♪ >> from bloomberg world headquarters, we are talking -- we are counting down to asia's market open. haidi: welcome to daybreak australia. here are your top stories this hour. here are your top u.s. stocks look set to boost asia among rising optimism the

coronavirus fallout has peaked. while ways relations with the --. sour again as the cff freedom ino gain her vancouver. >> we are seeing u.s. futures flat at the open. -- we haveinvestors the s&p 500 in the regular session gaining for a third consecutive day, 11-week high. holding at that 3000 point level. stocks was punished by the pandemic now rewarded. we have the nasdaq composite gaining a tense of 1% after micro technologies forecast earnings that beat estimates lifting the chipmaker. small-cap led the games. u.s. futures -- small-cap led

the games. -- let the gains. the u.s. house legislation on sanctioning chinese officials. we really have a havetion where investors to choose whether they think geopolitical matters matter -- to the direction of the market. a mixed picture when it comes to japan. japanese futures pointed a bit higher, looking to extend robust gains in yesterday's session. zealand, we are seeing another day of gains, half a percent higher. kong's future as an independent trading leader in asia after washington said it

can no longer certify working distance from china. the trump administration's decision could trigger sanctions that have far-reaching consequences on hong kong special trading status. tom mackenzie is watching all of this. it is a momentous decision that has already seen widespread reaction. tom: that is right. the secretary of state, mike pompeo, was compelled to review hong kong status under this hong kong human rights bill was passed by the congress last year and signed off by president trump. the conclusion is that no reasonable person, as he says, can content that hong kong enjoys autonomy from china. he says hong kong does not warrant treatment under u.s. laws in the same manner as before 1997, one hong kong was

handed back to mainland china from the united kingdom. it now turns to what actions the u.s. may take to enforce this decision. some actions being weighed out include things like sanctions on chinese officials, particularly visa restrictions as well. other options include potential tariffs, maybe investment restrictions. those seem less likely because the balancing act for u.s. officials is trying to punish china rather than the people of hong kong. they could, of course, revoke the special trading status that hong kong currently enjoys. that is seen as less likely at this stage. we are potentially looking at things like sanctions on certain chinese officials and may be visa restrictions. china says it would respond with appropriate countermeasures to any actions from the u.s.

we are waiting to see if they say anything else about this measure by mike pompeo to effectively decide that hong kong does not enjoy autonomy from china. in terms of what else is happening on this front, and terms of the geopolitical tensions between beijing and washington, we did have this case of the cfo of huawei who failed to persuade the judge in vancouver to and does at tradition -- to end those extradition proceedings. the two sides are in spat over a number of issues. huawei and its decision on autonomy for hong kong. >> it seems the ball is in president trump's court. whether it is on this revoking of the special trading status for hong kong and also this legislation that has not only passed the senate but now the house on sanctioning chinese officials over human rights.

what do we know? tom: this bill was passed unanimously in the senate and is being passed in the house, lend up on president trump's desk. he has not said whether he will sign this bill but it is aimed at punishing chinese officials involved in what the u.s. says is the internment of more than a million muslims in china. it is not just u.s., it is human rights groups and the 90 nations as well. -- and the united nations as well. it is taking aim at those camps where muslims have been held. president trump has not yet decided, he said, whether he will sign off on it but it is another area of significant tension. >> expected to pass that

security bill at the embassy. tom: the delegates will be gathering in beijing around 9:00 local time to go over a number of proposals. at 3:00 p.m. local time, we are expecting them to look at this bill, to pass this bill establishing an enforcement mechanism for ensuring national security in hong kong. it does not enshrined in law at this stage but it is a crucial step and is expected to be signed into law in months time. that is what we are looking at around 3:00 local time. the premier will give a briefing at around 4:00. anything he says about these tensions with the u.s. or hong kong or this human rights bill will be focused as well. that is what we are looking at today. >> tom mackenzie with the latest from china.

more on the outlook for hong kong and beijing's relations with washington. greg allen joined at the bottom of the hour. founder- next digital and the hang seng industries ceo. we ask jay mcdonald. this is bloomberg. ♪

>> you are watching daybreak australia. i am karina mitchell. the european central bank says the single market is deteriorating and heading for a recession as bad as it most pessimistic forecast hurt christine lagarde -- forecast. christine lagarde says it will shrink by 12%.

the eu is proposing a new stimulus package worth more than 800 billion u.s. dollars. japan is doubling its stimulus measures that want to keep the economy alive with the world's biggest virus similar package. he is proposing a plan worth more than a trillion dollars to help companies, housing, health care, and regional economies. it will be funded by an additional budget that breaks record for government spending. reports from washington say the trump administration is to end waivers on doing business with iran over nuclear operations. the decision would apply to the islamic republic heavy water reactor and the transfer of fuels. anhington may extend waivers agreement that proceeds the 2015 deal with major powers. america's historic return to manned spaceflight has stumbled with bad weather halting the

spacex launched from cape canaveral. he would've been the first launch from u.s. soil since the shuttle was retired a decade ago. spacex will try again on saturday in the hopes of ending nasa's reliance on russia to send cruise to the international space station. 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 am karina mitchell. markets are taking the u.s. threat to revoke hong kong special trading status in stride. global markets have shrugged off rising tensions between the u.s. and china that don't involve tariffs. are investors being to an complacent -- too complacent? jay mcdonald joins us from -- jim mcdonald joins us from chicago. after hours, we also saw the u.s. pass legislation that could put sanctions on chinese

officials over human rights. u.s. futures not reacting. has most of the tensions between the u.s. and china already been priced in? this is been going on for years now. jim: we do have a long-term theme called irreconcilable differences which captures our view that the u.s. and china are not going to reach agreements on the significant differences between the two countries. we will continue to see tensions build and maintain. these are tensions -- china has issues going on with canada and with australia. the regional aspect of what is going on with hong kong is being priced properly by the market. the u.s. has a risk of overreacting and pushing hong kong even further under china's direct weighing. the market will want to see how that transpires. you cannot say this is a big

surprise. they have been incrementally exerting influence over hong kong. to thee are not reacting u.s.-china tensions as of yet, what our markets reacting to? it seems like all it is doing is following the latest pandemic headline. : this market is a little bit on autopilot with respect to continuing to price and the benefit of all of the policy stimulus that has been put into place. there seems to be a positive knee-jerk reaction to any news on the vaccine front, even if it is incredibly early. we are still in mode where good news is good news and what will matter over the next 6-12 months is the development on the coronavirus case front. cases,ee a jump in new as economies reopen or we see a second wave, the fall, that will

be a risk to the markets. if we get some big advanced on the treatment front, that will be a big help. we seem to be on autopilot with a significant amount of policy support that has been given to the global economy and financial market so far. whether we get our second wave and whether we see a continued recovery will drive the direction of this next bloomberg terminal chart. looking at the beginning of a cyclical rotation when it comes to u.s. stocks. tech is still in league of its own, as you can see in this chart. we are starting to see some of the other actors, the real estate or financials start to take up. -- take up. -- tick up. jim: it is a constructive development that the more

cyclically rated stocks are performing better. it would be very uncomfortable to have the rally continue to be led by more independent or virus immune stocks, if you will. you do want to see some evidence that the economically sensitive stocks are benefiting and that is an early hopeful sign that the economy is going to start to show some momentum. >> we are starting to see rotation away from mega cuts to small-cap stocks. do you think it is a matter of time and when we finally -- will be finally see that rotation from growth to value? >> i think it will be dependent on what happens with economic growth. if we get the sustainable upturn, some of the value names that have underperformed, whether it is in financials or energy or industrials will definitely get a bid behind

them. that would be a scenario that will come to pass if the coronavirus is under control. the huge amount of stimulus that has been put in by the monetary authorities and the fiscal authorities will have a chance to take hold. >> jim mcdonald, thank you very much for your time. the markets watching thursday's jobless claims. we have seen 40 million americans lose their jobs since the onset of the pandemic. this has been a global loss. this leading to a potential lockdown generation, according to a new report from the international labor argan's asian. -- organization. one in six youths have stopped working as a result of the shutdown. hitting things are young people in the context of this pandemic. first, you have just given the

numbers. those working at the beginning of the pandemic are suffering a high rate of ejection from the labor market. that is over one in six. even though staying in work are having -- even those staying in work are having a severe reduction in hours. we have seen a dramatic disruption interruption of education and training around the world. this means that 50% of young people tell us that they fear their qualifications will be delayed for a long time. 10% think they will not be able to complete their education. access to skills, acquisition of skills is falling off. thirdly, in this lockdown economy from which we are suffering, those people who should be entering the labor market more or less right now, they have nowhere to go. they really have nowhere to go.

we have this accumulation of young people who risk becoming this lockdown generation because we know from all of the evidence and past experience that young people who are out of the labor market for a significant period, a year or so, at the beginning of their careers, they bear the scars throughout their working lives. wereve young people who thrown out of the labor market in 2008 and they are still not back and have not recovered from the disadvantage. >> we are seeing economy start to reopen. how important will testing and tracing be for the job market? at theave had a look relationship between testing and tracing and from a health perspective, we know testing and tracing is a good idea. what we see is there is a strong association between high levels of testing and tracing and more

benign labor market outcomes. where testing and tracing has been intense, job losses have been less. that is because if you are testing and tracing, you don't have to rely on closures to such an extent. testing and tracing gives confidence to consumers, investors, employers. when you do start to open up your enterprise, your workplace, being able to rely on the evidence really makes the job easier and quicker. this are many good reasons is a good idea. it is money well spent. the benefits from the investment look like a good return to us. >> if we are talking about the covid-19 pandemic affecting specific sectors of the job market, do you envision other sectors that could be more badly affected given the rising tensions of trade protectionism?

the tensions do not help we want to construct an international common purpose response. questions, specific we are hearing a lot about the new normal in the global economy, deglobalization, restructuring in the light of the pandemic. it is very difficult to know what that will work out to mean. look at global supply chains. are we going to see a radical simplification, resilience building in global supply chains? it seems like a possible policy option. that will have further secondary effects which could complicate the story even further. was guy ryder. we are getting some breaking news saying president trump will sign a social media executive

order, according to the white assumes is to do with his dissatisfaction with twitters move to add a fact checking option to a couple of his tweets. he was furious and threatened to shut down twitter and other social media that did similar things. we are hearing from the white house that president trump is set to sign an executive order. we will get you more details on what that might contain and what it means for the social media companies. coming up next, while way cfo loses her bed to's stop -- hua stopfo loses her bid to extradition. we will get you the details.

>> another flashpoint in the

mounting u.s. china tensions, huawei has failed to persuade a canadian judge to end extradition proceedings to the u.s. it is continuing to strain relations between beijing and ottawa. what are the steps forward from here? >> this was a key test, an early chance to have the case thrown out. she lost and it marks an early victory for u.s. authorities. what was at the crux of the calledwas a principal double criminality in order for canada to consider extradition. she tried to have it thrown out. the judge disagreed with her. she remains under house arrest and proceedings will continue. >> this comes as we continue to

see tensions between china and the u.s. and china and canada. the two canadians detained in china. what do we know on this front? >> this is what makes it such a thorny matter for justin trudeau. they've marked more than 500 days in detention. afterere arrested shortly the cfos arrest. it is seen as retaliation. the chinese government came out with a statement protesting it strongly and calling for her release. linkedadian government the detentions directly to this case and called for their arbitrary detention to end and for them to be brought back to canada. >> as we continue to see the broader context of things with the u.s. applying the pressure on huawei. what do we have on that front?

>> she has been the highest profile target in the broader u.s. attempt to crackdown on huawei. this is going to raise tensions further. in that sense, canada is in a hard position. either outcome, it would have faced the ire of the u.s. or china. the u.s., this was an early victory for them. this case will go on. hearings are set to continue for another 12 months. >> thank you. coming, the u.s.-china business council on the u.s. decision that hong kong is no longer separate from beijing. that is next. this is bloomberg. ♪

>> goldman sachs is warning investors to belt up for a bumpy ride as economy start to emerge from the coronavirus lockdown. the president says the volatility of government pullback on stimulus programs amid a new wave of infections. he says there is a risk that no market lenders may miss out on access to capital markets and government support. u.k. prime minister boris johnson is refusing to back his top aide despite rising anger. he continues to ignore calls to quit or apologize for apparently breaking virus lockdown rules.

the prime minister remains firmly in support of him. reports from washington say the trump administration is to end waivers on doing business with iran over its nuclear operations. the decision would apply to the islamic republic heavy water reactor at the iraq plant and the transfer of spent fuel. washington may extend waivers on support for the nuclear plan and --eement that could hong kong's first major anti-china demonstration of 2020 saw a huge police presence. approach toted any the legislative council building. spread across the city. police fired pepper spray and arrested about 300 people. 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.

haidi: we are getting some breaking news crossing the bloomberg terminal. hong kong -- when it comes to affairs in hong kong are internal matters. we are getting the reaction, clearly making a statement about sovereignty for beijing. when it comes to matters in hong kong, they are considered to be internal. to.-china tensions are set tighten even further after the administration said it could no kong'sjustify hong political autonomy. craig allen is the president of the u.s.-china business council. it feels like the relationship has deteriorated and unraveled since the last time we spoke to you. what are the implications and

how grave are they for businesses and individuals that have ties to both sides of the fight? g: many things remain unclear. the most important one is that the laws that the national people's congress is considering, tighten security in hong kong, has not been revealed. what do the words mean? idea but theeral details matter. secretary pompeo's announcement today that hong kong is no longer autonomous from china, it is a big step. the practical implications of are not yet clear. over the next few days, i would expect a lot of announcements on

both sides. i would agree with you, on both sides, things are getting a little more testy and even more tense. getting some more details from the chinese embassy. send the security legislation -- saying the secret he legislation did be passed is said to be very narrow, that china will be taking the nexus very -- necessary measures when it comes to meddling. a war of words that has happened so far. we know there are great concerns over the legitimacy of the financial institutions in hong kong. are you hearing concerns from your membership about what this means for companies and people working in hong kong? will they be subject to mainland law or hong kong law, for

example? craig: the chinese embassy is -- what we expect to happen is that chinese law enforcement will enter hong kong and will operate in hong kong. there is a little bit of a disconnect between chinese legal standards and hong kong legal standards. the chinese police and other law enforcement officials in the hong kong court system. how this is going to work out, it is anyone's guess. what does it mean for the sanctity of contracts? what does it mean for american companies invested in hong kong? what does it mean for headquarters of companies in hong kong currently but operating throughout all of asia? this is a question that we are going to need to look at in the future. we don't really know, although

the signs this evening are quite worrying. >> any indications from some of your members that perhaps if the national security law is implement it correctly, that could safeguard the rule of law in hong kong? remove some of the uncertainty, like the ongoing protests in hong kong and make business easier? : i have heard from some americans on a hong kong who feel very much that way. that the protests have been inconvenient and perhaps dangerous at times. however, right now, rather than really the general feeling is a uncertainty more and lack of clarity as to the future trends within the

u.s.-china bilateral americanhip and the companies invested in hong kong. >> what actions would your members like to see the trump administration take given that these threats coming from the u.s. are based on the fact that perhaps beijing's reach is becoming too strong within the city and that could eventually affect the way you can do business in hong kong? dilemmas the the trump administration faces is that any steps it could take will probably hurt the people of hong kong and american companies in hong kong as much as anybody else. anything on the tariff side or the currency side will hurt hong kong. we do not want to hurt hong kong. i would expect more talk about

the greater -- possible sanctioning of individual chinese government officials, communist party leaders, particularly those active in hong kong that might be one way, let's proceed without further .urting a bad situation i think a key principle to keep in mind is what is good for the people of hong kong at this time of great uncertainty and economic distress. this is a difficult time for hong kong and we don't want to make it worse. >> during your past experience with diplomacy, is there a better playbook that should be used at the moment when it comes to the dealings between washington and beijing? and also between beijing and some of its other trading partners, like australia?

raig: the lack of communications is a concern. there used to be dozens and dozens of discussions and negotiations and operation groups and now, unfortunately, there is a great lack of communication between washington and beijing. it is only exacerbated by covid-19. is ank also that there at aof trust now that is more dangerous level than at any .ime in the past these are difficult times for u.s.-china bilateral relations. covid makes it worse. the u.s. election process

probably makes it more complicated. aroundsiveness i the region, including hong kong, south china sea, india, and elsewhere, make it all the more difficult. these are tense times and we would urge de-escalation on all sides. ambassador, we are getting new details from the china embassy statement essentially talking about have narrow the category said to be seriously jeopardizing national security. in terms of the foreign meddling, saying they would take necessary countermeasures. what are those countermeasures that u.s. companies would be

worried about? what could be the response? what are the implications? : the chinese officials have been talking about and unreliable entities list for the past year. they look at it differently than the hong kong situation. they look at it as a counterpart to the u.s. entities list managed by the department of commerce. however, this type of sanction against foreign companies could be used under chinese law in any way that they want. , arbitraryis a worry retaliatory actions by any government are a concern for the corporate world. we hope not to see that.

context,ic hong kong the chinese are making it clear that their intent is the political side than to stop terrorism and what they consider terrorism or treasonous or independence type of activities. i don't think that foreign companies or foreigners living take thatare going to much solace in that narrow focus. knowing that could be interpreted broadly, any future actions by chinese police authorities in hong kong are certainly going to be more robust than they are now or ever have been in the future. that is something that will increase the level of uncertainty and anxiety as we go forth. >> craig allen, thank you very

much for your thoughts. we will have more analysis of the u.s.-china tensions ahead. with ing and hong kong basic law committee member albert chen. novavax says the coronavirus vaccine could be ready by the end of the year. our interview with the ceo, coming up. ♪

>> global infections of the coronavirus have topped i've .6 million with cases storing in brazil. cases million with storing in brazil. fatalities, dr. anthony fauci indicating a vaccine could be ready by year end. what do we know? said wednesday morning, he november could be the earliest vaccine as trials are being fast tracked. vaccines typically take more than a year to go from development to mass market. vaccine willd the be a 2021 event. mark ceo said he is not holding

the company to the 12-18 month timeline. >> in the meantime, we are seeing more shock and when it comes to -- shock and awe when it comes to stimulus measures. >> starting with japan, a record making second extra budget. government pulls out stops to save jobs and businesses with shinzo abe's popularity waning. that supply will increase by nearly ¥60 trillion. a blueprint has come together, the eu unveiled a proposal that could be worth as much as 750

billion euros. italy would stand to receive ample support to the program with the backing who they still blocking the idea of funding via joint debt issuance. >> we continue to talk about the effects of the lockdown measures on the world's poorest. that is coming into play in india. >> the human cost has mounted from india's protracted lockdown. economic activity dries up, pushing the unemployment rate above 27%. indians estimated to have lost their jobs last month. according to a chicago analysis, 84% of indian households reported a drop in income with

hit. house comes hardest the concern is that the governments measures, this will not be enough to mitigate the virus impact. situation last month, the world bank singled out india is a country to see poor.rgest number of the world is waiting and watching as biotech companies raise tort of coronavirus vaccine. these companies face huge profits if they succeed. after novavax started its testing on people, the company jumped 18% in shares.

other vaccine manufacturers, we are going as fast as we possibly can. as the u.s. government set up a warp speed program. we are using warp speed. our expectation is that we go into a phase two trial. the phase two travel be designed seee a phase 2-3 so you can advocacy and the expectation is we will do it in multiple countries. we will do it in australia, u.s., and likely a couple of other countries in august. we would expect to be able to see efficacy. that could lead governments to conclude the vaccine might be deployable, at least under an emergency use authorization.

by the end of the year, the vaccine should start being distributed at least to the first line, frontline health care workers and on down toward people at most risk. that would be the fastest timeline. >> you are using a protein approach as opposed to some of the other manufacturers and researchers that are using other approaches. what is the advantage of the protein approach? stan: it is an approach that has been proven for some time. this is not our first coronavirus vaccine. it is actually our third. we showed that -- it is the production of a protein that is found on the surface of a pathogen such as coronavirus or flu or ebola. the production system is the same for all of these vaccines

and it has been shown to be effective at preventing disease. you challenge it with the actual virus and show protection. instance, nonhuman primate challenge models and showed low doses, you could have 100% protection. the advantage of that, you can get very low doses so you can make large quantities. billions of doses in manufacturer facility. we just announced, an hour or two ago, the acquisition of manufacturing facility in the czech republic that is being finished up the summer that has the capacity to produce over a billion doses of vaccine. our protein based platform allows us to make lots of vaccine.

it has been shown to be safe and half a dozen different virus disease models. was a 170 million acquisition. manufacturing is a sticking point for a lot of companies that hope to have a vaccine. what happens if you are not first to the market? is the acquisition a mistake? are you in trouble for the future for other research? stan: not at all. there will not be one coronavirus vaccine. there is no one company that has the scalability to make enough vaccine required. fewe is going to be a vaccines deployed globally. it is needed. even if we are not first, everybody has to be safe because you are giving vaccines to

healthy people so it has to be safe, first. secondly, you have to show that it is effective and there will be different levels of efficacy. the third, it has to be scalable. scalable and now we have the physical capacity to make it scalable into the billions of doses. that was stan erck speaking to us a little bit earlier. you can get around up of the stories you need to know in today's edition of daybreak. this is bloomberg. ♪

>> let's get you a quick check of the headlines nissan is aiming to resume production in the u.s. at the start of next month. vehicle production will return to its plant in massachusetts on june 1. put 1.5as been told to billion dollars to cover any sanctions.ver -- it is the latest setback for the

iron ore producer. vale has accepted homicide charges alleging that it knew about security issues at the time. tiktok value is soaring after revenue doubled to $17 billion last year. -- $17 billion last year. it is said to be worth $150 billion. having attracted around 1.5 billion monthly users to a family of apps that include tiktok. increased revenue came at the expense of rival tencent. cmc markets gives us its view on the trading outlook. mike mccarthy joins us in the next hour. wraps today.l ncp plenty more ahead on daybreak asia.

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we've always believed in the power of working together. that's why, when every connection counts... you can count on us. haidi: a very good morning. i am haidi stroud-watts in sydney and we are counting down to is his major market opens. -- asia's major market opens. shery: hong kong's future is in doubt as washington says it is no longer separate from china. trade relations in the city's special status may come under review. u.s. stocks looked to boost asia on rising optimism that the coronavirus fallout has peaked. the s&p 5