haidi: very good morning. i am haidi stroud-watts in sydney. we are counting down to asia's major market opens. set toasian markets look fall after wall street saw its t since the height of the virus pandemic. on the feds gloomy forecast for the recovery. opec's restrictions are overshadowed by week manned in u.s. stockpiles at a record.

in the white house, continue -- they continue to push reopening. stephen mnuchin says another shutdown is off the agenda. like ait does look terrible set up when it comes to this final friday training session. the selloff looks to continue. in the u.s., it was deep and heavy volumes as we saw that box provedy go -- really be wrong that came to a screeching halt. $2 trillion to write off the value of u.s. equities in under seven hours time. the are seeing a rebound when it comes to u.s. futures trading for the s&p, seeing upside about .5%. chicago and nikkei futures looking positive. still, we could see some downside in the session, particularly as we continue to see the yen, really the only outperform against the dollar. in sydney, no such luck. futures plummeting by over 3%. we had aussie stocks falling the

most in six weeks in the thursday session. we are seeing the correction extend to almost 4.5 percent in the early part of this session as we see downside for the kiwi and the aussie dollars. let's get more on the markets. our next guest says this retracement was pretty long-overdue but that we have now seen those low. joining us now is state street global macro strategist, marvin low, with us. this felt like the correction we needed to have. i suppose the question is, going forward, is this more capitulation to, or do you start seeing pockets of value, in particular, the retail investors? do they stay away for a bit now? marvin: the retail discussion is up for debate. based on how certain stock names were higher in general, you could see a retail thumbprint on that.

i think there is a lot of pain with those trades and if retail was a big part of the run up over the last few weeks, they will be hesitant to jump right back in. i don't think we are done with this part of the capitulation, but you know, those that we saw in march and april, i do not see us getting anywhere near those levels again. we hearde other thing from steve mnuchin overnight is that even though we are seeing these pocket of second wave infections, pretty bad members across parts of the u.s., we know that that story has repeated across parts of asia as well. he is saying you cannot put the genie back in the bottle now. in that case, the worst case scenario on the macro fund, is it -- macro front, is it over for the global economy? marvin: i guess so. the approach of just shutting down the world and stopping all the cash flow, you know, we are

not going to see that again, and certainly, within lots of different parts of the world, we are not going to need to. when it comes to the states, i don't think there is a tolerance to do state-by-state shut downs that way we have seen. some regions might be forced to really curtail activity. i think it really, in terms of thinking about it, it is going to feed into whether or not it keeps people at home rather than getting reengaged. if they do not feel comfortable with the virus and containment of it and masks and whatever the commentary is out there, they are going to pull back and then the whole recovery is going to someower than may be what of the evaluations recently have started to apply. shery: we are getting lines from the bank of korea governors saying they will keep policy accommodative as expected until the economy recovers. they will use non-rate policy as needed and also they want to prepare for that post virus

policy normalization. normalization seems to be way off in many of the books of central banks around the world. when we are looking at the impact that the pandemic has had, do we have some markets that are better positioned for upside given how fast they recover that they really did not have to go into full lockdown, say south korea or taiwan? marvin: to a certain degree, he asked. reese on the global economy really recover in europe and the u.s.. it is part of those stories. at the fringes, you might feel more comfortable getting into new zealand, kind of getting into some of the asian countries that seem to be more in control of things, but really, without kind of the big heavyweights starting to feel comfortable, it is not going to be that robust of a recovery. haidi: what do you mean by that? the big heavyweights coming into the markets? youin: i guess i mean,

know, unless the u.s. economy really starts to regain his footing quickly in the european economic -- and the european economy, everyone is reliant on these economies finding their stride after what has been a horrific couple of months. shery: what about the chinese markets? we have seen small caps rebound, the chinexts up. china is a big economy. if we see a rebound there, could we see the fallout and the positive impact on economies that depend on them and markets as well? marvin: i would normally definitely go down that routes, however, let's not forget that the trade tensions -- actually, they are further than trade tensions. they are u.s.-china tensions, if you will. they have resurfaced and are looming in the background even though we might not be looking at it this week. it did cause a lot of concern and there's been no resolution around it.

it is an election year on top of things, which seems to have the tendency to drive some of these actions. shery: we had the cio of china asset management. he sort of predicted the 2015 crash. he is clearing out his calls when it comes to his positions in february and march, and he's also calling for the hang seng index to continue to perform badly given the ongoing protests. what should investors be on the lookout for when they get into china? marvin: i think we are expecting some of the fiscal response, and that has been long and waiting and it does seem that the country is gearing up to start that degree of stimulus now that the country is reopening. some of the trade data was not as bad as expected. certainly, the import side of things was weak so the domestic economy was weaker. stimulus,ok for that

but really, in terms of kind of how again the tensions between china and the u.s. evolve, that is a very important part of the story. shery: we have seen the offshore yuan gaining a little bit of ground in recent days with potentially more positive noise coming from the trade headlines. when, in a day like today you had u.s. dollar safety haven bids, where do you position in the currency market? think theu know, i dollar is still going to be challenged. once we kind of get through this extreme risk. today was a frightening degree of risk off, as many people have mentioned. it does bring back the specter of what we went through in march, and you know, we had a risk-off function which includes the dollar, but i think the dollar does have a lot of headwinds. i would continue to think about the euro and whether or not some of their proposals in terms of

getting their fiscal and monetary house in order will continue. as if it is to me more of a g10 against the dollar rather than an em against the dollar from a strength perspective as we move forward. is the market already pricing in further stimulus? market is expecting some more fiscal stimulus to come out of the u.s.. i think europe, in terms of how much they are pushing, you know, will have to wait to see how things evolve. it is interesting. we will see how washington, whether or not the bipartisanship comes back and then whether or not that affects some stimulus, but i do think that there is a stimulus that is expected on the fiscal side of things in the u.s. sometime within the next quarter or two. haidi: we talked about the fed support creating a potential bubble when it comes to debt markets. where are the opportunities when

it comes to fixed income in that space, particularly as you get this picture of monetary policy support artificially preventing the level of defaults from going too high? out there.t is still a lot of companies are going to be challenged. i do not think that the fed is looking to keep all companies solvent. kind ofame time, with overall yield as low as they are, we will be pushed to look for a credit risk in terms of trying to generate more income, still an areais that you have to consider. i think that it is not -- it is never -- with the problems companies have, you have to be especially careful and pick those single names. the fed has your back in high yield. it is not as robust as effectively trying to stop all

defaults and we will have defaults. more on thean get markets and other stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers go to dayb on your terminals. also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get your news on the industries and assets you care about. still ahead, we will get the outlook for the dollar and broader aspects with eric nelson. up next, president trump is continuing his push to reopen the economy despite fears of a second wave of coronavirus cases. we will get more from d.c.. this is bloomberg. ♪

haidi: you are watching "daybreak asia." oil futures plunge the most

since april on the back of the fed's gloomy forecast to the u.s. recovery. by opec-plusdriven production cuts in the easing of virus lockdowns. u.s. stockpiles are at a record. the demand is seen as weak amid fears of a second wave of virus infections. standard chartered says too many people are being too optimistic that covid-19 will be a short-term issue. union arehe european to accelerate trade negotiations amid fears of brexit talks heading for collapse. five more rounds of discussion to start at the end of the month. boris johnson has repeatedly threatened to abandon the process if he does not win an acceptable deal. we are hearing the u.k. will rule out a brexit extension for the deadline on friday. the trump administration has formalized years of u.s. opposition to the international criminal court by authorizing sanctions against officials who participate in investigations against america and its allies.

the president signed an executive order -- funds for staff following the court's plans to probe alleged war crimes by all sides and afghanistan. fox news host tucker carlsen is losing more big-name advertisers over his black lives matter comments. disney, papa john's, and now t-mobile quit his show after he said the protests were not about black lives. he added "remember that when they come for you." fox says that was clearly about the democrats. dropped himo, they over comments about immigrants. the trump administration is continuing its push to reopen the economy despite fears of a iner surge -- another surge coronavirus cases. steven mnuchin says another shutdown will not be needed. emily wilkins has the details. interesting.

mnuchin says he cannot reverse this. we cannot have another shutdown. what does that mean for individual states as we continue to see the surge in cases in places like texas and california? a lot of these shutdowns were implemented by states, by localities. there was a national shutdown but a lot of this is happening at the state level. i think what secretary mnuchin and other white house officials are trying to talk about a little bit here is the need for the economy to be open. this is a message we have heard from the white house again and again. they want the economy to rebound. they want strength. they don't want to see another economic shutdown. at this point, as we mentioned, we are seeing an increase of cases in a number of states and it very much remains to be seen what it will look like through the rest of the summer going into the fall. shery: we are seeing houston area officials saying they are getting close to reimpose in their stay-at-home orders, so

what are the prospects right now as we continue to see more states reopening? emily: i think it is a lot of wait and see. some have been able to open with relatively low numbers of cases and other states, that is not the case. congress is still looking at coronavirus stimulus. they are hoping to get a bill out. potentially next month. something that will target various industries that have been hurt but also might provide another check to american families to make up for some of the financial hardships that they are experiencing during this time. shery: emily wilkins, our bloomberg government congressional reporter there. coming up next, the boj showered them with trillions of yen in aid, but that is still not winning japan's commercial banks over negative rates. we will tell you why, next. this is bloomberg. ♪

haidi: let's get you a quick check of the latest business flash headlines. amazon is facing a formal antitrust complaint from the e.u. a major investigation into claims that the company is shortchanging more merchants and its digital marketplace. the complaint is expected to lay out allegations of amazon's misuse of data. european could access big tech runs a rigged game by writing the rules for platforms that host smaller rivals. apple has removed two podcast apps from the app store in china at the request of mainland officials. the developer says that apple has ruledd -- china is illegal. a fellow developer has told it has been told the same. apple has declined to comment but said it follows local laws wherever it operates. are expandingirms their footprint in hong kong even as the pandemic prompts

some banks to consider scaling back in the world's most expensive office market. alibaba and -- both signed up to take up more space in times square. the move follows the secondary listing in hong kong at next week's debut from jd.com. pastor at inside -- toyota as the most viable carmaker in the world with a market cap of $190 billion. it is still some way away. a rally of 10% from here. tesla shares have already jumped 23% since the beginning of this month thanks to rising demand from china. the bank of japan provided trillions of yen to domestic lenders to offset the coronavirus fallout. backre bankers willing to deeper negative rates if needed? kathleen hays is here with both

sides of the story. not really surprising given how long these banks have been squeezed with these negative rates, especially regional banks that cannot even go abroad? >> i want to applaud our tokyo weaker team for talking to senior bank officials and really digging deep into this. of course, we can understand that basic point. it is a crisis. maybe the boj will have to do more, push that barely negative key rate of them a bit more negative. you guys have received ¥75 trillion. that is $700 billion to prop up lending during the pandemic. instead, bankers made it pretty clear, senior bankers across the board, that the negative rates, first of all, should not be lowered forward and basically, they should be eliminated altogether. as shery alluded to, they are main beef is simple. it has eroded profit margins. here is what the head of the japanese bankers association and

the cochair of mufg said when he was inaugurated in april. the profit environment of not only banks but all financial institutions has become severe. as interest rates fell and the yield curve flattened. if you consider some of the theers on what happened, negative rate was put in place in 2016. from march of 2016 to march of 2019, domestic net interest income at the association's bank fell from ¥6.4 trillion. may be just growing more slowly, no, it actually fell. the average net interest margin is a gauge of lending profitability and has narrowed the 1.8% to 1.23% when policy was introduced. the bankers are grateful. they give the boj high marks. remember how chaotic markets --

markets. all sued the this is very important. they applaud the boj for giving them 0.1% on reserves held at the boj to max the amounts they have lent out from their free loans from the boj. they are appreciative for what they have got. does not mean they are ready to help the boj out by expect negative -- accepting negative rates. >> what does it mean for next week when it holds that today policy meeting? kathleen: it is a pretty easy question in a way because they are not expected to do anything. they are not expected to lower the negative rate any further when they meet on the 15th or the 16th. the boj has had a pretty aggressive virus response as well. they pledged to unlimited bond buying. introduced two emergency lending plans, so they

do not have to do anything now, probably except watch the impact of that. the worst of the virus impact is behind them. two quarters of negative growth. this is a deep and bad recession. thing, negative rates is something mr. kuroda might want to try. we are seeing him on the screen right there. the opposition makes the hurdle for the boj to go and try this all the higher. cutting the negative rate was not necessary. will he still say that if the second quarter is negative? survey by bloomberg news of economists in japan found that the vast majority said -- 90%. it would take a move the yen versus the dollar below 98 for the boj to feel this is necessary.

but it may become a hot topic. not at this meeting but certainly beyond. shery: we do have the boj implementing yield curve control , something that has been speculated on here in the united states as well. is there something kuroda san can teach mr. powell on this? kathleen: there's so many things fans of yield curve control -- governor kuroda is one of them. every time fed officials are asked about this, they said they are considering it. they are not quite ready to implement it. give youve control can more precise control over the long-term rates that you want to keep in place when your government is issuing lots of debt particularly at a time like this to finance stimulus. then you have that offset. you have the central bank helping you do that. what the critics say is that markets's provide important

signals on where investors see the economy, where they think central banks should go. to the more you control rates, not just short-term rates, but the three year note in australia, the 10-year note in tokyo, and may be beyond in the u.s., may and policymakers have very important signals from the markets, haidi. shery: our global economics and policy editor, kathleen hays, with a look ahead on what is next for the boj. let's take a check of markets, asre we are looking to -- asian markets reacted to that torrid selloffs. we saw in that decline. s&p futures, when it comes to u.s. futures, outside of .5%. nikkei futures were off session highs, but still in positive territory by .5%. we are expecting the slump to be extended in sydney. the biggest drop in six weeks yesterday. we are seeing futures falling

over now. coming up next, the u.k. is expected to rule out an extension of the brexit transition period beyond the end of the year. we will get the latest, next. this is bloomberg. ♪

>> here are the first word headlines. president trump has resumed his attacks on the fed, saying he sees a better picture of the u.s. then jerome powell does. he tweeted "the federal reserve is wrong so often." the criticism is just the latest in a long line of attacks on the fed chairman and comes after policymakers offered a sobering view of economic prospects at the latest meeting. soldier apologize for taking part in president trump's charged photo op earlier this month, saying he should not have been there. the chairman of the joint chiefs of staff general mark milley

says his presence outside the white house meant to the perception that the military was involved in domestic politics. op came after protesters were removed from the area. president trump has rejected an overhaul of law enforcement, calling instead for economic development, better school choice, and improved health care for minorities. speaking in dallas, he said he is finalizing an executive order that would demand "force with compassion" without actually explaining what that means he added the government would ensure police are properly trained. bain capital is said to be eyeing a stake in top-level italian -- putting it in direct competition with its rival. they are offering $3.5 billion in a stake. they offered 2 billion dollars for 20%. both want to invest in the unit that controls tv rights at a

time when soccer and other sports are suffering from coronavirus restrictions. the u.k. is said to be formally set to rule out the brexit extension for the deadlines during talks with e.u. officials later on today. let's bring in derek wallbank for more details. of course, brexit does not stop just because there is a pandemic. in the background, all of this is still dragging on. what more do we know about what we expect to hear later on today? way to is a really great phrase this because when you are looking at the difficulties that the u.k. in the european union are having in terms of their deadline,tead of the the coronavirus does come to the fore. it's complicated a lot of this. the latest thing we have is that the u.k. will introduce a temporary light touch customs regime at its border with the european union next year.

in an attempt to avoid piling burdens on businesses already struggling with the impact of that coronavirus. talks betweenng -- and ursula von der leyen. those should be coming up later today. is going to detail of the plan when he formally rules out ending the brexit transition period before the end of the year. shery: what are the sticking points when it comes to the trade talks? well, you have a lot of things that cannot be reasonably put down to how does this mechanically work? i hate to be overbroad, but that is kind of where we are right now. the u.k. has this idea of how it vis-a-vis thep

european union, but they really do not necessarily have it set down between the two sides how this is going to work in practice. it is these details about how everything works, how customs work. all these things have to be worked out. that is what we are seeing in terms of the customs check. it is one of those areas where they are trying to put that down. the u.k. is saying it does not want to extend the december 31 deadline. sort of going on with the strategy. you see it a lot from the current conservative government that says let's put the pressure on the talk and amplify pressure into there. result ratherce a than taking measures to sort of de-escalate, take the pressure off, which they think takes them further away from the deal. haidi: is boris johnson likely

to make good on this threat, walk away if negotiations are not to his liking? emily: i am not sure they are looking at walking away. what they are really trying to do is sort of double down on them. the idea, if you are following the logic that think johnson government is following, you cannot just be in this holding pattern forever. let's say that this is the deadline. that puts the pressure on us to actually reach a deal. let's try and get to that point. that is where the johnson administration is ending. it set up december 31 as a much harder period and i do think, as i say, with these customs checks being lighter coming after it, you are seeing some concessions by the british government towards business, recognizing the fact that coronavirus has played havoc with a lot of the best intentions.

shery: our bloomberg senior editor with the latest on brexit. forma ecb president jean-claude trichet says the french-german proposal to issue common debt is a very important move for the deeper european fiscal union. let's speak exclusively from paris. >> i think what has been proposed is extremely important. obviously. many are speaking of the start of a moment. what hast captures been happening now. of course, we are far away from what will be complete. very, very important indeed. very important. i know who no one understands borders and the restrictions of borders like you. can you culturally get towards a fiscal union in greater europe? and think it is a process,

of course, a historical process. it takes time. was to create a for the euroinance area. i continue to trust that it will be part of the moment. again, we should be aware of the fact that the proposal of germany and france is a very important one. of course, it is not fully accepted. by the commission and it will be discussed. i am very confident that this proposal of the commission now will materialize. what makes you confident about the fact that, you know, all countries have to vote on this? one of the countries is now on board with the proposal.

is it structural reforms needed by countries that access the money or how can you get those countries that have been more reticent on board? >> everything, as always, is in the technicalities. in the way it would be operated. i am confident of the fact that youill have probably -- don't have to be too decisive on that. it is a matter that's been discussed. 750 billion, i trust. subsidies or grants. another part would be spent as loans, and all taken into account, of course, there will be some kind of discussion between the commission and the various countries concerned, but again, an immense step has been done. it has been considered rightly by themy opinion,

majority of observers. what worries you about the economy right now? fiscal policy is going seemingly hand-in-hand with what the ecb is doing. will covid-19 have deep structural changes in the ways some countries operate? >> when i look at the projections that we have now, or the projection of the ecb projections, and i compare the various countries concerned, i of clearly that at the end 2021, we will not be at the level of 2019. and it is true for the euro area. it is true for the u.s. it is true for most countries concerned. that does not mean that on top , which is very big and very dramatic, we will

have also changes. the market will change. the households will change. they have consumption. global economic change. suchways, in circumstances, the reward is for the economies that are the most rapidlycould adapt as as possible to the new circumstances. that was the former ecb president speaking exclusively to us on bloomberg. coming up next, the u.s. dollar breaking its weakening streak. says itency strategist may be tough to go back to that trend. dollar direction, and his fx pixar next. this is bloomberg. ♪

>> let's take a look at how we are setting up for asian markets. let's get to sophie kamaruddin in hong kong. what a lead we get from wall street. how is it looking? sawie: after the moves we overnight, usc minis holding about 3000 mile is shut is bracing for steep declines. i can see a pickup and volatility. this after the vix climbed to a two month high. kiwi stocks falling the most since march 23, extending losses for a fourth straight session. more losses anticipated at the open. ahead of the economic

assessment. with financing at a record high as retail investors are ready to pile into stocks, that is fighting concerns of margin calls, prompting regulators to consider extending a short telling. nikkeir japan, we have futures in singapore extending losses by 2.3% and the asx 200 set to slip further below 6000. switching it out to check in on bonds, qb and aussie bonds extending gains that were led overnight by a long data treasuries with both flattening's seen across the curve. treasury futures are edging lower. that's switch out the board to check in on currencies. heading towards 64. the aussie towards 68. staying your a one month high below 107, ahead of factory output data from japan. the offshore yuan holding losses at 708 after breaching its 100 day moving average as the u.s. dollar extends gains following the best session in april. checking that chart on the

terminal, it is out of oversold territory and looking to test the 200 day line as strategists debate if there will be a larger structural downturn. expects thehe dollar's core fundamentals will drive weakness. sharing. they: for a look at where dollar is headed as well as other currencies, let's bring in eric nelson, the currency strategist at wells fargo securities. great to have you with us. that's start with the dollar. we have seeing this huge correlation between the dollar and u.s. stocks. gtv chart on the bloomberg shows it. not surprisingly, as we had u.s. stocks selling off today, we saw a strengthening of the u.s. dollar, rising the most since april. i do wonder how long this could last because as sophie just mentioned, it seems we are looking at some larger structural downtrend here. we ares talk about where

today versus where we were three months ago. the bank in early march -- a situation where there were no swap lines. that said had just begun to implement its emergency measures. the public health situation was very much the same in nearly every g10 economy. it was bad and getting worse. and we had no recovery fund .roposal for merkel and mccrone we saw the euro fall eight cents over a short period of time. fast-forward to today, the euro is once again sitting at 114. do we go back to 106? fedave swap lines, emergency liquidity programs, we have the recovery fund proposal, and the public health situation in europe looks much healthier than it does in the united states. shallow.ely to be very we recommend buying the euro on the dips. and we see more dollar downside over the next couple of weeks. >> we have started to see the

selloff across asia, especially when it comes to the aussie and the kiwi dollars. what are we looking at right now? >> one of the things he recommended today was buying the euro against some of these higher data currencies like the canadian dollar, like the australian dollar, because a lot of the run-up in these currencies has been so tied to the s&p 500, or really global stocks more generally. we really prefer to buy that safer currency that now has a lot of tail risk removed against some of these higher risk currencies with stocks looking a little shaky here. commodities are returning to outperformance given the domestic stories for some of these economies are pretty resilient, the likes of new zealand and australia potentially recovering quicker? i suppose at a more independent pace compared to the rest of the world? >> one of the big things that

australia and new zealand benefit from in the current environment, the exposure to china. in particular, we think about australia's exposure to china's industrial sector which has had the closest it can get to a v-shaped recovery. australia setting a lot of iron, coal, imports into that chinese industrial process. it is well-positioned in this scenario. it is one of the reasons we themmended the favoring of australian dollar and new zealand over the canadian dollar, which is more exposed to the u.s. and oil prices, which look more vulnerable in some of those kiwi and aussie commodity prices. >> tell me about your conviction. the swiss franc is really well-positioned right now. isis tied to the euro which fundamentally in a lot better position than it was three months ago. moreover, it is a safe haven. inhave seen strong buying the past couple of days despite

the improvement over the last couple of weeks or so. we are back to where we were just a couple of months ago. that suggests a strong structural demand for swiss francs. the dollar do see continued to gain in the short-term, the swiss franc outperforms versus the dollar. shery: let's talk about underperforming. in the last couple of hours, we heard the u.k. will formally rule out an extension to the brexit deadline, so really, with so much uncertainty over where the u.k. is headed, can anybody be positive on the pound right now? erik: you have to be very careful with sterling around brexit deadlines because we have certainly seen this movie before where the u.k. squares off extensions. one of the reasons we like to play sterling by the options market, in particular, in eurosterling, where we see

relatively subdued volatility compared to most brexit deadline periods, we like to buy protection in either direction because he could very well see an imminent agreement given the higher-level officials are involved or you can see it turn pear-shaped very quickly. we like options based protection there. >> let's turn to china because we have seen the offshore yuan with all of the uncertainty underperforming. just recently, we have seen -- holding steady given we saw some positive noise on the trade front. what are we watching to see where the yuan is heading? erik: they u.s.-china developments recently have definitely been negative. what is key is they have not been focused on the economics and the trade agreement. until that changes, i am not worried about the chinese yuan weakening very much. interestingly enough, it has been weakening on a trade-weighted basis which is more important when we think

about what it means for the chinese economy and moreover, what it means for how the u.s. looks at china. if we see more trade-weighted weakening that could start to draw the ire of the united states and that is something to watch out for. haidi: thoughts on car bass and , and hisrl bass expectation we will see a collapse in the dollar peg in hong kong? erik: it is trading towards the stronger end, but we have seen that foot very quickly in the past. ultimately, it is a political decision. the fundamentals point towards hong kong dollar strength versus the dollar and that is what we are seeing. what does china want? the hongant to de-peg kong dollar from the u.s. dollar, that signals they have given up on hong kong as a financial hub that focuses on doing business in dollars. i think we are a long way from

that. peg will holdar for the time being. nelson talking with us. lots more to come on "daybreak asia." this is bloomberg. ♪

>> let's get a quick check of the latest business flash headlines. palantir is said to be preparing for an ipo with a preferred

listing in the coming months. newburgh understands the secret of big data could funnel paperwork within the next couple of weeks and is working with banks to clean up its financial structure. palantir was valued -- was valued at -- it is not clear what valuation it may seek. dow jones is reporting that doordash is nearing a new funding round which would value the company at $15 billion. the closely held company is set to be planning to sell hundreds of millions of dollars in equity to existing backers. move follows news earlier this week that takeaway is making a takeover of grubhub. trademon slumped in late after reporting revenue short of expectations. the athletic wear retailer says online sales rose 70% in the quarter ending early may but

that was not enough to compensate for physical stores. total revenue wants $652 million short of estimates in four years. lululemon has withdrawn guidance because of the coronavirus. has reported rising profits even as demand falls for its advertising cloud project. the software maker declared income of just over $3 billion for the current quarter as operational costs fell during the coronavirus pandemic. the better-than-expected results saw the stock rise in extended trade. they have paused their annual forecast as announced in december. fiat chrysler has won an order blocking u.s. imports of a mahindra off-roader. the international trade commission upheld the order although the government can veto the ban on public policy grounds. the store is nearly identical to

the cheap. mahindra has been purposefully trying to evoke the wranglers image. a look at's take asian markets where we are seeing some pretty severe downside when it comes to tracking the losses we saw in the u.s. session overnight, but just remember, this is a risk-off demand that started in the asian session yesterday. it could be interesting to see where the downside is limited. even though we are down by 3%, that is off the session lows. sydney loans are looking off session lows and aussie stocks have fallen the most in six weeks in the thursday session. nikkei futures bouncing around. now in negative territory. we could see quite a bit of damage at the open in tokyo. kospi futures trading in seoul 1.6%.y the return of the u.s. dollar after eight or nine sessions of

losses. we see strength when it comes to the u.s. dollar index and that is translating to weakness when it comes to the aussie dollar. these commodity pairs and risk proxies doing very poorly. coming up on the next hour of "daybreak asia," we will be getting more analysis as to whether this makes a trend or if it is just a blip. alice brown will be with us, plus the school will be with us to talk about china's ties with europe, the u.s., and australia. shery: coming up this weekend, our conversation with paul chan on the future of the city as he battles beijing's tightening grip and the coronavirus outbreak. that is at 11:00 a.m. sydney time on saturday. the market open is next. this is bloomberg. ♪ save hundreds on your wireless bill

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now that's simple easy awesome. switch and save up to $400 a year on your wireless bill. plus get $200 off a new samsung galaxy s20 ultra. >> good evening from bloomberg's world headquarters. i'm shery ahn. to "daybreak: asia." asia-pacific stocks took a slump after the s&p 500 fell the most in 12 weeks. an epic rally has gone too far. oil falls, too. restrictions are overshadowed by weak demand in

the u.s. stockpiles had a record. stephen mnuchin says another shutdown is off the agenda. let's get straight to the market action with sophie. sophie: we are seeing a pickup and volatility likely to continue, keeping an eye on credit markets given the whitening we have seen in spreads. stocks are moving lower. the nikkei 225, losing 2% this morning. below 107.trading jgb, opening slightly higher. week's jgbntil next sale. the costly become a off more than 4% this morning, extending losses. - the cost be -- the

kospi, off more than 4% this morning, extending losses. -- tech index, fell falling, outpacing the nasdaq. morningk governor this is saying the policy will be accommodated in the meantime as we wait for recoveries. and as we wait for post-virus policy normalization. have the extending the kleins after the war session for the index in six weeks. the aussie dollar, extending overnight declines for the first weekly drop in a month. the kiwi dollars, set to halt a three-week gain. there are concerns of a severe

recession. we summon fracturing pmi -- we saw manufacturing pmi -- for new zealand. 10 year treasuries, just holding steady at 67 basis points after the bond rally, which saw full signing across the curve. the dollar, adding that the session since april. testing its 200 day moving average. crude, joining other asset classes in the pullback we are seeing. shery: let's get more market analysis with the associate director of family wealth management, alice brown. check inort of reality asia or here in the u.s. sort of inevitable given where we are when it comes to fundamentals? >> good morning. that is a great way of describing it.

it is a reality check. the last few weeks, markets have overheated with optimism and momentum. cap its 50s&p 500 day rally since the great depression. the nasdaq boston thousand points. -- lost 10,000 points. airlines,lines from cruise ships, companies in bankruptcy. , there are the most overbought stocks in the s&p 500 since 1991. optimism has now been dampened. they see the possible second wave in the u.s. and a long road to recovery. this has caused investors to reassess their expectation for that v shaped recovery. shery: that takes me to the question of the day, which is, is this round a blip or a sign

of more to come? >> from what we know, if we look , when we see these stretch valuations, it means the downside is much larger. that could be sparked by a number of things, the resurgence in infections, escalating political tensions, which we have heard about this morning. the market is vulnerable to a short-term pullback, and that is exactly what looks to be happening. what is going to be the next driver? we potentially see consolidation. >> in terms of what we are looking to do, cap taken a slight underway -- we have taken a slight underweight stance on

australian shares and international shares. that reflects values that australia has a broad outlook. that, withchieve gross profits, with stocks, which have performed well, in favor of more portfolio protection by looking at a real gold and fixed interest security. securities issued by the major banks. haidi: in terms of emerging markets, is there more opportunity that you have seen? what would you be concerned about and staying away from? beene emerging market has a main concern during this crisis. i think i have reiterated before on this program, we were concerned about a larger and

in infections. that, unfortunately, is occurring in brazil, russia. there is a lack of health care infrastructure in emerging markets and the physical capacity to provide meaningful stimulus to get back on the road to recovery. that ishose reasons, not an area we want to invest in right now. china is the only exception. their containment efforts allowed them to recover sooner. they are operating now at around 95% production capacity, although demand is proving much slower to recover, running than the normal level. our preference remains for u.s. and chinese equities. shery: what about domestic stocks? we have seen some false bonds when it comes to value stocks.

it seems like when it comes to australia, we are seeing a greater search and value stocks and even here in the u.s. >> when we think about the stocks werearket, dominant by ranks and -- by banks and companies. where we have seen gross stocks, particularly in the u.s. performing, we are expecting this next phase will see the outperformance of those value stocks. if we assess previous downturns, the main winners have been financial, consumer, and construction stocks over a period of someone months. in australia, there are a handful of companies available that provide cyclical exposure, but they are not set to recover. in the financial space, it would be avoiding the commonwealth

bank, because they are more exposed to dead, and we are expecting -- debt, and we are expecting that debt to trickle higher. in terms of construction and has takene, that a big hit. most of the challenges are factored in, but we want to look at more diversified exposure, like an industrial property. the other areas would be building materials and containment stocks, as well. haidi: how are you hedging risk? i know you talk about gold, fixed income. what allocation are you talking about? >> with allocation to cash, for example, cash is a difficult one. we are earning 1.5% in profit, but we are looking for a balanced portfolio, to have 13%

in cash. that is to make sure you have cash ready to go on the sidelines if opportunities to present. in terms of gold, and allocation of around 5%. allocation of around 5%. that is by rallying hard this year. we are expecting further upside. is showing it is more of a strategic allocation for protection moving forward, rather than purely speculation or a tactical trade. we are looking to position about 20% allocation, but across a mix of those different investments, like hardware securities, issued by the big banks, short dated in nature. some global bonds. retail investors, most easily accessed if you're partnered with specialist managers.

the associate director for family wealth management at dixon advisory. still ahead, angela merkel is opening up markets. jetblue's president and coo will give us her outlook on the return of travel. this is bloomberg.

shery: let's take a look at how markets are trading at the moment. the nikkei, with the biggest drop since april 1. we are seeing material stocks leading the decline. at japanese yen is holding

the 106 level. that was the one-month high against the u.s. dollar. but a lot of change when it comes to 10 year yields. take a look at korean markets. we have seen the worst drop on the middle ofe march. we are seeing samsung, one of the biggest decliners in today's session. todayn of cost be shares -- of kospi shares today. retell investors have been piling into the tech heavy index, raising concerns about whether we will see regulators step in. there is overheating also happening with the kospi, up more than 30% -- 40% since march. you have to put everything into perspective. let's get to karina mitchell with the first word headlines.

karina: president trump resumed his attack on the fed, saying he sees a better picture of the u.s. than jerome powell does. he tweeted "the federal reserve is wrong so often. i see the numbers and they do better than they do." the criticism is the latest in a long line of attacks on the fed chairman. it comes after policymakers offered a sobering view at the latest meeting. america's top military officer has apologized for taking part in president trump's church, saying he should not have been there. the chairman of the joint chiefs of staff general says his presence outside the white house led to the perception that the military was involved in domestic politics. the photo op came after protesters were forcibly moved from the area. the trump administration has override authorized sanctions at officials participate in investigations against america and its allies. he signed an executive order that would deny lock fronts for -- staff following the plan

an afghanistan. the u.k. and the european union are to accelerate trade negotiations amid fears they are heading for collapse. there are five more round of discussions to start at the end of the month. boris johnson has repeatedly threatened to abandon the process and he does not -- if he does not win an acceptable deal. it will roll out the brexit extension on friday. 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. haidi: treasury secretary, stephen mnuchin, says the economy will not shut down again even if there is another surgeon infections. -- surge in infections. let's check in with selina wang in beijing.

texas,the numbers at of florida. stephen mnuchin, saying you can't put the genie back in the bottle. what are health experts saying? >> mnuchin is saying that if you shut down the economy, more damage is created with medical problems being put on hold. he said covid testing and tracking is improving. this is countering what health experts say. infections surpassed 2 million. more than 100,000 people have died in the u.s. to u.s. continues to see 1000 deaths per day. inesurgence in case totals arizona, texas. in fact, houston officials are getting close to real posing -- three imposing stay-at-home orders and are preparing to a covid-19 hospital. they say "we may be approaching

the precipice of disaster." the increase of testing has not been able to keep up with the pace of new cases in some states. the health costs of the shutdown may have exceeded the toll of the virus. the white house has offered no data to support that assertion. the white house has declined requests to do so. the u.s. has seen a decline in some services during the pandemic. you can do screenings and child vaccinations during the lockdown. but this is a false choice to weigh those directly against the pandemic. there's research published showing that public health measures have prevented about half a billion of it in sanctions -- billion covid infections across the u.s.. shery: what about other parts of the world? any standouts when it comes to coronavirus cases? >> we are continuing to see this

hit countries around the world in different ways. in indonesia, the death toll has more than doubled in the past month, reaching 2000. with fidelity's in indonesia -- in indonesia being one of the greatest. as you see cases rise again, the president and officials have threatened to reimpose social distancing rules. i also want to cross to italy. you are seeing the gradual reopening and return to normalcy. italians toked for all download the virus contact tracing application and italy -- come also announcing closed door sporting events can resume on friday. shery: our china correspondent,

selina wang, in beijing. aviation has been one of the sectors most hit by the virus pandemic. jetblue is among carriers to announce new safety measures aimed at restoring the public confidence in air travel. the ceo told us what it will take to get passengers back in the sky. thehat we have learned is only thing certain is that there is a lot of uncertainty. you see things in the news media today, regarding increases in cases in other parts of the u.s. our focus has been on building confidence and flying again. we have seen small glimmers of hope in the leisure sector. jetblues is a large -- is a largely domestic carrier. we think it will be coming sooner than business travel. our business is ultimately going to evolve?

-- how are businesses ultimately going to evolve? you will then have the freedom to start to change the reality. what is jetblue going to look like in that environment? >> we have been very lucky to be a recipient of cares act payroll dollars. it covers about 76% of payroll. after september 30, when the cares act payroll dollars cease, we're looking at what the size and shape of jetblue will look like. we will be a smaller airline. it is so difficult to predict that far out. every week, we learned so much more about the impact of the coronavirus. we are looking to june and july as signals to demand recovery and what we think the coming months will look like. >> in terms of what the demand peopleing like, is that -- are people going to be going to see friends and family?

or will it be travel? >> it is a combination of things. we are seeing front of demand for leisure travel, but also customers going back to see family and friends. we have seen and political events, people are really going visit friends and family sooner than the business sector. >> what do you see at the moment, what feedback are you getting from passengers that you are taking on board at the moment? what feedback are you getting? >> we are measuring very closely what customers they to rebuild confidence again. cleaning aircraft, social distancing is high on the list. we built a program that will continue to evolve around those very things.

it confident for them to travel again. they won't crew members to be healthy when we are serving them. focus on clean services. reduced surface touch points. we are no longer providing higher touch service. >> what about your staff? staff is focused on the success of jetblue, doing everything we can so customers start feeling comfortable flying again. whether that is how we serve them, the cleaning products, policies and procedures we had in place, our crewmen are dedicated to jetblue. have a -- we have a family culture. >> how do you think the network is going to change? i want to talk about london. largelyhe u.s., you are

a domestically focused. how does the network change, how does the offering change? you -- how are you going to reconfigure? >> i will speak to network first. we are largely domestic. 70% of the domestic market. 80% of the customers we carry our leisure. -- are leisure. we are set up for a recovery sooner than other airlines. domestic will return quicker. short-haul international will return quicker. longer haul international, right now it is a patchwork of different openings. where watching that very closely. from jetblue's perspective, as customers get confident traveling again, we are well-positioned to take advantage of that. shery: that was the

here.ue president and coo t this is bloomberg. ♪

look at the take a early trading session here in asia this friday. the worst of handovers when it comes to sentiment in the u.s. 225re seeing the nikkei in japan extending the kleins down by 2% in just the first half hour of trade. -- declines down by 2% in just the first half hour of trade. new zealand, although very much

still off session lows. next, the relationship between the eu and china. this is bloomberg. ♪

urged angela merkel has china to take action in opening up their market. beijing needs to treat foreign companies fairly. nows get some perspective from our political economies, joining us now out of new york. surely, great to see you again. does the eu have a choice given the state of global trade? thank you for having me. i think economically, europe will have no choice but to

continue to fall into china's economic gravity as it continues to shift. as we look at 2020, china is projected to grow 1%-2% this year. german gdp will contract 7%. the u.s. will contract about five% -- around 5%. china continues to be the high-growth engine of the world for this year. seek alse would europe market other than working with china? on the geopolitical narrative, it is a slightly different story. china's ambition has always been about connecting the two ends of the ratio. be infrastructure connectivity, but also digital infrastructure. europe is as equally

important for china, know whether region matters more to china geopolitically then europe -- than europe. haidi: does europe have to make a choice to align itself the way we have seen alongside the u.s., the u.k.? to a certain next that come here in australia? -- to a certain extent, here in australia? it is difficult, because it is not a binary view that all countries take. particularly talking about the likes of italy and france. >> absolutely. not only not binary. tension as we have seen is not to be equated to tension all around between 10 and the other countries -- between china and the other countries. china relationships are a mixed bag.

it is a very complex political architecture china needs to move through here. and -- ina expanded think china expanded investments in europe. when italy joined china's cri back in 2019. when it comes to member eu and its the relationship with china, there will be continued ideological questions and a diplomatic spat. that has been an ongoing theme. the eu and china will have to look the young the political noise. it is and of the day, bigger story of economic integration, not only trade, but

even perhaps in technology. >> how different is that you-china relationship to the u.s.-china relationship? >> it is different that the china is not a threat to the eu the way it is a threat to the u.s. economies are more complementary than competitive. they have a lot to complement each other, but the president of the european commission, she said that europe actually needs massive investments in the form of a marshall plan, that i think in today's geopolitical environment, trump's administration would be the least likely candidate. the plausible partner for europe would be china.

think deal comprehensively, -- i think deal comprehensively, it will be a strategically of heaving for china and europe as well. >> does this mean european countries will look past the diplomatic during this pandemic? >> i think diplomatically, that the struggles.e themenk the ongoing from 2020, the bigger story is that global economic gravity will continue to tilt and integration will be the bigger story moving forward. strategic interest and the spirit complex

economic relationship with china. >> how much of a pressure point will it -- will there be a with the treatment of huawei? they might be punished if the u.k. decides to exclude huawei. use huawei, a clear sign of saying -- that will be a crucial decision for huawei's future and for china as a global technological leader. some german companies will have substantial investment interest in china. bank, theyeutsche

might be put in similar positions as hsbc. that is an awkward and difficult position to be in. it will become this major strategic variable in defining the future of the u.k german -- of the german-china relationship. to you expect pressure when it comes to the hong kong issue? you see this as a done deal, nothing will change. do you expect further pressure when it comes to angela merkel? to bekel will continue vocal about the other issues. it is interesting, because you said the world knows, nothing is inng to change china's move hong kong. a sort ofo have bargaining chip in their hand. they have the power to hurt hong kong economy and perhaps very badly. the chineset hurts

economy at large. europe, in a way, does not need to have that sort of power. germany does not have that sort of our and leverage over hong kong. i would say talks will remain charged. i don't see any concrete action coming out of europe at this point. particularly specifically targeted to hong kong. one particular agenda, as we in this is a talk the china-u.s. treaty. it is expected to be completed by the end of the year. the investment treaty, hopefully it will give the eu some more market access that the european union has been holding for and perhaps in theng the key terms u.s.-china trade deal.

that are specific protections and also currency stability colossus. i think all of these should be offered. -- clauses. i think all of these should be offered. market access should continue both ways. this investment treaty has been under negotiation for years. reallya sudden, china wants to expedited and have it completed by the end of the year. as the u.s. continues to propose laws to limit chinese companies, the economic war continues to escalate, china will seek global market access, most prominently in london, but now in frankfurt, paris. we can see a glimpse of hope, i would say, possibly coming.

haidi: will the relationship with europe be able to upset some of the decoupling china is already facing with the u.s.? >> absolutely. the saudi arabian integration is a major thing going forward. it is in china and european interest. if you look at the 2019 trade, after the china-u.s. trade were come on values with europe increased. trade value with other countries. this is the bigger story, the recalibration of the global supply chain. chinese supply chains are going to go into emerging markets and continue to be integrated more with europe.

shirley yu, thank you for joining us today. we have an alert on the bloomberg. we are now hearing about the republican national convention selecting jacksonville, florida to host the republican convention. this, coming after republicans were expected to move the national convention from charlotte, north carolina, when president trump said he did not want the convention to feature social distancing measures. now, they have selected jacksonville to host the republican convention. haidi: coming up, oil is set to see the largest weekly drop since late april. we get more analysis on the energy sector, next.

this is bloomberg. ♪

>> this is "daybreak: asia." travel stocks slumped after increased cases in the u.s.. coronavirus cases in the u.s. the easing of lockdowns have led to optimism of a swift recovery, but texas, california and other areas are reporting a spike in infections.

treasury secretary, stephen mnuchin, says a second shutdown is in required, even if virus cases surge. u.s. infections are now above 2 million. president trump rejected an overhaul of law enforcement, calling instead for economic development, better school choice, and improved health care for minorities. speaking in dallas, he said he is finalizing an exit of order that would demand "force with compassion" without explaining what that means. he added the government would ensure police are properly trained. a fox news host is losing more big-name advertisers over there black lives matter comment. disney, papa john's, and t-mobile are not about -- added remember that when they comfort you. that was clearly about the democrats. 18 months ago, so to stream, tv marriage it, and others dropped them over comments they made.

they are said to be offering the report $5 billion for a stake in cba. both want to invest in the unisex -- and the time that -- in a time that sports are suffering from the coronavirus restrictions. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm karina mitchell. this is bloomberg. shery: let's get you a check of the markets trading across asia. we are headed for the first weekly drop in asian stocks. the nikkei and the kospi, falling the most since april 1. energy stocks are leading the decline. samsung is the biggest drag on the kospi. we are seeing the worst two days for the index since mid-march. downstocks are still

more than 2%. energy is a big loser today. oil prices, again in the spotlight after plunging more than 8%. the global selloff in stocks wave of second -- a second wave of coronavirus the drop wextends saw in new york. sue k. has the latest. not a lot of good news when it comes to the oil market. just concerns about the global economy. >> yeah, the combination of those factors is really sour sentiment. we are seeing an end to the winning streak in oil. , nowatest drop in the wti on track for the third weekly drop since april. as you said,

grappling with record high inventories of supply levels here in the u.s. and uneven demand rebound. particularly in the u.s., there's concerns the coronavirus cases are rising in states like texas, florida, california. again, there has been some positive sign and the u.k., the consumer brent crude. it is starting to see a recovery of demand. what is really supporting the rebound and prices has been these unprecedented production costs by opec producers and easing of the pandemic lockdown restrictions. if there's any concern about the man's being upended by another round of coronavirus, it reveals that the recovery is kind of fragile. investors have been bullish in wti pricess as jumped to the highest levels in 22 months. shery: in the meantime, the

chesapeake story continues the wild ride. the asia-pacific energy conference will take place virtually. it is a brave new world when it comes to energy players now. >> yeah, we really have to look at the chesapeake trading. many have called it and send volatility. it was one of the few stocks that rose in the thursday session after plunging on a bloomberg report that it was preparing an imminent bankruptcy filing and then rising again. there are many market observers saying a lot of this has to do with a whole range of new, small investors on this robin hood platform, thousands of small buyers, for some reason, piling into the chesapeake stock, which was once one of the biggest energy players, with exxon, now saddled with debt. traders are no longer being held in singapore in september,

it will be virtual. there are many traders that will really look forward to this ability to either celebrate or commiserate with their colleagues on what is going to be the 36th annual event, one of the biggest for the -- biggest of the year for many traders. the pandemic concerns are causing it to be held virtually rather than in person in singapore. back to you. next, it is a new battlefront emerging for asia's financial hub. why singapore and hong kong are facing off over chinese stocks. that story, next. this is bloomberg. ♪

shery: let's get a check of the latest headlines. apple removed to podcast apps from the app store in china at the request of officials. apple decided the podcast has content that china has ruled is illegal. that 10% of users of the app are in china. accounts of

pro-democracy chinese activists word -- were deactivated but xoma still available in china, which heavily censors all reference of the tiananmen crackdown. chinese tech firms are expanding their footprint in hong kong even as a pandemic has a comeback. -- the pandemic has a comeback. alibaba and tiktok's owner have signed up to take on more space in times square. the move follows this week's secondary listing in hong kong and next week's debut. the battlefront is opening up between asia's two financial hubs. now the focus is turning to chinese tech features. our guest joins us that singapore. give us a background to this

upcoming battle when it comes to this long-running rivalry between the two exchanges. background,of the sinceore has been trading 2006. it is the only overseas platform that investors can trade chinese features. hong kong is trying to come up with a similar product. still pending approval. shery: how was the singapore exchange planning to make up for venue with a slowdown in listings? >> what the deal has done is effectively move the msci index franchise to

37 futures options contract read -- contract. the exchange will focus on more proprietary products, such as single stock futures. launched single stock futures on singapore equities earlier this month, for example. there will likely be more agreements with other index providers. choice. like a natural plans in place to make up for the lost revenue? right now, they have not come on the record to tell us what a but the reason they acquired scientific data, for

develop is so they can products. now, there's not much from the exchange on how they plan to deal with this. they have seen the profits from the msci a deal. our southeast asia stocks reported there. this weekend, our conversation with the financial secretary, paul chen, on the future of the city as it battles protests and the coronavirus outbreak. that is at 11:00 a.m. sydney time on saturday. before we handed over to bloomberg targets: china open, -- bloomberg markets: china open, we are seeing the kospi falling the most since april 4. we could be headed for the biggest weekly drop. they are seeing the worst two days since mid-march. when it comes to the kspi

samsung is the biggest drag. oil continues to fall. barrel, aound $34 a level of down more than 4%. energy stocks, one of the big laggards right now, haidi. haidi: yes, one of the biggest decliners. checking in on futures, this is where we are seeing u.s. futures at the moment still hanging onto games when it comes to equities come up 3/10 of 1%. taiwan, looking at something. when that market starts trading. you can see futures down about 1%. little instability when it comes to trading on the offshore yuan, holding at the seven handle. that is it for "daybreak: asia."

lots of coverage continues. we look ahead to the start of trading in hong kong. this is bloomberg. ♪

♪ tom: it is 9:00 in beijing, shanghai and singapore. i am tom mackenzie with david ingles. asia-pacific stocks fall a second day as investors steer the recent -- fear the recent epic rally has gone too far. japan is set for its worst week in two months. oil is down on the doom and gloom of forecast to the recovery. crude facing a first weekly decline