shining light, and we have always looked at bhp on this, their dividend was a little behind. cents perdend was 78 share which was better than estimated. you can see analysts, the most bearish have been on bhp for years. is that really fair? it is still a good business or is it just overpriced? david: we have been somewhat bearish as well because about a month ago, we saw bhp on the view that we thought iron ore prices have hit a peak. we expected to see a good result. that has happened from that point of view. if you have a look at the iron

ore price subsequent, it has come down below the $100 limit. that will start putting a little bit of pressure on the finances going forward into 2020. shery: do the trade headlines provide support for iron ore prices? david: look, we certainly think when you have a look at the iron ore prices, they have hit their peak. we are not quite sure that perhaps the bottom is yet. because the vale incident has taken some time to play right through, you have to remember the markups in production which happened four or five years ago, they are still going to have to have tension in the supply side. that does mean we think the iron ore prices have not gotten far to go before they do bottom out. maybe another $10. we certainly don't think that will be the case. we continue to hold somewhat with a positive outlook on iron ore price went into the end of

the calendar of this year. shery: we have seen bhp announce their at $7.1 billion. i do wonder when it comes to not only bhp but other companies like rip what -- rio, what are the avenues of growth left for these companies? david: that is really difficult when you are the size of bhp and rio. with a have been focused on over the last four or five years has been internal growth where they obviously understand the assets and have been working to expand and optimize production out of those assets. it does get to a point where perhaps some of those facilities now are at capacity and they are going to have to look at other green field operations to start up growth. it is a hard task when you are such a large size. you really do have to look for a fairly big project to move the second decimal. paul: we have seen oil climb a

little bit on the trade news but this decision from bhp, gun held to the head in some respects, to get out of u.s. shale is looking more. david: they went into it with their eyes open. they thought they could expect more value out of that shale operation then they intended. when you look at the return of assets, unfortunately because of the oil price, it was not staying up and they decided to sell. we think going forward they still have their conventional operations, they have good exposure to natural gas. provided they are getting those returns on assets, they are going to stay inside the oil sector. shale, we have seen big companies making mistakes with acquisitions before. they have now been a step closer to minimizing it, but it was an error. paul: bhp is a much more diversified miner than rio

tinto, which produces iron ore. if you look around bhp, the ones we talk less about -- coal, copper. however those looking? david: copper, they are struggling with a big project. keeping a lid on that return. regionper price in the for some time now. it does not look as though there will be any significant rally. they will be looking at those assets and saying shale, what are the return on assets? the returns they are expected to get. how much capital to get those returns. i think at this stage, they are looking at a couple of assets and thinking we may exit these in the future, if we can get a reasonable price. paul: you look at the commodities sector more broadly, how much is the future really hinging on the trade deal at the moment? , where the trade

deal impacting is on expected future growth of the world. that is where it has been difficult to get a handle on slowly we sort of been watching those growth numbers winding down, winding down, winding back, i should say. that doesn't mean there is going to be pressure in the future on demand for commodities. really, what has been bugging the commodity space is the high u.s. dollar. pressure on the commodity process in terms of any rally we could see going forward. paul: whenever we get you want, i like to get your thoughts on gold particular in the current environment where it is enjoying a moment in the sun. what is your outlook? david: that moment in the sun may have come to an end already. we saw the price go back to last couple of trading days. we had seen the u.s. dollar index rising up beyond 98.

when we see that increase in the u.s. dollar, we are seeing the corresponding pullback in the gold price because it has negative correlation. we have also seen some of the pressure coming out of the trade wars. it has been somewhat of a step back that takes that safe haven aspect away. we have seen somewhat of a surge in yields. that means investors are looking elsewhere other than gold for safe havens. the inversion of the yield curve has disappeared. right now, fears have maybe eased. that has taken that safe haven aspect out of gold and we have seen the pullback in the gold price over the last couple of days. shery: let see how long that lasts given all the uncertainties out there. david, great having you want. david lennox. bhp group ceo andrew mackenzie will join us later today in his first broadcast interview to discuss results, coming up on bloomberg markets: asia.

next, the boston fed president said the time is not right for more easing. we get more from our exclusive interview -- interview with eric rosenkranz just ahead. this is bloomberg. ♪

paul: i am paul allen in sydney. shery: i am shery ahn in new york. a quick check of futures trading at the moment. we are seeing upside for futures in sydney, up 2/10 of 1%. kiwi stocks are gaining half a percent. nikkei futures unchanged but this coming after two sessions of gains. the japanese yen holding about 106 level after the first weekly drop in a month. we saw asian stocks jumping the most in a month. more risk on sentiment spread across the market. as we continue to see some more positive sentiment on trade. we had u.s. stocks treasury

yields gaining ground. let's see how that translates to the asian session. paul: thanks. it does look like another strong day for asian markets. we have that positive news on trade and speculation as well of central bank stimulus. andreea is here. what are you seeing from emerging-market currencies? they like to come under a bit more pressure with the dollar continuing to surge. andreea: i think that is going to be the focus today. we are just basically reacting to one headline. after another. there will be some support, i guess, from this potential stimulus of germany. the fact that central banks are thinking about, this will give some comfort to investors. definitely, i think currencies will be the focus today. we have the dollar touch the highest this year. we saw the yen and emerging currencies especially under pressure. the korean yuan will be want to

watch when that opens today. it has been the most vulnerable in the space itself. having said that, also focusing on the yen because hedge funds have finally woken up to the rally in the yen this year and they are the most bullish on the japanese currency since november 2016. while we will probably see these emerging currencies in asia under pressure, the yen would be one that any sort of weakness will be short-lived. it is still the preeminent safe haven currency out there. shery: asian junk debt also coming under pressure. it looks like it is getting harder to make money there. andreea: hi. that is right. lostbonds in asia have money for three straight weeks. that is amid this risk off sentiment that has seen investors pile into investment grade mode. to be sure, asian bonds have

outperformed peers and other emerging markets. they have seen inflows from other regions. that appetite of issuance of junk bonds in the region, that is fading. they are vulnerable to any sign of economic downturn. while they did boost performance while the market was hot, the demand for junk bonds is now waning. some real challenges there in terms of the asian credit market after that rally that we saw at the beginning of the year, whether that is going to be sustained after those declines we had in 2018. shery: thank you so much for that, andreea papuc. you can find her charts on the library on the bloomberg. now, president trump pounding the table for more rate cuts as another top fed official says the u.s. economy is doing fine

and another reduction is not needed. our global economics and policy editor kathleen hays joins us now from the boston bureau. start us off with the president's comments. kathleen: donald trump certainly has been pushing the fed for months, the economy will do better, italy a lot stronger. today, he is talking about global growth. let's put this in context before we go to his suite because why has the markets gone so crazy? it is not the u.s. economy that changed so much, it is what we are seeing overseas. starting with germany where their exports recently in july, worse drop in three years. the economy has contracted by 0.1% -- on the verge of recession perhaps. look at china, the weak industrial sales number last week showing that the trade war is taking a bite. not a surprise that donald trump tweeted this out. "the fed rate should be adduced

by at least 100 basis points with perhaps quantitative easing as well. if that happened, our economy would be better in the world economy would be greatly and quickly enhanced. good for everyone." it is also interesting that trump is tweeting this just days before jay powell is going to give his speech friday morning at the kansas city fed conference. we have seen pictures of jay powell last year, just a year ago with esther george, john williams, people are waiting for signals from jay powell. is he going to signal that yes, another rate cut is possibly coming? not so specifically, but opening the door, sympathizing with the market view, etc. it's clear for my interview today that not every fed official is on board with that view so it will be interesting to see how jay powell treads that path. paul: in terms of that, you have

been speaking to one of the more hawkish members of the fed, eric rosengren. he was a defender of the july meeting against the rate cut. why is that? is it getting harder to do so with the president constantly criticizing the fed like this? kathleen: that start with why he dissented because it is a big deal if you are a member of the federal open market committee to dissent. he talked in his statement after that july 31 meeting about low unemployment and financial stability concerns. today he said i have to see evidence there is a slow down before i am on board with a rate cut. let's listen to how he explained that when i asked him about it. mr. rosengren: it was tied to the fact that economic conditions are still pretty good. 3.7% unemployment is still a very low rate. inflation is a little bit low. look at the core measure, 1.6%. but if you take out some of the outliers, it is closer to 2%.

exactly 2%. of my own view was we have to be careful not to ease too much when we don't have significant problems. the focus is not to do something that affects the exchange rate or something that necessarily takes care of the world economy. we are supposed to focus on unemployment and inflation in the united states. i think we are in a pretty good spot right now and there are calls to ease at times there is not. kathleen: what is the cost? mr. rosengren: one of the ways monetary policy works is you cause people to buy houses and cars earlier than they otherwise would. you choose to make an investment now because interest rates you think will temporarily below. so you make extend at your is you might not otherwise make. when we lower interest rates, we make the cost of that lower. that means both households and firms are likely to be leveraged.

if they get leveraged before we have more significant problems, they are actually in much worse shape. we have to think about the financial stability curve. thinking of how much we want households and firms to be leveraged going into whatever action we do have a significant downturn. kathleen: how concerned are you about a significant downturn? the signs from the global economy. the signs from the bond market in particular. even signs from wall street banks that have cut their gdp forecast, and indicators suggesting the recession risk is rising. is it rising in your eyes? mr. rosengren: many indicators are tied to financial markets so that start with what most economies think is the likely outcome. one way to gauge that is to look at the blue-chip forecast. we came off real gdp at 2.1%. the blue-chip forecast for august has growth for the third quarter and fourth quarter, both at exactly 2%, roughly exactly the same as the second quarter.

that is clearly not a recession. continued growth at a moderate pace. on implement rate at exactly where we are right now, 1/10 less in the blue-chip forecast. economic forecasters are not seeing a lot of weakness in the data. what i think has people really focused on whether we will have a recession is a combination of volatility and stock market. we had a very big movement a week ago when we lost 800 points on the dow. in subsequent days, we moved back up. if you look at the long bond, it is low. around 1.6%. one of the reasons for that is the global weakness. the cure for global weakness is for countries around the world to expand with fiscal or monetary policy in their own countries rather than just the united states. kathleen: i pushed eric rosengren in this interview really hard on all of these bond market indicators that seem to be saying, hey, there is a problem here.

when you look at the yield curve when you look at the yield curve inversion, even if they uninvent for a while, that seems to be the risk. 30 year bonds falling to 2% for the first time since 1977. he said, yes, i am watching the yield curve. he agreed all of these things are there but he thinks this is happening in large part not because investors are worried about growth in the u.s., but because of growth overseas. he said there is no justification rate cut as long as the economic outlook stays on track. i would like to give you perspective on eric rosengren. he has been on the boston fed for many years as an economist doing research. head of bank supervision before he became president in 2007. oh, he sounds like a hawk. maybe he is now but at the beginning of the financial crisis, that was a last time he dissented. he dissented because he wanted rate cuts ahead of his colleagues.

he wanted more quantitative it easy. he was in a different position as how to move the economy. i have to say at the very least, i don't see him as a dogmatic heofficial but you just heard hs view. he wants to see something happen in the economy before he moves. as for president trump and what it means, does it make it more difficult to do your job is basically what i said? he said, our job is to achieve a dual mandate of low unemployment and price stability. it is not the fight trade wars, said exchange rates. clearly, everyone knows what the president is saying. i think all of them are saying we are going to do our job, do the right thing and that president trump tweet as he may. shery: who can stop him? thank you so much, kathleen hays. great conversation. joining us from boston. you can find her conversation with the boston fed chief on tv . you can dive into any of the securities or bloomberg functions we talk about. become part of the conversation.

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paul: let's get a quick check of the latest business flash headlines. a former disney accountant is accusing the company of overstating revenue for years and filed a series of whistleblower tips to the sec. he worked as a senior financial analyst at disney for 18 years and claims employees in the parks division systematically overstated revenue by billions of dollars. disney denies the allegations. shery: hong kong is setting up a new panel to investigate claims by short seller blue orca. the committee will work with one of the big four accounting firms. it is questioning the companies financial data for a second time. denying the allegations, saying it is misleading and incomplete.

coming up next, we will discuss global markets with tribeca investment partners. this is bloomberg. ♪

paul: good morning. i am paul allen in sydney. we are under one hour away from the market open. shery: good evening. i am shery ahn. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." paul: our top stories this tuesday, huawei wins a reprieve in the u.s. but says it is being treated unfairly by washington. the waiver extension will run for 90 days. trump demands aggressive