haidi: good morning and welcome to "daybreak: australia." from bloomberg's world headquarters in new york, i'm shery ahn. haidi: big tech once again drives u.s. markets higher. the nasdaq hitting a high on easing concerns about the recovery. apple and tesla offsetting a slide for energy and banks.

the u.s. and china may start talking trade again. beijing says the phase one progress review should happen soon. alibaba offered more signs of china's strengthening rebound. shares jumped last quarter. the company says it is no threat to national security. let's take a look at our final friday session in asia. sophie kamaruddin is half in hong kong. green for are seeing asian futures on friday, this after the wobble we saw. we are keeping an eye on names like panasonic. we are keeping and i on a theme in japan, showing the dominance of quality stocks versus their value peers may have a bumpy road ahead. torall, we could be looking end the week on a risk on note.

watching the terminal, we are looking to see if asia will track. joint the slot punch -- joins the slump on softer chip prices. with that risk, the big jump in taiwan's july export orders may be too backwards looking. offer a more timely check. on the tech front, alibaba's results showed improving chinese consumer sentiment. shery: here in the u.s., futures higher at the moment. this, of course, after we saw another narrow rally for u.s. stocks. the s&p 500 gained 0.3%, but it was giant tech firms that drove the praise.

companies returning to normal -- zoom, peloton, netflix really offsetting a slide for energy producers and banks. a composite gain of more than 1%. the nasdaq composite hit a record. we have hit a high more than a dozen times since june. let's get more. sarah, we had another rally today, but this was a really narrow rally. these are summer markets, after all. markets.ey are summer we have seen volume this entire week of about 30% below the average we had seen over the past 30 days every single day. we are seeing very light summer volume. at the same time, like you said, a narrow rally today. you mentioned the nasdaq 100 closing at a record of 1.4% today. you look at an equal weight version of that to see just how top-heavy the mega caps, the largest 100 company rally was,

but the version of the nasdaq 100 was only up to basis points. you see this dispersion of 100 basis points showing you that it was the likes of the things, the likes of tesla, the nasdaq as well that was pulling the index higher. it really is that we are back to that safety trade once again. the this morning in the u.s., we did get initial claims data that came in higher, above one million once again. water onw cold expectations for the recovery. until we are no longer dealing with the coronavirus, we are going to continue to see fits and starts and see popular trade takeover likely in the end. we saw a lot of moves when it comes to the s&p, but that eclipsed the february high earlier this week. the fact that it took this many months to get to that fresh record could be seen as a more bullish sign of returns to come.

do we have expectations that in the next leg of the rally, we could see that rotation play? sarah: it is definitely a topic of conversation. there has been research showing that you do recoup bear market losses in a short time, that can give way to stronger gains going forward. however, we have to remember that when we were going through the bear market just a couple months ago, in the month of february, march, april, so many people were using historical comparisons. because we were dealing with such unique times, many of those did not hold true. however, if we do see a recovery take hold, if there is hope on that front, then there is hope we will see value, cyclical, small caps really outperform. we just have not seen that trade really stick yet. i do think it is notable, though, small caps being a part of the recovery of that comeback trade. small caps are still leading the nasdaq 100 this week, beating

those mega caps this month. we saw that at the beginning of the month, we saw yields rise and we saw bond yields rise. we saw that recovery trade take hold, but since it has really stalled out. i am a minded that apples to trillion dollar value is bigger than the whole of the 2000. that's extraordinary. if we get another delay of this u.s. stimulus package? there was a lot of hope writing on that. sarah: yes, apple is almost there. fiscal stimulus has been very important. investors have been shocked that up until this point, even though we have gotten delays of the fiscal package, the last cares act, or many components of it, fell off at the end of july, 20

days ago. many investors are shocked that we continue to see stocks fold in. we saw the s&p finally hit a new record -- i should not say finally, because it was very quick, but the quickest reclamation of a bear market in history. however, we do not get a fiscal package going forward, and it is still a big question right now, but considering the fact that we did see initial jobless claims rise once again, that there is a sense that a source of recovery is going to take a very long time, the majority of people or those that have been laid off are going to need help. it is not going to be a quick return to normal. you would imagine that you will see some volatility, you will see an uproar, potentially, in the markets. inever, when we saw a delay july, there was no such thing to be had. haidi: really appreciate your time there. sarah ponczek. we are getting more breaking news in terms of the earnings

drum roll in australia. we are getting suncorp reporting net income for the full year that beats the average analyst estimates. they offer retail business banking, general life insurance amongst some of their businesses. the four-year net income coming in at 913 million aussie dollars, the estimate for 818 million. the final dividend per share are being issued is just one billion since. to the be speaking suncorp ceo a little bit later on. ahead, alibaba's revenue growth returns to pre-pandemic levels. the company says it is keep an eye on very fluid policies in the u.s. we are breaking down the numbers at of china's most valuable company. before that, we will be assessing the latest with neil

ferguson. we will be gathering his thoughts on what he is calling the new cold war and prospects for the u.s. election, next. ♪

karina: you are watching daybreak australia. iran has shown a new cruise missile as the u.s. called for new sanctions against tehran. mike pompeo said iran is not come playing with the 2015 nuclear deal despite the u.s. abandoning it -- complying with the 2015 nuclear deal despite the u.s. abandoning it when donald trump came to power. a former trump policy advisor steve bannon is to be released on $5 million bail after being charged with fraud over an online group that raised money to fund the southern border wall.

prosecutors say he and others portrayed the group as a volunteer campaign, but bannon pocketed more than $1 million. trump said he never supported bannon's group. the russian opposition leader is an a, at the hospital after suspected poisoning during a trip to siberia. is awaiting the results of tests before commenting. the opposition leader claims he is a powerful enemy and has been arrested several times. kim jong-un warns the economy faces major challenges. his country faces unexpected threats in a range of areas, and a development seriously delayed. his sister will now be in charge of relations without taylor -- with south korea as the north tackles sanctions. onbal news 24 hours a day,

air and on bloomberg quicktake, powered by more than 2700 turn lisanti analysts in more than 120 -- journalists and analysts in more than 120 countries. revealed planss to talk to u.s. officials soon on the phase one trade deal. this as relations continue to sour on issues ranging from human rights in hong kong to tech dominance. analysis from niall ferguson. always nice to have you with us. to what extent do you expect a detente in this new cold war that you have been writing about and talking about if we do get a change in the white house administration in november, or do you think this kind of hegemonic struggle between china and the u.s. is going to continue regardless of leadership in the united states? niall: great question.

if the first cold war is anything to go by, changes of party affiliation in the white house do not really make that big of a difference. in fact, if you look back on the original cold war, it was sometimes democrats who made the most hawkish moves. it was harry truman who went to war over korea. the key point here is however much joe biden's inclination when he was vice president was to have good relations with china, it is very difficult for him, if elected, to turn the clock back to those days, because structurally the relationship has just deteriorated in so many different dimensions. i thick it is a great mistake to imagine, which he has sometimes argued, that this is all donald trump's doing. i think donald trump changed sentiment in the united states

significantly, but it was china that changed the direction of travel and started cold war two. there might be some change in detail. i don't think the biden administration, if it comes to pass, is going to pursue the tariff strategy that was central to donald trump's approach, but on a whole range of other issues, from technology to taiwan to hong kong to human rights, i think the democrats will have to maintain continuity. so, there is an argument that president trump's actions of withdrawing from multilateral institutions, withdrawing the u.s. from the world stage, and giving face to beijing to come into that, so to that effect, do you get a better u.s. handling of the pandemic after november? do you get a more globally friendly u.s. administration, does that mean there is a better chance for u.s. exceptionalism to return again?

jeffrey: i don't know there is that kind of mood music my that atmospheric talk, but it all boils down to the issues of substance. a key issue in cold war one was, how many countries wanted to opt out by being nonaligned? number of nonimportant countries did do that, including india and yugoslavia. to can see, when you talked some europeans, and inclination to be nonaligned in cold war tw o. when it comes down to the crunch, if you ask the question, do you want chinese companies like huawei to have a dominant position in your 5g networks, given what we know about while way's connections to the chinese government, -- on plot away -- connections to the chinese government -- mike pompeo has been a good job

at exploiting the fact that china's performance this year, particularly with respect to the early stages of the covid-19 pandemic, has not been impressive. and the will for your diplomacy beijing tried in the first half of 2020i think largely backfired in europe -- four-year diplomacy beijing tried in the first half of 2020 i think largely backfired in europe. if joe biden's president, i don't think the key is the atmospherics. i think the key is on the specific issues that we confront, whether it be huawei or 5g, or bigger tech questions like artificial intelligence, it is impossible for anyone to be nonaligned in cold war two. shery: i wanted to have you on the show because i read your latest comment on bloomberg, and it was really provocative. this comment, tiktok is not china's revenge, it is the opium, a digital sentinel to get

our kids stoked for the coming chinese imperium. that's a very strong thought. i would like your elaboration on that, and also, how is it that you see tiktok, for example, different from the likes of facebook, snapchat, twitter, and so on? jeffrey: let me be -- niall: let me be clear, i am not a massive fan of social media generally, but i think the big difference between tiktok and facebook is obvious. tiktok is owned by chinese company bytedance, and that means that tiktok's data, and it gathers a great deal on its users, are available to the chinese communist party on-demand. that is the nature of china's internet law. all chinese tech companies have to make data available to the party if requested. looking to tiktok, and i'm a guy in my mid-50's, not a natural

tiktok user, might reaction was, how can this thing possibly be a threat to u.s. national security? but the more i delve into it, the more i realize it could be, because half of american teenagers have used tiktok. because it is an ai powered app, they are making all kinds of , potentially embarrassing in their future lives, available to tiktok. while it is not the most important part of cold war two by any means, huawei is a more important issue, it is, nevertheless, highly significant that tiktok has been able to establish such a market share with american teenagers and indian teenagers, and it represents in some ways the most successful of china's efforts to get outside of its own internet space and into the rest of the world. though,hat the chinese, say when it comes to the 2017

national security law that they have to provide any information that the communist party wants on-demand, though the way beijing puts it is that will not happen. and companies like huawei say they don't even have access to that type of information. how do you push back against those arguments? niall: they would say that, wouldn't today? -- wouldn't they? one has to take a very clear eyed view on where china is in relation to the internet as it is used by americans. china has been pursuing actively the kind of disinformation campaign that russia pursued four years ago in 2016. there is ample evidence that china uses twitter, for example, to push messages. for example, fake news about the origins of covid-19.

the chinese foreign ministry was using twitter to push the absurd claim that covid-19 had originated in the united states. let's not pretend that china is not engaged in cyber warfare and information warfare, because it is. i do not think it is in the interest of any western company to take on trust, the things that chinese tech companies say. the reality is the shots in china are called by the chinese communist party, and the tech companies are beholden to them, to the point that the most important of all the chinese internet companies, alibaba, essentially was told that they would have to kick it's boss, jack ma, upstairs into a more philanthropic role to make sure the party properly controlled alibaba. that is the kind of thing going on. arechinese tech companies

actively involved in building a surveillance state of the chinese communist party. they are building a system of social credit for the chinese communist party. if you look closely at what is happening in china, xi jinping is building a pennock to come. if that becomes global and americans find themselves under chinese surveillance, i think there would have to be a serious we think about our strategy. it is appropriate that the u.s. government has taken a tougher line on chinese tech companies over the last couple of years. i think cold war two was in many ways initiated by china economically, and it was really, if anything, surprising to me that it took so long for americans to wake up to this kind of chinese challenge. haidi: i am just waiting for your tiktok account, to be honest. it sounds like you are saying there is an inevitability, that we will see a bifurcation of systems in the realms of tech

and even of global financial infrastructure. i know you have spoken about the pay, fore of ali example, not to mention the encroaching dominance of the rmb. niall: there are two issues. if you ask the question of if there is a partition of the internet, china has started it. it was china that built the great firewall and make sure that the u.s. tech companies could not take a big chunk of the chinese market. yet allowed chinese champions, like alibaba and tencent, to rise in their domestic market. i think china has become successful and expanding his payment platforms -- in platforms.ts payment you can see china has made massive advances in that area, and that is something that should concern you, as policymakers, without dollar dominance, u.s. power

significantly eroded. but china remains weak in its dependence on important similar -- imported semi conductors from countries like taiwan, the european union, and the u.s. that is its achilles' heel, and it is exactly what the u.s. commerce department has gone after this year, trying to cut huawei off from those. i think china is strong in payments but very weak in hardware. shery: talking about power eroding, what about the status of the united states? you talk about the u.s. finally awakening from these threats coming from china, and you see trump trying to sabotage every alliance. at the united nations, we had one ally when it came to the u.s. arms embargo boat. how will the isolation of the united states hamper its fight against china? i do think one of the

central weaknesses of donald trump's strategy has been his relative disregard and lack of respect for american livelihoods. this is a critique that jim mattis made very forcefully in his recent statements since leaving the government. i think this is one obvious opportunity for a bite and administration to do better, and i do think it will be a top -- a biden administration to do better, and i do think it will be a top priority for him to repair damaged relationships that are one of the weaknesses of donald trump's strategy. america first in some cases turned out to mean america alone , and that is a misreading of history, buckles cold war one was not won by america alone. the war one was won by alliances in europe and asia, which were so much more powerful than anything the soviet union could put together.

when you said what you just said about the relative isolation of the united states, it's not like china has a number of allies rooting for it either. at the moment, the two superpowers both seem relatively isolated with relatively few enthusiastic friends. who are xi jinping's allies? it looks like the answer to that question would be kim jong-un and vladimir putin. it's not believe the smart set of international relations, is it? haidi: so where does that leave middle nations like australia? niall: i am fascinated by the fact that, in many ways, australia led the western response in cold or too -- cold war two. it was really australians government and is thrilled and services -- australia's government and intelligence services that woke them up to

chinese intelligence operations. how important its relations with china might be, alliance has to be with the united states and the democratic countries of the west. the u.k., where am originally from, for example, wanted until recently to try to stick with huawei for its 5g networks. that was not the right way to go. australia has played a leading role in shifting sentiment not only in the u.s., but elsewhere. to youi could talk forever, but we've got to go. niall ferguson joining us from montana. don't miss our special coverage of the democratic convention. that starts at 11:00 a.m. in sydney, 9:00 a.m. hong kong, and 9:00 p.m. in new york. ♪

shery: you are watching daybreak australia. we are seeing nikkei futures up .1%, but this is after japanese stocks fell in the latest session. we have the japanese yen a little stronger in that 105 level. we get ppi numbers out of japan, so watch for those. we have a lot of eco-data this morning out of asia. south korea, the first 20 days of exports, those numbers out later today. we have seen a recovery in those exports, but that will be under a little bit of pressure. afterfutures are down .4% they lost ground previous session. we have seen a lot of risk asset

being hurt because it a bleak outlook from the fed minutes when it came to the recovery. sidney futures higher .2%. we get retail sales out of australia as well. kiwi stocks gaining ground after losing for the past two sessions. let's get to the first word news now with karina mitchell. karina: president trump is threatening american companies with tariffs if they did not move jobs back to the u.s. he told supporters he will offer tax credits if they comply, but they will have to pay out if they refuse. the president spoke in a one hour long rebuttal of joe biden's nomination acceptance, but offered no explanation of how it would work, and it is not clear if it is official white house policy. china delayed phase one trade talks will happen soon, after president trump postponed a review over the weekend. tensions between beijing and washington continue to rise over trade, human rights, land hong kong, but the congress ministry says they will be in touch.

president trump says he is unhappy of china's handling of the coronavirus pandemic. global coronavirus cases continue to rise, but their indication rates may be slowing in the u.s. hospitalizations in california fell to the lowest levels since june, with a nationwide infection is now above 5.5 million. worldwide, fatalities are approaching 800,000, with the economic fallout expected to affect the whole our economy. low unemployment could persist for years. germany is warning eu leaders to avoid a new let -- a new virus lockdown. blocellor merkel says the must not close orders but act in unity to prevent spread of covid-19. she held face-to-face talks with french president emmanuel macron, who said economies cannot be shut down again because the damage would be quote, considerable. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more

than 120 countries. i'm karina mitchell. this is bloomberg. alibaba reported first-quarter earnings and revenue that beat estimates, with sales almost back to pre-pandemic levels. at the same time, the chinese e-commerce giant appealed to president trump that they are not a security threat. stephen engle joins us from hong kong. what is the take away and waken -- what can you extrapolate about the chinese recovery? stephen: we need to break this story down into two main stories. of course the domestic business is the bulk of their business. this is a $700 billion empire spanning a lot. on the flipside they are trying to expand abroad in particular in the u.s. leah potentially in the crosshairs of the trump administration. the results were fairly good, considering in march and the first calendar quarter, sales the down to new lows as

lockdowns really prevented any kind of commerce. so what we saw is a rebound really accelerated from their june 18 to meteor sales promotion, which came in at a record as china came out of the lockdown and he pandemic faster than most nations in the world. revenue,a 34% rise in almost back to prepare gnomic levels, because we saw a 38% rise in the december quarter in sales. sales, not badn considering the state of global economy. annual active consumers and china has also grown by another 742stein million, to million for active annual consumers in china. they own alipay, 33% owned by alibaba. 1.3's --ixfold to

ahead of the much anticipated planned dual listing in hong kong and shanghai. the alibaba results validate the thesis that alibaba will emerge from the pandemic stronger than before. shery: it seems alibaba executives spent a lot of time in the earnings call trying to clarify business objectives in the u.s. how much of a threat is any potential action by the trump administration, when alibaba's u.s. business is relatively small compared to what they do in china? stephen: that is right. they want to grow in the u.s. and the ceo, really kind of tried to appeal to the trump administration and say alibaba's primary focus is business. in the united states, it's to support american brands, retailers, small businesses, farmers, to sell to consumers and trade partners in china and around the world. they do not want to fall into what has happened to tiktok, as well as wechat from tencent,

outright banned. the clean network program announced by mike pompeo, it is also urging u.s. companies to cut ties with chinese firms, including cloud providers like alibaba, tencent, and baidu. that is what it comes down to. alibaba is spending millions, if not billions on its cloud business, and they want to hire many tech workers in the u.s. for its cloud business, and that is where the trump administration says the security gaps are the basic -- are the biggest. theme,on that u.s. china the trump administration is keeping listed chinese companies in his crosshairs. the state department has warned u.s. colleges to divest from the chinese assets under the risk of more onerous measures on holding shares under the secretary of sees thed us why he potential for wholesale delisting's. >> it is really a whole it -- it

is really a heads up. i think that is why they were appreciative. because i can tell you, most of these boards of trustees, back when i was the chairman at purdue, i did not know that their endowment funds are invested in many chinese companies. it may be done through venture capital firms, maybe with the companies listed on the american exchanges, might be with the ones listed on chinese exchanges, or it might be through an emerging index file. and as you know, the president's financial working group announced, hey, by the end of next year, the chinese companies have to do something equivalent. they have to have their books audited, so they have to be transparent as all the other companies on the exchanges. that is key, because right now the risk is huge for the average american investor. >> just a couple months ago, this is something you and i had talked about in a previous interview.

and since then it has passed unanimous consent legislation that would require for chinese firms that are listed on the u.s. exchanges to follow and comply. is the president supportive of that, and is that likely going to be taken up in the house? >> i think that when you see the results of this recommendation from the president's working group, in essence, that is what they said. you have to be transparent, or you have to delist. these companies are forced to delist, they have one other choice, and at is to get their books audited. there's probably a high likelihood have to restate their financials. as a guy who has taken three companies public, man, i tell you, if you have to restate your financials, that is the time you want to go under your desk into the fetal position. >> that is about 200 companies impacted. are you nervous about the impact

that could have un-american investors who are many of them in the middle class facing significant economic uncertainty? >> by the way, i think that is why it is a heads up. it doesn't end at university endowments. if you think for example the mother state pension fund is they a $500 billion fund, have tens of millions of dollars. they might even have over 100 millions of dollars invested in chinese companies. and their chief inject at -- their chief investment officer was just asked to leave. the firemen's fund, the teacher's fund. not only has the president done a great job of waking up the world on this, but also congress. you can see, this is one of the most unifying, passionate, bipartisan issues, is this threat from china. whether it's in the

universities, the pension funds, wherever it may be. why weursday, that is announced confucius centers we have announced our a foreign mission run by a foreign country. so that is really to shine the light on it. this really has to do with our transparency campaign we are doing with hong kong. so, it's important. that was the under secretary of state speaking to us earlier. retailup, aussie conglomerate warns of a heavy lockdown toll as profits fall. our interview with rob scott coming up next as weak caps off what has been another busy week of earnings. this is bloomberg. ♪

>> the resilience of the portfolio that we have, which has helped us see through the last six months of covid, is going to stand us in good stead going forward. in spite of all the uncertainty. >> still battling some of the challenges. three of our operations set new production records, and nine out of 10 operations decreased their actual operating costs. >> electronics, agriculture, supply chain logistics, clearly areas that are very busy and hot at the moment.

we have been the beneficiaries of the growth in those segments in china. >> the suppression of covid-19 in australia is a test case around the globe, and we are hopeful we can have the majority of our domestic business by the end of the year. >> we think stimulus programs all around the world to try and get economies back on their feet, get people employed. they all have a positive impact on demand for copper. >> i think we are going to see quite a bit of volatility and uncertainty in the way the rest of the world recovers. >> position us as well as we can to navigate through some political tensions at this present time. those are just some of the big guests we have had this week on a barrage of earnings coming out of australia. staying with aussie result, wesfarmers is reporting a four-year profit drop of 69% with a net income of $1.2 billion, paying a special dividend payment as well. ceo rob scott talk to us about

managing australia's largest workforce amid the pandemic. rob: i think one of the biggest challenges that i think we have how do wee well is keep a hundred 7000 team members engaged and safe and what is a really turbulent time. and we are really proud of the way our team has stepped up the challenge. we have made a lot of changes within our business to protect the health and safety of our team and our customers. and i think the results we have delivered this year are really attributed to those 107,000 team members who have delivered them. >> australia now faces less of a fiscal cliff to the job keeper program the government announced. you're one of the biggest employers in ostrow you. how do you rate -- in australia. how do you rate the government's response? rob: i think the federal government should be commended by voting swiftly and decisively

with the launch of job keeper and the job seeker program. they have been very effective across the broader economy. they have made a real difference. i guess what we are seeing now though is that we are going to be in for the long haul with covid. from my point of view, i think we are in the first phase of covid. and even if we were to get fortunate and see vaccines come into development in the new calendar year, it will state -- will still take time to flow through. the challenge now in our country and probably similar challenges around the world, is how do we use every legal at our disposal to keep people in jobs, keep the economy going, keep investment going, and that ultimately goes to ensuring that there is sufficient confidence in build it -- in business? -- in business. >> what does that mean for online?

he saw spike in online. did that continue reopening? i want to get a sense of where you are online and its propensity to move higher. as you saw a reopening's, did that change? that narrative i think is critical in your business. rob: it is a really interesting point. firstly, it's really fortunate that over the last three years we have invested heavily in our digital capabilities. i am pleased that we get. we have also moved ahead over the last six months, which helped us to the lockdown. there's no question we are going to see further acceleration of e-commerce and online. but what has been interesting than our business is that our stores have held up really well. once the lockdowns and the restrictions start to ease, we've seen a significant increase in demand back in our stores. ultimately it comes back to what

is the quality of the preposition you have in your rate house doors. we are fortunate we have some from mono -- we have some phenomenal and well loved brands. kmart. customers have been keen to get back into our stores, once lockdowns start to subside. that was rob scott. next, an interview with the maker. biggest pulse to talkbacci joins us about how pandemic panic buying has affected business. this is bloomberg. ♪ omberg. ♪

haidi: as the coronavirus crisis spreads throughout the globe, it is led to a number of interesting side effects. one being the falling price of pop despite surge for tissue paper and food packaging. still turning a healthy profit. marcolo -- marcelo, great to have you with us. morgan stanley just upgraded your stock. when it comes to the actual number and level, they were still down the last quarter. i have to ask, how strong are you seeing the demand globally, and especially in china? marcelo: a pleasure to be with

you. demand has been very strong in china, since the beginning of the pandemic. in demand onrease a worldwide basis. in the beginning -- but with growing concern about hygiene products, we saw international stronger through all these months, in china and the rest of the world. shery: go ahead. wecelo: on the other hand, see smaller demand from graphic paper producers because officers are out. the question is how much will come back in the coming months. shery: exactly. we are seeing that writing paper segment be under pressure. how much of that is in your business, and do you expect a permanent change there? we sell of the pulp today on a worldwide basis, 60%

of that goes to the tissue industry and about 20% those to the graphic paper industry. so so far, what we are seeing is tissuewing demand for products is offsetting the decline on the graphic paper side. it so far has been good, but in the future it is difficult to say. but the demand for graphic paper has been historically declining. with a trend that is being accelerated by the pandemic. on the other hand, the concern about hygiene has also been a favorable factor for the tissue industry. haidi: so if the issues relating to paper are a permanent or ongoing structural change, does that mean it is inevitable that you will have to look at closing paper units in brazil? marcelo: the paper units we have in brazil, they all -- we are very efficient.

it is inevitable that some of the paper mills on a worldwide basis will have to be shut down as demand goes down. on the other hand, demand for other products made of pulp is growing. so what we are seeing on a worldwide basis is a conversion of some of these graphic paper units into fresh pulp, which is used for other applications and other products like packaging. haidi: where do you see the strongest demand, geographically, coming from in the period following the pandemic recovery? marcelo: the demand has been strong in china, especially. and also in the u.s., with the caveat that in our case in the u.s., we sell mostly to the tissue industry. in europe i think they are a bit slower, but not too different from what you saw before the pandemic. shery: how concerned are you that, say, some of the demand we

saw during the pandemic especially in places like china was mostly stockpiling, that that could really wear off once the pandemic is done? marcelo: the question here is because of the demand for tissue was very high, our tissue clients in china were were -- were willing to carry more inventory to make sure they had what was necessary to deliver to their clients. so they increased their inventory levels in order to be secure. this is a trend we will follow over time, but we do not feel they have much more inventory than they usually would have. shery: what about pulp price recovery? will it come this year? marcelo: difficult to say. it's always very hard to predict commodity prices. we are in the middle of the low season, with the summer in the northern hemisphere.

normally in the third quarter volumes are down, so it is unlikely. on the other hand, current prices are sitting at a level where about 20% of our industry is at losses. this is not sustainable and we will recover at some point. but i would not risk saying that we are going to see a recovery in one, two, three or five months. it's always very difficult to predict. haidi: we are seeing the potential for a new global credit system being designed for 2021. is there a risk your company will not be able to sell your credit if there is a limit put on projects? marcelo: you know, we will benefit the society from a more organized carbon credit market. what we're trying to do at this moment where we do not have this organized market is to try to restructure bilateral deals with

some of the carbon companies they are trying to mitigate emissions with. our forest activities could be one of these means for compensation. so we are very positive that we will be developing this market in the coming months. thank you so much for joining us. marcelo bacci, suzano cfo. a quick check of the latest business flash headlines. china's biggest oil driller is cutting costs as it prepares for a future of low prices. it has been producing crude at $26 a barrel in the first half, down from $29 from last year. president xi jinping has asked we'll makers to raise domestic output and reduce dependency on lookt, as they increasingly towards energy security. swiss watch exports to china grew by 69% from the previous month. --bally however, switched

they are down 17% month on year. that is half of what was the previous month. the bad news is the industry expects lube exports to be down 30% for the year, as the coronavirus continues to hit the market. planning a major expansion in china with in-house medics and local hospitals in shanghai and more, as it looks to attract more users to its health care app. the company reported a net loss of $31 million for the first half, down 22% year on year. millioncame in at 400 dollars as monthly users rose by 7% to just over 67 million. will: coming up, we discuss the markets and a rally in tech with research is fairly its -- , reaction to japan's figures with wisdom tree japan ceo.

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haidi: a very good morning. we are counting you down to asia's major market open. shery: welcome to daybreak asia. our top stories this hour, asian stocks look set for gains after big tech drove u.s. markets higher. the nasdaq hit a new high on the evening concerns about the recovery. apple and tesla offset the slide for energy and banks. investors also welcome signs the u.s. and china may start talking trad