welcome to daybreak australia. kathleen: we are counting down to asia's major market open. paul: here are the top stories we are covering. the u.s. and china welcome their trade deal and say new tariffs are off the table. robert lighthizer warns important problems remain. the u.k. heads for brexit before christmas. boris johnson insists he will get the job done before -- next year.

rage on with record temperatures forecast this week. forleen: a positive week stocks, but what a volatile day on friday, as news coalesced that a phase one trade deal has been reached between the u.s. and china. but questions emerge about just how tough it will be. nevertheless you can see after an up-and-down day, the major market objects -- index eat out small gains -- eked out small gains. although it is nine out of 10 weeks the s&p 500 has been higher. the nasdaq getting .2%. 17.5 points. apple a big gainer on friday, 1.3 .16%. anestalling the tariffs, unequivocal plus for apple and the chipmakers who supply parts. the u.s. bond markets, what a volatile 48 hours it was. you look at the left-hand side

of your screen and you can see how bonds sold off on friday as news was coming out that yes, some kind of trade deal was in place. in fact, early friday 10 year treated as high as 1.9%. emerge, bondsns started rallying ending at 1.82%. this is a big question as to what asian bonds do next. paul: yes. let's take a look at what happens next, as the trading week gets underway here in asia. we are going to see it looks like a modest rise on the nikkei futures traded out of chicago. kospi futures a little weaker. risk on for the asx futures pointing higher by little more than .5%. new zealand currently flat. we are seeing movement on the bond markets, though. the aussie 10 year yields dropping eight basis points at the open. the three year yield also easing. seeing something similar for new

zealand's 10 year. an important day here in australia as well. we are going to have the midyear fiscal outlook from the government. we may see the size of the forecast budget surface edge down a little. revenues have been crimped. that is something to keep an eye on. we should have news on that in about a half-hour. but now let's get the first word news with su keenan. where start in hong kong, protesters clashed with police at a mall and a subway station, amid a day of small-scale demonstrations. standoffs continued into the night. protesters blocked roads and police fired tear gas to disperse crowds. the violence came as chief executive carrie lam visited beijing to give president xi jinping what she called a full account of what has happened in hong kong over the past year. meanwhile, the protests continue to hurt the hong kong economy.

fresh data shows that passenger traffic at the airport fell by about 5 million people, a decline of about 16% last month from a year ago. the total number of flights in and out of hong kong fell by more than 8%. meanwhile, cargo throughput fell more than 6% from november for 4.5 million tons. to australia, the choque-inducing smog blanketing sydney is being called a public health emergency by doctors and researchers. air pollution across the city and new south wales is as much as 11 times higher than the agreed threshold for hazardous levels. as of sunday morning there were 106 bushfires in the state, with 57 burning out of control. meanwhile a heat wave in western australia is expected to move eastward this week. finally, the english football club arsenal is facing a potential backlash from china. this, after one of its top

players alleged the treatment of legal muslims. the state run cctv holds arsenal's game on sunday despite the club's immediate attempt to distance itself from the star player's remarks. earlier this year the nba was slammed in china after an executive showed support for the democracy protests in hong kong. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. paul: thank you very much, su. let's get back to our top story. the u.s. and china have agreed to the first phase of a broader trade agreement that brings temporary calm to the task of letting between the world's two largest economies. tom mackenzie is in beijing, and ros krasny is with us in d.c. trade deals the

everyone was hoping for? ros: i think to a large extent it is. it is supposed to be a phase one trade deal and there could be a phase two behind it, for he could be one and done at this point. certainly this deal was a long time in the making, and it is quite complex. there are a lot of elements to it. the u.s. will reduce tariffs on a number of chinese goods and not go ahead with tariffs that were planned for this month. they would have gone ahead today had they been done. because is quite key, these are the grinch that stole christmas tariffs. they were tariffs on iphones and toys and other consumer goods, things that would hit the heart of the u.s. economy. so those are off the table for now. china has agreed to buy a significant amount of agriculture goods from the u.s., above the pre-trade war level. that is a big win for farmers. they are also going to buy more energy and manufactured goods from the u.s. the deal is very complex.

it is expected to be signed in january. there are nine chapters on ip, currency manipulation and other elements. at this point we think everything is set according to the u.s. trade representative, ubles to bether ba done, although you never really know. but this is the deal people expected in the first round. kathleen: president trump said last week phase two starts immediately. today robert lighthizer on cbs saying, yes, this will probably take more time. but is there even a set timeline for the phase two talks? ros: there really is not. i think what we are seeing now is going into a trust and verify stage. given that china has made very specific commitments on agricultural goods and certain other purchases, the u.s., led by lighthizer, really wants to see those purchases made. and he said today, lighthizer said on cbs, we are going to

check down on every detail and make sure that china is upholding its commitment. and i think that is why president trump and his team kept 25% tariffs on quite a lot of chinese goods, just to make sure that they do not renege on their response ability. kathleen: tom, what does this deal mean for china, given its domestic challenges, which the trade war has been making more difficult in some cases? tom: it absolutely has. bloomberg economics has been crunching the data and they say there will be an immediate boost to china's growth. it is small and modest as a result of the reduction of these tariffs as ros was saying down to 7.5% on about $107 billion with of chinese goods. of course there were additional tariffs which some feared would kick into place over the weekend, which have not happened. but you may be looking at about 0.1% of 2018 gdp.

very modest but it is a boost to sentiment as well which is most important, in terms of removing some of these uncertainties. of course there is now a reduced expectation that things will, in terms of retaliation, increase on both sides. if that improves sentiment and mood, which means chinese policymakers will take that welcome window to look at some of the key domestic challenges, and of course these range from the diverging inflation pictures, to pressure from the banking sector. specifically the structural challenges around policy transmission and the business environment here domestically as well. that means they can focus on some of those issues. bloomberg economics things in terms of the easing from the pboc, the chance of aggressive easing has reduced on the back of this trade one, phase one deal. but we are going to get more november activity data out around 10:00 local time today here in china, which will thin out the picture in terms of how

much pressure the economy is under. that will also give us a guide as we look at 2020. the priority for china's policymakers in 2020 is making sure they pick this target of double gdp growth from 2010 levels. they need to hit about 5.9% to get that. the data today will give us an idea of how close they are to getting that. paul: tom, huawei back in the news today. china is threatening some retaliation on germany for its reluctance to comes to huawei technology. tom: yeah, absolutely. this is a reminder that even if the trade and tariffs on those issues, you have some kind of convergence, or at least a reduced attention level between the u.s. and china. the issues around technology remain, and it is not just between the u.s. and china. also between china and some of its major trade partners, including germany. you have a piece of legislation that is working its way through the legislature there in berlin.

and the chinese ambassador pushing back against this, saying if this legislation, which would effectively freeze out huawei's equipment, 5g from networks in germany, if that goes into place and becomes law, then china will be forced to retaliate. the chinese ambassador name dropping the auto sector of course. china is the largest market for german automakers. suggesting maybe there would be significant consequences if this piece of legislation goes into law. again, the legislation does not name huawei, but it is effectively tailored around huawei. lawmakers infrom kel, whoagainst mer tried to take a quote unquote more balanced view in terms of the controversy around huawei. but if this legislation goes into place, china says it will be forced to retaliate. kathleen: a very touchy issue. tom mackenzie and ros krasny, thank you very much. let's move on.

find out how much the trade deal is going to reduce uncertainty for investors. a lot of people are betting that it will. that remains to be seen. joining us now is managing partner at concorde financial group. thank you for coming into our studio today with us. so what do you think? we know what we know? there is more to do? what does it mean? guest: i think overall it is positive for the investor. it takes some of the uncertainty. we have always been anxious about the trade war. so that is certainly very helpful. seen ine is a lot to be the weeks and months ahead whether we are going to be able to actually deliver on the phase i deal that we just went through. we do not know all of the specifics. we know broadly speaking that there will be additional purchases. but we do not know how we will be able to scale to those numbers. it seems that compared to what we are doing right now as far as

exports from china and in relation to 2015 or 2017, we are sitting at about 24 billion agricultural products and all of a sudden we are going to get the 40 billion, 50 billion. it is a very large number. we do not know a lot of the detail but certainly we know that we do not have additional tariffs coming on board, which will be very helpful. and some people perhaps sitting on the sideline want to take a little more risk. as i said, i think the execution risk is something we worry about. kathleen: does that mean this is more -- taking away the negative, we are going to be hit by the trade war fell apart again, as opposed to something that opens the door to a big rally. businesses investing again, global economy picking up again, which i know is another one of your concerns. think absolutely, but i business also wants to have more concrete evidence that this is going to stick.

so, there's nothing that prevents us from, two months from now, they are not fulfilling our obligations so we are back to raising tariffs. so, i think that is a real fear. and we have seen that before where we had almost an agreement, then it fell apart at the last minute. we have gone a lot farther this time for sure, but i believe that compliance on both sides is going to be important. already there is a system in place to address issues of noncompliance. alwaysertheless, there's the threat that we are going to back to raising tariffs. that will perhaps hold some corporate for making the investments that they have been holding off from making. without a doubt we are in a far better place today than we were mid-last week, no doubt. we will take the good news. but we are also a little bit careful with our excitement. paul: yeah, so, with that in

mind, do you expect to see some ongoing strength in u.s. equities? is there still some room to run, and if so, where? been thedo, but it has whole premise of this year. you need to have free cash flow. so, you know, anything that helps the bottom line, the earnings, is going to make the case for growth and continue to stay in the u.s. for stockpicking. and i think that is certainly our conviction. but at the same time, the trade war has taken off on some of the bottom line potential. so we are hoping that that is going to come back into the picture. as far as sectors go, i would say our focus has been and will continue to be health care financials, technology, we have gotten into energy. , will continue

to be our main focus for the balance of this year and certainly next year. that you dorstand see ongoing slow growth. do you think there is a scenario in which that might force the fed and other central banks back to the easing table in 2020? ephie: think it will have to be something very dramatic for inflation to become an issue. i do not think that is going to provide any further support. i do not think we need it, actually. and it is best that they hold off. so, i do not expect them to jump in. and if they did jump in it would be because of something further catastrophic and it would be in a big way. so, i do not expect anything particularly020, if the trade agreement holds and you move to phase two, in addition to executing phase one. kathleen: do you think the consumer is going to hold up? because that is what the fed says every time.

business investment has been very weak. --hich has decelerated consumer, which has decelerated lightly -- do you agree with the fed that this is a strong and healthy consumer? ephie: i see the consumer is very euphoric. people have jobs, they have stability in their lives and they are spending. you saw that with the unemployment numbers, you are starting to see some wage pressures. 3.1% i think was november. unemployment is at a 50 year low. stillthink the consumer remains the driving force for the u.s., and that will continue to be the case. but if the manufacturing decline, or slow down were to move over and affect people's jobs, then obviously you have an issue. kathleen: i have to ask you about something you said. you are fairly u.s.-focused until the dollar turns, then you

want to leverage opportunities in emerging markets. so, what is going to turn the dollar and where are you going to go in emerging markets? ephie: i think the news that we are getting out of europe could potential he had -- potentially have an effect on the dollar as well. i think we have a positive outcome with the election in the u.k., and i feel christine lagarde as well is coming in is a breath of fresh air with her own style, pretty much staying the course but also inquiring about all the possibilities through this strategy review which is about to start in january. so, anything that would strengthen the euro of course will be in relation to the dollar, so that is a possibility. i do not see emerging markets really having a productive chance, unless the dollar weakens. so, we hope to see that. but europe certainly i think is more promising now than before,

as long as we focus on quality. paul: all right. ephie coumanakos, managing partner at concorde financial group, thank you so much for joining us. do not miss our interview with the australian finance minister later on daybreak asia to discuss australia's midyear budget and outlook. kathleen: up next, getting brexit done. the challenges ahead now for boris johnson. this is bloomberg. ♪ this is bloomberg. ♪

kathleen: having won the u.k. election, boris johnson is moving quickly. one of the most highlighted tensions. governmenttional editor is joining us now from london. let's start with the irish backstop question. will that just get bulldozed over by boris johnson in something that gets pushed through congress? what do you see in that initial

circle before we even get to the eu? guest: certainly he now has the mandate to get brexit done. he has enough seats in parliament to put that bill before parliament -- before christmas, andre get that passed pretty quickly. and then brexit will officially happen at the end of january. of course the word from that just beginning -- work from that is just beginning. just because brexit is done doesn't mean britain is out of the eu. so there could be pretty painful relations between britain and the eu. now arrangements would be in place and that would continue as usual but at the end of 2020 there needs to be a proper trade deal in place. that is where things could get tricky for boris johnson. he will probably get his brexit deal through but parliament has to sign off on any future deals

any concessions he makes could be objected to by some of the hard right-wing elements of his own party. boris johnson has vowed not to extend the 11 month transition period, but realistically does he have any option? considering he is firmly in number 10 for five years, is it a big deal to extend it? rosalind: that is right. he has said he does not intend to extend that arrangement. but the alternative is a no deal brexit, which again, is what everyone had been fearing all along. the europeans are saying it is not that long a time to negotiate. they need to get moving pretty quickly on that. if borisards -- johnson went back to europe and said we probably need to extend, brussels would be willing to do that. so, we probably need to see how things are in the second half of 2020. but even as boris johnson says that he will not extend, the

possibility that it could end up happening the matter what, because again, people do not want a no deal brexit. paul: thank you so much for joining us. you can get a roundup of the stories that you need to note to get your day going today's addition of daybreak. bloomberg's discovers can go to your terminals. it is also available on mobile on the bloomberg anywhere app. you can customize your settings so you only get the news that you care about. this is bloomberg. ♪ this is bloomberg. ♪

now for a quick check of the latest business flash headlines. deutsche bank may/bonuses this slash bonuses this year. compensation may come down by as much as 20%, although a final decision will not be made until the end of the quarter. they need to retain top talent

with his pledge to deliver $50 billion of cuts overcoming years. paul: reports from china say leading automaker baic plans to double its stake in daimler. the move would double its holding to 10% and a seat on the board. dimer anddy own 5% of the move could make it the biggest shareholder. kathleen: the fallout from the grounding of the 737 max is widening. flying the plane could earn at least $300,000 a year in china's booming aviation market. the carriers have largely stopped hiring from abroad while it remains out of service. chinese airliners account for 20% of the global 737 max fleet. plenty more to come on daybreak australia. speaking of australia, we are going to be waiting for the aussie treasurer to deliver his

annual remarks on the financial -- finance of the us trillion economy, and he will maybe tell us they are still pushing for a surplus. keep it here. this is bloomberg. ♪ s bloomberg. ♪

paul: 9:30 in sydney. we harbor relatively smoke-free thanks to -- the harvard thanks to smoke-free -- the market open 30 minutes away and futures pointing higher by a little more than half of 1%. the aussie dollar is stable as we await comments from the treasurer. economic midyear outlook. we will have all of the news from the treasurer as a break should be just a few minutes away. 5:30 in new is york. you are watching daybreak

australia. let's get to first word news. on we start with the latest an interim trade deal. china welcomed the signing of phase one of the trade deal with the u.s. by pledging to suspend additional tariffs on certain imports from america. the ministry of finance will refrain from imposing deed -- duties run on imports from the u.s. there will be a suspension of terrorists on a combined $126 billion -- we have to get the final cut translations worked out, the formalities. but the second phase was going to be implemented by how we implemented phase one. it will be right down to every detail. it is remarkable agreement but it is not going to solve all of the problems. newdays after a landmark north american trade deal was hammered out, mexico is raising

objections to u.s. legislation surrounding the ratification. the deputy foreign minister said the bill includes a provision for u.s. officials to monitor labor reform in mexico which he says was not part of the deal signed last week. it wasexico's position not consulted and is therefore rejecting the proposal. popularly cash property speculators in china are being warned to think carefully as they try to control the real estate market. the pboc says homes are for living in. it is a warning against buyers attempting to inflate prices. the bank will be flexible on monetary policy and boost financial support from manufacturers and lower financing costs with the private sector. protests against india's new citizenship law directed in new delhi with buses set on fire and parts of the subway system

shutdown. demonstrations spread from the eastern state. they also oppose a visit by shinzo abe. protesters oppose the new law which grants citizenship to undocumented migrants based on religion and bars muslims from applying. the international effort to rein --fossil fuel pollution and have stumbled after talks were wandered down. -- water down. there were two weeks of discussions, only agree on the urgent need for deeper cuts to greenhouse gases. they will work on market mechanisms, and they failed to agree on necessary financing. global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am su keenan. this is bloomberg.

kathleen: dow jones within from -- interesting news. halting oronsidering further cutting production of the 737 max against a backdrop of growing uncertainty over the troubled airplanes' return to service. so many questions about what happened and what needs to be done. they may disclose the decision monday. this is what dow jones is reporting. we will keep you on this story as it progresses. getting news from camera come -- canberra. the budget being updated. surplus has been trimmed from in april, $5 saw billion expected down from $7.1 billion that had been forecast. the following year, also revised

downward to $6.1 billion down from $11 billion. the government also cutting half a percentage point off of its growth forecast. to quarter percent, now the oneth forecast down to quarter percent. with moretyre is here on the outlook. so what is it going to mean for the government, the surplus getting narrower, credit forecast that as well, what now? >> it seems the government is on track to getting to a surplus. the numbers indicate there is a lower expectation of wages. that makes sense given the data. they have adjusted almost down to where the reserve bank forecast was that we were seeing last week or the week before when they released their statement on monetary policy.

we have yet to see the finer points about iron ore. iron ore has been relatively high. an assumption of $55 a ton. this is $95 we have been seeing more recently. there might be capacity for surpluses to remain. we have not seen any stimulus other countries have had. that is something missing in australia. on.leen: that is a source -- a source story. he stuck to the story. we are going to go to surplus, it is what we promise to the voters. sign -- theny government is changing his forecast. any chance we will at least hear them easing up on the size of the surplus they need? >> probably not. ore is why iron

important. several things that were announced that were small measures. there was accelerated infrastructure spending, $4 billion australian. there is additional health care funding and assistance. theyovernment is saying don't want to panic and they are firm about keeping the surplus target. we might see investment. the stimulus towards business investment coming through. but it remains to be seen what state the economy is in by then. to give you an example from last week was new zealand, $300 billion new zealand, very small compared to australia and globally. billion announced a $12 infrastructure package. if you were to translate what it looks like, it was 4% of gdp. if australia was a posted -- going to do something similar you would see an $80 billion infrastructure package. the australian government is not on the same page like we have seen from new zealand are in

japan where fiscal authorities are doing what the imf has been suggesting and providing relief to monetary counterparts. paul: the australian government welded itself to getting back in black and have been hammering the opposition for years on deficit disasters. couldn't they at least bring forward some of the infrastructure spending? >> they announced a small drag forward. there is some scope to announce additional spending perhaps outside sydney and melbourne where there is large infrastructure programs and concerns about them crowding out and capacity constraints. you are right. we have had a political amendment towards what is it an important economic policy lever. we will be continuing to carry through this type of budget policy even though it is probably not right for the economy. you: james mcintyre, thank

for joining us. you can see the treasurer josh freudenberg making remarks in canberra regarding the economic outlook. we are waiting on some word as james mentioned on what the iron ore price forecast is and the impact on revenues. we will bring you that as we get it. you can watch josh freudenberg speaking on your bloomberg terminal if you go to live go. let's look at asia-pacific markets. nikkei futures trading out of chicago looking positive, up .8%. we saw a flash finish on u.s. equities at the end of the week. saul futures are down. -- seoul, korea futures are down. flat after is pretty an hour and a half. let's get to more on what we should be watching with trading

in asia. we have got the markets editor andrea with us. u.s. and china feeling the detail -- the deal but where are the details? >> highly anticipated and probably priced into the markets. there was a bit of disappointment. it was not as much as investors had anticipated which is why you saw the lackluster performance in the u.s. on friday. on the positive side you have the offshore yuan supported by the delay in tariffs which we had expected sunday. there is caution. we have got a chart that shows implied volatility for the offshore yuan which is a measure of how people are about the chinese currency remains elevated above levels in april in july when the trade tensions were higher. this tells you just buy the deal, the market was waiting for more details. there was a lot of skepticism

going into next year about where the focus is going to shift. and another sign of the skepticism is what happened with u.s. treasuries friday when you saw selling off on the deal and then they came back. positive wraps going into the end of the year but still a lot out there for investors to think about. on this trade tensions between the u.s. and china. there will be a future for markets going into 2020. kathleen: moving on to hong kong stocks, analysts are cooling off for 2020. what are the reasons? >> that is right. they are a lackluster performance. perhaps not surprising given the trade situation this year and the in the last six months

tensions we have seen in the city. to give you an example what strategists are saying, morgan stanley remains underweight. singapore banks instead of hong kong banks because of domestic factors. we have a chart that shows hong kong stocks have been trailing chinese stocks, measured by shanghai composite. ubs has hong kong among the least favored asia-pacific markets next year. it is overweight china at the same time. valuation in hong kong has come down. this year they are not attractive enough given all of the uncertainties. thank you -- paul: thank you for joining us. let's check in on the treasurer, josh freudenberg, speaking to press.

we have seen the forecast trimmed a little, $5 billion instead of 7.1 billion dollars and the final year that followed one gear down from $11 billion. trade has weighed on sentiment and he is also saying the government is restoring the nation's finances to pay it down . don't miss our interview coming up with the australian finance minister matias common. we will discuss more content of that budget and outlook. this is bloomberg. ♪

i am kathleen hays in new york. .aul: i am paul allen you are watching daybreak australia. the back to the trade story. china and the u.s. agreed on a phase one deal to include the removal of tariffs on chinese

goods. our next guest advice to the state and defense departments as a former deputy assistant trade representative. joining us is an adjective as are of law. -- adjunct professor of law. i am is hesitate for your opinion, the details of which are not yet public. are you reserving judgment here? >> you have to reserve judgment. there is a lot of detail we don't know but there are some things we can figure out at this point. you figureat can out? we have china considering -- china agreeing to buy more but how much more? >> it is not a confession at all. it is hardly even a deal at all. it is more covert for president trump to not increase retaliatory tariffs as he was planning to do and to step back

the smallest bit on pre-existing tariffs. china is agreeing to buy pork and soybeans. that is not a concession. there is some talk about china buying from corn, rice and wheat but they said it will lead to a limited degree. there is discussion about the agreement having dispute resolution. but it is only a series of meetings to talk about why china is violating the agreement if .hey do rather than enforcement there is discussion in the agreement about new chinese rules for financial services and foreign investment in china but those are all things we can tell that were in the works previously and are being repackaged. we don't see a lot new in the deal and that is why wall street was lackluster. when the deal was announced it became clear there is not much there. kathleen: i would like to ask

you about a couple of things. robert lighthizer seemed optimistic they would move ahead. he said it depends on whether or not the hardliners are in control in china. purchases, tariffs are still in place. be usedl says they will as an enforcement mechanism and it lays out how that will happen . according to our reporting the deal would center around what a senior administration official called state-of-the-art ip commitments and a breakthrough on forced technology transfers. are we waiting to hear what that is? >> i don't have news it is not happening but we don't have details. most of what we are seeing the chinese previously announced that have been in the works for some time. a lot of them are things china was moving in the direction towards before trump became president. and then they slowed down when he became confrontational. now things are moving forward

again. we have not seen anything specific that is a breakthrough. is it possible there is some breakthrough on something here like forced china -- technology transfer? this isssible but lighthizer's objective to sell this, as if it is a win or a success by president trump when it is really classic trump theater of success. what if there is a phase two? what if there is a phase two trade deal and the problem with all the past deals, bilateral deals, there was no enforcement mechanism. is that not some kind of accomplishment? >> i don't think it is going to happen. the enforcement mechanisms of the wto have problems and the united states should be involved in reforming them rather than making them worse.

this doesn't seem like it will have additional enforcement mechanisms between the u.s. and china. i don't see it as a breakthrough. see what is really happening besides president trump gaining cover for not further escalating tariffs which would hurt the u.s. more than china. two, i am sure there will not be one. there is a lot that goes into that analysis. the bottom line is i don't see any conditions for china making the compromises necessary for phase two. i see the labeling of this negotiation as phase one and this deal as a way of implying there would be phase two when there was no substance to believe we would get to anything. a quick follow-up. and the this trade war

imposition of tariffs would hurt the u.s. more than china. china's economy is slowing down and is expected to fall below 6%. china's exports in the latest months were down 23%. apple phones might get hit but do you really mean broadly speaking this has hurt the u.s. more than china and it will? >> thank you for catching that. i didn't mean to say the u.s. economy was getting hurt more than the chinese economy. u.s. economy is getting hurt. the overall political impact of the injury on president trump is applying more pressure to trump than the overall impact of the chinese economy is applying to president xi. those negative consequences are more of a problem for president trump than for president xi.

another big risk event, the u.k. election. looks like a no deal brexit off of the table. boris johnson is giving himself 11 months to get a free trade agreement. is that realistic or will he have to push out that transition? >> it is possible. there is no guarantee. thebigger problem is that u.k. might not get out of the free trade agreement what they had hoped to get. the people really hoped they would get most of the benefits of e.u. membership without having open borders, the free movement of e.u. people to live and work with the free trade agreement. you can't have your cake and eat it it. british people getting used to the compromises of what is involved in the free trade agreement as compared to being a part of a customs and political union.

thank you for shedding light on these issues. a lot of them's cap -- share your skepticism on the phase one trade deal. u.s. trade representative. a lot more coming up on daybreak australia. this is bloomberg. ♪ australia. this is bloomberg. ♪

smog that hasing been blanketing sydney has been called a public health emergency by a group of doctors and researchers. the air pollution across the city and eastern new south wales is 11 times higher than the agreed threshold for hazardous levels. jason gale has been tracking area ofm the clear melbourne. you don't have to breathe this. ? at is the latest we have a declaration of public health emergency. groups, theical

doctors and their various hotties have declared this a public health emergency and really warning greater action on climate change which they believe is one of the main drivers of the drought and consequent bushfires we are seeing. we have got more than 100 grass fires across new south wales area more than half of which are yet to be controlled. we are going to have more

fascinating. choking haze is turning sydney into the world's laboratory. we have been watching the california and alaska wildfires. how much is the world going to learn from all of this? >> much of the evidence about the toxic effects of air pollution comes from studies of the burning of fossil fuel's like coal -- fossil fuels like coal and gasoline. sydney provides a unique opportunity to look at what happens when it is woodsmoke that is blanketing the city and for a prolonged time. what is happening in sydney is quite unprecedented. scientists are hoping to be able the health impacts on the short and medium-term. we have already seen hospital admissions, ambulance callouts and emergency room presentations increase something like 40% the past week or so. where we are interested in what is happening in the longer term as well. paul: thank you for joining us.

to get you back to canberra briefly where the treasurer is still speaking about the midyear outlook. the budget surplus trimmed a little, down to $5 billion. the treasurer saying the trade has weighed heavily on the sentiment. we will have the finance minister a little later. this is bloomberg. ♪ nister a little later. this is bloomberg. ♪

paul: good morning, i am paul allen in sydney. we are an hour from the market open in japan and south korea. kathleen: i am kathleen hays. welcome to daybreak asia. ♪ kathleen: let's take a look at our top stories, the u.s. and china welcome the trade deal and take new tariffs off the table but robert lighthizer warns important issues remain. th