>> welcome to "daybreak: asia." i'm shery and in new york. to there counting down markets. the top stories this summer. concerns the global rally has overshot economic realities. the nasdaq, slightly topping 10,000. in u.s. a strong rise crude inventories.

focus with back in more job cuts in the wake of a record loss. >> let's get you started with breaking news out of south korea. the unemployment rate for the month of may, coming in at 4.5%, much higher than economists had expected. 392,000 jobs were lost in may from a year earlier. 4.5% would be the highest level since 2001. this would be the adjusted jobless rate. we have seen losses of jobs when it comes to the hospitality, retail, and manufacturing sectors. pressured because of weakness in global demand. there was some positivity over easing social distancing. for the month of may, it seems the unemployment rate has jumped in april, the.8%

highest level since 2001. theing us for more is jpmorgan chief economist. great to have you with us. that seems to be much higher than expected. his it just the -- is it just the tip of the iceberg given that we are expecting external demand to continue to be weak for the time being? >> good morning. yes, that number is higher than our expectations, indeed. that is showing a rise of 3.3% since february. this is because new lee unemployed workers -- newly unemployed workers were suddenly

outside the labor force and have not been reflected in the not beenumber -- had reflected in the jobless number by april. i think this rise of the unemployment comparative to the other economies. the instability we see from the covid-19 shop. >> how healthy is the south korean labor market? we continue to see numbers that are not as bad as expected. not just during the pandemic, but even before this. a lot of it came from government job creation efforts. are these real job gains we have seen in the past? tell us a little bit about the health of the labor market ther e. jobless number,

the more stringent measures for the may not fully reflect workers. looking through the labor considering also the other indicators, we saw the korean labor for 2018s holding up and 2019, even with the geopolitical tension with china on exportse drag last year. makes the19 shock

data complicated, but we still think korea has been successful in containing covid-19 without locking down the economy, through tracking exercises, and also high-frequency educators come us -- high-frequency educators, such as the social cost an -- social distancing. >> at the same time, korea's economy is so super vulnerable to the downside of global trade, volumes come and sentiment. i'm wondering, given the trade, volumes, and

sentiment. i'm wondering, given the deflation, what do you see in the data? >> given though we have --hlighted korea's growth that we have highlighted korea's growth as relatively resilient, it is inflationary through core prices. the korean won has been relatively stable during the recession. headline think korea's inflation rate will mark .1% throughout this year. negative territory for the month -- for the second half of this year. backdrop,e policy references have sh

ifted toward financial stability. >> which was a disappointment for markers in may. will they revisit the idea of government bonds or establishing a bond buying program? >> the bank of korea's communication has consistently front.adual on that ,he governor's commentary was in principle, they will step in if the market is on stable. think the bank of korea's measures will be more gradual. think we will have to be -- i think we will have to have surprises in the covid-19 outbreak number or the global pandemic decision, or the close

outlook. i don't think one data reading from unemployment makes the bank gradual approach very different. >> we have also seen fiscal stimulus measures really come into play in south korea. 14% of gdp already when it comes to the government response to the pandemic. how will this help in stabilizing the economy? >> actually, we expect korea's annual gdp growth will be growing year-over-year in 2020. that is helped by korea's success of the contagion, but also including the fiscal stimulus package by the government.

the chief korea economist, --ing us for your joining us. thank you for your time. some breaking news -- nc. says the chairman and will resignounders resigne effective june 9, the protests -- there are protests after the resignation, saying he has them is to commit time to other businesses. he is an investor. fairly controversial given the scandal that has plagued that company. c. to be caused car in volatile in the

last three months. he seems to be a member of the nomination committee. let's check in on markets at the moment. we have that reserve of sentiment. the pullback that was expected after the s&p 500 losses for the year. this concerns the global rally -- there are concerns the global rally is overheated. futures, up about a 10th of 1%. the nikkei futures, up about 2/10 of 1%. we continue to see declines for the dollar. about 1%tures, when we get into the cash trading session. highestading at the since early march. more to come. this is bloomberg. ♪

>> you are watching "daybreak: asia." new surveys and decay coronavirus cases in south asia are increasing at the fastest rate in the world. salvation and latin america are seeing the most infections, with 136,000 cases reported on sunday. the most in a single day so far. newly three quarters of them came from south asia and latin america. outlookatings cut the for japan from positive to stable on the plan to tackle the followed from the coronavirus. covid-19 setback fiscal stabilization, but they expect matters to get back on track in the next 2-3 years. the government packages around $2 trillion, with a record second extra budget last month. mass protests return to hong kong a year after the first

anti-government demonstrations. they converged on the district, defying orders of unlawful assembly. the chief executive, carrie lam, once financial integration with china amid concern about hong kong's future. here in the u.s., george floyd has been laid to rest in his childhood home of houston, texas. floyd was remembered as a father and a brother and potentially a force for change after his death in police custody sparked outrage. the 46-year-old has become a global symbol of injustice, with mourners saying his death can help change the world. 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. >> staying with the followed from george floyd's death,

republicans in the u.s. senate are drafting legislation to tackle police practices, release of a bill by democrats. emily will constraints us on the line from washington. is this -- emily wilkins joins us on the line from washington. you still have to see what republicans are going to propose. a party thats is is big online order, which you have seen a lot from president trump in the last few days, but they have put together a task force. the leader is senator tim scott, the only black republican only serving -- currently serving. require a will law-enforcement agencies report public injury,e, that is something we saw in the democrats' bill, we have seen republicans come out supporting a ban on chokeholds, also a

point of agreement with the democrats. >> even as the protests simmer down, president trump continue to feed the flames with this instantiated sweet. -- unsubstantiated tweet. >> this was a video of a man coming toward police, not only does it show him appear being pushed to the ground, but none of the police officers go to help him. the one that seems to attempt to help is turned away. you can see a pool of blood forming under his head. it was a very emotional video. it was a video that really triggered concern and talks on what was already there. trump today suggested that that individual was not actually trying to help, that it might have been staged. at this point, so many things in our world change in the last couple of months -- changed in

the last couple months, but trump's tweets have stayed the same in a certain regard. many have tried to distance themselves from the tweet. need fax to substantiate that, and until this time, you have not seen facts to substantiate what is in that video. show that somebody was pushed, not that it was staged. >> emily, with the latest. u.s. job losses were's are many tonumbers relating consider a second stimulus. the white house chief of staff, now islvaney, thanks that -- thinks now is not the time for more payments. >> mitch mcconnell was there at one point. maybe it is a good idea to wait.

not all of the money has been distributed out of the first program yet. you have seen an uptick in the jobs numbers. maybe now is not the best time. i'm not saying we should not do one ever, but it may be too soon to do it effectively. when we start throwing hundreds of billions in julian's of dollars at problems, one of the things we get -- and trillions of dollars at problems, one of the things we get is lost. to better plan now would be take a deep breath and see what happens in the next 60, 90 days. >> the president has really been talking more frequently about the issue of the payroll tax. do you think that could be a potential solution, or does that not have any appetite from democrats, but republicans in congress? >> i don't know about the appetite. i don't know the president said some good things in the past. one of the challenges you face

is it is not very stimulative. it is a way to get more money into the middle class, but not the most stimulative type of program that you can have. that being said, it's better than an unemployment scheme that these people not to work. similarly, going back to work bonuses are probably not the most effective way to get an economic jumpstart, but it is giving people an incentive to stay home. you have to look at it in a relative scale. best not to dos the worst thing. if the next e-mail us, -- if the next stimulus comes in the near future, as long as it does not rp things for the worse, you will be ok. that thereworried might not be an incentive for people to go back to work, especially if they are

potentially making more money on unemployment? how do you make sure that does not happen? >> there absolutely is, there are folks who make more money staying home. there has been anecdotal evidence, it does not equal data, but there are stories at folks getting mad at their employer for not taking the program because they wanted to take the unemployment payment because it is more than they were making working. those types of misaligned incentives are problematic, and they are rife when you rush through large government programs. i think it is a disincentive to work right now. i hope the program is not renewed when it comes up in july. it does not mean you cannot do something else. >> i want to ask you about this issue of local austerity. so many across the country are hurting from the pandemic, hurting from having to close down. there's been unrest throughout the country. how do we combat the issue of local austerity at the time when

so many local budgets are hurting? >> that is a decision localities will make. minneapolis is looking at defunding the police. which i think is absurd. if that is what they want to try and do, they are democratically elected, i say give them a chance to do it. be the american experiment to see if it works. i honestly do not think you will have a lot of folks rejecting this until you see what it means on the ground. i'm not a fan of the federal government coming in and saying or fore to do x, y, z, them to come in and they'll out towns and cities -- bail out towns and cities. localities have the decision to the best of their ability. >> that was chief of staff, mick mulvaney, speaking to bloomberg's kevin cirilli. this is bloomberg. ♪

vision fun is expanding its job cuts after reporting record losses the last fiscal year. what is the latest on this? >> good morning. we are now hearing the vision fund is likely to cut as many as 80 employees. probablyncement will land sometime today. this is not a surprise. we knew the cut would be about 10% of the workforce last week. it is now about 16%. untils a group that recently, the major source of profit for softbank [indiscernible] but it became the biggest source of losses.

some sort of reduction in headcount is not exactly a surprise. we hear that they are trying to cut costs as much as 20%. >> what does this mean for the and instability to manage the portfolio? >> it is an interesting question. vision fund has already stopped investing. they have spent more than 85% of their capital. you get into the cuts, you realize about 50 people of those 80 will come from the operating division fund. these are folks that are not direct skill making but building the portfolio companies, helping them is persevere through this crisis -- helping them persevere through this crisis. questionsing some

on whether the fund can actually look after the portfolio they have invested in. reporter,chnology el, thank you so much. kyle bass is starting a new fund with an all or new wager. the founder of payments capital manager will leverage the new funds asset by 200 times. gather outsidell gains. the dollar is still intact after 18 months. hsbc and standard charters are being reviewed by a top shareholder for their support of china's sweeping security laws for hong kong. david cummings says he is "uneasy" about the decision to back the legislation without knowing exactly how it will work. he has its companies make political statements, they must

accept the corporate responsibilities that follow. hong kong have -- hong shares werese oversupplied by 360 times. they are now going up to 20 million shares, while the number of institutional investors will be reviewed to 150 million. trading begins tomorrow. .p next, the smart money at researchresearch affiliates joins us with more. this is bloomberg. ♪

>> u.s. stocks falling today. let's get a check of how we are setting up in asia. >> the optimism seems to be fading. futures pointing lower in asia. stocks have swung to the downside. s&p looking little changed. overall, risk likely to be taken off the table. the rally looking overheated. $225 billionledged to cushion the virus impact. the outlook still looks dire and employment is not expected to improve.

koreabless rate in south just reached a 10 year high. oil, we are seeing prices retreat. decision, on the fomc treasury futures are taking higher while the dollar is trading about steady and the yen holding onto a two-day gain. proxy, aussie dollar, unable to hang onto that 70 handle. heidi? haidi: investors are taking a break from this rally. let's get some ideas and a little bit of wisdom from mike, the head of research. i want to start by throwing up this quick chart that shows where we are at in terms of global stocks. since that bottom that we hit in

march, we've seen $20 trillion worth of value being added to global stocks market cap. in light of all this, i know you say every great investment starts with discomfort. where are you finding discomfort in this market? >> thanks. say that the rally has not been as wide as we thought it would be. it has been focused on stocks. value more in the stress stocks, the ones that are looking like they might survive. the ones that are linked to future inflation, such as property trust, small-cap stocks, commodity and

resource-related investment. these are ones that have done poorly compared to other securities, but that is where the value is hitting. haidi: we have started to see that rotation story, from large caps to small caps, from growth to value. do you expect a broadening of the market? >> i do. that covid isw is morphing into a traditional recession. i think this rally took everyone by surprise. get good or bad news on the economy. but we have been overdue for an economic slowdown.

we will see rising unemployment, less jobs coming back, as the different colonies are reopening. to your point on finding some bargains, we are seeing investors pile into these airline stocks. seeing a record inflow on this monday. there's a lot of optimism about reopening. are you willing to bet on some of those sectors like hospitality, retail, travel, that have taken a disproportionate hit, or is it too early? signs of the strongest that we are morphing into a traditional recession is that there was a massive jump in april. we have seen traditional savings

5% and 10%. between this is expected in a recession. people get scared about their job prospects. is it lowers spending and it lowers the demand for work and creates that entrenched unemployment. we also saw personal income down in march in the u.s. we haven't got data from any other markets. this is just the u.s. means that a very large amount of capital had to

go somewhere. shery: what are you expecting the federal reserve and other central banks to do? will they take more comfort in the fact that we have seen payrolls coming in stronger than expected, or is it just, keep it low until things go slightly back to normal? inthere's been a shift governments throughout the world toward much more deficit spending. economists have been saying for over 10 to 15 years that inflation is coming and it hasn't reared its ugly head at all.

that's a bit of skepticism central banks and the government need to be sort of careful in their spending. i would say the money supply will increase. they need to keep the corporate bond market open. we don't want to see a repeat of the credit crisis in 2008. went under or couldn't rollover their debt. they are more focused on keeping those markets open. the yields are being managed and as a result, you are not going to be compensated. how appealing is the emerging market space?

particularly in china, the equity recovery being driven by a recovery in small caps. if we take china, the yuan, the downside of the dollar, do you see opportunities in that space? markets, rightfully so, are much more global. fact that you are getting -- this has been driven by confidence, by people saying that they are through the worst of this. the expectation there has been overbought. stocks, stocks that do quite well, haven't

rallied as much as the small-cap stocks. theres some inconsistency . shery: thank you very much for your time. the marketsmore on and also other stories you need to know to get your day going on today's edition of daybreak. go to your terminals. also available on mobile. we have plenty more coming up. this is bloomberg. ♪

shery: this is daybreak asia. the imf says the risk of default among the poorest nations is rising and wants creditors to offer debt relief. the managing director told the u.s. chamber of commerce that they would provide time for restructuring. private investors said they may offer low income nations extra $400to ease the burden of billion in debt payments. palestinian authorities threatening to declare an independent state if israel

presses ahead with annexation plans in the west bank. israel aims to claim the strategic jordan valley and dozens of settlements in the occupied territory. the prime minister said such a move would have serious consequences with further tension between the two sides. kuwait has become embroiled in the search for the man accused of leaving behind malaysia's scandal. according to a report, he traveled to kuwait to escape a notice for his arrest. it also reports a money trail through the gulf and says low was known to have ties with the kuwaiti royal family and the son of the country's prime minister. hundreds of protesters converged on hong kong's central business district, defying police warnings. it marks the one-year anniversary of the first major

against china's extradition bill. yvonne man joins us from hong kong. a year on, where do we see the pro-democracy movement heading? >> you have to wonder where they are one year later. they haven't been able to draw the same crowds we saw a year ago. this was a smaller crowd on tuesday night, but they disrupted traffic in the evening. police had to fire pepper spray according to some reports. the city does still have a social distancing restriction for gatherings. but you bring up the video from a year ago, it was a much bigger scene of one million strong in this pro-democracy movement that hit the streets over the extradition bill, which forced the government to scrap that legislation, but it kicked off months of protest.

this movement has now evolved into much more. and thisor democracy controversial legislation that china has pushed through, raising concerns with hong kong's autonomy. there is a sense that the pro-democracy people are scared to turn out in big numbers due to the coronavirus. we do see tensions building between the u.s. and china. we heard from u.s. senators, urging the government to take in hong kong residents who want to flee the region. they say some hong kong errors are seeking refuge outside the region. this follows the move the u.k. did, proposing to change its immigration rules to make it easy for hong kongers with british national overseas passports to seek refuge. shery: given all the challenges hong kong faces, not surprising

that there is a new bet against the hong kong dollar peg. >> he's long said that the hong kong dollar peg is doomed and now it seems like reportedly he's doubling down on that bet. according to our sources he is setting up a new fund, all or nothing wager against the hong kong dollar. it is designed to get big gains if the hong kong currency tumbles against the dollar. investors can also stand to lose all their money if the peg is intact. unclear how much money he's raged so far, but this is an audacious trade even for the likes of kyle bass. you also have investors chiming in. sayinghareholder of hsbc it is uncomfortable about the

decision to back china's national security law. haidi: cathay pacific set to resume trading this morning after getting that lifeline from the hong kong government. what more do we know about what this bailout entails? >> this is a rare move by the hong kong government. pacificrman of cathay saying this was the only option they could go by here in order to avoid a collapse of the carrier. cathay will sell shares to the government. they also proposed a rights issue. the government connected entity because aviation 2020 is extending a bridge loan.

at the end of this, the government will own about 6% of cathay. other shareholders will have their holdings diluted. qatar taking a 9.3% stake. cathay has also talked about, there could be some more job losses. proposing another round of voluntary paid leave. some analysts say the bailout from the government is a good thing. financial strength and credit rating will get a boost from this announcement. cathay shares along with air china resume today. shery: yvonne man with the latest from hong kong. we will get more on the outlook for cathay and the broader industry later. shipst, how disney cruise

are sailing into trouble in a rainforest in peru. we will bring you details. this is bloomberg. ♪

2011 disney launched a massive cruise ship. butas instantly profitable, in environmental terms it has been sailing into trouble. it is ensnared in a rainforest

in peru. with us is investigative journalist zach. he joins us for bloomberg green. zach, let's start with disney. a major producer of emissions, but it is able to reduce them on a spreadsheet. explain how it does this. >> disney, as you know, does a lot of things. they have theme parks all over the world and television stations and movies. but the thing they do that produces a lot of emissions is the cruise ships. expanded, they decided to try to do something to lower emissions. forestsically financed a in peru and tried to keep people from chopping down trees there and tallied up all the carbon they saved from entering the

atmosphere and count that against their emissions. shery: to put things into context, just how connected is disney to the forest in peru? >> disney partnered with a multinational nonprofit called conservation international and essentially paid conservation international to start this forest conservation project. once it got going, disney would buy carbon credits from the project. the project is being funded through the sale of these carbon credits. butey bought most of them, a few other companies bought significant amounts of credit from this one forest in peru. shery: we are seeing internal conflict, right? how is this complicating the issue?

>> you might think of preserving land,rest as being virgin keeping people off of it, but this is a forest that was owned by the state, but that thousands of people already lived on kind of illegally for generations. been kind of trying to kick them off for years. suddenlyey came along, the government had a lot more money to hire rangers and put up signs and try to police the territory for the thirst -- the first time. that kind of inflamed conflict with the locals. haidi: how does this continue to play out? business. cruise

what are the implications going forward? business ise basically shut down locally. when it does restart, disney is actually building three more cruise ships. sevenill have a total of when that construction is complete. so their emissions are expected to keep rising pretty significantly. they may very well be more dependent than ever on these carbon offset projects to maintain their goals of lowering their emissions. haidi: thank you so much for your time. zach mider with that story for us. let's get you the latest data when it comes to japan. japanese cpi for machine orders coming through. let me just get you that data

up. just giving an indication as to where we are seeing the recovery. month, coming in at a decline of 12%. much worse than the decline we were expecting and certainly worse than the slight contraction in previous months that we saw in the month of march. that is a contraction of almost 18%. when it comes to producer prices, we are seeing deflation of about 0.4%. slightly worse than inspected, but an improvement on april and that year on year number is a contraction of 2.7%. still in deflationary territory when it comes to japanese producer prices. let's get a quick look at how the markets are trading when it comes to the japanese yen. dollar-yen continuing to react

to the u.s. dollar falling from nine straight sessions. sincengest losing streak 2006. elsewhere, we are seeing a continuation of the cautious pullback after that global rally. for ae new zealand down second straight session. sidney futures will open weaker by about 1%. the nikkei also seeing some weakness going into the open. shery: let's get a quick check of the latest headlines. apple is said to be ready to move to its own processors for mac computers, replacing intel chips as early as this month. sources say the annual developer conference will be given the news to allow delegates to adjust to the plan before new macs next year. the new processors are expected inbe based on the tech used iphones and ipads. boeing fails to sell or deliver

a single one of its marquee dreamliner's, highlighting the depth of the coronavirus crisis, even as stocks soared. shares are up around 75% since the start of may. boeing shipped just four commercial jets last month. says it has been hit by a cyberattack that disrupted internal systems and forced the closure of some plants. production has stalled in ohio and turkey as well as india and south america. japanese plants haven't been affected and hondas factories in the u.s. have restarted production. up in the next hour of daybreak asia, we will preview china's inflation figures. the market open is next. this is bloomberg. ♪ you doing okay?

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haidi: i'm haidi stroud-watts in sydney. asia's major markets have just open for trade. shery: i'm shery ahn. welcome to daybreak asia. asian markets are looking at declines today after wall street pulled back on concerns that the global rally has overshot economic reality. softbank is back in focus with deeper job cuts. -- vision fund has seen [indiscernible] cathay pacific will be in the

spotlight later as the stock returns to trade. it says its $5 billion bailout is the only way to avoid collapse. haidi: let's get straight to the market action. we've seen a global pullback take place. taking a look at the markets starting off here in asia. what do you think? >> kicking it off with tokyo, the nikkei falling below 23,000 points with another data point to consider. falling loweran than expected for april. the yen easing its earlier loss but still near a high. turn to south korea. the latest jobless numbers jumping to a 10 year high. the kospi up 0.1%. up korean won trading

against the dollar. in sydney, reid is outpacing fear. the asx 200 up. after tuesday's reversal for the aussie dollar, we are seeing it stable at 70. let's check in on u.s. futures. we are seeing some swings. a move to the upside while the dollar is trading steady. keep an eye on trash treasuries. we could see yields move lower. we have seen a flattening trend as we await yield control from the fed. checking in on oil, we are seeing moves to the downside. view of trying to get a this asian stock rally. here in hong kong, the hang seng is trading at 2003 lowe's

against its peers. prompting the hong kong monetary authority to continue suspending the peg. it resumes trading after the bailout was announced the stock has been -- at credit suisse. haidi: that concern that the risk rally has run too far feeding through the asian session. mark joins us on the line. we are seeing risk off on almost everything. actually i see this slightly different. it is very hard to find a single equity market that is down from friday's close. continued at the crazy pace we've seen in recent weeks, but it is hard to say any market is risk off. i think we could see a several

percent decline and still be in that general risk rebound mode. i think we will see some risk aversion. about 1% or 2% off three-month highs. i don't think it is a reason to panic yet. i think the coronavirus is coming back. think that is one issue. and we've already seen the bear market capitulation after job numbers out of the u.s. ofve kind of seen the end that forced buying phase. rather than seeing risk aversion, we are seeing a pause at the highs because the pressure has ended. now it is going to turn to more two-way volatility. what about the u.s.

dollar? does the dovish fed really extend this nine days of losses for the greenback? >> i think absolutely we do. the dollar has become more key than ever. part of that is the fact that we are seeing the end of u.s. exceptionalism. i don't think the u.s. exceptionalism story was ever an economic story. most of asia was growing much faster than the u.s. now we are seeing the fact that u.s. asset are extraordinarily expensive. and you also look at treasuries and that applies to the dollar. the dollar is expensive. the risk assets in america are no longer as cheap. we are seeing the end of

american exceptionalism. i think there will be more two-way volatility and we have this very obvious risk event where there is a lot of room. the last few moves have been driven by this story of extraordinary stimulus from policymakers around the world. it is going to be very hard for them yet again. bass: we again had kyle betting against a hong kong currency peg. what do you make of it? he's been returning to the scene many times. if we are going to bet on the dollar hong kong peg breaking and because hong kong --

wouldn't it make more sense for the hong kong dollar to connect the chinese yuan? i still believe that is much more likely. while i don't think the peg is going to break anytime soon, you are seeing extraordinarily little pressure on it. billions,o they have but they have the pboc behind them. there's very little real pressure. we are seeing the hong kong property market hold up. there is no real pressure. it seems to be a story encouraged out of the u.s. if we ever do see the dollar hong kong peg break, it is more likely to break on the downside. mark, thank you very much for that. you can follow more on this story and all the trading in our markets live blog at mliv .

analysiscommentary and from bloomberg's expert editors. ahead, cathay pacific avoids collapse with a government lifeline. with record losses this year. coming up next, china's main inflation rating is due out in the next hour. we will be previewing the numbers. this is bloomberg. ♪

shery: you are watching daybreak asia. return to hong kong a year after the first antigovernment demonstrations. protesters converged on the central business district, defying warnings of unlawful assembly. at least 25 people were

arrested. chief executive carrie lam says she wants closer financial integration with china. the imf says the risk of default among the poorest nations is rising and wants creditors to offer debt relief. the managing director told the u.s. chamber of commerce that it would provide time for restructuring. private investors say they may offer low income nations extra cash to ease the burden of debt payments. itsal ratings has cut outlook for japan. says covid-19 has setback fiscal stabilization, though it does want to get back on track. the government packages about $2 trillion. there is more evidence the pandemic is hurting japanese industry.

more than 50% from a year earlier. fallingere already before the virus, but the fall implies the outbreak is having a deeper impact and that recent data may overstate resilience in capital spending. global news, 24 hours a day, on-air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm karina mitchell. this is bloomberg. shery: we will get another reading of china's recovery later. further.ave slowed saysberg economics deflation should highlight the need for more stimulus. liu, great to have you back. when it comes to stimulus, will it be fiscal or monetary policy, given that so far we have seen

the pboc refraining from big action? becky: we believe china's upcoming stimulus package will be a combination of fiscal and monetary policy. will take aicy supporting role. have monetary policy changing, not in terms of interaction, but in terms of the way of how to ease monetary policy. that is a substantial rebound. but we do not see a change of the direction here. two more directly channel liquidity into loans rather than interbank markets. shery: what does this mean for existing channels like medium lending facilities? becky: it doesn't replace the medium lending facilities.

continue to forecast china's future policy rates framework. has been further cementing a role by fixing its operation date each month. it will become almost like a semi-official policy rate going forward. it goes very well with the other rate, which is the long prime rate. facility is looking to more directly channel the funding into loans. if we look at the collateral, it becomes different. the money can only be channeled into a loan because the collateral is worth a 60% haircut. shery: what are you expecting

when it comes to the producer price, but cpi numbers as well and mark do you expect the deflationary trend to continue? china cpi and ppi declining further into the year end, almost on a one-way downtrend. lower.lation is servicesthe decline in lower as well. we are looking for cpi inflation declining to about 0% towards year end, but it will still be around 2.6%, which is higher than china's one year policy deposit rate, and it will remain a hurdle for the pboc to further cut this rate. on the other hand, ppi inflation will become more negative

because of the lower oil price. , wer the current situation feel that covid-19 is still a deflationary sector and we are looking for ppi to stay negative throughout the rest of this year. ofdi: do you see a repeat 2012-2016, where we saw that exported to china's major trading partners? becky: it is possible, especially the ppi. we have seen a correlation between china's ppi and china's mader -- major trading partners. from that perspective, we feel that china's ppi will likely stay negative for the rest of this year. it would likely drag down inflation globally. on the hong kong dollar, we have the likes of kyle bass

upping his bet against the hong kong dollar peg. given the challenges the city faces, is it justified when the chief executive carrie lam comes out and says she wants to see more financial integration with the mainland? becky: we are very confident about the hong kong dollar peg so we see no risk. our rationale is that hong kong dollar's position will become after theimportant passing of the new security law. on hong kongtrust could get even higher. factoong dollar is the de chinese version of u.s. dollar. on the rising tension between china and the u.s., with the u.s. adding chinese companies to the black this, it probably has

become more risky for certain chinese companies. but under the current situation, no one can avoid u.s. dollar exposure. dollar ishong kong the best currency to hold for anyone that would like to maintain u.s. dollar exposure but avoid the risk of being targeted by the u.s. government at a later stage. further, because the u.s. is paving the way to delist some of the chinese companies, and hong kong has become the best place for a lot of chinese companies, therefore after the passing of the law and the knee-jerk reaction in the markets, we have seen hong kong dollar trading on the strong side because of capital inflows rather than outflows. stage, the highest

globally, similar to india's and higher than south korea's fx reserve, we see hong kong dollar supportedng strongly with the hong kong government, not to mention a strong willingness to support hong kong's currency peg, even by using china if needed in the future. was becky lou with us. thank you for your time. as coronavirus cases in the u.s. rise at the slowest daily pace since march, we will hear what the who says now. this is bloomberg. ♪

the world health organization says it is still unclear how readily the coronavirus is spread by people who are asymptomatic. >> what i was referring to yesterday were two or three studies that actually try to follow asymptomatic cases. i used the phrase very rare. misunderstanding to state that asymptomatic transmission globally is very rare. haidi: that was the head of the who emerging diseases unit. let's cross over to our china correspondent for more. just a day after we had cautious optimism that asymptomatic cases may not be contagious, we had this backtracking. what else did we hear from the who? >> as you just heard from the world health organization official, she is trying to clarify those comments after she

said that asymptomatic transmission was very rare. she's now saying those comments had been misunderstood, based on a relatively small set of studies from countries that have carried out detailed contact tracing. she says while it is known that some people without symptoms can transmit the virus, there needs to be much more further study. some of the confusion comes from the distinction between actually asymptomatic people and those who are presymptomatic. before thatsaid these presymptomatic individuals could be infectious. spread ofing the asymptomatic people is critical to economies reopening, since countries across the globe have been worried that relaxing

social distancing guidelines could result in another wave. but identifying these cases is incredibly difficult. you are seeing the u.s. and other countries struggle. what is the latest on that potential second wave? >> if you take a look at what is happening in south asia, despite a rising number of cases, countries there have started to ease lockdowns and ease the economic pain. this is while the rate of infection is rapidly rising. cases in south asia have increased at the fastest rate globally in the past week. 17% in india. according to the world health organization, of the more than 136,000 cases reported worldwide on sunday, nearly 75% came from

just 10 countries. even though you are seeing the rate start to slow, they are still rapidly increasing in other parts of the world. economies are starting to reopen. there is no telling how long the virus is going to take in those areas or if it is even possible. shery: our china correspondent with the latest on the out rake. latest's get the business flash headlines. softbank is said to be preparing to cut staff following record investment losses. we are told the planned cuts have risen to 80 of about 500 people at the london-based operation. softbank reported a record operating loss of $13 billion last month after writing down holdings. honda says it has been hit by a

cyberattack that disrupted internal systems and forced a closure of some plants. production has stalled in ohio and turkey as well as india and south america. japanese plants haven't been affected and hong kong's -- honda's other factories in the u.s. have restarted production. says it expects to raise around $2.7 billion from its secondary listing in hong kong and has raised the amount of shares it will make available to investors. allocationl retail was oversubscribed by 360 times. the number for institutional investors will be reduced. trading begins tomorrow. apple is said to be ready to

move to its own processors for mac computers, replacing intel chips as earlier as this month. sources say the annual developer conference will be given the news to allow delegates to adjust to the plan before next year. the new processors are expect to be based on the tech used in apple chips and iphones or ipads. haidi: let's look at tracking in asia. took a breather overnight on concerns that we are seeing this rally run to quickly. seen the downside on the nikkei two we are just coming off those levels, but still pretty much the highest levels we've seen since early march. onnext, the fed is focused interest rates. we will be assessing the policy options to address a steepening yield curve next.

this is bloomberg. ♪

♪ haidi: getting the latest numbers when it comes to a gauge of consumer confidence in australia, and it is pretty positive. the index for june jumping to may, as large in parts of the country continue to emerge from the stress test arts of the lot down. parts of the locked down. on a seasonally adjusted basis, 16.3, a drop from the previous month, but the headline, 93.7,

better than the previous month as we continue to see the recovery here. itsy: the fed just started two-day meeting with jaw-dropping friday may jobless reports still fresh, investors wondering if jay powell will change course. bloomberg policy editor kathleen hays is here. kathleen, what are we expecting kathleen: we expect jay powell and his colleagues at the federal reserve to take a good look at the economy and take that number into account. but our bloomberg economics team is saying they are not going to let that reassure them so much that they will back away from one of the most dovish positions the fed has taken in years. jay powell saying repeatedly, we are not going to think about raising rates until the economy has gotten fully back on track. rose 2.5gh jobs million in may, largest gain on record, unemployment fell to 13% instead of rising to 19%.

i will pull up a chart and you can look, and we will see there is a lot of work to be done. the top line shows 21 point 5 million americans are still on the unemployment role. that blue line below shows that after jumping up something like 7 million in one week, jobless claims are back down to a mere 1.8 million, dell five or six times bigger than jobless claims in any given month. so the fed will stress there is lots of risk. they will also say, jay powell saying the fed has many incentive programs in place and can do more. less -- let's listen to other things our bloomberg economic team says we should be looking for. jay powell made it explicit again, no rate hikes even thought about until on employment shrinks. people are thinking 4% the fed will have to see. policy guidance, just that we keep the rate low, near zero for as long as we need to. no more definite than that. even though there is discussion

about the fed moving to yield curve control to keep on yields from rising too much, especially at a time it is borrowing record much of money for its bond sales, it is still too early for the fed to go to that. maybe there will be more discussion in the minutes we see in three weeks, but not in the policy statement. lots of questions that jay powell's presser tomorrow with reporters. the projection, still dire, warranting more stimulus. and inflation, you are going to see this inflation as far as the eye can see. couple of things traders are zeroing in on, as our markets leave team points out, starting with cinderella, they say the dark spots will be as important as ever. the fed hasn't issued them, it t plots.voided the do if it starts signaling rate hikes this year or early next year, people will say, that is

not as accommodative as we thought. people are waiting for single that signal. right now they are buying bonds on a week to week basis, will they give us a monthly forecasting get to the old quantitative easing that we had in the last financial crisis, something bond traders are looking at. haidi: and we will continue to see the black lives that are movement inspire protests all across the u.s., and the demand for equality in terms of the economic disparity. this has weighed into the fed policy debate. kathleen: it will, certainly. it is hard to imagine it not being part of the fed policy discussion, because this has become something much more the fed looks at and thinks about and mentions. and congress talks about it all the time although many would argue, want to do something for black workers, and improve their opportunities. that has to come through education and other programs. congress has to do that.

the fed has sent, dropping interest rates to new zero, we can make sure that helps workers who'd needed even more in these locked out low-wage workers, that it would for white workers who tend to have higher-being jobs. it is something jay powell has said, he realizes lockdowns have hit lower-wage workers harder. another thing that shifted at the fed is that for the longest time the phillips curve dominated, unemployment slow, economy strong, but the fed with its fed listens events over the past year, and look at the numbers, they are 2% inflation more than 12 years, so it has become clearer to them they could change that aspect of it. we will see when the things start picking up again, will the fed allow the economy to run hot? it still too early to ask that question because the economy is still facing negative gdp in the second quarter at a lot of obstacles. but it will be interesting to see if jay powell gets questions

about that at the press conference, what he says. and i expect he will. haidi: our global economics and policy editor kathleen hays in new york. one big bond investor things the fed will slow down when it comes to purchases, and it also sees another wave of bankruptcies and rating downgrades. i had, marathon asset management head bruce richards tells us out how he is preparing for the moves. addedmid april, the fed to their balance sheet $2 trillion. that $2ion pout trillion. istrillion plus $4 trillion $7 trillion, that is a lot of assets to buy. i think tomorrow they are going to slow the pace to about $100 billion a month coming down from $2 trillion a month.

the markets have done their job by normalizing, and the liquiditybillion a month added e system. tomorrow we will get guidance. rates will be zero for a very long time. count on 2023 on longer. afore you were talking about yield curve, and i think there will be affixing of the yield curve, but most of his comments will be around the fundamentals in addition to monetary policy. fundamentals is about jobs and gdp. we have had a bunch of fundamentals that maybe help you do your job, and the rate is at four point 5%, the highest in the most recent cycle. so what happens next? do we get another leg lower? more fallen angels, a bunch more distress? >> good point. the high-yield market today yields 6%, it is ripping back. record buying for high-yield bonds, with $50 billion of

inflows coming into reported market like mutual funds and etf's and things. record influence. so that, markets feel a lot better. but below that surface are these undercurrents you are talking about. so although the markets are thewhat healed, vonnie, economy is not and a lot of these companies are not. there are a lot of problems forward. we have reported that marathon, since mid-march, we have reported 60 bankruptcies in the u.s. totaling about 100 alien dollars. we think that $100 billion number will grow to $400 billion. the 4.5 percent default rate will grow to 18% cumulative, taking you to an annual default rate of 10%. the default rate is measured in 12 months, so we will go from go to a 10% come and

cumulative rate four times what as it relatesand to downgrades, the downgrades are coming, and they are coming ferociously. we have 20 downgrades and there is actually close to 30 downgrades for every upgrade by moody's and other ratings agencies. that 20 or 30 to one ratio is so much greater that we saw during the financial crisis, when the ratio was 10 to one. in terms of fallen angels, there has been $185 billion thus far. we see that number as close to $400 billion over the next year and a half, because what is ailing these companies is revenues, despite the fed injecting liquidity in the market rushing into the equity markets and credit markets. the markets should improve because that liquidity gap has been healed in a very big way. gdp,.s. has a $21 trillion

and the fed has added $3 trillion to its balance sheet. and the physical spend has been $3 trillion. so $6 trillion of a $21 trillion gdp, that is 28%. the 100 billion dollars be the liabilities on the bond sheets? >> outstanding on these companies that file for bankruptcy. it is currently 100 alien dollars. we think it is a four-fold increase from here. shery: marathon asset management ceo bruce richards. up next, the hong kong pacific, howathay investors are reacting to the carrier's $5 billion recapitalization program. this is bloomberg. ♪

♪ karina: this is "daybreak asia." coronavirus infections are up 17% in india, 19% in bangladesh, 27% in pakistan. south asia and latin america are now seeing the most infections, 100 36,000 cases reported sunday, the most in a single day so far. nearly three quarters came from south asia and latin america.

in the u.s., george floyd has been laid to rest in his childhood home of houston, texas, as protests against police treatment of black people continue in the u.s. around the world. floyd was remembered as a father and mother and force for change after his death in police custody sparked outrage. mourners say his death could help change the world. kuwait hascome -- become embroiled in the search g -- mbcasia's mbs scandal suspect. reports say a money trail from lf, andhrough the gu he is known to have deep ties to the son of the kuwaiti prime minister. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm karina mitchell. this is bloomberg. ♪ pacific hasy

allowed its global carrier to receive a lifeline in the coronavirus pandemic, the chairman saying raising millions of dollars from the hong kong government is necessary. soning us from singapore is be aviation analyst brendan sobie aviation analyst brendan sobie. brendan, this only ties them over for a few months. what happens in a few months when they have to make tough decisions about reopening the business? brendan: financially, this gives them $5 billion u.s., which is enough for a year or two. the decisions coming up in the second half are strategic, more than just about getting cash. they have to right size and make important decisions in terms of the fleet, capacity going forward the next couple of

years, because the international market will take a few years to recover. you can't just continue going on the fleet and staff size as it is in this environment for so long. makemeet -- they need to key decisions coming up. step one would be to survive in step two would be to right size and give them a better longer-position and allow them to come back in a few years, hopefully when the market recovers and a strong way. hay is the flag carrier in a city that is under the cloud of protest we have had for exactly one year now. when the trading halt came yesterday, we were wondering if this was going to be an air china takeover? is that likely, given they have been amassing a stake? not now.

this is really the best scenario for them. i don't think the air takeover is a short-term move. everybody has been speculating about that, even before this crisis, that that could perhaps passing in the long -- could perhaps happen in the long-term. that could still happen, but that is not with this is about right now. this is about maintaining balance prayed that is what this scenario does, you have three major shareholders and they all dilute by the same proportional amount. and the issue of putting in another $1.5 billion u.s. between the three, then the government comes in with $3.5 billion and gets a 6% stake, plus the loan. so this is about maintaining that balance and also preserving hong kong's position as a hub from the government's strategic perspective. it is the right move command the right move for shareholders. and i think we will continue to hear about air china speculation but flyers are

going to stay in this now. they don't want to exit in a crisis. they will review their situation over time. shery: hong kong had several support packages for the aviation industry. why weren't they enough? brendan: it didn't include financial support for the airline. there is different packages, or types of packages. there is what is called airline financial support, and then there is general support. hong kong so far provided general support, which reduced fees. they have an interesting scheme where they were buying tickets on hong kong carriers, they give them a little bit of money, hong kong dollars each per aircraft. but cathay pacific didn't participate in the wage subsidy scheme because they didn't think the terms and conditions were attractive enough. hong kong was in the news at the beginning about providing support, but it wasn't just

financial support for the airline, and that is what is required in most countries, as well as general support. this crisis is just so deep, so bad, that just having a few waivers here and there and subsidies here and there is not enough to weather the storm we have in this industry. in thegiven challenges industry, how much consolidation are you expecting in the next couple of years? and who will be best positioned to take advantage of that? brendan: in the next couple of years, we could see consolidation, not too much. the airlines that will take advantage of the ones that have the strongest balance sheet, our cashed up toe survive the storm. because a lot of it is focused on those airlines that aren't able to get government support and aren't able to raise money privately, so some natural consolidation there, and in the longer term you can see that the mergers and acquisitions as

well. but that is not the focus right now. what in terms of taking advantage of the situation long-term, definitely airlines in asia, cafe in singapore would be on the top of that list -- cathay pacific in singapore would be on the top of that list because they are in the best cash standpoint because of huge packages from the government. singapore came back in march and now this one from cathay pacific. a long-termu expect asset downside when it comes as when it comes to the industry, not just regarding stimulus, but changes in travel and behavior? hong kong has a specific position with geopolitical tensions and domestic tensions that it is trying to work through. brendan: it is very hard to answer that because there is so much unknown. it is easy to talk about the difficulty of this year and next 2023, 2024, so many

variables out there. so assuming we will have a back -- have a vaccination, the market and there he should recover to where it was in 2019 overall. there are questions about changing travel patterns, corporate travel, virtual meetings more, which could have some impact. but i think their hope is that for travel overall, people will still want face-to-face meetings, still want conventions, still want to travel the world and use that, still want to go on holiday, long all travel, air travel. -- long-haul travel, air travel. in terms of the hong kong situation, it is a political issue that is very difficult to predict. cathay pacific, about 50% of its traffic's transit traffic. it is also about the hub, and there is a huge investment in expanding hong kong airport with a new runway and terminal, so it

is about competing in that space as well. that is what this package in this support is about, it is hopinghe hub, as well as and assuming things are back to normal, from both a travel pattern standpoint and political stability standpoint in a few years, although we don't know what is going to happen in those cases. , greatbrendan sobie having you with us, that was sobie aviation's analyst. crime,0 a.m. hong kong that is 12 30 p.m. in sydney, coming up next, ready to play a chinese game, out for -- out with new numbers for his upcoming listing in hong kong. we have him coming up. this is bloomberg. ♪

♪ haidi: a quick check of business flash headlines. charge to a top shareholder, as china's sweeping security law in hong kong ceo david cummings says he in -- is uneasy about backing the legislation without knowing exactly how it will work. starbucksf china's rival has quit as head of the largest car fleet over a scandal

over accounting practices. he says he is leaving to concentrate on other businesses. ordered emails joe the in. move at luck shery: there seems to be no east.ge of demand at ned the chinese game maker says it billionto raise 2.7 dollars from its secondary listing in hong kong. sharestial allocation of was oversubscribed by more than 360 times. our asset reporter gregor hunter joins us on the line. what are the implications? is clearly offs to a good start. netease isn -- clearly off to a good start. getting -- we will

be getting indications from the retail market later today. but it looks like they are off to a great start. it has been a solid week for the hang seng index, up the last seven consecutive days. haidi: the hong kong ipo this week, 26 times oversubscribed, so what does that tell us about domestic demand for big internet names? gregor: jd was an interesting one to watch as well. we are seeing clearly that investors sell a one-to-one slice in the internet sector. even though hong kong is facing questions about its future as a financial center, and protests entering the second year, we are still seeing a lot of demand for internet names that are now also

exposed to the hong kong economy, that are listed [inaudible] haidi: gregor, thank you so much for that. asset reporter gregor hunter in hong kong. before "china open," a quick look around the region as local stocks take a breather from that heady rally, u.s. stocks pulling back but futures looking positive, downside about .4% in trading, the kospi off one quarter of 1% after horrible jobless numbers came out a couple of batters -- a couple of hours ago. australia still trading high according to levels we have seen since the start of march.

coming up, a big interview with the british favor of commerce in china. the chair will discuss boris johnson's citizenship offer to hong kong citizens.

♪ >> it is 9:00 a.m. in aging, andapore -- in beijing singapore. asian markets look at the kleins after wall street pulled back on concern the old -- concern the global rally overshot reality. charger underard fire over support for the chinese security law for hong kong. investors