this is how we inspire hope. this is how we heal. cancer treatment centers of america. appointments available now. paul: welcome to "daybreak: asia." the worldwe are at headquarters anyway. >> we are counting down to asia's major market open. paul: still no slowing for the mainland economy. violence returns to the streets

of hong kong. oil strengthens after a shakeup in saudi arabia. family is in charge of energy for the first time. kathleen: a quick reminder of how u.s. stocks ended the session on friday. the fed chair speech later in the day with some of the big drivers. you can see is narrowly mixed. leak.big there is some good news. points. 69 nasdaq a little nowhere. suffering after news about the investigation. basically, it was about jobs.

25,000 with temporary census records. those are the parts that initially got a bond value. you have average hourly earnings following year-over-year. unemployment at a 50 year low. there is no recession on the doorstep. not a 50 basis point cut. at any mate, jay powell confirmed that saying that he thinks that the labor market looks strong. pointing to a rate cut, but nothing to get the markets going after all of that. pointing a little bit to the positive side. how are things looking in asia? >> asia futures are pointing to

mixed and muted start this morning and signed further economic softening. that data is likely to curb any of that. switching boards, i want to take a look at some of the currencies. last week, it was beginning from that 94 level and now is treating -- trading at 106. the new zealand dollars are continuing to edge higher despite the week data from china. trading around that level. did actually fall on friday as much as .3% on the backs of that week data. weak data. break economics is a thing data to fall to 1.1%.

it is down from the preliminary estimate. it will give a suggestion as to whether the economy is strong enough to whether the tax hike in october. we will be watching for how this might be moving. it could increase the level, increasing that risk off appetite. japan's cut into competitiveness and deputy inflation. revised likely to be down to .7%. the entire gdp data is expected to be revised downward because investment data. paul: thank you very much. let's check on the first word news. >> let's start with brexit. worse johnson insists he still wants a brexit deal rather than

a hard split but you officials are increasingly doubtful. london says the talks are constructive but one even official called them farcical. i third said that they are only there to boost johnson's reelection prospects. to china now. experts shrank last month. termss fell 1% in dollar for the year earlier while imports slumped, leaving a trade surplus of almost $35 billion. the u.s. raised tariffs at the start of august and is said to impose additional one month if there is no progress in trade talks. the latest on the typhoon. flights and trains were canceled in tokyo as the typhoon hit late during the night.

it headed back out into the ocean early monday. they canceled a total of almost 70 flights. the -- is the 15th typhoon of the season so far. leading recovery in the property market. the south australian lead increaseown posted an in the past 12 months through august. a jump of recorded 42%. shockednd melbourne rising demand as well. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. marketn: hong kong

another week of protest as the controversial extradition bill failed to placate. sophie, business as usual this morning. that would seem to be the case after the activity that we saw were small pockets of protesters clashed with police. as you can see here, you would at know that from looking them. this entrance was set on fire yesterday and you see remnant in the garbage right next to me, along with a used gas mask and umbrellas. islooks like hong kong continuing with daily life despite the thousands that took to the street.

they attempted to push for the u.s. congress to pass a democracy act when they resumed their activity this week in u.s. it looks like protesters are not giving up on their demand. seems protesters are not being placated i plan to withdraw the extradition bill. paul: what has the response been from carrie lam's government? a statement on sunday from the hong kong government, they condemned the illegal behavior of radical protesters while addressing the use of force by police in those clashes with protesters. that might cause a further wedge

, including the independent inquiry among other unmet demands. also in that statement, the government expressed regret over the reintroduction of the democracy act and reiterated that foreign legislature should not interfere in any form and in the internal affairs of the special administrative region. continued warnings against meddling in its internal affairs. facing tension from global leaders. we had angela merkel visiting china over the weekend. this 14th weekend looks like it will continue with more protests scheduled for friday. it includes students looking to boycott classes. paul: sophie kamaruddin, thank you for joining us with an update. still to come, we will break the gdp and trade balance numbers

with an instant analysis. kathleen:, navigating the big trading risk. -- outlining the preferred equity market. this is bloomberg. ♪

paul: keeping track of a typhoon causing disruption in japan at the moment. canceling anyone domestic flights this monday after 70 flights were canceled on sunday. it halted train services as well. gusts up to hundred -- 172 miles per hour. i will be more details a moment.

paul: this is "daybreak: asia." kathleen: i'm kathleen hays in new york. our next guest is tracking who they might be and how to invest accordingly. the global strategist for aberdeen standard investment. it has assets under management and she joins us from tokyo. welcome to the show. our next guest, but we are so happy to have you with us. every economic report that comes out every other country is scrutinized. being a bigger bite, be will looking at the current account surplus.

how do you begin to do the analysis of this one big factor that has so many tentacles that can affect 70 countries in different ways? >> is a matter of looking at each individual country working out exactly how its economy is going to be impacted. one of the things that one can do is to look for countries that are resilient to trade. they have well developed, domestic economy. that means that less and china will be less impacted. are more dependent on those countries for their market. kathleen: so expert dependent versus left seems pretty clear. right now, you favor equities, broadly. why is that?

that has been a tremendous rally and bond at the central banks. they are the key determinants for what is happening with the market. it is still an element of determination because good companies will survive and thrive. at the moment, equities can offer income and growth. just in terms of what you like, you mentioned china and the u.s., but i wanted to get your thoughts on japan as well. what do you think? does begin limit the amount of opportunities in japan? >> with japan, we like certain aspects of the japanese markets.

currency and other reasons. companies have a long history of innovation and being quite smart for the market. opportunities. we are in active investor, so we look at individual companies to pick relative trade. if you are being selective, you are looking at individual companies. can you share what you like or sectors that you prefer? benefit from the economy, the big disruptors, technological breakthroughs, but also those who benefit from

those technologies, changing that. health care for instance. data, processing, intent to help in the long-term future. we think there are quite a lot of moving parts to the economy. at longerking horizons for long-term. --hleen:kathleen: speaking kathleen: speaking of longer-term, you have to pay attention to contrarian views. he said the cycle might not end as quickly as people think and recession is not necessary, though it could become a self fulfilling prophecy. it really does not have to happen, but if everybody keeps looking for it, it could create

itself. yes. there are a couple things, the way that we look at macro data. we have focused on economies the way that they used to be. the data does not capture the high growth areas, such as the digital economy. we have well aware of that, but we still anchor on those headline figures. we interpret that as being what really matters. there is a lot happening under the surface. that is one thing to look at. headlines one data data, it focuses on already published rather than latent development. get a littlepeople

too gloomy and pessimistic about things. particularly, our most current data are a gauge of sentiment. you have a lot of politically induced sentimentality. kathleen: we can be concerned about the u.s. economy and travel across the country, but there are trains everywhere, a lot of construction. central bankers -- how do they fit into the equation? based on what he said, are you more some attic with people at the federal reserve, policymakers who say, i am not in a hurry to cut rate? there are many indicators suggesting that the economy is strong. to a great extent, the central bankers have done their part. we have been overly reliant on

the central bankers in the global financial crisis, and we looking to them every time we get an economic wobble. perhaps it is time for governments to step up on the fiscal side, looking, as a country, and australia. been more growth has than halved in the last year. it is in the public sector of the government. it is not really around commodities and exports, which goes back to what we were saying earlier about countries that are dependent on exports for growth. that prefer to grow themselves. kathleen: thank you so much. what you are saying about fiscal of theg, the head

federal reserve with so many central bankers around the world saying that. fromis hudson joined us hong kong. that's move on to another big story. secret talks between the trump administration and the taliban are on hold after a dozen people were killed in a bomb blast in kabul. traumaticly a occurrence of the weekend to suddenly tweet about the secret talks and how they are off. , it is nowat he said up to the taliban if they want to restart the talks. they have been very popular with the afghani government, which has been shut out of negotiations. and talibanvoy about 10atives has met

times or more over the past year , but there are many problems with the proposal. it is quite unclear where we go from here. it is unclear why president trump, having called off the talks felt the need to tweet about it. a lot of upset in washington among members of the administration. lawmakers who did not know about the talks and they would have been opposed. kathleen:kathleen: any reaction from the other side? been pretty negative. we heard from the taliban. the calling off of the talks will harm america more than anyone and it harms their reputation as a reliable partner in negotiation. afghanistan's president never liked this agreement.

diplomats have come out in the past few days and saying that the deal could be catastrophic to national security and we heard from lawmakers, billy saying that the meeting should never have taken place and democrats said the same thing, so suddenly, it was a very unpopular meeting. the next step is really unclear, the special envoy is coming back to washington. it is not known if he will continue in his post or if talks can be started in your future. president trump has flip-flopped before. that could be the next thing that happens here, but for now, we have to take mike pompeo at his word. the talks are off.

back, a u.s.g president meeting the taliban. how is that viewed in terms of the foreign policy? >> nobody thought that this seemed like a good idea. a democrat running for president said this was trump showmanship at its best or worst and not the best way to conduct foreign policy. of the taliban actually coming to washington or to camp david, which is the rustic white house. certainly, it would have been in keeping with president trump's desire for bold and unorthodox policy moves. all in all, it was not seen as a good idea. perhaps that was one of the reasons why the meeting was called off.

is extremely sad that a u.s. servicemember was among a dozen people killed in kabul. attacks are so frequent, that it is hard to know if that was really the reason the talks were called off or just the pretext. paul: thank you very much for joining us. let's get a quick check of the latest headlines. wish airways say that many flights were canceled ahead of the biggest pilot strike in decades. it has canceled most of its daily flights monday and tuesday. relies ony airport it. kathleen: reported outwards during a test on the ground.

it is part of the process. there were problems with the general electric engine. scrutinyalready under over the 737 max. saudi arabia's royal family takes charge of oil policy. this is bloomberg. ♪ we call it the mother standard of care.

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this is how we inspire hope. this is how we heal. cancer treatment centers of america. appointments available now. su: this is "daybreak: asia." itstart with iran who says is no longer abiding by limits .n uranium enrichment this creates a new challenge amid rising tensions with europe and u.s. the islamic republic is pushing ahead with developing advanced centrifuges in a breach of the timeframe agreed to in the deal. scaling back its compliance ever since president trump abandoned riemann last year. the u.s. is moving ahead with plans to investigate a french digital tax.

part tariffs on wine and other goods in response. this despite an apparent summit.t at the g7 president macron said at the g7 that they had reached a deal. the hong kong government has condemned groups of what it caused radical protesters after more clashes with police this weekend. demonstrators vandalized some locations and set fires in the street. tos of thousands marched appeal for help in their bid for democracy. saturday, 19 people were injured in clashes and police were criticized for using pepper spray. the tanker has reached port in -- eastern

announcement but offered no other details. it was thought to have been carrying 2 million barrels of oil. the foreign ministry indicated tanker soon release the seized in the gulf july 20. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan and this is bloomberg. kathleen: yeah half an hour away from the open in tokyo. stocks intching australia. months after the stock started trading on the australian exchange. alsopharma company was rated new. that stock is up 10% since it started the year. looking at

middle-management. it was downgraded, shares of the company up more than 20% since the start of the year. we will be checking to see if it reverses any gains. we want to take a look at gold and its massive rally, which is suddenly endowed. after posting its first loss since april, enclosed lower on friday. been -- assurances from paolo coming in more positive than expected with powell saying that he is not expecting a recession on the horizon. we saw it closing at a two-week low opinion showing some of that volatility there. it is interesting that gold failed to rally.

worries of the u.s. trade war. clearly those comments from powell and better-than-expected u.s. table data outweighed some of the negative sentiment. despiteto show that this pairing back of gold recently, it is still up over the past months. it has had four straight monthly gains. a surprise contraction in trade last month is underscoring called to step up support for the economy, even after they lowered the reserve ratios. tom mackenzie joins us from beijing and adam is here in sydney. how bad was the data? >> it was pretty dire. expansion of about 2.2%. in july, there was growth in terms of china's export.

we got contraction of 1%, so significantly below those forecasts. if you look at the trade relationship, in terms of chinese export, 13%. saw some pickup, but not enough to really impact the broader picture, the exports continuing to be squeezed. at weakfell, pointing demand. most economists suggest that it is just going to get worse. saying that it will just get more difficult. that isand december, the expectation, unless there is a medical breakthrough in the talks. messick picture in terms of demand remains. they expect imports and exports to soften in the month ahead.

a challenge here for policymakers in terms of trade picture. weak exporte some numbers and stimulus as well. what is the market impact of this going to be? this is reflected reasonably well in the expectation for how the chinese continue to deal with the economy. it has been to a period of weakness some time. you are starting to see a little bit of resistance for me. the gtp library and it shows you around that 120 day moving average. more broadly and in other parts of the world, this continues to be a big thing. ?ow is that data being assessed how much more stimulus can they provide? the follow-through is, how much

is this price into risk asset? be cuttinggoing to another two or three times. as we heard from our guests, there are pockets of the equity market where they are offering some yield in a world where the bond rally is made a lot of the fixed income market too expensive for a lot of people. kathleen: additional easing. many steps are being taken. will they have much impact? the devil is in the details. we had the cuts in the reserve ratios by about half a percent. there will be additional cuts of 1% in october and november, targeted at commercial lenders. this is a liquidity injection. just second pair that -- just to

compare that, it is a much bigger number but officials say where it pays to stretch, there is an easing. part of the liquidity would be taken up to that as well. there is clear attention now. in terms of things like mortgages, it is being reduced, where it is clear that officials are trying to make sure there is enough liquidity. bubbles a tension about in the financial sector and parts of the economy, but also ensuring that those areas also get access to the credit that they need. they are pleased with the process -- progress they have made. mentioning the expectation later this month. there is a gap in terms of interest rate, that differential

does give the pboc room to remove or lower those operation rate. in terms of bond issuance, that is another area that could be put into play. there is a little more support going forward. it gets more interesting every day. morgan stanley strategist made the point that many of the risks remain firmly in place, but stocks remain close to all-time highs. this assets are getting ahead of themselves. the three things that really plagued us as we went into huge selloff last year are essentially still intact. the trade war is unresolved and the picture continues to be cloudy as every data point suggests weakness in the global

economy. up,tions have been pushed sitting pretty much on that record high. there is a risk for a bit of downside. do need those to be picking up for risk asset. manufacturingthe pmi's continued to see are showing broad based weakness. morgan stanley does point out that maybe there is a chance, some signs that you are seeing a bottoming, see you so -- you could see. but it is too early to tell on that data find whether we are reaching an inflection point. global asset allocators not wanting to make large changes given that we still have to wait for that policy announcement next week. a lot for the next weeks on the

policy front. kathleen: tom mackenzie and adam, thank you for that discussion. futures rising after saudi arabia fired mr. khalid and replaced him with one of the sons. minister told bloomberg that the decision is unlikely to mean a change in strategy. happy for the royal highness. i think we are lucky to have someone with that knowledge of the industry. he will be there for every decision. decisions,se especially the corporation working with us.

day and night to conclude it. i do not think that we are awareg someone who is not or who will be a shock. >> he was a man who said he would do whatever it takes. do you think what would you know if there will be more of the same? to do whatever it takes? >> when it comes to what we decide as ministers, this comes from the leadership of the country, the support that we get from our leadership, so it is not just the minister's decision. it is a legal decision to do whatever it takes to balance the market. i am not expecting to have changes. knowthe personality that i , it is very decisive.

he has a strong personality when it comes to the market and he understands the benefits to all of the producers of leadership for the role of saudi arabia to balance the market. i am not expecting changes. it will be a continuation of the good work. used --u lobbying for deeper cuts? until the team comes and tells us that we need to do more in terms of cuts, then we will it.de and debate after that debate, we will raise that accommodation. we will be as the commendations.

unanimous. is a if he sees that it makes sense, then you will take it. is there a commendation in place that i am aware of right now? no. still to come, we are standing by for what could be the latest signs of economic gloom in japan. the second-quarter gdp numbers next. this is bloomberg. ♪

paul: this is "daybreak: asia." kathleen: i'm kathleen hays yuan. japan is getting ready to release gdp data. we will discuss all that with the vice chairman and chief equity strategists. great to see you again.

to it.et right the gdp forecast right now, the consensus on bloomberg is looking for the annualized quarterly number to come in at 1.3. what are you and your team looking for? >> our colleagues are forecasting an upper division to second-quarter gdp number that will be released very shortly 1.9%. the reason for this is our foromists see upward scope fixed investment, which turned out to be stronger than the preliminary meeting a while back. if we are looking at close to a 2% annualized number, i think that underscores the point that we have been making, which is remains pretty resilient, keeping the economy

in positive territory. is there domestic demand so much? 0.6 on the last quarterly meeting. if it is public spending driving the economy, i saying that there is plenty of support for spending because the government is stepping up and providing stimulus? >> right. personal consumption is not flying off the charts, but it is the greatest portion of japan's overall economy in terms of size. for it to be growing at all is remarkable after such an elongated method of expansion. with the coming hike starting next month, the government is trying to reinforce domestic -- ensurepumping in

that it remains as resilient as possible. paul: in terms of domestic demand, will there be a boost from negative events? there is the world cup and a couple weeks. is that going to keep things going to a certain degree? >> i think those big events will certainly help at the margin, but overall, the underpinnings of keeping domestic demand resilience will be number one. corporate profitability and confidence. shortages, you are seeing companies continuing to plow any excess earnings that they gain into investments, especially productivity. second on consumption is age growth and confidence as well. confidence is still quite fragile, but we are seeing wages

not exploding but gradually continuing a modest upward trend, which is supporting consumer spending. kathleen: we are going to get these numbers on the gdp and we will test your forecast and a couple of seconds. i am watching my screen to see how they show up. we didn't get the current at ¥1.9surplus trillion. .e are getting the gdp it is 1.3, as it was before. 1.8 stays in place. the business spending came in very weak. only to a certain extent, it came in at 0.2%, down from 1.5. when you see that kind of

number, i am seeing if we could get anything on the current account. let's go to the growth number. the way it interacts with yen and equities, this is all something that you have to watch very closely. >> absolutely. it is backward looking. again on the upcoming consumption tax hike and repercussions of that tightening and what that will mean for private consumption in the country from the fourth quarter gdp and onward. a lot of focus there, but in the the weakness second quarter, as far as we can tell from the sector analyst and information we are getting from companies is that the demand to isest in efficiency and ai

going to continue for the foreseeable future. with that combination of consumption holding up close to the hike, there is in. theolicy measures to offset negative. our economists do believe that it will be less than what it was the last go around. some resilience will allow japan's gdp to grind forward. keep in mind the economy has enjoyed a very elongated expansion cycle already. it is quite long in the tooth and the same can be said about corporate profitability. it is hard to paint an upbeat picture, but nevertheless, we are not calling for a recession and we expect corporate profits to start bottoming out in the beginning of 2020. paul: corporate profits is

interesting. i wanted to get your view on japanese equities. yen.a strong what is your outlook for japanese equities? i think you've just highlighted one of the headwinds that will cause the japanese equity market to struggle near term. yes, it has depreciated somewhat against the u.s. dollar as of late. he saw the weaker than normal payroll number last week. not just the fed but the ecb moving to ease policy. going forward is that they probably will be limited in what they can do from the monetary front, going forward. is going to put renewed upward pressure on the

japanese yen, which will act as a headwind against corporate profits. , we think thatt domestic demand will hold up better than the forecast. toot of companies are tied domestic demand as well. that is the area of the market to focus on for investors around the world. paul: still waiting on those revised gdp numbers to drop. goldman sachs, japan vice chair, thank you for joining us to unpack those numbers. more to come on daybreak asia. stay with us. ♪

paul: this is "daybreak: asia." kathleen: markets are getting

ready to open in sydney and tokyo. we just got that gdp number, weaker than the previous quarter but right on spot with the forecast. selena, what are you watching? a little change from the nikkei futures. expecting a mixed and you did open given the data that we saw over the weekend and geopolitical overhangs. searching, we want to take a look at the rrr cuts and what it looks like. it will unleash a further liquidity that will take effect over the two steps, october 15 and november 15. bloomberg economic's are expecting a cut. take a look at this chart. a look at this yellow line, which is the medium term lending

facility coming down as well. inhave a lot more coming up the next hour of daybreak asia as well. plenty more to come. china's export disappoint. we will have reaction in a moment. this is bloomberg. ♪

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paul: welcome to daybreak: asia. i am paul allen in sydney. kathleen: i am kathleen hays in new york. selina: i am selina wang. in beijing. we are counting down to asia's major market open. paul: our top stories this figures underscore the pressure on china. slowing in the mainland economy. violence returns to the streets

of hong kong. protesters call upon president trump for democracy. johnson pushes ahead with his brexit campaign. kathleen: let's get straight to market action and reaction. asia stocks are going for their fourth week of gains. we are seeing the nikkei little changed since the gdp a data way sow weaker than expected. data weaker than expected. private expenditures the main thing investors will be looking for. we are seeing pressure there, upward pressure on the u.s. dj pi, around the 106.9 three level. there is also a massive typhoon hitting tokyo, bracing for potentially record-breaking wind

and rain that could affect airline companies. switching boards we will take a look at the kospi. the kospi was on a three-day streak of gains. it may continue, up .2%. the korean long trading around 1193 point 50 level. trade talks to continue next month. and more pressure from investors on the chinese export data that came in weaker than expected. switching boards to take a look at australia and new zealand, the afx tire friday looking like it is down a little bit, little changed, potentially reversing. up 1%d vx 50 last closed friday after six straight days of gains. -- the nzx 50. we are seeing the new zealand dollar continuing to gain higher despite weaker than expected numbers coming out of china. thanks, let's check in on

the first word news. >> we start with china and the latest on exports. they shrank last month was shipments to the u.s. plunging amid s gliding trade war. exports fell 1% in dollar terms from a year earlier. 5.6%.s slumped that leaves a trade surplus of $35 billion u.s. raised tariffs at the start of august and set to a pose additional duties next month as well as in december, if there is no progress in trade talks. thehong kong now, government has condemned groups of what it calls radical protesters, after more classes with police over the weekend. sunday demonstrators vandalized subway stations and set fires in the streets. earlier tens of thousands marched to the u.s. consulate to appeal for help in their bid for democracy. people were 19

injured in crashes -- clashes and police were criticized for using pepper spray on journalists. iran meanwhile says it is no longer abiding by limits on uranium enrichment under the 2015 nuclear accord. this creates a new challenge amid rising tensions with europe and the united states. the islamic republic is pushing ahead with developing advanced centrifuges in a breach of that timeframe agreed upon in the deal. iran has been scaling back its compliance ever since president trump abandoned the agreement last year. to australia, mining towns across the country are leading recovery in the property market. record low interest rates and easier rules for bank lending support demand. the south australian lead 71%ter town posted a increase in average home prices in the past 12 months through august. while the steel count of weiland norrie jumped a record 40%.

sydney and melbourne are not doing too bad, both are rising demand. global news 24 hours a day and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am su keenan. this is bloomberg. kathleen: japan has posted a raft of data, july trading three times the estimate of $700 million while the final gpa is in estimates -- in line with estimates growing 1.3% in the second quarter. so closely watched ahead of this and even more closely now as you know capex, the business investment spending. >> yes, most of the rest of the data were very much, very boring really. they do not give us a lot of and update. at that drop in business to beng, it was expected revised lower. initially came in at 1.5%, but

not to 0.2%, that hasn't once evaporated. that is an ongoing concern in japan. the manufacturing pmi has fallen into contraction, industrial output has been week. concerns from central bankers across the globe have been centered on the idea that the uncertainty generated by the trade war is leading businesses to cut spending. business ispan's almost stop their spending plans, that is a major concern. not just for japan inc., wizards facing some profit concerns, but for asia and the world generally. garfield you are also keeping a close eye on the offshore yuan. what are you expecting? >> is an interest in question. -- it is an interesting question. will adjustpbs see

for the onshore yuan. if you look at the rr are cut last week in the export data that came out of the weekend and disappointed to the downside, you would say those economic factors should mean that the dollar yuan rises, that that you on weekends. at the moment, it is holding close in fact to the strong as to levels for the yuan in a while. kind of an excess in that there's going to be a potential bias for china to avoid much weakness in the yuan if they really do think there is a chance for some sort of progress in trade talks. they are supposed to come next month and they're supposed be laying the groundwork this month. i would be very interested to see where that you want goes. i do expected to weaken from here. there may be some question about what is going on politically if it weekends by a large amount. it weakens by a large

amount. paul: you can follow more on this story and all the day's trading on our markets live blog that is on the bloomberg at mliv there's commentary and analysis by bloomberg extra -- expert editors. two can find out what is affecting your investments right now. --icom, west is troubled while the east is stable. investment strategy next. we will go live, this is bloomberg.

kathleen: this is daybreak asia. i am kathleen hays in new york.

paul: i am paul allen in sydney. reasons to be optimistic in global markets. let's look ahead to the rate. with ahead of investment strategy for martin curry, thank for joining us. we saw a risk on rally toward the end of last week. let's be serious, the problems have not really gone away. is this rally perhaps too optimistic? >> the short answer would be yes. it is founded on nothing other than hope. i think the trade war is here to stay. i think brexit has not been resolved. so i'm afraid to say this is just a little breather. of our guest earlier was saying also wearing a very late cycle for equities. what is your outlook, are equities being propped up by central banks going ahead, and

how long can that last? >> that is right. where are late cycle by anybody's standards. what is particularly strange is that i do not remember any of the textbooks told that this is how central banks behave. in terms of propping up growth. but this seems to be the new normal. in top that we are going to inject extra uncertainty in the sense of geopolitical tensions leading to trade war, weaponization thereof. this cannot be good for the global economy. under any measure. .o outlook has to be modest the way we work at martin curry is we pick stocks rather than countries. it means that as you are cognizant of the risks that you have any particular country and each one is in a different place, then you should be all right in picking good-quality names, well-managed companies and brands et cetera. so what country, what industry, what companies are the

top of your list, can you give us an example ech? >> of course. a couple of examples, both old economies. and a couple of new economy once two of we have time. from the developed world, let's take a name we have heard of, ferrari. a great brand. it takes decades to build a brand of that strength. in an global automotive industry where roi is around 8%, this is a company that is returning mid-20, 25%. our analysts believe that can be pushed over 30% over the next five. one anecdote, there bring out a limited edition car soon. it may have already launched. there only 500 and the world. they're selling at around 200

million that -- -- $2 million each. that may sound obscene. but the global middle income group has been growing. here in asia, you'll have 1.3 billion more little income group consumers over the next 11 years according to pew research. a big percentage of those is going to be millionaires who can axley afford this kind of item. another developed -- developing world example would be something like credit corp., the biggest bank in peru. pierre-hugues has a publishing of 30 million people of which 15 million are formally employed. than 155,000 mortgages in the system. that is your father's banking penetration story. it is absolutely valid today as it was 50, 60, 100 years ago. moving on to other economy stories, look at south korea. samsung electronics. along with taiwan semiconductor

in taiwan. his are well-known companies. -- they are the world's highest quality producers of memory. every division that they are in is working very well. ,hatever way the trade war goes both sides are going to be buying from these guys. so i think that is a really interesting and still probably undervalued story. so, quickly, i wish i too could drive in a fright. we will have to get them to give us a drive sometime -- in a ferrari. for journalistic business purposes. >> research. technologynformation , who, what, where do you like? while i mentioned samsung electronics, tsmc, sk hynix is another in the right place.

particularly memory, this is the big word of the moment. coming,that with 5g that is the embodiment really of the final stage or latest stage of the industrial revolution. that is going to be a great enabler for more efficiencies to come. it is going to be an enabler also of artificial intelligence and these other great exciting develop meant coming down the line. need awe are going to lot more servers, lower memory chips. -- a lot moreably memory chips. those are probably the best examples. alibaba, note really technology but an online marketplace, those guys grow on the back of it. it is a bit like the american railroad. the people he made the most money when all those guys were making steel, it was the people who got their goods down the tracks and sold it across the country.

i can keep going? paul: let's talk about trade, perhaps. we do want to get to that topic. optimism.ittle bit of a meeting set for october. we have been your before though, haven't we? we are looking down the barrel of december when those tariffs on consumer electronics live. will that be averted? >> i do not think it will be averted. a quick resumption let's step back. before donald trump came president, tariffs in the world trade-weighted average around 1.5%. that does not sound like a lot but we are sitting in asia and in this part of the world you have much higher average tariffs. some more ground to be made in terms of reduction. today that world trade-weighted number has moved up to 2%. again, tubes not sound like a lot. but is a big jump from 1.6.

it comes down to whether we think this as let's further. i'm not a believer as i have said that we are going to get peace and a great deal today. i do however think that you have polarizing positions between the united states and china. in the united states as we know, it is one of the few very few, probably the only topic that crosses partisan positions. so the democrats and republicans appear to be equally concerned with china's growth. it ising from that somehow a big threat to the u.s.. the other side you have the chinese who, franca, have lost frankly lost any they may have had for the anglo saxon financial model. them to change. coming forward to today, we are in a position where both of these giants think that they can outlast the other one. in a trade war, nobody wins. i think everybody knows that.

everybody believes everybody get hers. yet -- gets hurt. it is a question of who gets hurt the least order can tough it out the longer. it looks like china's going to tough it out longer. from beijing they are looking at washington, d.c. in saying that guy has elections next year and that guy might not win. if he does not when we have some but he knew to talk to so why would we give anything up now? you maze will wait for then. on the others, if you're sitting in washington, d see your thinking elections are coming pretty quick. let me just do a limited deal. i will trumpet it like it is something bigger than it is and hopefully that will get me to the polls and i'll get reelected. then we can join the battle again in earnest. paul: what we are tied into this. one of the ideas you do not like is consumer staples. is that because of its exposure to the trade war and what my becoming echo? >> no, actually its not. are structural or almost

structural position include consumer staples has been underweight in the classical sense since 2010. in the aftermath of the global financial crisis these are the stocks that everybody backed up the truck and filled up with. what it meant was you had probably good companies that were actually hunting really high valuations. example,uld buy, for nestle india, which would probably grow your earnings over the next five years between a percent and 12% per year. but you're going to be asked to pay i do not know the latest valuation, 54 times for that. and that makes us get nosebleeds. where a scottish house, after all. what we like to do is try to find some equivalent that is maybe playing a similar theme but is significant leak cheaper in the indian context, that has been marie to suzuki for us. -- marie to suzuki. it is growing at 15% per year

and exactly the right part of the market. in that growing tomography. suzuki. paul: martin curry, head of investment strategy thank you for joining us. boris johnson is not giving up his break the plan despite the latest tory defection. why this week is crucial for the u.k. prime minister. this is bloomberg. ♪

the u.k. prime minister boris johnson is refusing to back down, despite in other defection from his cabinet. amber red quit -- secretary amber rudd quit. johnson is expected up to head for a general election next

month. what can we expect today from boris johnson and what are the ?ndications going to be ech by anyr was a tough week measure and as you mentioned on the heels of his own brother a keyng,, amber rudd, cabinet secretary left. betterot affected get for boris johnson certainly in the next day or so. there will be in other but in the house of commons that he could well lose. earlier on monday -- another vote in house of commons he could lose. to meet with his irish counterpart and has played down any excitations that there will be a breakthrough there. it looks like he is in for another tough week. he said he is not giving up his hard-line strategy. he wants to leave the e.u.. and he wants to do it by october 31 with or without a deal. so what appears to be

the prime minister's strategy, with quotations around it in doubling down on this hard-line brexit stance? that is a really good question. he is starting to go it alone that way. or pretty much alone. it seems at this point he feels like he has no choice. he said he would deliver brexit and that has been is makes it -- his message all along. bycontinues to say only really making clear that he will leave or he will try to get the u.k. to leave the e.u. on that deadline, will he have any kind of leverage with the e.u.. he has been criticized repeatedly for not trying to come up with a new plan, amber rudd said of the weekend he seemed to be spending 90% of his time talking about a note yield brexit rather than trying to get an agreement. but he has said this is the only way to have leverage with the e.u.. if you act is that you have to

go to them you lose your leverage or any hope you have of making a deal. so this continues to be his strategy although his increasingly going it alone. -- he is increasingly going it alone. paul: with all of the chaos with the prime minister and parliament, our they to getting a deal to leave the e.u.? years andbeen three they do not look like they are pared what we hear from the e.u.'s they do not have anything new on the table. they said they would consider it. they do not want to extend the deadline. increasingly everyone is looking like being worried about what a note yield brexit could be, in terms of economic harm and disruption. however at one interesting fact, a lot of the public is not leaving johnson or they are basically saying in terms of a poll taken thursday and friday, we will see if that changes. have not changed in

terms of the stance of people. else is that, but little at this point. paul: senior international editor jodi schneider. british airways canceled hundreds of flights ahead of the first pilot strike in decades. the weekend brought no progress in talks. the a's says it canceled most of its 850 daily flights on monday and tuesday. the disruption will mainly affect heathrow airport and gatwick airport london city airport will largely is gape as flights there operate abides affiliate. boeing is at work on the new 737 max 8. a cargo door moved outwards during an faa certification process. -- the 777 x.

already under global scrutiny for the grounded 737 max. 20 more to come on daybreak asia, this is bloomberg. ♪ we call it the mother standard of care.

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this is how we inspire hope. this is how we heal. cancer treatment centers of america. appointments available now. this is daybreak asia. i'm su keenan with first word headlines. boris johnson and says he still wants a brexit deal rather than a hard split. but e.u. officials are increasingly doubtful. negotiations have taken place twice a week since johnson first became prime minister, and while london says the talks are constructive, when you official called them farcical. another said they are useless. a third said they are only there to boost johnson's reelection prospects. more than 100 20 domestic flights have been canceled in hit inter typhoon fifi

the early morning hours. rail and bullet train services were disrupted as the cyclone passed through the region before heading out to the pacific ocean. almost a million homes lost power. marking the 15th of the season so far. -- faxai the u.s. moving ahead with plans to investigate a french digital tax. it may impose taxes on winds and other goods in response. this is a follow-on to last month g7 summit. concerns france is planning to tax digital giants such as amazon, facebook and google. president crone said at the g7 that he and president trump had reached a deal -- president macron part in theched eastern mediterranean and sold

its cargo. the foreign ministry made the announcement but offered no other details. the ship was thought to be carrying 2 million barrels of oil. the u.k. tankard seized in the gulf on july 20. global news 24 hours a day and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. keenan, this is bloomberg. much, let's very get a check on what is happening in the markets with selina in beijing. selina: where looking at a muted start to the trading week with an unexpected slump in china's imports, exports of the weekend, paring down any of that risk appetite absent any gains from the u.s. china trade talks. the kospi is leading gains, four straight days of gains. the i.t. sector is leading, pushing that exchange higher. we had the japan nikkei following. line, butgdp data in

weaker than expected capital expenditure data. we could see pressure on the nikkei with the typhoon landing near tokyo. these he x 50 is trading lower. and the -- the nzx is trading lower. see it as well, we can is weakening slightly but it is mostly been steady over the past few days as investors are waiting for the next trade headlines. switching boards, let's take a look at how japanese stocks are impacted by the typhoon sue mentioned. trainanceling flights and services are being just rafted typhoon disrupted as faxai makes length near tokyo. flights were canceled on sunday affecting 10,000 passengers. in canceled flights affecting

two thousand people. east japan way away had disruptions to its tokyo area train service this morning. you, moving on to hong kong, mark 14th weekend of protests. carrie lam's controversial extradition bill which are all failed to placate the protesters sophie kamaruddin is there. what is the move? here it is looking as business as usual monday morning. folks are going to work but up the road from here in the relatively wealthier districts we have human chains being formed by schoolchildren, by still to our chanting and handing out pamphlets saying big nor the voices. continue momentum we saw sunday we saw tens of thousands take to the streets, marching to the u.s. consulate which was the focal point as demonstrators are

attempting to get the u.s. congress to pass the hong kong human rights and democracy act when they return for the fall session this make. wengside the peaceful march also had pockets of a violent clashes between protesters and place throughout hong kong island, as well as on kowloon. in the wake of that, the hong kong government condemned in a statement the illegal behavior by these radical protesters. but they did not address that use of force by police to deploy teargas and beanbags. pulling up the board, the hong kong government expressed its regret over the reintroduction of the hong kong human rights and democracy act and reiterated that foreign legislatures should not interfere in any form in the internal affairs of the hong kong special administrative region. beijing'sws on continued warning against external morning on internal affairs. this is in the face of

increasing attention from global leaders including germany's angela merkel who want to china over the weekend for state visit. she raised the issue of hong kong. kamaruddin in hong kong. thanks raonic for that update. -- global affairs analyst michael mociurkiw . that therefore additional demand speed are they reasonable? >> good to be with you. i was among the protesters yesterday and spoke to many of them. there was no exception they all said we are going for all five demands and we are going to continue doing what we are doing for as long as it takes. as you mentioned, that proposition for universal suffrage, that will not happen. i cannot see beijing doing that.

it is the most difficult of their demand. the sense i got yesterday being among the protesters, and i was there when the violence occurred as well, is that they really want some action on what they call out of hand police brutality. not the commission that carrie lam set up but something with marti than it. and they're very, very worried about those who have been arrested rate over 1000 being labeled as writers. because of the end of the day, that can give each of them up to 10 years in prison. a lot at stake here. a way forwardsee through all of this? it is dragging on. we didn't have the withdrawal of the extradition bill. and universal suffrage aside, perhaps those other three demands are achievable? do you think it is time for it may be an expression of goodwill from the protesters, would that help with things forward? >> absolutely. there needs to be goodwill from both sides. from the protesters, the tens of thousands that were out there

the u.s. consulate were very peaceful. at the u.s. consulate. but then the radical element came out in the evening and cause a lot of damage. i think what beijing might have been hoping here is that with the granting of the withdrawal of the extradition bill, it might have divided the movement of it and the moderates would stay off the streets. but i think what needs to happen from the government side, reminding say the beijing side because at the end of the day i think carrie lam is forgive the expression a useful profit. from beijing. -- a useful profit. they need -- puppet. they need to start a dialogue with the protesters. the cost of living in hong kong is expensive. a lot of people cannot afford housing. you have the sense of hopelessness among the protesters. we have seen that, by the way, in the protest in ukraine, and cairo as well. these underlying deep-seated concerns that need to be addressed. kathleen: i'm so glad you

brought that up because last week i was speaking to a guest on bloomberg radio. this is one of the main points he made. that the oligarchs have plenty of money to buy up land, build housing that is affordable, put their money and their authority. the positions behind that. sounds good. is it anything that is likely to happen? know how deeply concerned they are about what is going on other than their bottom line. don't forget also that the hong kong government, the people that advise the chief executive carrie lam, a lot of them are either tycoons or connected to them. i think what carrie lam needs to do is to get rid of maybe even half of them. and up a new people who know how to deal dialogue, who have deep roots in the community. who are very consent to eight have. -- who are consultative.

right of the government is keeping itself in a cocoon. not consulting with the ordinary people. what is happening is the protesters see the place as the face of government, and that is why you see so much anger against them as well. kathleen: you read a piece for cnn recently and i think many people are conjecturing if this keeps going it does not end well. the beijing may be deciding they are getting to a point where they're just going to have to enforce this with military might. where it is something won't end well. they have reached the point of no return, et cetera. if you could get inside the heads of the officials in beijing who are pulling the strings if that's what we are saying, what is the calculus? do to endey need to this or what are they willing to put up with two ended? -- willing to put up with to end it. >> this is unusual considering

the control they have across the mainland. they are scrimmaging. that allowed carrie lam to withdraw that bill. they are showing restraint so far. they are experimenting. whether they will call in the paramilitary or pla forces we have yet to see that happen. if you watch the police in action, it does almost seem like a paramilitary force. the force they are using, and i would say often unprovoked. they do seem to want to handle this with the mighty hand. and keep the protest down. , morer i think concessions need to come. because likely said there is no end in sight. we probably have reached that point of no return. again, the sense i get from the young people here on the streets is that we are going to go for it. we have nothing to lose for many reasons. this is kind of our last chance to get some reform going. one more thing i must add is that if they do bring in pla forces here, china rolled the

dice once already in 1989 in tiananmen square. i was there as well. they are probably willing if need be to use that mighty force even though there would be a big, big decline in business here. loss of investment, that sort of thing. kathleen: it is not a pretty picture you paint, but it seems you have been following this for some time. thank you for joining us and sharing with us. level affairs analyst michael , mociurkiw . fitch ratings andrew fennell would be joining bloomberg market up in china later. now we want to look at oil futures rising after saudi arabia fired a long time energy minister and replaced him with one of king solomon's sons and royal family in charge of oil policy for the first time. toldae he energy minister bloomberg that it is unlikely to

mean a change in strategy. we are very happy for the prince well highness as these. and lucky to have someone with that knowledge of the industry. the prince probably has been in opec more than any of us. he has been and therefore every decision. and people may be does not know but many of those decisions, especially the cooperation agreement between opec and non-opec, the prince was working. he was working with us. and dan at night to conclude it. so i do not think we are getting someone who is not, who is not aware or who is going to be a shock. he is a man who often said he would do whatever it takes. you think of what you know of the role highness of the prince he is going to be more of the same? to do whatever it takes? are the saudi's going to push more of whatever takes? >> i think when it comes what we

decide, as ministers this comes from the leadership of the country. the support that we get from our leadership. so it is not just the minister decision. to do whatever it takes. it is the country decision. the country do leaders decision to do whatever it takes to balance the market. i do not think there will be changes. i'm not expecting to have changes. with ups and lt that i know of prince abdulaziz, is very decisive. strong personality when it comes to the market. and he understand the benefits. producers of that leadership for the role of saudi arabia that it took to balance the market. and i'm not expecting changes. i think it is going to be a continuation of the good work that has been done. >> today used the phrase

whatever is necessary to balance that market. what do you mean by that and are you lobbing for deeper cuts. -- lobbying for cuts. >> at the technical team comes and tells us we need to do more in terms of conformity's or term of cuts, and then we will decide, will challenge that, debates that. after that debate, we will rate their recommendation. that is how the mechanics, we will raise the recommendations to the ministerial. the ministerial, again this is a unanimous, if the ministerial sees that that recordation makes sense, they'll take it. it is their recommendation in place now that i'm aware of? no. minister energy al-mazrouei active tbet are in an function tv go where you can dive into any the securities we

talk about. you can also send us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv go this is bloomberg.

paul: this i am paul allen in is daybreak asia. i am paul allen in sydney. kathleen: i am kathleen hays in new york. the escalating trade war with the united states continues to fight. the pboc cut reserves by banks by half a percentage point on friday. joining us now is eva yi, senior economist china intl capital corp the export with number. what accounts when you look deeper into the report and data, what accounts for this on expected drop in expert check of

-- unexcited drop in exports. >> the export number publish yesterday was lower than expected because in august we sought pmi export orders pick up a bit. we are expecting some in terms of some frontloading before the september 1 tariff kicked in. that is what the consensus was expecting 2.5% year on year. it came in negative 1% year on year. if you look at byproduct and country analysis, we can see there is a slower export growth to the u.s.. external export growth to the u.s. dropped to -16% year on year. in august that is one of the larger negative country enters. in terms of products -- negative contributors. in the saw slowdown tariff affected sectors, apparel, light industrial items, electronic items. expect --what you what you expect to happen, they're a bunch of tariffs

already on and no one is talking about taking them off. and a threat of more terrorists. what does this -- a threat of more tariffs. can china take this and with this kind of hit to exports, does it get worse and, more damage on china? our expectation when we 2019-2020 outlook in june, was that what if you do see a blanket 25% tariff on china exports we expect growth to be 6% this year and 54% this year. now it looks like that was the bear -- and 5.4% next year. in the best case we are expecting 10%, three hunter billionaire less. in this case it looks like we are heading more toward the bear case scenario. the cut on growth would be -- the impact on growth we felt next year given the timetable of

the tariff hikes. can china take it? depending on how you are looking at this, last year for the government, both in the u.s. and china and global investors, this is more unexpected. it was harder to navigate. there was a lot of uncertainties around it. both for the government and the markets. this year, or and more people trade attention become a longer-term overhang rather than a short term. shock. in this sense i think the government is more at ease and policymaking in terms of navigating the situation. probability of more slowdown next year, given the timetable were the last tranche of products will be taxed in december. that should reflect in the trade number next year. to what degree has the depreciation of the yuan and helping to offset some of this,

and where do you see it heading from here? all, we have always held the view that given china forhe marginal price setter a lot of experts globally, especially for the last 300 billion left of chinese exports, given we are the biggest single supplier for a lot of these products, so yuan depreciation compared with other smaller open economies is not as effective in offsetting the impact. that said, depreciating more than 2% versus one dollar last month and 4% year on year does buffer the impact a little bit. more importantly, is big because a lot of the products when he go down the list, of tariff hikes, into the $300 billion list, a lot of the products are not easily replaceable. given where the supply chain has ended up in the past two decades.

that is why we have not seen as much of an impact is a lot of people expected. although there is slowdown. part of it is tariff. part of it is just global manufacturing cycle. going into recessionary mode. unsurprisingly the conversation has turned to stimulus. we have analyst talking about a cut to the ml left rate and then there's the lpr decision on september 20. iva chart here of various tools that the pboc has at its disposal. you expect to see more easing or similar coming echo >> from a forecast but if ui think there should and will be more easing, given -- forecast since maye rapidly when the small bank deleveraging oferts stepped up and some

the reglet tory fine tuning started to kick in on the credit market as well. cuts should be more rr before the end of the year in order to support or mitigate the downward pressure on the credit cycle. to your point on the lpr, , these in remote locations pboc including when they publish the reform rr last month, they have specified that taiwanese to guide the finding cost lower. those market as well as us expect the high probability of, left cuts which is the base rate for lpr before such, 20th. the timeline to actually pay attention to is mlf issuance today and next tuesday, as well as the fed rates decision temer 19th, and whether pboc will do something about interest rates in these time windows. economist andior

managing director. still more to come on daybreak asia. this is bloomberg.

paul: this is daybreak asia. i am paul allen in sydney. kathleen: i am kathleen hays in new york. let's get a preview of what to watch and markets later this morning. selina: if you take a look this

chart that shows market sentiment has been so bad in hong kong that everything is sold down, even stocks that do not have very much to do with hong kong and the protests. it begs the question is a time to buy? take a look at the yellow line showing the honks and has over performed the most since 2016. -- underperformed. since put 2006 in. , et ceterane is mtr would temporally shut down the prince edward station. that stock has come a nurse in if you pressure since the protest began. also taking look at tencent. on friday and announced to bought back shares for the eighth straight session. that stock up 10% after falling more than 20% last year. also look at saic motor with vehicle cells and august of formed 86,000 here, it all starts with a simple...

hello! -hi! how can i help? a data plan for everyone. everyone? everyone. let's send to everyone! [ camera clicking ] wifi up there? -ahhh. sure, why not? how'd he get out?! a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. tom: it is 9:00 a.m. in

shanghai, singapore and beijing. i'm tom mackenzie. yvonne: i'm yvonne man. we are counting down the opening to trade. david: grim trade figures underscored the pressure on china's stimulus plan. yvonne: violence returns to the streets of hong kong. protesters call on president trump to support their democracy drive. insists it isnson brexit or bust. eu officials a recent talks in brussels have been useless.

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