paul: good morning. i am saikawa in sydney. we are under one hour away from the market open. >> good evening. i am kathleen hays. selina: and i am selina wayne in beijing. -- selina wang in beijing. welcome to "daybreak asia." paul: our top stories this friday, president trump indicates new trade talks after china said it would not step back on new tariffs. it is staying on the mainland. china's energy majors wrapped a

first half. is ticking asck london and brussels plan new talks. they can still block a new deal divorce. kathleen: breaking news on south korea industrial production. i was talking about whether or not the bank of korea might cut their key rate and a couple of hours. the pricing jump, up 2.6%. up more than forecast at 0.5%. that is what was expected. in terms of the monthly number, let's move on to the year-over-year number. up 0.6%. a big improvement over -2.9%. that has been revised a little bit higher, -2.6. very good news for south korean

industrial production, closely linked to manufacturing, closely linked to the trade war. we will get more details on that and get more on that later. beijing for ato look at the asian markets. there has been a lot of volatility this month but it looks like on the last day, we are seeing cautious optimism. more green across the board. for the nikkei. positive numbers out of korea so that will help bolster when the markets open, up almost 1%. 5% thisei is down month. the cost be down 4% since the down. and the nzx some really because it looks like a trade talks will continue and china will not immediately retaliate. such imports, i want to take a look at emerging-market currencies. they are on track for their worst months in seven years, as

you can see from this chart. it has been a steady downward decline pushed them levitate turmoil as the dollar is a two-year high. this drop. preempt trade escalation dragging this down. the msci index has 32% weighting and it is within touching distance of dropping its moving average. the last time it did so was in 2014. the move preceded a flight of 14%. kathleen. paul. joining us now, we have s&p global chief economist paul grunwald. very glad you are here. we had outstanding numbers from south korea. a huge beat on industrial production in the month of july in a trade dispute with japan, when it was really cooking. how do you explain that? >> date is one data point.

and look at the chart. the trend is down. let's remember the narrative around the global trade war is the two pressure points are manufacturing and trade. consumer spending is holding up oferally good through most the global economy, so there's a couple of countries, germany and korea, where we would expect to see most of the pressure. this is one the data point from south korea but i suspect we are not out of the woods in terms of the weakness on manufacturing. paul: those this change the picture at all for them considering it is one data point? >> they tend to be more forward-looking. we expected them to hold and look at the effects of the previous rate cut. there is probably one on the horizon but i think we agree with the consensus on this one that they will stay put for this meeting. kathleen: what is it going to tank for the bank of korea to decide it is time to move? is it going to be data dependent? you see the numbers getting

worse. somethingg to be about what happens in the trade war. it gets better and they can say all the more reason to hold. they are an inflation targeting central banks so they are waiting to see what actions will do for the level of inflation over the next year or two, so as the data continue to weaken, and we see the trend you put up, i suspect they are leaning lower. if you think the current monetary policy stance is not going to get into their inflation target, they are going to cut again. the trend is down so we will kind of see how this plays out. we will have a bit of respite overnight on the trade war but i suspect this is not the end of it. kathleen: how does this affect how much the bank of career, what other central bank -- big of korea, what other central banks are doing? a lot of asian central banks are cutting so they do not have to worry about that. how about the federal reserve?

does it make sense for them to wait to see how accommodative this said is, what it does and signals? >> that would be part of their calculus but they are seeing what their rate decision does on the domestic inflation. to the extent the fed has an impact into that, a lot of em's would wait for the fed to ease before they did it themselves. that is a possibility. the majority of the weight would be on domestic factors for korea. they are not alone in the neighborhood. in australia, the rba has cut twice in the last couple of months. the rbnz gate 1 basis point cut. this is part of the trend we are seeing as the outlook continues to weaken. recessionalk about indicators. one of the ones that is not, i want to bring up this chart on the bloomberg terminal. the oil prices are still playing although it did play a bit of ketchup today. where do you see the oil price and what does that mean for the

global economy? >> it will be a mix of consumer and industrial spending. the strong point we have seen so far in the global outlook is consumer spending. the oil price outlook is relatively flat. orhave got lots of inflation deflation or recession scenarios around out there. the other shoe that needs to drop in consumer spending. u.s. consumer spending was revised upwards in q2. we still have it as a risks narda. oil would be one of the indicators. kathleen: the global chip cycles made a big difference for the korean economy. what do you see happening there? >> we think tech is actually ground zero for the trade war. i mean, it started out with trade and weakening trade is optically important. where the attention is between the u.s. and china is really

over the acquisition of technology and tech transfer, and that is centered on the chip sector. that will be a very, very sensitive set arethat would prok sector until the trade -- weak sector until the trade clouds lift a bit. paul: let's get a check of the first word news with jessica summers. jessica. teamsa: u.k. and e.u. will meet at least twice a week next month in a bid to resolve the brexit impasse. london has asked brussels to step up talks although both sides are playing down the chances of a breakthrough. says theyson's office remain some distance apart on key issues. the e.u. says it is still awaiting concrete proposals from the u.k. incoming ecb president christine lagarde is offering clear signs she will stay on the dovish half

set by mario draghi. in her first comments on politicians when a majority on the she set the bank has the tools to tackle the downturn in europe and must be ready to use them. policy makers meet in two weeks and are expected to launch another round of stimulus. lagarde takes the rain that the ecb in november. issued what agency it's called the strongest warning yet. the antigovernment protesters in hong kong. if as any activities that harm the security of china's sovereignty or challenge the one principal,o systems will not be tolerated. it comes a day after pro-democracy protest leader was attacked by masked man in a catalonia restaurant. -- kowloon restaurant. there are talks in beijing. president xi jinping met his philippine counterpart, if rodrigo duterte, but they failed

but theyico dutere, fail to reach an accord. it is a loan agreement for a new rail contract. president trump says the u.s. is close to a deal with the taliban and is planning to withdraw more than 5000 troops from afghanistan. he did not offer any timeline for pulling folders out according to level levels to 8600 would bring the total down to roughly what it was when the president took office in january 2017. the fight against the taliban is the longest war in american history. global news, 24 hours a day, on air, and@tictoc twitter, powered by more than 2700 journalists and analysts -- global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. kathleen: still ahead, uber's ceo says the u.s. consumer is not slowing down. we will have more from our exclusive louvered interview.

paul: up next, the trade war may be set for a breather with president trump talking of new talks by phone. this is bloomberg. ♪

paul: this is "daybreak asia." i am paul allen in sydney. hays in: i am kathleen new york. stocks got a lift from the positive news on the trade from as well as on the than expected tumors ending data. su keenan is here to take us through the action. pretty positive day. su: it was pretty much a one-two punch. weaker than expected. consumer spending coming in strong. but take a look at the market snapshot. we had the dollar strengthened at a two-year high. treasuries slipping a bit. a key area of strength in the s&p 500. if we go into the bloomberg, just a little bit more on the

gdp data. one of the best quarters for consumer spending since 2003. it helps power the u.s. gdp. ofs is really a story resilience in the u.s. economy. let's go to the big movers. earnings were part of the big story. a lot of strategist point out the earnings component continues to be robust. notice nvidia chip stocks, and you also have halliburton and some of the energy stocks were areas of strength. burlington stores came in with very strong numbers on their off-price merchandise. multiyear-the company and that bodes well for the u.s. trade. jpmorgan chase also a big gainer. paul: big move. su: after hours, a very big story with dell computer, which was up 9% on better than expected numbers. the ceo continued to diversify the company. the also is helping with

improved bottom line. paul: i am very eager to talk about commodities. a big move in oil. a two-week high. orange juice, futures jumping 10%. could be something to do with the weather. su: we have dorian, a hurricane, that is on past to hit florida. we have the president postpone a trip to poland to be in country for this. hurricane two years ago that wiped out billions of dollars of florida's orange crop. we go right to the five-day chart of orange juice. futures, the knee-jerk reaction by traders is to push that to a 12 week high. it is almost a 10% gain over the past week. and take a look at oil. it has also gotten a bit of a bump in large part because of the supply situation. we had a very big drop in a key supply hub here in the u.s. as

well as optimism that the u.s. and china can get it together for a deal. paul: su keenan, thanks very much for joining us. the u.s. trump says and china will remain trade calls although he offered no timeline or other details. indicatedfter beijing it will not immediately retaliate against the president latest tariff increase and wants to prevent any further escalation, so let's bring in our senior trade editor, sarah mcgregor. what do we know about these talks? we heard from donald trump today that the two sides were supposed to speak by phone. he did not indicate a level of officials that would be speaking. the top negotiators or people below them. but really, they kept up the communications throughout. arefact that the two sides not having a phone call is not necessarily a huge, significant event. what is is what is coming up and the eight hours with the u.s. hitting 100 $10 billion of

chinese goods with the 15% tariffs. intend to it does not really retaliate in a major way but it has announced that it ofld hit $75 billion american goods, so it does remain to be seen if they will move ahead with that once the u.s. tariffs take effect on the weekend. paul: after some days and perhaps weeks of ratcheting up the rhetoric and tension, what is the response to this? sarah: we have heard from america's largest business lobbying group, the chamber of commerce, today that they are urging president trump and xi jinping to stand down from try toriffs and get a trade deal. they are very frustrated. this latest round of tariffs that are taking effect this weekend on the goods that hit consumer items, a lot more stuff that americans like to buy could

raise prices and make it more difficult for companies in the bottom line. they aren't sort of throwing their -- they are sort of throwing their hands up in the air. they want the war to end. kathleen: president trump is a ,an who says many things sometimes impulsively, it seems, and often a little hyperbole. last week, he did say i am ordering companies to break off ties with china, stop doing business in china, and it seemed like there was a lot of pushback. in terms of action, is anybody leading china? sarah: the big question was made when trump made that directive over twitter. what power does the u.s. government have to stop companies from doing business? there were the dire situation where people thought there could be legislation passed or data orders that could make it harder for companies to do business there. we have not heard any of that. there is a survey out today by business group showing these companies have zero intention of leaving and have not pulled

back. they see a huge market and want to keep taking advantage of that. a lot of themselves of the domestic market in u.s. companies have their operations in china. they do not necessarily operate outside or back to the u.s. so they are content being there despite the hardships caused by the trade war. trump made this directive. we have not seen a lot of follow-up or specifics from him. we will have to see if that is part of a wider plan by the trump administration. kathleen: it remains to be seen, doesn't it? sarah mcgregor. and you can get a roundup of the stories you need to know to get your day going in today's edition of "daybreak." bloomberg subscribers can go to dayb on their terminals and it's also available on mobile in the bloomberg anywhere app. you can also customize your settings so you only get the news on industries and assets you really care about. and follow closely. this and more is bloomberg. ♪

paul: this is "daybreak asia." i am paul allen in sydney. kathleen: the brexit clock ticking ever faster with boris johnson thing you can e.u. teams will meet to try and solve their differences. his move to -- triggered a storm of protests. john mcdonald says he is confident mp's can block a new brexit butdeal admits that time is tight. there is one to be tough. that is exactly why force johnson has exercised this dictatorial power of trying to present parliament from meeting long enough to do it. so what is happening at the moment is the opposition parties have all met jeremy corbyn and brought all of the opposition parties together. they set up a group working to the detail of how we can achieve it next week.

we are working with senior conservative mp's. we have seen ex-ministers come out and express their outrage upwards johnson's behavior and we think there is a majority in parliament now who secure legislation to prevent or strong senate imposing a no deal. is you are right, the time incredibly tight. there's lots of opportunities that boris johnson could take to try and prevent it happening. what is interesting is that has been a popular reaction against his you are now and -- his behavior now. on the streets. we have seen demonstrations yesterday announced within hours of his behavior being public. literally hundreds of thousands of people coming out on the streets in city after city of the country. >> your leader, jeremy corbyn, said yesterday that he thought it was time for a no-confidence vote. the time tot have

get through legislation to stop a no-deal brexit, do you have time for a no-confidence vote? do you think the votes are there now the way they were not with theresa may? >> there could be time, but again, it will be tight. it will be tight. we know how tough it is in terms of the legislative move and for a no-confidence vote as well. ,ut here is the real question and you struck on it straight away. how things move in parliament, particularly amongst the conservative party members, in a way they would support either a legislative move or a no-confidence motion. by boris johnson zone behavior, he seems to be woven together and a lance against him even within his own political party. so i am increasingly confident now that we could have a andrity legislative move may be a no-confidence motion. paul: that was john mcdonald speaking to bloomberg's david

westin. let's get a quick check of the latest business flash headlines. uber says it will continue to experiment and take risks but it sees a clear road ahead to profitability. the ceo, dara khosrowshahi, told bloomberg the right-hander will touch the brakes and will focus on more promising areas. may'slumped 27% since ipo. a reported quarterly net loss of more than $5 billion. >> we now have a path to profitability, i believe, so while we have had bumps on the are, and ie where we like the position we are in now for the next few years. kathleen: abercrombie & fitch is trying to reduce its dependence on suppliers in china by more than 40% from last year. cheers came to after it warmed trade tensions could adversely affect costs and hurt profit. the maker american outdoor brands plunged in late trade.

saudi aramco -- reportedly aramco is reevaluating its plans for an ipo. dow jones is splitting the biggest ever share sale in two. with one up international offering next year or the year after. aramco sources say management is inclined towards tokyo for the second listing, edging ahead of new york, london, and hong kong. kathleen: china's biggest banks are seeing margins squeezed by the drive to bolster the economy. icbc reported first-half profit up, matching estimates. talk lenders bowed the government calls -- top lenders calls andovernment reduced financing costs. paul: volkswagen saudi -- is said to -- volkswagen's audi.

we are told negotiations are at an advanced stage but there is no guarantee a deal will be struck. vw plans to deliver 22 million fully electric cars by 2028 with more than half of them built in china. list its battery business in the next few years to raise funds for expansion. coming up next, -- kathleen: let's take a look at what is coming up in the week ahead. trump's new tariffs on sunday. will there be any move between the two sides, particularly donald trump at the white house? the rba rate decision. governor rossello signal -- signalr phil lowe caution. could he be inclined to make a bigger cut? the u.k. parliament returns at a time when there is so much that and forth about brexit. looking at the regional economies across the country. u.s. job days. a lot of people are watching this closely to see whether the

fed will end up cutting mat rate in two weeks. -- that rate in two weeks. paul: china's big oil wrapped up a first half. it punish refining. we will have the details in a moment. this is bloomberg. ♪

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kathleen: that is "daybreak asia ." i am kathleen hays in new york. in sydney.paul allen just want to get you to get into some breaking news coming out of japan at the moment. theave the jobless rate for month of july coming in a little better than expected at 2.2% on the year and that is better than the 2.3% estimated. line cpi is coming in in with estimates. an increase of .6%. once you strip out fresh food, the numbers are not quite so good. .7% increase the market was looking for .8%.

jobless in line with expectations. forell for to -- ditto tokyo cpi for the month of august. the reaction from the japanese yen. first word news now with jessica summers. jessica. jessica: china has indicated it will not retaliate immediately against the latest u.s. tariffs, saying it is more important or on removing existing duties. the commerce ministry says china has ample means to strike back but the focus should be how to prevent further escalation in the trade war. it adds that beijing is launching -- most u.s.uggests companies will ignore president trump's order to leave china and will continue to work there. the u.s.-china business council says 87% of respondents say they have neither moved or planned to move operations out of china. the survey was conducted in june before trump tweeted a director for american companies --

directive for american companies to stop looking at china. as simply global ratings is cutting debt to selective default after one of cyrus -- b uenos aires postpone payments. notes are ahead by institutional investors this year and it will seek a voluntary be profiling of $50 billion of longer-term debt. and the iranian oil tanker u.s. for alleged smuggling seems to have changed course and the eastern mediterranean. apparently sailing away from its expected destination of turkey but it is not clear if the course is temporary or permanent. last week, it was showing the turkish port of merson as its intended destination. the reserve bank of india raised its gold holdings by 9%.

that is the biggest purchase in nearly a decade as global central banks bolster defenses against trade tensions and cyclical slowdown. bought one than 50 tons of gold last year, raising total holdings to 618 times. global central banks added more than 370 times this year, pushing bully and demand to a -- bullion demand to a three-year high. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. kathleen: thank you so much. we are half an hour away from the open in tokyo, sydney, seoul. gains in u.s. stocks. what are you watching and seeing now? selina: i am taking a look at some australian stocks. global defense prime contractor last close down .5%, forecasting revenue of

$1.9 billion in 2020. galaxy resources reported revenue for the first half of $28 million and says it is reaffirming its guidance. galaxy closed down 3%. harvey norman expecting fiscal year results. switching boards, i want to take --ook at the that currency depreciated, .1445 level.nd the 7 we have seen it snapped a 10 day losing streak on some of the positive trade lines that we have seen come out on both sides. the central bank has also set the daily fixing stronger than expected for a seventh straight day, suggesting the pboc is starting to get a little uncomfortable with where the yuan is starting to slide. theng a look at the again, yen is actually now heading for its worst monthly decline -- weekly decline since march amid

some of the optimism over trade. it will be on the bank of japan bond buying operations with the nation's benchmark yield near that record low. trading around that level. we did hear some of the positive news come out of japan in terms of the jobless rate being slightly better. cpi largely in line. we will have to see how that continues to affect the yen throughout the day. tohleen: we want to move on earnings season rolling on in china and topping icbc posting first-half income that meets estimates of more than $20 billion. robin thicke -- rosalind chin, icbc numbers look pretty good. thelind: you can see results here, actually, with revenues making healthy gains and that is helping net income gain by about 4.7%, growing in the first half.

that is ahead of the consensus estimate for the full year, so not doing too badly there. however, they are seeing some pressure on the net interest margins. the icbc president did say as much during the results. he did say there was limited impacts from the new loan -- waye is an impact on the central bank is are setting rates. that is probably yet to come. one of the issues we have seen is valuations have been falling. historic lows, the u.s. in a trade war. we have all of these weighing on the banks who have been asked to increase their lending to smaller companies and to cut financing costs. all of these weighing on them. this is how the banks are looking right now in terms of their price ratios. paul: a couple marks ago. bank of china -- a couple more

to go. think of china could see it -- the bank of china could see external pressures as well. rosalind: take a look at the estimates. the last two big four banks are yet to post earnings. these are banks which have exposure to hong kong. a very tight relationship between hong kong and the chinese finance communities. if you look at this board, you will see the actual explosion the bank of china. that is the most exposure to hong kong, getting about 1/5 of its revenues from hong kong. unrestoing on rest -- may hit it. retail sales dropping. not thatnment is optimistic about the economy going forward for the rest of 2019. the bank of china may be one of those that feels the impacts of that going ahead in this year. back to you. paul: rosalind chin in hong

kong. we will have some more analysis on this chinese bank earnings a little later with the asian bank research cohead in about one hour's time. china's oil majors wrapped up the first half but rewarded exploration and production and punished refining. postedina and cnooc stronger earnings. sinopec saw profits slide. tom mackenzie joins us now from beijing. run us through the top lines there. china's oil and gas majors have a commitment tee times president xi jinping to increase spending on exploration and production to ensure that china is less dependent on the imports of oil and gas from overseas. they have been spending very heavily. if you look at spending, they have almost got to 50% of their four-year targets. it is normally the second half ex takes up more

strongly. it is starting to pay off in terms of production. we have seen production tick up for both petrochina and cnooc. they have also focused very heavily on natural gas promises he next saw a record low -- so cnooc saw a record low. china seeing double-digit growth in terms of natural gas. the other things these oil and gas majors in china have been cutting down costs of production per barrel. from $32 a barrel to $28 a barrel as well and that started to impasse the bottom line for the companies and pay off. in terms of some of the pressure of the money, you mentioned the light of sinopec. it remains heavily under pressure. sinopec posted net income drop of 24%. the other part of this is the upstream and downstream. that links to the refining. and then there is the import of

gas from overseas. the likes of petrochina imports gas at market prices and have to sell it at a discount in the domestic market because prices are capped. the losses are starting to narrow for petrochina. kathleen: it looks like cnooc seems to be doing a lot of things right. tom: that is largely because is very well sheltered from the refining side of the business. it does not focus heavily on refining. a result ofwell as them. in fact, it posted in terms of profits for the third have the best set of profits since 2014. at 420ome billion u.s. dollars. the cost-cutting around the production of each barrel of oil as well that has benefited cnooc , so 9% reduction in those costs. 6%, getting $4

billion in the first half. cost-cutting around productions of each individual barrel is important there as well. focused which is more on refining, remains under pressure. kathleen: thank you so much. tom mackenzie in beijing. he is our china correspondent. today marks two years since dara khosrowshahi took the wheel at uber. fromiting the ceo role terms: it. there is a cloud -- travis colonic. how uber plans to whether the headlines. u.s. the consumer in the is very strong. we are a very global company. the majority of our transactions are outside the u.s. so we look at global growth to the extent it slows down. that could be a negative for us. local growth slows down, we will have more partners wanting to come off of the platform because

flexible very, very labor opportunities. the growth of the company is such that we will be relatively resistant to any macro slowdown and we are not the man is down with the u.s. consumer as of yet. >> what is plan b? we have heard about investing in vietnam or brazil. what is the backup plan? we do not actually have to go out and buy cars, etc. andill obviously be wary make sure our partners consorts vehicles in an economic way. many of them source vehicles through the secondhand. i do not think this trade war -- we certainly have not felt it. we are importing. there is some additional expense but it is not having a material effect on the company and we are very confident of our growth over the next few quarters, trade war or no trade war.

>> you have a food delivery business, self driving cars, flying cars, food delivery. dara: transportation of every kind. >> you asked the company to ber like thelu amazon of transportation, that amazon was a bookstore. is not the right time to do this other stuff and now is the right time to focus on the core, ridesharing and food delivery? dara: we have been in a ridesharing business for a long time as well and that business is developing and its profitability is developing. we are the top player in every market in which we compete. we are holding share or taking share in this market places. we have a core business that provides a framework for us to build multibillion dollar opportunities and i think it will be criminal if we do not take advantage of that. you are seeing more and more pps and companies that are

building ecosystems, super apps, especially in these, for example in china. >> tencent of course. is that a way to think about it? >> the super apps are winning. we can be the super app of transportation that allows us to acquire customers at much cheaper rates than our competitors. it allows us to keep customers because we have a deeper relationship with them. long-term, if you can acquire customers and keep them longer, that is the winning formula. >> uber eats is 20 or 30% of the business map? 90% on akings grew year-over-year basis. we are the largest global player out there. and we continue in the category of food. we believe it can be as large or even larger than the ridesharing category. we love that business. kathleen: that was uber ceo dara khosrowshahi with emily chang. he sounded pretty optimistic

about more expansion. up next, more reaction to japan's latest on data from bank of america merrill lynch. this is bloomberg. ♪

paul: this is "daybreak asia." i am paul allen in sydney. kathleen: i am kathleen hays in new york. busy days for economic data from japan. cassini inflation readings for tokyo. we will get retail sales and industrial production numbers. let's get straight to tokyo now for some in-depth analysis. joining us is the head of japan economics. before we get into the specific numbers, what is your sense of japan's economy right now? tight labor market. you know, job openings per worker.

also signifying that part of the economy are strong. we have seen purchasing managers sink a bit and manufacturing get hit a bit. what is the economy in terms of momentum look like to you? izumi: good morning. if you look back to the first half of japan's gdp performance, we had very strong growth rates of 2% plus. despite the fact that, for over a year now, you had weakening in the manufacturing sector. but yes, the economy is held up because we have had very tight labor markets underpinning x tends ton and cape be vulnerable to slow down and exports and it has an holding up relatively well. we have a structural story with pickups -- in hiccups in can -- in hiccups in consumption. we have a relatively resilient domestic sector.

'sthleen: the bank of japan meeting at the same time as the federal reserve. as they go into the meeting, what would you say the biggest indicator is for the yen? where is it at? izumi: that is september. it will be very tough. we will be watching very closely markets. in particular, reactions. not only the fomc decision which will come out overnight, but also the ecb meeting earlier on september 12. in the event that the boj has to deliver additional easing, the rate cut. taking it into negative territory would probably be one of the most likely options, but they cannot deliver that option very easily because of the about the impacts for

longer rates on financial institutions. the hurdle is quite high. closerdollar-yen moves to 100. paul: we have seen the yen strength and quite a bit. would talk foru another 10 seconds because we are waiting on retail sales numbers out of japan right now as well as industrial production. we do have industrial production for the month of july. a surprising increase, up .7% for july. we were expecting a contraction of .6% and that gives us a month on month figure of 1.3%, so quite a big beat from industrial production. still waiting -- i spoke too soon. a contraction of 2.2%. much worse than had been expected. an annualized number of 2% contraction. coming in your sales

contraction of 4.8%. seconds had all of 30 to think about that. i want to grab your reaction. beat on industrial production because it is getting quite seriously squeezed. mean, and the second quarter, we have pretty strong consumption numbers. in the third quarter, ordinarily, this time of year, you would expect some rushed spending in the run-up to the tax hike. that is another big worry on investors minds is we have the two percentage point increase hitting the economy on october 1. we have been saying all along that, actually, if you focus on the consumption fundamentals, we a very volatile month-to-month and quarter on quarter swings. the underlying picture is households are not particularly confident. disposable income growth has been sluggish as of late. is we are not going to

see that rush demand like we did in 2014. that is not a bad thing because it means when the tax cut hits, it will not be that severe. on the other hand, if consumer confidence stays as weak as it is, it will probably be a pretty rentable recovery. -- gradual recovery. kathleen: getting back to the yen and what you're looking for in terms of a move by the boj, for the yen, it seems so often, it is risk off and respond. it has little to do with what the fundamentals are doing so kind of a complement of -- kind of a complicated question. do you have anything that would down close enough to 100 for the boj to say we will pull the trigger in september rather than maybe waiting a little bit longer till the end of october? izumi: yes, i think we would

have to have some pretty severe events. right? there's already a lot of bad trade war news priced in but we have other risks on the horizon. for example, issues and europe and the u.k. it would have to be quite a sizable shock, however. paul: bank of america merrill lynch's izumi devalier. thank you for joining us to unpack that data from japan. do not forget interactive tv , function, tv . there, you can watch us live, and catch up on past interviews, as well as dive into any of the securities or bloomberg functions we talk about. you can become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

kathleen: this is "daybreak asia ." i am kathleen hays in new york. paul: i am paul allen in sydney.

latestn: time for the business flash headlines. big oil in china around of a first half that reworded exploration and production but punished refining. posted strong earnings at its cost cutting drive pays off. petrochina focused on domestic output over imported natural gas. losses narrowed. sinopec saw profits slide 24% from a year ago as losses on imported gas talked 1.4 -- t opped $1.4 billion. paul: jay y lee is facing a retrial for bribery. it navigate the turmoil of a trade war. the supreme court overruled an earlier to decision to suspend his prison sentence and is sending the case back to a lower judge. lee was arrested and spent a year behind bars. the new ruling means he may eventually returned to prison.

kathleen: markets are opening in tokyo, sydney, and seoul at the top of the hour. what are you watching? selina: we are seeing a little bit of relief for the asian markets on the last day of trading in august. seeing green across the board with nikkei futures and coffee futures up one for -- cost be the -- kospi futures up 1%. we saw it better than expected industrial production but worse than expected retail data. all eyes will be on the bank of korea rate decision. switching more than taking a look at treasury futures, treasury futures are pointing to some of those declines. the rally paring back a bit on some of that cautious optimism on trade with more cash moving into the equity market. see how thatto continues. kathleen. paul. paul: thanks very much. coming up on the next hour of "daybreak asia." we will discuss what we can

expect as asia-pacific markets come online. what has been a big week for think earnings in china. we have got the market open, up next. this is bloomberg. ♪

paul: good morning. i am paul allen in sydney. asia's mak major markets are bak open for trade. kathleen: i am kathleen hays. selina: i am selina wang in beijing. welcome to "daybreak asia." paul: our top stories this friday, president trump indicates nutrient talks after china said it would not hit back on new tariffs. it is staying on the mainland. earnings season rolls on. numbersrun through the

of icbc and look ahead to the last of china's big banks the published results. a retrial for jay y lee. the company faces more pressure as it navigates the turmoil of the trade war. straight to the market action with selina. what do you see on this screen? selina: on this is arguably the coolest month of the year -- montht month -- cruellest of the year. the nikkei up almost .9%. this is on some of the relaxing of trade tensions. we heard that the two sides are going to be getting together to talk. china will not immediately retaliate that we did get some mixed numbers from japan's economic data in terms of the industrial output versus the wea k retail numbers. korea, the bigt news we are expecting today is on that rate decision for the bank of korea, expecting to hold at that 1.5%. kospi is up one percent. level. trading at the --

the won is one of the worst-performing currency's. -- currencies. kospi is down 4% since the start of the month. taking a look at what is going on in new zealand and australia, seeing a bit greener on the board. a bit muted on the asx 200, up .2%. the asx is on its fourth straight day of gains. we are seeing the nzx 50 up .7% but it is down one the asx 200 is on its fourth straight day of gains. kathleen, paul. >> thanks very much selena.

the first word news with jessica summers. >> thanks paul, s&p global ratings is cutting argentina's local and foreign debt to select and default. they said they will postpone payments over $100 million of debt. institutional investors this year. a voluntary profiling of $50 billion of longer-term debt. u.k. and e.u. teams will meet twice next week ahead of the october 31 deadline. they are playing down the chances of a breakthrough. boris johnson said they are some distance apart on key issues.

kristi lagarde is saying she is seeing clear signs on the dovish path set by mario and draghi. in her first pass the policy since winning the job, she said the bank has the jobs to tackle the downturn in europe and must be really to use them. the reins of the ecb in november. used agencyhin one has issued what it calls the strongest warning at two antigovernment protesters in hong kong. any commentary, it says activities that harm the security of china's sovereignty or challenge the one country, two systems principal will not be tolerated. it comes a day after pro-democracy protest leader gigemnation was attacked by two masked man in a calhoun restaurant. tanker sought by the u.s. for alleged smuggling seems to have change course in eastern mediterranean.

website shows it sailing away from its expected destination of turkey, but it is unclear whether the course is temporary or permanent. last weekend, the ship was showed to the turkish sport as its intended destination. this is bloomberg. ♪ --global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. >> asian-pacific markets are poised to rise at china signaled it will retaliate to the imminent extra u.s. tariffs. we are joined from singapore. what do you think? can you buy stocks and find out what happens next? we benign. like we saw in june and july, we could see a decent move.

investors are sensitive to the demand, what it sounds as though the united states and china are fighting with each other. you can see how the markets respond in a negative way. the same time, when there is not much being said or only a few things were being said, the markets seem to be a lot happier than they can drift quite a bit higher. it has been such a bad month for equities. i got the knee-jerk response. if we get to moment where the u.s. and china, what they say to each other is not derogatory or the keep away from trying to outdo each other with a warning about new tariffs. equities could stumble before you know it. what people are hoping for is a benign. where they can focus on a couple of earnings and they can forget

about the trade war for a little while. > how are things looking now after a rally on thursday? >> it's a little bit technical, what is driving the market. havehinese authorities been trying to get a cap on what is called the markets which large banks put into the financial system. they are pretty flush with money. withwill do something else the money. we saw a decent size rally in chinese government bonds yesterday and did my continue for a few days as these banks redistribute the amount of money they have sloshing around in the system.

in the short-term, i could boost. it doesn't say that china is about to cut interest rates. it's more a technical feature of the money moving its way through the system into a different asset class. >> with increasing signs that may be the u.s. is heading for recession, if you listen to some of the more hawkish people, they say it looks fine so far. there were warning signals out there. it,ou're worried about where you find shelter from the ?ending storm > in the currency world, mliv was writing about the swiss franc and the japanese yen. taken think the background you have at the moment where inflation is extremely low. there are concerns that negative rates in some asian markets would go deeper into negative territory. the swiss franc gets the edge.

gold is prevailing extremely well. that will give the frank abuse compared to the japanese yen. some of the flooding into japan is going on in unhinged basis. -- unhedged basis. needs a slight edge when you look ahead over the next few months. on the assumption that negative yields will continue. it looks like, if i was europe and japan, negative rates would be fine. > president trump says the u.s. and china will renew trade calls with no timeline or other details.

they said they wanted -- china said it will rate -- retaliate. it wants to prevent further escalation. derek wahlberg joins us from singapore. what we know about these calls? >> we don't know much yet. a lot of details on this -- not a lot of details. metric the cause of happened yet. there have been supports suggesting that president trump's earlier comments at the there may notts have been completely reflective of the calls that actually may have happened. he was trying to send a signal according to some reports we have seen.

>> you are set on this program before the president trump is watching markets on the trade war. trump willnfer that cave here to make sure he keeps stocks going? >> it's a good question. he addressed this this morning. he said, no. in his view, the tariffs were working. there was no reason to quit while he was ahead. he tried to put the idea to rest that he would cave as elections come. there is a big connection between the election and equities. this is a point that president trump has made repeatedly. if you want to know how the economy is, he says, look at your 401(k). if folks look at their 401(k)s, they won't be happy. this is going to be one of those things you have to watch. overnightent came out

in america time to put some of that to rest. hisleen: the time is on side, perhaps. republicans, what are you hearing about what they are telling the president about the trade war and the election and what he should do? getting a bit nervous. there have been comments that you have started hearing bubble up. the governor of the swing state in pennsylvania, pat toomey, he blamed a large part of the economic slowdown on the trade war. those comments got to trump. he was forced to address that. to see a little bit of bubble up from republicans who are concerned

they are walking into senate slowdownh some of the that they're going to have problems here as part of an incumbent party. they're concerned that the trade war, if it doesn't resolve, it does handle the elect -- the electoral problems. you are looking at in asia that is getting excited about a downshift. even mind, the white house has not said it will back off any of the three accountable in quarter three. the two tariff increases that are expected. watch that. thanks for joining us. proper head, we're counting down to the bank of korea's latest policy meeting in the next hour. investors are watching to see what governor lee can do after last month's price cut.

tom: jingyi pan joins us to talk about friday market training. she is sticking to her guns. this is bloomberg. ♪

on the other hand, i think this is one of the reasons where i would say against the dollar and dollar asians that we do see upside. that's across asian central banks. i think there's quite a bit of shift of focus. last week, we saw coming through from previous weeks from the other central banks including the bank of indonesia, which shifted a little bit from this

stability perspective. the bank of korea might come through as well. extent, while keeping the dollar strength going, adequate start upside to go. kathleen: thank you. jingyi pan, ig market strategy. you can get around of the stories you need to know in today's issue of debris. go to dayb in your terminal. this is bloomberg. ♪

kathleen: i debris am kathleen hays in new york.

more pressure being heaped on samsung. it supreme court overruled decision to suspend the ceos prison sentence and is sending it back to a lower judge. joining us now is peter elstrom. how worrying should i be if i am him. -- worried should i be if i am him? peter: i thought we were done with talking about his legal troubles. this has been going on for a long time. with the supreme court decided yesterday was a surprise. they said the case of him in the .ormer park back from retrials it's a bribery scandal that dates back a few years that went back to tuesday samsung subsidiary companies. what the prosecutor's alleges that samsung was giving gifts to the president to any government support for the merger.

it seems like he could face more time in jail after being released. also for president park, she could face a longer time in jail depending on how the records decided. tom: what challenges are samsung facing? what's at stake? peter: they face many crosscurrents. there is the trade war. that has ruined the entire technology supply chain. the second thing is a trade dispute between japan and south korea. more complicated for samsung and other korean companies.

a lot of challenges ahead for the company, not just the competition of its smartphone business and chips, they now need to deal with this leadership issue, where the de facto head of the company is going to have to go back on team and his management will have to step up and take more control over strategic initiatives so that they don't lose ground on key competitors like apple and huawei. tom: get a quick check of the latest business flash headlines. abercrombie & fitch says is trying to reduce his dependence on supplies from china by 40% from last year. this was after warnings that trade tensions could continue. plansker american outdoor with more than $5 million in costs for tariffs.

kathleen: volkswagens already is said to be adding byd as a battery supplier for its new electric vehicle. we are told negotiations are in an advanced stage but there is no agreement that it will be allowed. they plan to lift its battery business to raise funds for expansion. 20 more to come. this is bloomberg. ♪ ♪

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first word headlines. won'thas indicated it retaliate immediately against the latest u.s. tariffs. they say it is more important to work on removing existing duties. the commerce ministry says china has ample means to strike back, but the focus should be on how to prevent further escalation in the trade war. it adds beijing is adding formal representations with washington

on the issue of tariffs. suggests most u.s. companies will ignore president trump's order to leave china and will continue to work there. the u.s. china business council says 87% of respondents say they have either -- neither moved nor plan to move operations out of china. the survey was conducted in june before trump treated -- tweeted a directive for american companies to look for alternatives to china as a production base. chinese prosecutors are investigating huawei over new allegations of theft over a dow jones report. it may expand beyond criminal cases against the company on accusations of huawei stealing intellectual property from multiple people and companies over several years. huawei said they are committed to complying with laws and ip processes. can't really comment on

ongoing litigation. i believe information is related to those investigations. we are concerned about ip theft as much as anyone. we do hold a significant number of patents. would like to see those issues addressed. we are a proponent of due ip and and handling of inappropriate manners. >> president trump says the u.s. is close to a deal with the taliban is planning to withdraw more than 5000 troops in afghanistan. he did not offer any timeline for pulling people out. brought downld be to roughly what it was when the president of office in january 2017. the fight to get to the taliban is the longest war in american history. to be no agreement on territorial disputes in the south china sea. despite top-level tops in

beijing. hisident xi jinping met counterpart, but the two failed. the leaders did sign a range of deals including a loan agreement for new rail agreement. global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. let's check in on the -- and what is happening with the markets. after a volatile and cruel month for asian equities, they are set up for relief in the last trading day. you can see some green on the board with cost be up 1.3% with energy and health care. it is down about 4% since the start of the month. we are seeing the yuan

strengthening after a few rough months with you on. we see the japan nikkei is up about 1%. the energy and tech sectors are leading the gains there. on some economic metrics including industrial production. we did see week retail data. in south korea, the main focus will be a bank of japan. see the rc index up as well on some cautious optimism that trade talks may be a better footing than the previous few days. i want to take a quick look at samsung. meanso talk about what it that the vice chairman of samsung could end up in jail again. we saw shares closed down quite significantly.

now we are seeing a little bit of green. markets are trying to get back some of that meant -- pair back some of that negative sentiment about the business ramifications of the jailing of the former samsung ceo. tom: earnings season rolls on in china. icbc posted first have that meets estimate that more than 23 million -- $23 billion. looks like first half results are holding up. >> not too bad. revenue made decent gains. that is upping net income grow. we did see that the president of icbc, so that there was some pressure in the margin.

if we look at what is expected with in bank of china, revenues coming in like this and going into the future as well. terminal, weat the see the average price to book banks. the before banks we've been looking at, we see that the price-to-book ratio is dropping to historic lows. falling on the back of issues at the u.s. china trade war. that is not getting better. economy andslowing institutions is better to take on bigger loans. of course, cutting financing costs at the same time. even the revenues are doing well. that's why we will be expecting

more pressure in the quarters to come. kathleen: thank you. joining us now is ismael pili, co head of asian bank research at creditsights. speaking, you have heard all the things she was just summing up. ground are these big chinese banks standing on right ground are these big chinese banks standing on right now? their fees and commissions look good, but there are all these other things around them. they have been challenged and they may even challenge them more in the future. ismael: sure. what we have seen so far our fees are strong drivers of the revenue. the bigger component, on the net interest income side, they both come under pressure. part of the reason behind that is a new pricing benchmark. essentially, looking to lower

interest rates. the second-quarter gdp number is the lowest in 27 years. they are trying to balance deleveraging with its growth agenda. if you look at financing numbers, they are looking at 30% higher than 2018. situation that the part of the reason behind that the pretty stability the giant like in terms of profit is it's clockwork that comes in at 405 net percent profit growth. the reason they are able to that as the play around. at the moment, the higher profitability they have allows them to make higher provisions. if those margins come down, profitability comes down and should come down.

the medium and small banks have been having a tough time. is this going to result in what the chinese government would like to see, more lending, more growth and overall better health of these banks, or, is it not going to make that much ?ifference >> i don't think it will make a huge difference for the central banks. if you look at the ldr, it's with around 95-200%. there is a reflection of shadow banking. those numbers can go up to 160%. where anin point is

ldr showed 60%. if you include this use. you can go to 160%. at that level, they don't have the liquidity to grow. that's why you saw these companies take a stake in the bank just because they need help in terms of addressing their liquidity. tom: you did mention shadow banking. we have a chart that shows shadow financing has been falling. it is now $3.5 trillion for the first time since 2016. is this encouraging in terms of reduced risk? it is in terms of the perception in the sense that people think shadow loans are all bad. the reality is, they are not all bad.

what is happening is the deleveraging. we are still seeing loan growth from banks and lg bonds picking up. the compensating for deregulating and shadow financing. this explains why the last number we had was 10.9% on the show -- social financing numbers. much higher than what we saw in 2018 on that campaign. tom: are you satisfied that chinese banks are enough -- capitalized enough for potential sharks? -- shocks? sonali: the headline -- ismael: the headlines look pretty good. be 18 lakhsng to impose. the good news is emerging market

banks don't have to meet the 60% requirement till 2025. it will be raised to 18% in 2028. the amount they will have to raise is quite big. it's roughly $300 billion per year, per bank. if you try to stretch it out in terms of the amount they have to raise, it's to meet that regulatory climate, assuming the current run rate toward net profit. earlier, we saw a nice graphic of the biggest banks' exposure to hong kong. bank of canada -- bank of china above the others. there is exposure there. aboutall -- paul talks shocks, i think that's in mind for any bank in asia. what do you see? sonali: the protest -- ismael: the protests are not good for sentiment in terms of banks and consumer and business confidence.

already disappointing time with added pressure. they are anticipating it can't go on like this. if you look at bank of china, they have had as much is 30% before coming from hong kong. it is either a boon or a boon or bane for china. if it is doing well, great. if not, the sentiment on china does not go well. we don't have any signs to suggest that asset quality is cementing. kathleen: in terms of investigating any of these banks , what is the takeaway? is it a risky bet if you pick the right one or the big one solvent enough to put money in their?

ismael: we saw this before in the early 2000's. people said valuations and dividends were low. we fast-forward to where we are now, and for many years, we used to see them as a value trap. that should be applied to chinese banks of the moment in the sense that they are cheap. the smoke -- there is margin pressure, a predominate driver of profitability. we have been seeing that in the past couple of quarters. if that is coming down, profitability will come down. tom: thanks very much for joining us. wanted to get you in alert on the bloomberg terminal. the hong kong activist joshua wong has been arrested. the groupcording to he helped found, his pro-democracy party. that's them saying he was arrested.

they are saying he was picked up on friday at 7:30 on his way to the train station. you are seeing pictures they from some time ago. those are not reason. no confirmation from the police. party is saying he has been arrested. to come, hong kong retail sales for july. they are expected to show a big decline. we will discuss the current consumer land state -- cape this is bloomberg. ♪

kathleen: i am kathleen hays in new york. paul: i'm paul allen in sydney. local retail sales continued to take a beating in july. this terminal chart shows the forecasted for the most since

2016 as escalating street protests are in demand. we are joined now by our consumer reporter. however retailers doing and of course, the trade war has had showed known signs of waiting. >> they are predicting that we will see 12.5 percent decline of retail sales. ats number will come out 4:30 today. everyone is waiting to see that. before we saw that, we walked on the street and asked retailers what they were thinking. those street sides, mom-and-pop shops, those that are getting a hit, but also luxury malls, central models, there also taking a hit. war isotest and trade

putting a huge blow on retail sentiment. you asked them about how it was affecting them, what kind of sense did you get about whether or not they figure it was worth it where it was worth paying the price. i imagine they would quickly have something new say about that as well. we are seeing carrie lam saying that this is worse than the epidemic in 2003, sars. it's worse than the financial crisis in 2008. we talked to lawmakers and what they were saying is that this time, hong kong is torn apart because people no longer have a concerted atmosphere to reconstruct hong kong, even after all these protests. they are worrying what will happen next. even if they are starting to boost consumption whether tourists have confidence to come back.

kathleen: we're going to look at some breaking news. bank of korea leaving the key rate unchanged at 1.5%. survey, three economists who thought they might cut it. this era july 17, there were going to leave it where it is, see how the economy unfolds and see how the trade war can get some time to absorb this. you can see the currency getting hit here. we will have more on this coming up throughout this show and certainly in the next. keep it right here. this is bloomberg. ♪

a look at this breaking news. , as expected by most economists, leaving its rates unchanged at 1.5%. there was an expectation they would wait and see whether this month pans out well before moving down the track. unchanged after the count in july. still parked there. to anda curran. convincing data at of korea earlier this morning, but no surprise they didn't move. anda: this was excited. they could last month and they are getting close to 25 basis

points of the record low. a lot of central banks have been lowering interest rates. a bit of a hold on it at the moment. markets are volatile. fed have an important meeting coming up in september. south korea has some of its own domestic concerns. they don't want to cut too low too fast. it might cause broader instability around, given the debt they are nursing. today's decision is probably, the critical thing would be what guidance does the government get from here and where there are more cuts on the table in the weeks ahead. inhleen: there is a meeting october. looking at a chart earlier which says the key rate coming down to 1.5%. yield, theonth bond seven-day repo rate, the 10 year bond yield, they are all below

the bank of korea. what should we take away from are they saying they are 20 push the be ok or are there other drivers? make is not to ignore what is happening on the fiscal side. that's one reason why they are on hold today and why they are comfortable taking a backseat. record span for 2020. that's in line with an ongoing increase in spending. that's an emerging trend around asia that governments are taking more on the spending side. nonetheless, markets are listening. to be moment, they seem missing the signals that markets are sending them and have markets are responding.

kathleen: they really cut meeting to meeting at the bok. they haven't done that since 2009. that would have been a surprise. in terms of the economy, how does it shape up to you? consumer confidence fell this week. unemployment is rising. whod you say, as someone watches this, it has gotten weaker, but it is not urgent for them to move now? enda: absolutely right. there are obvious downsides to the economic outlook. 2.5 year low. so the figures this week. seems like we are in their ninth month of contraction. that's bad. are it isdications getting caught up in the middle of the global trade tensions and war. it snatches the u.s. and china trade war.

japan and korea have their own that economists expect to drag on growth and weigh on e-sports over the coming month. the cheaper one not adding much impose. side, you have the trade war going on. not much of a circuit breaker in the near term for their -- their economy. paul: one of the most been up currencies in asia right now, it does provide korea a benefit in terms of exports. enda: there is a broader debate going on about the impact of cheaper exchange rates. of the emerging currencies have weakened. you lose that first mover

advantage. that's part of the debate. while they have to allow to weaken further to get something going for their book? the other issue is that are lower. all governments are being careful in terms of what they say on their exchange rates. kathleen: thank you so much. a want to go quickly to preview of what to watch in markets later this morning. selena. >> watching some of those stocks for china banks. watching out for their earnings. a little changed earlier, but we will see how they moved. lots more coming up in the next hour.

this is bloomberg. ♪

♪it is not :00 a.m. in beijing, singapore and hong kong. i am tom mackenzie. >> we are counting down to the opening in hong kong and asia. >> the top stories this friday morning. equities on the up amid the trade optimism. president trump indicates new talks after it said it would not hit back on imminent tariffs. yvon