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And that it is financially insane to buy anything but an electric car. Hong kong is bracing for more mass protest as the extradition bill goes before them. Breaking news out of south korea. We have the Unemployment Rate coming in at 4 for the month of may. Slightly lower than was anticipated. 4. 1 . It is also lower than in the previous month, when we saw 4. 1 , the jobless rate. We have seen, when it comes in south korea, really strong growth when it comes public sector, jobs. The government trying to support the economy and working towards job creation. In the private sector, we are seeing some of that weakness. We are expecting budget coming from south korea to help job creation in the future. For now, the Unemployment Rate at or percent the month of may. Markets in asia are shifting up and go to sophie in hong kong. Some midweek caution may emerge after the best threeday gain for asian talks since january. Kiwi shares giving back some of tuesdays game. Game. Gain. Do bok is to release money supply and Household Debt figures as well. Seoul and across the region after qualcomms afterhours dropped. Flipping the board for a quick check on the ecoagenda. The young looking steady ahead of that after a twoday dropped. Singapore retail sales are expected to recover. Indian cpi is slack. Chinese cpi on the other hand is forecast to rise in food prices but ppi as falling commodity prices. Paul lets check in on the first word news with jessica summers. Jessica. Jessica hong kong is bracing protests as its controversial extradition go goes before lawmakers. Thousands of people gathered overnight out that the Legislative Council. Some local Companies Said they would suspend work and allow staff to join them. They are urging members to join the protests. Falling carmack it extended car market extended. Sedans, suvs, and minivans fell more than 12 to 1. 6 million last month following similar declines in march and april. It hit local brands in particular although vw has office in sales fall. A new report says Global Carbon emissions jumped the most in seven years in 2018, indicating the world is falling behind on pledges to tackle climate change. The annual survey found Energy Demand last year rose at the fastest pace this decade even though Economic Growth weakened. China, india, and the u. S. Are responsible for the increase. The conservatives fighting to be u. K. Prime minister are warned there is no chance of renegotiating brexit. Jeanclaude juncker says they must abandon any idea of new talks, adding the deal struck with the u. K. Must be respected by all. Boris johnson launches leadership launched his leadership campaign. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Shery thank you. President trump says he is personally holding the rains on trade deals reins on trade deals and that he struck a secret accord with mexico. The latest lines out of washington with joe sobczyk. Lets get started with the china fund. Are ams these comments bit more personal. President trump not really leaving xi jinping a lot of room to save face. Joe he is certainly not. This comes as a team leaders are expected to meet at the g20 later this month. Trump has been putting greater pressure on china. Right now, the u. S. Officials say they do not expect the two leaders will be able to reach a deal or create some sort of breakthrough of the talks. And this is something we have seen from trump before, the threat to walk away if a deal cannot be reached. But this is obviously going to be putting some additional pressure on xi because he will be also looking at his own domestic audience about how it will look at he seems to be capitulating to trump. So the president is pushing for a deal that saying that he will not act unless he gets what he wants. It is unclear exactly what any the u. S. L commissions has put on or if there is some sticking points of other portions of what they have been talking about, but right now, they are at a standoff and it is a bit of brinksmanship by the u. S. President. Paul lets get to that other trade front, a bit closer to the u. S. The president telling reporters tuesday that he reached a secret pact with mexico that nobody but him seems to know about. What do we know about this great deal . Secret deal . Joe mexican officials said the u. S. Wants to talk about if they are unable to reduce illegal migration into the u. S. , that mexico might take some steps to in mexicolumseekers while they are awaiting action by the u. S. But and that there is a 45 day period during which they will evaluate how well the current sensor working, but it is not it does not seem to indicate that trump would be able to trigger some sort of ventures by the Mexican Government. That would suggest they would go into some additional negotiations. It probably would require some action by the Mexican Government to accept the asylumseekers, some changes in mexican law. Whether or not there is some firm agreement or sugar, it trigger, it has not been publicly shared by the president. And the mexicans are saying they have an agreement, but not quite what trump is talking about. Shery President Trump and then going after the Federal Reserve, tweeting that the Interest Rate is way too high and they do not have a clue. Joe, was there anything in particular that brought on this latest attack . Joe he this was prompted he retweeted a Bloomberg Opinion beingabout european deluged by tourists. This plays into his contention that they are depressing the value of their current, making the trade deficit higher with the u. S. Officialsministration however were quick to say that trump is not trying to talk to the dollar in any way, but this has been a theme that he has returned to several times now recently about whether or not other countries are fairly valuing their currency and the u. S. Is taking some steps to impose perhaps tariffs on countries that are determined to beat evaluating their currencies devaluing their currencies. It is a long issue for the president. He is really on the saids case case to lower Interest Rates. They have a meeting in washington. We can expect to hear more from them on this. Shery joe, thank you so much for that. Joe sobczyk. Lets turn to the u. S. Market closed because, as we mentioned, President Trump is really getting out his latest terror threats against china tariff threats against china. The dow breaking five days of gains. Su keenan is here with more. Really, the markets did not know where to go with this one. Su it seems like the best way to go was to sit on the sidelines a little bit. Happen, trade,o what is going to happen, not a lot of answers. Some strategists are saying it could be a range going forward. You see the s p 500 had gained some 5 in the last five days. That is coming back down to earth. Take a look at the snapshot, if you will. We had a lot going sideways. Changed, which is surprising. Treasuries also steady. Look at futures. Absolutely flat. Even the tech, which rebounded a bit, was not by much. Take a look at individual stocks and you will see some very big moves in certain stocks. Beyond meet is the meatless meat in the meatless company. 572 , to be exact, since its debut. Update he 7 in the last two sessions alone. Suddenly, there is a lot of concern that it is overvalued and everybody seems to hit sell. Advanced micro out with a new chip. It might not be as competitive as thought. Tesla, optimism as elon musk meets with investors on schaeuble today. Down 30 down stock yeartodate. Paul for the first time in a long time, it feels like, it was not a wild ride for the oil price. What happened . Su there was a report about the supply data, which comes out on when they hear in the u. S. Wednesday here in the u. S. It is indicating that perhaps prices will not be going anywhere much in oil as well. We are looking at range bound. Some of the wild gyrations came back down, below 53, which is significant big picture. Take a look. That is down 18 plus from the peak in april. The private data that came out showed that they would be a decline in oil, but in the storage hub in oklahoma, which is key, a gain of 2. 4 million, and if confirmed by the government data, one leading analyst says that will indicate there is more than adequate supply in the u. S. It would limit any upward move in oil for a wild. E are down a while we are down significantly from the peak. Paul thanks for keeping an eye on the markets for us. Still to come, elon musk hits back at tesla critics and says it is financially insane to buy anything but an electric car. We will check in on the tesla agm later on this hour. Joininghristopher smart us to discuss geopolitics and the escalating trade tensions. This is bloomberg. Shery this is daybreak asia. I am shery ahn in new york. Paul allen in sydney. President trump says he is personally holding up a trade deal with china and he will not sign any agreements unless beijing return terms negotiated earlier in the year. Lets see how this changes things with the bearings Investment Institute head, christopher smart. He worked in the Obama Administration as a senior policy maker. Christopher, thanks for joining us. When you are in that role, did tariffs ever come out of the toolbox . They seem to be part of the furniture now, dont they . Christopher they were actually used once or twice in a tire case against china early in the Obama Administration, but it was focused on a particular industry that had been behaving badly and where we felt that was the only resort we had. We are now living in a world where tariffs are almost an essential part of the toolkit right now. And i think, if you are a business or investor, you have to start planning on that uncertainty. One of the broader things we discussed here is is this really just about trade . Is it about other things . Belt and road . The South China Sea . Influence in the pacific . Is trade just a metaphor for a broader geopolitical struggle between the u. S. And china . Christopher i think china and the u. S. Of course are coming you know, talking to one another on a broad range of issues across the board. Including the list you just mentioned. Trade issues have always been at thecenter of some of concerns that have divided us. The things that President Trump is pushing for, whether it is better protection of intellectual property, forced technology transfers, subsidies within the chinese economy for some of their key industries, these are things that president s obama, bush, and clinton talked about. His tactics of course a much different, and i think the are much different. They do to infect some of these other issues that you have been talking about, these tactics, he is taking everything all in approach, putting all of these things on the table at once, including huawei and some of the other issues you mentioned. Shery let me take you through some of the forecast we are seeing from citigroup. This gtv chart on the bloomberg showing that their calculation, if you have 25 tariffs on the remaining chinese good, plus tariffs on car imports, and if the Federal Reserve does not cut Interest Rates, we could see the s p 500 on the top panel going to a bear market. Gold prices just rise to 1600 an ounce. Ced what is your base Case Scenario and where do you put the market . Christopher i think if all of those things happen, you know, clearly, it will be that for market. Markets are trying to assess at least two bank moving parts two moving parts. One is on the trade front. Hasink anybody who negotiated a job, negotiated by a new home, understand that you get closer to a deal, the the ethics and emotional engagement becomes much more theatrics and emotional engagement becomes much more central and harder to understand where we stand in negotiations. The base case is we will be headed towards a deal, but it is a shortterm troops, even as oute, even as we work issues with china over a longer period of time. Markets are trying to assess whether the fed will respond to these dynamics in the bond markets, some of the more mixed Economic Data in the united they. United states. It is a little bit too pessimistic when it comes to the Market Assessment in the economy given that corporate earnings seem to be holding up and you have u. S. Fiscal policy to consider . That is exactly right. I think, you know, the city banks and are you described as the worst possible outcome on many fronts. City banks and reo you described citibank scenario you describe is the worst possible outcome on many fronts. It is a very vibrant part of the u. S. Economy, and i think, you know, it seems to me at least markets are getting a little too pessimistic a little too early right now. We will see if that sort of pessimism and markets leads the fed to start worrying about impact on consumer confidence, impact on investment confidence, and leads them to act. If you are just looking at some of the Economic Data coming through, it has been slowing. It has been weakening, but it is not anything it seems to me that the markets have been overreacting of late. Paul christopher, and terms of potentially resolving the trade impasse, we are looking ahead to the g20 leaders meeting in no soccer osaka at the end of the month. But then we have President Trump saying if president xi of china does not show up, there will be more tariffs. To what extent does that put president xi in a nowin situation and is this really about President Trump by being a 2020 eyeing a 2020 Election Form . Christopher theres certainly a on both sides. These are difficult deals for both governments to have to strike. President trump has to come back and say i pressed as hard as i could and this was the deal i could get and nobody could get a better deal than this. President xi has his own very different internal dynamics politically at home. But again, i think a lot of these late stage antics are to be expected when youre coming closer to a real agreement. President xi, of course will be at the g20. It would be surprising if they did not meet at all. I would be equally surprised if they met and resolved everything at that one discussion. It will be sort of a way station heading into a new round of andtiations on both sides, you know, the timeline is of course unprinted double, but it till field at least like we are unpredictable, but it still feels like we are at least heading towards something. Paul thanks very much for joining us. And you can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers can go to dayb on their terminals and mrs. Also available on mobile in this is also available on mobile in the bloomberg anywhere app. You can customize your settings so you only get the news on industries and assets you care about. This is bloomberg. Has addressedk tesla critics, saying there is no problem with demand and that it is financially insane for by anything other than an electric car. The annual Shareholder Meeting wrapped up and he pushed the stock higher. Lets get over to san francisco. What were the Key Takeaways from the tesla meeting . Dana it was an interesting meeting. Elon musk addressed the issue of the man had on, assuring shareholders there was no demand problem and tesla was selling every car they can make and the whole idea that demand has slowed or softened is not true. He said if you are looking for the future, it would be financially insane to buy anything but an electric car that is upgradable to autonomy. The vp of technology onto the stage with him. He sounded very optimistic about progress on the china factory as well. Shery tell us about that, china being its secondlargest market after the u. S. Dana factory is key so china can make both data and autos in china for the chinese market. That would help them with finances. They would not have to deal with the long logistics of shipping cars from california and would not have to pay the tariffs. Is being equipment installed. We have seen youtube videos and pictures on twitter of the building going up, but it sounds like equipment is being put in place as well. They are on an aggressive timeline. Musk faces some difficult questions when it comes to corporate governance. Was there anything like that . Dana it was the first meeting with the new board chair, and she spoke to shareholders at the very beginning of the meeting. People are really happy to hear from her. She is the first new board chair since 2004. You know, there were some proposals but no fireworks. The board is shrinking from 11 mine. Rs to i have to go back to the beginning of the meeting to double check some of these proposals. It was not anything major that we are aware of. Shery thank you for joining us. Dana hull in san francisco. Lets get a quick check of the latest business flash headlines. The Renaultnissan Alliance back in the spotlight when shareholders meet in paris for the french companys annual general meeting. The chairman will be asked to explain whether the partnership can survive following the upset caused by Carlos Ghosns arrest, the failed merger with your chrysler, and nissans growing unhappiness with the terms of the alliance. Ridesharing personal flights. The plan will be announced on uber elevate conference in washington. It comes after deals were agreed with Macquarie Capital and others. Ae aircraft will be flown by pilot, powered by electricity, and they will be able to carry four passengers and hand luggage. Aery chinese conglomerate chinese conglomerate want to sell a stake in its fashion unit. A french label and hopes to raise more than 100 billion. We are told it started gauging interest from potential investors and make it or an ipo in paris among several other options. Coming up, a moment of reckoning for hong kong. The city pricing for new mass protests against a controversial exhibition bill. Youre looking at live pictures of hong kong at the moment. Organizers said was than one Million People came to the protest on sunday, although police put the number at 240,000. We will be live at the scene, next. This is bloomberg. I dont know why i didnt get screened a long time ago. I kept putting it off. What was i thinking . Ok, mr. Jones. Were all done. I told you it was easy. With life line screening, getting screened for unknown Health Conditions is so quick, painless and affordable, youll wonder why you hadnt done it before. So if youre over age 50, call now and schedule an appointment near you. For just 149 a savings of over 50 youll receive a package of five screenings that go beyond your doctors annual checkup. Ultrasound technology looks inside your arteries for plaque that builds up as you age and increases your risk of stroke and heart disease. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke. So call today and start with a Free Health Assessment to understand your best plan of action. So why didnt we do this earlier . Life line screening. The power of prevention. Call now to learn more. Jessica this is daybreak asia. I am jessica summers with the first word headlines. President trump renewed his attack on the bed. He said Interest Rates are too high and the euro and other currencies have an unfair advantage over the dollar. He railed against tightening, saying Jerome Powell and his colleagues do not have a clue. Comments, wes before they meet in washington to discuss the future of u. S. Monetary policy. Meanwhile, President Trump says he is personally delaying a trade to with china. He says he has no interest in an agreement until beijing accept the terms washington says it abandoned last month. He claimed a secret deal with mexico that will come into effect when he wants it to. He brandished a paper, claiming it as part of a more lengthy agreement, but fails to offer any more details. Mexico denies any secret accord. And opec and its allies are facing gridlock over when to hold their next meeting. A gathering in vienna has been scheduled for this month, but three weeks ago, russia sought to change the date. The rest of the organization has been unable to reach a consensus. Is driving the opposition. They are deciding whether to extend production cuts into the second half of the year. And the chinese owner of the waldorf is for you aim to sell luxury condos in the hotel later iss year waldorf astoria aiming to sell luxury condos in the hotel later this year. Offeringsurance is high price apartments, bettering defy aels cachet and stagnating can defy a stagnating that market. They range from studios to fivestory bedrooms. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Thank you. Ery lets get a check of what to expect in markets in asia this morning. Here is sophie. Sophie. Expo underwayhe in los angeles, gaming stocks are in focus. Nintendo adr fell overnight after announcing the delayed release of a key animal crossing title that would have supported the launch of a cheaper version of the switch console, which still has an impressive lineup. The company did not mention the new console at the expo. In tokyo, nintendo shares are up 40 this year, outpacing rivals and tech stocks. Macquarie has upgraded the tech stock to outperform. Also watching softbank today in tokyo as a group of u. S. States su to block the tmobilee merger. Reports that it will be joining companies that will multiply chinese firms blacklisted by the u. S. Komatsu is on the radar after chinas usage of it Construction Equipment fell nearly 4 in may. Chinese demand for hydraulic 27 year onfell year last month. Shery. To another story a we are watching closely, more mass protests in hong kong as the controversial extradition bill goes before lawmakers. Thousands of people have gathered outside the Legislative Council to protest the proposal. David joins us from the demonstrations, and we saw some incidents of violence on sunday. What is the atmosphere like where you are today . Right now, i would say the atmosphere is pretty peaceful. Since about 6 30 this morning, when we got here, we have been able to see that there are crowds slowly swelling here. Denies hers have called for as many as 50,000 people to come here. The organizers have called for as many as 50,000 people to come here. Some Church Groups singing hallelujah. He said we want to diffuse she said we want to diffuse the tensions and we want the police to be relaxed. There are a lot of Police Deployed here. One number put it at 5000 police. You can see right down at the beginning of the entrance into the court of the Legislative Council, there are riot police completely decked out in shields , ready to deal with any protests should they get violent. At the moment, we seem to be entertained in a way by some people singing, and now, there are some speeches taking place. One thing i can possibly say, the crowd is slowly swelling here. Paul david, what are we expecting to happen at the Legislative Council leader . Later . Process, terms of the the president of the Legislative Council announced yesterday that there are going to be 66 hours of discussion about the extradition bill, so theres going to be a lot of discussion about amendments to the bill that are being put forward by the opposition, and that means that opposition leaders will be able to give them time for discussion of the bill that at the end of the day, by next thursday, not tomorrow, but by around 9 00 in the evening, there is expected to be a vote and the vote is expected to be carried for the governments extradition bill. That is because we have a Legislative Council here that is heavily skewed towards people on the progovernment side. David, what have we heard from the International Community so far . Well, the International Community is being pretty vocal for a change on its opposition to the bill. We actually heard from the state department yesterday. They put out a statement. And in that statement, they were saying that they were concerned that his extradition bill would erode some of the freedoms that have been guaranteed to hong kong since the former british colony was handed back to china. So but at the same time, there was a high degree of autonomy and guarantees on having different legislations, and the big concern of course is that if you pull down the firewall between the hong kong jurisdictions and hong kong law, and the chinese way of doing law, then youre really just merging these two areas and just completely eroding the whole idea of hong kong being a highly autonomous place in which to do business and also undermining i ts status as an independent Financial Center in asia. Paul bloomberg Senior Reporter, david tweed, in hong kong. Thank you for watching those protests that are expected to expand during the course of the day. We will have more analysis in the next hour. We will be joined by the hong kong Legislative Council member at 8 30 a. M. Hong kong time. If you are watching in sydney on a that is at 10 30 a. M. You can also turn to your bloomberg for more on this at tliv from bloombergs expert editors. Car sales declined in china for the 12th consecutive month in may and the historic slump is showing no signs of ending as economic worries weigh on immigrant women. On them. Hays weigh kathleen hays, what are you seeing . Kathleen we are seeing an Auto Industry that is in trouble. As we watch the Global Impact of the trade war, volatile markets, country, and in many emerging markets, you have to watch car sales, because it is such a gauge of what the consumer is doing. And what we see in china in the may report is more bad news. In fact, sales of sedans, minivans, suvs, down 12. 5 in may. If we pull up a chart now from our bloomberg compendium, you will see the pattern has been negative for a while now. We know there is a trade were creating uncertainty, we know chinas economy has been going down. Down 12. 5 , that is made. April, down 16. 6. March, down 7 . It has been such a tough month and something i do not think the chinese were counting on any more than they were counting on a prolonged trade war hanging over them. The government has created a plan to boost auto sales, but people watching the Auto Industry and certainly those in it themselves are saying there is no new spending attached to this and that is why we do not expect it to be a very effective plan, so people are just, i guess, waiting to see what happens, hoping to take steps, maybe hoping the trade war will towards a of light conclusion, and maybe that will bring people back to the show. For now, a very difficult time. Shery how does this breakdown between chinese brand and Premium Brands . Kathleen well, you can tell that the International Brands are holding up a bit better. Lets just take a look at some of the numbers from that may report. What you are going to see is the Chinese Brands are down local brands, particularly hit hard. Their sales declined 40 or more over the time of this Chinese Auto Association tally was taken. , about 9. 4 . Volkswagen sales down 8 in ofna through the month april. Here is another thing. Early june sales, the first week, show a slight decrease. Dealers are flashing prices slashing prices. The big question for the chinese industry, economy, government, weak,es continue to be so what happens to the big Expansion Plan that those global brand have had in place . This is one more thing that is an impetus to the chinese economy. Certainly, it helps the manufacturers, it helps jobs. If this is something that starts flowing, it is just one more chinas autog on industry, and again, you can see that it was not that long ago. Look at how big those green bars were until the last several months. It is so obvious, the trade war uncertainty, slowdown in china, and the drop in the stock market if you are investigating stocks and your portfolio declined, you will have a little bit less wherewithal to put it into a new car. As i said, there is some news out of in the overnight that there on a sales are not looking so hot their auto sales are not looking so hot. It is a global ecocar still more wayt gives one for everyone to see how much this trade war is taking out of growth. Shery kathleen hays, thank you so much. Our Global Economics and policy editor in tokyo. Coming up next, what Corporate America would like from the upcoming u. S. Japan trade talks. We will speak to the American Chamber of commerce in japan, next. This is bloomberg. Paul this is daybreak asia. I am paul allen in sydney. Shery i am shery ahn in new york. The operator of japans most popular messaging platform has been investing heavily in Financial Services in the face of the stagnating user base. It expects its simtech business to break even in one year to two years. The coceo spoke exclusively to bloomberg in tokyo about when they should become operational. To acquireto prepare the license and but i think it takes it does not take so much time. So we are expecting maybe the next year we can launch the service. 2020 . How important is it to break the dominance of your main revenue stream, and that is advertising . It open in our company has to year. Half the year. Youre out of period of investment for the next three years to four years . Potentially into 2023, you are not looking at profitability . Shin it depends on how fast we security users. If we in this domain, as we expect it, we can become profitable in one year or two years to reach the breakeven point. It depends on how fast we can secure the users. Shin and japan is going to be the entry point and japan is going to be the entry point . All simultaneously . Shin simultaneously. In case of taiwan, the payments we proceed simultaneously. Maybe the taiwan bay will be launched tie on bank nk will be launched. Simtech is my priority. In what area . Shin in taiwan, it is our first priority. Behave the specific plan to the dominant player. After we have some time to plan one country, it is easy to extend our service and to other countries, so japan and taiwan is the country to provide the service. In the case of indonesia, the circumstance is different. Even though we are not the dominant player as the investment service, we see a huge opportunity. Lineco ceo shin speaking to Stephen Engle in tokyo. Japans economic minister is said to meet with the u. S. Trade representative, robert lighthizer, in washington, for the next round of trade talks. Lets get a preview with the former u. S. Ambassador to malaysia, christopher. Mr. Ambassador, thank you for joining us today. So we have heard from the president matt we could perhaps see a trade deal by august. When are your members thinking that a deal could come . Christopher you know, trade negotiation might this typically takes many, many months, if not years. There are a lot of issues that ought to be discussed in any agreement. Al i think this is going to take a little bit more time and expectations of a deal as early are probably pretty optimistic. There are several key issues that need to be discussed. Clearly, there needs to be an understanding of what is going to happen on agriculture. The u. S. Is very concerned about japans huge surplus in the Auto Industry area. We are very concerned about the increasing problem that our pharmaceutical companies have with japanese plans to reduce the prices in japan that are pharmaceuticals here. That is going to cut into u. S. Exports to japan. That needs to be addressed. And then this agreement really ought to be looking to the future to digital trade, where u. S. Companies have been very successful in the japanese market. That needs to be clearly included in any sort of comprehensive deal. I think this will take a little bit of time to negotiate. Mr. Ambassador, what do your members need to see in this agreement you to be able to call it a win as compared to their Test Partnership that the trump transpacificn partnership that the Trump Administration pulled out of two years ago . Tpp would havee provided a lot of access across the region. We are focused of course on are very supportive of having this new bilateral force. Nt brought into it does need to address some of these key issues to discuss agriculture, auto trade, pharmaceuticals, and then finally, it needs to be futureoriented. What we mean by that is in the digital area, pretty much everybodys Business Model is being transformed. And in this area, the u. S. As particularly has particularly strong companies, great technologies, and is very competitive. If this agreement is future oriented as well as being a winwin agreement that the japanese see is going to work for them as well, then i think we can expect to see u. S. Exports to japan and the u. S. Business presence in japan further expand. Inare doing pretty well japan as u. S. Businesses, but we can do better and that is what we are hoping this new agreement is going to accomplish by bringing in a deal. A comprehensive deal. Paul are you concerned that auto tariffs are going to the back of the agenda once the elections are out of the way in japan . The president indicated, as you are suggesting here, that he was going to lay off the pressure on japan until after those elections. They are indeed very important for Prime Minister abe. He has a two thirds majority in the upper house and he certainly want keep that. And depending on the outcome, his ability to get a trade deal, including some of the difficult areas in agriculture will be affected. It is going to be important, i think, to see what the Prime Ministers margin for maneuver is after those elections. Clearly, it is going to be a key thing to be watching here as we gave the prospects for a quick resolution or a quick agreement, rather, in these negotiations. Paul christopher, i want to pause for a moment to get our viewers across some breaking news on the bloomberg. We have core machine orders for japan for the month of april coming in at a huge beat. We have been expecting a contraction of. 8 . We got an extension of 5. 2 . A really blowout number. It gives us a year on your figure of a 2. 5 tension, reversing the contraction of i 5. 3 we had by seen. A slight contraction from a, down. 1 . Downtopher, from may,. 1 . Speaking to japan particularly, is it becoming harder to argue against the imposition of this controversial sales tax towards the end of the year . Christopher that would be my view. I think there is a tremendous amount of momentum behind moving forward with this increase from 8 to 10 in the consumption task, that task in japan. And so, i certainly expect these numbers to encourage or to build rather on that momentum as we move into the fall here. At this point, i think it is a pretty good bet that japan will move forward with this. And that will be an important further step in the efforts by japan to improve its fiscal position, which as you know, in terms of what the straight numbers look like, one of the most serious countries. Shery just quickly, as the numbers show, investment in japan does not seem to be slowing down. What are your members thinking about expanding does this in japan when you have so much uncertainty over trade . Christopher japan represents an extremely important market for the largestmost and most high employment american companies. And also, the companies that have tremendous Growth Potential, further Growth Potential in the future, so the fact that japans economy and expand isrow a very important indicator for u. S. Business about where they should be paying their attention going our. The u. S. Japan relationship has never been stronger. The alliance has been further strengthened under prime so,ster abe, and absolutely, for u. S. Businesses, a very encouraging sign. Shery christopher, thank you so much for joining us. Christopher lafleur. Plenty more to come. This is bloomberg. Korea, andn, south austria the uptick off trading at the top of the market open. Sophie a threeday gain with futures indicating losses for the nikkei 225 as well as the cost be. The kospi. On the stocks radar, nissan is in view with iss. They are urging investors to vote against the election of ceo of the second hour ceo. He said he should have taken graders that to prevent misconduct. Company may move and seoul a new study showed positive results or treatment of rheumatoid arthritis. It delay to august 5 from july 29. There is a focus on currency markets today with trump saying the euro is undervalued against the dollar. The euro only briefly dipped. Volatility has been subdued. Trading at its highest range as you can see on this chart right here, paul. Paul thanks very much for that, sophie. Still to come on the next hour will bereak asia, we joined by a senior economist and executive director to preview chinas cpi. We will have the market open, coming up next. They with us. Stay with us. This is bloomberg. I dont know why i didnt get screened a long time ago. I kept putting it off. What was i thinking . Ok, mr. Jones. Were all done. I told you it was easy. With life line screening, getting screened for unknown Health Conditions is so quick, painless and affordable, youll wonder why you hadnt done it before. So if youre over age 50, call now and schedule an appointment near you. For just 149 a savings of over 50 youll receive a package of five screenings that go beyond your doctors annual checkup. Ultrasound technology looks inside your arteries for plaque that builds up as you age and increases your risk of stroke and heart disease. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke. So call today and start with a Free Health Assessment to understand your best plan of action. So why didnt we do this earlier . Life line screening. The power of prevention. Call now to learn more. Good morning. Asias major markets are about to open for trade. I am shery ahn. Hi m Sophie Kamaruddin in hong kong. To bloomberg daybreak asia. Our top stories, President Trump claims total control of tariffs. He says he is personally delaying a deal with china and has struck a secret accord with mexico. Foxconn says it has sufficient iphone capacity outside china if a trade for forces a new strategy. More mass protests as an extradition bill goes before lawmakers. We are live at the demonstration. Lets get to the market action. Presser ei 22 500 nikkei two pressure. Points ina few data view. Consumer prices rose 7 last month. Machine orders gained in april, a Third Straight monthly advance. Underul, korea, the kospi pressure after a fourday game. The korean won is firmer against the greenback as investors digest the latest job status showing the Unemployment Rate improving. Sydney, the asx 600 looking like it will be a green day. Gaining 0. 2 this morning, continuing to rise at an 11 year high while the aussie dollar is looking steady ahead of chinese inflation data. Plus, commentary from christopher kent, highlighting financial links with china. In wellington, stocks now up 0. 1 , a racing earlier losses. Tokyo shares on the move. The sector in focus. Reuters reporting the company will not supply to chinese clients blacklisted by the u. S. Government. Nhai saying it can move production lines outside of china. Pressure on the space as reports qualcomm is in talks for purchase of a unit. Watch oneping a close nintendo shares as well. Paul thank you. Lets get to first word news. Thanks, hong kong bracing for mass protests as the controversial extradition bill goes before lawmakers. Thousands gathered outside the Legislative Council, and some company said they would suspend work and allow staff to join the demonstration. The Hong Kong Union federation and Student Association are urging members to join the protest. President trump has renewed his attack on the fed. He said Interest Rates are too high and other currencies have an unfair advantage over the dollar. He railed against tightening, saying Jerome Powell and his colleagues dont have a clue. His comments come before the fed meets in washington to discuss the future of u. S. Monetary policy. Allies are facing gridlock over want to hold the next meeting. The gathering in vienna have been scheduled this month, but russia sought to change the date. Organization has been unable to reach a consensus. Iran is crating opposition. They are question whether to extend production cuts. Conservatives being warned there is no chance of renegotiating breaks it. The Eu Commission president said they must abandon any idea of new talks, adding the deal must be respected by all. Boris johnson has launched his leadership campaign, valley he would make brexit happen ing he would make brexit work with or without a deal on october 31. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Hery President Trump said is personally holding the reins on trade deals, claiming he is delaying an agreement with china and he struck a secret accord with mexico. Lets look at the latest lines with jody snyder. Is there a strategy here . It appears there is a political strategy. President trump does want a deal with china, but once it on his terms. He wants it to be more than just narrowing the trade deficit with china, he wants it over things , huawei astection part of that. He wasnt getting that, so he walked away to try to get more. Now the longer this goes on , theut further talks tougher it is, so now it looks like hes trying to play tough with china to get them to come back to the table. There is a potential for a sideline meeting at the g20. Isthis point, rhetoric heating up on both sides. The nationalist rhetoric is heating up in their comments. Paul in terms of that potential meeting as the leaders get together, is there any progress on that . President trump has painted president xi into a corner, saying he will slap on tariffs if there is no meeting. Lets write. More threats on tough talkie hopes could result in a meeting, but it puts both president s in a tough position. Meeting doesnt occur, it makes the threat of tariffs more likely he will need to go through on that, and there are a lot of critics about tougher tariffs on china when you already have tariffs on 300 billion worth of goods. On the other hand, president xi jinping is in a tough spot. Difficulttting more for the economy in china, and he wants to make a deal. He says he wants to make a deal, but he wants to make it under his terms as well. The problem is he doesnt want to appear weak at home and giving into the threats of the american president , so it is difficult to say what will happen there. They have only talked about a sidelines meeting. They havent talked about a full diplomatic meeting. We dont know if that will occur. It may be the last chance for them to meet and talk about trade before the 2020 campaign in the u. S. Heats up and President Trump feels he muska through with those further hes, which could be must go through with those tariffs, which could be economically painful. , does on the mexico front anybody else know about that secret deal with mexico that the president is talking about . It doesnt appear to be. The mexican leaders dont seem to know about the deal, only they have agreed to what has been made public, enhance Border Security, use their National Guard to try to keep people in mexico while they are awaiting to find out whether their cases will be adjudicated in the u. S. , so President Trump again appearing to try to be tough on mexico, saying he has this deal and will use it if he needs to if they dont meet their obligations under would have been discussed. Forn, this is a key issue President Trump into the 2020 campaign. He ran in 2016 on tougher Border Security with mexico, and he is running on that again in 2020. He did not get funding for that wall, so he is trying to satisfy his space with tough talk on mexico, given that the numbers at the border continue to increase. This is something he needs to try to have some kind of rhetoric to satisfy his space on this, so we will see what happens, but mexican officials are saying they dont know of anything beyond what they have agreed to on Border Security so far. Paul our Senior International editor thank you for joining us. Economic data, starting with south korea and japan. Kathleen hays is here with the numbers. Better news for south korea and tokyo. Absolutely. Lets start with korea. The Unemployment Rate being watched closely. The government trying to raise the minimum wage. People thought it hurt the jobless rate. This chart, you can see what happened. It is not a big move lower on south korean unemployment, but a 4 after ao fou spike earlier. We saw the last couple of days that south korean export numbers have been poor, semiconductors down. So many people waiting to see how this plays through into unemployment in future months. In japan, machinetool orders were down 27 . The good news that is not as bad as 33 the month before. The core machinetool orders were up more than 5 year over year in japan, up from more than 3 yearoveryear the month before, so that was good news. On the inflation front, the latest ppi readings look at the core ppi at 0. 7 yearoveryear. Cpi, that isr is ahead, but the pole back on ppi is not a good sign for cpi, the key gauge for the bank of japan. Cpi minus fresh food is that 9 . A mixed bag for japan. The less bad reading on machinetool orders is important in industrials activity have shown weakness lately. Shery what will be the policy implications of the latest numbers . We see a lot more strength in the korean labor market, that might slow down the bank of korea from cutting key rates, but all these other indicators suggest that is inevitable for them. I spoke with governor kuroda. He said he is ready to provide more stimulus, doesnt see the need yet. These latest numbers will reinforce his sense that there is solid enough growth that they can wait and watch to see what is happening next. Some big numbers ahead. Ppi, at ppi gauge affect replete inflation, people think china will be watching that closely. India has Inflation Numbers out hours from now. Ppimore thing, the u. S. Yearoveryear also weakened. The Federal Reserve meets next week. They are not expected to cut there yet great yet either, but giving us signals in that direction. A global view out of g20 and central bankers, waiting for the leaders meeting at the end of the month, it does seem there is a bit of a downward tilt to inflation, possibly to growth, and this will be key as all these Global Leaders meet in the Central Banks gear up for meetings later this month. Shery thank you so much. A mixed picture across markets in asia. Lets check in with sophie. Looking at nintendo, tracking an overnight drop after the Company Announced a delayed release of a key title that would have supported the launch of a cheaper version of the switch console. The company did not mention the new consul at the expo. Softbank under pressure, 2. 9 , halting a new drop with tmobile in the crosshairs after 10 u. S. States filed the suit to block the deal. Sharp gaining ground and tokyo arising the most after the briefing on tuesday when the president said he will pick an internal successor by 2021. In on onet to check stock off almost 9 in the session after announcing its turnaround talks. It will hold talks with creditors on july 22 with the decision to be made on the turnaround planned on september 18. In sydney, one mover surging after its forecast for fiscal 2019 be forecasts, 20 higher than the previous period, noting Market Conditions positive with the outlook strong. Noted thermal coal contributes to less than 25 of total revenue. Shery thank you. Apple has a backup plan. Possibleook at what is should the trade war spiral out of hand. Paul what should investors do as tariffs from the lawn . We will rumble on . This is bloomberg. Asian equities faced a difficult wednesday after u. S. Stocks lost momentum. Time to strategize where stocks had from here. We are joined by the cio of Atlas Capital from singapore. Thank you for joining us. I want to jump into the bloomberg terminal and look at this chart that shows the famous curve we have been looking at, the yield in version a recession. Stocks near record highs, so when you look at that chart, what do you see . Is it time to start getting defensive . Quickly, it is the degree that matters. The duration within the degree of yield inversion as well. Having said that, with the yield supporting risk assets, you have to step back and from an Asset Allocation perspective, technical or dynamic overlays, you take profit as you should have been doing through this rally of risk Asset Classes. Paul you are remaining overweight. Can you explain your reasoning behind that . Thats it. Trimming over the course of this rally year to date, so still trimming, but remaining overweight, just less overweight. That is the thematic, taking some of that off in trimming where you can come looking for some retracement between now and the next quarter. Shery shery we are still seeing corporate earnings assessments not that optimistic. The chart on the bloomberg showing global earnings revisions are again in negative territory. What activity will be to sustain the stock market . Good point. The momentums earnings a celebration cannot increase at the same annualized pace. It is retracting. Yield,rnings yield, bond is driving that demand to hold up valuations. It is trimming where you can, because earnings in europe is in paralysis. Areother parts the world slowing from healthy levels. At the end of the day, it is that extraordinary rally supporting the prospect of additional intervention. It is the quandary for people at this stage, but some form of profittaking is warranted at this stage. Shery how much do you diversify into properties or cash . Your first one. It will not give you the return. It is not building a powder for retracement. Other Asset Classes we see Pension Funds going into that seem to do well are not listed, so there is a liquidity tradeoff there. It is a different way of looking gear,atility, but low highquality assets in some Property Assets like a Global Hotel Chain or private equity vc funds, but those are things to be looking at for Pension Funds that need to Fund Liability so for many decades. Those of the things to look at at the margins, and taking profit from those equities where you can. Dont go into unrated or high yield at the moment. That has the same correlation of risk with the equity class. There are other parts of the capital structure, you can park your money at the margin. Atin, pension fund looking funding by billys over 40 or 50 years, where do you tilt for the next 90 days and 180 days . That is taking equity off the table where you can come cash as well as unlisted. Thanks for joining us. You can get around up of the stories you need to know in todays edition of daybreak. Atvomberg subscribers go to d. You can customize your settings so youre getting the news on the industry and assets you care about. This is bloomberg. Mberg. Worsening trade war could mean trouble for Consumer Products made in china and bought in the u. S. Apple may have a backup strategy. Peter elstrom joins us from tokyo. We could hear, see on High Precision honhai try to move things out of china. What have we heard . This news came as a surprise. Apple is one of those Companies China in thes u. S. , making its products in china and shipping to the u. S. And the world. Whencame as a surprise honhai said, if necessary, they would shift production of iphones bound for the United States away from china and make them someplace else instead. This came at an investor meeting in taipei. They were asked about the cost of the trade war and what they could do if some of these worstCase Scenarios came to bear. We can shifts production away from china if we need to, especially to avoid tariffs that could go up to 25 on these key components and move it someplace else and ship it to the u. S. Any apple has not requested shift at this point. It is not clear how much cost would go up if they have to make these products in Southeast Asia or somewhere else. Can you explain what exactly it is hon Hai Precision does for apple and where it has its factories. Hon Hai Precision is a Large Company that makes products for companies well beyond apple. Apple is 50 of their business. The iphone is the most important product for apple, and by extension the most important hon hai hon hai product for. Important product for hon hai. They have been assembling these products for years. Hon hai has been trying to move up the value chain. They bought sharp to get expertise in some display so it can make the components and do the final assembly, which is a lowmargin business. They are trying to expand the value they add to apple and other partners around the world. Paul Peter Elstrom in tokyo. Thank you. A quick check of the business flash headlines. Nine states and washington, d. C. Are soon to block suing to block tmobiles takeover of sprint, claiming it will raise prices by 4. 5 billion a year. The move puts pressure on the Justice Department at decides on the merger. Tmobilesbetween offer price and sprint shares was the whitest and was a month. Shery the Renault Nissan alliance in the spotlight was shareholders meet for the annual general meeting. Nissanrenault will be asked to expand with the partnership can survive followed by Carlos Ghosns arrest, a failed merger, and nissans unhappiness with the terms of the alliance. Coming up, protesters gather as hong kong lawmakers set to debate the extradition bill. We will discuss the implications with a hong kong councilmember next. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. This is daybreak asia. President trump says he is personally delaying a trade deal with china and has no interest in an agreement until beijing excepts the terms it abandoned last month. He also claims a secret deal will come into effect with mexico when he wanted it to. He brandished a paper saying it was part of a lengthy agreement, but failed to offer details. Mexico denies any accord. In new report says Carbon Emissions jumped the most in seven years in 2018, indicating the world is falling behind on pledges to tackle climate change. The annual survey found Energy Demand last your the fastest pace this decade, even though Economic Growth weakened. U. S. Aredia, and the responsible for two thirds of the 3 increase in consumption. s stalling car market extended its lump as the trade war in the cooling economy cap buyers out of the showrooms. Sales of sedans, suvs and others fell more than 12 to 1. 6 million last month, following similar declines in march and april. The slide has hit local brands, although vw has seen sales fall. Of thenese owner waldorfastoria aims to sell luxury condos in the hotel later this year and is scouring the globe for buyers. Nor years after snapping up willrfastoria, an bang offer apartments to a stagnating market. It has picked a Real Estate Company to find buyers. The condos range from studios to five bedrooms. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Paul lets check in on markets with sophie. Some modest gains across the region after a threeday advance. The asx 200 gaining, an 11 year high. The kospi gaining for a fifth session. The won is steady. In tokyo, fluctuations for the nikkei 225 after a threeday advanced with that benchmark up 0. 2 for the moment. Banks among the biggest rags in tokyo. Currency markets are muted with steady afteroking being in a tight range after trump lambasted currencies around the world, including the euro, which briefly dipped. I want to show this chart on the terminal. Thats are rising the euro will strengthen us traders pricing easier fed policy as soon as next week. Outlook, that could possibly increase the euros allure. Shery thank you. More mass protests in hong kong as the controversial extradition bill goes before lawmakers. Thousands have gathered outside the Legislative Council to protest the proposal. Tweednior reporter david joins us from the demonstration. We saw some violence on sunday. What is the atmosphere like today . I can say there is no violence, but the protesters are getting a sense of control over the situation. What we have seen outside the Legislative Council has been quiet and peaceful, people singing religious songs, but in the distance we can see thousands of protesters here flooded onto the road, one of the main roads that runs past the Legislative Council through hong kong, and they have managed to take over the road and occupied it. They have not given it up as they did earlier today. If you look at the other side, right around here on the others of where i am standing on a covered walkway above, there is another group of students that have flooded onto the road. They are dragging the barricades. The police are sticking in their positions at the moment, lined up around the outside of the building, but they are dressed in heavy duty riot gear. It is difficult to say exactly how many students and others are here at the moment, but we can see there is something happening over here. The crowd is surging backwards and forwards. It is like watching walter try to break its banks. It is difficult to say how many are here at the moment. It had been mostly students earlier, but i spoke with two architects and a teacher. There are older people here as well joining in this protest against the extradition bill, which is causing so much strife in hong kong. The situation outside the Legislative Council is fluid. What will happen inside later on the david . Later on, david . We know the Legislative Council will start to debate the extradition bill, which has caused so much strife as we were saying in hong kong. Hours ofl be 66 discussion of those amendments. Those discussions will take place every day until next thursday, not tomorrow, until next thursday, at the end of which there will be a vote in the Legislative Council. It seems that vote will be carried in favor of the bill, much to the disappointment of protesters today, and many of the one million or so the organizers said came out on sunday. Police said that number was only 240,000. Still, a significant number of the population out in the streets, worried about what will happen if that bill goes through. Our Senior Reporter david tweed in hong kong. Thank you for joining us. With this now, we have an executive councilmember, regina ip. Thank you for joining us. You support the bill. Can you explain your position . I understand there is deep into trust of the mainland and the judicial system. There are people who would like to see a firewall between ours and theirs. When not talking about importing mainland systems. We will submit every surrender request, whether Mainland China or other jurisdiction, to rigorous human rights scrutiny of our courts. Moreover, our chief executive has raised the threshold for offenses which entail seven Years Imprisonment or more, so it means only people who are real criminals allegedly involved in serious crime could be subject to a surrender request. It is not as though large numbers of hong kong people will be in jeopardy. Is it those people could not be prosecuted in hong kong under hong kong law . Do you not understand the protesters concerns . This looks like a slower version of hong kongs independence . Leon understand their concerns, but people can only be tried in hong kong if they commit offenses in hong kong. We have 20 condition agreements with other jurisdictions to deal with crossborder crime, like drug trafficking, money laundering, terrorist financing. 68 suchsurrendered fugitives to the usa. Shery what happens if a jurisdiction cant keep a promise to protect the suspects rights . We will suspend cooperation with him. I noticed a judgment just came out of the new Zealand High Court for bidding rendition to china of an ethnic koreannew zealand citizen who allegedly murdered a sex worker and Mainland China. Our courts could follow similar jurisprudence. Hery of course the key question is what will happen as we continue to see the protest . Has the government underestimated the opposition to this bill . Regina i do admit the consultation period could have been longer. The government underestimated the opposition and ability to mobilize and spread fear in our community, but we have to get on with the resumption of the debates. After the bill has been passed, the people will find out that very few rendition requests will be received. They will be handled in strict accordance with the law, and hong kong people would not be offended. Regina, how long do you think the authorities will continue to tolerate the protests, which are getting large and sustained . Regina it is an operational decision for the police to make, but i hope people will exercise their right to express their views peacefully and in an orderly manner that will not disrupt the daily lives of others or order in her chamber. Our chamber. Paul what with the reaction be from china if this bill was withdrawn . Is that something you fear . Us to it is a matter for just decide whether we get on with enacting the law. I am satisfied that it is totally untrue that large numbers of hong kong people would be handcuffed or sent to Mainland China. And is part of the fear Smear Campaign mounted by the opposition. I think people will only find out about the truth after the bill has been enacted. Shery do you worry about washingtons position . We have seen comments coming from analysts that if washington is not happy with this, we could see repercussions. Take a listen. Lets save the legislation passes and unadulterated form, the u. S. Chooses to up the ante and say we recognize hong kong as being china rather than a separate entity, well then hong kong can no longer export freely to the u. S. That trade channel breaks down. And the credit taps. Everything breaks down how does hong kong maintain a peg when it loses easy access to the dollar through trade and the Banking System internationally . Shery are you taking those comments into account . Ofina we are fully aware the concerns. We met with m cham in washington this week the American Chamber of commerce this week to explain the systems in hong kong. We ourselves will continue to engage u. S. Politicians and officials so that they know that the big will not be a threat to u. S. Interests or rights and freedoms in hong kong. Worriedre you at all that washington stance could be swayed by the ongoing trade tensions between the u. S. And china . We are a longstanding law enforcement, trade, and economic partner of the u. S. The u. S. Has consistently enjoyed a large trade surplus with hong kong on a per capita basis. We are the largest importer of u. S. Agricultural consumerproducts from the u. S. , we have sent 68 offenders to the usa since we entered into an agreement with him. In the past 22 years, we have surrendered no more than 180 fugitives, of which 68 have been sent to the u. S. , and 18 from the u. S. To hong kong, so we are very trustworthy lawenforcement partners with the u. S. Paul right. , an executivea ip councilmember. Thank you for joining us. Still to come, number some china inflation due within the hour. We will have a preview with a senior economist from cicc. This is bloomberg. We are expecting key data from china with the release of consumer and factory gate Inflation Numbers that will spell out how much more weakness there it was in the economy in may as the trade war worsened. Lets discuss this with the senior economist from cicc. Great to have you with us. Lets turn to those cpi and ppi numbers. This chart showing the rising Inflation Numbers that we have prices, cpi, consumer but mostly because of pork prices. We saw that search of 22 . We have that swine fever taking a toll on production. Be aConsumer Prices problem for policymakers with this continues . Thank you. 2. 6 toooking at cpi at 2. 7 for may. This number might hold around this level and approach 3 , mainly because the base was extremely low. We dont think it will be a constraint on policymaking. Number one, cpi is quite tame, pretty much zero. Sequential inflation was driven by a low base for food prices last year. Stillly, core cpi is benign at 1. 5 to 1. 7 . The low base effects should received in the Third Quarter. Were looking at fullyear cpi around 2. 4 to 2. 5 . It should not be a concern. Shery what about Producer Prices . We see this pressure on the Manufacturing Sector with industrial profits plunging. We have ongoing u. S. China trade tensions. Sure. Producer prices will be under more pressure mainly because the dynamics are different in china, especially given the trade war, which may raise Consumer Prices globally, but depressed rural material prices. For may, cpi should still be 0. 8 ,ve around 0. 6 to but Oil Price Action lately and chinas Domestic Production price, it should be trending toward zero by the Third Quarter was the base becomes higher. If you look at that, you can see corporate profits should be under pressure in the third and Fourth Quarter in china. Broaderive us in the picture of the chinese economy. We saw better numbers in the first quarter, growth accelerating, but that does not seem to be holding up as the chinau. S. Trade tensions intensify. Where is the chinese economy right now . To be honest, we observed an abrupt slow down in export orders on the production side, starting from the tweets sent out by President Trump on may 6. We have done field trips to the export centers of china as well. 40 rt orders dropped 20 to soon after the may 10 terrified came into effect, so we think china is facing a fast slow down in export growth. From the growth trajectory point of view, a lot of it is still up in the air given we dont have the verdict on whether china whether the tariffs on china will be raised by the u. S. , but we think chinas policy response if that were to happen would be to boost domestic demand growth. We have seen lately that they to boostnew policies the financing for infrastructure investment. ,ooking forward, chinas growth if the 300 billion is not taxed , should be over 6 . Were, should should be under 6 . Export demand in export demand should change dramatically. Shery those Financial Measures you mentioned were not mandatory. They were left to the local authorities to decide what else they can do to boost consumption, whether it is car products or electronics. So i wonder if that will have a Significant Impact given they are not forced to do anything. I see your concern. Local governments have been under pressure this year after the significant tax cuts. Was i was referring to china allowing special local government construction bonds to be used as capital for important infrastructure projects. That was announced yesterday. Also, if the trade war or trade ,ensions escalates further china will implement more aggressive measures to boost domestic consumption of domestically made cars and appliances. Lets talk about what the pboc can do in the Monetary Policy side of things. This gtv chart showing movement when it comes to the rrr cuts on the top panel. Not much on the oneyear lending rate since 2015. We heard from the governor talking about tremendous room to adjust Monetary Policy if the trade war with the u. S. Deepens. Movement around Monetary Policy as opposed to fiscal stimulus . I think the short answer is it isf course, a lot of trade tensionsdependent at this point, whether it will escalate further. Even the status quo, the pboc to 150 bps. Cut 100 they still have room to do that for the rest of the year. The benchmark rate is something they are trying to phase out in the next year or two, so i dont think they will move that unless there is extreme weakness in the economy very quickly, so under these terms, circumstances, if the u. S. Fed were to cut the federal funds rate soon, i think china has room to cut its open market operation rate or thisday repo by 30 bps year, back to the level before the 27 recession. They have room to do that as well. If trade tensions worsen, china has room for more rrr cuts or consider moving the benchmark rate, especially if the fed moves more aggressively. Shery even though we have seen a stronger yuan fixing, the speculation is there we are getting ready to see the seven threshold break on the chinese yuan. Where do you stand there . , i am not thaty worried about the yuan over the mediumterm given the u. S. Dollar and u. S. Economy is running out of steam in china did a lot of fiscal easing that is supportive, but in the short term, we have been getting signals from the government. Chairman saying everything should be stable. The governor of the pbc giving an interview, saying we should not stick to a certain level in the market as it priced and more cnh weakness. If you look at monday morning, they fixed towards the stronger side using the count of factor. I dont think the countercyclical factor. I dont think the pboc is ready to let go, however, there might be two scenarios where they might consider letting it break seven. The first one is if the u. S. 300d the tariffs on billion in chinese exports. The shocks will send the cny weaker. The second scenario, if the u. S. ,ollar gaps up but stay strong however, the second one looks less likely given what is going on with the fed. Shery thank you for your time today. Plenty more to come. This is bloomberg. Markets gaining ground for a fourth session. Lets preview what to watch this morning. Lets check the hong kong dollar. It is stronger, heading towards the 7. 83 level. Mark cranfield notes that would be odd given the demonstration, but points out the move is happening amid a tightening of funding costs. , we mainland markets open will watch to see if the good the indexinue after rally. Opens, the company saying it could relocate capacity outside china. The stock climbed to a three week high, gaining 2 yesterday. That was seen as a reentry window, which boosted the taiex to a onemonth high, so we could see good vibes in taipei. Shery thank you for that. Live pictures of hong kong. We could be bracing for a historic showdown over extradition legislation. The law would allow extraditions to Mainland China. We are seeing several roads blocked in hong kong by protesters. That is it from daybreak asia. The china open is next. This is bloomberg. This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. 00 a. M. In beijing, welcome to bloomberg markets, china. Here are your top stories. Mass protests as the extradition buildup before lawmakers. President trump claims total control tariffs. Personally delay a deal with china and has a great accord with mexico. Apple supplier talks on says it has sufficient supply cassis supply capacity outside of china

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