shery: welcome to "daybreak asia ." you are watching live pictures out of washington, d.c. a seventh day of unrest as we are now looking at police force against protesters after president trump spoke to the public, saying that these instances of violence were acts of domestic terror. withys that if governors the national guard cannot dominate the streets, then he will deploy military if cities

and states will not act, saying that he is dispatching thousands of armed soldiers. trump also saying he is going to see that these mobilizing civilian and military resources, that these actions are taken to really stop the rioting. let's get to our white house reporter, mario parker, with more on the latest coming from the white house. president trump talking about dispatching armed soldiers, stopping these riots, dominating the streets. tell us a little bit about what authority would go ahead and do this, especially when it comes to intervening in these states and sending the soldiers in. authority to do so. what was fascinating about these remarks is he put them on law and order.

condolences to george floyd's family. the bulk of the president's remarks were really about his plan to institute law and order, and again, that was on the heels had withy call he governors earlier today, where some of them urged him to tone down some of his rhetoric, and he urged them in return to step up efforts to enforce the law in their streets. the president spoke about different resources and he also spoke about protecting the rights of law-abiding americans including specifically he mentioned second amendment rights. could this be seen as a bit of a call to arms? faro: i would not go that that it would be a call to arms, but what he is doing is -- president trump is masterful at feeding his base and figuring

out a way to always not towards his base -- nod towards his base, so the reference point to the second amendment was clearly him throwing red meat to his base, reassuring his base that heone would be coming, as says, to take their guns away, that he would be protecting their second amendment rights while also enforcing this law and order on the streets. shery: to your point, mario, how successful is the president being so far in turning the attention away from his handling of the coronavirus pandemic into this new -- into reframing the protests in very partisan terms? mario: absolutely. you make an amazing point there. ofmentioned that she kind slipped on the coronavirus a bit. he made an offhand remark about nurses who have been battling

the virus, have been scared to leave work or some such. to hisanother nod political base or a political part -- a part he has been particularly vulnerable in during the election cycle. has -- we that, he have not been speaking as much about the coronavirus, but he has received -- his handling of this matter. as you mentioned, a few days have gone by. there has been increased calls for him to address the public. he had taken to twitter and made some incendiary comments, so his handling of this latest crisis, if you will, have been called into question as well. we are already seeing

that fractured relationship between the states and the federal government. how is this likely to play out and be received by the government? held: the call that he earlier today, if it is any indication, it splits along partisan lines. it splits along some of the lines that we saw actually with the coronavirus, where the president was holding these calls with governors, and they would sometimes get testy. he had a testy exchange today with illinois governor jb pritzker, which is similar to an experience the two of them have had going back to the coronavirus for the last few weeks. you will see some of these governors have asked the president to again tone down some of the rhetoric, to employ more of a calming presence, to tone-- more of a collegial

and call for people to come together. the president has struck more of a combative tone. this law and order tone. you are seeing some of these protests that have turned violent, including right outside the white house. we have seen the presumptive democratic candidate, joe biden, being challenged by black leaders to outline a plan where he would do things different from president trump. where are we in the polls right now when it comes to the elections in november? sure, another close election, but at least right now, nationally, biting -- i was shown up by 10 points. now, when it comes down to the swing states, they will that the raceide

is a lot closer. president trump we mentioned earlier about him. he does enjoy a substantial lead in terms of just the enthusiasm of his base as opposed to biden. if coronavirus is going to continue to be with us, it will have a resurgence in the fall, then turn out at debates will be very big, with people not necessarily running to the polls or having hesitation to run to the polls. whoever can turn out there base, that will be a very big, essential weapon for november. we seeing this play out when it comes to the economy? a lot of analysts said the protests will peter out but if we are seeing curfews mandated, troops on the streets, is this going to have a massive impact on this nascent reopening, recovery story? mario: sure, absolutely.

this does not help matters at all. economy is, the u.s. starting to wake up from this artificially induced,. you also have again, as you mentioned, curfews being instituted. this does not help at all. to liftomy starts itself off of its feet. mention u.s. tensions. some of the latest rhetoric between those two countries. president trump had been beijing'sbarbs toward handling of the coronavirus epidemic. now, we are seeing tensions rise between two

of the world's largest economies. getting -- ofjust course, mario, we heard cryptically president from ending that press conference saying he was visiting a very special place and it seems that he has walked out of the white house, crossed lafayette park, and is walking up to st. john's church, the church that sustained damage from being set on fire last night by protesters. so we see president from doing this. we hear about potentially international guard being sent to protect my given -- monuments, confederate monuments, that were being -- what is the message being sent by the president right now? theo: the message that other image or messages that have been sent of course was that on friday, he had been taken to the bunker within the

white house. so for president trump to walk middle ofain in the these protests, it sent a hesage that he had been -- is rebuffing that image. he went to florida for the nasa launch. haidi: mario, are things looking pretty good? sorry?i'm mario, i'm sorry. i think we had some technical issues. i just wanted to get your views as to sort of prospects going into november because obviously,

there's been very little campaigning with social distancing in the coronavirus. successfulst been a pivot away from the administration's handling of the virus, and now, president trump able to kind of step in with his narrative of restoring law and order? and as you say, being able to really appeal to his base? mario: absolutely. himuld say that it allows to fall back into some of his political instincts. his political instincts, he campaigned in 2016 as being the law and order candidate. derided professional american -- black american professional football players during the national anthem, which was their way to protest police brutality. he has courted police and police unions, harkening back to a time

where they can send a tougher message. he has done all of this again without being able to hold some of his signature campaign rallies, so this was a semblance of him being able to get back to some of his comfort -- his place of comfort, political comfort, that is, when he's engaging in some of these activities, when he is engaging some of these talking points as well. this is a comfortable space for him. shery: mario parker, thank you very much for all of your insights as we watch president trump now leading the church church-- leaving the grounds. he was saying the united states is coming back strong and it will be greater than ever before. breaking news for you right now. south korea's final first quarter gdp now out. we have seen those numbers revised upwards. we are talking about 1.4% growth year on year in the first quarter instead of 1.3 percent.

also, the quarter on quarter number being revised up for 1.3% quarter on quarter contraction instead of a bigger contraction of 1.4%. these are the final numbers. we are kind of coming in line with estimates in a preliminary reading. take a look at what cpi has done. we just had consumer prices in the month of may contracting 0.2% month on month, which is in line with estimates, but of course, it's really seeing the disinflationary trend. prices falling mainly due to oils drop according to the vice finance minister who was speaking at a meeting and saying they will take stern measures to stabilize the markets if needed. the main core consumer prices rising .5% year on year, which thanfaster acceleration was expected. still, these disinflationary trends leaving little room for the bank of korea to do more.

of course, they have already cut the policy rate to a record low, haidi. and we are setting up for, i think, a little bit more uncertainty going into the start of trading here in asia. gains 5.7%. the market playing catch up on yesterday's stellar session across asia after it was closed for the queen's birthday long weekend. nikkei futures looking pretty mixed. you are still seeing gains when it comes to osaka and trading in singapore. worth pointing out that when it comes to trading in chicago, we are seeing nikkei futures trading lower now. this as we also see u.s. futures extending those declines. futures for the s&p down .6%. we are still looking at some positivity going into the open. potentially here in australia. we'll have lots more to, including the latest of what is going on in the u.s. after president trump just spoke in the last few minutes. also really talking about

putting military as well as civilian forces on the street to quash the ongoing protests. this is bloomberg. ♪

haidi: there are new signs of a hard-fought phase i u.s.-china trade deal that may now be in jeopardy. agriculture farms have been ordered to halt some purchases as beijing evaluates president trump threats over hong kong. our chief north asia correspondent is watching this. shrugginge short -- this offer now. we are seeing retaliatory action. >> agricultural products are a cornerstone of this phase i trade deal. china agreed to buy 36.5 billion dollars worth of u.s. farm goods this year alone but of course, the coronavirus came along and in the first, those plans did

not materialize. china managed to import 3.3 5 billion dollars in the first quarter. that is the lowest level for that period since 2007. still, the chinese economy has opened up faster than the rest of the world. it increased the pace of imports including one million tons of american soybeans in the first couple of weeks of may and also rare purchases of soybean oil and ethanol, but people, as you said, haidi, familiar with the matter who did not want to be identified, are telling bloomberg news that the large soe ag buyers like costco, sino grade, they have been ordered to fco, sino grade, they have been ordered to halt. they evaluate the ongoing escalating tensions between china and the united states, exacerbated by donald trump threats on hong kong and those possible sanctions on communist party authorities, haidi.

haidi:haidi: talking about hong kong, the annual tiananmen square vigil has been banned. how significant is this? stephen: it is the first time since 1990 that the vigil has been called off. foras been held every year 30 years since the one-year anniversary of that 1989 crackdown in beijing. the timing, you know, just a few days after the passing of the national security laws for hong beijing, itnpc in raises the question of intent. why are you banning this? protesters say it is intended to quash the commemoration and any type of gathering more than eight people, which would violate the social distancing rules on the coronavirus crackdown, which by the way, those restrictions end that day. that is the last day that they are going to be enforced, so again, protesters say that the timing is coincidental, but authorities say that there is no

link. they are worried about the spread of the virus. they have had five new local cases in the last couple of days and they are watching that very carefully, but organizers say they will move this vigil online. protesters are worried that this will set a precedent for banning future commemorations. shery: stephen engle. coming up next, we will be joined by a global strategist to discuss the impact of the protests and the trade escalations. this is bloomberg. ♪

shery: investors are putting the focus on the economy, largely looking past the prevailing risk factors and there are many u.s. protests. watch out for lower stocks and yields. a globaldent of

strategies company joins us on the line from los angeles. always great having you with us. are focusingrkets on the reopening of the economy, given the u.s. protests right now, how much of a reopening will we realistically have, not to mention that this really heightens the risk of a second wave of infections with protesters out there, right? are we in dire need of a healthy correction right now in the markets? >> i would say yes to many of your questions. i think we are due for a correction. we are due for a major correction. but what the equity market is doing right now, meaning in the is also or three days extremely irrational from a market viewpoint. what is happening in terms of protests in different cities, while it is heartbreaking in terms of what it does to human life, it is still not significant in terms of its impact on the economy coming

soon after the adverse impact of the coronavirus crisis. that the newt disturbances mean the economy will have to shut down for several months, then we are going to see the stock market turn on a dime and go down. the stock market is acting based upon the latest information that it has with it. that i think is completely irrational. let's go to the other part of your question. look longer-term. the economy is not going to recover quickly. it is going to be a very slow recovery, not a v-shaped recovery. some will not come back. u.s.-china tensions are increasing. they are not going to go down anytime soon. that, youactor all of are going to test the 23 hundred low for the s&p 500 futures. both of those, to me, seeing very much rational and likely to

occur. to whether it comes it is the ongoing protests or the pandemic or the china-u.s. tensions, it all seems to boil down to costs. security,increased costs for disinfecting everything, costs for supply chain reallocation. how much will that hurt profit margins at companies and market levels because of that? komal: that is going to hurt the profit margins. i think that is not yet fully taken into account in equity prices. first part. second, when the economy comes back, because of the factors that you just mentioned, the come back is not going to be a strong one. it is likely to be a weak recovery. that again is not incorporated into equity prices. what the equities are reacting to hear very much is the fact that the fed is going to stand behind it. they think the fed will cut

rates, go to negative rates if necessary. another $3 trillion worth of cash into the system so that whenever equity prices go down, you have a chairman and the federal reserve who would step up and provide the resources. that is what is supporting the equity side despite the fact that, as you said, the comeback is going to be slow and all of the increased costs are going to affect the comeback process. if the protests and the curfews do not have a meaningful impact on how the markets are trading. what about trade? what about an escalation of these trade tensions, more reports of this phase i deal falling apart? komal: if the trade situation worsens, if we tensions increased significantly, i think you will see that getting

reflected in market prices. so far, president trump has essentially said that he is going to take action. secretary of state pompeo on the u.s. side has said that hong kong is no longer autonomous. all of those are mere statements . we have not seen not translate into any specific action. in termse that change of tariffs being put on hong kong products and you have a measure of how that is going to affect the chinese economy, then you are in a whole different situation of the conflict and that is where you would see the impact. the markets are still hoping that this will not be a full-fledged flight between the country. shery: always great to have you. komal sri-kumar. coming up next, u.s. cities

preparing for another night of protests. you are seeing live pictures there of just some of the street protests still going on. the president is vowing to end the violence by force if necessary. this is bloomberg. ♪ ♪

karina: this is "daybreak asia." i am karina mitchell with first word headlines. china is said to have told major state run agricultural companies to put pause on some purchases of u.s. farm goods as tensions with washington escalate. we are told posco and centigrade have been told to suspend orders of soybeans and pork in a sign the phase i trade deal may be in jeopardy over hong kong. premier li keqiang has pledged to stick to the deal but china security law's straining relations. hong kong retail extended its slump in april as the coronavirus suppressed travel and demand. retail sales fell by value and 36% from a year ago to 3 billion u.s. dollars, a 15th consecutive

monthly decline although marginally less worse than the median forecast. retail sales by volume fell more than 37% had hong kong recorded its worst order on record in the first three months of the year. india's credit rating has been cut to the lowest investment grade by moody's amid a slowing economy and a deteriorating fiscal position. the agency lowered the currency rate with a negative outlook. that comes as investors lose faith in the modi government. india has erased more sinceolder -- any country the start of the second term. popular chinese video app tictoc has apologized after complaints that posts with the #black lives matter and #george floyd were marked with zero views. they say they are being censored. tictoc claims it affected a wide array of posts. videos linked to black lives matter have generated more than 2 billion views. 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. share a. to watch continue ongoing unrest across the united states. president trump in the past hour promising a forceful response to violent protests across the country. pres. trump: if a city or state refuses to take the actions that are necessary to defend life and residence, their then i will deploy the united states military and quickly solve the problem for them. what is the latest on these developing's? let's bring in bloomberg's alisa parenti in d.c. for us. what is the situation in the capital? >> it is interesting. time..m. here at this it is light out and we are already 32 minutes into the curfew. ,he curfew has been rolled back

starting much earlier. four hours earlier than they did over the weekend. determined notis to have a repeat of what occurred over the weekend, so they are starting at earlier in hopes that it will be more controlled and they will be able to maintain safety and peace throughout the city. we did see -- i want to mention our bloomberg bureau in d.c. is in the northwest part of the city, and actually, our office building where the bureau is, it was damaged such that they had to blockade it endboard it up, and it was closed. we have not been going into work because of the coronavirus and risk of spread because -- so we had not been there but we did see some pictures. it is just amazing, the amount of damage that was sustained in our building. one of several dozen throughout the city.

shery: we were talking to mario parker earlier and we saw president trump walking over to st. john's church which he had earlier alluded to. he would visit a very special place. what is the message that the president is conveying with this visit, and also with the press conference he delivered a short while ago? komal: it was fascinating -- >> it was fascinating because right before they made that move, they had a massive police force which cleared out the area with flash bangs, mounted police officers, forcing back the crowd from lafayette park, which is right on that side of the white house. it sits between the white house and st. john's. that church is really a church of presidents going back to jfk and u.s. presidents decades that were shipped at that church which was damaged in some of the vandalism that occurred over the

weekend. president trump walked over there. two messages. reiterating -- mario talked about this. the law and order president he wants to make himself, wants to really communicate that message. there was this massive clearing out of protesters of the area to clear the area for him to walk there. also just that whatever means are necessary, he said he is going to dispatch thousands and thousands of heavily armed soldiers. that was a quote in that presser that you referenced, so he is determined to maintain control and do what he can. that was really kind of what resonated with me when i looked at that and i heard those comments. from: we are hearing andrew cuomo, speaking to press at the moment, saying that he was shocked at the force used to move d.c. protesters. what are we hearing in terms of concerns about the spread of covid-19?

this disease is out of here and we are now seeing mass gatherings. alisa: such a good point. you look at these crowds of people, and some of them are wearing masks. many of them are not. u.s.ta's mayor here in the are not, saying that this pandemic is still with us, and i d.c.,ll you, in the virginia area, we are seeing rates of infection, and even mortality rates, spread and continue to be a real problem. there were concerns about restaurants opening up outdoor seating in northern virginia. there were some who said we are not there yet. we have not reached that phase where we could do this safely so it would not allow for the kinds of gatherings of people that we have seen in the city. it is a concern. something that is very much there. you're dealing with a couple of crises. great to have the latest

from alisa parenti. coming up next, china making a move that will surely be testing the limits of their relationship that it has with the u.s. as well as whether this phase one trade deal will go through. we get more analysis on the latest cracks in the trade relationship, next. this is bloomberg. ♪

haidi: breaking news crossing the bloomberg. the latest updates when it comes to the coronavirus case numbers out of china. china reporting no coronavirus deaths on june 1 but 10 asymptomatic coronavirus cases on june 1, reporting five symptomatically coronavirus cases for june 1. all five of those new cases are imported cases so we are still seeing a trickle of cases come through when it comes to china. we will speak with china. one of our top stories that could potentially see the next correction in the markets is a deterioration of the trade relationship between washington and beijing after that hard-fought phase one trade deal that was struck. we are now hearing that beijing has ordered some of its state owned companies to refrain from u.s. agricultural purchases, including soybeans, which we know was key as part of that

phase one trade deal arrangement. some analysis for a former u.s. trade representative and now the chair and ceo of hills and co. hearing beijing is reevaluating the statists of the trade relationship and some of these agro purchases in light of the u.s. reaction to hong kong. >> we are hearing the same thing. i do not think that we can know for sure. relationship, unfortunately, has been in a downward spiral, and it is very sad. we really need diplomacy, where both sides sit down and talk about their differences and try to work it out. we have not had a high level meeting. in the old days, you had these strategic and economic dialogues and brought top level leaders together. that has not occurred. it is a disappointment.

is that likely? in your experience, is that likely to occur in a geopolitical environment that we are in at the moment, considering some of the rhetoric that we have heard from washington over the security law in hong kong? carla: i think it is very difficult before the election. we have had so much animosity over trade, but it is not just trade. it is over how we have each handled the covid-19 pandemic. have a series of differences. that is why it is important that we handle that with greater anlomacy, but we are facing election in november. i think the current administration will be focused on that. is kind of an uncertain time. and how fastt

china moves forward with this national security law, that it andmposing on hong kong bypassing hong kong's legislative body, we do not know. it is all uncertain. the hong kong security legislation will not be enacted until september, ambassador, is there still time for the u.s. to recalibrate its sequence of policies towards big action is any taken, or will, as you mentioned in the november elections, will it not give president trump a choice given that he has a base to rally? carla: i think it is uncertain. we do not know what is going to happen. ideally, if i were recommending to the president, i would say slowdown. let's sit down and talk to china about our differences.

i don't think that is going to happen. is not certain that it would happen. i think it is uncertain that it will. problems.t some there is great unhappiness in the united states about the taking tona is hong kong. i am sorry that china is taking those steps because it only so ivates the distrust, think the reaction in the united states is going to have harmful effects both on hong kong, which is a financial center -- actually, we have about 1300 u.s. companies that have offices in hong kong. we have 85,000 u.s. citizens that live in hong kong who have been attracted because of the

british common law. we have something at stake. i am sorry. we have not been able to work out our differences. shery: all these tensions coming out a time when the u.s. is facing its own issues. ambassador, we now see the foreign ministry spokesperson in china prompting the united states, tweeting -- retweeting a tweet from the u.s. state department's spokeswoman, and adding the words "i can't breathe." these were the last words george floyd said before he died from from an encounter with the police. will this give leverage to beijing given the ongoing issues domestically here in the u.s.? that: i think domestically, for beijing, they will probably say look, they are having -- they are having

marches, and their resistance to government. that is probably more for the domestic audience in china. to try to take isr hong kong's security adversely being received by not only the united states -- they already have australia, the united kingdom, burton, and -- a number ofd countries i believe there are more than 35 countries represented by top-level policymakers that have come out in resistance to what china is doing. ifwould have been helpful china were to sit down and work it out. this is not an issue it should have taken on its own.

i am not saying that china is doing the right thing. to the contrary, i think it's actions are counterproductive, but i also think that our reaction is not helpful either. -- the have reacted actions that we are threatening to take are going to be harmful to hong kong, on for to u.s. businesses, and will not solve the problem that the western alliance sees and what china is doing. toward hong kong. our aeps we have taken remedy that do not fix the problem. haidi: we continue to see the bifurcation of global trade, the dislocation that we are already seeing as a result of supply chain dislocations and the blame game over the virus.

i am wondering what the kind of post pandemic outlook for trade is for multilateral trade. does this change anything when it comes to the tpp? does it change anything for these china led multilateral agreements? i am very worried. we are stacking up a lot of opposition to each other in the two -- where largest economies should be working together. i wish that the chinese and the united states were working in laboratories to find a vaccine, not hurling insults at each other. both governments made a mistake. china moved to slowly to advise the world about the problem. the united states moved to slowly to advise our states about the problem. for six weeks, we said it was not really a big issue. and so we did not begin to

gather the masks and the equipment that we needed to ofpond, but let's put both our actions that were not perfect behind us and try to work together. the pandemic is going to harm both of us. china, the united states, and the rest of the world. when all of us are harms, we each are more harmed. economically. because of what it does to our trade. it makes a whole lot of sense for us to try to work together and find solutions to our problems. our trust is at a very low level. shery: is that possible going forward? we continue to see the u.s.-china dynamic being framed as somehow something of a west versus east sort of dynamic. we have heard from secretary

pompeo saying that the communist party's intent on the instruction of democracies. given what we are seeing not only coming from president's administration, but also just the deep resentment towards china in washington, d.c. is the era of cooperation now over? not beingis certainly taken. in the united states, there is great shock about what is happening in western china with the uyghurs and the fact that the muslims cannot be muslim. i mean, we believe in freedom of religion. that there are differences, but again, i look around the world, and we have differing political and social and legal regimes from many countries that we get along with.

resists not just that we . i think it is a question of how can we work better together? the chinese government has become over the last decade far more centralized, less looking -- ieform, although i hope took some comfort in prime minister's words about focusing on the needs of the people in moving towards the market because i think it is in china's interests. i would like to cs working together to try and solve problems, whether it be pandemics or terrorism or climate control or a host of other issues that do not respect borders. thank you so much for your thoughts tonight, carla hills. we will have more on the outlook

for hong kong ahead and we will speak with the head of the office of the city and macau, next. also activist investor david webb will be joining us after that. this is bloomberg. ♪

haidi: the reserve bank of australia is expected to keep its policy levers unchanged at today's meeting as it braces for data that could show the crowd

28 year expansion run is coming to an end. our global economics and policy editor, kathleen hays, is here with a preview of the rba. how important is it to the central bank to a void a technical -- avoid a technical recession especially when others are headed in that direction? >> it certainly takes some pressure off governor phil lowe to make sure that does not happen. a lot of people figure what he really wants to make sure happen, technical recession or not, is to bring this back to the 600,000 jobs that have been lost in the impact of the virus, course,hutdowns, and of for the time being, there is not a lot of room for phil lowe to move. is ready to do something a lot more dramatic. avoidld like the rba to negative rates. if you look at this chart, you can see the reserve bank of australia rate, the key rate, is down to 0.25%.

the three year bond yield, that is the innovation by phil lowe in march, basically saying the reserve bank of australia will buy enough bonds, something else they started in mid-march, to keep the three year bond yield at 0.25 percent. they are succeeding. there is more downward pressure on global bond yields. they get help from that. the five year bond yields just under 5%. that is what we expect. we do not expect any big moves. in terms of this question of falling into recession or not, the thing is that gdp in the first quarter right now, if it turns negative, you have one negative quarter. two negative quarters in a row. we know that the country, the gdp down about 10% in the first half of the year with most of that in the second quarter. this is why we are waiting for that gdp report to come out tomorrow and let us know how it is doing. the big question is just getting the economy back on its feet,

whether they get a technical recession or not. shery: a smaller than anticipated shock on the economy. we are expecting the fiscal support to be revised downward. does that change the calculation a little bit for governor phil lowe? is going tonor lowe push as hard as he can, as he has in the past. even before the virus hit, i was telling the economy to urge scott morrison's government to hold onto money. they have obviously been spending money. some of the key nuts and bolts for the reserve bank of australia, phil lowe is not ready to embrace negative rates, not ready to start buying corporate bonds and any other kind of bond under the sign and he has already expressed a less negative view on the economy. the virus estrogens were lifted sooner than expected. last week, he said -- he talked about that when he talked -- he

had to say one more thing. the thing is, he warned the thernment to not end stimulus early because you might find the economy and worse shape. the rba is doing as much as they can. so i think that is why the policies should be very closely watched. consumer confidence rising for australia in the latest week. a positive sign the economy is doing better but not positive enough, not big enough for phil lowe to back down from teaming to suggest that fiscal spending is needed and it has to persist until the coast is clear for the australian economy. shery: our global economics and policy editor, kathleen hays there. before we head to another hour of "daybreak asia," here is how markets are trading at the moment. we are seeing more upside for sydney stocks. -- kiwi stocks although sydney futures are under pressure. first quarter gdp numbers. nikkei futures higher. along with kospi futures. the kospi at the highest levels

since march. we will have plenty more to come in the next hour of "daybreak asia." this is bloomberg. ♪

shery: good evening from bloomberg's global headquarters in new york. i am haidi stroud-watts in sydney. asia's major markets have just opened for trade. welcome to "daybreak asia." our top stories this hour. president trump says he will mobilize military forces to restore law and order as protests raged on across the u.s. the president says state leaders have been weak. asian markets looks at to follow wall street higher as traders

look past the protests and the coronavirus pandemic and rising u.s.-china tensions. those tensions are raising questions about the phase one trade deal as china suspends the buying of some u.s. farm goods. beijing's hong kong security law is straining those ties. startedet's get you with a quick check up on how markets are trading. most sectors in the green as we see the start of trade in japan. energy and consumer staples are leading the gains on the nikkei, which is higher by .3% and at the highest level since february. the japanese yen holding steady about 107 level. a little bit of upside there. against the u.s. dollar. this of course as we saw strength in the previous session. the japanese yen has held mostly steady at the 107 level for the past few weeks. take a look at what korean stocks are doing at the moment. we are seeing the kospi down

.25% so a bit of a mixed picture across asia at the open. this as we continue to see some gp members and eco-data out of finalkorea with the first-quarter gdp numbers being revised upward slightly. growth of 1.4% year on year. in cpi numbers were probably line with estimates, so on the kospi, energy and consumer discretionary, the clients of materials and real estate are higher. haidi: we are seeing a flat start to trading in australia. just kind of toppling into negative territory. we are expecting to see gains when it comes to gold stocks. they trade at the highest in months. we are seeing the reversal of risk appetite happen. you can see that materially when it comes to the trading in the aussie. the aussie had been sitting about 68 u.s. cents for the

first time since the start of this pandemic but we are seeing that retreat now when it comes to the aussie dollar also of course keeping an eye on the rba. certainly gauging the messaging from governor phil lowe as we do expect that gdp numbers later on this week to potentially, likely, show a slippage towards a technical recession. new zealand trading higher, almost 1%gains up by now. our next guest says investors are shrugging off political tensions, instead choosing to focus on signs of economic recovery and reopening from the pandemic. the global markets strategist, carrie cragg, joins us from melbourne. we have seen when it comes to itnsions, the trade -- be trade tensions or tensions for hong kong, the markets have really chosen to look the other way. is this still the case as we see thousands of soldiers on the

streets of the united states? curfews? that is surely going to have an impact on investor sentiment, consumer sentiment overall. >> good morning. it has been a case of focusing on the positives. a highly charged political environment at the moment. andill potentially continue that will see a smaller version to risk as this narrative unfolds. the bigger question when it comes to what is happening in the u.s. and the longer economic outlook, if this would actually change the view on control of the covid virus and lead to the shutdowns in the economy beyond the expected reopening because that is what the markets are focusing on, the fact that the world's largest economy is getting back on its feet even though -- the narrative is really about how much it would affect the spread of the coronavirus for second wave, just when the economy up. elsewhere in the world, we are seeing economic data improve,

and that is what really markets are latching onto, particularly when we look at how relatively expensive the sectors have become throughout the rallies and the march low. excuse me. is this also a market that has been so well-trained by the fed and in fact, well trained by the generosity and the expectations of other central banks around the world? plenty ofre's still instrumental support that would flow into markets, and we know of -- unless these programs go through, not all of it goes into the economy. it goes into asset markets. no one is worried that inflation at the moment is coming through. again, the ecb this week is likely to extend its purchase program by at least another 500 billion euros. we still have very accommodative policies around the world in developed markets, central banks, emerging market central banks, which have undertaken

kiwi in various forms or cutting interest rates as well so all that dose of art the equity market on a relative basis towards bonds and will continue to do so so there's definitely upside potential in equity markets for this point for the long term. that narrative does not flow line givena straight that there's plenty of political and economic risk that is present. shery: we are not expecting much from the reserve bank of australia, have we? kerry: it has been keeping a thin line when it is willing to act as needed. purchases of bonds, the key reprogram. we see the functioning of the bond market that has improved. borrowing costs at low levels. there is less of a need for the rba to intervene, in their view. that will reiterate the stance. may be some slightly more positive tone from the

government low today given the outlook for the economy and things that have been faring perhaps a little bit better than what was expected. the view on going into recession in australia, you think about what can happen for gdp numbers. beyond on whatd the economy looks like in q3 and q4 and beyond that given the changes possible around matt mika. shery: what does it mean for the aussie stock market -- net migration. shery: what does it mean around the aussie stock market? kerry: it is a large move. basically, it is a bigger market playing on growth for the rest of the world. we have supply disruptions in the iron ore that is helping support the local market in terms of the resource names. .ery low interest rate

at the same time, you have a banking sector which is on a relative basis looking more attractive for the risk of the market and that rotation continues. however, the big question comes down to the politics and the relationship with china should we see a trade war erupts between the u.s. and china and the need of sentiment for the markets and further souring of the australian and chinese relationship. might derive investor sentiment towards owning a market like australia. shery: do we see the sector rotation story continue? today'sooking at markets, you might see a breather in terms of the risk and political environment coming through. the economic data continues to improve. it is difficult to see it being impeded in the near term.

medium-term or longer-term, the continued rotation is in more cyclical areas of the economy. you need to see a lot more confirmation that growth is generally rebounding beyond just the focus of high-frequency data around mobility. the idea that consumers will really return to the same patterns as before. we have the staggered reopening going on. the other thing we need to focus on is bond yields, the fact that historically, to get a really strong sectoral balance, you need a much higher bond yield to think about the impact on net interest margins and banks and that is hard to see that happening when you have that downward pressure on government borrowing costs coming from central banks. very near term. outlook forn the inflation in bonds and also the outlook for the economy recovering as much as expected by the market at the moment. jp organ strategist,

kerry craig, joining a spit a joining. joining us is the head of the e.u. office to hong kong and macau and we will be speaking to david webb. but first, in the u.s., they are preparing for another night of protests as president trump vows a military crackdown. we have an update on the latest from washington, next. this is bloomberg. ♪

>> you are watching "daybreak asia." i am karina mitchell with the first word headlines. china has told agricultural companies to hit pause on purchases of u.s. farm goods as tensions with washington escalate. cosco and centigrade have been told to suspend orders of soybeans and pork and assigned the phase one trade deal --

premier li keqiang has pledged to stick to the deal but china's security law is training relations th. it will buy loans from local bands to boost lending in the real economy. the bank will use money from a separate program to buy maturities of at least six months with lenders paying a year later. the lenders will continue to earn interest from the borrower and will bear any losses should the loan turned sour. boris johnson is preparing a major policy revamp in the face of the worst recession in 300 years. the treasury is set to be planning to bolster the economy in the powassan virus world as the government wins its massive support program. johnson's policy addresses expect it at the end of the month and we are told he will reassert his wider message as brexit looms in the six months time. president putin launched a constitutional reform that could see him remain in power for another 16 years. july 1 will see a nationwide

vote on amending the rules until 2036. the vote was postponed as russia's coronavirus cases surged. putin --redits say critics say putin has been downplaying the coronavirus to maintain power. 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: president trump has promised a forceful response to violent protests across the u.s. after accusing state and local leaders of being weak. if a city or state refuses to take the actions that are necessary to defend the life and property of their residence, then i will deploy the united states military and quickly solve the problem for them. parentiloomberg's alisa in d.c., joins us now live.

what is the situation washington right now? alisa: after the president spoke in the rose garden, he walked across lafayette park and then visited the st. john's church, which is right across the way from the white house and has been a church visited and worshiped at by many presidents. they are going back several decades. the presidents messaging is basically first and foremost, he intends to crackdown on the lawlessness that he has seen, that we have all seen, the kind of violent rioting that has occurred with fires being sent and property being vandalized. he also seems to be wanting to show respect and be respectful. he talked about honoring the memory of george floyd in that, just clearing that pathway for him to walk from the white house to st. john's. they used -- jennifer jacobs,

one of our white house correspondence in her piece that she wrote about it described the protesters that were cleared. p for protesters. they were cleared out of the square when police forces used tear gas, compression grenades, and were on mounted patrol. that was a very forceful way, just in action, right there, as he discussed. in fact, you are looking at the pictures now, life. it was pretty remarkable, and you could hear a lot of the reporters that were set up in the rose garden. you could hear -- not very eloquent. i guess they are called, more appropriately, compression grenades. very loud. there were no rubber bullets, that he was a very -- it was a forceful movement of the protesters that were peaceful. clearing them from the area. that is basically where we stand.

shery: we have already seen a fractured to and fro between the states and federal government over the handling of the covid issue. are we likely to see that and are we seeing any reaction from the governors on this issue as well? governors have been responding to president trump. he, in a call with them, video call that was leaked to the media in the afternoon, he said you need to dominate. he was very critical of them saying they were week. illinois governor jb pritzker came back and has kind of responded, saying we need more resources. new york governor cuomo has been a little more conciliatory and has talked about how he has been concerned about some of what he has seen in video, so i think that this is going to play out in these localities. i wanted to mention president trump talking about the

lawlessness, and there is definitely a division between businesses being impacted by looters and vandals, and folks that are coming in and straightaway stealing merchandise, and peaceful protesters who want their voices heard, and how that is going to play out in the streets over the next few days and weeks, we'll have a big impact on who gets elected in november to the white house, but also in races across the country. shery:shery: what about the impact to the economy at a time when we are starting to see states reopening? alisa: yeah, you know, it is interesting. i spoke with a business owner in georgetown. that area has some very nice shops. not only are there large retailers that we have seen target cvs getting vandalized and losing property and having their property damaged. this is a small business owner who has a boutique set up on m

street in georgetown. she said this is not a protester. they basically drove up in a big suv. guys kind of unloaded the suv, broke the window, cleared out bashedher merchandise, it into the truck, and off they were. that is a very different type of behavior than the activity of people kind of holding science and demonstrating. that is going to be a real problem for these small business -- businesses that have been impacted, hundreds of them. larger impact will be difficult to say. ifthe spread of the virus -- we have a second wave as a result of all of these protests, that is another thing to think about that will hamper the reopening of our economy. bloomberg's alisa parenti

with the latest out of d.c. and of course, you can follow more on this story and the latest development spit all the other stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers, just go to dayb on your terminals. and it's also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get the news on industries and assets that matter to you. this is bloomberg. ♪

haidi: global coronavirus infections have topped 6.2 million now is more economies seek to reboot. sophie kamaruddin has the latest on the pandemic. that's a start with singapore. phase reopening after the circuit breaker today. what restrictions will be lifted? >> singapore will be kicking off its three states reopening and we will be seeing more people returned to work. banks among them.

they will allow staff to return to the office from this tuesday, keeping in mind that the monetary authority has advised that staff be kept to 25% in terms of headcount. in singapore, since the lockdown began, communications have been falling to zero. infections in migrant worker dorms are still on the rise with 400 eight cases as of june 1. in hong kong, four new cases have been confirmed. to evacuateneed people from the building in question. newor japan, we have seen sequesters emerge in tokyo. the health ministry reportedly approved testing of saliva samples from this tuesday. shery: asian policymakers now embracing bigger budget deficits in order to push in the virus impact. what is the latest? alisa: we saw india's data showing the budget gap sliding deeper into the red. this after missing the target

for the last fiscal year. some are forecasting the widest shortfall since 1991. this waiting fiscal strength has prompted a ratings downgrade from moody's to be aa three, the lowest investment grade. increasing calls for the r.b.i. to directly monetize debt. to date, the central bank will be looked to to provide a backstop for the rupee bonds for the south expected. companies from airlines to luxury condo builders are issuing profit warnings. expect more aid to be announced in the coming days, including $644 billion targeting farmers. forecasters are projecting a budget shortfall of at least 6.3% as authorities seek to avoid social unrest in the face of rising unemployment.

the 9 million are already out of work for the policymakers. challenges for authorities there. shery: sophie kamaruddin in hong kong. let's get a quick check of the latest business flash headlines. facebook workers are increasingly critical of ceo mark zuckerberg's lack of action. social media comments on president trump after he tweeted about shooting looters last week, twitter obscured the post but facebook was far more restrained, saying people need to know more. several senior staff have now declared their disagreement with zuckerberg, holding a virtual work from home walk out. the london stock exchange has found most participants want to cut the longest trading hours by 90 minutes. fromreferred day would run 9:00 a.m. to 4:00 p.m. rather than the current schedule, which was two hours longer than u.s. markets. its bond and say that would improve liquidity my well-being,

and diversity. they are awaiting the results of similar surveys across europe. towards a secondary listing in hong kong that could raise more than 2.5 billion u.s. dollars. the nasdaq listed company plans to sell about 170 million shares at a maximum price of 120 six hong kong dollars apiece. the former comes as u.s. lawmakers tighten scrutiny of chinese firms, trading in america. alibaba listed in hong kong last year, while jd.com is poised for a 2 billion u.s. dollars sale. chinese mentor is planning a hybrid car using batteries by byd. the deal with mark byd's first known battery supply deal with a global auto company and comes at a time when relations are strained between the u.s. and china. bynzhen-based byd is backed

warren buffett plans to launch more than 30 new or redesigned models in china by the end of next year. shery: -- haidi: let's take a look at how markets are trading in this asian session. we saw a pretty stark reaction when it comes to trading in u.s. futures after we heard from the president speaking about thousands of troops potentially being on the streets of the u.s. if that is what it takes to quash these protests but that has not flown on when it comes to sentiment in asia. the nikkei 225 seeing upside of .8%. we are seeing asian stocks extending on yesterday's rally. we have a bit of downside when it comes to trading in australia ahead of that decision. no policy change expected but washing out -- watching out for messaging around the potential for australia to fall into recession. new zealand trading higher as well. we will continue to take a look at the future of hong kong.

the e.u. says it is gravely concerned about the hong kong security law and the impact on businesses. that is up next. this is bloomberg. ♪

>> this is "daybreak asia." across the u.s., bracing for another night of protests as president trump slams local politicians for not coming down harder on demonstrators. new york city will be under curfew from 11:00 p.m. 5:00 a.m. after looting after the -- over the weekend. the president is mobilizing forces to restore order, telling governors they must be tougher on protesters. pres. trump: if the sea or state refuses to take the actions necessary to defend the life and property of their residence, i will deploy the united states military and quickly solve the

problem for them. >> popular chinese video at tictoc has apologized after the #black lives matter and george floyd were marked with zero views. there were accusations of censoring. the display glitch affected a variety of posts. india's credit rating has been cut to the lowest rating amid a deteriorating fiscal position. a negative outlook comes as [inaudible] india has a raised most shareholders. the coronavirus suppressed travel. sales by value fell 6% from a

year ago. the 15th consecutive monthly decline. byail sales by volume fell 30%. hong kong recorded its worst quarter on record. 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. bloomberg. voicedeuropean union has sweeping new national security legislation in hong kong. by thee, we are joined head of the eu office of hong kong and macau. great to have you with us. tell us, how unified is the european union when it comes to the national security law being passed in beijing given that we have seen some cozier

relationships with some members of the european union and beijing policymakers like italy and hungary, not to mention more cautious members like germany and france? ? as you have said, the european union and 27 member states have declared several times great concern for the action taken by beijing. we think these undermine the one country two systems. --do not question [indiscernible] 27 member states, how this is used. democratic -- the european businesses have voiced concern.

impact ittimate the has on confidence. >> any actions on beijing because of this? calibrate our actions on reactions. we are following very closely. [no audio] fors there any room confrontation at this point? now, there are question marks. the? also comes from our people. kong, we havehong 1600 european companies.

it is more than the number of companies -- >> we will try to sort out your audio and get back to you. south africa's reserve bank governor is warning against unrealistic expectations of what can be done for the economy. take a listen. >> this is not a full opening of the economy.

-- by the time we get there, we will have enough data. >> limits to the role central banks can play as you said. is there room for a conversation about running the mandate. what is the limit of action here? >> the mandate can shine in the constitution of south africa. it spells out the price stability.

taken the economy, in i think this is important. central bankers are seeing the engagement, but we need to be very clear. institutions, particular instability, it is institutions that make their position about lending and -- notng allow us to into spending deficiency. divisionsivisions are

of the public institutions. there is no doubt this is taking place around the world and central bank's are engaged with the discussion. anna: you currently have a 3.5% stretch between the lending rate central-bank supply over the south african reserve bank repurchase rate. >> are you interested in bringing that down? there unrealistic coming from

-- and becausere they think we can use the social bank to solve all societal problems -- >> that was the governor of the south african reserve bank. this is bloomberg. ♪

>> the european union has expressed grave concerns over the hong kong national security law and its impact on business. let us get back to the head of the eu office to hong kong and macau. ambassador, thank you for sticking around. what are you hearing from european businesses right now working in hong kong? have 1600 european

companies in hong kong. it is more than the number we have in japan or the u.s. and it is getting close to the number of companies we have in mainland china. our companies are here because they are enjoying a different system. a system which provides rule of law, which protects basic rights and freedoms. they do not have censorship of the internet. you have facebook. you have freedom of expression. is value of hong kong definitely the one country, two systems. wait mood.re in a some of them were already affected by the economic slowdown and the recession in the last month. we do not see any immediate movement. but medium to long-term, the companies will have to review strategies. things inn impression hong kong are moving.

isthe security legislation being worked on. what conversations are you having with beijing or hong kong on what can be included? >> the legislation is being drafted. what we are asking the hong kong government is how much the hong kong government or the institutions are involved in the process and how much it is a concern of hong kong taken into consideration. --are reader rating our view reiterating our view. >> ambassador, are you hearing practical discussions about what alternatives there are to you -- to businesses? situation,the perhaps look forward to a level

of certainty that any legislation could bring? npc andecision of the the many comments about the legislation and the draft process, uncertainty, and pretty -- price stability could be good for business. china will not win either because they need hong kong. they need hong kong. also as a gateway to the world. to raise capital for the chinese companies. the thirdis also renminbi offshore center. the strength of hong kong is based on one country, two systems and trust in the principal.

>> welter tips are being discussed? what are the alternatives for businesses should a worst-case scenario arise? now, it is the moment of unpredictable and. there are not so many options if you are thinking about the location. in this time of crisis, our companies will not move. medium to long-term, strategies will have to be reviewed. we do not tell our companies what to do. it gets backrtant on the principle of one country two systems. we see it being eroded and undermined. will beijing's crackdown on hong kong help accelerate european efforts to

have a more unified response to china's influence? >> i think the european union has been united. in the reaction and the answer. it is quite rare we have this kind of a statement, and it concern, a united reaction. >> the u.k. has now announced they are considering whether or in to give british nationals hong kong a path to u.k. citizenship. what does the future for hong kong hold? >> we will need to see how it materializes.

regarding what will happen next, i think we are waiting to see how this legislation will come out, how it will be implemented. let me add that part of hong kong is that it is an international city full of talented people. you have the best journalists, the best professors. it is built on this international identity of the city. we hope it will remain like that. important one is country, two systems is fully restored.

lots more to come on "daybreak asia. we are going to get continued analysis when it comes to the situation of frayed trading relations and the diplomatic route between the u.s. and china. ♪ are seeing protests in hong kong. turn to washington dc. ongoing protests across the united states as well as is an trump promised a forceful response to violent protests across the country. we are talking about a seventh day of unrest. you are seeing live pictures in washington, d.c.. theave seen violence across u.s., from chicago to new york. new york implementing a curfew as well. ♪

>> investors seeking exposure to hong kong's economic engine helping fuel its status as a leading business hub. financial services contribute 20% of gdp from 10% to decades ago -- two decades ago. we are joined by david webb.

great to have you with us. we have seen president trump now threatened revoking the special trading status of hong kong. what does the future of the city as a financial hub, a trading hub, hold? it does depend to a large extent on the extent of the overseas reaction, including from the usa and other major partners like e.u.. u.s.ld expect that approach to be incremental over time. they have only passed a list -- a resolution there should be a law. if, for example, it involves censoring the internet in hong kong, that would be seen as a big no-no. and might block facebook twitter. if they were seen as suppressing insurrection in hong kong.

on the other hand, if it was a very narrow-focused law of the type that was proposed in hong kong in 2003, the only time they tried to pass legislation here, i would expect more measured reaction, perhaps sanction from individual officials. the sort of thing that damage theirectly trade and business environment in hong kong. there is not much to commit on by standing duties on hong kong. asorts are usually treated chinese exports. the more any country ceases to some degree greater or lesser today recognize hong kong as removes --al, it china can say you are special,

but if nobody else recognizes it, it does not really work. not only toslation, avoid ambiguity for investors, but also just the fear that a vaguely defined law could lead to broad enforcement. >> you might have concerns, for foreign for headquartered employers in hong kong. subsidiaries in hong kong of american banks for trading multinationals. they might be liable for the actions of their employees. a large proportion of hong kong supports the call for greater democracy, or proper democracy in hong kong and even democracy in china. they might become concerned difficulty of getting into hong kong to work in the first place.

there is already a brain drain going on, partly of hong kong-born people migrating overseas for a more stable and better future, and also now, since the protests of last year, there is a very -- a great difficulty attracting expatriates to bring skills into hong kong. as current expatriates rotate out, it is hard to get people in. that also includes things like schoolteachers. the international schools find it harder to get people to come. the brain drain effect could damage the economy. that is something that is of great concern. >> is the enduring resilience of the capital markets and the financial hub operations in hong ing working against the city

driving necessary change? we have seen the markets resilience over the last 12 months or so of protests. we are seeing a healthier ipo pipeline with the number of chinese companies coming back home. holdshe fact that that almost work against the city and the pro-democracy protesters and that there is not a real belief hong kong will be affected? >> you have to remember, more than two thirds of the hong kong stock market as mainland companies. the value of a company like tencent, one of the largest ones, is not affected by street protests in hong kong. businesstiny part of in hong kong. compared to the rest of china. -- value of multinational i'm sorry, of chinese enterprises listed in hong kong is not much affected, except if you start to get capital

evenrawal and possibly what i called last year, a year ago today i wrote an article on the possible escalation of the trade war into a capital war where the u.s. could, using the foreign control of the u.s. theirry, have all of state owned enterprises, somewhat inconsistent with complaining about protection of state owned enterprises and investing in them at the same time. that could have a big impact on valuations. because of the withdrawal of that foreign capital. >> great having you with us. activist investor david webb. live pictures from the united states as we continue to see ongoing unrest. this is washington, d.c. after president trump pledged strong measures to counter violent

protests. plenty more to come. ♪ ome. ♪ when you say what you're in the mood for,

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>> it is 9:00 a.m. in beijing. welcome to "china open." president trump says he will send in the troops to restore law and order as protests rage across the u.s.. the president says state leaders have been weak so far. asia-pacific markets are generally higher, though u.s. futures slide as traders assess th