♪ shery: good evening from bloomberg's world headquarters. we are counting down to asia's major market open. i am shery anh. -- haidiam heidi want stroud-watts. --re is no reason to receive continue the special trading status for hong kong. china said washington's campaign is bound to fail. geopolitical tensions for coronavirus and anger in the

u.s. threatening any recovery optimism. australia braces for the end of a record run. gdp data showing whether the 30 year recession free streak is over. looking at how markets are trading, u.s. futures under pressure after stock markets in the u.s. and in most that's ended mostly positive -- stock markets in the u.s. ended mostly positive rating. -- friday. oflly no real substance concrete measures against beijing. we have the dollar index falling friday, the declines continue on down .2%.monday, this as confrontation with china continues but after the s&p 500 closed may on an up note and now at the highest level in more than 12 weeks.

1.7%, about $35 a barrel level. this is the highest in 11 weeks and the biggest the klein in more than a week. -- decline in more than a week. russia and saudi arabia agreed to coordinate on the deal reached by opec-plus to cut output. seeing u.s.e futures falling. upside holding on with futures trading in this part of the world. nikkei futures trading higher, australia going into rba decision week as well as gdp data expected to be the litmus test of how resilient the astronomy -- the australian economy has been to the coronavirus lockdown. major states including new south wales lifting restrictions for services like restaurants. we don't have trading in new zealand. they are closed for the queens

birthday holiday. birthday holiday. pmi is manufacturing expected to show a modest bounce back as well. the chinese and hong kong governments pushing back against the united states after president trump said he would remove special trading privileges the u.s. gives to hong kong. beijing says trump's actions are dimmed to fail and hong kong says it is not worried about losing these favorable trading rules. we are really bracing for comments about any policy change from president trump on friday. wasn't as worse as week -- was it as worst as we expected? stephen: we spent the weekend trying to figure out what this means. the chinese and hong kong governments put out different statements from different channels, using the same terminology you mentioned, that

trump's policies are dimmed to fail. to fail.oomed they talked about double standards with riots and the trouble with the police in the u.s. and his comments over the last year. so trouble on the streets of hong kong, they used the term double standards. i find what is interesting what has come from the hong kong government. they say what it says is probably more important now because it is the jurisdiction which is likely to be hurt the most from trump's actions. the hong kong government put out a 949 word statement in response to the trump action saying they are not unduly worried about the that could beions eliminated as well as those sanctions that were announced friday by donald trump. i will read you one line. we note with deep regret president trump and his

administration continue to smear and demonize the legitimate rights and duty of our sovereign to safeguard security in the hong kong region. demonize smacked of being written by beijing, but we are still trying to sort out what the long-term ramifications are. these are trading privileges which were bestowed on hong kong as far back as 1992 for enactment after the handover to china in 1997. there is a lot of doubt whether the confidence of hong kong including the financial secretary out with a -- the global times saying there will be little impact. whether these statements of defiance will hold water overtime is yet to be concerned. there is concern with the international business communities. shery: the announcement did not

contain much. on --ompeo, tumbling down doubling down on beijing over the security law, but with president trump, what did we really here, especially with -- what did we really hear? we did not get concrete measures. stephen: nor did we get a timeline for dismantling of trade privileges that the u.s. bestows on hong kong. mike pompeo was on sunday orning talk shows in the u.s. he said trump has ordered a review of the privileges bestowed on hong kong and then work to eliminate them. there is lots of different -- not just on trade. there is extradition, visa considerations, hong kong people can get visas to the u.s. fairly easily. are they going to be treated the same as mainland chinese and make it more difficult? there is lots of ripple effects

that can come from this more so than what the government is dismissing. mike pompeo said it is a different chinese communist party today than 10 years ago. the party's intent on the destruction of western ideas and values. he seems to be doubling down on his criticism. he said of the chinese treat hong kong the same way they treat mainland china there is no basis for the u.s. to treat hong kong differently. it is a war of words. we have to see what the actions will be. we will hear from the american chamber of commerce and their comments on the long-term ramifications. , a weekend ofhead violence across major u.s. cities as demonstrations over the death of george floyd intensify. he emerging markets posted their second straight month of gains in may, but will the resilience

last? this is bloomberg. ♪

sophie: -- dave: karina: you are watching daybreak australia. a fragile pace of recovery from the coronavirus lockdown in the first quarter. the official pmi results were expected, indicating the rebound is faltering amid weaker global demand. china has abandoned numerical growth targets as the pandemic and trade war cripples overseas orders. india is moving through a phased lifting of the lockdown despite recording a record number of daily cases. shopping malls, restaurants and places of worship will not be open as the government attempts to reboot an economy that was already slowing.

there was an estimated 100 million people out of work. brazil has announced a record number of new virus cases as well and has overtaken france as the fourth worst hit nation for deaths. fatalities nearing 29,000. thailand has backed a $60 billion virus package. lawmakers approved the plan between the opposition leaders. the u.s. has sent men into orbit for the first time since the space shuttle was retired on years ago. the dragon capsule docked with the international space station carrying two now/or nats, marking -- nasa astronauts. saturday's launch is said to have been watched by 10 million 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. i am karina mitchell. this is bloomberg. shery: emerging stocks and bonds coming off a straight month of gains. theresa berger, which runs a portfolio of small and emerging economies. could we say the disappointing em and small-cap performances over? we can be know definitive about it, but i feel that the most successful investment strategy of any one decade is not the most successful of the following decade. about u.s. and mega-cap stocks and index

investing. poisedee the 20 20's are to be a personal of that. we can see other asset classes including the emerging markets do better. do you see a reasonable place for active investors to china? opportunity in we see these geopolitical tensions between the u.s. and china, including the most crucial for domestic stability which is jobs pressure given the coronavirus pandemic. >> that is true. i think that this is very much a stockpicking market for many reasons. the chinese have really wanted to develop a powerful, deep capital market what they have not done so -- but they have not

done so yet. they have been slow, but there is a movement to have improved corporate governance very we have to pick and choose. this is a country where there is a stable path between the people and the government. confirmed, one of the thing the government promises to do is to have a better understanding of their people. andle want employment possibly alleviation. if the government largely does while thereises to, peoplel 600 million making $120 a month, the average $4000 and $5,000

a month. there is a lot of spending power and good business models. haidi: do you think the restart from the pandemic to put through structural reforms or derail the reform agenda? how does that go into your stockpicking for that area? are you still looking at new economy stocks in china? >> yeah. see ak that china will change in their economy. i think the other 25 emerging markets, this might be more evidence. china is in the middle of changing their business model. based on an economy cheap labor exports. they have been trying to become

a consumer led economy. it has been slow. but they are going in that direction. the new economy will be a big part of that. as we see a lot of their infrastructure reform and stimulus is oriented towards technology. there will be opportunities. in terms of other opportunities we see coming out of the covid crisis like decentralization of businesses, moving from offline to online, china is already there. wherebigger opportunities business model changes at the company level outside of china because the business model change at the country level in china is so large. haidi: is this really a time to

start looking at, as opposed to the stay-at-home stocks, looking at the go out stocks of emerging markets, given the assumption the restart will be quicker in this part of the world on a first in, first out basis? >> i think that will be true but later in the year. the stay-at-home stocks, many of them will have persistence because the business models are -- ing to be attractive and i think for us the big issue in stockpicking is not simply stay-at-home or go out but what does the balance sheet look like? king now balanced sheet is -- balance sheet is king. shery: what are your thoughts

about hong kong as the future -- as a financial hub in the future? just the fact the u.s. is threatening to do list companies -- d list companies in its exchanges? could that provide a boost? >> it does if the judicial process stays independent. investors are concerned. issuers will be right to be concerned about capital market debt. hong kong only has 1/10 of the capitalization of the u.s. and -- comfortable in being in an exchange that is that much smaller than what is offered to them in new york, alibaba, baidu, jd, will they swap the hong kong trading volume? that is a big question for them.

haidi: really great having you with us. theresa parker, cardica management ceo. protests in america's largest cities as they are trying to reopen from the virus related lockdown. we will have the potential economic fallout next. ♪

check of thek latest business flash headlines, the coronavirus has deepened the slump in macau where the economy was already facing pressure from travel declines. visitor arrivals collapsed almost 70%. the outlook for the casino dependent economy is bleak with the slow down in china restraining gambling. airbus is putting up production

plans as coronavirus undermines plans for travel. output for theed a320 range with the output having been slashed by a third in april. airbus said it would aim for 40 planes a month while it determines if the global recovery will be v or l shaped. emirates will have to eliminate jobs as part of a cost-cutting plan for coronavirus disruption. they have come to the conclusion staff will have to leave as they adjust. they have not said how many workers will go but sources say there is a current headcount of 105,000 employees which could be slashed by 30%. shery: protests over the death of a black man by a white police officer in the u.s. have spread coast-to-coast, affecting more than 11 cities area -- cities.

companies like amazon and target, scaling back operations. su: because the violence is threatening to undermine not only the safety of their employees but against the economic recovery, we saw in these cities mentioned standoffs with police. it was a stunning view for many americans throughout the weekend as these protests escalated. we saw police and the national guard in minneapolis engaging in standoffs with protesters. they began a peaceful protest. as the night fell in city after city they turned violent. apple said with health and safety of teams in mind we will close a number of stores sunday, here in the u.s. major cities which include los angeles, new york, chicago,

these are just on the verge of reopening with 20% unemployment, 50 million people out of work. looting,rning cars, violent arrests, police throwing canisters of tear gas and rubber bullets. channels one australian nine team i was able to watch in the u.s. they described the scene as something from syria. it was stunning. that has a lot of companies involved in this concerned as well. in terms of the more specific complications that this throws out for various companies, obviously those a struggling to recover from the shutdown already and the complications when it comes to logistics for example. su: you look at a company like

amazon which has done well during the pandemic because of the increased orders, in los angeles where protesters set fire to a car over the weekend and many standoffs with police, they sent out messages to their drivers on saturday night, if you are delivering in los angeles or chicago, stop, return home, concerned about the safety of their employees. amazon is scaling back deliveries and shutting down delivery stations including in chicago, l.a. and portland. and target which has shuttered 32 stores in minneapolis, which was ground zero where this started, where the reality -- minneapolis resident was killed while being arrested by a white police officer who has been charged with murder, that was the hub, but it spread out. target is one of those companies

that is dependent on brick and mortar for sales spree what we have seen in the video broadcast from protests is that as the protests turned violent, they result in looting. many stores have been destroyed and merchandise depleted. apple is also keeping some stores shot on sunday. -- stores shut on sunday. they had reopened about 230. this comes as companies are preparing to reopen stores across the country. shery: su keenan with the latest on the u.s. riots and the impact that is having on businesses. look at the markets. investors are watching closely how this will affect market performance. we had seen president trump weighing in on the unrest area we saw the s&p 500 closing on an

up note. we are seeing u.s. futures under pressure, down .8%. there is a risk off sentiment across asia, nikkei futures down .6%. we were already down on the nikkei last week with rising china tensions. thanikkei 225 gaining more a percent over the past month. it is the best since october 2015. looking at a bit of pressure now. the japanese yen strengthening of it. risk off spreading. the brent crude under pressure. we have not -- we have heard from a delegate opec-plus would be discussing an extension of cuts. is australia's recession free run set to continue? why the economic downturn may not be as severe as first

feared. this is bloomberg. ♪ rg. ♪

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haidi: it is 8:30 a.m. here in sydney. tensions and unrest and protests in the u.s. continuing to engulf uncertainty when it comes to markets facing the global reopening. we do have reopening measures, more restrictions for the australian side. we are getting the aig performance of manufacturing index for the month of may coming through on the bloomberg. that's at 41 point six, bouncing back from the 35.8 and giving an

indication of how we are seeing the reopening of the economy taking place gradually from the month of may. we are seeing manufacturing activity coming through. production jumping. new orders recovering as well. we are seeing deliveries up by close to 12 points and input prices seeing decline. we are seeing downward pressure when it comes to the price side of that number. for the reserve bank of a straley meeting tuesday head of the crucial gdp report, which could show or foreshadow a chinese first recession in almost 30 years. paul allen joins us. what are we expecting from the rba tomorrow? great deal. not a cash trade is already at the lowest it will be in one quarter of 1%. we can't really see the point of going lower than that. the three yield bond target also likely to stay unchanged at a quarter of 1%.

it's worth noting the rba bought securities two days last month so it seems to be plenty of demand on treasuries. a lot of the focus can be first quarter gdp numbers. you are expecting to see a contraction, the consensus is for 10th of 1%. bloomberg economics sees only 1/10 of 1%. real declines are likely to come in the second quarter hopefully for the reserve bank and the government. they are sounding a note of optimism as well talking to parliament last week, saying maybe the downturn will not be as severe as thought. there does that mean still is a slim possibility australia could dodge a recession yet again and keep the record intact? slim and all caps would be the emphasis. it is not the base case of most

analysts but they do acknowledge there is a possibility. deutsche bank economist phil o'donoghue sees a growth of 1/10 of 1%. even if the second quarter as horrible as everyone is expecting, a straley would still escape the technical definition of a recession, which is two consecutive quarters of contraction. we have another -- a bunch of other data coming out that might help the picture. that is seen cratering by almost 18%. that would fall into the second quarter period. of course, the lockdown prepping in march, the first quarter saw a spike and now we have restrictions easing in australia so things could possibly rebound quickly. trade balance numbers for april also out and we are expecting a modest pullback, but still healthy at $7.5 billion surplus. all of these definitions of technical recessions don't really mean huge amount to the

rba. part of their mandate is full employment with more than half a million people likely to be out of work, the focus is really on what can be done to get a rebound on those numbers. -- in paul allen it sydney. we will focus on australia's property market in the next hour so we will get you that soon. for now, first word news with karina mitchell. reporter: president trump is stepping up his confrontation with china, vowing to end hong kong's special trade status after beijing approved sweeping security loss. legislators will review the preferential links with the u.n., while chinese companies listed in new york will come under closer scrutiny. the president is also denying u.s. access to chinese nationals deemed to to be a threat to national security. >> china's latest incursion, along with other recent developments that degrade the territories freedoms, makes clear hong kong is no longer sufficiently autonomous to

warrant the special treatment that we have afforded the territory since the handover. promises replaced its formula of one country, to systems with one country, one system. karina: cities and states across the u.s. bracing for more protests after a weekend that recalls memories of the late 1960's. outrage sparked by the death of george floyd erected coast-to-coast initially in minneapolis, but spreading to washington, d.c., new york, angeles.nd los president trump has branded protesters as anarchists and has threatened to send in the military. the former prime minister of malaysia is fighting a dismissal from his own party after being removed with four others from sitting in opposition in parliament. he was the party leader when the decision was made late last week . he resigned as prime minister in february and has been seeking a with theo-confidence

person who replaced him as premier. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm karina mitchell. this is bloomberg. shery: the fed chairman jerome thell is defending unprecedented policy response to the pandemic, saying the central bank's aggressive move are unnecessary now to shield the u.s. economy. >> we crossed a lot of redlines that have not been crossed before and i am comfortable this is that situation in which you do that and then you figure it out afterward. shery: still negative rates continue to be one red line the policymakers are unlikely to cross when they meet next week. the cleveland president loretta -- discuss what the fed can do >> the second quarter numbers, when they come out, are going to be very negative numbers. we know that. . we know that was the height of

the shutdown when there was no activity. in the third quarter and fourth quarter, we will see activity begin to emerge. quarterly growth rates will outstate what it looks like in the field because we will see from very little activity, some pick, looking like big growth rates, but we will still be below where we are at the start of the year for employment and output. when you have so many people out of work, it is hard to imagine we will see a quick v-shaped recovery. i think it will be slow. businesses will be thoughtful about reopening. people will be thoughtful about spending. what that means is that monetary policy has a role to play and we support the economy getting back to the dual mandate goals of full employment and price stability. that is more traditional monetary policy and the tools we have are the interest rate tool, already get zero forward

before,, which we used and also asset purchases. market not to improve functioning, but so to support the economy. reporter: at the moment, there are people worried about how big the fed's role is in clearing markets and how big the federal is in setting prices. there has been a conversation with colleagues about yield curve control. i want to get this from you. this is where the confusion is on wall street for some people in fixed income at the moment. would your confusion -- concentration be on the front end or would you think about doing japan is doing, all the way out 10 years, how much control over the yield curve would you be looking to have? >> my view of yield curve control is it really is a support for forward guidance if we were going to do it. to me, the discussed yield curve control is a tool in 2010 during

the financial crisis and also as part of our framework review as a tool, potential tool. . no decisions have been made on that at all. again, i don't think of that is something that would be in this phase or something to make sure the markets continue to function. but as a tool, i think it works well and thinking about what the tools are going to be that we can use. right now, that is a discussion for the future phase. my own view is that if you wanted to do it, you have to think hard about how you would implement it, and also, how do you exit from it? with any of these tools, there are pros and cons of using them. outcome,, as you point the yield curve is flat at the short end. we haveth the guides given already, it is not necessary to do something to emphasize the forward guidance, but i don't want to take it off the table as something that is a

potential for me to think about as a possible tool. i just don't think we need it here in this space, nor do i think going forward we need to use it. but if we were to use it, i would use it as a reinforcement from forward guidance on the short end. reporter: before we let you go, have to ask you about the possibility we could end up in a new trade war with china, additional tariffs going on. how would that affect the economy? have we already absorbed that, or would that be a new hit to the economy? >> whenever there is a new rising of uncertainty and another uncertainty, i think we have to think of it as another potential hit to eventual recovery. , weink we have to use that have to take the conditions as we are and i think we have played this game before and saw how the uncertainty did dampen the expansion earlier. so i think we have to take that uncertainty added

to an incredible amount of uncertainty we already had. haidi: we are hearing from the cleveland fed president loretta mester. further developments in reaction to the ongoing protests in the u.s. chicago announcing they will suspend bus and rail services from 6:30 p.m. to monday morning in chicago, and of course we have also as of saturday night seen a curfew announced in chicago as protests over the killing of george floyd and golf large parts of the u.s. and businesses are boarded up, rallies turning violent. the anger continuing to spill , hearing thatts rail and train services suspended in chicago during those times. coming up, australia's largest office landlord as the pandemic keeps workers at home.

the dexus cio ross g du vernet tells us what the workplace will look like post virus and what his $11 billion plus portfolio is looking at. this is bloomberg. ♪

haidi: the coronavirus pandemic has forced employees around the world to work remotely from home

for months now, but as lockdown sees, more australian workers office.rning to the to get a sense of what it means to the public sector and the new normal at the workplace, we are joined by ross du vernet, they cio of australia's largest office landlord dexus,. give us an indication of how much your business has been impacted over the last couple of months, to start with. morning. and good certainly, cobit has been a significant and unexpected expected to bes a long-term phenomenon. certainly we are not expecting to have a major impact. from our perspective, the government is managing the health crisis and it does appear they are averting an economic one. businesses where permitted are encouraging people to get back into the office. we recently completed a survey

of customers and more than 90% had detailed plans to get their people back to work. there will be a progressive come back to the office and those are expected to be back to about 70% capacity by august. i know there are business geters that are trying to people back to the office as quickly and decisively as possible. we are doing the most to support our customers and getting people back to work safely. there's no supplies i think at this time with so much uncertainty that new inquiries have slowed. tenants are typically staying put. dexus is fortunate to be running at high levels coming into this ribbing of time at 97%. notwithstanding, the uncertainty we still intend to

.ake longer-term commitments . what sort of arrangements and haidi: -- haidi: what sort of arrangements are had around work arrangements ? i have spoken to people at large companies in sydney. a lot of them say if they were to properly maintain social distancing, there's no way they capacity oflf the the normal workplace back to work, there simply isn't the space. are you hearing these conversations being held on problem-solving? >> we certainly in the short term, there will be operational impacts as to how we safely get our people and also our

customers' people back to the office safely and acknowledging and respecting social distancing requirements due to the text of legislation. public transport is also a consideration. as i have said, we are inserted in temporary phase -- we are the sort of a temporary phase. we are seeing an evolution of what is required in terms of social distancing in the workplace is evolving as the knowledge and understanding of the transition works and really as the government gets better control around the health. the government and regulatory boards see getting people back into the office as important for the broader economy, and i think we look to see some of those eased.tions get

the key area where i think customers will found levels of inconvenience will be things transport, public the like. planorganizations have a and measured approach to how to bring people back to work. in a recent survey, people are realistic they will not get their workforce back together in the near term. productivity by august. eventuallyou expect your tenants' workforce to completely return, or given that remote work has become more acceptable, it would just fundamentally change the way office spaces are used? quickly, if you can. >> work from home is not new, trying tok we are solve this over the last few months or the long-term impact of what this looks like to some are along, but i think

the office will continue to be central. while stillositives working from home is collective appreciation that the nature of work is complex and we probably need a range of workplaces to remain production -- productive. we are not expecting this to occur permanently. it has been done in the past, but it has usually been cost driven or short-term focus. . that almost all end up gravitating back to the office in some form. i think globally there is a classic example of this. shery: ross du vernet, thank you for your time, the dexus cio with the latest on australia's property market. more on the outlook for australia's real estate market.

high net worth chinese buyers showed no sign of slowing down, on the next hour of "daybreak: asia."breaking news out of south korea. they will submit their third extra budget bill to the parliament, according to the finance minister. we have been expecting an emergency economy meeting that president moon jae-in is expected to chair this afternoon and south korea. the third extra budget would add to the 100 trillion one plus of stimulus package we have already seen in the country to create jobs. . coming up next, the ceo of tesla rival neo says it is bullish on china market growth, despite growing sales. this is bloomberg. ♪

haidi: china's electric car sales have declined for 10 straight months, and our forecast to drop another 14% this year, according to bloomberg new energy finance, even as the nation's auto market recovers from the pandemic. with our exclusive interview with selina wang, the neo-ceo remains bullish. covid-19 has greatly impacted

our supply chain in china and overseas for the first quarter, especially in february and early march, but our supply chain has been restored since late march and mostly back to normal in april. so far, supply chain and manufacturing are back to normal. in terms of demand, most off-line businesses in china were closed in february and march. they have started reopening in april. the sales orders have been back to pre-covid-19 level since late april and the virus impact on nio has been gradually eliminated. run, the virusg impact on the overall auto industry is quite big. do you have any estimates for this full-year delivery and sale? we will not adjust the sales estimate we made earlier this year because of covid-19. as we have seen orders continuously grow since april.

so we are optimistic about the full-year sales estimate. our estimate for second quarter delivery would be 9500 to 10,000, which would be a record. we think the growth of our order should be sustainable, as we will be delivering our new car the ec six and plan to deliver new battery packs in the fourth quarter and turn the new business model, battery as a service, into reality in the second half of the year. at the rate of last year's cash burn, the $1 billion investment would only last less than a year. what is the long-term plan when it comes to fundraising? of course, we may raise more capital, but overall, we think our capital is sufficient. reporter: you set on the earnings call you could list for new china entity potential

in mainland china. what are your plans around that and how soon could it happen? china meets the criteria for being listed on china's tech board, so there's a possibility, but we don't have a plan so far. but it's possible if we want to do so. we will make reasonable arrangements based on the changes in capital markets and the company developments. volkswagen officially theunced it has a stake in parent company of your partner. how would this ownership impact nio? are you concerned about this competition? they are definitely our long-term strategic partner. we believe volkswagens develop the evd

industry. volkswagen investing in a battery manufacturing company is confident news for us because i think the supply chain is very important for companies like us. shery: that was the nio ceo william li . coming up, we speak to black diamond group founder, and the president of the american chamber of commerce in hong kong tara joseph. stay with us for those interviews. in the meantime, here's another check of how markets are trading. we are seeing broad downside pressure for futures at the moment with u.s. futures down 7/10 of 1%. more heated rhetoric between china and the u.s., not to mention we are expecting eco-data out this morning. we will have japan capital spending and south korea trade data in the next couple of

hours. plenty more ahead on "bloomberg daybreak: australia." this is bloomberg. ♪

haidi: a very good morning. we are counting you down to asia's major market open. shery: welcome to "daybreak asia ." u.s. futures fall as violence rages on across the united states. the outpouring of anger they threatened a post-virus recovery. asian markets enter the second half in uncertain mood. the protest adds to geopolitical